Office of Ombudspersons for Families
Financial Audit Division

The Office of the Legislative Auditor (OLA) is a professional, nonpartisan office in the legislative branch of Minnesota State government. Its principal responsibility is to audit and evaluate the agencies and programs of state government (the State Auditor audits local governments). OLA's Financial Audit Division annually audits the state's financial statements and, on a rotating schedule, audits agencies in the executive and judicial branches of state government, three metropolitan agencies, and several "semi-state" organizations. The division also investigates allegations that state resources have been used inappropriately. The division has a staff of approximately fifty auditors, most of whom are CPAs. The division conducts audits in accordance with standards established by the American Institute of Certified Public Accountants and the Comptroller General of the United States.

Consistent with OLA's mission, the Financial Audit Division works to:
Promote Accountability, Strengthen Legislative Oversight, and
Support Good Financial Management.
Through its Program Evaluation Division, OLA conducts several evaluations each year and one best practices review.

OLA is under the direction of the Legislative Auditor, who is appointed for a six-year term by the Legislative Audit Commission (LAC). The LAC is a bipartisan commission of Representatives and Senators. It annually selects topics for the Program Evaluation Division, but is generally not involved in scheduling financial audits.

All findings, conclusions, and recommendations in reports issued by the Office of the Legislative Auditor are solely the responsibility of the office and may not reflect the views of the LAC, its individual members, or other members of the Minnesota Legislature.

This document can be made available in alternative formats, such as large print, Braille, or audio tape, by calling 651-296-1727 (voice), or the Minnesota Relay Service at 651-297-5353 or 1-800-627-3529. All OLA reports are available at our Web Site: http://www.auditor.leg.state.mn.us

If you have comments about our work, or you want to suggest an audit, investigation, evaluation, or best practices review, please contact us at 651-296-4708 or by e-mail legislative.auditor@state.mn.us

Senator Ann H. Rest, Chair
Legislative Audit Commission

Members of the Legislative Audit Commission

J. Ann Hill, Ombudsperson for African American Families
Bauz Nengchu, Ombudsperson for Asian Pacific Families
Dawn Blanchard, Ombudsperson for American Indian Families
Alba Olmedo-Bihi, Ombudsperson for Spanish-Speaking Families


We have audited the Office of Ombudspersons for Families for the period July 1, 1998, through June 30, 2002. Our audit scope included grant receipts from the Department of Children, Families, and Learning, and payroll, rent, and other administrative expenditures. The audit objectives and conclusions are highlighted in the individual chapters of this report.

We conducted our audit in accordance with Government Auditing Standards, as issued by the Comptroller General of the United States. Those standards require that we obtain an understanding of management controls relevant to the audit. The standards require that we design the audit to provide reasonable assurance that the Ombudspersons for Families complied with provisions of laws, regulations, contracts, and grants that are significant to the audit. The management of the office is responsible for establishing and maintaining the internal control structure and complying with applicable laws, regulations, contracts, and grants.

This report is intended for the information of the Legislative Audit Commission and the management of the Ombudspersons for Families. This restriction is not intended to limit the distribution of this report, which was released as a public document on March 27, 2003.

/s/ James R. Nobles /s/ Claudia J. Gudvangen

James R. Nobles Claudia J. Gudvangen, CPA
Legislative Auditor Deputy Legislative Auditor

End of Fieldwork: February 21, 2003

Report Signed On: March 21, 2003



Table of Contents

Report Summary

Chapter 1. Introduction

Chapter 2. Payroll Expenditures

Chapter 3. Non-Payroll Administrative Expenditures

Status of Prior Audit Issues

Office of Ombudspersons for Families' Response

Department of Administration's Response


Audit Participation

The following members of the Office of the Legislative Auditor prepared this report:

Claudia Gudvangen, CPA Deputy Legislative Auditor
Jeanine Leifeld, CPA, CISA Audit Manager
Ching-Huei Chen, CPA Auditor-in-Charge


Exit Conference

We discussed the results of the audit with the following representatives of the Office of Ombudspersons for Families and the Department of Administration at an exit conference on March 3, 2003:

J. Ann Hill Ombudsperson for African American Families
Bauz Nengchu Ombudsperson for Asian Pacific Families
Dawn Blanchard Ombudsperson for American Indian Families
Alba Olmedo-Bihi Ombudsperson for Spanish-
Speaking Families
Mike Zabel Accounting Officer, Department of Administration
Bruce Lemke Accounting Director, Department of
Administration


Report Summary

Key Findings:

· The office did not review the payroll register report to ensure that the Department of Administration accurately entered payroll and personnel transactions. (Finding 1, page 6)

· The office overpaid one employee $448 as a result of a special pay miscalculation by the Department of Administration. (Finding 2, page 7)

· The office did not comply with certain provisions of its space rental agreement that was in effect from November 1, 1996, to October 31, 2001. (Finding 3, page 11)

Agency Background:

The Legislature created the four ombudspersons for families' positions in 1991. The legislation requires the office to operate independently, but in collaboration with, the Indian Affairs Council, the Chicano-Latino Affairs Council, the Council on Black Minnesotans, and the Council on Asian-Pacific Minnesotans. The office's primary duty is to ensure that all laws governing the protection of children and their families are implemented in a culturally appropriate manner, and that decision-making processes are in compliance with the laws that protect children of color in the state.

Financial-Related Audit Reports address internal control weaknesses and noncompliance issues found during our audits of state departments and agencies. The scope of our work at the Office of Ombudspersons for Families included federal receipts, payroll, rent, and other administrative expenditures. The Office of Ombudspersons for Families' response to our recommendations is included in the report.



Chapter 1. Introduction

The Legislature created the four ombudspersons for families' positions in 1991. The legislation required that they operate independent of, but in collaboration with, the following councils:

· Chicano-Latino (previously Spanish-Speaking) Affairs Council,
· Council on Black Minnesotans,
· Indian Affairs Council, and
· Council on Asian-Pacific Minnesotans.

One ombudsperson represents each of these communities. In 1994, the four ombudspersons became the Office of Ombudspersons for Families, separate and apart from the related minority councils.

Each ombudsperson reports to a community-specific board. Each community-specific board has five members. The chair of each minority council appoints the board for the community represented by that group. Each community-specific board selects the ombudsperson for its community. The board advises and assists its ombudsperson in the areas of policy development, work plans, and programs. Minn. Stat. Section 257.0768, Subd. 6, requires the community-specific boards "to meet jointly at least four times each year to advise the ombudspersons on overall policies, plans, protocols, and programs for the office." Each ombudsperson has the authority to monitor state and local agency compliance with all laws governing protection or placement as they pertain to children of color.

The office consists of the four ombudspersons. The office does not have any support staff. One ombudsperson takes lead responsibility for the office's administrative functions. During the audit period, the Department of Administration performed all budget and accounting functions for the office.

The office receives most of its funding from General Fund appropriations and transfers from the Department of Human Services. In fiscal years 1999 and 2000, the office received grant funding of $75,000 per year from the Department of Children, Families & Learning (CFL). CFL extended the grant until September 30, 2000, and the office received $18,775 for fiscal year 2001. Under this grant, the office hired a staff person who operated the parent assistance hotline in order to respond to the increased volume of requests for information and assistance from parents regarding laws, policies, and services that affect children. CFL reimbursed the office for payroll and other costs incurred under the grant.

Table 1-1 shows the office's sources and uses of funds for fiscal years 1999 through 2002.

Table 1-1
Office of Ombudspersons for Families
Sources and Uses of Funds
Fiscal Year 1999 through 2002


1999 2000 2001 2002
Sources:
State Appropriations $ 161,000 $ 166,000 $ 171,000 $ 236,000
CFL Grant (1) 75,000 75,000 18,775 0
Transfers-In from DHS (2) 92,000 92,000 92,000 92,000
Balance Forward In 65,954 77,225 61,760 60,955
Total Sources $ 393,954 $ 410,225 $ 343,535 $ 388,955

Uses:
Payroll $ 249,266 $ 275,752 $ 236,394 $ 174,046
Rent - Space 19,682 20,163 20,821 21,533
Other Expenditures 47,781 52,550 25,365 22,323
Total Expenditures $ 316,729 $ 348,465 $ 282,580 $ 217,902

Balance Forward Out 77,225 61,760 60,955 171,053
Total Uses $ 393,954 $ 410,225 $ 343,535 $ 388,955

(1) Grant from Department of Children, Families and Learning for parent assistance hotline for the period from July 1, 1998 through September 30, 2000.
(2) Annual Department of Human Services transfer made pursuant to Minn. Stat. Section 257.0755, Subd. 3.

Sources: State of Minnesota MAPS accounting system budgetary basis accounting reports for fiscal years 1999, 2000, 2001, and 2002 as of December 31, 2002.


Chapter 2. Payroll Expenditures

Chapter Conclusions

Except for the payroll register verification issue discussed in Finding 1, the internal controls of the Office of Ombudspersons for Families provided reasonable assurance that payroll expenditures were accurately reported in the accounting records and in compliance with applicable legal provisions and management's authorization. The office overpaid one employee $448 as a result of a retroactive pay miscalculation by the Department of Administration. For all other items tested, the office complied with the significant finance-related legal provisions concerning payroll. It also properly charged payroll to the appropriate funding sources, including the grant contract with the Department of Children, Families & Learning and the money transferred from the Department of Human Services.

Employee payroll represents the largest administrative expenditure for the Ombudspersons for Families. The office had payroll expenditures of approximately $935,500 during fiscal years 1999 to 2002, which comprised about 80 percent of the office's total expenditures.

The office consists of four full-time ombudspersons who belong to the Minnesota Association of Professional Employees (MAPE) compensation plan. There is no support staff.

During our audit period, the Department of Administration provided human resources support and processed payroll for the office. Each pay period, the staff completed timesheets and leave requests, which were approved by the community board chairpersons. The staff faxed the timesheets and leave requests to the Department of Administration for data input. The staff later submitted the original documents to the department. The department processed bi-weekly payroll transactions and pay rate changes through the State Employee Management System (SEMA4). The department recorded these transactions in MAPS through a system interface.

Audit Objectives and Methodology

We focused on the following objectives during our audit of payroll expenditures:

· Did the office's internal controls provide reasonable assurance that payroll expenditures were accurately reported in the accounting records and in compliance with applicable legal provisions and management's authorization?

· For the items tested, did the office comply with the significant finance-related legal provisions concerning payroll?

· Did the office charge its payroll to the proper funding sources, including the grant contract with the Department of Children, Families & Learning and the money transferred from the Department of Human Services?

To meet these objectives, we interviewed the ombudspersons, as well as employees of the Department of Administration, to gain an understanding of the internal control structure over personnel and payroll processing. We analyzed the payroll transactions to ensure that the office charged its expenditures to the correct funds and verified that hours processed were supported by timesheets authorizing hours worked and leave taken. We also sampled payroll expenditures, including pay rate adjustments, retroactive payments, and vacation payouts to determine if the Department of Administration accurately calculated and properly recorded these transactions in the State Employee Management System (SEMA4). Finally, we reviewed the human resources and payroll transactions to determine if the Department of Administration processed the office's payroll transactions in compliance with applicable legal provisions and labor agreements.

Conclusions

Except for the payroll register verification issue discussed in Finding 1, the internal controls of the Office of Ombudspersons for Families provided reasonable assurance that payroll expenditures were accurately reported in the accounting records and in compliance with applicable legal provisions and management's authorization. The office overpaid one employee $448 as a result of a retroactive pay miscalculation by the Department of Administration. For all other items tested, the office complied with the significant finance-related legal provisions concerning payroll. It also properly charged payroll to the appropriate funding sources, including the grant contract with the Department of Children, Families & Learning and the money transferred from the Department of Human Services.


1. The office did not review the payroll register report to ensure that the Department of Administration accurately entered the office's payroll and personnel transactions.

The office did not ensure that a review of the by-weekly payroll register was performed. A review of the payroll register report produced by SEMA4 would verify proper input of timesheet hours, pay rates, and special transactions. The Department of Administration entered payroll and personnel transactions into SEMA4, which generated payments to the office's employees. However, neither the office nor the Department of Administration reviewed the payroll register report to verify that staff accurately entered the transactions. SEMA4 Operating Policy and Procedure PAY0028 requires agencies to review the payroll register. The policy requires agencies to "…review the payroll register to verify that time and amounts were paid at the correct rate, and any necessary adjustments were processed." Without this verification, erroneous payroll and personnel transactions could be entered into SEMA4 without detection.

Recommendation

· The office should work with the Department of Administration to ensure that a review of the payroll register is performed to verify the accuracy of payroll and personnel transactions entered into SEMA4.


2. The office overpaid one employee $448 as a result of a special pay miscalculation by the Department of Administration.

The Department of Administration incorrectly calculated one employee's retroactive lump sum payment. The office made two special payments to the employee, a progression increase in July 1999 and a pay rate correction in October 1999. When the Department of Administration payroll staff calculated the October retroactive payment, they did not subtract out the July amount already paid. As a result, they overpaid the employee by $448, the amount of the July payment.

Recommendations

· The office should recover the overpayment from the employee.

· The office should verify that all special employee payments calculated by the Department of Administration are accurate.


Chapter 3. Non-Payroll Administrative Expenditures

Chapter Conclusions

The internal controls of the Office of Ombudspersons for Families provided reasonable assurance that administrative expenditures were accurately reported in the accounting records, adequately safeguarded, and in compliance with applicable legal provisions and management's authorization. However, the office did not comply with certain provisions of its space rental agreement. For the other items tested, the office complied with the significant finance-related legal provisions concerning administrative expenditures. It also properly charged administrative costs to the appropriate funding sources, including the grant contract with the Department of Children, Families & Learning and the money transferred from the Department of Human Services.


In addition to payroll expenditures, the office also incurred various costs to facilitate the office's operation. The office spent a total of approximately $230,000 on administrative expenditures during fiscal years 1999 through 2002 as noted in Table 3-1.

Table 3-1
Office of Ombudspersons for Families
Non-Payroll Administrative Expenditures
Fiscal Year 1999 through 2002

1999
2000
2001
2002

Rent - Space
$ 19,682
$ 20,163
$ 20,821
$ 21,533

Printing & Advertising
7,915
3,791
1,216
3,371

Professional/Technical Services
4,643
6,124
3,723
25

Communications
13,326
10,598
1,611
4,969

Travel
3,581
6,659
1,662
1,077

Supplies
3,611
3,436
844
1,717

Equipment
1,924
5,475
6,462
3,324

Other Expenditures
12,781
16,467
9,847
7,840

Total
$ 67,463
$ 72,713
$ 46,186
$ 43,856

Note: The decrease in expenditures from fiscal year 2000 to 2001 resulted from the discontinuation of the grant program with the Department of Children, Families & Learning, as discussed in Chapter 1.

Source: State of Minnesota MAPS accounting system budgetary basis accounting reports for fiscal years 1999, 2000, 2001, and 2002 as of December 31, 2002.

Rent

The office moved into the current space in 1994. The office relies on the Department of Administration to negotiate, prepare, and execute lease agreements. During our audit period, there were two lease agreements for the office's space in Saint Paul's Energy Park. One lease agreement covered the period from November 1, 1996, through October 31, 2001. The new lease period is from November 1, 2001, to October 31, 2006. The office receives monthly invoices for the amount of the lease payment. The office approves the invoice for payment and submits it to the Department of Administration for input into the state's accounting system (MAPS).

Other Administrative Expenditures

Other administrative expenditures included printing and communications, supplies, equipment, and other miscellaneous costs. The office spent a total of $148,019 on these expenditure categories during the four-year audit period. The Department of Administration provided budget and accounting functions for the office. During the audit period, the office initiated purchase requests and Administration entered the purchase orders on the state's accounting system (MAPS). The office received invoices for purchases or services, approved the invoices for payment, and submitted them to Administration for MAPS input. Administration sent monthly MAPS accounting reports to the office for the ombudspersons to review.

Audit Objectives and Methodology

We focused on the following objectives during our audit of non-payroll administrative expenditures:

· Did the office's internal controls provide reasonable assurance that non-payroll administrative expenditures were accurately reported in the accounting records, adequately safeguarded, and in compliance with applicable legal provisions and management's authorization?

· For the items tested, did the office comply with the significant finance-related legal provisions concerning non-payroll administrative expenditures?

· Did the office charge its administrative costs to the proper funding sources, including the grant contract with the Department of Children, Families & Learning and the money transferred from the Department of Human Services?

· Did the office submit accurate quarterly grant reports to Children, Families & Learning?

To answer these questions, we made inquiries of the ombudspersons, as well as employees of the Department of Administration, to gain an understanding of the internal control structure over office expenditures. For the rent program, we reviewed the lease agreements to determine whether the office's rent payments complied with the lease terms. For the other administrative expenditures, we performed analytical procedures to determine if payments were reasonable and tested a sample of transactions to ensure that the transactions were authorized and properly recorded in the state's accounting system (MAPS). We also tested whether the office charged its administrative expenditures to the correct funding sources.

Conclusions

The internal controls of the Office of Ombudspersons for Families provided reasonable assurance that administrative expenditures were accurately reported in the accounting records, adequately safeguarded, and in compliance with applicable legal provisions and management's authorization. However, the office did not comply with certain provisions of its space rental agreement that was in effect from November 1, 1996, through October 31, 2001. For the other items tested, the office complied with the significant finance-related legal provisions concerning administrative expenditures. It also properly charged administrative costs to the appropriate funding sources, including the grant contract with the Department of Children, Families & Learning and the money transferred from the Department of Human Services.


3. The office did not comply with certain provisions of its space rental agreement.

We noted two concerns regarding compliance with one of the office's space rental agreements. The agreement was in effect from November 1, 1996, through October 31, 2001.

First, the office did not pay for parking as required by the lease agreement. The agreement stated, "Ombudspersons for Families agrees, pursuant to Minn. Stat. Section 16B.58, subd. 8, that payroll deductions for the monthly parking fee shall be made by the Minnesota Department of Finance from each employee of Ombudspersons for Families using the parking area and said amount shall be paid to LESSOR by the Department of Finance." We saw no evidence that, under the lease provision, the office employees ever paid for parking through payroll deduction. According to the lease, employees would have been responsible for paying their own parking from November 1996 at least until the statute was repealed in May 1997. The lease also states, "In the event less than four (4) employees are paying for parking, LESSEE shall pay LESSOR, with the next monthly rent payment, the difference between the actual monthly parking payment made by the Department of Finance to LESSOR." From November 1996 through October 1998, the office paid an amount for parking as part of each monthly rent payment ($44 per month). After October 1998, the office stopped paying for parking. It appears, however, according to the lease agreement, the lessor expected to receive monthly payments for parking, either from the office employees via payroll deduction or from the office operating budget as part of the monthly rent payment. The office did not have the ability to stop making parking payments based on the repeal of Minn. Stat. Section 16B.58 without amending the lease agreement.

In addition, the office overpaid the lessor $55 in its July 2001 rent payment. According to the lease agreement, the monthly rent payment at that time should have been $1,753. However, in July 2001, the Department of Administration made a rent payment of $1,808 to the lessor, resulting in an overpayment of $55.

Recommendation

· The office should work with Real Estate Management at the Department of Administration to resolve the noncompliance issues relating to the old lease agreement.


Status of Prior Audit Issues
As of February 21, 2003

Most Recent Audit

Legislative Audit Report 98-44, covering the period from July 1, 1995, through June 30, 1998, was issued in August 1998. The audit scope included payroll, rent, and other administrative expenditures. There were no audit issues contained in the audit report.

State of Minnesota Audit Follow-Up Process

The Department of Finance, on behalf of the Governor, maintains a quarterly process for following up on issues cited in financial audit reports issued by the Legislative Auditor. The process consists of an exchange of written correspondence that documents the status of audit findings. The follow-up process continues until Finance is satisfied that the issues have been resolved. It covers entities headed by gubernatorial appointees, including most state agencies, boards, commissions, and Minnesota state colleges and universities. It is not applied to audits of the University of Minnesota and quasi-state organizations, such as the metropolitan agencies or the State Agricultural Society, the state constitutional officers, or the judicial branch.