Key points and summary

     Texas Department of Protective and Regulatory Services
          1995 Statewide Financial and Compliance Audit 

                        Report # 96-318

Overall Conclusion:

Our audits continue to indicate that the Department is not
complying will all federal requirements for two of its federal
programs.  Expenditures for these programs total $127.5 million and
represent 40 percent of total federal funds expended by the
Department in fiscal year 1995.  Material noncompliance for the
Child Welfare Services program has occurred for the third
consecutive year.

Key Facts and Findings:

The Department is not limiting payments to appropriately documented
clients and cost for the Child Welfare Services Program.  This has
resulted in material noncompliance with federal requirements.  This
issue has been identified in prior audits.

*    The Department is in material noncompliance with the federal
     eligibility and allowable costs requirements for the Child
     Welfare Services program (CFDA 93-645) - (Prior Audit Issue). 
     The Department uses Child Welfare Services funds to prevent
     child abuse and ensure safety of abused children.  The $20.1
     million spent on this program in fiscal year 1995 included
     payments for psychological evaluation and testing, homemaker
     services, therapy, counseling, and parent skills training for
     clients.  Before clients are considered eligible for these
     services, a caseworker must document the need for the services
     and authorize the payment for the services.  29.2% of the
     clients tested received services for which eligibility was not
     documented under the Child Welfare Services program.

The Department used federal funds to pay for settlements of
lawsuits in which the Department allegedly violated federal and
state laws and regulations.  

The Department did not comply with federal debarment and suspension
requirements.  70% of the Departments Title IV-E Foster Care
contracts tested did not comply.

The Department did not ensure that all adjustments are posted to
the accounting records in a timely fashion and the Department's
annual financial report and related Schedule of Federal Financial
Assistance are not accurate.

The Department has not ensured that interagency support service
costs are correctly charged to federal programs.  Reimbursements
for the support services were based on a predetermined contract
amount rather than the actual cost of services.  Also, the
Department charged its federal programs at different amounts that
were originally charged by the Texas Department of Human Services.

Due to a programming error, the Department overcharged the Foster
Care Title IV-E program by an estimated $2.9 million in unallowable
care maintenance costs.

A prior audit issue related to cash management controls has been
resolved.  Also the Department has made progress in resolving the
following prior audit issues, which are not repeated in this
management letter:

*    Agree eligibility information between automated systems.
*    Allocate foster care income credits in accordance with federal
     requirements
*    Establish policies and time frames for processing foster care
     eligibility correction.

For a copy of the entire report, contact:

OFFICE OF STATE AUDITOR
TWO COMMODORE PLAZA
206 EAST NINTH STREET, SUITE 1900
AUSTIN, TEXAS 78701
PHONE: 512-479-4700
FAX: 512-479-4884
E-MAIL: [email protected]