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HomeMy WebLinkAboutMINUTES - 07182000 - C163 3 TO: BOARD OF SUPERVISORS COn c'3 Costa FROM: INTERNAL OPERATIONS COMMITTEE County DATE: July 18, 2000 L SUBJECT: STATUS REPORT ON CORRECTIVE ACTIONS TAKEN BY THE EMPLOYMENT AND HUMAN SERVICES DEPARTMENT TO DETECT AND PREVENT WELFARE FRAUD SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: 1. ACKNOWLEDGE the efforts of the Employment and Human Services Department (EHS) in the implementation of its Internal Security Plan, which specifies steps to be taken to enhance and improve the internal security environment. 2. ACCEPT the attached status report on corrective actions taken by EHS to detect and prevent theft of County funds relating to benefit issuance. 3. DIRECT the EHS Director to return to the Internal Operations Committee on November 13, 2000 with a follow-up report that addresses: a. Identification of the individual who monitors system security access in the EHS, and the process and criteria used to determine security access levels. b. Review and verification of appropriate system security access for existing staff, in addition to new staff. c. Clarification of the levels of managers who will review program compliance and security reports, and how accountability will be established. d. Progress on the implementation of the Comprehensive 2nd Party Review Process for welfare cases and transactions. e. Use of random sampling of benefit issuances to enhance fraud detection efforts. f. Clarification of the mandated Electronic Benefit Transfer (EBT) Process for food CONTINUED ON ATTACHMENT: X YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR X RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER a SIGNATURES)/�� AYLE B. UILKEFAA MARK DeSAULNIER ACTION OF BOARD ON July 1 8 , 2000 APPROVE AS RECOMMENDED XX OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE XXAND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS(AB5EN I ��1 ) AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE AYES: NOES: SHOWN. ABSENT: ABSTAIN: ATTESTED July 1 8, 2000 CONTACT: JULIE ENEA (925)335-1077 PHIL BATCHELOR,CLERK OF THE cc: INTERNAL OPERATIONS COMMITTEE STAFF BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR COUNTY ADMINISTRATOR EMPLOYMENT AND HUMAN SERVICES DIRECTOR AUDITOR-CONTROLLER B DEPUTY WELFARE FRAUD PREVENTION JULY 18, 2000 PAGE stamp issuances, and an evaluation of the option for using EBT for cash issuances and related effects on security. f. Verification that new check stock is being used for Imprest Fund disbursements. 4. DIRECT the EHS Director to take the necessary actions to immediately implement the Welfare Fraud Hotline, and to work with County Counsel to ensure that proper protocols are developed to ensure confidentiality and promote use of the Hotline. BACKGROUND: On April 6, 1999, the Board of Supervisors referred to our Committee the issue of the theft of funds from the EHS (formerly Social Service Department), which had recently taken place. This referral was expanded to include concerns that had been expressed regarding the size and number of petty cash funds which are in existence in the County, particularly the Immediate Need Imprest Fund. The 1999 Committee received and reviewed the attached reports dated September 27, 1999 and October 11, 1999 from staff. Based on its discussions, the Committee reported back to the Board the theft of funds portion of the referral on October 5, 1999. We are now satisfied that the Imprest Fund has been made as secure as is realistically possible, given the $1000 limit on checks and the need for two signatures on checks. The Auditor-Controller advised us that he believes there are adequate controls on the use of the remaining petty cash funds and we concur with that assessment. The Board of Supervisors referred to the 2000 Internal Operations Committee the monitoring of actions taken by EHS following the filing of fraud charges against two County employees, and on County check issuance procedures and administration of petty cash funds. Our Committee received a status report, attached, from EHS on June 26, 2000, that raised additional questions and concerns. We have, therefore, asked EHS staff to return with a follow-up report that addresses these questions and concerns. We are also recommending that the proposed Welfare Fraud Hotline be immediately established by EHS as a further means to deter and/or detect welfare fraud. Employment& Human Services June 20, 2000 IOC Status Report 2000 IOC Committee Status Report: Steps Taken Since October 1999 to Detect/Prevent Theft of County Funds Relating to Benefit Issuance Since our previous report to the Committee, EHS has continued to work on a series of goals, strategies and actions to improve internal financial security and increase fraud detection and monitoring capabilities. Our fundamental mission is that we significantly lower the County's risk and exposure to internal fraud, and meet our Federal, State and County program mandates. The following is a summary of the steps taken since the last IOC report in October 1999: 1. Maintain and Control Employees' Access to Computer Systems (CDS and +GIS) For Issuing Benefits: EHS continues to closely monitor and control security access levels assigned to employees using the CDS/CIS computer systems. Without this basic entry point of control, any other preventive measures would be diminished. Currently, there are approximately 1,540 system users, with varying levels of access. Our standard for assigning (and deleting) security clearances is based on matching access with the employees' job functions. Despite many new program mandates in the last year, and changing job functions, the Department has maintained a benchmark level of employee classifications assigned sensitive monetary access on CDS/CIS. No new job classifications have been assigned payment access, as a result. 2. Comprehensive Second Party Review process for welfare cases and transactions: After reassessing our control and organizational environment, we have again concluded that it not reasonable or cost effective to fully segregate the cash aid and food stamp issuance functions on CDS. While this would be an ideal preventive measure, our operating environment presents special challenges that require more innovative solutions. The Department maintains approximately 10,000 active welfare cases, and issues approximately 18,000 checks and 11,000 food stamps on CDS monthly, and approximately 4,000 checks on CIS. On these cases, there are approximately 1,700 routine payee (client and/or vendor) name changes, and 1,900 address changes occurring monthly. Because of the volume and variety of transactions processed daily and monthly, together with our mandate for timely service delivery, the z Employment&c Human Services June 20, 2000 10C Status Report Department is not positioned to reorganize and increase staff for full segregation. Where we could fully segregate, as in the GIS Child Care, and CDS Immediate Need payment functions, we have done so in the last year. For the other remaining CDS issuances and transactions, however, we have concluded that it is more reasonable and cost effective to focus on implementing an effective Second Party Review process that involves unit supervisors, as well as managers, a Corrective Action group, an independent Quality Assurance group performing targeted reviews, and Internal Security staff's input. The multi purpose focus will be to: • Monitor program integrity and compliance • Increase employee accountability and identify training needs and performance issues • Complement ongoing fraud detection/deterrent efforts Since the last IOC report, we have developed a general model, but considerable work remains to design the details for implementation. The reviews will cover CDS and GIS benefit issuances, and transportation and ancillary payments. (A process already exists for the Child Care function.) Our plan requires: • Supervisors regularly review a systematic sample and minimum number of welfare cases, transactions, and reports to assess pre- defined program compliance and security issues. • Full management reporting of review results. • A formalized Corrective Action Process that is responsive and effective, and includes proper follow-up to identify needed reforms, increased training and other issues. • Developing a new Quality Assurance Unit to perform targeted reviews, based on corrective action and other issues. • Creating an interface with supervisors, managers, Quality Assurance, Quality Control and Internal Security. Most recently, the Department assembled a work group of managers charged with further developing, during the next 6-8 months, detailed policies and procedures covering this Second Party Review process. We will also be involving EHS Human Resources and Staff Development. Decisions will be made regarding how best to select transactions and cases for review, and the number, variety and frequency of transactions to be reviewed. 3 Employment & Human Services June 20, 2000 10C Status Report 3. Expansion of the training curriculum for first-line supervisors to address both program compliance and security issues: As soon as the Second Party Review process is designed, we will involve our EHS Staff Development Unit in devising comprehensive training for supervisors and other employees. In the meantime, a number of employees have attended a variety of program and system training sessions, conducted by Staff Development, which have included training on acceptable standards for computer password usage and confidentiality, and proper sign on and off of computers. A training session specifically relating to fraud prevention and detection is planned for August 2000. 4. Formation of an Internal Security Committee: In 1999, EHS proposed creating a "Security Committee" as an avenue to promote and implement enhancements. Since the last ICAC report, the Department's alternative strategy has been to assemble a specialized work group of managers that focuses on the design for a broad Second Party Review process (referenced in above item#2). 5. Fraud Hotline: EHS has not implemented this tool, as yet, in order to focus resources on other key issues, such as the Second Party Review issue and fraud alert monitoring. We are holding this as a future action item. 6. Augment Internal Security Staff: The Board recently approved two added positions: one Fiscal Compliance Accountant and one Accounting Technician that we will fill this year. With this added staff, we hope to increase the number of targeted internal reviews. EHS has also realigned its Quality Control and Special Projects functions. These units now report to the Administrative Services Bureau Division, also focusing on Internal Security/Compliance/Accountability issues. Our goal is to develop, later this year, an independent quality assurance group to conduct focused reviews, and interface with Internal Security and the Second Party Review Process. 4 Employment&Human Services June 20, 2000 IOC Status Report 7. Ongoing and New fraud Monitoring Tools: The Department has continued to create new automated reports to alert for possible fraud. These reports are generated on an ad hoc basis from CDS/GIS, and by using separate database software to query and review select transactions. The focus continues on monitoring high-risk transactions, including payee changes, some types of supplemental and vendor payments, and case status changes. As transactions are identified, Internal Security reviews the cases on- line, and as necessary, reviews paper case files for transaction validity. The development of more and enhanced monitoring tools will continue as a long- term project. In the last six months, EHS has obtained necessary approvals and procured from the Oracle Corporation an "enterprise database" software system to warehouse and extract data, from CDS/GIS, the Child Welfare system (CWS/CMS) and from other sources, to be used for a variety of management and fiscal reporting purposes. Expected implementation of the fraud component is early 2001. In the meantime, EHS will continue using its existing software database for fraud detection and monitoring. Since the last IO)C report, Internal Security has met quarterly with other proactive northern and southern counties to share ideas for fraud detection and prevention. State fraud representatives have joined in some of these meetings. This sharing has also helped increase support for proposed security enhancements for the planned replacement for CDS/CIS, referred to as the Ca1WIN system (see item#10 below). Currently, we are aware of four other counties in the State that have established full time Internal Security Units, while other counties continue to explore this issue. During this year, both Alameda and Solano counties have visited our Department to obtain information and ideas on starting their own Internal Security Units. The most recent quarterly meeting, attended in May, focused on "Background Clearance" methods involving all new and existing employees. As a result, we are studying the information gained and methods employed, with the intention of revaluating our current process. 5 Employment & human Services June 20, 2000 IOC Status Report S. Internal Compliance and Control Reviews: In the fourth quarter of 1999, the Department's Internal Security staff performed an internal control review covering two disbursement functions: 1) Land distributed checks and food stamps and 2) Child Welfare service payments. Additional reviews are planned in other areas, particularly as staff positions are filled. 9. New Preventive GIS Controls and Improved Audit Trail: The Department has purchased from EDS, the system vendor, significant GIS security programming especially designed for our County. Installation of this package: 1) effectively segregates the payment function for Child Care supportive services and 2) improves system audit trail reliability for all supportive service payments (child care, transportation and ancillary) under CaIWORKS/Welfare to Work programs. With this programming, we have a reliable on-line audit trail that documents employee accountability for authorization and issuance of payments issued on GIS. Included is a feature to limit computer access to caseloads, based on job functionality. Installation and testing is scheduled for completion in July 2000. The Department also proposed to EDS development of a feature for on-line second level approval of selected high-risk transactions. The cost estimates returned were high, but more problematic, was the expected, protracted development period as EDS is now focusing its programming resources on the replacement, Ca1WIN. Rather than pursue this path with CDS/GIS, the Department elected to focus on promoting security enhancements for the new CaIWIN system, such as automatically examining cases for high-risk characteristics and flagging them to require supervisory approval and/or closer monitoring. The Department and other counties are currently providing input, in formal work groups, to the EDS project planning team. (See #10 below.) By the year 2002, California counties are federally mandated to implement the Electronic Benefit Transfer (EBT) process for food stamp issuances, and have the option to also use this process for cash aid disbursements. The mandate, and the County's decision on the cash aid option, will have security impacts that remain to be evaluated and addressed. A preliminary review suggests that the EBT processing of cash aid, in particular, could present an opportunity to further control the disbursement function. 6 Employment&Human Services June 20, 2000 10C Status Report 10. Future Replacement of the CDS/GIS Systems and New Preventive Controls: The CDS/GIS systems are scheduled to be replaced by Ca1WIN, in year 2003. Our County, along with the 17 other California counties in the consortium, will be using CalWIN for welfare case management and benefit and supportive service payment issuances. Ca1WIN is currently under development and some counties are formally participating in this process, including Contra Costa County's EHS. For instance, there are 8 counties assigned to help pian Ca1WIN's Internal Security features, with our County included. Our Internal Security staff participated in the Planning Phase just concluded this month. We have advocated for new security design features including "field level" security on computer screens to increase segregation, an improved audit trail, and extensive ad hoc reporting capabilities. One of the most significant features recently included in the system plan is flexibility, at county option, to require on-line supervisory approval of designated high-risk transactions. This is a significant enhancement that would open more opportunities to EHS, in the long term, to increase segregation and further lower risk and exposure. We will be providing continued input in the next, Design phase in August. 11.Imprest Fund for Immediate Need Checks. In response to the issue raised in the October 1999 report to the Committee, EHS has ordered new check stock that deletes any references to dollar limitations. 7 • 111 ''��'�"`„4�" �""''�*"R" { R # 1 «#.' i .: - i ♦= ! _ # - «♦ moi# i # s t � r • ♦ r t ♦ - r - i t - -,r. •, a •.. r lilt, WJ7 I.- i. Our Committee has received and reviewed the attached September 27, 1999 report from staff. Based on our discussion at that meeting, we reported back the theft of funds portion of the referral on October 5, 1999. We still had several questions about the petty cash funds and particularly the security of the Imprest Fund, which consists of three $100,000 bank accounts in the three major areas of the County which the Employment and Human Services Department staff use to meet the immediate needs of their clients. The attached October 11, 1999 report from staff responds to the questions we raised at our September 27, 1999 meeting. We have met with the Auditor-Controller, members of his staff and the staff of the Employment and Human Services Department and the County Administrator's Office. We are now satisfied that the Imprest Fund has been made as secure as is realistically possible, given the $1000 limit on checks and the need for two signatures on checks. We do agree with the recommendation that the fact that there is a$1000 limit on the checks be removed from the face of the checks since this may actually encourage someone who wants to steal money from the County to write a series of $999 checks, knowing there is less likelihood of their being detected up front. We are advised by the Auditor-Controller that he believes there are adequate controls on the use of the remaining petty cash funds and we are prepared to concur with that assessment. 2 `CO: INTERNAL OPERATIONS COMMITTEE Contra Costa FROM: PHIL BATCHELOR, County Administrator County DATE: October 11, 1999 - SUBJECT: FOLLOW-UP REPORT ON CHECK WRITING AUTHORIZATION la h AND PEM CASH PROCEDURES SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: RECEIVE follow-up report from the Employment and Human Services (EHS) Director, Auditor- Controller and County Administrator on the following issues raised by the Internal Operations Committee: Placing additional controls on Imprest Fund disbursements including: • A dollar capon the check amount, to be controlled by the banking institution, and • Multiple Signatures on checks exceeding a pre-determined amount. => Additional recommendations for Strengthening controls on petty cash expenditures, particularly in relation to the Social Service Imprest Fund. Update on possible utilization by EHS of an Oracle product to enhance fraud monitoring and protection. BACKGROUND: At is September 27, 1999 meeting,the Internal Operations Committee received and accepted a status report from the EHS Department, Auditor-Controller and County Administrator on actions CONTINUED ON ATTACHMENT: �,_"'YE5 SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENOAV BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON APPROVE AS RECOMMENDED,_,_,,OTHER VOTE OF SUPERVISORS Y CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS(ABSENT ) AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE AYES: NOES: SHOWN. ABSENT: ABSTAIN: ATTESTED CONTACT-JULIE ENEA(925)335-1077 PHIL BATCHELOR,CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR CCs COUNTY ADMINISTRAT AUDITQR-CONTR EMPLOYMENT HUMAN SERVICES DIRECTOR BY DEPUTY r INTERNAL OPERATIONS COMMITTEE October 11, 1999 Welfare Fraud,Check Issuance, Petty Cash Page 2 taken following the filing of fraud charges against two County employees, County check issuance procedures and administration of petty cash funds. The Committee decided to recommend that the Board of Supervisors refer these issues to the Year 20001/O Committee for follow-up in six months. However, the Committee asked for a follow-up response to several issues that arose during the discussion on the 27h. Additional Controls on Imprest Fund Disbursements Dollar Limits. A few years ago, EHS arranged with Wells Fargo Bank to have a limit on the amount of each Immediate Need check of$1,000 that is still in effect and is valid based on current statutory welfare aid payment amounts. This limit is stated on the checks. Multiple Signatures. Since the last discussion,we learned that disbursements from the Imprest Funds are not hand-written, but computer-generated checks using EHS's Case Data System (CDS). The EHS Director's signature is stamped on the printed checks. However, the real approval "signatures" are electronic, recorded in the CDS. The two required signatures are the caseworker who initiates the transaction and the worker's supervisor, who approves it. Additional Recommendations for Strengthening Controls on Petty Cash Expenditures As a refinement to the dollar limit on each check, it is recommended that this limit should be known to appropriate EHS personnel but not printed on the checks. Printing the limit on the checks will tell potential check forgers the maximum amount they could write checks for,without the checks being rejected by the bank. Regarding revolving/imprest funds in general, we believe the existing policies and controls at each department and the monitoring efforts by the Auditor-Controller represent an appropriate balance between the risk of loss, amount of exposure and the cost of the controls and monitoring efforts. Adequate detective controls are in place that would likely discover any substantial misappropriation of funds. History has shown that employees are unlikely to risk loss of job and criminal sanctions to misappropriate small amounts when they are likely to be discovered. Update on EHS's Utilization of an Oracle Product to Enhance Fraud Monitoring and Protection EHS is currently negotiating costs and services with Oracle Corporation to procure an "enterprise database system" to extract and analyze data from mainframe systems, such as CDS, and other sources. The Oracle product will essentially replace, consolidate and enhance databases now in use, including Microsoft Access. After appropriate approvals and funding are obtained, and implementation follows, this system will provide information retrieval tools to support management and regulatory reporting and fiscal requirements under the CalWORKS (CDS/GIS) and Child Welfare (CWS) programs. There will be other significant departmental uses, including fraud detection and prevention. After negotiations conclude sometime this month, EHS will submit an "Advanced Planning Document" to the State requesting funding; approval is expected to follow by November. EHS estimates Installation of the fraud component by June 2000. This timetable will allow for technical conversion and testing, and training of staff. In the meantime, EHS will continue to use its existing Access database for fraud detection and monitoring. TO: INTERNAL OPERATIONS COMMITTEE Contra FROM: PHIL BATCHELOR, County Administrator Costa J DATE: September 27, 1999 J' SUBJECT: REFERRAL OF CHECK WRITING AUTHORIZATION AND • .- '`�+' . PETTY CASH PROCEDURES FROM THE BOARD OF SUPERVISORS SPECIFIC REQUEST(S)OR RECOMMENDATION(S)6 BACKGROUND AND JUSTIFICATION RECOMMENDATION: RECEIVE report from the Employment and Human Services Director, Auditor-Controller and County Administrator on: actions taken by the Employment and Human Services Department following the filing of fraud charges against two employees, the check issuance procedures of all County departments, and => accounting procedures currently in place to prevent inappropriate use of petty cash funds. BACKGROUND: On April 6, 1999, the Board of Supervisors approved a report submitted by Supervisor DeSaulnier that requested the Employment and Human Services Director to report on actions taken by the Department following the filing of fraud charges against two employees and directed the County Administrator and Auditor-Controller to review all processes for the issuance of checks by County departments. This matter was referred to the Internal Operations Committee for discussion, and was expanded by a request from Supervisor Uilkema to include controls and accounting procedures related to the appropriate use of petty cash funds. The Internal Operations Committee was to report back to the Board of Supervisors in three to six months of the referral CONTINUED ON ATTACHMENT; YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATIONo66ARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON APPROVE AS RECOMMENDED VOTE OF SUPERVISORS 1 HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS(ABSENT ) AND ENTERED ON THE MINUTES OF THE AYES: NOES; BOARD OF SUPERVISORS ON THE DATE ABSENT; ABSTAIN; SHOWN. ATTESTED 11.10 PHIL BATCHELOR,CLERK OF THE BOARD OF CC: COUNTY ADMINISTRATOR SUPERVISORS AND COUNTY ADMINISTRATOR EMPLOYMENT AND HU SERVICES DIRECTOR AUDI TOR-CONTR BY DEPUTY ter INTERNAL OPERATIONS COMMITTEE September 27, 1999 Welfare Fraud,Check Issuance, Petty Cash Page 2 Actions Taken by the Employment and Human Services Department Following the Filing of Fraud Charges Against Two Employees. The Department continues to implement specific actions as detailed in its August 1998 Internal Security Plan, which specifies steps to be taken to enhance and improve its internal security environment. Specific actions that have been implemented include: 1. Restrict Access to Closed Cases on the Case Data System (CDS). The department has implemented special programming changes on the CDS to restrict staff's computer access to re-open cases or take any action on closed cases. This restriction will lower the overall exposure to fraud and enable monitoring to be focused on open cases. To further reduce exposure on open cases, the Internal Security and Compliance Unit monthly reviews selected open cases to identify any cases that should be closed. 2. The Internal Security and Compliance Unit monthly monitors payments and food stamps issuances for fraud alerts. Examples of fraud alerts include out-of-County addresses, multiple payments to the same payee, or matches between payee and employee addresses. These fraud alerts do not necessarily indicate that fraud has occurred, but are possible indicators of fraud that should be investigated. It was through this monitoring process that the recent incidences of fraud were detected. 3. The Department has implemented second-level approval of emergency benefits that requires supervisors to approve, on-line, emergency benefits (Immediate Need Warrants) submitted for issuance by caseworkers. 4. The Department has conducted a review of CDS security access and has reduced by 350 the number of employees with payment issuance access and/or ability to open new cases,thereby reducing potential fraud exposure. The Department also identified and removed 380 obsolete users from the system. Security standards have been applied more uniformly, based on security clearance models that are consistent with employees' duties and the security system is now being managed closely. 5. The Department has restricted caseworkers' ability to input or change their case assignments on CDS to firmly establish accountability for cases, as assigned by supervisors. 6. The Department implemented new programming to reliably record the user ID for CDS transactions in order to establish an audit trail and provide for close monitoring of transactions. 7. On a temporary basis, the Department has continued limited use of a rubber authorization stamp that enables recipients (an average ten per month) with inadequate identification to cash a County Warrant. Use of the stamp is being monitored until arrangements are made to suspend it permanently. The Department continues to work on remaining objectives geared to improving and enhancing internal financial security. These objectives include: 1. Expansion of the training curriculum for first-line supervisors to specifically address internal security procedures, and the roles and responsibilities of supervisory staff in monitoring, detecting and preventing internal fraud. This would include reinforcement of the zero fraud tolerance policy and password confidentiality issues through instructional memoranda and possibly an instructional video. 2. Formation of an Internal Security Committee comprising Department program operations, auditing, fiscal and information technology department staff. The mission of this Committee will be to provide liaison and technical support to assist the department in establishing and maintaining a secure internal control environment consistent with the Department's and County's zero fraud tolerance policy; and help to promote employee accountability and uniform compliance with departmental, INTERNAL OPERATIONS COMMITTEE September 27, 1999 Welfare Fraud, Check Issuance, Petty Cash Page 3 County, State and Federal policies and procedures. 3. The Department maintains as a key objective the development of a structured internal review process of cases by supervisors. Itis expected that supervisors will be held accountable for performing and documenting this function, which would be formalized in written guidelines. 4. The Department is poised to implement a Fraud Hotline and has developed guidelines for staff regarding referral protocol and confidentiality. The Department will consider extending the Fraud Hotline to the County Home Page. 5. The Department is planning to augment internal security staff to increase detection and deterrent capabilities, assist in targeted site reviews, and handle anticipated "hotline" and other referrals. 6. The Internal Security and Compliance Unit continues to monitor through periodic on- site audits, the distribution of warrants and ATPs (Authorizations to Purchase) within district offices. On-site audits of other functions are planned n the future as staffing increases. 7. Possible development, in the longer term,of added CDS programming and operational changes that would require some level of second level approval of high-risk transactions (such as vendor payments, payee name and address changes, supplemental issuances, and edits on dollar limits). However, it is clear that these modifications will require a significant financial investment for programming, widespread organizational changes, and support of staff using CDS. The County Auditor-Controller's Office has reviewed the Department's progress in addressing control weaknesses identified in the 1996 Audit Report. While it appears the Department has made much progress in limiting potential exposure and strengthening preventative controls, significant improvement can be achieved only with the training and endorsement of supervisory staff, and a re-definition of some job duties of staff. These steps take time. In the interim,the Department continues to develop detective controls such as activity reports and exception reports to flag unusual activity for administrative follow-up. Check Issuance Procedures of All County Departments. Until 1994,the focus of the work by the Auditor-Controller's Internal Audit Division was primarily on collections and the fiduciary activities of County departments. Most of the at-risk disbursements were funded with federal and state moneys and there were aggressive audit efforts by those agencies to monitor them. These moneys were also audited annually by independent Certified Public Accountants. Around 1994, the routine monitoring efforts by the federal and state agencies were significantly reduced. In response, the County's Internal Audit Division specifically included the examination of these disbursement activities it its scope of work. Major projects in this area included the Community Services Department In 1994,the Social Service Department in 1996 and the District Attorney (including Family Support) currently nearing completion. Of course, the Division completed many other examinations during this time including quarterly reviews of the Treasurer's accountability and annual reviews of the Treasurer's financial controls and investment activities. In response to the Board's direction, the Internal Audit Division will continue to emphasize reviews of disbursement activities until all significant areas have been covered at least once. However, because the risk of loss is at least as great for collection activities, once disbursement activities have been reviewed,the Division plans to return to a comprehensive program to include reviews of procedures and controls for all the of the County's financial activity. , It is important to note that even with an on-going control evaluation program, absolute immunity to fraud or embezzlement is not possible. Collusion by two or more dishonest staff can defeat the best of controls. For example, the San Francisco Chronicle reported on 14/1 INTERNAL OPERATIONS COMMITTEE September 27, 1999 Welfare Fraud, Check Issuance, Petty Cash Page 4 September 15, 1999 that workers in San Francisco's General Assistance Program are under investigation by the district attorney's office and the Department of Human Services for alleged welfare fraud. The Chronicle reported that, "It's one of those cases where one person couldn't have been doing it alone." Investigators are looking into a scam in which a worker or workers invented phony clients to get general assistance; the workers or their accomplices then cashed the checks. Accounting Procedures Currently in Place to Prevent Inappropriate Use of Petty Cash Funds. The Internal Audit Division reviews requests for fund increase and for relief of shortages. The Division also performs an accounting of petty cash and a review of petty cash expenditures when it does a departmental audit. Although there is no established County policy defining appropriate purchases using petty cash, the Board of Supervisors specifies by Order permissible uses when it authorizes each new petty cash fund. When reviewing petty cash expenditures, auditors look for the purchase of items that should have been obtained from Central Supply or through Purchasing and for inappropriate "gifts of public funds" such as birthday cakes for employees, etc. The transactions of the Employment and Human Services Department Immediate Need Irnprest Fund are reviewed concurrently with public assistance disbursements. Attached is a list of petty cash funds and their balances as of April 12, 1999 for information purposes. Pie y Cash and CashDift-once Funds ydthin General Fund 100300 Account# Title Amount 0020-0004 Building Inspection Petty Cash 1,200.00 0020-0005 Probation Petty Cash 4,400.00 0020-0006 Policy and Innovation Institute Petty Cash 100.00 0020-0008 Sheriff-Coroner Petty Cash 2,615.00 0020-0009 Social Service Petty Cash 12,000.00 0020-0012 Public Works Petty Cash 3,640.00 0020-0013 Personnel Petty Cash 700.00 0020-0014 Agriculture Petty Cash 450.00 0020-0015 General Services Petty Cash 630.00 0020-0016 Treasurer-Tau Collector Petty Cash 425.00 0020-0017 County Counsel Petty Cash 50.00 0020-0019 County Administrator Petty Cash 100.00 0020-0023 County Clerk-Recorder Petty Cash and Cash Difference Fund 1,140.00 0020-0026 Office of Revenue Collections Petty Cash 150.00 0020-0027 Health Services Petty Cash 1,000.00 0020-0029 Community Development Petty Cash 175.00 0020-0032 Auditor-Controller Petty Cash 100.00 0020-0035 Community Services Petty Cash 1,500.00 0020-0037 District Attorney Petty Cash 6,550.00 0020-0039 Public Defender Petty Cash 1,000.00 0020-0041 Office of Emergency Services Petty Cash 100.00 0020-0042 Private Industry Council Petty Cash 400.00 0020-0043 Animal Services Petty Cash 950.00 0020-0044 Cooperative Extension Petty Cash 100.00 0020-0045 Veterans Resources Center Petty Cash 50.00 0020-0046 Assessor Petty Cash 100.00 0020-0049 Social Service Immediate Deed Imprest Fund 300,000.00 Total S339.625A0 Other Petty Cash and Cash Difference Funds Fund and Account# Title Amount 120600-0020 County Library Petty Cash $ 2,460.00 131100-0010 Treasurer-Tax Collector Cash Diff. Fund (3,364.80) 140100-0020 Airport Enterprise Petty Cash 400.00 141500-0020 Contra Costa Club Enterprise Petty Cash 500.00 145000-0020 Hospital Enterprise Petty Cash 28,320.00 248900-0020 County Service Area M-17 Petty Cash 1,500.00 265100-0020 County Service Area P-1 Petty Cash 4,000.00 276000-0020 County Service Area R-10 Petty Cash 1,500.00 499800-0018 WC/Danville Superior Court Petty Cash&Cash Diff. Fund 1,050.00 499800-0022 Bay Superior Court Petty Cash&Cash Diff. Fund 925.00 499800-0024 Mt. Diablo Superior Court Petty Cash&Cash Diff. Fund 1,530.00 499800-0025 County Clerk Petty Cash&Cash Diff. Fund 2,125.00 499800-0028 Delta Superior Court Petty Cash& Cash Diff Fund 965.00 499800-0033 Superior Court Admin Petty Cash 300.00 499800-0036 Jury Commissioner Petty Cash 10.00 816100-0020-0048 Lav Library Trust Petty Cash 150.00 Total $ 42,370.20 Shortages Fund Title Amount 111800 Superior Courts 564.05 100300 probation 17.45 100300 Health Services 72.26 100300 Social Service 15.29 100300 Treasurer-Tax Collector 99.60 120600 County Library 78.55 Total 147 0 Shortages were replenished during fiscal year 1997-98 in accordance with Government Code Section 29390.1. zr SOCIAL SERVICE DEPARTMENT" CONTRA COSTA COUNTY To: Jack Cooper,Principal Auditor May 17, 1999 Internal Audit From: Leslie Gutie cc: Jim Takahashi Administra iv yst Marilyn Furness Subj: Social Service Revolving Fund Accounts Following is the information you requested regarding the Social Service Department's Revolving Funds. SOCIAL SERVICE REVOLVING FUND The Revolving Fund is a master account authorized by the Board of Supervisors and administered by staff in the Social Service Fiscal Unit. The revolving fund includes twelve petty cash accounts at eleven different locations,three postage due accounts, one Verifications checking account,and an unassigned portion that is used to replenish the other accounts. The current authorized amount in this fund is$12,000. Attached is a listing of how the fund is assigned within the Department. Disbursements from the petty cash accounts are authorized for advances to clients for transportation,work-related ancillary expenses, and emergency expenses for Child Welfare Services clients. Disbursements are also authorized for employees to purchase food and incidentals for Department sponsored meetings with other agencies and counties, for Job Workshops for Ca1WURKs and General Assistance clients, and for department employee recognition events and training sessions. Occasionally petty cash is used to purchase office supplies that are too small in cost to be purchased with a check through the purchasing process. For example, a building key, special paper,etc. The postage due accounts are used to prepay for postage at the local post office. Our "Postage Paid-Business Reply"mail is charged against these accounts. The Verifications checking account is used to pay for birth,death,and marriage certificates requested by Eligibility and Child Welfare workers. Emergency Benefltts Inuance System(EBIS) The Emergency Welfare Revolving Fund Account is under the control of the County Welfare Director for the purpose of generating emergency payments to clients receiving Temporary Assistance for Needy Families(TANF)and General Assistance. The maximum amount of$300,000 was established by authorized action of the Board of Supervisors in 1988. The County Welfare Director authorized the use of three commercial checking accounts with balances of$100,000 at Wells Fargo Bank locations Page 2 of 2 in Pittsburg,Martinez and Richmond. The locations were selected to accommodate the client and County Welfare Department's issues regarding transportation, issuance and cashing of warrants within East,Central and West Contra Costa County. Currently, warrants are initiated at each Social Services District office on the Case Data System (CDS). The CDS entries are checked daily by department supervisors and forwarded to Auditor-Controller and Social Services staff for reconciliation. The County Auditor- Controller replenishes the fund based on the previous month's activity and reconciliation. If you have any questions regarding this information,please feel free to give me a call at ext. 3-1652. H:RevfundltntAudmemo.doe 0 Sid fill > d s CONTRA COSTA HEALTH SERVICES Prepared by: C.McHugh PETTY CASH ACCOUNTS Updated: 15 April 1999 TYPE OF FUND SITE LOCATION ASH MANGE THER TOTAL A83632 SPECIAL CHILDREN'S PROGRAM 2425 BISSO LANE 0280 CONCORD $70 570 ACCOUNTINOmDMINISTRATION 20 ALLEN ST.,MARTINEZ 120 120 ALCOHOL-WEST C UNTY 3043 RESEARCH DR RICHMOND 2S 25 ANTIOCH CHILDRENS MENTAL!MMM- 2400 SYCAMORE DR.033 ANTIOCH 50 id BRENTWOOD CLINIC I I8 OAX ST.,BRENTWOOD 50 i0 BRENTWOOD CLINIC I18 OAK ST.,BRENTWOOD 25 25 CCHP 595 CENTER AVE. MARTINEZ 165 165 CCHP-CONCORD POST OFFICE 20 ALLEN ST.,MARTINFZ 50 50 CCRMC-ADMISSIONS 2500 ALHAMBRA AVE MARTINEZ so so CENTRAL CO.CHILDRENS MH 1026 OAK GROVE RD.01 I CONCORD 30 50 CENTRAL CO MH CLINIC C NCORD 1420 WILLOW PASS RD. 0200 CONCORD 100 IOt3 CHECKING ACCOUNT 20 ALLEN ST.,MARTINEZ 14,855 14 855 CLINICAL LAB-CCRMC2500 ALHAMBRA AVE. MARTINEZ SO 50 COMMUNITY SUBSTANCE ABUSE 595 CENTER AVE.,MARTINEZ 65 65 CONCORD HEALTH ENTER 3052 WILLOW PASS CONCORD 25 25 CONSERVATORSHIP 624 FERRY ST.,MARTINEZ 175 504 675 CONTRACTS AND GRANTS 597 CENTER AVE SUITE 255 MTZ. 25 25 ATA CENTER $95 CENTER AVE. MARTINEZ 50 30 DISCOVERY HOUSE 11 4694 PACHECO BLVD MARTINEZ 300 2,700, 3 000 EMERGENCY MEDICAL SERVICES 50CIER D&,---,nNEZ 100 100 EP5DT Program(EstAb.7197 2450 STANWELL DR 0270 CONCORD 50 50 FAMILY PARTNERSHIP Qknrwdy OP 2450 STANWELL DR 0270 CONCORD 7$ 75 GEORGE MILLER EAST 3020 GRANTCONCORD 100 100 GEORGE MILLER WEST 2801 ROBERT MILLER D RICH 75 75 HOSPITAL ADMINISTRATION 25W ALHAMBRA AVE. MARTINEZ 100 100 HOSPITAL k RESIDENTIAL SERVICES 2425 BISSO LANE,STE 235 CONCORD 50 50 HOSPITAL CAFETERIA 2500 ALHAMBRA AVE MARTINEZ 1 1w 1,500 INPT PSYCH ADMINISTRATION 2727 ALHAMBRA 04 MARTINEZ 250 250 MARTINEZ POST OFFICE 20 XM ST.,MARTINEZ 1000 1 000 MEDICAL SOCIAL SERVICES 2727 ALHAMBRA 03 MARTINEZ 30 SO MENTAL HEALTH-ADULT 343 CENTER M STE 200 MTZ i S00 1,500 MENTAL HEALTH-CHILDREN`S 2450 STANWELL DR 0270 CONCORD 11504 11500 MENTAL HEALTH ADMINISTRATION 393 CENTER AVE. MARTINEZ 175 175 MH Crisis Services PES 25M ALIIAMBRA AVE. MARTINEZ 200 200 NURSING ADMINISTRATION 2500 ALHAMBRA AVE. MARTINEZ Sti 50 NUTRITIONAL SERVICES 2500 ALHAMBRA AVE.,MARTINEZ 200 200 OP PHARMACY-CCRMC 2500 ALHAMBRA AVE. MARTINEZ 100 I00 PATIENT ACCOUNTING 593CENTER AVE.,MARTINEZ 100 104 PERSONNEL 347 CENTER AVE. SUITE 260 MTZ 100 t00 PITTSBURG HEALTH CLINIC $50 SCHOOL ST. PIT I SBURG 100 100 PITTS EAST CO MENTAL HEALTH 530 SCHOOL ST.,PITTSBURG 30 SO PITTSBURG POST OFFICE 20 ALLEN ST.,MARTINEZ 125 125 PITTSBURG REGISTRATION 330 SCHOOL ST.,PTTT9BURG I00 100 REHABILITATION THERAPY 2300 ALHAMBRA,MARTINEZ 70 70 RICHMOND HEALTH CLINIC 100-38TH ST.,RICHMOND I00 100 RICHMOND HEALTH CLINIC 100.38TH ST.,RICHMOND 50 50 RICHMOND MENTAL HEALTH ADMIN 100.38TH ST.02400 RICHMOND 320 920 RICHMOND CNP REGISTRATION 100438TH ST.,RICHMOND ro 30 RICHMOND POST OFFICE 24 ALLEN ST.,MARTINEZ 200 200 SOJOURNE CLINIC 3024 MACDONALCt SUITE 102 RICHMOND 100 100 SPECIALTY CENTER 2500 ALHAMBRA AVE. MARTINEZ 30 90 SUMMIT CENTER Eatab.7147 204—39=DIE,MARTINEZ 100 100 TRI-CITIES DISCOVERY CENTER 2586 APPIAN WAYPINOLE 50 50 VOLUNTEER SERVICES 2500 ALHAMBRA,MARTINEZ 20 20 WEST CO OLDER ADULT CL 11720 SAN PABLO A EL CERRITO so 30 WEST CO.CHILDRENS MH 303 41ST STREET RICHMOND I so TOTAL Q mm Audmized Balance per A"uw-Coutollar c dy Overages Overage Fund 810900 Account# Title Amount OF 5000209 Office of Revenue Collections $ 238.92 OF 5000210 Mt. Diablo Superior Court 562.74 OF 5000211 Bay Superior Court 223.16 OF 5000214 Walnut Creek-Danville Superior Court 794.91 OF 5000215 Delta Superior Court 1,270.72 OF 5000355 County Clerk-Recorder 512.41 OF 5000366 Animal Services 33.83 OF 5000373 Clerk's 342.36 OF 5000374 Building Inspection 33.21 OF 5000377 Hospital Pharmacy 12.16 Total $ 4.024.42 Overages were transferred to General Fund Revenue on August 4, 1998 as required by Government Code Section 293 80.1.