YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

September 3, 2003

Report No. 2003-90

The following problems were discovered as a result of an audit conducted by our office of the Department of Health and Senior Services, Office of the Director.

The Department of Health and Senior Services (DHSS) needs to improve its policies, procedures, and records over contracted professional services.� The state's Office of Administration (OA) has granted the department the authority, through state law, to procure certain contractual services directly rather than referring their procurement to the OA, Division of Purchasing and Materials Management.� The department must still comply with the state's purchasing guidelines, such as soliciting competitive bids for purchases of $3,000 or more, and referring purchases of $25,000 or more to the OA.

Our review disclosed the following concerns:

• It appears the procurement of some contracted services compromised the intent of the state bidding laws.� The department sometimes obtained consultants and other services by contracting with governmental entities rather than directly with the entity who provided the service, and incurred management fees in some instances.
  
   
• The department's bid process did not always provide a legitimate opportunity for prospective vendors to compete.� Nor did the department always solicit qualified bidders.
  
   
• The department did not always properly prepare/retain documentation of the procurement process or follow procurement guidelines.� In addition, the department does not require documentation from contractors that they use a bid and evaluation process for the selection of subcontractors.

The department did not always receive or require adequate invoices or other documentation to support payments for contracted services.� In addition, it appears the department did not always adequately review invoices and/or supporting documentation for compliance with contract terms.

• The department contracted for computer consulting services related to the development of a centralized public health information system.� The contract covers the period of February 2001 to January 2004, and the department has paid the vendor approximately $3.7 million through March 2003.� The invoices did not document job classification; however, the invoices were based on hours worked, at the contracted rate for various job classification titles.
  
   
• Vendor invoices for an outreach program did not adequately document the services provided. The maximum cost reimbursement for the contract was $985,000.
  
   
• In fiscal year 2001, several vendor invoices for a HIV/AIDS service coordination contract did not include sufficient detail for costs, and it appears the department did not sufficiently review the invoices.� Although the contact listed a maximum amount of $16,157 for administrative costs, we noted administrative costs billed totaled $25,224, or $9,077 more than what was allowed.
  
   
• Not all contracts required a budget for planned expenditures.� Two of eight contracts and related amendments reviewed were not supported by a budget outlining how the funds were to be spent.

The State Public Health Laboratory (SPHL) does not generally recover the related costs of its services.� In fiscal years 2002 and 2001, SPHL expenditures totaled approximately $6.8 million and $5.6 million, respectively, while revenues, including testing fees, handling fees, and Medicaid billings, totaled approximately $1.3 million each year.� In addition, the SPHL did not always bill Medicaid programs for applicable services.� Also, the department needs to determine if it is effective and efficient to continue staffing branch laboratories.

The department needs to improve its policies and controls over cellular telephones.� The procurement and coordination of all cellular telephone equipment and services has not been adequately overseen.� Expenditures related to cellular telephone services totaled approximately $33,600 and $22,100, for fiscal years 2002 and 2001, respectively.

Bids were not obtained for some expenditures in excess of $3,000 and many invoices were not processed and paid on a timely basis.� In addition, some food expenditures did not appear to be a prudent, reasonable, or necessary use of department funds, including $468 for an appreciation luncheon for 28 employees at the Governor's Mansion� and $1,350 for breakfast and luncheon for a diabetes conference.� Although the department was billed for 50 breakfasts and 125 lunches, only 58 attendees for the diabetes conference were documented.

The department needs to improve its management of state-owned vehicles.� At December 31, 2002, the department maintained a fleet of 97 vehicles.� Vehicle usage logs are not maintained for all vehicles and vehicle usage documentation, where maintained, varied among the department units.�

The audit report also includes some other matters related to time accounting, computer equipment controls, policies and records, and internal audit upon which the department should consider and take appropriate corrective action.�

Complete Audit Report