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HomeMy WebLinkAboutAudit Committee Minutes 09-14-2006Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 1 of 12 Deschutes County - Audit Committee MINUTES - 9/14/2006 Re: Deschutes County Audit Committee Meeting Minutes – Thursday, September 14, 2006 Committee Members Present: Commissioner Dennis Luke; Scot Langton, Assessor; Tom Anderson, Community Development; Jade Mayer and Barry Jordan, Public Sector. Committee Members Absent: Jim Keller and James Kerfoot, Public Sector. Others present were: Marty Wynne, Finance Department; Dave Kanner, County Administrator; and David Givans, County Internal Auditor. Present for a portion of the meeting were Daniel Peddycord and Vicki Shaw, Health Department; Jeanine Faria, Finance Department; and Dave Stalker, Visual Thinking. Jade Mayer called the meeting to order at 12:15 p.m. Introductions Introductions were made and it was noted that Dave Stalker with Visual Thinking was at the meeting to do a project on internal audit functions and was shooting video footage for Inside Deschutes County. Contracting Article In the Bulletin Jade Mayer mentioned the contracting article in the Bulletin and wanted to discuss it with the Committee. He wanted to know what happened internally and before this even went to the Bulletin. The Bulletin provided some recommendations and he wanted to know the Committee’s thoughts on those recommendations. He wanted to make sure the Committee could stay in communication so they were aware of what is happening before it is read on the front page of the Bulletin. Dave Kanner said the article said that everything we are doing is perfectly legal and we have not had any problems, although the headline did not match the article. Keith Chu, the Bulletin writer, raised two examples of contract awards that were pe rfectly legal and that followed the prescribed process for awarding a contract. The article gave t he impression there was something wrong with the way we did it. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 2 of 12 Mr. Kanner explained that in first seeing the accounts payable vouchers, he did not know who the contractors were, what the expenditures were for, he was not here when the budget was prepared, and he did not sign any of the contracts. It was difficult for hi m to read through the items to determine if they were legitimate expenditures. He did see immediately that the accounts payable vouchers required only one signature which is not prudent practice in terms of financial control. He talked to Mike Maier about it and Mike went through every single voucher, one at a time. Mike knew where every single penn y in the budget was and he knew all the contracts and the contractors so he was, for all intensive purposes, that second signature on the vouchers. Mr. Kanner did not feel he could perform that function so he simply said we were going to have two signatures on the vouchers. The first one would be the person who prepared it and the second one would be the Department Director. This is his assurance that the Department Director has looked at it and agrees that it is a legitimate and budgeted expenditure. Even had he not been new, it still is good financial control to have two signatures on every transaction. Somehow, this decision to require two sets of signatur es on every single financial transaction became this massive article in t he paper. He felt the article had more to do with a contract that was awarded for investigative service s, that the Bulletin considered to be questionable, rather than the need for two signatures on the vouchers. Mr. Mayer said he was more interested in how we communicate between County Administrator and the internal Audit Committee. He is hoping that we have a system set up so the Internal Auditor can be brought in and be part of that. He said he was assuming there were other opportunities out there like this and this would not be the last time that we were on the front page of the Bulletin. He hoped that a process was set up so that internally everyone would be comfortable. Commissioner Luke said from a longer term perspective, the Commissioners m et with the Department Directors every month and Mike met with them too. They are not going to sign a contract without having talked to the County Administrator unless it is a sm all standard item. They keep harping back to Greg Brown. The reason Greg Brown was successful in Deschutes County is he ended up opening up an account that only he had access to. Marty and his people have worked on that. Do contracts go out that shouldn’t, he did not think so. Is there a list of contracts that you can go to and pull all the vendors, no, but he said that is being worked on where you can go to one spot. He said he sees the invoices that come through and before a contract gets paid there has to be a contra ct on file at finance. He said there are a lot of internal checks. Commissioner Luke said in a community this small there is always potential conflict. Regarding the contract with Pete Wanless; Pete was in the Secret Service and guarded Reagan and Carter, was head of the Sunriver Police Department and worked for the Sheriff. He said he felt he is a competent investigator. He did compete against other people and at the time he was not married to the Adult Parole & Probation Office Director. He said Deschutes County bends over backwards to make sure there are no conflicts and that things are done above board. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 3 of 12 Mr. Kanner said, in answer to the question, did he run the idea past David before he implemented it? He did not think he did but he did talk to Marty about it. He does have a regular meeting with his Admin staff that report to him every Monday morning . If he were to make changes in the contracting process, and there may be some, he would run it past David and his other staff members at that time. Commissioner Luke wanted to point out that on all the construction projects that have been done over the last few years, Jeanine is the one that follows and tracks them. He said she makes sure that the bills are in line with the contracts, tells them when they are over or under, and asks the right questions. Marty Wynne said regarding the article, he felt it was a misrepresentat ion filled with general comments and then it compared us to the Culver situation which was complet ely different. He said as Commissioner Luke mentions, the Greg Brown situation had nothing to do with writing checks in the County; it had nothing to do with expenditures. Where there was an opportunity for the Sheriff was on the revenue side. He had access to checks coming into the Sheriff’s Office that were deposited into a checking account that was not the Counties. There was no issue of controls of expenditures in that case. Mr. Wynne said the other thing that was done two years ago is David, our Internal Auditor, did an audit in the Finance Department from A to Z looking for improvements in internal controls. He said there were a couple and they were implemented exc ept for one on the property tax side where they need to get some programming done by ORCATS. He said they have done a lot of things. In the normal process for processing a pay voucher, the accounting clerk who puts it together reviews everything, the accounti ng manager reviews it, he reviews it, then it goes to the County Administrator and the n it has to be signed off by two County Commissioners. That is after it gets to us and it has already been reviewed by the Department. That did not come out in the article. Commissioner Luke said to follow up, the only people who have credit cards in Deschutes County is the Sheriff’s Office for emergencies when they have t o go out of the area on short term notice. Other than that, there are no credit cards in Deschutes C ounty. Mr. Mayer asked if the controls were adequate and if the county did not need to implement the Bulletins suggested changes. Mr. Wynne asked what were the suggested changes? Mr. Kanner said the big one is that the County hires a contract administrator. He personally did not feel that was necessary. He felt that we would be creat ing a position that would not have enough work to do. Mr. Mayer said the second item was lowering the threshold from $150,000.00 down to something lower than that. Mr. Kanner said that is something to consider. He would rather have some time to get in some experience with the system and tweak i t as necessary before he overhauls it Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 4 of 12 Approval of Minutes from the meeting on July 6, 2006 Commissioner Luke: Moved Approval of the Minutes from April 13, 2006. Scot Langston: Second. VOTE: Unanimous Approval. Health Department Internal Audit Report David Givans said he invited Dan Peddycord to the meeting today to address any questions the Committee may have on the Health Department audit in reference to the audit process, how it worked for them, and any questions on the audit findings. He did get a response from management that he did include in his report. This audit was lengthier than his prior audits because it not only had a business practice section but i t also had an operational aspect that was pretty significant in terms of its sco pe. He said the project received a lot of good buy-in from the staff at Health Department. H e worked with the receptionists to the managers to go over issues and to try to resolve them . They did a very good job as a Department. There were other things he did in helping the group compile data that was not included in the report. Those items were turned over to the Health Department. Dan Peddycord thanked David for his time that he devoted to the Department. He not only looked at internal business functions and practices but he looked at the front office clinic flow practices. It is important to find ways to maximize the number of patients they see in a day and to look at the various steps along the process. They run over 24 different programs and all of them have different processes. He said the Depa rtment felt the audit report was a fairly good reflection of the business practices of the De partment. Most of the findings have been known to the Department for some period of time and they have been looking at ways to address them. Mr. Peddycord said David’s audit has brought some focus to them and provided them the opportunity to sit down and decide how they want to move through it. Vicki Shaw and Jeanine Faria have been involved with the audit from the very start. They have developed a prioritization sheet on how they would move through the various audit findings. He will have them address that later. Mr. Peddycord said one item that came up was income verification for someone to qualify for service. He noted they have a number of services that are free of charge if you income qualify. He said he would really like to see proof of income but the State says that is a barrier to care. Some of the Federal programs like WIC are a ctually now beginning to tighten the process a little bit. WIC clients must show income verification and citizenship verification. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 5 of 12 Mr. Peddycord said the new Federal Deficit Reduction Act took effect July 1st and for the Family Planning programs it goes into effect Nov 1st. In effect, although they will not require that they have proof of income to qualify, they must have proof of citizenship. This means a number of the Hispanic families that the Health Department serves will no longer qualify for that program. For the Department it means 50 – 100 clients that w ere billed to a Federal source will default to other free services or they will utilize other grant monies the Health Department gets from the State. He is very interested in developing an internal department policy that tries to balance it out and actually begins to w eigh in where they feel comfortable to ask for income verification. Jeanine Faria gave a recap of the issues (from David’s report) to the group, suc h as, financial controls, financial reporting, issues with enhancing the revenues of the Department, and the front office operations side. She went over a document that assi gns the recommendations to four categories; assign the person that is going to take responsibility, when they are they going to start it, when it is going to be com pleted, and what comments are on it. There are a couple of things in David’s report that have alr eady been resolved. They will be closing out their petty cash fund, which is not necessary. Mr. Peddycord said they have a little bit of progress to make in terms of handling and depositing money. The same person who receives the revenue for vital record processin g deposits the money. That will be broken up as the segregation of duties is an important item. Mr. Givans said one more area that lacked adequate segregation of duties was Healt hy Start. Vicki Shaw said Healthy Start is doing receipts now, so it is not just being handed over to the data entry person. They are accounting for the money before she gets it. Mr. Peddycord said one of the most exciting opportunities is the new business software system called OCHIN. OCHIN has been in place for approximately 18 months. They can now see their accounts receivable, they can have dated accounting, and they can see what is outstanding from what payer source. They are at the point where they ca n actually identify which types of management, both financial and productivity repo rts, they would like to see and track. They are able to look at payer source as well as have the ability to look at productivity on the clinician side. Mr. Peddycord said they will be able to talk to specific clinicians about their client productivity and they will engage in productivity benchmarks for the type of service rather than by the provider. He said one thing that is not in David’s report is their int erest in electronic medical records and being able to secure a system that would tie t o their clinical business systems. He said he would be very cautious of doing business with any vendor’s product that could not, in fact, prove that it fully integrated with all of the systems. The OCHIN system that they currently have has both sides of the application, the business application and the electronic medical record application. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 6 of 12 He stated that David also spent a lot of time with business flow functions. He identified a number of opportunities to address some things. One example is the Department historically did not have a no show policy. Every time a client does not show it is a vacant slot that sits unfilled, no service to provide, no one to bill for a service, clinicia ns doing nothing. The goal is to maximize the number of patient slots that are actually filled with clients, either by walk in or double booking appointments. Because of David’s findings they are actually able to have good information to track and benchmark over time. Historically they had a 22 to 25% no show rate. He would like to get it down to a 10% range which would not be bad for a public facility and would allow them to collect more billable revenue. There are a number of findings that they are well into the proc ess of implementing. Mr. Mayer asked how they deal with no shows, do they double book? Mr. Peddycord said they call a day ahead if possible as a reminder or double book. Ms. Shaw said they can also track how many times a person makes appointments and then does not show up. Maybe those people should be on an on call visit and not an appointment. Mr. Peddycord said they do schedule for walk-ins. Mr. Mayer asked if most of the clients give names. Mr. Peddycord said if they do not want to give a name they can do same day tests (such as HIV.) He said the public health industry is plagued by a very high no show rate. He felt that this means that they need to find every way they can to work the issue and get that number down. Mr. Givans said an interesting dynamic he saw was that a lot of the clinics had been set up as walk in clinics. You can’t get no-shows on walk-ins. How do you balance slots? Mr. Peddycord said they can track total clinic appointment slots that went unfilled that day or that week. One of things they are doing right now is looking at the various management reports that the OCHIN system can produce for them. They are goi ng through the reports to identify the ones that make the most sense to look at on a routine basis. He has also asked Vicki and Jeanine to look at how they are doing on their budget accounting, month to month. They were doing some double entry by using the Counties HTE system and then reentering it to an Excel spreadsheet system. Ms. Faria said she and Vicki have talked about that and she did not know if double booking was the right term. It is not uncommon throughout the County that they download information from HTE and enter it again into a separate Excel program. They do it a lot in the Finance Department and it is easier than trying to manipulate dat a in HTE. They can then format that information any way they want. They do need to enter into HTE the internal changes from project to project, as recommended. Mr. Peddycord said they are going to go back to the philosophy of cost accounting most, if not all, of the indirect's that make sense. In order, if nothing else, to capture the full cost of doing business at the program level. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 7 of 12 Mr. Mayer asked what would that help the Department do? Will that help make a decision on discontinuing one program or starting another program or what? Mr. Peddycord said it could potentially do that. By having full visibility over the cost of the program he felt they would be able to hold programs accountable for their total budget. Ms. Faria mentioned that even if a program ends up costing more than what was thought, as a public agency, the Department still has to provide that service. Mr. Peddycord said they are but they need to look at the budget for each program and look at what they feel they can afford for each profile of service. Tom Anderson said that by having that cost data per program the Department woul d be able to lobby back to the grantors if more funds were needed. Also, to the extent that others in the State provide the same program with the same pot of money, the Department would be able to prepare themselves and share with others how well the Department is doing. Mr. Peddycord said one of the unique aspects of what they do, as a Department, in terms of their service to the public, which he did not think any other department shared, is a multicultural population. About 20% of the clientele now is Hispanic, many of which are non paying clientele. That number is going to continue to grow as the Department profile of services increases. Mr. Peddycord said the other small change they are doing is better signage in their front office (bilingual signage.) They have hired staff, over time, that have come from various districts of Mexico, so to speak. They have different dialects so there is not just one way to say it. He is very proud of the Department and that they have hired bilingual staff. Nearly his whole front office reception staff is bilingual and some of the cli nicians are bilingual. Mr. Kanner said 42% of the services went to self pay clients. He assumed that many other clients do not have private insurance but State or Federal insurance programs ar e paying and those reimbursements are capped. Even if you raise your fees, you a re still going to get the same amount of reimbursement. So, an increase of fees is goin g to fall entirely on the self pay clients who are already the biggest problem for c ollectables. Increasing the fees could be covering the actual costs but it could exacerbate the collection problem that is identified. Mr. Peddycord said that is correct. Medicare and Medicaid has decreased the amount of reimbursement per type of service. In the private market they do not take Medica re because it pays them 32 cents on the dollar. Medicaid is similar with the percentages being a little different. If you think of a private industry as being more ef ficient and more effective than even the public can provide the service, they are losing 70 cents on the dollar. He said the Departments small advantage is that they get some gra nts to make up the difference. They are still supplementing 30 to 50 cents on the dollar of service f or many billable client services. The Department then still has a number of clients that are self pay and are put on a sliding pay scale. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 8 of 12 Commissioner Luke said, in the time he has been here, one of the constant discussions with Health and Mental Health is collections. The Commissioners were sold on the OCHIN system in that it was going to improve collections. Clearly, if you are only collecting 32% of the self pay and you are not getting 17% of the insurance payments and other provider payments, even though it is better than it was before, from his standpoint for the amount of money put into the system it is still very unacceptable. He felt the y are still not getting there, what is the answer? Mr. Peddycord stated they have gotten there. He said OCHIN has provided them a means to actually collect revenue that is outstanding. For the first time ever , they have an accounts receivable. So, they are sending out bills and they are collecting more revenue. The initial investment was about $100,000.00 and that was 3-1/2 years ago. They have collected more than that by virtue of having OCHIN. The initial capital investment has reached its ROI and he thought that would grow over time. Mr. Peddycord said the opportunity he thinks they have is around income verification. Rather than a client paying nothing, ask them to pay $20.00 that day or be sent a bill like a private practice. If they came in several times and have an outstanding bill , if the Department is not required by law to provide the service, then they are not going to provide it. Although they do not go that far, he felt that it was an option. Commissioner Luke asked why they have a 17% non-collectable rate for Stat e and Federal payments. If it is a collectible bill, why do they have such a high non-collection rate? Ms. Shaw said some of it is at the front office and some of it training. They are not capturing that previous balance when the client comes in and letting them know that they have a balance. Commissioner Luke stated he was asking about the 17% uncollectible on the billable collectables, such as State, Federal and other insurance, not private. Mr. Peddyc ord said if you had substantial accounts receivable you would hire some to work your AR both with the patient and the insurance company. Footnote fact, insurance company staff are paid a commission incentive to deny claims, that is a fact of the industry. They will do anything they can to deny claims, including putting it out to such a date that you are now past your contractual window of opportunity to even pay the claim. In order to work the 17% down to 1 or 2%, they are going to have to hire someone to work claims. The question is then do they have enough collectable revenue in that 17% to justify a $40,000.00 or $50,000.00 dollar salary. Commission Luke said there surely is at 66% of the people who are self paid. Mr. Peddycord said that is a question they have asked themselves, are they willing to provide resources to work those claims down. Commissioner Luke said they have been told that yes, we need to collect that money. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 9 of 12 Mr. Wynne said going back; one of the things that was missing was the receivables and especially an Aged receivable. The fact that they have an Aged receivable is a giant step forward as having that is very valuable. What he asked is why someone with insuranc e would go to the Health Department instead of going to Bend Memorial Clinic or a pri vate doctor. Mr. Peddycord said the only people that come in with insurance are immunization cli ents. The Department has the vaccine when others don’t and it may be more affordable. The y are getting a little primary care in the school based health center. In tha t case they would be working with kids, many of which their parents have insurance, many of which will be Oregon Health Plan. Mr. Peddycord said the Family Planning clients that come in will qualify for the Federal program called FPEP (Family Planning Expansion Program), or they will be in sl iding scale category, or covered by a small State grant. There is some opportunity there to work those payments. Mr. Wynne said that by having this better database they can look at what they are doing compared to last month or last year which is obviously valuable. He asked if it woul d be of use to look at how well our Health Department does in collections compared to other county health departments. Mr. Peddycord said anyone with great third party insurance would not come into the Health Department to get their medical treatment. The clientele they get is low income and with that is low payment issues. FPEP is a great payer. It is really more around the primary care and the immunizations that create that 17%. Granted, they need to conti nue to look at that. He felt the Department as a whole is not doing to bad and the OCHIN system is helpful in showing the outstanding receivables. Ms. Shaw said because they have insurance, that does not mean that they are covered. They may have a deductible or only $5.00 is paid on immunizations. So, looking at someone with insurance, thinking you should collect all of that, it may not happen. Commissioner Luke said he just wants to make sure that the County is doing everythi ng they can do to collect the money from the people who have it. If it takes a staff person, then maybe that is something that they ought to talk about. Maybe not just a staff person for Health but someone out of Finance Department that collects for other departme nts as well. He felt that was something that needed to be talked about. Mr. Kanner said he would rather turn it over to a collection agency than County staff. Mr. Givans said they are doing that with Justice Court. Ms. Shaw said she felt their person would need to know and understand insurance claim denials, not just someone asking for a check. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 10 of 12 Mr. Peddycord said on the 17% it is not because the Department did not send the bill out but that it is not being collected for some reason. Either because the insurance compan y is denying it, there is not enough information, the billing code does not quite match what the clinician did, or any number of factors that can contribute. He would not want to leave anyone with the impression that they have the opportunity to bill and they have not billed. At this time Commissioner Luke left the meeting. Mr. Mayer asked if there were any other comments or questions. Mr. Peddycord t hanked David again for his time. Scott Langton said he agreed with billing as they are providing a service but he would not want to see them alienate people. Mr. Peddycord said if a young girl goes over to Planned Parenthood and if they are late on their bill, Planned Parenthood will not see them, they send them to Health Department as they can’t deny serving them. He said they would like to come back in the future and re-review the status of their recommendations. Dan Peddycord, Jeanine Faria, and Vicki Shaw left the meeting. Follow-up on County Fair - Mr. Givans said he sent off the follow-up report last time. He wanted to follow-up wit h the fact that he did get some great correspondence back from Dan Despotopulos about their cash over short rate as it was the lowest they have ever had. Mr. Wynne sai d it was under 10 dollars with the season tickets making it right around 20 or 30 dollars. Mr. Givans stated Mr. Despotopulos said he had a good fair and it went along well. He said the training given the Rotary and having them assigned to longer shifts helped w ith the financial accuracy. Follow-up Report on Commission on Children & Families – Mr. Givans said he went through most of the report last meeting. The final was distributed and he just wanted to see if there were any questions on the final. He also said they have been responsive. Follow-up Report on Mental Health – Mr. Givans said they have been responsive and he had a meeting last week with further following up on some productivity analysis which they are going to implement. He felt they were heading in the right direction. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 11 of 12 Status of Current Work – · July/August 2006 Internal Audit status report – Mr. Givans went over the 2 month period. He stated he sends out monthly reports to Dave Kanner. The Health Department was one of the bigger challenges. Along with COVA, ORCATS and ABHA he has been doing various follow-up items. · COVA – Mr. Kanner said on COVA, the County gives them $850,000.00 per year and we do not have a contract. That is one of the items that has to be corrected. He and David have talked about it and he would like David, when he is done with his review, to make recommendations about what the County should have in a contract with COVA. Mr. Givans said he has already hinted to COVA about it and they do not have a problem, they are welcoming it. Mr. Givans said the amount represents about 80% of their budget. They bring in some other money from membership dues and a little other revenue. The audit was supposed to be a small look but it has actually taken a lot more time as there were a couple of other issues there. He has been working on the contract issue as well as some general recommendations. · ABHA – Mr. Givans is getting information from them and has scheduled a date to meet with them, he just has to determine what he will need to look at. Mental Health Department, who works with ABHA, has some concerns about certain types of expenses and ABHA’s processes. Those might be good areas to include in the inspection. · Helion (ORCATS) – Mr. Givans said it is a little problematic in getting the data. He said Jackson County has been very helpful in sharing resources. Helion is thinking that they might have to charge for our request. How does it get paid? Is it in our current contract already by support maintenance agreement or is it something they can just bill us for. Deschutes County is going to try and split it with Jackson County if we do have to pay. Mr. Langton said he is very supportive of David getting the information. Maybe the cost of the audit is something that needs to be addressed later down the road. What if it is not in the budget for our Department? Mr. Wynne said if it is determined that this is necessary by the County Administrator, then it would be done and it could be taken out of the contingency of the general fund. · Cash receipting - Mr. Givans has a lot of stuff to start that one off he just has not had a chance to look at it. It is on his near term list. Minutes of Audit Committee Meeting Thursday, September 14, 2006 Page 12 of 12 Other Items – Solid Waste Franchise Fee – Mr. Givans said that has been going along and he has been working with an outside CPA to try and make sure Solid Waste gets their consulting done. They have the engagement letter and it is going through the contract process with Timm Schimke (Solid Waste Department Director.) That process is starte d; they just have to make sure they do not start any work until they get information from both haulers. Mr. Mayer asked about the Hay Committee. Mr. Givans explained that the Hay Group is a group that came in and did consulting on the structure of personnel descriptions and people’s rank. Essentially they ranked people through skill points throughout the organization and assessed certain types of pay ranges and groups. Mr. Mayer aske d if it was to make sure we were comparable to other counties and what our County is paying. Mr. Givans said that was part of it but part of it was the internal scaling of peopl e in terms of responsibility, authority, and supervision. Mr. Wynne said it was a complete compensation review in terms of being competitive and hiring practices. Mr. Givans said the Hay Group has trained an internal County group from various departments and personnel that will carry the baton in assessing ne w positions and other positions in question. He sits in on those meetings and gives some feedback. Mr. Kanner stated that this was for non-union positions only at this time and the County has an agreement to look at union positions in the next 5 years. Mr. Mayer asked how the external audit was going. Mr. Wynne said it is going very well. Being no further issues brought before the Committee, Jade Mayer adjourned the meeting at 1:45 p.m. Respectfully submitted, __________________ Connie Thomas Senior Secretary