Washington State Auditors Office

Citizen Hotline Report

Department of Social and Health Services

Report Date September 17, 2008 Report No. 1000025

Issued October 27, 2008 Reissued November 5, 2008

Washington State Auditor Brian Sonntag

November 5, 2008

Department of Social and Health Services Thurston County Olympia, Washington

Report on Citizen Hotline Investigation

Attached is the official report on Citizen Hotline Case No. 07-174 for the Department of Social and Health Services. This referral was submitted to us under the provisions of Chapter 43.09 of the Revised Code of Washington. This report contains the results of our investigation. Questions about this report should be directed to Senior Investigator Sandra Miller at (360) 902-0378 or Director of Special Investigations Jim Brittain at (360) 902-0372.

BRIAN SONNTAG, CGFM WASHINGTON STATE AUDITOR cc: Ms. Kathy Brockman, Department of Social and Health Services

Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388 FAX (360) 753-0646 http://www.sao.wa.gov Washington State Auditors Office 2

Investigation Summary
State of Washington Department of Social and Health Services
ABOUT THE INVESTIGATION
On December 6, 2007, the State Auditors Offices was contacted through its Citizen Hotline by an individual reporting that in July 2007 the Department hired a vendor to take fingerprints of prospective foster care and adoptive parents. The individual stated the Department did not pay the vendor in a timely manner, causing late fees to be added to the balance owed. The individual further stated the Department still owes the company money. We asked for a copy of the written contract or agreement between the Department and the vendor and were told a Department social worker had a verbal agreement with the vendor; nothing was in writing. From July through October 2007, the vendor billed the Department for 423 prints at $25 per print, totaling $10,575. Copies of redeemed payment warrants totaled $10,175 when we began our investigation. The remaining $400 was paid on December 24, 2007. The vendor charged the Department late fees of 15 percent per month for unpaid balances 30 days or more past due. However, because the agreement was not written, the Department is not obligated to pay the late fees. If there had been a written contract, the Department would be required to pay one percent in interest per month as required by state law (RCW 39.76.010).

RESULTS
We found the Department of Social and Health Services has paid its vendor in full for all services provided. We found no written agreement between the vendor and the Department.

DEPARTMENT'S PLAN OF RESOLUTION

1. The new Regional Business Manager has been instructed not to deliver or pay for any services in which a conflict might or could prevent DSHS from entering into a purchased service contract. A contract must by in place before services are delivered and paid. This was completed verbally in July and by email on July 22, 2008. A reminder was sent to all management team staff, that services may not be purchased and delivered to clients by DSHS, Division of Children and Family Services (DCFS), Childrens Administration (CA) unless there is a contract in place. A memo that included a corrective action plan was sent to all staff on July 22, 2008. Fiscal and contracts staff in the region were reminded of the statutory requirement regarding paying late fees to providers or vendors. This information went out in an email on August 5, 2008, and was verbally discussed with staff in July 2008. Payment processing methods in the business office will be reviewed at random to ensure payments are processed and completed in a timely manner so that late fees are not

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incurred. Staff will also be reminded that tracking of all payments must be completed. There will be random periodic reviews beginning in September 2008. 5. The contracts tab on the regional intranet website will be updated to include a broader range of contracted services. Staff will receive an informational email about the expanded content. Update to be completed by October 31, 2008.

AUDITORS CONCLUDING REMARKS

We thank Department officials and personnel for their assistance and cooperation during the investigation.

INVESTIGATION CRITERIA/POLICIES
We came to our determination in this investigation by evaluating the facts against the criteria below: RCW 39.76.010 Interest on unpaid public contracts-Timely payment. (1) Except as provided in RCW 39.76.020, every state agency and unit of local government shall pay interest at the rate of one percent per month, but at least one dollar per month on amounts due on written contracts for public works, personal services, goods and services, equipment and travel, whenever the state agency or unit of local government fails to make timely payment. For the purposes of this section, payment shall be timely if: (a) A check or warrant is mailed or is available on the date specified for the amount specified in the applicable contract documents or, if no date is specified, within thirty days of receipt of a properly completed invoice or receipt of goods or services, whichever is later. (b) For any amount which is required to be withheld under state or federal law, a check or warrant is mailed or is available in the proper amount on the date the amount may be released under the applicable law. RCW 39.29.100 Contract Management-Uniform guidelines. (1) The office of financial management shall adopt uniform guidelines for the effective and efficient management of personal service contracts and client service contracts by all state agencies.

(2)

State Administrative and Accounting Manual 85.32.50 Agencies are to establish procedures to ensure timely, accurate, and cost effective payment of obligations to vendors. An agencys payments will be considered timely when its records show that the agency pays 95 percent or more of its obligations to vendors by the due date defined below. Agencies are to maximize effective cash management by paying as close to the due date as workable. Special attention is to be given to the following: Due Dates Due dates for payments are established by the terms of contracts between the agency and vendors. If the contract is silent concerning terms or there is no written contract, the terms are net 30 days. The 30 days, or other terms, begin upon receipt of the goods or services or a properly completed invoice, whichever is later. Vendor payments are to be made by the due date. As
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prescribed in RCW 39.76, agencies, if billed, are required to pay interest at the rate of one percent per month on amounts of past due accounts. Due dates are postponed in the case of disputes. Partial Payments when agencies accept partial delivery of goods or services without reservation, prompt payment is to be made for the goods or services received upon receipt from the vendor of a properly completed invoice or in accordance with contract terms covering the partial delivery. Disputes Prompt and proper notification to a vendor of receipt of unsatisfactory goods or services or an incorrect invoice defers the due date. The due date is recalculated from the date the problem is resolved. Proper authorization is required when material changes are made.

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Contacts
Washington State Auditor Brian Sonntag, CGFM sonntagb@sao.wa.gov (360) 902-0360

Director of Special Investigations Jim Brittain, CPA brittaij@sao.wa.gov Deputy Director of Special Investigations Kim Hurley, CPA hurleyk@sao.wa.gov Whistleblower and Hotline Program Coordinator Julie Cooper cooperj@sao.wa.gov Investigators LaRene Barlin Sandy Miller Cheri Elliott Director of Communications Mindy Chambers Public Records Officer Mary Leider Main phone number Toll-free hotline for reporting government waste, efficiency Web site

(360) 902-0372

(360) 725-5352

(360) 902-0377

barlinl@sao.wa.gov millers@sao.wa.gov elliottc@sao.wa.gov

(360) 902-2213 (360) 902-0378 (360) 725-5358

chamberm@sao.wa.gov

(360) 902-0091

liederm@sao.wa.gov

(360) 725-5617 (360) 902-0370 (866) 902-3900 www.sao.wa.gov

To receive electronic notification of audit reports, visit: https://www.sao.wa.gov/applications/subscriptionservices/

Americans with Disabilities

In accordance with the Americans with Disabilities Act, this document will be made available in alternate formats. Please call (360) 902-0370 for more information.