351.7232 L72dhe 1995 Legislative Audit Division w State of Montana Report to the Legislature Financial-Compliance Audit March 1996 For the Fiscal Year Ended June 30, 1995 Department of Health and Environmental Sciences This report contains four reconunendations related to: ^ Compliance with federal regulations. Payroll reporting procedures. •ri' :;ST;,rF DOCUMENTS COLLECTION APR 1 1 19S6 WONTANA STATE LIBRARY 1515 E. 6th AVE. HELENA, MONTANA 59620 Direct comments/inquiries to: Legislative Audit Division Room 135, State Capitol PO Box 201705 MT 95SP-84 Helena 59620-1705 MONTANASTATELIBRARY 3 0864 0010 1542 2 FINANCIAL-COMPLIANCE AUDITS Financial-compliance audits are conducted by the Legislative Audit Division to determine if an agency's financial operations are properly conducted, the financial reports are presented fairly, and the agency has complied with applicable laws and regulations which could have a significant financial impact. In performing the audit work, the audit staff uses standards set forth by the American Institute of Certified Public Accountants and the United States General Accounting Office. Financial-compliance audit staffmembers hold degrees with an emphasis in accounting. Most staff members hold Certified I*ublic Accountant (CPA) certificates. The Single Audit Act of 1984 and 0MB Circular A-128 require the auditor to issue certain financial, internal control, andcompliancereports regardingthestate'sfederal financial assistance programs, including all findings ofnoncompliance and questioned costs. This individual agency OMB audit report is not intended to comply with the Single Audit Actof 1984or Circular A-128 and is therefore not intended for distribution to federal grantor agencies. The Legislative Audit Division issues a statewide biennial Single Audit Report which complies with the reporting requirements listed above. The Single Audit Reportfor the two fiscal years ended June 30, 1995 has been issued. Copies ofthe Single Audit Report can be obtained by contacting: Legislative Audit Division Room 135, State Capitol PO Box 201705 MT Helena 59620-1705 MEMBERS OF THE LEGISLATIVE AUDIT COMMII lEE Legislative Legislative Audit Division Branch Scott A. Seacat, Legislative Auditor March 1996 To the Legislative Audit Committee of the Montana State Legislature: This is our financial-compliance audit report on the Department of Health and Environmental Sciences for fiscal year 1994-95. The department was abolished by the 1995 Legislature and programs were transferred to the newly created Department of Environmental Quality (DEQ) and Department of Public Health and Human Services (DPHHS). The report includes recommendations concerning compliance with federal regulations and payroll reporting procedures. The recommendations in the report are addressed to the newly created departments as appropriate. The written responses to audit recommendations are included at the end of the audit report. We would like to thank the dirertors and staff of DEQ and DPHHS for their cooperation and assistance throughout the audit. Respectfully submitted. ^4i2i^ Legislative Auditor Room 136, State CapitolBuilding POBox201706 HelenaMT69620-1706 Phone406-444-3122 FAX406-444-9784 Legislative Audit Division Financial-Compliance Audit For the Fiscal Year Ended June 30, 1995 Department of Health and Enyironmental Sciences Members of the audit staff involved in this audit were Jody Brandt, Scott Hoversland, and Cathy Pennie. Table of Contents List of Tables iii Appointed and Administrative Officials iv Summary of Recommendations v Introduction General 1 Background 2 Prior Audit Prior Audit Recommendations 5 Recommendations Policies and Procedures 5 Department-wide Policies and Procedures 5 Subrecipient Monitoring 5 Computer Security 6 Summary 6 Local Water Pollution Control Facilities' Matching Funds 6 . . Findings and Federal Cash Management 8 Recommendations Federal Reporting 9 Payroll Reporting Procedures 11 Accounting Issues 11 Cash Cutoff Procedures 12 Revenue Classifications 12 Improper Expenditure Cutoff 13 Improper Revenue Accruals 13 Unreconciled Federal Public Health Account 14 Summary 14 Independent Auditor's Independent Auditor's Report A-3 & Report Agency Financial Schedules Schedule of Changes in Fund Balances for the Fiscal Year Ended June 30, 1995 A-5 & Schedule of Budgeted Revenue Transfers & In - Estimate Actual for the Fiscal Year Ended June 30, 1995 A-6 Schedule of Budgeted Program Expenditures & Transfers Out by Object & Fund - Budget & Actual for the Fiscal Year Ended June 30, 1995 A-7 Notes to the Financial Schedules A-8 Page i Table of Contents Agency Responses Department ofPublic Health and Human Services B-3 Department ofEnvironmental Quality B-6 Page ii List of Tables Table Transfer of Programs 1 Page iii Appointed and Administrative Officials Department of Health The Department of Health and Environmental Sciences (DHES) and Environmental was eliminated by the 1995 Legislature, effective July 1, 1995. Sciences Public health programs formerly administered by DHES were transferred to the newly created Department of Public Health and Human Services (DPHHS). Envirorunental programs formerly administered by DHES were transferred to the newly created Department of Environmental Quality (DEQ). The director's office and central services were split between the two agencies. Administrative officials from the two agencies responsible for the programs transferred from DHES are listed below. Department of Mark Simonich, Director Environmental Quality Judy Hanson, Centralized Services Division Administrator Department of Public Peter Blouke, Director Heatth and Human Mike Billings, Operations and Technology Division Administrator Services Page iv