1997 Legislative Audits


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1. Summary of Report 97-01: COMPENSATION PRACTICES OF QUASI-GOVERNMENTAL ORGANIZATIONS

We reviewed board and executive compensation practices within three quasi-governmental organizations and one special district. Overall, we found significant compensation practice differences among the four organizations we reviewed.

1. Executive board compensation practices are significantly different among the four organizations.
2. Executive compensation practices at the Workers' Compensation Fund of Utah (WCFU) are comparatively aggressive.
3. The Utah Transit Authority (UTA) is somewhat aggressive in their executive compensation practices.
4. The Utah Retirement Systems' (URS) executive compensation practices are comparatively moderate, as are the executive compensation practices at the Utah Housing Finance Agency (UHFA).

The markets to which organizations choose to compare has a significant impact on executive compensation. The Legislature may want to provide some direction to quasi-governmental organizations regarding appropriate comparison markets.

Full Report -Quasi-Governmental Organizations

2. Summary of Report 97-02: RESIDENTIAL TAX ASSESSMENT PRACTICES

This report discusses how homes are assessed for property tax purposes and the processes established to insure that the tax burden is equitably distributed. In general, county assessors and the Tax Commission have made significant improvements in recent years that make home values more accurate and property taxes more equitable. While both county assessors and the Tax Commission are commended for the progress they have made, this report focuses on policy issues that remain and possible additional improvements. The Tax Commission's Property Tax Division (PTD) has already made some of the changes recommended in the report.

The following describe the major findings and conclusions of the report:

1. Despite recent improvements, not all county assessors' valuation practices meet statutory requirements.
2. Some aspects of the Tax Commission's role in equalizing property assessments need clarification.
3. We found no merit to allegations of unfair and improper practices in how homes are assessed and how appeals are processed in Salt Lake County.

Full Report -Residential Tax Assessment Practices

3. Summary of Report 97-03: HIGHER EDUCATION NON-LAPSING FUND BALANCES

Although non-lapsing fund balances have grown 63 percent system-wide from fiscal year 1992 through fiscal year 1996, about half of the growth during that time can be associated with increased total revenues. In addition, the institutions we contacted generally provided reasonable explanations for growth in their balances. Also, other states' higher education systems have non-lapsing revenue sources.

Our review of the uses of these non-lapsing balances in Utah indicates that uses are one-time in nature and reasonable. However, we have concerns about the adequacy of record keeping on balances at some of the institutions. In addition, we reviewed the liability for compensated absences and early retirement costs as it affects the reporting of non-lapsing balances. Information on fund balances and the liability can be reported more accurately to the Legislature.

Full Report -Higher Education Non-Lapsing Balances

4. Summary of Report 97-04: CENTRAL STORES

Central Stores has historically purchased supplies from vendors in bulk, provided warehouse and delivery for state agencies in the most economical manner possible, and then billed agencies for these services. Central Stores is now in the process of a complete change. Central Stores has recently negotiated a vendor-direct or "stockless" office supplies contract which eliminates the need for a central warehouse and delivery system, and consequently plans to cease its current operations.

We agree with the plans to eliminate Central Stores. The move to a stockless office supplies contract will be positive for the state, primarily because supplies will cost less for state agencies while delivery time and service should improve. The traditional functions for which Stores was created--buying in bulk and warehousing product, receiving, filling and delivering orders, billing customers, and providing customer service--can all be handled more efficiently and effectively directly through the private sector. In fact, we feel the prices and service available from the state contract are such that many political subdivisions throughout the state may benefit from using the contract.

Full Report -Central Stores

5. Summary of Report 97-05: UNINSURED MOTORIST IDENTIFICATION PROGRAM

Insure-Rite, the company the state has contracted with to administer the Uninsured Motorist program, uses a computerized system to match information from the state's motor vehicle database to policy information provided by insurance companies. When Insure-Rite first began reporting statistics on Utah's uninsured motorist rate in July of 1995, they reported that 23 percent of the registered vehicles were unmatched with insurance records. Insure-Rite then reported a steady decline in the number of unmatched records over the next two years. Insure-Rite estimates that Utah's current uninsured motorist rate is about 12 percent. The following is a list of the audit's findings:

1. Insure-Rite achieves a high level of matching accuracy.

2. Insure-Rite reports that the number of unmatched vehicles has fallen from 23 percent to an average of about 12 percent over the last year. Unfortunately, we cannot confirm or deny the accuracy of this statistic because of a lack of data from the first year of the program.

3. Utah does not take direct enforcement action against uninsured drivers identified through its program. On the other hand, most other states with identification programs have enforcement measures built into their program such as revocation of vehicle registrations, suspension of drivers licenses, and fines.

Full Report -Uninsured Motorist Identification Program

6. Summary of Report 97-06: OFFICE OF LICENSING

The audit team was asked to determine how effective the Office of Licensing has been in accomplishing its goals and objectives. The audit findings include:

1. There has been a duplication of effort between the Office of Licensing and other regulatory agencies.

2. The Office of Licensing has been ineffective at obtaining compliance from those who persist in violating licensing standards.

Although the Department of Human Services has made a number of changes to the Office of Licensing in recent years, additional improvements to this program are needed. We suggest that the state limit the scope of licensing to those issues specifically aimed at public protection. While the quality of services provided by human services providers is still a concern, other forms of regulation are more appropriate for addressing service quality. Once the Office of Licensing has a clearly defined purpose, the office will be in a better position to do an effective job of enforcing its licensing standards. Enforcement can become more effective by giving licensors more specific policy direction and offering both positive and negative sanctions to providers.

Full Report -Office of Licensing

7. Summary of Report 97-07: DAVIS MENTAL HEALTH CENTER NON-CLIENT ACTIVITIES

There are a number of deficiencies with the administrative operations of Davis Mental Health Center that are a direct result of poor financial controls and insufficient oversight. Poor controls and insufficient oversight have allowed the executive director to:

1. Abuse his business travel privileges.
2. Gain significantly from compensation and perquisites that are far above reasonable levels.
3. Operate a recreational program that is not necessarily in the best interest of Davis clients.
4. Utilize funding from a second board in a manner unacceptable to the funding donors.

We believe that, between 1993 and 1996, the Davis Mental Health director personally gained by at least $80,000 by taking advantage of the organization's deficiencies outlined in this report and, has unnecessarily received an additional $29,500 in the form of excessive salary.

Correction of the organization's administrative problems cannot be achieved by just altering organizational policies and procedures. The causes of the organization's administrative problems are pervasive and deeply embedded within its structure and may need to be addressed by organizations beyond Davis management and the Davis Board.

Full Report -Davis Mental Health