September 14, 1998

To:Strategic Policies and Priorities Committee

From:Audit Committee

Subject:Management Letter - Metropolitan Toronto Homes for the Aged Division for the year ended December 31, 1997

Recommendation:

The Audit Committee on September 11, 1998, recommended to the Strategic Policies and Priorities Committee that the report (August 31, 1998) from the City Auditor, forwarding the 1997 management letter relating to the Metropolitan Toronto Homes for the Aged Division and the response (August 26, 1998) from the Commissioner of Community and Neighbourhood Services, be received and Council so advised.

The Audit Committee advises that the management letter and the response were forwarded to all Members of Council with the agenda for the Audit Committee meeting held on September 11, 1998.

Background:

The Audit Committee had before it a report (August 31, 1998) from the City Auditor forwarding the management letter of the Metropolitan Toronto Homes for the Aged Division dated April 23, 1998, and a report (August 26, 1998) from the Commissioner of Community and Neighbourhood Services forwarding the response to the 1997 management letter concerning the Homes for the Aged Division.

City Clerk

Ina Robinson 392-7031

Attachment

Item 6

August 31, 1998

To:Audit Committee

From:City Auditor

Subject:Management Letter

Metropolitan Toronto Homes for the Aged Division

For the year ended December 31, 1997

Recommendation:

It is recommended that the management letter of the Metropolitan Toronto Homes for the Aged Division dated April 23, 1998, be received for information.

Background:

We are forwarding a copy of our management letter addressed to the Commissioner, Community and Neighbourhood Services, containing comments on systems and procedures arising from the 1997 audits of the Division.

We have reviewed the response from the Commissioner and are satisfied that the actions contemplated are appropriate.

Contact Name and Telephone Number:

Rafiq Dosani 392-8438

Jeffrey Griffiths

City Auditor

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April 23, 1998

Ms. Shirley Hoy

Commissioner

Community and Neighbourhood Services

Station 1111

11th Floor, Metro Hall

Dear Ms. Hoy:

As part of our 1997 financial attest audit of the Community Services Department, we have reviewed the operations of the Homes for the Aged Division. During our review, we noted areas in which internal controls could be strengthened and procedures could be improved. In order to ensure that our concerns are addressed on a timely basis, they are discussed with staff on an ongoing basis during our audit.

This letter, by its nature, contains only our observations and recommendations on deficiencies observed during the course of our audit. It does not include our observations on the many strong features of the Division's system of internal controls.

Considering the test character of our audit, you will appreciate that reliance must be placed on adequate methods of internal control as your principal safeguard against irregularities which a test examination may not disclose. In this letter, we are presenting, for your consideration, our comments and recommendations on matters relating to the system of internal control which came to our attention during the course of our audit. We have commented on some operational issues which you may wish to consider.

RESIDENT FINANCIAL MANAGEMENT SYSTEM

Observation:

During 1996, Head Office converted the Residents' Trust accounts from an ACCPAC based accounting system to the general ledger module of the Resident Financial Management System (RFMS), the system already in use at the Homes. Financial statements are prepared using the general ledger module. The information from the other modules within the RFMS cannot however be downloaded to the general ledger module. As a result, this information must be input to the general ledger module to produce the financial statements. We understand that the vendor is currently in the process of changing the system to a Year 2000 compliant Windows base.

Recommendation:

1. Management should consult with the vendor before the change of system base is finalized, to modify the Resident Financial Management System general ledger module to avoid duplication of input effort.

INTEREST TRUST FUND

Observation:

In accordance with our recommendations made in 1996, all Homes have cleared most of the old reconciling items in the residents' trust and comfort accounts. Some of the remaining items pertained to deceased residents and other differences could not be identified and allocated to individual residents. All unreconciled amounts were written off against the Interest Trust Fund. It should be noted that the intent of the Interest Trust Fund is to be used for the general benefit of the residents.

Recommendation:

2. The Interest Trust Fund should only be used for purposes that would benefit residents.

ATTENDANCE KEEPING SYSTEM

Observation:

An electronic time keeping system has been in operation at each Home since early 1996. Each home has a number of card machines located on various floors and employees swipe their individualized time cards to clock in time in and out. The machines for the most part are not located in areas where their use could be monitored by a supervisor or other authorized person. There is opportunity for misuse whereby Homes employees could collude to swipe more than one card to record time in or out. The situation is more problematic as there are persons who work various shifts and weekends. Misuse would result in payment for time not worked.

Recommendation:

3. The policy relating to the proper use of the cards and consequences for unauthorized use of time cards should be clearly explained and distributed to all users. Supervisors should be aware of the possibility of misuse and monitor the use of the machines at unexpected times.

Observation:

Passwords based on authorization granted is used to access the time keeping system. This access is limited to a few people in each home who are authorized to input and make necessary adjustments to attendance. There is no report printed which identifies the adjustments made and the author of such adjustments.

Recommendation:

4. An exception report detailing access to the screen for adjustments including the author of the adjustment should be available for regular management review.

OTHER COMMENTS

Observation:

In our 1995 management letter, we recommended that the Homes ensure that all resident files contain written authorization for charges billed to residents. Management's response addressed the policy of the Division whereby written authorization is a requirement if services are to be billed. The practice in the Homes however seem to differ from policy as was noted again in our current years' testing results. In several tested cases, residents were charged with receipt of services such as cable TV, clothing, and hairdressing while authorization of this service was missing from their files.

Recommendation:

5. Authorization for services rendered and date of authorization should be contained in residents' files. Staff in each Home should be required to review all current client files to ensure this policy is in place and ensure missing authorizations are obtained.

Observation:

The daily admission and discharge of residents is recorded in the Nursing Report and Unit Census. This report is used as a statistical base and records resident movement on any given day. The information on resident movement is reported to Head Office and recorded in the Resident Financial Management System. We noted one case where a resident was not marked in as admitted on the Report. The same resident was not marked out as discharged on a subsequent date. There was no valid explanation for such an omission. Such omissions could result in loss of revenue for the City.

Recommendation:

6. The Nursing Report and Unit Census should capture completely the movement of residents assigned to a home.

Observation:

We noted a case where a resident was billed based on an incorrectly calculated daily rate. An adjustment was made to correct the misstatement after this error was brought to the attention of the home. This type of error could result in loss of revenue for the City.

Recommendation:

7.All calculations of daily rates should be checked by the Administrator or Assistant prior to authorization.

We have reviewed our comments with management staff of the Division and would be pleased to review them further if you so wish.

Yours very truly,

Jeffrey Griffiths

City Auditor

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August 26, 1998

To:Audit Committee

From:Commissioner of Community and Neighbourhood Services

Subject:Response to the 1997 Management Letter Concerning The Homes for the Aged Division

Recommendation:

It is recommended that this report be received for information.

Background:

The City Auditor completed the 1997 audit of the Homes for the Aged Division and provided a Management Letter summarizing his findings and recommendations. These findings were discussed with the Homes for the Aged Division of Community and Neighbourhood Services Department. The response and action plan of the Homes for the Aged Division to the recommendations contained in the Management Letter is outlined in this report.

Comments and/or Discussion:

The Homes for the Aged Division acknowledges with appreciation the observations and recommendations provided in the Auditor's Management Letter. The areas of concern identified in the Management Letter and proposed remedial action are supportive of the Division's continuous quality improvement process.

Recommendation 1:

Management should consult with the vendor before the change of system base is finalized, to modify the Resident Financial Management System general ledger module to avoid duplication of input effort.

Management Response:

Discussions with the vendor are ongoing and any modifications that would improve administrative efficacy and effectiveness will be implemented.

Recommendation 2:

The Interest Trust Fund should only be used for purposes that would benefit residents.

Management Response:

The Division acknowledges and adheres to the policy that `the Interest Trust Fund is to be used for the general benefit of the residents of Toronto Homes for the Aged'. The Advisory Committee on Homes for the Aged monitors, on a transaction basis, the use of the Interest Trust Fund, and the Auditor reports annually on this fund to the Advisory Committee. The policy governing the use of this fund further provides that `no expenditure shall be made for the ordinary operation and maintenance of the Homes'. The adjustment made was a one-time correction that did not relate to home operations.

Recommendation 3:

The policy relating to proper use of the cards and consequences for unauthorized use of time cards should be clearly explained and distributed to all users. Supervisors should be aware of the possibility of misuse and monitor the use of the machines at unexpected times.

Management Response:

The Division formally communicates all policies and standards to staff. Internal controls are in place to ensure that policies and standards are properly implemented. All hours recorded as being worked in the timekeeping system are matched against a pre-authorized schedule which is input directly into the system. Any exceptions identified are carefully reviewed and approved. Due to the nature of the care and services provided by the Homes, any employee who was not on duty according to his/her work schedule would be readily identified by management. The Division will continue to review and evaluate all management controls in order to identify any opportunities for improvement.

Recommendation 4:

An exception report detailing access to the screen for adjustments including the author of the adjustment should be available for regular management review.

Management Response:

The TimeKeeper System is currently able to produce a variety of reports that are available to management on an ongoing basis. The Division is moving to the vendor's windows version and enhanced audit capabilities are expected.

Recommendation 5:

Authorization for services rendered and date of authorization should be contained in residents' files. Staff in each Home should be required to review all current client files to ensure this policy is in place and ensure missing authorizations are obtained.

Management Response:

The Division investigated each of the files identified by Audit and found that written confirmation of verbal authorizations had not been obtained as required by policy. All Homes will be required to conduct a comprehensive review of all current resident administrative files and practices to ensure that all necessary authorizations are on file in accordance with Divisional policy. In addition, the Division will inspect residents' records during the course of its regular operational reviews of the Homes' operations. Consideration will be given to the implementation of any other control mechanisms as deemed necessary to ensure ongoing compliance with this policy.

Recommendation 6:

The Nursing Report and Unit Census should capture completely the movement of residents assigned to a home.

Management Response:

The Division agrees that this daily record of resident movements needs to be produced with complete and accurate information. Controls are in place within the Division to ensure that correct resident statistical information is processed.

Recommendation 7:

All calculations of daily rates should be checked by the Administrator or Assistant prior to authorization.

Management Response:

The Division acknowledges that a recording error occurred. The procedures established by the Division require the verification by the Administrator/Assistant Administrator of the resident's calculated rate prior to a client executing an Admission Agreement contract.

Conclusion:

The Homes for the Aged Division appreciates the observations and recommendations made annually by the Audit Department in the interest of improving the Division's operations. The Division acknowledges the findings of the 1997 audit, and has taken or is in the process of taking the appropriate action in response to the recommendations made.

Contact Name:

Reg Paul, Director, Financial & Administrative Services

Tel: 392-8896; Fax: 392-4180; E-mail: reg_paul@city.toronto.on.ca

General Manager, Homes for the Aged Division

Commissioner of Community and Neighbourhood Services