DOVER, Delaware – Today, Delaware State Auditor Kathleen McGuiness released the following statement in response to the Memorandum Opinion and Order from the court confirming the Auditor’s Office’s power to conduct performance audits:

Judge Karsnitz released his decision in our court case with the Delaware Department of Health and Social Services (DHSS) regarding our requests to audit Medicaid spending. My office fought for nearly two years for access to information needed to conduct a performance audit set within the professional standards and guidelines of the U.S. Government Accountability Office. This audit sought to determine if DHSS’ Division of Medicaid and Medical Assistance (DMMA) complies with federal and state requirements, implements effective internal controls, and incorporates data integrity throughout the program.

Medicaid spending accounts for nearly 1/5 of the state’s annual budget, and Delawareans deserve to know if Medicaid is complying with state and federal requirements when spending these critical funds.

The Auditor’s Office regularly receives confidential data as part of our duties under Delaware Code, and the prior administration conducted a nearly identical performance audit of Medicaid eligibility in 2014. However, despite a history of conducting this work, my staff and I received significant pushback and delays that undermine the independent audit process in our state.

This performance audit was hindered by the Department of Justice (DOJ) and their insistence this audit was not within the Auditor’s scope of authority. My staff was forced to learn to draft a subpoena because the assigned attorney from the Department of Justice declined to provide my office legal representation on this matter. The DOJ initially refused to grant my office outside legal counsel forcing us to represent the office pro se.

I would like to thank Judge Karsnitz for his objective ruling confirming the scope of authority of the Auditor’s Office. I commend Governor John Carney for his judgement in granting the office independent outside legal counsel. I applaud the efforts of Luke Mette of Armstrong Teasdale LLP and his team for their outstanding legal expertise and presentation of the facts.

There’s been a lot of confusion about what this office does or should be doing, but this decision makes it clear; taxpayers deserve to know if they’re getting a fair deal from their state government, and Delawareans should know they have fighters on their side in the State Auditor’s Office working on their behalf for accountability no matter the resistance.

Read the Court’s Memorandum Opinion and Order here.

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Contact: Tori Parker, Deputy Auditor
tori.parker@delaware.gov

Secretary of Finance Rick Geisenberger is pleased to announce the appointment of Jane L. Cole, CPA, as the new Director of Delaware’s Division of Accounting. The appointment became effective Monday, May 15th.

Ms. Cole most recently served as the State’s Manager of Financial Reporting and Internal Control, overseeing the creation of Delaware’s award-winning Comprehensive Annual Financial Report (CAFR), which ensures the completeness and accuracy of work submitted to the State’s auditors. She was also responsible for implementation of all new Governmental Accounting Standards Board (GASB) pronouncements; ensuring the State’s financial reporting adheres to the highest-quality standards. Her responsibilities included overseeing the staff responsible for reviewing the internal control policies for all State organizations.

The Division of Accounting provides financial and technical accounting services and support to state organizations, establishes the State’s internal control structure, and promotes consistent, reliable, and transparent financial information to the public. “Jane is an accomplished financial professional and manager, and she possesses a wealth of expertise in governmental accounting standards and systems,” said Secretary Geisenberger. “I am pleased that she will be overseeing the very capable staff of our Accounting Division and working with agencies throughout State government to boost efficiency, internal controls, and transparency in our accounting and management of revenues and expenditures.”

Before joining State government in 2013, Ms. Cole had 20 years of private sector experience in public accounting and financial management – most recently as Senior Manager of Accounting and Audit at Herbein + Company, Inc., a leading regional CPA firm headquartered in Reading, Pennsylvania. There she oversaw audits for scores of governmental and non-profit organizations, as well as 990 tax compliance for the firm’s tax-exempt clientele. Her responsibilities included supervision and training of audit staff and clients in governmental accounting standards, regulations, and compliance matters.

Ms. Cole holds a Bachelor of Science degree in Social Work, an Accounting Certificate, and has been a Certified Public Accountant since 1999. She is a member of the American Institute of Certified Public Accountants, the Association of Government Accountants, and the Government Financial Officers Association. From 2004 to 2013, she served as a member and then Chair of the Not-for-Profit Committee of the Pennsylvania Institute of Certified Public Accountants.

Dover, Del. – State Auditor, R. Thomas Wagner, Jr., is pleased to report that MOT Charter School and Thomas A. Edison Charter School consistently got it right by establishing and following internal controls, which helped ensure compliance with rules and regulations. The same cannot be said for Delaware College Preparatory Academy (DCPA) and Kuumba Academy Charter School (KACS).

The DCPA Board President claimed she made an unrecorded related party loan to the school. As part of her response to the otherwise untraceable arrangement, she provided a letter dated August 2011 in which she approves her loan to the school. The lack of appropriate accounting and related party disclosure aside, she stated she was not aware of the “why and how’s of the [$11,252.87 in] transactions” for which she was reimbursed. The Board President’s reimbursements were highly questionable as legitimate business expenses given the nature of the transactions and the missing or poor quality supporting documentation. The Executive Director of DCPA also received $18,025.78 of which $11,740.87 (65%) lacked supporting documentation to justify the reimbursement. At one point DCPA’s Board President writes “…I am not following why DCPA needs to justify expenses incurred to run its business…”

Kuumba Academy Charter School (KACS) processed payments made in addition to the employees’ salaries for the same work already included in their job descriptions. This arrangement took place for the Head of School, the Assistant Head of School, and a custodian to provide payments for the same services they were employed to perform. In the case of the custodian, his contract was almost as much as his salary as a full-time employee. During the same period, a Managing Director of a CPA Firm held a contract to perform the “Financial Director” responsibilities for the School at a cost of $4,000.00 per month.

A copy of the complete report can be found at: Charter School PCard and Personal Reimbursements Inspection.

For more information, please contact Kathleen A. Davies, CPA-PA, CISA, CGAP, CGFM, CFE, Chief Administrative Auditor, at 302-857-3919 or kathleen.davies@delaware.gov.

Dover, Del. – State Auditor R. Thomas Wagner, Jr. releases an inspection report on the Belvedere Volunteer Fire Company (the Company). The Office of Auditor of Accounts agreed to perform an inspection over the Company’s financial records after the Office of the Attorney General notified us that Belvedere’s former Chief pled guilty on November 12, 2014, to theft related to his tenure as Treasurer of the Wilmington Fire Fighter’s Association and theft and forgery at Belvedere.

The Belvedere Volunteer Fire Company is plagued with mismanagement. During the period of our inspection, we found the Company struggling to pay its bills on such a scale that it puts the mission to protect loss of life and property in jeopardy.

According the Board of Director’s Meeting Minutes from March 2014, the ambulance used to serve the community “has been out of service more than in service.” Further, we found an instance where the Company’s paid EMTs did not receive their bi-weekly paychecks for an entire month. Both issues stemmed from the Company’s severe financial difficulties.

The Company did not ensure they had a proper accounting system or supporting expenditure documentation for the period under review. During the period January through May 2014, they claimed the accounting records were lost when backing up their accounting software. Correspondingly, they somehow lost or failed to obtain the majority of the supporting documentation for the same period of time. We were able to obtain the bank records directly from the bank and found that more than 78% of the expenditures were never posted to their accounting system for one of the seven accounts alone.

The Company’s mismanagement is reflected in Company officials’ inability to respond to inquiries and provide documentation during this inspection. Our report provides details of our initial request for records at the opening of our engagement, which the Company could not locate and questioned whether the former external bookkeeper still had them. It took the Company about two months to find and provide us with what little records they maintained. Throughout the inspection, it took Company officials weeks to return phone calls and email inquiries, if responses were received at all.

A copy of the complete report can be found at:  Belvedere Volunteer Fire Company Inspection

For more information, please contact Kathleen A. Davies, CPA-PA, CISA, CGFM, CGAP, CFE, Chief Administrative Auditor, at 302-857-3919 or kathleen.davies@delaware.gov.