East Mississippi State Hospital (EMSH) serves thirty-one counties covered by five of the state's fifteen mental health regions. PEER received allegations of personal use of patient resources by EMSH personnel, including: submittal of fraudulent receipts and embezzlement of money from the Weems Fund by an EMSH employee, theft of non-perishable foods from EMSH's kitchen, and theft of arts and crafts supplies from the Activities/Recreation Department.
Patient Activity Fund
EMSH's Patient Activity Fund is utilized to provide a variety of patient activities which are not provided for by state general funds, such as parties, field trips and social activities. Funds are received from donations from the public, chapel collections, and sales of employee craft items by the Activities/Recreation Department.
Weems Trust Fund
The last will of Charles S. Weems made Trustmark National Bank in Laurel, Mississippi, fiduciary of his estate upon the death of his brother, who was a patient at EMSH. The Chancery Court of the Second District of Jones County, via its decree of January 21, 1987, authorized expenditures by Trustmark for the needs of EMSH patients as follows:
The trustee also provides $4,800 annually to EMSH for patients to attend the Mississippi Arts Fair for the Handicapped.
Conclusions
Patient Activity Fund
EMSH has not established formal written policies and procedures governing receipts and disbursements of Patient Activity funds.
EMSH had no formal written policies and procedures for the collection and disbursement of Patient Activity funds at the time of PEER's initial fieldwork session at EMSH. EMSH Accounting personnel provided PEER with informal policies and procedures&emdash;i.e., a description of their practice prepared for PEER's reference but not distributed to employees&emdash;during PEER's second fieldwork session.
Without formal written policies and procedures as standards, EMSH has no consistent basis for insuring accountability in utilization of Patient Activity funds. These control deficiencies expose the hospital's administration to allegations of employee wrongdoing that the hospital could not effectively refute in the absence of receipts showing that the funds were used for their stated purposes.
EMSH did not consistently comply with generally accepted internal controls during fiscal years 1996 and 1997, resulting in disbursement of $2,919, or fifty-two percent, of Patient Activity funds without sufficient documentation to demonstrate that funds were used as intended.
PEER reviewed all Patient Activity expenditures for fiscal years 1996 and 1997 and found the following cases of noncompliance with practice as conveyed by the Director of Accounting:
EMSH's failure to develop policies and to implement internal controls over the expenditure of Patient Activity funds poses significant risks to the integrity of the fund. Thirty-eight percent, or $1,120, of the $2,919 in Patient Activity Fund transactions PEER reviewed were not supported by receipts and were checks made payable to EMSH employees. EMSH has no verification or proof that Patient Activity funds paid to multiple vendors and employees, which were not documented with receipts as to proof of purchase, were used for their intended purpose.
Weems Trust Fund
EMSH policies and procedures governing receipts and disbursements of the Weems Fund are consistent with generally accepted internal controls. However, EMSH managers do not require internal auditors to conduct compliance audits periodically to determine the extent of the staff's adherence to these control procedures.
Although EMSH has established policies and procedures which, if consistently implemented, would insure adequate controls over the expenditure of Weems funds, the hospital does not routinely review employees' adherence to these controls. As a result, hospital managers do not receive periodic reports that would alert them to inconsistencies in staff members' adherence to these controls.
EMSH did not consistently adhere to its own policies and procedures governing receipts and disbursements of the Weems Fund during fiscal years 1995 through 1997.
A review of a sample of 111 of the 363 Weems Trust Fund expenditures for fiscal years 1995 through 1997 showed that EMSH did not consistently adhere to its own internal control procedures:
Each of the above problems decreases accountability for funds of the Weems Trust. PEER found no evidence of theft, but EMSH's system of controls, as implemented, compromises the integrity of the system.
Inventory Controls
EMSH's Dietary Department's inventory control policies include sufficient internal controls over the department's non-perishable food inventory to safeguard those supplies. However, EMSH managers do not require internal auditors to determine the extent of the staff's adherence to these control procedures.
EMSH Dietary Department's policies contain sufficient controls to deter personal use of nonperishable food inventory by Dietary Department employees. However, EMSH managers do not require internal auditors to determine the extent of the staff's adherence to these control procedures. Thus EMSH does not have assurance that all food items requisitioned from the central warehouse are properly accounted for and legitimately used in the food service program.
The Activities/Recreation Department's failure to develop and implement internal controls over its arts and crafts supplies could allow personal use of inventory by employees.
The Activities/Recreation Department has not developed nor implemented policies and procedures for internal control over arts and craft inventory within the department. The department does not maintain a perpetual inventory of supplies. Other than the sewing inventory, EMSH cannot account for arts and crafts supplies once supplies are delivered to the Activities/Recreation building.
Current practices regarding use of arts and crafts supplies could allow for theft or personal use of supplies by EMSH employees. EMSH's system does not yield the documentation needed to demonstrate that supplies were used as intended. The department's lack of inventory controls exposes EMSH to allegations that the hospital could not refute because the department does not keep records comparing the depletion of supplies with their use in specific activities.
Recommendations
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