#1
Bureau of Rehabilitation Services: 
Procurements for Consumers
Weak Controls Allow Misuse of Funds, Affecting Resources Available to Serve All Consumers
a report by 
the Office of Program Evaluation & Government Accountability

#2
Purpose
•	BRS provides VR services in accordance with the federal Rehabilitation Act of 1973.  These services help disabled Maine citizens achieve gainful employment.
•	Services are provided by the Division for the Blind and Visually Impaired and Division of Vocational Rehabilitation.
•	In the past, auditors noted significant weaknesses   in controls over procurement of goods and services for consumers. BRS had taken action on these prior findings.

#3
Purpose (cont.)
•	OPEGA sought to determine whether internal controls for BRS Vocational Rehabilitation programs are adequate to assure expenditures for DVR and DBVI consumers are appropriate, reasonable, properly approved and accounted for.

•	The audit focused on procurement processes in DVR and DBVI as well as transactions for SFY 2004-2006

#4
Methods
To conduct this audit OPEGA:

•	Reviewed documents
•	Interviewed staff & key informants
•	Documented procurement processes and associated risks
•	Analyzed 3 years of transaction data
•	Examined select sample of higher risk transactions

#5
Background
Organizational chart showing BRS, DVR and DBVI divisions and office locations around the state

#6
Background
Flow chart showing rehabilitation process from initial application to eligibility, comprehensive assessment of rehabilitation needs, IPE development, IPE implementation, IPE amendments, case closure, post-employment services. A box describing reasons for unsuccessful closures – ineligible, 

#7
Background
BRS Procurement Processes
Standard - BRS approves individual expenditure prior to purchase and later confirms receipt
Manifest - BRS approves a series of future automatic payments to consumers.
Reimbursement - BRS approves reimbursement for a purchase the consumer has already made.
Advance - BRS approves payment to a consumer in advance of a planned future purchase.

#8

In any procurement process, internal controls guard against inherent risks such as:

•	Fraudulent customers or vendors
•	Overpayments for goods/services
•	Unnecessary purchases
•	Receipt of goods/services by persons other than intended customer
•	Purchases by unauthorized individuals
•	Employees receiving inappropriate payments
•	Duplicate payments 

#9
Conclusion
•	Internal controls are still inadequate to assure expenditures for DVR and DBVI consumers are appropriate, reasonable, properly approved or accounted for. 

•	OPEGA found instances of the misuse of funds including apparent fraud.

#10

Finding 1 – Weak Control Environment
•	BRS and Service Center management have not created an adequate control environment for the procurement of consumer goods and services.
•	BRS has emphasized improving consumer service and maintaining counselor authority over standardization and controls.
•	Procurement process is, thus, largely uncontrolled.

#11

Finding 2 – Misuse of Funds Including Apparent Fraud
•	OPEGA identified transactions in over 2,000 cases with indicators of potential fraud or misuse of funds.
•	A detailed review of 68 higher risk cases by OPEGA, and subsequently BRS, confirmed cases of apparent fraud by three employees and 12 other cases with misused funds.

#12
Finding 3 – Inadequate Policies and Procedures
•	Some practices not governed by any written policy and procedure
•	Existing policies not well supported by clear implementation procedures
•	Inconsistent compliance with existing policies

#13
Finding 4 – Inadequate Separation of Duties
•	VR counselors control all aspects of purchase transactions from initial authorization to payment approval
•	Computer controls are weak
•	Transactions are not reviewed before or after being transferred to MFASIS/ Advantage ME for payment
#14
Finding 5 – Insufficient Verification of Expenditures
•	Case files are not regularly, if ever, reviewed by supervisors 
•	Case reviews do not fully address financial aspects
•	ORSIS data is not being analyzed to identify questionable transactions
•	Service Center relies on controls at BRS, and does not perform its own check on transactions

#15
Finding 6 – Poor Documentation
•	Some case files could not be located
•	Lack of evidence consumers received goods and services, i.e. no receipts
•	Inadequate justification for expenditures
•	Lack of income documentation in support of successful self-employment case closures

#16
Finding 7 – Computer Controls Lacking
•	ORSIS is functioning as a purchasing and accounts payable system, but not recognized as such.
•	Internal controls, such as edit checks and role-based access, usually found in purchasing and payables systems are not incorporated into ORSIS.

#17
Observation 1 – Consumer Contributions Could Increase Resources
BRS may be able to increase resources available for all consumers, and improve “buy-in” to employment plan success, by consistently requesting a financial contribution.
•	Consumers can not be denied services or goods if they do not wish to contribute
•	Any contributions would result in more resources for others
#18
Observation 2 – Centralization of ORSIS Could Increase Efficiency
Currently ORSIS is decentralized, with a central server and local servers associated with each office.
•	Communication between servers is limited
•	Maintaining security and accurate, consistent data consumes considerable human resources
•	Information can not be readily shared between offices, creating inefficiencies

#19
Management Actions
•	BRS has taken a comprehensive, integrated approach toward addressing internal control weaknesses identified in this audit
•	Significant attention and resources devoted to designing complete system of internal controls
•	SIQA unit in BRS will oversee work plan for implementation of actions agreed on
#20
A. Revised Procurement Process (7/08)
–	Separate duties manually & electronically with additional verification and documentation
B. Strengthened Policies and Procedures (9/08)
–	Add new policies, revise and clarify existing
–	Specify when & how to use, and documentation requirements
C. Strengthened Computer Controls (Spring 08)
–	Incorporate automated controls and edit checks
–	Improve documentation

#21
D. Redesigned Case Review System (1/08)
–	Establish comprehensive case review protocols covering programmatic and fiscal components

E. Monitoring for Risk Indicators (3/08)
–	Utilize new and existing reports to screen for risk

F. Service Center Auditing (1/08)
–	Conduct semi-annual site visits to review procurement transactions
#22
G. Training for Supervisors, Managers and Staff (12/08)
–	Conduct training on new policies, procurement procedures, case review, internal controls
H. Enhanced Accountability for Staff Compliance (7/08)
–	Incorporate compliance into performance evaluations
I. Expanded Awareness & Identification of Existing Fraud or Misuse of Funds (2/08)
–	Review at risk cases identified by OPEGA

#23

Questions?