Audit Report Department of Health and Mental Hygiene Alcohol and Drug Abuse Administration December 2006 OFFICE OF LEGISLATIVE AUDITS DEPARTMENT OF LEGISLATIVE SERVICES MARYLAND GENERAL ASSEMBLY
This report and any related follow-up correspondence are available to the public through the Office of Legislative Audits at 301 West Preston Street, Room 1202, Baltimore, Maryland 21201. The Office may be contacted by telephone at 410-946-5900, 301-970-5900, or 1-877- 486-9964. Electronic copies of our audit reports can be viewed or downloaded from our website at http://www.ola.state.md.us. Alternative formats may be requested through the Maryland Relay Service at 1-800-735-2258. The Department of Legislative Services Office of the Executive Director, 90 State Circle, Annapolis, Maryland 21401 can also assist you in obtaining copies of our reports and related correspondence. The Department may be contacted by telephone at 410-946-5400 or 301-970-5400.
December 20, 2006 Senator Nathaniel J. McFadden, Co-Chair, Joint Audit Committee Delegate Charles E. Barkley, Co-Chair, Joint Audit Committee Members of Joint Audit Committee Annapolis, Maryland Ladies and Gentlemen: We have audited the Department of Health and Mental Hygiene Alcohol and Drug Abuse Administration (ADAA) for the period beginning January 23, 2003 and ending March 9, 2006. Our audit disclosed that ADAA did not adequately monitor substance abuse treatment grants. For example, ADAA could not document that it ensured that the grantees served the number of individuals for which they were funded. ADAA s grants to treatment programs totaled approximately $125 million in fiscal year 2006. In addition, ADAA did not establish sufficient controls over its cash receipts. Respectfully submitted, Bruce A. Myers, CPA Legislative Auditor
2
Agency Responsibilities Background Information The Alcohol and Drug Abuse Administration (ADAA) is a separate unit in the Department of Health and Mental Hygiene. ADAA develops, establishes, regulates, promotes, monitors, and supports prevention, treatment, and rehabilitation programs related to the misuse of alcohol and drugs. ADAA also promotes and conducts substance abuse related education, training, data collection, and research. During fiscal year 2006, according to ADAA, its expenditures totaled $132 million of which $125 million related to grants for alcohol and drug abuse programs. ADAA does not provide direct treatment services. Current Status of Findings From Preceding Audit Report We reviewed the current status of the three findings included in our preceding audit report dated July 1, 2003. We determined that ADAA satisfactorily addressed one of these items. The remaining two items are repeated in this report. Findings and Recommendations Substance Abuse Treatment Programs Background The Alcohol and Drug Abuse Administration (ADAA) awards substance abuse treatment grants to local health departments and private providers (that is, hospitals and non-profit providers) throughout Maryland. ADAA is responsible for monitoring providers to ensure that treatment services are appropriately rendered to the number of individuals funded in the grant agreements. According to ADAA s records, during fiscal year 2006, ADAA awarded grants totaling approximately $125 million to 265 providers (the majority of which were General Funds) including approximately $17.2 million from the Cigarette Restitution Fund and approximately $6.1 million from the Substance Abuse Treatment Outcomes Partnership Fund. According to ADAA, as of June 30, 2006, ADAA was funding 18,627 client treatment slots (that is, the number of clients that could be treated at facilities based on full enrollment) and provided treatment services to 60,760 individuals during fiscal year 2006. 3
Finding 1 ADAA did not adequately monitor substance abuse treatment grants to ensure appropriate services were rendered by providers. Analysis ADAA did not adequately monitor substance abuse treatment grants to ensure appropriate services were rendered by providers. Specifically, our review disclosed the following conditions: The ADAA did not adequately ensure that grantees complied with related grant agreements. Specifically, on a monthly basis grantees are required to submit data to the ADAA on the number of individuals served. ADAA management advised us that ADAA staff compared the actual services provided by grantees with the number of treatment slots funded and the related grant awards. However, all five of the grantees tested lacked documentation of the verification process. As a result, there was a lack of assurance that services provided by grantees were commensurate with the funding and the related grant awards. The ADAA did not perform routine field visits of all providers to verify the accuracy of reported treatment statistics. Specifically, during our audit period, the ADAA did not conduct field visits to verify treatment statistics for 80 of 265 providers that received State funding during fiscal year 2006. ADAA did not ensure that the vendor responsible for the substance abuse funds in Baltimore City was complying with the terms of its Memorandum of Understanding (MOU). Specifically, the MOU required the vendor to conduct monthly site visits of all Baltimore City treatment programs receiving State funds and to submit a monthly field report to ADAA. However, as of April 2006, no reports had been submitted since December 2005. In this regard, ADAA was not aware that the reports had not been submitted until we brought the issue to their attention. In response to our inquiries, ADAA contacted the vendor and was advised that site reviews had been suspended for the three months ending March 2006 and were subsequently being performed. ADAA did not verify that recipients of Substance Abuse Treatment Outcomes Partnership funds provided the required matching contributions. Specifically, according to reports submitted by counties, 15 of the 19 counties receiving grant funds did not have the required amount of county matching contributions. While State law provides for a waiver of the matching 4
requirement under certain circumstances, our further review of 3 counties who failed to have the required amount of matching funds disclosed that ADAA lacked any documentation to support such a waiver. Similar conditions were noted in our preceding audit report. Without adequate verification and monitoring, ADAA lacked adequate assurance that substance abuse treatment grants achieved their intended purpose. Furthermore, the grant agreements require providers to serve the number of clients funded in the agreements and state that data will be examined to determine whether services are commensurate with the provider s funding level. Recommendation 1 We again recommend that ADAA document its comparison of funded treatment slots identified in the grant awards to the actual treatment data submitted by grant recipients to determine whether services were commensurate with the funding and adjust future grant amounts accordingly. We also again recommend that ADAA perform routine field visits to verify treatment data submitted by providers. Additionally, we recommend that ADAA ensure that the vendor responsible for the Baltimore City substance abuse grants is providing the services outlined in the MOU and take appropriate follow-up action when instances of noncompliance are identified. Finally, we recommend that ADAA ensure that recipients of Substance Abuse Treatment Outcomes Partnership grants provide the required matching contributions or that waivers of the requirement are documented. Cash Receipts Finding 2 ADAA had not established adequate controls over cash receipts. Analysis Controls over collections, which according to ADAA s records totaled approximately $500,000 from July 1, 2005 through March 9, 2006, were inadequate. ADAA s collections primarily consisted of fees for training and conferences provided by ADAA. The collections are forwarded to the Department of Health and Mental Hygiene s Office of the Secretary for subsequent deposit. Our review disclosed that ADAA did not ensure that all training and conference fees were collected and subsequently deposited by reconciling course rosters to the related deposits. In addition, our test of 20 deposits totaling $66,118 disclosed that all were deposited; however, 8 deposits 5
totaling $25,435 were not forwarded to the Office of the Secretary for deposit for periods ranging from 4 to 8 working days after receipt. The failure to forward collections for deposit in a timely manner was commented upon in our two preceding audit reports. The Comptroller of the Treasury s Accounting Procedures Manual states that receipts must be deposited no later than the first working day after the date of receipt. Recommendation 2 We recommend that an employee independent of the cash receipt functions verify that collections were received and deposited for the individuals listed on the course rosters. In addition, we again recommend that ADAA forward all cash receipts to the Department s Office of the Secretary for deposit in a timely manner. Audit Scope, Objectives, and Methodology We have audited the Department of Health and Mental Hygiene Alcohol and Drug Abuse Administration (ADAA) for the period beginning January 23, 2003 and ending March 9, 2006. The audit was conducted in accordance with generally accepted government auditing standards. As prescribed by the State Government Article, Section 2-1221 of the Annotated Code of Maryland, the objectives of this audit were to examine ADAA s financial transactions, records and internal control, and to evaluate its compliance with applicable State laws, rules and regulations. We also determined the current status of the findings contained in our preceding audit report. In planning and conducting our audit, we focused on the major financial-related areas of operations based on assessments of materiality and risk. Our audit procedures included inquiries of appropriate personnel, inspections of documents and records, and observations of ADAA operations. We also tested transactions and performed other auditing procedures that we considered necessary to achieve our objectives. Data provided in this report for background or informational purposes were deemed reasonable, but were not independently verified. Our audit did not include certain support services provided to ADAA by the Department of Health and Mental Hygiene Office of the Secretary. These support services (such as, payroll, purchasing, maintenance of accounting records, and related fiscal functions) are included within the scope of our audits of the Office of the Secretary. In addition, we did not audit ADAA s Federal financial 6
assistance programs for compliance with Federal laws and regulations because the State of Maryland engages an independent accounting firm to annually audit such programs administered by State agencies. Our audit scope was limited with respect to ADAA s cash transactions because the Office of the State Treasurer was unable to reconcile the State s main bank accounts during the audit period. Due to this condition, we were unable to determine, with reasonable assurance, that all ADAA cash transactions were accounted for and properly recorded on the related State accounting records as well as the banks records. ADAA management is responsible for establishing and maintaining effective internal control. Internal control is a process designed to provide reasonable assurance that objectives pertaining to the reliability of financial records, effectiveness and efficiency of operations including safeguarding of assets, and compliance with applicable laws, rules and regulations are achieved. Because of inherent limitations in internal control, errors or fraud may nevertheless occur and not be detected. Also, projections of any evaluation of internal control to future periods are subject to the risk that conditions may change or compliance with policies and procedures may deteriorate. Our reports are designed to assist the Maryland General Assembly in exercising its legislative oversight function and to provide constructive recommendations for improving State operations. As a result, our reports generally do not address activities we reviewed that are functioning properly. This report includes findings that we consider to be significant deficiencies in the design or operation of internal control that could adversely affect ADAA s ability to maintain reliable financial records, operate effectively and efficiently, and/or comply with applicable laws, rules, and regulations. Our audit did not disclose any significant instances of noncompliance with applicable laws, rules, or regulations. Other less significant findings were communicated to ADAA that did not warrant inclusion in this report. The Department of Health and Mental Hygiene s response, on behalf of ADAA, to our findings and recommendations is included as an appendix to this report. As prescribed in the State Government Article, Section 2-1224 of the Annotated Code of Maryland, we will advise ADAA regarding the results of our review of its response. 7
Finding 1 ADAA did not adequately monitor substance abuse treatment grants to ensure appropriate services were rendered by providers. Recommendation 1 We again recommend that ADAA document its comparison of funded treatment slots identified in the grant awards to the actual treatment data submitted by grant recipients to determine whether services were commensurate with the funding and adjust future grant amounts accordingly. We also again recommend that ADAA perform routine field visits to verify treatment data submitted by providers. Additionally, we recommend that ADAA ensure that the vendor responsible for the Baltimore City substance abuse grants is providing the services outlined in the MOU and take appropriate follow-up action when instances of noncompliance are identified. Finally, we recommend that ADAA ensure that recipients of Substance Abuse Treatment Outcomes Partnership grants provide the required matching contributions or that waivers of the requirement are documented. Administration Response: The Administration concurs with the first recommendation. During the annual grant review process, the Administration s Regional technical Assistance Teams compare actual treatment data submitted to SAMIS with the number of treatment slots funded to determine whether the services provided are commensurate with the funding. The Administration accomplishes this using the ADAA Grant Review Protocol. Procedures are being implemented by which the Regional Technical Assistance Teams determine whether the services actually provided are consistent with the initial grant request. This will be done by comparing grant requests with actual SAMIS data and documented on the Grant Review Protocol. The completed Protocol form will become part of the agency base grant file. The Administration will monitor grant amounts and services and adjust funding as appropriate to reflect levels of services provided. The Administration concurs with the second recommendation. Procedures are being implemented to ensure that ADAA Information Services staff conducts at least one data validation visit annually for each program site. This validation process ensures the quality of SAMIS data as the basis for program performance measurement. The Administration has procedures to ensure field visits by ADAA Quality Assurance staff in response to complaints or concerns as they are raised about programs. Procedures are being implemented that the Regional Technical Assistance Teams, under the leadership of ADAA Community Service Division
Regional Team Managers, meet at least once annually with each jurisdiction to ensure that recipients of the ADAA funds have monitored performance regarding patient services and outcomes to be consistent with funding requests and conditions of grant award. The Administration concurs with the third recommendation. Procedures are being implemented to ensure that BSAS conducts the required program monitoring and provide the monthly field reports to the Administrations and will take appropriate follow-up action when instances of non-compliance are identified as required by the MOU. Finally, the Administration concurs with the last recommendation and will ensure that recipients of STOP grant provide the required matching contributions or that waivers of the requirements are documented. Cash Receipts Finding 2 ADAA had not established adequate controls over cash receipts. Recommendation 2 We recommend that an employee independent of the cash receipt functions verify that collections were received and deposited for the individuals listed on the course rosters. In addition, we again recommend that ADAA forward all cash receipts to the Department s Office of the Secretary for deposit in a timely manner. Administration s Response: The Administration concurs with the first recommendation. The Administration has implemented a procedure using a fiscal log worksheet to document the amount and date that cash was received, and the date the cash receipt was sent to General Accounting and posted in FMIS. A procedure will be implemented to reconcile course rosters to the cash receipts to ensure that all monies have been accounted for. An employee independent of the cash receipts function verifies and documents that all recorded collections are forwarded for deposit in a timely manner. The Administration s Fiscal Officer is reconciling the amount recorded in the cash receipt log with the amount deposited and posted to FMIS. The Administration concurs with the second recommendation. Procedures are being implemented to ensure that all cash receipts are deposited in a timely manner in accordance to the Accounting Procedures Manual.
AUDIT TEAM Brian S. Tanen, CPA, CFE Audit Manager Channel D. Sumpter Senior Auditor Anthony M. Yancey Staff Auditor