2011 Legislative Audits
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1. Summary of Report 2011-01 : A Performance Audit of PEHP's Business Practices
This report reviews the Public Employees Health Program's (PEHP) business practices. Specifically, we reviewed PEHP's claim costs as compared to the local insurance industry, contracting practices, financial business operations, pharmacy practices, and the claim appeals process. We found that PEHP has higher medical, hospital, and pharmacy claims costs than other local insurance carriers. PEHP is not as competitive in their contract negotiations with providers as other carriers. We completed this same comparison in the 2003 audit of PEHP. That audit showed that PEHP was better managing the state's claim costs. In reviewing PEHP's dealings with vendors we found PEHP has permitted a poor purchasing process to exist. PEHP is not following their procurement policies and not properly bidding contracts. In reviewing PEHP's financial practices, we found PEHP has allowed seven medical risk pools to have contingency reserve deficits (four had multiple-year deficits), and some of PEHP's business practices are not following the self-funded insurance model. The Legislature should determine if they want the state risk pool to follow the self-funded model. PEHP's pharmacy program requires better processes and rules to ensure members' needs are fairly addressed. Finally, PEHP's claims appeals process needs additional controls to strengthen independence and objectivity.
Full Report - A Performance Audit of PEHP's Business Practices
2. Summary of Report 2011-02 : A Performance Audit of the Division of Child and Family Services (DCFS)
By modifying practices and controls, DCFS can reduce its costs. First, providing effective in-home services can allow more children to remain with their families rather than entering foster care; this can both lower costs and improve long-term outcomes for children. Second, DCFS should proactively monitor foster care placements and implement cost-saving changes. For example, DCFS regions are placing children with private companies that are $30 per day more expensive than highly trained foster care parents. Third, DCFS can be more efficient when screening child abuse calls and following-up on abuse allegations. Significant savings appear possible if DCFS restructures its intake and CPS processes. Fourth, caseworkers need to perform work more efficiently through increased use of courtesy caseworkers and technology; in addition, caseload calculations need to be improved. Finally, monthly subsidy standards and funding practices need to be addressed to ensure consistent awards to adoptive families.
3. Summary of Report 2011-03 : A Performance Audit of the Division of Parks and Recreation
Utah's state park system could become more self-sufficient and less reliant on the state's general fund. First, the Utah Division of Parks and Recreation (division) needs to develop a more business focused operation to improve park system efficiency. Second, budget reductions and improved park efficiency can be achieved through staffing modifications. Staffing expenses represent 60 percent of the division's total costs and the division needs to evaluate the necessity of some positions if it is to become less reliant on the general fund. Third, some parks should reduce services by aligning operations more closely to public demand; other parks, however, may need to close. Finally, the Legislature could consider privatization of some Utah state parks. If the Legislature decides to pursue privatization, a pilot program should be implemented first to gauge success.
4. Summary of Report 2011-04 : A Review of DABC Actions Regarding a $300,000 Loss from a Package Agency
The Department of Alcoholic Beverage Control (DABC) exercised poor management of the now closed Eden Package Agency, contributing to increased losses to the state. DABC management failed to report the issues surrounding this package agency to their commission and the potential criminal activity to the Utah Attorney General. Additionally, the DABC failed to ensure payments were made in a timely manner, continued to ship liquor despite the store's growing debt, failed to follow commission rules, and failed to follow their own contract with the Eden Package Agency. We also found that the DABC increased compensation, sent the package agency checks, and waived finance charges to the Eden Package Agency despite unaccounted funds or liquor inventory and substantial debt. The DABC also failed to perform a statutorily required criminal background check on the operator of the Eden Package Agency. When considered together, these decisions and actions justify our assessment that the DABC exercised poor management of the Eden Package Agency.
5. Summary of Report 2011-05 : A Review of Public Education Cosmetology Programs
There is little evidence that private beauty schools have suffered undue competition from cosmetology programs offered by public schools. The school district programs are too small to have a significant impact on the overall industry. However, we did find significant differences in the sources of revenue and in the operating costs of public and private beauty schools. Public schools are largely supported by tax dollars, while private schools primarily rely on tuition and income from salon sales. The school district cosmetology programs also have higher operating costs than private schools.
Full Report - A Review of Public Education Cosmetology Programs
6. Summary of Report 2011-06 : Actuarial Study of PEHP's Contingency Reserves
Our January 2011 audit of the Public Employees' Health Program (PEHP) showed that PEHP has not actuarially determined reserves for the state's medical risk pool. In response to a legislative request, our office asked the actuary firm of Milliman, Inc. to conduct a study of PEHP's contingency reserves. Based on the Milliman report, we recommend that at least a 50-day contingency reserve of annual premiums be maintained for the state's medical risk pool. Depending on the Legislature's preference, as much as $26 million in reserves (based on fiscal year 2010 data) could be refunded to state employers and employees.
Full Report - Actuarial Study of PEHP's Contingency Reserves
7. Summary of Report 2011-07 : A Survey of School Districts' Health Insurance
A survey of 10 school districts in Utah showed that health care costs and benefits vary for each school district. On an annualized basis, the average family premium was $14,097; however, premiums varied by about $6,000. The highest premium was $16,716 and the lowest premium was $10,078. One factor affecting high premiums is the variation in the districts' procurement practices. Four of the ten school districts have not bid their health insurance in more than five years. Medical benefits offered to employees also affect premiums. Medical benefits vary significantly, by a range of 19 percent, among the 10 school districts.
Full Report - A Survey of School District's Health Insurance
8. Summary of Report 2011-08 :A Performance Audit of Higher Education Operating and Maintenance Funding
This audit reviewed legislatively-appropriated operation and maintenance (O&M) funding of facilities within Utah's system of higher education. We found that the transparency and accountability of O&M funding is weak. There is not a comprehensive record of how much funding is provided for O&M, nor a sufficient record of which buildings have been funded. Also, we identified some instances where institutions may be adding buildings to campuses without an identified O&M funding source. This practice can dilute resources available for facilities with legislatively approved funding. Lastly, we identify other potential sources of O&M funding available to the institutions that should be reviewed and considered, including reimbursed overhead funds and revenue-generating activities.
9. Summary of Report 2011-09 :An Audit of Higher Education Institutions' Residency Determination
The state of Utah, like all other states, charges different tuition rates based on student residency status. This report presents the results of a survey of some Utah institutions of higher education to establish whether they appropriately determine students' residency status. While most of the surveyed schools had little or no issues with determining initial and reclassification of student residency, two institutions, Dixie State College and the College of Eastern Utah (CEU), did have documentation issues with initial residency determination. CEU also showed inadequate documentation in granting residency for students applying for reclassification.
10. Summary of Report 2011-10 : A Performance Audit of IT Security at Universities and Quasi-Government Agencies
This report reviews IT security practices at higher education institutions and quasi-government agencies throughout the state. Higher education already conducts its own IT security assessments, which are carried out periodically by a team of IT security professionals at the Utah Education Network and various institutions. Given the time and staffing constraints placed on the team, their methodology is comprehensive and relies on a variety of industry-recommended techniques. Quasi-government agencies are diverse and have a wide range of IT resources available to them. Some quasi-government agencies were lacking key IT security features such as policies, IT continuity plans, and IT security awareness training. In cases where agencies take custody of significant IT assets, we recommend that management consider testing their IT solutions to ensure adequate levels of protection are in place.
11. Summary of Report 2011-11 : A Performance Audit of the Operating Efficiency of the Utah State Court System
This audit reviewed the courts process for transitioning from paper records to electronic records and found that the courts need to increase their focus on timelines and objectives for the project, address judges technical concerns, and mandate electronic filing when district courts are ready. Further, we recommend that the courts develop case processing time standards to promote better case management. We found that the courts budget process is increasingly transparent and personnel practices compare favorably with the executive branch. We also reviewed the custody evaluation process and found that the courts are working to improve this area, but custody evaluator oversight needs to be increased. Finally, we looked at traffic citation trends and the use of traffic schools by municipalities. Our analysis showed that statewide traffic citation trends have remained level despite the recession, however the quality of traffic schools is unregulated and at least one municipality has used invitations to traffic school in lieu of issuing tickets which circumvents the revenue sharing process.
12. Summary of Report 2011-12 : A Performance Audit of Mandatory Student Fees at the University of Utah
The University of Utah needs increased transparency and accountability for its mandatory student fee process. Policies are needed defining the approval process including the level of student involvement. Documentation requirements should include justification of the fee amount and appropriate use of revenues. Monitoring should be required to ensure fee revenues are used for the intended purpose. The Utah Legislature and Board of Regents should also provide more guidance.
13. Summary of Report 2011-13 : A Review of Allegations Regarding the Management of the DABC
We believe the DABC has been incompetently managed. This conclusion is based in part on years of bid rigging, falsifying financial documentation, and artificially splitting invoices in violation of state statute. The DABC has also done substantial business with Flexpak without competitively bidding or properly contracting, which was inappropriate and potentially illegal because of the familial relationship (company is owned by the former director's son). We also found that DABC management failed to provide oversight of the department's financial affairs. When looked at in total, a history of state and legislative audits further confirms a pattern of management incompetence. This audit also identifies additional inappropriate and questionable management practices. Because of this demonstrated pattern of poor management, the Legislature may want to consider revising the current oversight structure of the department
14. Summary of Report 2011-14 : A Performance Audit of the Division of Wildlife Resources (DWR)
This audit reviewed the aquatics, wildlife, and habitat sections of the Division of Wildlife Resources. Several inefficiencies in the Aquatics Section were identified. These inefficiencies stemmed largely from an inadequate system for tracking hatchery cost data that has led to wasteful levels of egg and fish production. In addition to improving the tracking of hatchery cost data, we identified a number of opportunities for the state hatchery system to reduce costs. These include, limiting the number of excess fish eggs given to other states, reducing the amount of unused eggs that are destroyed, better planning of the number of fish grown, and increasing oversight of the Aquatics Section by developing an enhanced long-range planning process. Our limited review of conservation permits in the Wildlife Section concluded that public hunting opportunities were not significantly impacted by the practice of allocating permits to conservation groups. Funds raised by the program appear to benefit the public by promoting species conservation and habitat preservation. Similarly, the Cooperative Wildlife Management Unit program has been instrumental in conserving valuable wildlife habitat by providing landowners with indirect financial incentives in exchange for limited public access to private land for hunting. Our evaluation recommends the division review whether the program is fully equitable to public hunters.
15. Summary of Report 2011-15 : A Performance Audit of Higher Education Graduation Rates and Excess Hours
Graduation rates at Utah's institutions of higher education are an important consideration if Utah is going to produce the number of people with bachelor's degrees necessary to meet 2018 job needs. Also, the State Board of Regents (SBR) estimates that low graduation rates cost Utah taxpayers about $24.5 million a year. The U of U's graduation rate is comparatively low and needs to improve. Although SUU and WSU compare favorably to peer groups, improvement could be desirable for both institutions. USU compares favorably. Further, SBR's policy to discourage students from taking excess credit hours (hours in excess of graduation needs) by assessing an excess credit hour surcharge appears ineffective; little has been collected. Excess credit hours contribute to the time it takes to graduate. The longer the enrollment span, the less likely graduation is.