Introduction
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:
- up to $2,000 per quarter for miscellaneous activities;
- an allowance of $30 per patient per month for indigent
patients who have no funds or income so as to provide such patients with an
allowance that the state does not provide; and,
- an allowance of $300 per indigent patient for personal
clothes, with total expenditures not exceeding $30,000 per twelve-month
period.
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:
- Fifty-two percent of the expenditures were not documented with
receipts.
- Five of the transactions did not have memos requesting the
expenditure of funds.
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:
- Twenty-four percent of the expenditures were not documented
with receipts.
- Forty-three percent of the transactions did not provide the
names of the patients participating in the activity.
- Twelve percent of the expenditures did not have memos
requesting the expenditure of funds.
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
- EMSH should formally adopt written policies and procedures
governing the receipt and disbursement of Patient Activity funds. Such policies
and procedures should include, but not be limited to:
- the submittal of written requests for the expenditure of
funds; and,
- receipts for disbursements.
- The Director of Reimbursement should adhere to existing
policies and procedures and should not release any Weems Trust Fund Account
funds to EMSH employees unless employees submit names of patients participating
in the activity to be funded by the Weems Trust.
- Although EMSH managers do not consider submission of names
necessary in cases in which both indigent and non-indigent patients participate
in group activities, EMSH managers should refrain from waiving this requirement
(that all names be submitted) until receiving formal approval of this practice
by the trustee.
- The Director of Reimbursement should place copies of all
receipts in the Weems Trust Fund Account files.
- The Activities/Recreation Department should develop and
implement policies and procedures governing internal control of arts and crafts
inventory within the department. Such policies and procedures should include
patients not only signing in for activities, but listing projects worked on
