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The Rundown with Kansas Legislative Division of Post Audit

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The Rundown is your source for news and updates from the Kansas Legislative Division of Post Audit including conversations with staff discussing the findings of performance audits released to the Kansas Legislature.
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School districts maintain sensitive data which makes them attractive targets for cyberattacks.  Although school districts maintain sensitive data, Kansas districts are not required to implement any specific IT controls. Many school districts have not implemented several basic It security controls: The majority of survey respondents (147 of 286 school districts - 51% resonse rate) indicated they lacked proper security awareness training and incident response plans, did not require secure confidential data transmission, and did not perform vulnerability scans at all or frequently enough. Districts reported that staffing issues and lack of knowledge about what IT security controls to implement were significant barriers to improving IT security.  Finally, districts reported spending an annual average of about $18 per student on IT security in recent years. In comparison, the average total expenditure per student is about $16,200. 
Substance abuse and mental health treatment in Kansas is provided by a network of providers and overseen by several state agencies. Individuals can seek treatment for a wide variety of conditions. The 23 providers we interviewed reported using many practices and programs to address their clients’ needs. Almost all of the 11 programs and practices most commonly reported by providers had at least some research indicating they were effective. But data limitations kept us from assessing how well they are working in Kansas.  Additionally, Kansas substance abuse and mental health providers use similar practices and programs as five other states we reviewed. We were not able to compare Kansas's outcomes to other states because of data limitations.
The estimated revenues of the Council Grove site of Butler County Community College were about $11,000 less than its estimated expenditures. Butler County Community College (BCCC) operates a site in Council Grove that serves about 200 students. In fiscal year 2019, the estimated revenues for the Council Grove site were about $11,000 less than its estimated expenditures. In fiscal year 2019, the estimated expenditures of the Council Grove site were about $158,000. In fiscal year 2019, the Council Grove site generated about $147,000 in revenues from state aid and student tuition and fees. State Aid has not been paid according to Regents’ formula in recent years, which could explain why the Council Grove site operated at a deficit in fiscal year 2019. Because state aid hasn’t been paid according to Regents’ formula, it’s possible that property tax may have supported the Council Grove site but we couldn’t tell.
25 counties received a total of $2.3 million in grants from the Center for Tech and Civic Life (CTCL) that ranged from $5,000 to $856,000 with no obligations. The Center for Tech and Civic Life is a non-profit organization that provides civic information for voters as well as tools for election officials. 25 Kansas counties applied for and were awarded $2.3 million dollars in CTCL grants. As of January 31, 2021, counties reported using 92% of their grant money  on items such as election equipment, staffing, and real estate expenses. There were no obligations associated with the acceptance of the CTCL grant.  The grants were the subject of some political concerns, and under a new state law, counties will not be able to accept these type grants in the future.
Rapid program changes, historically high unemployment claims, and an ill-equipped computer processing system created delays in claims processing during the pandemic in Kansas. The Kansas Department of Labor (KDOL) administers the regular unemployment insurance program and gives financial aid to unemployed individuals. In 2020, the federal government created several temporary unemployment insurance programs to help individuals who lost their jobs due to COVID-19. Kansas and other states across the U.S. experienced claims processing delays during the pandemic.  KDOL relied on an outdated, piecemeal, and poorly maintained unemployment computer system during the pandemic.   Frequent changes to the state’s unemployment computer system during the pandemic created system errors and processing delays. During the pandemic, a surge in valid and fraudulent claims strained the state’s outdated and piecemeal unemployment system, leading to system failures and claim delays. Prior to the pandemic, KDOL had few staff to answer calls because of low unemployment rates and federal funding structures.   Despite additional staff, the number of calls answered did not improve significantly during the pandemic, potentially leading to additional claims delays.   States with modern unemployment computer systems appeared better equipped to handle the challenges of the pandemic. KDOL is in the process of modernizing its unemployment computer system. In January 2021 we released a preliminary fraud estimate with the intent of releasing an updated estimate in this report. For this audit, we used an advanced computer model to create a more precise estimate of unemployment fraud in Kansas.  We estimate about $700 million in potentially fraudulent payments were made in Kansas during the pandemic.   Of the estimated $700 million in fraudulent benefit payments, about half ($343 million) came from federal funds and half ($344 million) from state funds.  We estimate about $2 billion in potentially fraudulent payments were prevented in Kansas during the pandemic.  KDOL officials reported working with federal organizations and banks to identify and recover fraudulent payments.
This is an economic development incentive evaluation that satisfies the requirements in K.S.A. 46-1137. STAR bonds allow local governments to use future sales tax revenue to help pay for development or redevelopment projects. As of November 2020, about $873 million in mostly state sales tax revenue has gone toward retiring $1.1 billion in STAR bonds. We used a tourism analysis and a break-even analysis to estimate Sales Tax and Revenue (STAR) bonds' economic and fiscal impact to the state. Tourism is a key component of the STAR bonds program. The Department of Commerce would like each attraction to draw 20% of visitors from outside Kansas and 30% of visitors from at least 100 miles away. Only 3 of the 16 STAR bond attractions we reviewed met those goals in one or both years we reviewed. We also estimated that it will take the state decades to recoup the sales tax revenue it gave up in 3 STAR bond districts (Hutchinson Underground Salt Mine, Overland Park Prairiefire, and Wichita Sports Forum) based on revenues from out-of-state visitors. We estimate it might take the state 43-118 years after bond repayment to break even on Hutchinson, 13-71 years to break even on Overland Park, and 5-49 years to break even on Wichita.
The Department for Children and Families (DCF) and its private case management providers administer the foster care system in Kansas. The case management providers develop case plans for children in foster care.  Those plans document a child's permanency goal and the tasks his or her parents must complete to achieve that goal. We reviewed 48 children's case plans to see if the parents' tasks appeared to be reasonable and relevant to reunification. The tasks we reviewed were generally reasonable and relevant, and parents generally made progress on or completed their tasks.  Additionally, we used regression analyses to help determine how demographic factors affect children’s foster care outcomes (e.g., reunification, adoption, emancipation). Those analyses showed children's permanency outcomes varied based on race, ethnicity, age, and sex.  Although children's outcomes were similar overall, being Black, American Indian, or Hispanic had a meaningful effect on children's outcomes when compared to White or non-Hispanic children. Older children also were less likely to reunify or be adopted than younger children. And female children were less likely to be transferred to another agency than male children.
The leading causes of death didn’t change much from 2019 to 2020, except for additional deaths due to COVID-19. Determining and recording cause of death involves funeral home directors, local medical certifiers, the Kansas Department of Health and Environment, and the National Center for Health Statistics (NCHS).  NCHS uses a standardized system to determine the underlying cause of death.  The leading causes of death in Kansas for Sept. 1 – December 31 were similar for 2019 and 2020, except for additional deaths due to COVID-19.  COVID was the leading cause of death for the period we reviewed in 2020. Otherwise, the leading causes of death in Kansas for that period remained mostly unchanged from 2019 to 2020.  In our review of the time period September 1 – December 31, there were 3,331 (36%) more deaths in 2020 than in 2019.  The increase in the number of deaths from 2019 to 2020 is largely attributable to COVID-19.  Both KDHE and NCHS officials reported adding new review processes when COVID-19 is listed as the cause of death.
The Legislature created the Health Care Access Improvement Program (HCAIP) in 2004 to increase the state’s Medicaid reimbursement rates for health care providers. KDHE combines hospital tax revenues collected under the HCAIP program with federal matching funds to increase reimbursement rates to both hospitals and non-hospital health care providers.  They increase rates through an add-on percentage  For hospitals it is a standard percentage.  For non-hospital providers, the add-on percentage varies by procedure.  Out of 900 procedure codes, the audit showed that 20 procedures generated 74% of total non-hospital Medicaid reimbursements in 2019. The add-on percentages for the procedure codes that generated the most Medicaid reimbursements for non-hospital providers ranged from 4.2% to 110.9%. Kansas’ Medicaid system has made it difficult for KDHE to adequately monitor and report HCAIP expenditures and revenues. State statute requires HCAIP revenues to be disbursed in a specific way and that the program be state general fund neutral. In 2020, HCAIP did not comply with those two provisions in state law. It is unlikely that KDHE can ensure compliance without changes to the HCAIP program. Finally, the HCAIP fund report we reviewed does not capture all HCAIP assessment revenues and expenditures.
County governments purchase a variety of goods and services in multiple ways. Individuals who participate in the purchasing process should avoid conflicts of interest. For the 11 counties we reviewed, larger counties appeared to have adequate policies and procedures to manage conflict of interest for purchases and contracts, but smaller counties did not.   State law has two requirements and best practices suggest additional ways counties can identify and manage conflict of interest problems.  Although good policies are important, counties must rely on the honesty of their employees to detect most conflicts.  The larger counties we evaluated typically had policies that addressed state law and best practices but the smaller counties did not. However, larger counties use a variety of purchasing processes and certain purchases receive little scrutiny for conflict of interests.
The Kansas Department of Labor’s fraud detection process was not designed to detect the large-scale, nationwide fraud campaign that occurred during the COVID-19 pandemic.  The Regular Unemployment Insurance program is administered by the Kansas Department of Labor (KDOL) and gives financial aid to unemployed individuals. In 2020, the federal government created six temporary unemployment insurance programs to help individuals who lost their jobs due to COVID-19. There were two main types of unemployment fraud alleged nationally and in Kansas during the pandemic. Nationally, fraudsters targeted the new Pandemic Unemployment Assistance (PUA) program because of weaknesses in its application process. Many of KDOL’s existing processes were manual and not effective to identify PUA fraud. KDOL officials told us they are in the process of upgrading their fraud detection process to better identify PUA and other unemployment fraud. Fraudsters also targeted the state’s Regular Unemployment program beginning in late 2020. The state’s unemployment trust fund balance has declined 75% in one year. Of the roughly $2.6 billion in state and federal unemployment benefits paid in Kansas in 2020, we estimated about $600 million (24%) could have been fraudulent. However, our fraud estimate is subject to some key assumptions and limitations. As far as impacts, if not reported, Kansas employees could owe taxes on benefits they never filed or received because of fraudulent claims. Further, if not appealed, private and public employers could be financially responsible for fraudulent claims filed under the state’s Regular Unemployment program. KDOL has not yet started criminal investigations into the potentially fraudulent claims it identified during the pandemic.
This is a guide to help readers understand the economic development incentive evaluations required by K.S.A. 46-1137. It provides important context to supplement those separate evaluations.
Districts account for the local, state, and federal money they receive using various funds. A fund can have a cash balance if the district transfers more funding into it than it spends. Districts maintain unencumbered cash balances for several reasons but receive little guidance about how much balance to maintain. After adjusting for inflation, total unencumbered cash balances statewide grew 35% from $1.56 billion to $2.11 billion in school years 2009 to 2019. Almost all the growth in unencumbered cash balances over the last 10 years has occurred in just 10 funds. Further, during the 10 years we evaluated, most unencumbered cash balances were in restricted funds which limits districts’ spending flexibility. In school years 2009 to 2019, the 25 districts we reviewed spent most of their unencumbered cash balances on purchases related to construction or maintenance of school buildings. Finally, at the beginning of the 2019 school year, many of the districts we reviewed had cash balances that met or exceeded best practice suggested minimum amounts, but the levels varied significantly. The Government Finance Officers Association (GFOA) recommends districts maintain a total cash balance of at least two months of operating expenditures.
The audit reviewed 10 recommendations from 3 prior LPA audits. It involved the Kansas Department of Agriculture and the Kansas Department of Health and Environment. The 2 agencies implemented 9 of 10 recommendations we reviewed for this audit. In April 2018, we published 2 audits with several recommendations for KDHE related to improving the state’s Medicaid program. As of October 2020, KDHE fully implemented 4 of 5 recommendations we evaluated. We were unable to determine the status of the last recommendation. In December 2018, we published an audit with several recommendations for KDA related to the animal facility inspections program. As of September 2020, KDA fully implemented all 5 recommendations we evaluated. 
The Kansas Department of Agriculture (KDA) conducts price verification inspections to check the accuracy of businesses’ pricing systems across the state. Businesses fail inspections when more than 2% of items inspectors check are mispriced. KDA may respond to failed inspections by conducting follow-up inspections or taking legal action. In fiscal years 2018 through 2020, KDA conducted a total of about 1,800 price verification inspections. The inspections covered a small percentage of all Kansas retail businesses and did not cover certain parts of the state. Businesses failed more than half (about 60%) of price verification inspections during that time. KDA didn’t conduct timely follow ups on about 75% of the failed inspections we reviewed and it issued legal orders later than it could have. Finally, it issued only small fines for repeated failed inspections. We interviewed officials in 5 other states and reviewed industry standards to learn how other states determine adequate coverage for price verification inspections. Like Kansas, other states we reviewed don’t make price verification inspections their top priority. Neither those states nor industry standards have specific criteria to determine adequate inspection coverage. Doing more price verification inspections would take additional funding or require KDA to do fewer scale or package inspections.
This is an economic development incentive evaluation that satisfies the requirements in K.S.A. 46-1137. We focused our analysis on the angel investor tax credit program’s general goals rather than economic or fiscal impact because of data limitations and the program's focus on investors instead of businesses.The angel investor tax credit program gives investors a tax credit for investing in certain Kansas startup businesses. During 2015-2018, investors received $20.2 million in income tax credits for investing $51.5 million in Kansas businesses. The program’s goal is to increase investment in innovative businesses. Department of Commerce officials said they consider how long businesses operate and whether they've created jobs to determine if the program is successful. State law does not define innovative businesses, but we think the businesses that participated in the program from 2015-2018 generally appeared to be in reasonable industries. Further, the participating businesses we reviewed from 2009-2019 stayed in business for 3-to-5 years about as often as non-participants but created fewer average jobs. However, we couldn’t determine whether participating businesses stayed in business or created jobs because of the program or something else.
Kansas Highway Patrol officials followed state law and regulations when dismissing two majors in July 2020.  Most KHP staff are classified employees, but senior management (including majors) are unclassified employees.  State law and regulations only have a few requirements related to the highway patrol dismissing an unclassified employee.  The highway patrol followed applicable requirements.
Hemp is an agricultural crop that farmers grow for its fiber, grain, and flowers.  Once processed, hemp can be used in a variety of products such as rope (hemp fiber), flour (hemp grain), and the chemical compound cannabidiol or CBD (hemp flower).  Hemp was grown in the United States before being banned in 1970 as part of the Controlled Substances Act.  Changes to federal and state law made it legal to grow and distribute hemp in Kansas starting in 2019.We used a consultant to estimate the potential financial returns on hemp grown in Kansas in 2019 and the next several years. Our estimates show that Kansas' 2019 hemp crop had limited financial returns, likely due to a lack of knowledge on how best to grow hemp in Kansas.  However, our estimates also show that hemp has the potential to become a more profitable crop in the future.  That will depend on future harvest yields and market factors that are not yet known.  For example, hemp's future financial returns will depend on future demand for CBD products and the development of new uses or markets for hemp fiber and grain.
KPERS administers the Kansas Police and Firemen’s Retirement System (KP&F), which provides retirement benefits to state and local police and firefighters. The Legislature created the deferred retirement option program (DROP) within KP&F to help retain experienced KHP and KBI staff. DROP participants’ retirement benefits are credited to accounts while they keep working. Only 32% of eligible KHP and KBI employees have participated in DROP so far, but more are likely to join. DROP appears to help agencies keep experienced staff without significantly increasing costs. DROP does not create any new staff expenses, and KHP, KBI, and KPERS officials told us DROP has not significantly affected their administrative expenses. Expanding DROP to other state or local agencies could slightly raise agency contribution rates and increase KPERS’ administrative costs. Finally, Kansas’ DROP includes most of the cost neutral elements of the other programs we reviewed.
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