Northrup Responds to Findings in Health Department Investigation
May 18, 2018
Oklahoma City - Office of Management and Enterprise Services Director Denise Northrup responds to the findings of Multi-County Grand Jury and Oklahoma Office of the State Auditor and Inspector's investigation into the Oklahoma State Department of Health (OSDH).
"After taking time to review the investigative report, I'm pleased to see that the recommendations made by the grand jury and the auditors' office mirror the recommendations OMES offered to both the Legislature and OSDH starting in January of 2018," Northrup said. "We are currently working with Oklahoma State Department of Health's (OSDH) staff to aid the agency in whatever way is necessary with our broad array of support services related to budget, finance, technology, purchasing and human resources training."
OMES offers this summary in response to the recommendations made by the Oklahoma Office of the State Auditor and Inspector starting on page 42 of the second section of the investigative report:
Auditor's Recommendation 1: The Board and the Commissioner should recognize the risks associated with this type of environment and work towards evaluating and addressing the situation to ensure the mission of the agency is accomplished in the most efficient and positive manner possible. In addition, they should be cognizant of the risk associated with ineffective communication within the agency and work to eliminate any such barriers in an impartial manner.We further recommend management perform some level of continuous monitoring, communicate its expectations for internal controls to all employees, and establish a system of clear communication that relays information from the bottom of the organization to the top and vice versa. The tone at the top regarding internal controls will determine to a great extent the success of the various elements of the internal control framework.
OMES Response: The Human Capital Management (HCM) division of OMES has training experts and a catalog of available courses and will work with OSDH in offering supervisor and leadership training to employees identified as in need of training in leadership and management development.
Auditor's Recommendation 2: OSDH should hire a CFO and Controller with adequate experience in state government including experience with federal grant reporting and experience with the statewide accounting system. The CFO should have unfettered access to, and regular communication with, the Board regarding the financial condition of the agency.
OMES Response: OMES will make available to OSDH central accounting, budget and agency business services employees and are prepared to step in and provide financial services until the administrative roles that have been identified by the Office of the State Auditor and Inspector have been filled. Additionally, OMES can offer shared services contracts in these areas to OSDH moving forward.
Auditor's Recommendation 3: OSDH should begin working immediately towards eliminating the duplicative internal accounting system FISCAL, and any related processes that duplicate accounting transactions, and move towards integrating with the statewide accounting system. This may require an agency-wide survey of what end financial information is needed, the basis for that need, and the most efficient means of obtaining that information without duplicating efforts. Doing this would eliminate the unorthodox accounting practices of borrows, payroll not posted, and program funds recovered.
OMES Response: OMES Information Services division is currently working on a Statement of Work (SOW) and a GAP analysis to start the process of moving OSDH off of the internal accounting system, FISCAL, and onto the statewide accounting system.
Additionally, OMES is developing a curriculum for all state finance employees to have a formalized certified finance officer program.
Auditor's Recommendation 4: To maximize cash flow, OSDH should consider transferring funds from the clearing account to agency funds on a basis that is more frequent than once a month.
OMES Response: This recommendation is outlined in the OMES Statewide Accounting Manual in Chapter 60.10.00 and we believe appropriate training of OSDH finance staff will address this issue.
Auditor's Recommendation 5: A separate restricted fund should be established at OMES for the Ryan White program rebates. A separate 4XX fund should be established at OMES for any federal grants that may require OSDH to maintain a cash balance.
OMES Response: OMES has established this fund and will work with OSDH staff to segregate funds and budget appropriately.
Auditor's Recommendation 6: OSDH should begin preparing budgets that reflect reasonable revenue projections based on currently known and historical information. Budgeted expenditures should also reflect estimated available funds and should avoid the use of “plugs” in the Fund 400 to make the budget balance.
OMES Response: OMES budget staff is preparing a budget proposal for OSDH to serve as a starting point for FY 2019 and work with staff to make any changes deemed necessary.
Auditor's Recommendation 7: OSDH should monitor expenditures to ensure that they do not exceed actual revenues during any year as this is not a sustainable operating process.
OMES Response: This is outlined in the training OMES will be offering to all OSDH fiscal staff.
Auditor's Recommendation 8: OSDH should work towards a process to pay payroll from an appropriate fund, based on accurate budgets, when it is initially processed in the statewide accounting system rather than funding all payroll from Fund 400 and then relying on manual entries to correct payroll.
OMES Response: OMES has already imported OSDH payroll data into the PeopleSoft Financials and HCM in a test environment so when the conversion is made it will be ready to execute immediately.
Auditor's Recommendation 9: OSDH should perform a work-flow analysis of financial staff to determine what tasks they are performing, whether those tasks add value to the financial reporting and accounting process, and if not, how those employee’s duties should be re-directed to support the needs of the agency.
OMES Response: OMES is committed to working with OSDH in training staff to maximize financial staff workflow and eliminate duplication of duties including offering shared services in identified areas.
Auditor's Recommendation 10: The OSDH Board should work towards fulfilling their fiduciary responsibilities for the agency as outlined in state statutes and best practices. They should develop a direct line of communication with the new CFO to ensure they receive sufficient and appropriate detailed financial information to perform their duties. When the duties and powers of the Board are transferred to the State Commissioner of Health in January 2019 as outlined in HB 3036, the Commissioner can benefit from following this same recommendation.
OMES Response: OMES stands ready to assist OSDH with financial training to incoming and current OSDH board members so the board can better perform their fiduciary responsibilities to the agency.
Auditor's Recommendation 11: The Oklahoma Legislature may want to consider recalling all or part of the $30 million emergency special appropriation as the majority of those funds have not been used to pay actual expenses of the agency as of the time of this report.
OMES Response: OMES agrees that the funds from the supplemental appropriation need to be monitored closely for their use and would recommend that, after reconciling the overall financial situation at OSDH, whatever portion is deemed unnecessary for supporting the agency's core mission be re-appropriated by the Legislature during the next legislative session for supporting other core government services.
Auditor's Recommendation 12: OSDH should implement procedures to ensure timely invoicing of payroll cost by the central office for employees located in county health departments and who are funded by county millage. This process could significantly improve agency cash flow.
OMES Response: Recommendation #12 is related to recommendation #8. If OSDH is processing payroll as it is actually paid, then invoicing will be done in a timely manner in order to have sufficient cash to meet payroll.
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