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Iowa state audit Community Corrections Improvement Association CCIA 2014

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OFFICE OF AUDITOR OF STATE
STATE OF IOWA

Mary Mosiman, CPA
Auditor of State

State Capitol Building
Des Moines, Iowa 50319-0004
Telephone (515) 281-5834

Facsimile (515) 242-6134

NEWS RELEASE

FOR RELEASE

Contact: Mary Mosiman
515/281-5835
or Tami Kusian
515/281-5834

January 10, 2014

Auditor of State Mary Mosiman today released a report on a review of the Sixth Judicial
District Department of Correctional Services (District) for the period July 1, 2008 through
June 30, 2012. The review was requested by the Director of the Department of Corrections as a
result of concerns regarding the relationship between the District and Community Corrections
Improvement Association (CCIA).
CCIA was established in 1991 as a non-profit organization.

According to its articles of

incorporation, CCIA is to “maintain, develop, increase and extend the facilities and services of
community based correctional service agencies of the State of Iowa, and in conjunction therewith
to perform the functions of or carrying out the purposes of and assist in providing services of such
community-based correctional service agencies”.

While it is not inappropriate for a non-profit

organization to support the District’s operations, Mosiman reported CCIA should support or
supplement the District’s functions rather than replace or supplant those duties.
The District and CCIA share 3 Board members and the former District Director also serves
as the Executive Director of CCIA.

While CCIA interacts with the Sixth Judicial District on a

routine basis, assistance has not been provided to the other Judicial Districts within the State.
In addition to the overlapping personnel and Board members, Mosiman reported CCIA’s
operations are located within the District’s facilities and many financial transactions were
identified

which

involved

both

the

District

and

CCIA,

unreimbursed costs paid by 1 entity on behalf of the other.

including

reimbursements

and

Also, it was determined District

employees performed functions for CCIA and/or were paid by CCIA. In addition, CCIA employees
performed District functions and/or were paid by the District.

As a result, Mosiman identified significant concerns regarding the relationship between the
District and CCIA. Specifically, the operations of the District are not consistently distinct from
those of CCIA. Because of decisions implemented by the former District Director, including the
sharing of staff and how certain costs are paid, what should be distinct lines between the
District’s operations and CCIA’s operations are blurred.
Mosiman also reported the review identified $775,716.72 of improper disbursements and
$158,094.17 of potential improper liabilities.

These disbursements had a significant financial

impact on the District over several years. It was not possible to determine if there were additional
improper disbursements because adequate records were not available for all disbursements. The
improper disbursements include $563,113.27 of estimated costs the District paid on behalf of
CCIA.

The estimated costs paid by the District on behalf of CCIA include $443,900.00 of

calculated payroll costs for certain management employees and an estimated value of
$119,000.00 for District office space used by CCIA but not paid for during fiscal years 2008
through 2013.
The improper disbursements identified also include $170,178.78 of vacation payouts to
former employees, $40,336.06 of vacation used before it was earned and $2,088.61 of excess sick
leave for a retired employee who participated in the Sick Leave Insurance Program (SLIP).
The potential improper liabilities identified consist of excess amounts awarded to 6
management employees who are participating in SLIP but have not yet expended all the benefits
awarded by the District.
Mosiman also reported CCIA employees were included in the District’s payroll records
exclusively for the purpose of receiving the same health and dental insurance benefits provided to
District employees. The cost of the insurance benefits was reimbursed to the District by CCIA.
Because CCIA employees were not eligible to receive the insurance benefits, they were removed
from the District’s payroll records in July 2013.
Mosiman reported actions taken by the District’s management staff and approved by the
District’s Board which had a negative impact of the financial health of the District were identified,
including the District’s budgeting practices and awarding management employees a greater

amount of vacation and sick leave than provided to other State employees. Mosiman reported
District officials and the District’s Board did not prepare a reasonable budget or exercise proper
fiduciary oversight.
The lack of appropriate fiduciary oversight and the failure to ensure implementation of
adequate controls over budgeted expenditures resulted in the District operating in a deficit
position. The Board was aware projected revenues were not being achieved and salary increases
were not funded by outside sources. However, the Board still approved salary increases and made
no efforts to reduce operating costs.
Mosiman also reported concerns were identified regarding relationships between the District
and CCIA in terms of their operations and certain types of financial transactions. Specifically,
several District employees work on CCIA programs. According to the former District Director,
CCIA staff could not handle the workload associated with all the programs CCIA administers.
Mosiman reported District staff should not administer CCIA programs and District functions
should not be performed by CCIA staff.

Mosiman also concluded the Batterer’s Education

Program administered by CCIA should have been administered by the District.
In addition, Mosiman identified concerns with the following types of transactions between
the District and CCIA:


The District maintains more vehicles than other Judicial Districts. The vehicles
are used by CCIA employees in addition to District employees. CCIA does not
reimburse the District for any costs related to use of the vehicles, including
costs for fuel, repairs, insurance, and replacement.



CCIA pays for the costs associated with District employees to attend certain
training events or conferences.



Cell phones used by CCIA staff are included in plans established by the District;
however, CCIA reimburses the District for the related expenses.

Mosiman reported it was not possible to determine how much the District paid for these
types of costs.
Mosiman recommended District officials and all members of the District’s Board exercise
due care and require and review pertinent information and documentation prior to making
decisions affecting the financial health of the District and its operations.

Mosiman also

recommended District officials implement changes which ensure a clear separation from CCIA’s
operations, including assignment of staff and ensuring each entity is responsible for its own
operating costs. In addition, Mosiman recommended the District implement a number of policies
and procedures to improve the operations of the District.
A copy of the report has been filed with the Attorney General’s Office and is available for
review on the Auditor of State’s web site at http://auditor.iowa.gov/specials/1260-2380-BE00.pdf
and in the Office of Auditor of State.
###

REPORT ON A REVIEW
OF THE
SIXTH JUDICIAL DISTRICT
DEPARTMENT OF CORRECTIONAL SERVICES
FOR THE PERIOD
JULY 1, 2008 THROUGH JUNE 30, 2012

Table of Contents

Page
Auditor of State’s Report

3-4

Review Summary:
Background Information
Detailed Findings
Recommended Control Procedures

5-8
9-44
45-51

Exhibit:
Exhibit
Summary of Findings
A
Excess Vacation Hours Accrued for Management Employees as of
April 30, 2013
B
Value of Excess Vacation Hours for Departed Employees as of
April 30, 2013
C
Excess Sick Leave Hours Accrued for Retired Management Employees
D
Excess Sick Leave Hours Accrued for Current and Former
Management Employees
E
Staff

53
54-55
56-57
58-59
60-61
62

Appendix:
E-mail message from Gary Hinzman

Appendix
1

2

64

OFFICE OF AUDITOR OF STATE
STATE OF IOWA
State Capitol Building
Des Moines, Iowa 50319-0004
Telephone (515) 281-5834

Mary Mosiman, CPA
Auditor of State

Facsimile (515) 242-6134

Auditor of State’s Report
To John Baldwin, Director of the
Iowa Department of Corrections:
As a result of concerns regarding the relationship between the Sixth Judicial District
Department of Correctional Services (District) and Community Corrections Improvement
Association (CCIA) and at your request, we conducted a review of the District. We have applied
certain tests and procedures to selected financial transactions of the District for the period July 1,
2008 through June 30, 2012, unless otherwise noted. Based on discussions with District
personnel and a review of relevant information, we performed the following procedures for the
periods specified:
(1)

Evaluated the District’s and CCIA’s internal controls to determine whether
adequate policies and procedures were in place and operating effectively.

(2)

Obtained and reviewed the District’s budget for fiscal years 2011 and 2012 to
determine the reason for the budget deficit identified by the Department of
Corrections (DOC).

(3)

Obtained and reviewed CCIA’s by-laws and articles of incorporation to determine
the purpose and mission of the organization.

(4)

Interviewed certain District employees to determine their job duties for the District
and if any District employees were conducting CCIA responsibilities while at work
at the District.

(5)

Obtained and reviewed checking accounts for the District and CCIA for unusual
activity.

(6)

Reviewed documentation for all payments between the District and CCIA to
determine whether the payments were reasonable.

(7)

Reviewed payroll records to determine the funding source of payments to District
employees.

(8)

Reviewed all payments for out-of-state travel to determine whether it was properly
authorized, properly supported, reasonable, necessary for job responsibilities, and
reimbursed at the approved rate. In addition, we reviewed the travel payments to
determine if the travel was paid for by the District or CCIA.

(9)

Obtained and reviewed U.S. Cellular and Verizon monthly cell phone statements to
determine the reasonableness of cell phone bills.

(10) Obtained a listing of all District vehicles to determine whether vehicle logs were
completed and maintained and to determine if District vehicles were used by CCIA
employees.
(11) Obtained a listing of all drivers covered by the District’s vehicle insurance to
determine if any CCIA employees were covered and if CCIA reimbursed the District
for vehicle insurance.
(12) Reviewed grant agreements entered into by the District and CCIA and related
expenses to determine if the expenses were allowable according to the grant
agreements. We also determined if any other Judicial Districts administered
similar programs.
3

(13) Obtained and reviewed the District’s policy for vacation and sick leave balances to
determine reasonableness. We also compared the policies to other Judicial
District’s policies to determine consistency.
(14) Obtained and reviewed agreements and policies for accruing and using
compensatory time to determine whether the related liability was properly
recorded. In addition, we determined whether compensatory time balances were
paid in accordance with State guidelines.
(15) Reviewed the amount of vacation and sick leave accrued by the District’s
management personnel for the period July 1, 2004 through June 26, 2013 to
determine if the District complied with State’s policy. We also reviewed the
District’s participation in the State’s Sick Leave Insurance Program to determine if
the District’s vacation and sick leave policies were consistent with the State of
Iowa’s vacation and sick leave policies.
(16) Confirmed all payments to the District from the State of Iowa and Linn County
were properly deposited into the District’s checking account.
(17) Obtained and reviewed agreements between the District and Linn County which
were established as a result of 2008 flooding in the Cedar Rapids area to determine
if the District complied with the agreements. We also reviewed the agreements to
determine if the rates charged and reimbursements from Linn County were
properly supported. We also reviewed activity associated with the agreements to
determine if the District properly reverted FEMA funds to the State of Iowa’s
General Fund.
(18) Obtained and reviewed the report prepared by the State Public Policy Group (SPPG)
to determine the objective of the review, the findings from the review and if District
funds were used to pay for the review.
These procedures identified $775,716.72 of improper disbursements, including $563,113.27
of estimated costs the District paid on behalf of CCIA. These disbursements had a significant
financial impact on the District over several years. The procedures also identified $158,094.17 of
potential improper liabilities. We were unable to determine if there were additional improper
disbursements during the period of our review because adequate records were not available for all
disbursements. Several internal control weaknesses were also identified. Our detailed findings
and recommendations are presented in the Review Summary and Exhibits A through E of this
report.
The procedures described above do not constitute an audit of financial statements
conducted in accordance with U. S. generally accepted auditing standards. Had we performed
additional procedures, or had we performed an audit of financial statements of the Sixth Judicial
District, other matters might have come to our attention that would have been reported to you.
A copy of the report has been filed with the Attorney General’s Office. We would like to
acknowledge the assistance and many courtesies extended to us by the officials and personnel of
the Department of Corrections and the Sixth Judicial District Department of Correctional Services
during the course of our review.

MARY MOSIMAN, CPA
Auditor of State

WARREN G. JENKINS, CPA
Chief Deputy Auditor of State

September 18, 2013

4

Report on a Review of the
Sixth Judicial District
Department of Correctional Services

Background Information
The Department of Corrections (DOC) is established by Chapter 904 of the Code of Iowa to be
responsible for the control, treatment, and rehabilitation of offenders committed under law to
penal institutions. DOC is also charged with operation of the State’s penal institutions, Judicial
District Department of Correctional Services’ programs, Prison Industries, corrections
administration, and contracting with the Judicial District Departments of Correctional Services for
community correctional services. In addition, DOC is responsible for accreditation and funding of
community-based corrections programs, including, but not limited to, pretrial release,
presentence investigation, probation, parole, residential facilities, and work release centers. The
community based corrections programs also include assistance provided to offenders to aid in
making their reentry into society successful and reduce the likelihood of future victims.
In accordance with section 905.2 of the Code, each of the State’s 8 Judicial Districts are
responsible for furnishing or contracting for services necessary to provide a community-based
correctional program which meets the needs of the District. Each Judicial District is governed by
a Board of Directors. In accordance with section 905.3 of the Code, members of the Board of
Directors are to be selected or appointed as follows:


The Board of Supervisors for each county within the Judicial District is to select 1
member from the Board of Supervisors.



The Judicial District Board may appoint 2 citizen members to serve on the Board
annually by December 31 for the following calendar year. If the Judicial District
Board does not appoint 2 citizen members, 1 member is to be selected annually from
each of the project advisory committees within the Judicial District by January 15.



The Chief Judge of the Judicial District should appoint a number of members equal to
the number of citizen members or the number of Board members from project
advisory committees by January 15.

The Code also requires each Judicial District’s Board of Directors to meet at least quarterly and to
establish an Executive Committee consisting of the Chairperson, Vice Chairperson, and at least 1,
but no more than 5, other members of the Judicial District’s Board of Directors.
The Sixth Judicial District Department of Correctional Services (District) covers a 6 county area
which includes Benton, Iowa, Johnson, Jones, Linn, and Tama counties. In addition, the
District’s Board of Directors (Board) has 20 members who are selected in accordance with section
905.3 of the Code.
The District has approximately 150 employees. Employees primarily consist of Administrative
staff, Program Directors, Probation/Parole Officers (PPOs), Residential Officers, and Supervisors.
The Administrative staff includes a District Director and a Division Manager.
According to the District Director’s job description, the position serves as the chief administrative
officer of the District under the general direction of the Board. As the District Director,
Gary Hinzman performed the following job duties prior to his retirement on May 15, 2013. Bruce
Vander Sanden was named the District Director, effective May 16, 2013.


Managed programs administered by the District in accordance with the policies of the
Board and DOC.



Ensured programs complied with the rules and regulations of DOC and State
statutes.
5



Prepared and directed the preparation and submission of an annual budget to the
Board.



Authorized payments for payroll and other expenses incurred by the District.



Presented information and recommendations to the Board at meetings for policy
issues, budget requests, contracts, and other matters.

The Division Manager serves as an assistant to the District Director in developing and formulating
policy and program direction for the District. Prior to September 2012, John Hannaford was the
Division Manager. Greg Wright became the Division Manager in October 2012. According to the
Division Manager’s job description, the position is responsible for the following duties:


Serves as an assistant to the District Director in developing and formulating policy
and program direction for the District.



Assists the Director in various public relations, budgetary, and other planning
activities and in Board and Advisory Committee functions.



Oversees all District and general administrative duties. Manages personnel, fiscal,
and data processing functions. Coordinates grant management and grant reporting
requirements. Oversees all construction and maintenance projects.

The District’s primary revenues are State allocations, federal support, revenue received from other
State entities, fees, refunds, and reimbursements. Federal support is primarily grants awarded to
the District which the District has applied for. The majority of fees received are from the costs
paid by offenders for participating in programs offered by the District. According to a District
employee, refunds and reimbursements are client rent revenues and rent receivables. In addition,
the District receives miscellaneous revenue, such as interest on investments.
Table 1
summarizes the revenues reported in the District’s annual reports for fiscal years 2010 through
2012. As illustrated by the Table, the total revenues reported by the District were incorrectly
totaled for fiscal years 2011 and 2012.
Table 1
Fiscal Year Ended June 30,
Description

2010

2011

2012

Carry forward:
State General Fund^
Local income
State allocations
Federal support
Local governments

$

218,153.86

-

-

190,075.25

84,461.65

(206,841.45)

13,146,693.00

13,613,012.80

13,712,506.00

1,963,648.53

1,843,601.47

1,948,047.13

79,248.00

79,167.80

48,585.82

Intra-State reimbursements^

-

-

663,568.00

17,498.16

29,433.53

5,522.87

1,103,529.67

1,197,206.17

1,064,910.38

Fees, licenses and permits

729,785.14

711,183.05

738,964.96

Other

421,581.81

305,593.64

152,534.98

$ 17,870,213.42

17,916,992.00

18,149,814.73

$17,870,213.42

17,863,660.11

18,127,798.69

Interest
Refunds and reimbursements

Total revenues reported
Revenues, correctly totaled

^ - According to the Division Manager, the State General Fund carry forward and IntraState reimbursements reported were improperly classified. They should have been
reported as local income carry forward and State allocations, respectively.

6

As illustrated by the Table, State allocations provide the majority of the District’s revenue each
year. According to the District’s annual reports submitted to DOC, State allocations accounted for
73% to 75% of the District’s total revenue for fiscal years 2010 through 2012. The State
allocations referred to by the District are appropriations enacted by the State Legislature each
year. In addition to the initial appropriations, each of the 8 Judicial Districts typically receives a
supplemental appropriation toward the end of the fiscal year. The supplemental appropriations
received by the Districts during fiscal years 2010 through 2012 are summarized in Table 2.
Table 2
Judicial
District

Fiscal Year Ended June 30,
2010

2011

2012

1st

$ 110,275

393,353

453,140

2nd

308,214

360,912

130,853

3rd

18,010

221,793

352,616

4th

76,117

169,067

25,498

5th

790,020

723,637

155,338

6th

302,810

460,329

599,943

7th

24,923

265,431

223,774

8th

400,850

177,991

492,704

$ 2,031,219

2,772,513

2,433,866

Total

The Senate Files which authorized the supplemental appropriations for fiscal years 2010 and
2011 did not specify the purpose of the supplemental appropriations. However, the “Notes on
Bills and Amendments” to the Senate File which authorized the supplemental appropriations for
fiscal year 2012 stated the additional funds were awarded to the Districts to fund existing filled
positions. The additional funds were used each year to assist in paying salary increases. DOC
was the only State agency which received additional funding for fiscal year 2012 for existing filled
positions.
Expenses primarily consist of personnel services, travel, supplies, contractual services, and
equipment. All disbursements are required to have supporting documentation and are to be
reviewed prior to payment by the Board. All payments are to be made by check and stamped with
the District Director’s signature. According to Mr. Hinzman, he stamped checks himself; however,
during our testing, he was unable provide an exact location of the signature stamp and who had
custody of it. Table 3 summarizes the expenditures reported in the District’s annual reports for
fiscal years 2010 through 2012.
Table 3
Fiscal Year Ended June 30,
Description

2010

2011

2012

$ 15,026,849.98

14,406,949.25

15,480,817.99

Travel and subsistence

149,240.58

111,219.99

115,693.53

Supplies

683,853.56

642,637.84

619,802.85

Contractual services

864,890.28

1,136,808.65

849,134.71

Equipment and repairs

963,350.69

734,833.75

935,452.52

Claims and miscellaneous

168,019.94

357,636.32

156,781.85

14,008.39

118,677.04

-

$ 17,870,213.42

17,508,762.84

18,157,683.45

Personnel services

Plant improvement
Total

7

In 1991, the District’s Board established the Community Corrections Improvement Association
(CCIA), a non-profit organization which has been designated as a 501(c)(3) organization by the
Internal Revenue Service. According to CCIA’s articles of incorporation, CCIA’s purpose is to
“maintain, develop, increase and extend the facilities and services of community based
correctional service agencies of the State of Iowa, and in conjunction therewith to perform the
functions of or carrying out the purposes of and assist in providing services of such communitybased correctional service agencies in the State of Iowa, including, without limitation thereto, the
Sixth Judicial District”. While CCIA interacts with the Sixth Judicial District on a routine basis,
assistance has not been provided to the other Judicial Districts within the State.
The District and CCIA share 3 Board members. In addition, Mr. Hinzman served as the Executive
Director for CCIA and as the District Director for a number of years. After his retirement from the
District in May 2013, he continued as the Executive Director of CCIA.
CCIA includes approximately 190 employees in its payroll register, including approximately 20
full-time employees, 40 part-time, 10 seasonal employees and 120 AmeriCorps and Vista
employees. However, according to District and CCIA officials we spoke with, the AmeriCorps and
Vista employees are volunteers. The full time employees consist primarily of Administrative staff,
Liaisons, Coordinators and Specialists.
CCIA’s office is located in the District’s administrative building in Cedar Rapids and provides
services to the same 6 counties as the District. CCIA’s Board meets and conducts business at the
District’s administrative building. During fieldwork, we determined CCIA does not pay the District
for the office space used by its employees or its Board. The District has not established a written
agreement with CCIA regarding this arrangement.
CCIA administers a number of programs to assist at-risk and high risk youth as part of an overall
comprehensive approach to creating safe communities. CCIA also administers other programs
which are designed to support offenders’ families and improve community safety.
In early 2012, the Legislature approved a supplemental appropriation of $599,943 for the District
to fund existing filled positions. However, according to a representative of DOC, Mr. Hinzman
contacted DOC and stated the District needed an additional $800,000 to get through to June 30,
2012. Because of this additional funding request, DOC reviewed the District’s budget. After
reviewing the budget documents, DOC was unable to determine why the District needed further
funding. In addition, DOC was unable to explain variances for certain line items in the District’s
budget. As a result, DOC requested the Division Managers from the First and Fifth Districts
conduct an internal review of the District’s financial records.
Based on the findings of the internal review, the Director of DOC requested a “formal in-depth
review of the District’s entire financial system.” The Director also stated, in part, in his written
request, “The District also supports, in some form or fashion, …CCIA. I do not believe you can
understand the District’s financial system without a complete review of the CCIA functions and
where their funding is obtained.”
The Office of Auditor of State subsequently received a letter from the President of CCIA regarding
the request from DOC. The letter stated the Board for CCIA was aware of the internal review
report dated April 10, 2012 and did not view the comments the same way as DOC officials.
As a result of DOC’s request, we performed the procedures detailed in the Auditor of State’s
Report for the period July 1, 2008 through June 30, 2012, unless otherwise noted.

8

Detailed Findings
The procedures performed during the review identified $775,716.72 of improper disbursements,
including $563,113.27 of estimated costs the District paid on behalf of CCIA.
These
disbursements had a significant financial impact on the District over several years. The
procedures performed also identified $158,094.17 of potential improper liabilities.
During our review, we obtained an understanding of the District’s financial operations and how
CCIA impacted those operations. We identified actions taken by the District’s management staff
and approved by the District’s Board which had a negative impact of the financial health of the
District, including the District’s budgeting practices and awarding management employees a
greater amount of vacation and sick leave than provided to other State employees.
We also identified concerns regarding operating relationships between the District and CCIA and
certain types of financial transactions. In addition to the overlapping personnel and Board
members, CCIA’s operations are located within the District’s facilities and we identified many
financial transactions which involved both the District and CCIA, including reimbursements and
unreimbursed costs paid by 1 entity on behalf of the other. Also, we determined District
employees performed functions for CCIA and/or were paid by CCIA. In addition, CCIA employees
were paid by the District and/or performed District functions. As a result, there is not a clear
separation between the 2 entities’ operations.
In addition, we identified the following concerns with the operations of the District.


District officials and the District’s Board did not provide adequate fiduciary
oversight.



Until July 2013, CCIA employees were included in the District’s payroll records
exclusively for the purpose of receiving health and dental insurance benefits
provided to State employees. CCIA reimbursed the District for the cost of health
and dental insurance benefits.



Adequate documentation was not maintained by the District or CCIA to support
grant activity. In addition, District officials could not support financial activity
related to FEMA grants for flooding which occurred in 2008. Also, several District
employees work on CCIA programs.



The District maintains more vehicles than other Judicial Districts. The vehicles are
used by CCIA employees in addition to District employees.
CCIA does not
reimburse the District for any costs related to the use of the vehicles, including
costs for fuel, repairs, insurance and replacement.

Because adequate records were not available, it was not possible to determine if additional
amounts were improperly disbursed or paid by the District on behalf of CCIA during the review
period because adequate records were not available for all disbursements. All findings are
summarized in Exhibit A and a detailed explanation of each finding follows.

CONCERNS REGARDING THE DISTRICT’S FINANCIAL OPERATIONS
District Budget - As previously stated, DOC conducted an internal review of the District’s budget
and certain financial transactions after additional funding was requested by the District due to a
shortfall in the District’s budget.
As a result of this concern, we reviewed supporting
documentation used by District and DOC officials to determine the budget shortfall.
We also reviewed Board meeting minutes to determine if the budget shortfall was discussed.
Significant actions identified during our review of the minutes are summarized in the following
paragraphs:

9



During the December 6, 2010 Board of Directors’ meeting, the Board was notified by
John Hannaford, the former Division Manager, current revenues were below
projections. However, because the minutes do not reflect Mr. Hannaford disclosed
how much budgeted revenues exceeded actual collections, it appears the Board may
not have received this information. The minutes also do not include any discussion
regarding reducing expenses to compensate for the lower revenue.
Based on periodic financial reports Mr. Hannaford prepared for DOC, the budgeted
revenues for fiscal year 2011 exceeded actual collections by approximately
$100,000.00 at the time of the December 2010 Board meeting.



On March 18, 2011, the Board was informed by Mr. Hannaford the State reduced
the District’s appropriation by $780,932.00. Mr. Hannaford also informed the
Board the District was behind in revenues and would need to reduce expenses,
including holding vacant positions. During the meeting, it was discussed why the
federal rent was down by $217,000.00 and if holding vacant positions and reducing
expenses would balance the budget. According to the minutes, Mr. Hinzman and
Mr. Hannaford reported the federal budget was also very tight, but holding vacant
positions and reducing expenses worked in the past and they believed it would work
again.
According to the minutes, Mr. Hannaford also reported the District would be
starting fiscal year 2012 with a deficit because the Legislature did not include salary
adjustment funds in the District’s budget. In addition, Mr. Hinzman stated the
District had been running at a deficit since January 2011 because it had not
received adequate funding. Despite reporting adequate funding had not been
received by the District, Mr. Hinzman also reported “supplemental funding rolled
over to the budget of FY2012 will get us through. There will be salary and benefit
increases; assumption is that we will not get salary adjustment money.”
As Mr. Hinzman reported to the Board, the Legislature did not include salary
adjustment funds in the District’s budget. However, this was not the first year
salary adjustments had not been funded by the Legislature. In addition, the District
was not the only entity to not receive salary adjustment funds. Other Districts and
State agencies responded to the mandated, but unfunded, salary adjustments by
not filling all open positions and/or reducing other operating costs. For instance, in
fiscal year 2010, a number of entities which faced similar challenges furloughed
workers for a specified number of days.



During the June 24, 2011 Board of Director’s meeting, Mr. Hinzman reported the
District was projecting a little over $10,000.00 deficit at the end of fiscal year 2011.
However, the financial report sent to DOC for June 30, 2011 stated “overall yearend budget will have a deficit of $161,804.” It is unclear why the amount reported
to the Board on June 24, 2011 was significantly different.



According to the August 19, 2011 Board minutes, the anticipated June 30, 2011
balance was a deficit balance of $161,804.00. This amount exceeds the prior
amount reported to the Board by approximately $150,000.00.



At the October 21, 2011 meeting, Mr. Hannaford reported to the Board the District
ended fiscal year 2011 with a deficit balance of $206,902.00.
According to supporting documentation available for our review, a DOC official
provided a list of questions to Mr. Hannaford regarding the fiscal year 2011 budget
deficit.
The first question asked was how the District accounted for the
$206,902.00 deficit balance at June 30, 2011. The deficit was not apparent in the
District’s accounting records. According to Mr. Hannaford’s response, the deficit
amount was recorded as miscellaneous revenue in fiscal year 2011 and negative

10

miscellaneous revenue in fiscal year 2012.
discussed with the Office of Auditor of State.


He also stated the overage was not

At the November 28, 2011 meeting, the Board was informed the projected shortfall for
the budget at the end of fiscal year 2012 was $653,000.00. The Board was also
informed revenue was much less than projected due to fewer residential work release
clients, OWI clients, and federal clients and increased food costs. The Board was also
reminded the District did not receive funding in the state appropriation for salary
adjustments for the 3rd year in a row. Mr. Hannaford reported, “Everyone is working
very hard to spend less.”
As previously stated, other entities responded to the mandated, but unfunded, salary
adjustments by not filling all open positions and/or reducing other operating costs.
These measures were taken over the course of several years, not just in years
following unfunded mandates.

According to a District official, Board meetings for December 2011, January 2012 and
February 2012 were cancelled. As a result, there were no minutes available for us to review for
these periods.
Based on our review of the minutes and other financial information available from the District
and DOC, it appears the budget and other financial information provided to the Board was
frequently incomplete and/or inaccurate. Information presented to the Board at subsequent
meetings was often significantly different. It does not appear the information presented to the
Board consistently included accurate forecasts of financial activity for the near future. According
to discussions with Mr. Hinzman, the financial information presented to the Board was prepared
by Mr. Hannaford. He also indicated Mr. Hannaford’s departure from the District was not
unrelated to the financial difficulties encountered by the District. However, as the District
Director, Mr. Hinzman was ultimately responsible for ensuring accurate, reliable information was
presented to the Board in a timely manner to ensure appropriate operating decisions could be
made.
As previously stated, the Legislature approved a supplemental appropriation of $599,943.00 for
the District in early 2012 to fund existing filled positions. However, according to a representative
of DOC, Mr. Hinzman contacted DOC in March 2012 and stated the District needed an additional
$800,000.00 to get through June 30, 2012. Because of this additional funding request, DOC
reviewed documents submitted by District officials regarding the District’s budget.
After reviewing budget documents, DOC was unable to determine why the District needed further
funding. In addition, DOC was unable to explain variances for certain line items in the District’s
budget. As a result, DOC requested Division Managers from the First and Fifth Judicial Districts
conduct an internal review of the District’s financial records. After performing certain procedures,
the Division Managers submitted a report dated April 10, 2012 to DOC officials which
summarized their findings. The concerns included in the internal report related to the District’s
budget are summarized in the following paragraphs.


The internal report stated, “According to reports generated from the state’s I3
[accounting] system, 6th District ended FY10 with a General Fund carry forward of
$218,153.86. However, it is further noted in the internal reports of the district that
they also had a carry forward of local income of $243,387.65 for a grand total of
carry forward of $461,541.51. The local income being carried forward was actually
shown as new Miscellaneous Income in FY11.”
According to the Division Manager, the District is not allowed to carry forward any
unused State appropriation funds remaining at the end of a fiscal year. All unused
State appropriations must be reverted to the State’s General Fund. However, the
11

District may carryover a portion of its unused local income (which is primarily
composed of fees collected from offenders for participating in various programs.)
The amount the District is allowed to carry over is determined by DOC officials.
Based on the supporting documentation available for our review, we concur with the
DOC officials’ finding. The $243,387.65 of local income reported by the District as
Miscellaneous Income should have been reported as carry forward funds. If the
District had properly reported its carry forward funds, DOC may have used a
portion of the funds to assist other Districts in meeting fiscal year 2010 unfunded
operating costs. The District properly reported the $243,387.65 in fiscal year 2011
activity in the State’s accounting system, referred to as the I/3 system.


The internal report stated, “At the close of FY11, the 6th District over expended
available resources by $206,902. Instead of applying expenses to FY12, which
actually supported the costs, Division Manager Hannaford added the same amount
to Revenue Source 704 (Other Revenue) to ‘balance’ their books in the state’s I/3
system. This was a ‘plug figure’ and there was no actual revenue to support it. Per
John Hannaford, there was no attempt to contact the State Auditor’s Office for
advice on how to handle this although he did say he talked with staff at central
office. Since FY12 revenue was used to cover this deficit, the new fiscal year started
off with a deficit of $206,902.”
Based on supporting documentation available for our review, we concur $206,902 of
revenue was recorded by the District for fiscal year 2011 which was not actually
collected. This was not an appropriate action.



The internal report stated an objective of the review was to evaluate the “District’s
finances/budgets for fiscal years 2011 and 2012 to determine whether the reported
deficit of approximately $800,000 even after receiving their supplemental
appropriation of $599,943, was legitimate.” The report also stated the reviewers
believe the deficit was legitimate. It also stated, “When the 6th District opened FY12,
they reported a deficit of approximately $800,000 to Department of Corrections,
defined as their unfunded salary adjustment, when realistically the shortfall was
closer to $1,500,000 when coupled with unattainable revenue projections.”
A financial analysis prepared by DOC officials summarized the deficit remaining
after the supplemental appropriation. The analysis is summarized in Table 4.
Table 4
Description

Amount

Shortfall due to unfunded salary increases^

$ 591,085.45

Shortfall due to unattainable federal rent income for FY12

588,023.42

Shortfall due to unattainable residential rent income for FY12

283,210.42

Subtotal of primary shortfalls for FY12
Less: Supplemental appropriation for FY12
Remaining shortfall for FY12

1,462,319.29
(599,943.00)
$ 862,376.29

^ - Cumulative effect of unfunded salary increases over several fiscal years.
As illustrated by the Table, DOC officials calculated a $862,376.29 remaining
shortfall after the supplemental appropriation. Their calculation included only the
revenue categories which were significantly different from budgeted amounts.
However, their calculation did not include all variances between the District’s
budgeted and actual revenue and expenditure amounts. The amount calculated by
12

DOC officials varied from the deficit amount of $782,121.72 reported by
Mr. Hannaford in the District’s financial report to DOC dated March 13, 2012.
While we concur with the calculation of the deficit, the correct calculation does not
make the deficit “legitimate.” The deficit was a result of poor decisions implemented
by District management and the Board. These decisions are discussed throughout
this report.
In addition, required budget cuts and unfunded mandated salary increases for
employees affected the District’s deficit position. However, State agencies dealt with
these factors by reducing discretionary spending and the number of programs
administered in a timely manner.
While other Judicial Districts received
supplemental funding for salary increases, the Sixth District requested an
additional supplemental appropriation.


The internal report stated the District had projected unrealistic and unattainable
revenue goals, including funds from federal grants for federal prisoners and refunds
for state residential offenders. According to Board minutes, when the Board
questioned the shortfall in revenues, District officials told them the number of
offenders was down. According to the internal report, this explanation was true but
accounted for only a very small portion of the actual shortfall.
Based on supporting documentation available for our review, we concur with the
DOC officials’ findings. In addition to reviewing DOC’s internal report and related
records, we also reviewed budgeted and actual activity for 2 revenue line items for
which the District failed to properly budget. Table 5 summarizes the budgeted and
actual amounts for the 2 revenue line items.
Table 5
Federal Housing
Reimbursement

Description
FY10: Actual
FY11: Budgeted
% Inc/(Dec) from FY10 Actual
Actual
% Inc/(Dec) from FY10 Actual
FY12: Budgeted
% Increase from FY11 Actual
Actual
% Decrease from FY11 Actual

Residential
Rent Income

$ 1,345,883.38

953,800.31

1,661,849.00

947,290.00

23.5%

(0.7%)

1,257,540.58

1,087,364.58

(6.6%)

14.0%

1,845,564.00

1,370,575.00

46.8%

26.1%

1,242,792.00

969,894.00

(1.2%)

(10.8%)

As illustrated by the Table, the District budgeted for a significant increase in federal
housing reimbursements for fiscal year 2011, but the amount actually received
decreased from fiscal year 2010. In addition, the District budgeted for a 46.8%
increase in the same revenue for fiscal year 2012 despite not meeting the budget in
fiscal year 2011. The District also budgeted for a 26.1% increase in residential rent
income for fiscal year 2012 after the amount received during fiscal year 2011
increased 14.0% from the amount received during fiscal year 2010.
13

We are unable to determine why District officials and the Board approved an
increase of approximately 47% for Federal reimbursements and an increase of
approximately 26% for residential rent income unless they had identified new
funding sources or expanded the District’s facilities. It appears the increases were
“plugged” to identify the amount of revenue necessary to meet budgeted
expenditures. To budget for such large increases is poor financial management and
leadership. When preparing a budget, District officials should strive to use as
realistic expectations as possible. They should be cautious to not overestimate the
amount of services to be provided and revenue to be received.


According to the internal report, DOC officials did not identify any “serious talk” of
ending certain contracts in order to help with budget deficits in fiscal years 2011
and 2012. Specifically, the internal report identified treatment contracts which
totaled over $260,000 and were paid in full at the beginning of the fiscal year prior
to services being rendered.
While we determined the District received the services it paid for in advance, we
concur with DOC officials’ finding the District should pay for costs, such as the
service contracts, on a billable basis after monthly services are provided. This
practice would allow the District to better match expenditures to the time periods in
which services are received and provide flexibility when budgeting difficulties are
encountered.



The internal report stated expenditures for items such as Office Supplies, Food, and
Other Supplies were significantly higher than other Districts of equal size. The
report specified Office Supplies reported for the District was more than double the
amount reported by the First Judicial District.
It also specified Food was
$10,000.00 more despite having 60 fewer residents and Other Supplies was
approximately $50,000.00 more than incurred by the First Judicial District.
We reviewed the operations of other Districts and concur with the DOC officials’
findings. In addition, District officials were unable to provide us with support for
budgeted amounts when requested.



The internal report stated CCIA administers the Batterer’s Education Program (BEP)
for the District. Annual revenues for this program are approximately $100,000.00.
However, 2 other Districts use existing staff to administer BEP. The internal report
also stated, “This could be a viable option for the 6th District to increase revenues.”
While we concur the District’s revenues could be increased by administering the
BEP, other costs may also be incurred. If existing District staff were used to
facilitate the classes, some payroll costs could be shifted to the program. Additional
costs may also be incurred, but the additional costs may not be significant.
As previously stated, the District provides assistance to offenders to aid in making
their reentry into society successful and CCIA administers programs which are
designed to improve community safety, and support at-risk youth and offenders’
families. As a result, it appears it would be more appropriate for the District to
administer BEP rather than CCIA.



The internal report stated the District’s budgets were not prepared in a consistent
manner, including classification of expenditures, which made it difficult to compare
budgeted information to actual revenue and expenditures. The report identified
budgeted Personnel Services (Expenditure Class 101) as an example and specified 5
different amounts reported for fiscal year 2012. Table 6 lists the 5 different
amounts reported by the District.

14

Table 6
Source Document
Original budget in accounting system software
Revised current year operating budget from accounting
system (provided to Board on 08/19/11)
Year-end amounts:
I/3 system
Quarterly report to DOC for Expenditure Class 101
Annual report submitted to DOC (Table 3)
Cash flow report to DOC

Amount
Reported
$ 15,127,920
15,696,975

15,306,404
16,050,523
15,480,818
15,527,307

We concur with the DOC officials’ conclusion. When we inquired of District officials
why the amounts reported varied, we were told Mr. Hannaford, who was no longer
employed by the District, was responsible for the amounts reported. We were also
told no additional information regarding the amounts reported was available.


The internal report stated the Board approved non-contract pay raises of 2% on
June 24, 2011, effective July 1, 2011, and 1%, effective January 1, 2012, despite
being informed of a projected deficit and knowing the pay increases were not funded
by DOC. As a result, the District absorbed the increased payroll costs.
We concur with the DOC officials’ findings. According to information obtained from
the Division Manager, the 2% and 1% pay raises resulted in $41,299.00 of
additional payroll costs during fiscal year 2012.
Because the pay raises were not funded, District officials and the District’s Board
should have been proactive in identifying costs which could be reduced to offset the
pay raises. When evaluating the District’s financial condition and making decisions
which impact it, District officials should strive to use as realistic cost projections as
possible. The projected costs should be compared to conservative estimates of
District revenues to determine the expected future financial condition of the District.

Mr. Hannaford, as the District’s Division Manager, Mr. Hinzman, as the District Director, and the
Board had a fiduciary responsibility to exercise authority over the District’s funds, efficiently and
effectively achieve its mission, provide oversight of the District’s operations and maintain the
public trust. Oversight is typically defined as the “watchful and responsible care” a governing
body exercises in its fiduciary capacity.
Based on our observations and procedures performed, we determined Mr. Hannaford,
Mr. Hinzman and the Board did not prepare a reasonable budget or exercise proper fiduciary
oversight. The lack of appropriate fiduciary oversight and the failure to ensure implementation of
adequate controls over budgeted expenditures allowed the District to operate in a deficit position.
The Board was aware projected revenue levels were not being met and salary increases were not
funded by outside sources. However, the Board still approved salary increases and made no
identifiable effort to reduce other operating costs.
Paid Time Off - The Districts operate primarily on appropriations from the State and funding is
provided by the State for payroll costs. In addition, District employees are included in the
collective bargaining agreement which covers State employees and receive health insurance
benefits under plans offered by the State. According to a representative of the Department of
Administrative Services (DAS), only State employees, their dependents and retirees are eligible to
participate in the health insurance plans offered by the State. As a result, individuals employed
by the State’s 8 Judicial Districts are State employees. While most State employees’ payroll is
processed by DAS, each District processes payroll for its employees. Processing payroll includes
determining net pay, accruing vacation and sick leave benefits and ensuring employees contribute
the appropriate amount for health and dental insurance and other benefits.

15

We compared the rate at which employees earned paid time off at each of the State’s 8 Judicial
Districts to the rate at which all other State employees earned vacation and sick leave and
determined the First, Fifth, and Sixth Judicial Districts established policies which allow
management employees to earn vacation and sick leave at a rate greater than other State
employees and in excess of amounts allowed by the Code of Iowa.
We also determined the District has allowed employees to carry over unused compensatory time
after the end of the fiscal year which does not comply with rules established by DAS. Our specific
findings and the impact to the District’s financial operations are summarized in the following
paragraphs.
Vacation Accrual – Section 70A.1 of the Code of Iowa establishes the amount of vacation awarded
to State employees based on their years of services. In addition, section 1C.2 of the Code
establishes unscheduled holiday time for State employees, which is to be accrued as vacation.
DAS has adopted administrative rules to implement these statutory requirements.
The amount of vacation and unscheduled holiday hours awarded to non-management employees
by each Judicial District agrees with the amount established for all State employees. However,
the amount of vacation and unscheduled holiday hours awarded to management employees by 3
Districts exceeds the amounts established by DAS. The amount of vacation and unscheduled
holiday hours awarded to management employees by each Judicial District is compared to the
amount established by DAS in Table 7.
Table 7
Vacation and Unscheduled Holiday Hours Accrued Annually
Based on Years of Service for Management Employees*
Entity
1st Judicial^
2nd Judicial

0-4

5 - 11

128

168

96

136

12 - 19

20 - 24

25 or more

208

224

248

176

192

216

Judicial

96

136

176

192

216

4th Judicial

96

136

176

192

216

5th Judicial

128

168

208

224

248

6th Judicial

136

176

216

232

256

7th Judicial

96

136

176

192

216

Judicial

96

136

176

192

216

3rd

8th

DAS*
96
136
176
192
216
* - DAS rules include 16 hours of unscheduled holiday leave in addition to vacation
earned based on years of service. The policy established by the 1st and 5th
Judicial Districts includes 48 hours of unscheduled holiday leave in addition to
vacation earned based on years of service. The policy established by the 6th
Judicial District does not specify unscheduled holiday leave, but the amount of
vacation accrued per pay period includes 16 hours of additional leave per year.

The additional leave awarded to management employees by the First and Fifth Judicial Districts
will be reviewed and reported on in a separate report at a future date.
As illustrated by the Table, the Sixth Judicial District provided an additional 40 hours of vacation
per year to management employees. According to Mr. Hinzman, management employees received
the additional vacation hours because the employees are salaried and not eligible for overtime.
This practice is in place to make it fair between union and non-union employees. However, this
situation is not unique to the District. Many State employees are salaried, work more than the
“typical” 40 hours per week and don’t receive additional compensation in the form of overtime or
additional paid time off.

16

Because the District’s management employees received an additional 40 hours of vacation per
year compared to State employees for whom DAS processes payroll and other Judicial Districts’
employees, the District’s financial condition was adversely affected and certain employees received
benefits not available to other State employees. We obtained benefits summary reports for 47
District management employees for the period July 1, 2004 through April 30, 2013 to determine
the financial impact to the District for the additional vacation awarded to management employees.
Based on the reports we received, District management employees received the 40 hours of
additional vacation per year for the period of our review. We were unable to determine when the
District began granting the additional vacation time to management employees. However, we
identified District management employees who had accrued vacation balances at July 1, 2004
which exceeded the maximum amount of vacation accrual established by DAS in compliance with
section 70A.1 of the Code. For example, an employee had 171 more hours of vacation accrued
than allowed at July 1, 2004 based on his years of service. As a result, it is apparent the District
had been allowing management employees to accrue additional vacation for an extended time
prior to July 1, 2004.
We also identified 2 management employees who retired from the District after April 30, 2013.
For these employees, we reviewed the amount of vacation they earned through the date of their
retirement and the value of their unused vacation for which they were paid upon their retirement.
Exhibit B lists the District’s 30 management employees and their individual accrued vacation
balances according to the District’s records as of April 30, 2013. The Exhibit also includes the
vacation balance we calculated using the accrual rates established by DAS. The calculated
balances do not adjust for vacation improperly accrued by the District for the employees prior to
July 1, 2004, except for reducing certain employees’ vacation balances at July 1, 2004 to the
authorized maximum limit established by DAS.
As illustrated by the Exhibit, we calculated a negative balance for 10 of the 30 employees. This
occurred because the 10 employees used more vacation than they would have accrued if the DAS
rates had been applied. Because the employees used more vacation than would have been
accrued, the District paid the employees a greater amount than would have been allowable under
DAS rules. Table 8 lists the 10 employees and the amount of vacation taken in excess of what
should have been accrued for them. The Table also includes the value of the vacation paid by the
District, using the employees’ salary rates at April 30, 2013. Some of the employees may have
been paid a nominal amount less than the amount shown if they used vacation, or a portion of
their vacation, prior to their most recent salary increase. As illustrated by the Table, the District
paid $40,336.06 more to the employees than appropriate between July 1, 2004 and April 30,
2013. The $40,336.06 of payments to employees for vacation used prior to it being earned is
included in Exhibit A.
Table 8
Calculated Based on DAS Rates
Employee Name

Excess
Hours

Hourly
Rate

Amount
Overpaid

Jerry Allen

118.52

$ 37.40

$ 4,432.64

Angela Brubaker

129.30

21.06

2,723.06

Melinda Lamb

78.90

47.40

3,739.86

Brenda Larkey

33.35

29.69

990.16

Robert Metzger

123.00

43.21

5,314.83

16.34

33.18

542.16

298.29

43.26

12,904.03

Shannon Ryan

80.06

39.35

3,150.36

Kelly Schultz

36.57

30.26

1,106.61

145.25

37.40

5,432.35

Shari Miller
Bobbie Peters

Theresa Tometich
Total

$ 40,336.06

17

Exhibit B also includes the employees’ hourly pay rates and the value of their vacation balances
at April 30, 2013. As illustrated by the Exhibit, the value of the employees’ vacation recorded by
the District at April 30, 2013 totaled $432,867.23. However, if the vacation accrual rates
established by DAS had been used, the value of the employees’ vacation balance at April 30, 2013
would have been $160,680.20. The $272,187.03 difference has not been paid by the District, but
is an on-going liability. When the employees leave the District’s employment, the District may be
obligated to pay employees for their unused vacation balances.
In addition to the 30 current management employees, the District previously employed 17
additional management employees. The 17 employees have retired or left employment with the
District, which resulted in the District issuing checks to the 17 employees for payment of their
accrued vacation balances at the time they left employment. Exhibit C summarizes the vacation
balances and the amount paid to the 17 employees based on the District’s recorded vacation
balances.
In addition, the Exhibit summarizes the vacation balances based on the State’s accrual rates to
determine the vacation payout. As illustrated by the Exhibit, the District paid a total of
$248,177.22 in vacation payouts based on its accrual rates. However, the District would have
only paid $77,998.44 in vacation payouts had the proper accrual rates been used. As a result,
the District incurred additional expenses of $170,178.78 related to overpayment of vacation
payouts. Had the District accrued vacation at the proper rate, the District’s deficit position would
have improved. Because vacation was accrued at a greater rate for management employees, the
District paid $170,178.78 more than appropriate, which impacted its need for additional funding
from DOC.
Because the District did not comply with the vacation accrual rate established by section 70A.1 of
the Code used for other State employees, the $170,178.78 of vacation payout overpayments is
included in Exhibit A.
Sick Leave Accrual – The amount of sick leave accrued for State employees and non-management
employees in each Judicial District is dependent on individual employee’s sick leave balances. In
accordance with section 70A.1 of the Code, when an employee’s sick leave balance is 750 hours or
less, the employee earns 5.54 hours of sick leave per pay period. When the balance is more than
750 hours but not more than 1,500 hours, the employee earns 3.69 hours of sick leave per pay
period. Once the employee’s sick leave balance exceeds 1,500 hours, the amount earned per pay
period is reduced to 1.84 hours. DAS has adopted administrative rules to implement these
statutory requirements.
Table 9 compares the amount of sick leave awarded to management employees by each Judicial
District to the amount established by DAS. As illustrated by the Table, the amount of sick leave
awarded to management employees by 2 Districts exceeds the amounts established by DAS.
Table 9
Sick Leave Hours Earned per Pay
Period Based on Accumulated Balance
Entity

0 - 750

751 – 1,500

Over 1,500

1st Judicial

9.23*

4.62*

4.62*

2nd Judicial

5.54

3.69

1.84

Judicial

5.54

3.69

1.84

4th Judicial

5.54

3.69

1.84

5th Judicial

5.54

3.69

1.84

6th Judicial

5.54

5.54

5.54

7th Judicial

5.54

3.69

1.84

Judicial

5.54

3.69

1.84

3rd

8th

DAS
5.54
3.69
1.84
* - 1st Judicial District uses 2 categories for management
employees: 0 – 750 hours and 750+ hours.

18

The additional sick leave awarded to management employees by the First Judicial District will be
reviewed and reported on in a separate report at a future date.
As illustrated by the Table, the District awards more sick leave to management employees than
other Judicial Districts and DAS. Specifically, District management employees received 12 hours
of sick leave per month, or 144 annual sick leave hours, regardless of their sick leave balance.
District staff we spoke with were unable to provide an explanation for the increased sick leave
amounts provided to employees.
Because the District’s management employees received additional sick leave hours per year
compared to State employees for whom DAS processes payroll and other Judicial Districts’
employees, the District’s financial condition was adversely affected. We reviewed the amount of
sick leave awarded by the District to all management employees for the period July 1, 2004
through April 30, 2013 to determine the financial impact to the District for the additional sick
leave awarded. Based on the reports we received, District management employees received
additional sick leave each year during the period of our review. We were unable to determine
when the District began granting the additional sick leave time to management employees.
We also identified 2 management employees who retired from the District after April 30, 2013.
For these employees, we reviewed sick leave accrual rates and balances through the date of their
retirement.
Exhibits D and E list the 11 retired District management employees and the 36 current and
former District management employees who have not retired, respectively, and their sick leave
balances according to the District’s records. The Exhibits also include our calculation of their
sick leave balance. The calculated sick leave balances are based on the sick leave accrual rates
used by DAS when processing payroll for all other State employees. The calculated balances do
not adjust for sick leave improperly accrued by the District for the employees prior to July 1,
2004.
Up to $2,000.00 of the value of sick leave balances can be paid out upon retirement. In addition,
the remaining value can be used to pay the State’s share of health insurance premiums after the
employee retires until the employee becomes Medicare eligible when the employee retires under
the Sick Leave Insurance Program (SLIP). As a result, we reviewed the sick leave payouts and
SLIP accounts for all eligible employees. The 11 employees who had retired from the District as of
June 20, 2013 and received a sick leave payout of $2,000.00 are listed in Exhibit D
We reviewed the re-calculated sick leave balances for the 11 employees who received the
$2,000.00 sick leave payout and determined all 11 employee’s sick leave balances were large
enough to allow the employees to receive the payout. Of the 11 employees retiring from the
District, 7 elected to participate in SLIP.
According to a DAS benefits website, in order to be eligible for SLIP benefits, the employee must:


Be employed in an eligible class, such as Executive Branch employees represented by
the American Federation of State, County and Municipal Employees (AFSCME) or
UE Local 893/Iowa United Professionals (UE/IUP), Executive Branch non-contract
employees, and community based corrections employees.



Have attained at least age 55 by their retirement date.



Have applied for and received State pension benefits.



Have a converted sick leave balance value greater than $2,000.00 plus the cost of at
least 1 month of the State’s share of the employee’s group health insurance premium.

After an employee is determined to be eligible for SLIP benefits, the value of the employee’s sick
leave balance is converted into a SLIP account balance based on a percentage of the sick leave
value at the time of retirement. Table 10 summarizes the sick leave conversion chart.

19

Table 10
If the sick leave balance is:

The conversion rate is:

0 to 750 hours

60% of value

Over 750 to 1,500 hours

80% of value

Over 1,500 hours

100% of value

For the 7 retired District employees participating in SLIP, we obtained the employee’s “Sick Leave
Insurance Program Calculation Worksheet to be used to estimate SLIP Balance” from the District
to determine the employee’s sick leave balance used to calculate the beginning value of the SLIP
account. As illustrated by Exhibit D, we determined the District incorrectly converted 100% of
the accumulated sick leave value to a SLIP account for 3 of the 7 employees. The correct
conversion rate for these 3 employees should have been 80%. Table 11 summarizes the
beginning value of the SLIP account calculated by the District for the 3 employees. The Table also
includes our calculation of the beginning value of the SLIP account based on the sick leave
accrual rates established by DAS for State employees and the applicable conversion rate.
Table 11
Description

Deb
Drahos

Gail
Juvik

Jean
Kuehl

1,867.50

1,802.20

1,918.45

100%

100%

100%

1,867.50

1,802.20

1,918.45

$ 72,187.03

69,619.43

89,836.20

1,445.70

1,288.30

1,470.45

80%

80%

80%

1,156.56

1,030.64

1,176.36

43,910.64

39,357.63

54,712.35

137,980.62

$ 28,276.39

30,261.80

35,123.85

93,662.04

Total

Per District Records:
Number of Hours
Conversion Rate
Converted Number of Hours
Related Benefits

231,642.66

Correct Calculation:
Number of Hours
Conversion Rate
Converted Number of Hours
Related Benefits
Difference

As illustrated by the Table, the difference between the District’s calculation and the correct
calculation resulted in $93,662.04 of additional benefits deposited to the 3 employees’ beginning
SLIP account balances. Because factors such as the cost of future premiums are variable, we are
unable to determine what portion of the additional $93,662.04 of benefits will be used by the
employees prior to their eligibility for Medicare. Therefore, the total is included in Exhibit A as a
potential improper liability.
For the remaining 4 retired employees participating in the SLIP program whose sick leave was
properly converted, we re-calculated the employee’s beginning balance of their SLIP account
because the District did not use the proper sick leave accrual rates. Table 12 summarizes the
beginning balance of the employee’s SLIP account according to the District and the beginning
balance of the employee’s SLIP account based on our re-calculation of sick leave hours.

20

Table 12
SLIP Account
Retiree
Cynthia Engler
Jane Mason
Michael Meeks
Steve Street

Retirement
Date
05/31/11
09/04/08
05/11/11
08/30/07

Total

District
Balance

Calculated
Balance

Variance

$ 103,286.74
6,861.01
90,143.50
70,418.21

73,349.49
4,772.40
66,580.25
59,486.58

29,937.25
2,088.61
23,563.25
10,931.63

$ 270,709.46

204,188.72

66,520.74

As illustrated by the Table, the District calculated SLIP account balances totaling $270,709.46 for
the 4 employees. If the proper sick leave accrual rates had been applied, the SLIP account
balances would have been $204,188.72. Therefore, the District overstated the beginning balance
of the 4 SLIP accounts by $66,520.74.
Of the 4 retired employees listed in the Table, only Jane Mason has expended the SLIP account
balance calculated for her by the District. As a result, the excess $2,088.61 is included in
Exhibit A as improper disbursements.
Because factors such as the cost of future premiums are variable, we are unable to determine
what portion, if any, of the remaining $64,432.13 of benefits included in Table 12 will be used by
the employees prior to their eligibility for Medicare. Therefore, $64,432.13 is included in
Exhibit A as a potential improper liability.
Because District employees are State employees, the State’s vacation and sick leave accrual rates
should have been used to ensure all State employees received the same benefits. The District
allowed employees to earn more sick leave than the State’s accrual policy allowed, which resulted
in employees retiring from the District have significantly higher sick leave balances and were
accruing sick leave hours at a significantly higher accrual rate than other State employees.
Because the District has awarded more sick leave to management employees than most other
Judicial Districts and DAS, the District may incur more costs for SLIP than appropriate. As a
result, the District should ensure the sick leave balances of management employees are properly
adjusted before retirement benefits are calculated.
Compensatory Time - For the fiscal years ended June 30, 2010 through 2012, the District
reported to DAS the District did not have a financial obligation for unpaid compensatory time
earned by employees. However, the District did have an obligation to a number of employees.
Specifically, the District owed the employees the amounts specified in Table 13.
Table 13
Fiscal
Year
2010
2011
2012

Balance Due
at June 30,
$ 2,940.69
6,417.97
5,702.05

District officials provided us an agreement between the District and the American Federation of
State, County and Municipal Employees (AFSCME) Iowa Council 61 dated December 20, 2007.
The agreement states Residential Officers can carry compensatory balances for 2 months after the
end of the fiscal year. According to District officials, the agreement was established because
Residential Officers were unable to use all of the compensatory time they had earned prior to
June 30 each year because of their scheduled job duties. The District agreed to allow 2 additional
21

months for the Residential Officers to use their earned compensatory time because the Residential
Officers preferred to use the time rather than be paid for it.
According to section 5.32 of DAS’ Managers and Supervisors Manual, Residential Officers are not
allowed to carry-over compensatory time. In addition, compensatory time which cannot be carried
over must be paid out at the end of the fiscal year.
According to a representative of the District, the agreement was signed in 2007. However,
Residential Officers did not take advantage of it until 2010. During our fieldwork, we were
notified the District has discontinued this practice and the Residential Officers would no longer be
allowed to carry over the unused compensatory time.
Based on our review of the District’s payroll records, the Residential Officers were paid for their
earned compensatory time prior to June 30 during fiscal years 2008 and 2009. If the Residential
Officers would have preferred to use the compensatory time rather than be paid for it and this
option was available to them during fiscal years 2008 and 2009, it is unclear why they would have
received the payouts prior to June 30 each year.
During our review of e-mail communications between Mr. Hinzman and DOC officials, we
identified a message sent by Mr. Hinzman on July 12, 2012. The e-mail stated, in part, the
practice of allowing Residential Officers to carry over unused compensatory time “saves the
District money.” This is not an accurate statement. At best, allowing the carry over delays the
payroll expenditures and allows the expenditures to be paid with subsequent fiscal year funding.
However, the District incurs additional costs for any employee who receives a pay raise after
June 30 of any fiscal year prior to using and/or being paid for the carried over compensatory
time. It is not unusual for pay raises for District employees to be effective July 1.
Federal Emergency Management Agency (FEMA) Funds - As a result of extreme flooding in
Cedar Rapids in 2008, individuals being held in the Linn County Jail were relocated to other
facilities, including the First, Sixth, and Eighth Judicial Districts, Anamosa State Penitentiary, the
Iowa State Penitentiary, the Iowa Correctional Institution for Women, the Iowa Medical and
Classification Center, and the Mt. Pleasant Correctional Facility. According to DOC officials, the
Districts and other DOC facilities housing the relocated prisoners were instructed not to use per
diem rates when billing Linn County for housing the prisoners because FEMA had previously
disallowed any costs which were not actual costs.
We obtained and reviewed supporting
reimbursement requests and payments
reviewed information from the District
reimbursements and the amount reverted

documentation from Linn County for the District’s
received from Linn County. We also obtained and
identifying the amount expended from Linn County
to the State.

The documents we reviewed identified the District billed Linn County for housing prisoners each
month from June 2008 through April 2009 on a per diem basis. A Linn County official we spoke
with stated the County received reimbursement on September 20, 2012 from FEMA for 90% of the
total paid to the District. The remaining 10% of the costs to be reimbursed to the County by the
State was received February 22, 2013.
Table 14 summarizes the amount the District billed Linn County for housing prisoners and the
amount the District reverted to DOC.
Table 14
Description

Amount

Amount billed to and received from Linn County
Amount the District reverted to DOC
Amount retained by the District
22

$ 870,841.49
(297,232.24)
$ 573,609.25

As illustrated by the Table, the District reverted $297,232.24 of the funds collected from Linn
County to DOC. The funds were reverted on June 25, 2010. Each of the other facilities which
housed Linn County prisoners reverted all of the funds they received from Linn County to DOC.
DOC then reallocated the reverted funds among the facilities to restore each of the facilities to
their condition prior to housing the additional prisoners. The District was the only facility
housing Linn County prisoners which did not revert all of the funds it received. According to DOC
officials we spoke with, all of the funds the District received from Linn County should have been
reverted to allow proper recording and tracking of the federal funding from FEMA which ultimately
paid for housing the prisoners. This would also allow for proper reallocation of the funds. It is
unclear why DOC officials did not require the District to revert all funds received in a timely
manner.
As previously stated, the District billed Linn County from June 2008 through April 2009.
Payments were received in a timely manner. As a result, the District should have reverted the
funds received from the County at the end of fiscal year 2009 rather that at the end of fiscal year
2010. In addition, a small reversion may have been payable at the end of fiscal year 2008. DOC
officials did not question District officials about the reversion which had not been made at the end
of fiscal year 2009. According to the DOC officials, they incorrectly believed a reversion of
approximately $850,000.00 at the end of fiscal year 2009 was related to the funds from Linn
County. However, the reverted funds were unspent appropriations for the ANCHOR Center, a
location in Cedar Rapids which provides residential and outpatient services. This information did
not come to DOC officials’ attention until June 2012 when staff from the Legislative Services
Agency (LSA) requested a copy of the reversion check related to the payments from Linn County
and reimbursements from FEMA. When District staff submitted a copy of the reversion check and
corresponding internal memo dated June 27, 2012, DOC officials learned the reversion was for
unspent ANCHOR Center appropriations.
By reviewing State accounting records to which DOC officials had access, we confirmed the
reversion at the end of fiscal year 2009 was composed of unspent State funds from the ANCHOR
Center’s appropriation unit. It is unclear why DOC officials were unable to readily determine the
reversion was unspent State funds rather than payments from Linn County which were
reimbursed with FEMA funds.
In addition, the District was the only facility to not follow DOC’s instructions on how to bill Linn
County for housing prisoners. The other facilities billed Linn County based on actual costs rather
than a per diem rate. The per diem rate the District charged to Linn County is summarized in
Table 15. When we asked District officials for support for the amounts listed in the Table, they
were unable to provide any additional information.
Table 15
Inmate Costs

Per Diem Rate

Rent

$ 41.12

Food

4.32

Personal care items

1.22

Laundry

0.95

Uniforms

0.58

Total per diem charged to Linn County

$ 48.19

Based on documentation available for our review, District officials worked with DOC at the
beginning of the flood to ensure compliance with FEMA requirements. However, the District
discontinued working with DOC in August or September of 2008 and instead worked through
23

Linn County. When we asked Mr. Hinzman why the District discontinued working with DOC, we
received an e-mailed response. A copy of the e-mail is included in Appendix 1. As illustrated by
the Appendix, Mr. Hinzman’s response included the statement, “The long term care of the [Linn
County] jail prisoners became more costly than our budget could absorb. If not for that we would
have told Linn County we would keep them for nothing.” The District’s budget was not
established for the purpose of housing county prisoners, nor was the District’s State appropriation
meant to cover these costs. It would not be appropriate for any District Director or District Board
to allow these funds to be used for any purposes other than District operations.
According to District officials we spoke with, the $573,609.25 retained by the District included
$328,981.88 of costs spent by the District to repair damages caused by housing Linn County’s
prisoners. We reviewed documentation provided by District officials to confirm the $328,981.88 of
costs spent by the District were to repair the facility.
District officials also stated the remaining $244,627.37 was “regular local income” the District lost
because they were unable to house individuals in need of services in their community. According
to District officials, these individuals included participants in OWI treatment programs and other
services. Because District officials did not have any documentation to substantiate the number of
individuals who would have received services or the individual amounts the District would have
billed for the services, we are unable to support the $244,627.37 retained by the District.
While the District incurred costs to repair the facility and was not able to house and serve other
individuals who would have generated income for the District, these factors should not have
reduced the amount the District reverted to DOC. As previously stated, the District was the only
facility housing Linn County prisoners which did not revert all of the funds it received. Had the
District reverted the funds, DOC could have reallocated the funds necessary to repair the facility
and “replace” the lost income.

RELATIONSHIP BETWEEN THE DISTRICT AND CCIA
As previously stated, CCIA’s articles of incorporation state CCIA’s purpose is to “maintain,
develop, increase and extend the facilities and services of community based correctional service
agencies (CBC) of the State of Iowa.” This indicates CCIA intended to support (emphasis added)
the Districts’ operations. The articles of incorporation also state CCIA’s purpose is “to perform the
functions of or carry out the purposes of and assist in providing services” of community based
correctional service agencies in the State of Iowa. This indicates CCIA intended to also operate in
a similar capacity as the Districts.
Because the Districts are established by the Code of Iowa to perform certain functions, it is not
appropriate for an organization to appoint itself to operate in the same capacity. CCIA should
support or supplement the District’s functions rather than replace or supplant those duties.
The Iowa Attorney General’s Office provided a Letter of Advice dated April 22, 2008 to the Office of
Auditor of State regarding the transfer of public funds to private non-profit organizations. The
Letter of Advice provided by the Attorney General’s Office stated, in part:


“Past opinions of this office have consistently concluded that a governmental body
may not donate public funds to a private entity, even if the entity is established for
charitable or educational purposes and performs work which the government could
perform directly.”



“The Iowa Constitution prohibits governmental bodies from making a gift to a private
non-profit corporation. Article III, section 31 states: “No public money or property
shall be appropriated for local, or private purposes, unless such appropriation,
compensation, or claim, be allowed by two thirds of the members elected to each
branch of the General Assembly.”
24



“Delegation of control: The transfer of public funds to a private non-profit corporation
also raises concerns regarding the delegation of the discretion of the governing body of
the government entity over the use and expenditures of the funds.”

While the Letter of Advice received from the Attorney General’s Office discusses donations and
gifts to private non-profit organizations, payments made by the District on behalf of CCIA
effectively achieve the same result as donations and gifts to private non-profit organizations. The
following paragraphs discuss payments made by the District on behalf of CCIA.
As previously stated, the District and CCIA share 3 Board members and the District Director
served as the Executive Director of CCIA in addition to his role at the District. Also as previously
stated, the Director of DOC reported the District supports CCIA. Because of the unique
relationship between the District and CCIA, we reviewed certain financial transactions between
the District and CCIA. We also reviewed available documentation to determine if certain
payments between the District and CCIA were appropriate, reasonable, and properly supported.
Grants - As previously stated, the District’s and CCIA’s primary revenue sources include grants.
Most grants provided by a County, the State and the federal government have strict guidelines for
the use of grant funds, including maintaining supporting documentation in order to ensure all
expenses are within the guidelines.
The grants administered by the District are primarily structured to provide services to offenders.
Many of the grants are funded by a county, the State, and federal agencies. The grants
administered by the District are not unlike those administered by other Judicial Districts. The
grants administered by CCIA are broader in scope and can be structured to provide services to
offenders and/or their families and address community improvement issues. Many of the grants
are funded by non-profit organizations and local sponsors, such as United Way, Bank Iowa, and
Veridian, although grants are also received from counties, the State, and federal agencies. The
types of grants administered by CCIA typically are not provided by other Judicial Districts. Jean
Kuehl, the District’s Assistant Director, prepares the grant applications for essentially all of the
grants received by the District and CCIA.
We reviewed all District grants which had a period of availability during fiscal year 2012. We also
reviewed the related supporting documentation, such as grant agreements and invoices, to ensure
expenses incurred under the grant agreements were properly supported and allowable.
During our review of grants administered by the District, we identified 6 programs which were
awarded to the District but were administered by CCIA. The District established a sub-contract
with CCIA to administer the 6 programs funded by the Iowa Department of Human Services
(DHS). The programs and the related periods of availability, amounts awarded, and amounts
expended are summarized in Table 16.
Table 16
Program

Period of Availability

Amount
Awarded

Amount
Expended

CPPC Coordination
07/01/11 – 06/30/12
$ 30,000.00
16,143.57
Family Support Workers^ 07/18/11 – 06/30/12
125,000.00
184,207.59
Parent Partners
07/01/11 – 06/30/12
135,000.00
134,967.68
Family Reunification
07/01/11 – 06/30/12
61,137.02
54,310.34
DHS Family Liaison
07/18/11 – 06/30/12
55,959.00
55,609.62
Youth Development
01/17/12 – 06/30/12
16,414.00
10,799.83
^ - CCIA used funding sources other than the grant for the additional costs incurred.

25

We reviewed the contracts to determine if the District or CCIA was responsible for administering
the programs outlined in the contracts. According to the contracts, the programs which received
funding are part of the Partnership for Safe Families Initiative administered by CCIA. Because the
funding was received from DHS for each of the 6 programs, we contacted the local DHS office in
Cedar Rapids and the DHS central office in Des Moines to determine if DHS was aware of the
relationship between the District and CCIA.
According to the individuals we spoke with, the District’s role in administering the programs was
intended to be as a fiscal agent when the programs were established a number of years ago
because the funds were required to be awarded to a governmental entity. They also stated the
language in the grant agreements has not changed even though the funds no longer need to pass
through a governmental entity.
According to DHS representatives, DHS was aware CCIA was the entity receiving the funds even
though the District was awarded the grants. The DHS officials also confirmed CCIA applies for
the grants each year and DHS provides the reimbursements for grant expenditures directly to
CCIA rather than the District. In addition, the DHS representatives stated the grants should be
awarded to CCIA rather than the District, but they have not updated the language used in the
grant agreements each year to reflect what actually happens.
We also discussed the process with District representatives to determine if CCIA was receiving the
funding or if the District received the funds. According to District representatives, the District
does not receive any of this funding. It all goes to CCIA. During our review of CCIA accounting
records, we identified collections from DHS for the programs. CCIA applied for the grants and the
grants are on a reimbursement basis. Therefore, CCIA submits reimbursement requests to the
District, which provides the claims to DHS. The reimbursement requests submitted by CCIA for
program disbursements should be supported by appropriate documentation.
We reviewed the reimbursement requests submitted by CCIA for the 6 programs listed in
Table 16. In addition to testing the 6 programs which were passed through the District to CCIA,
we also reviewed other programs administered by CCIA.
During our review of the “Each One Reach One Offender Mentoring” project funded by the
U.S. Department of Justice, we determined CCIA included District staff salaries as in-kind match
in the program’s summary report. For the remaining programs we tested, we determined 155
transactions listed on the summary pages for the individual grants were not supported by
documentation. The transactions for which support was not located total $82,551.89.
Because the grants are awarded to CCIA for a CCIA program, we have not included any costs in
Exhibit A. However, because the grants do not require a governmental entity to be the fiscal
agent, the funding should be provided directly to CCIA and the District should discontinue the
practice of being the pass-through entity.
As discussed in the following paragraphs, several District employees work on CCIA programs.
According to Mr. Hinzman, this occurs because CCIA staff cannot handle the workload associated
with all the programs CCIA administers.
If District staff are available and capable of
administering a program or grant, the program or grant should be administered by the District
rather than CCIA. In addition, District functions should not be performed by CCIA staff. In
accordance with the Code of Iowa, the District is responsible for carrying out certain functions
and those responsibilities should not be delegated to other parties.
Payroll – As previously stated, DOC requested Division Managers from the First and Fifth Judicial
Districts conduct an internal review of the District’s financial records. After performing certain
procedures, the Division Managers submitted a report dated April 10, 2012 to Department of
Corrections (DOC) officials which summarized their findings. The report stated, in part:
26

“In a copy of a CCIA payroll requested by Correction’s staff payment date 1/25/2012,
there is a total of 110 payees with 41 (37.3%) also being employees of 6th Judicial
District. While CCIA is an established 501(c)(3) non-profit agency with all the capability
to exist as a separate entity from the Sixth Judicial District, it appears boundaries have
become so blurred between the two agencies that it is next to impossible to separate
one from the other.”
When we requested detailed payroll information, CCIA staff informed us CCIA does not process its
own payroll, nor do they keep detailed payroll records. The only information available from CCIA
for payroll was the net amount recorded in CCIA’s general ledger along with the related payroll
taxes. However, CCIA was able to provide us with a detailed listing of employees’ payroll
information for the pay period ended January 25, 2012. This is the same information provided by
CCIA to the District officials who prepared the internal report.
The detailed information provided for the January 25, 2012 pay period included 13 District
employees. Only 5 of the 13 employees received compensation for the pay period. The records
provided showed no hours were recorded during the pay period for the remaining 8 employees.
While the employees received their pay from the District, CCIA reimbursed the District for the
$5,831.74 of net pay recorded for the employees along with the related payroll taxes. We
confirmed the District received the reimbursement from CCIA.
The limited general ledger information regarding payroll available for our review included periods
from fiscal year 2009 through the current fiscal year. CCIA reimbursed the District for certain
payroll costs throughout this period. Because records prior to fiscal year 2009 were not available,
we are unable to determine when CCIA began reimbursing the District for District employee’s
time.
During our review of documents supporting payments from CCIA to the District, we identified a
number of reimbursements CCIA made to the District for payroll costs of District employees who
administered programs on behalf of CCIA. According to CCIA staff we spoke with, the individuals
were employed by the District but “contracted out” to CCIA. As a result, the employees were paid
by the District and CCIA periodically reimbursed the District for the payroll costs. Based on the
documents we reviewed, not all of the reimbursements were made in a timely manner. We also
determined the reimbursements included the proper amount for the time allocated to CCIA
duties. However, because detailed time records were not available, we were unable to determine if
the time allocated (such as 5%, 10% or 25% of an employee’s time) was correct.
While CCIA staff we spoke with referred to the individuals as “contract employees”, no one was
able to provide us with copies of the contracts which supported the payments made by CCIA to
the District or could explain the specific terms under which the District contracted the
employees’ services out to CCIA. Based on the supporting documentation available, the District
billed CCIA for half or less of certain employees’ payroll costs. We were unable to determine if the
positions filled by the employees were necessary for District operations since the employees were
not working for the District on a full-time basis.
According to Mr. Hinzman and based on our observations, CCIA’s Finance Officer is the only
administrative staff member employed by CCIA. As previously stated, CCIA’s office is located in
the District’s administrative building. CCIA’s Finance Officer’s office is located in the same area of
the building with administrative staff of the District. There is no physical separation between
CCIA’s operations and the District’s operations.
During our review of the documents, we also identified communications between Mr. Hinzman
and various parties regarding providing additional compensation to 4 District employees who were
managing CCIA programs in addition to their District duties. The communications are described
in the following paragraphs.
27



On June 4, 2009, Mr. Hinzman sent an e-mail to members of the CCIA Board of
Directors which stated, in part:
“I realized that a District administrative employee was actually getting paid
about $6,000.00 less annually than a CCIA program employee …. So in effect I
have a District administrative employee fulfilling all their District job
responsibilities plus managing CCIA AmeriCorps program with 15 members
and there appears to be a pay equity issue .... As I have reflected up on this
issue I think the reasonable thing to do is to provide a contract with CCIA for
$6,000.00 annually to compensate the administrative assistant for managing
the AmeriCorps program. As soon as I thought that I realized that 3 other
people on my admin team are also managing CCIA programs that significantly
increase their workload …. Therefore I believe it would be fair to contract with
each of the other 3 for $5,000.00 annually as long as they are managing these
programs. I am seeking the approval of the CCIA Executive Board to sign these
contracts once they are developed.”
The administrative employee initially referred to in the e-mail was Angela Brubaker,
Mr. Hinzman’s Administrative Assistant. The 3 additional employees referred to
include Clinical Services Director Melinda Lamb, Assistant Director Jean Kuehl and
Bruce Vander Sanden, the Assistant Director prior to Mr. Hinzman’s retirement.
We reviewed minutes from the CCIA Board meetings held during 2009 and did not
identify any notations regarding Mr. Hinzman’s request.



On June 17, 2009, Mr. Hinzman received an e-mail from an employee of the
Department of Administrative Services (DAS). According to the e-mail, he had
requested clarification on whether a private foundation could pay District employees
for additional work performed for managing programs of the foundation. In the
response to Mr. Hinzman, the DAS employee provided a copy of Senate File 478,
section 22, which stated, in part, “Effective July 1, 2009, employees of the executive
branch, judicial branch, and legislative branch shall not receive bonus pay unless
otherwise authorized by law, required pursuant to a contract of employment entered
into before July 1, 2009, or required pursuant to a collective bargaining agreement….”
The response did not address whether a private foundation could pay District
employees for additional work performed for the foundation. However, Mr. Hinzman
responded to the DAS employee’s e-mail with the message, “Thanks Jeff for clarifying
the issue for me. I just wanted to make sure that a private foundation could pay our
employees for additional work they are doing to manage programs of the foundation
and do not use state appropriated money per Senate file 478, Section 22….”



On June 25, 2009, Mr. Hinzman sent an e-mail to the DOC Director regarding the pay
issues with the 4 District employees managing CCIA programs. The e-mail included
the response from the DAS employee regarding additional compensation and the draft
contracts for the 4 employees for additional pay.



On July 1, 2009, the Director of DOC responded to Mr. Hinzman with questions
regarding the additional pay contracts. Specifically, he asked:
o

Are the 6th District employees that are being paid by CCIA receiving an
additional IPERS benefit?

o

Is any of this work done on normal business hours?

28

o

Are these the only 6th District folks that work for CCIA?

o

Does CCIA receive client fee money?

Mr. Hinzman replied to the DOC Director’s e-mail the same day stating, in part, “The
District employees do address program issues in a timely manner during work hours
which requires them to work additional hours. These are all employees that have
flexible hours. However, the overall program management and responsibility and
working evenings and weekends on these programs are the basis for these
contracts …. Many staff of the Sixth District have for years worked as facilitators
(when they are off-duty) for CCIA programs and receive a fee for that ….”
We are unable to determine specifically to whom Mr. Hinzman was referring.


On August 4, 2009, Mr. Hinzman sent an e-mail to the CCIA Executive Committee
stating the members of management were offered a contract and declined. According
to the former Director, the members of management preferred providing the extra
service to CCIA without compensation.

The e-mails identified illustrate representatives from DOC and DAS were informed in 2009
District employees were administering programs on behalf of CCIA and Mr. Hinzman intended to
seek additional compensation for District employees. It is unclear why steps were not taken at
that time to ensure a proper segregation of duties between the District and CCIA.
The report prepared by the Division Managers from the First and Fifth Judicial Districts also
included examples of “perceived blurred boundaries and questionable processes.” The report
included the following findings/areas of concern:


The salary of Jean Kuehl was listed in the District’s personnel system. According to
the District’s Table of Organization, Ms. Kuehl’s duties included certain programs
administered by CCIA, including Youth Development, Children of Promise, Foster
Grandparents, Youth Leadership, Circles of Support, Faith-Based Initiatives,
AmeriCorps – EORO, and Partnership for Safe Families.
The DOC internal report stated minutes from the last several years of District Board
meetings included reports made by Ms. Kuehl which revolved around CCIA programs
and activities. According to the report, Mr. Hinzman confirmed to the Judicial District
Managers CCIA did not reimburse the District for any of Ms. Kuehl’s time spent
working on CCIA activities.
When we spoke with Ms. Kuehl, she stated her duties for the District include
overseeing training, quality assurance, internal investigations, and being a grant
writer and project manager. She also stated she is responsible for writing grants and
managing projects for CCIA, such as AmeriCorps and Children of Promise. According
to Ms. Kuehl, many of the grant writing responsibilities are blurred between the
District and CCIA. In addition, due to the heavy correlation between CCIA and
District work, she does not allocate her time between the 2 entities on her timesheet,
but half of her work during the day is for the District and the remaining half is for
CCIA.



The DOC internal report stated the salary of Bruce Vander Sanden was listed in the
District’s personnel system.
According to the District’s Table of Organization,
Mr. Vander Sanden’s duties included certain programs which were administered by
CCIA, including Project Safe Neighborhoods, VISTA, VITA, and Weed and Seed.

29

The DOC internal report also stated Mr. Vander Sanden reported numerous times to
the District Board about various CCIA activities. When we reviewed the minutes of
Board meetings, we confirmed Mr. Vander Sanden reported to the Board about
programs and activities administered by CCIA.
According to the report, the Judicial District Managers did not identify any
compensation paid by CCIA to the District for Mr. Vander Sanden’s salary. When we
spoke with Mr. Hinzman, he confirmed CCIA does not reimburse the District for a
portion of Mr. Vander Sanden’s salary or for any of the time he spent working on CCIA
programs or activities.
When we spoke with Mr. Vander Sanden, he stated his primary job duties for the
District were to oversee probation, parole, and residential staff. He also stated he is
responsible for coordinating the Weed and Seed, Project Safe Neighborhood and
AmeriCorps/Vista programs which are all programs of CCIA. Mr. Vander Sanden
estimated he spent 5% to 10% of his time on CCIA duties.


The DOC internal report stated, “In addressing the issue of Sixth Judicial
Administrative staff involvement in CCIA activity with Director Hinzman, he
responded that most of his time and that of Ms. Kuehl and Mr. Vander Sanden for the
non-profit was done in the evenings and on week-ends.”
However, as previously stated, Mr. Hinzman stated in a July 1, 2009 e-mail to the
DOC Director that District employees address CCIA program issues in a timely
manner during work hours which requires them to work additional hours. In
addition, when we spoke with Ms. Kuehl, she stated she performed her CCIA duties
during her normal working hours. When we asked Mr. Vander Sanden when he
performed the duties associated with grants administered by CCIA, he did not provide
a direct response.



The DOC internal report stated, “Retired Assistant Director Cindy Engler serves as the
contact person and monitors federal offenders placed in a 6th District residential
facility by the Bureau of Prisons [BOP]; however, she is paid through CCIA for those
duties. According to a listing provided by 6th District to DOC Central Office,
Ms. Engler makes $1,969.50 bi-weekly or $51,207.00 annually.
Both John
Hannaford [former District Manager] and Cathy Saddoris [CCIA Finance Director] say
that the District reimburses CCIA for the cost of Cindy’s salary. Based on the
guideline that retirees receiving IPERS benefits cannot be employed by an IPERS
covered agency and her work is directed by a contract between 6th District and the
BOP, it appears this arrangement between 6th District and CCIA has been designed to
circumvent the IPERS re-employment rule. Additionally this was a new expense as
the District was continually reporting they could not financially make it through to
the end of the year.”
We reviewed the contract CCIA established with Ms. Engler which was effective from
July 1, 2011 through June 30, 2012. The employment contract between CCIA and
Ms. Engler described her job duties as management of the programmatic
requirements of the BOP contract. A month prior to establishing the contract with
CCIA, Ms. Engler retired from the District on May 31, 2011. According to the District
Manager, she performed the same job duties for the District (as well as other
responsibilities) as those described in the contract with CCIA. At the time of her
retirement from the District, Ms. Engler’s annual salary was approximately $93,825.

30

The terms of her employment contract with CCIA include $47,000.00 of annual
compensation. While CCIA paid Ms. Engler during fiscal year 2012, the District
reimbursed CCIA for the costs associated with her employment contract. The
employment contract was not renewed for fiscal year 2013.
Based on CCIA records we reviewed and information obtained from District officials,
we determined Ms. Engler received IPERS benefits and participated in the Sick Leave
Incentive Program (SLIP) after her retirement on May 31, 2011. We concur with DOC
officials’ conclusion Ms. Engler simultaneously received these benefits and payments
for performing the same duties she performed prior to her retirement. While CCIA
compensated Ms. Engler, CCIA was ultimately reimbursed by the District. As a
result, it appears the District employed Ms. Engler “through” CCIA in an effort to
circumvent IPERS’ re-employment rules.


The DOC internal report stated, “CCIA employs five 6th District employees to conduct
pre-trial services on the week-end. Two of these employees are probation/parole
officers, two clerical, and one a residential officer during the week. CCIA invoices and
the 6th District pays for the cost of the pre-trial service. Director Hinzman commented
that this saves the District from having to pay overtime; however, the major concern is
a potential violation of FLSA rules as well as IPERS for these individuals. Even
though these individuals are technically paid by CCIA, 6th District trains them, directs
their work, and pays CCIA back for their cost. Additionally, pre-trial interview
information entered into ICON (Iowa Corrections Offender Network) shows that many
times the clerical support, paid through CCIA, entered the data during the workweek
during State time.”
We requested copies of all agreements, contracts and/or grants established between
the District and CCIA.
None of the materials we were provided included
documentation which indicated the District had established arrangements with CCIA
to provide pre-trial services during the week or on weekends.
Pre-trial services include meeting with and/or interviewing individuals on probation
or parole. These functions are performed exclusively throughout all Judicial Districts
by Probation/Parole Officers who are employed by the Districts. These services are
not contracted out.
We confirmed the 5 individuals identified by DOC officials were paid by CCIA and
those costs were reimbursed to CCIA by the District. We also confirmed with
Mr. Hinzman his comments the arrangement saves overtime costs for the District.
In addition, we concur with the DOC officials’ finding the arrangement causes
concerns regarding the District’s compliance with the Fair Labor Standards Act (FLSA)
and the District’s required contributions to IPERS for the work performed by the
employees. The work performed by the 5 individuals is a function of the District
rather than CCIA.



The DOC internal report stated the District’s personnel system included 22 positions
(11.75 full time equivalent positions) described as AmeriCorps Student Interns. The
report also stated, “John Hannaford informed us these were CCIA-supported
AmeriCorps interns and have been added to PMIS [District’s personnel system] in the
last couple of years because of span of control issues, further explained by John as
being a “political issue.” While none of the Districts liked working through dilemmas
caused by span of control issues, we are not aware of any other Districts adding
student interns to their FTE’s in the PMIS system.”

31

We reviewed the District’s payroll records and determined the 22 positions identified
by DOC officials were included in the District’s listing of employees. However, each of
the 22 positions were unpaid and they did not receive any benefits. According to
District staff we spoke with, the 22 individuals were volunteers. Because they were
volunteers and there were no employment costs associated with the positions, CCIA
did not reimburse the District any funds for these positions.
It is not appropriate for the District to include volunteers in personnel records for the
purposes of meeting span of control requirements. All individuals who are not
directly employed by the District should be removed for the District’s personnel and
payroll records.
In addition to speaking with Mr. Hinzman, Ms. Kuehl and Mr. Vander Sanden, we also spoke with
the former District Manager, John Hannaford, and 5 additional District administrative staff
members to determine the employees’ job responsibilities for the District and CCIA, if applicable.
Because an additional District staff member was on maternity leave, we were unable to discuss
her responsibilities with her at the time of our fieldwork.
Based on these discussions, we determined 9 of the 10 administrative employees performed work
for CCIA but are District employees. According to each employee other than Mr. Hannaford, they
did not maintain timesheets documenting the amount of time spent on CCIA projects. In
addition, the time spent on CCIA projects was during their work day at the District. Based on our
discussions, they did not incur any “extra” hours for the projects. However, Mr. Hannaford stated
his work for CCIA was completed either after hours or during weekends.
According to
Mr. Hinzman, several District employees work on CCIA projects/programs because CCIA staff
cannot handle the workload associated with all the programs CCIA administers.
We reviewed payroll for the former Director, 2 Assistant Directors, the Clinical Services Director,
and the Administrative Assistant to determine if these 5 employees were paid with State funds or
if CCIA was reimbursing the District for its payroll costs. In addition, we reviewed the former
Division Manager’s payroll because he was an authorized check signer on CCIA’s bank accounts.
During our review of payroll reports, we determined the Director, the Assistant Director, and the
Division Manager positions are funded from District funding and the Clinical Services Director
and the Administrative Assistant are funded from local funding. As a result, these employees
should not have performed any services for CCIA during District hours. Therefore, all work
performed by these employees on CCIA programs should not have occurred or should have been
reimbursed by CCIA to the District to offset payroll expenses. The remaining employees reported
they worked only a very limited time on CCIA duties each month.
As previously stated, the employees we spoke with do not maintain timesheets. As a result, we
were unable to determine how much time the employees spent performing responsibilities related
to programs administered by CCIA. Because timesheets were not available, we calculated a
percentage of time based on the job duties they perform for CCIA and an approximate amount of
time these duties would take. We asked the employees to estimate the portion of their time they
spent on CCIA duties. Each individual is summarized below, including the calculation of the
amount of each employee’s salary that should have been funded by CCIA. Because each
employee’s job duties did not change substantially during fiscal years 2009 through 2012, we
applied the percentages to the total salaries earned by the employees during this period. We were
unable to determine the accuracy of the estimates provided by the individuals.
 Gary Hinzman – The original by-laws of CCIA stated the Director of the District will
also be the Executive Director of CCIA. As previously stated, Mr. Hinzman retired
from the District on May 15, 2013. In April 2012, CCIA changed its by-laws to state
the Director of the District may serve as the Executive Director of CCIA.

32

According to Mr. Hinzman, the Director for the District is to oversee the operations
of the District and the Executive Director’s responsibility with CCIA is limited
predominantly to oversight. Mr. Hinzman also stated he spent approximately 25%
of his time on CCIA activities.
 John Hannaford – During an interview with the former Division Manager, he stated
he was primarily responsible for managing financial and accounting employees and
transactions, including purchasing, preparing reports, reconciling, and reviewing.
He also stated he is an authorized signer for checks written from CCIA’s bank
accounts and he reviewed the related bank reconciliation. He estimated his time
spent for CCIA was 5 to 10 minutes each day, but this time could vary depending on
the activity for CCIA. As a result, we estimated CCIA activities to be 2% of his time.
Table 17 summarizes the salary for the 4 employees for fiscal years 2009 through 2012, the
amount of time we calculated these 4 employees spent working on CCIA activities and the amount
CCIA should have reimbursed the District for the 4 employees. As stated previously, the other
employees who reported they performed some CCIA duties also reported the amount of time spent
each month was very limited. As a result, they are not included in the Table.
Table 17
Salary for
FY09 through FY12

Percentage

$ 629,265.00

25%

$ 157,316.25

Jean Kuehl

510,636.30

50%

255,318.15

Bruce Vander Sanden

466,100.25

5%

23,305.01

John Hannaford

395,945.19

2%

7,918.90

Employee
Gary Hinzman

Calculated
CCIA Salary

Calculated total

$ 443,858.31

Rounded total

$ 443,900.00

As illustrated by the Table, approximately $443,900.00 was paid by the District for these 4
employees’ salaries, even though their time was spent performing functions for CCIA. The
estimated amount of $443,900.00 is included in Exhibit A.
Health and Dental Insurance - During our review of CCIA’s bank statements, we identified
several checks issued to the District. We requested supporting documentation for these
payments and determined CCIA reimbursed the District for health and dental insurance for all
CCIA employees who received the benefits. Because CCIA employees are not State employees, the
District should not include CCIA employees on the State’s health and dental insurance plans.
By reviewing District payroll records, we determined CCIA employees were included in the payroll
records. According to District staff we spoke with, the CCIA employees were included in the
District’s payroll records exclusively for the purpose of receiving the same health and dental
insurance benefits provided to District employees.
A representative of the District provided a copy of the District’s general ledger summarizing all the
payments received by CCIA. According to the District’s Division Manager, when Mr. Hannaford
was employed by the District, he off-set expenses which would not be identified in the District’s
general ledger. As a result, certain transactions were not recorded by Mr. Hannaford. For
instance, if the District owed CCIA for janitorial services for a given period and CCIA owed the
District for health and dental insurance, Mr. Hannaford net the 2 amounts and only recorded the
difference between the 2 obligations, if any.
According to the District representative,
documentation of the amounts netted was not maintained.

33

Because we were unable to obtain supporting documentation from the District, we obtained a
listing of payments issued to the District by CCIA for the period July 1, 2008 through July 31,
2012 from CCIA’s Fiscal Officer. We also received supporting documentation for certain months
to determine if the District was reimbursed for the entire amount, or a portion, of the insurance
premiums.
Based on supporting documentation, the insurance premiums paid by CCIA agreed with monthly
health and dental premiums established for State employees. We also attempted to determine if
CCIA employees paid for a portion or all of the premiums CCIA reimbursed the District for.
However, because detailed payroll records were not available from CCIA, we were unable to
determine what portion, if any, CCIA employees contributed toward the health and dental
insurance premiums paid on their behalf.
The payments issued to the District from CCIA are summarized in Table 18 by fiscal year. The
amounts reimbursed agree with the costs incurred by the District.
Table 18
Fiscal Year
Ended June 30,

Health and Dental
Insurance Payments

2009

$ 63,322.30

2010

101,387.50

2011

113,394.24

2012

118,406.74

Total

$ 396,510.78

As illustrated by the Table, CCIA reimbursed the District $396,510.78 for health and dental
insurance for the period July 1, 2008 through June 30, 2012. We were unable to determine
what effect, if any, there was to the State and the calculation of health and dental insurance
premiums as a result of CCIA employees being allowed to participate in the State’s insurance
benefits. As a result, we have not included any improper disbursements in Exhibit A for these
costs.
Office Space Rent - As previously stated, CCIA’s office is located in the District’s administrative
building. According to Mr. Hinzman, CCIA Board meetings are held in the District’s building. We
also observed offices used by various CCIA employees, including CCIA’s Fiscal Officer, in the
District’s administrative building. According to Mr. Hinzman, CCIA does not maintain any other
offices or rent any other facilities.
Based on our review of financial records, CCIA does not pay the District rent for the offices used
by CCIA employees. Based on our review of records available and discussions with District and
CCIA staff, we also determined CCIA does not reimburse the District for a portion of the costs of
maintaining the building or building services, such as electricity and telephone costs. However,
CCIA did reimburse the District for a portion of the custodian costs incurred.
It is not reasonable for the District to pay CCIA’s operating costs of this nature. As a result, we
contacted a commercial real estate agent in the Cedar Rapids area to determine how much it
would cost to rent office space based on CCIA staffing. We reviewed the amount of space needed
by CCIA to conduct its business and determined approximately 1,700 square feet would be
reasonable. The 1,700 square feet allows for a conference room, file/storage room, an office for
the Executive Director and 5 office cubicles for various employees.

34

With the assistance of the real estate agent, we determined it would be reasonable for CCIA to pay
$14.00 to $17.00 per square foot per month for a Class B building in Cedar Rapids. This type of
building would be an average office building. Therefore, CCIA would expect to spend $23,800.00
to $28,900.00 annually to rent office space. Because rental fees vary based on location, square
feet, and building, it would be reasonable for CCIA to pay $23,800.00 to rent office space.
However, this estimate does not include miscellaneous occupancy expenses, such as office
equipment, supplies, and utilities. Because we are unable to determine a reasonable amount to
be allocated to CCIA for the office equipment, supplies, and utilities, we did not include this
amount in Exhibit A. As stated previously, CCIA currently does not reimburse the District for
these costs.
Since CCIA has not paid office rent to the District for the period July 1, 2008 through June 30,
2013, the estimated value of $119,000.00 for the office space is included in Exhibit A as costs
paid by the District on behalf of CCIA.
Because CCIA was established in 1991 and started with offices at the District, the value of the
office space would be significantly greater if we extended the time period of our review. In
addition, because documentation was not available to identify any miscellaneous expenses, such
as supplies and cleaning, an amount is not included in Exhibit A. If documentation had been
readily available, an amount would have been allocated to CCIA since CCIA does not reimburse
the District for these expenses.
During our review of e-mail communications involving District officials, we identified messages
sent in October 2009 between Mr. Hinzman and a representative of the Legislative Services
Agency (LSA). A message from the LSA representative asked Mr. Hinzman if CCIA reimbursed the
District for office space occupied by the CCIA Finance Officer. Mr. Hinzman’s response stated,
“The District allows the office space to be the District’s match in grants. Better than cash.” It is
not appropriate for District officials to use District resources as a match for programs
administered by CCIA. We were unable to determine if the use of a non-cash match would be
allowable for the specific grant to which Mr. Hinzman referred.
Vehicles - As previously stated, DOC conducted an internal review regarding certain District
transactions. During DOC’s review, a concern was identified regarding the number of vehicles the
District maintains, the reasonableness of the number of vehicles the District maintains and the
funding used to purchase certain vehicles. According to the DOC’s internal review, the District
purchased 2 vehicles which were financed by Ford Credit and GM Credit. In addition, the District
paid CCIA for 4 vehicles the District purchased in April 2009.
According to a representative of the District, the District maintained a fleet of 39 vehicles for use
by employees for various activities, such as transporting offenders and traveling to training
events. In addition, CCIA employees are allowed use the District’s vehicles for business purposes
at no cost. CCIA relies on the District to provide vehicles because CCIA does not own any
vehicles.
We obtained a listing of vehicles owned by the District and reviewed the related mileage logs. We
also verified the odometer readings agreed with the mileage logs for a selected number of vehicles.
As a result, we determined mileage logs were not maintained for all vehicles and vehicles are
assigned to locations, not individuals. In addition, employees using vehicles must sign them out
using a sign out log. High Risk Unit (HRU) employees are not required to keep mileage logs for the
vehicles used by the unit due to the high frequency of travel. In addition, if a vehicle is not kept
at the District’s main complex in Cedar Rapids, the employees at the surrounding locations are
responsible for tracking and maintaining mileage logs.
However, the mileage logs from
surrounding locations are not reviewed by an independent individual.

35

The District took 15 of the 39 vehicles out of service on June 30, 2012. According to
Mr. Hannaford, the vehicles were taken out of service as a cost saving measure. The vehicles are
still owned by the District, but they are not allowed to be used by District employees. We verified
the 15 vehicles were not driven after June 30, 2012 by matching the odometer reading to the
June 30, 2012 mileage log. Because the 15 vehicles are not being driven, it appears the District
does not need these 15 vehicles to conduct District operations.
According to the motor vehicle purchase agreements, 4 black Dodge Chargers were purchased on
April 1, 2009 for $20,871.00 each for a total cost of $83,484.00. The motor vehicle purchase
agreements identified the purchaser as the District. According to District and CCIA staff members
we spoke with, CCIA obtained a loan from its financial institution for the purchase of the District
vehicles. However, when District and CCIA staff members were asked why this agreement was
established, an explanation was not provided.
The District and CCIA subsequently established an equipment lease for the vehicles in May 2009.
According to the equipment lease, the District agreed to pay CCIA a total of $97,566.00 for the
May 1, 2009 through July 15, 2013 term of the lease. Table 19 summarizes the dates of the
payments and the amount of principal and interest payments by the District to CCIA for the
equipment lease.
Table 19
Date

Description per District
Documentation

Principal
Payment

Interest
Payment

Balance

04/06/09

Beginning balance

05/06/09

DCS payment

$ 1,626.10

-

81,857.90

06/11/09

DCS payment

1,089.52

536.58

80,768.38

09/04/09

Jul 09 – Jun 10 pay

18,738.48

774.72

62,029.90

10/18/10

Jul 10 – Dec 10 pay

4,647.93

5,108.67

57,381.97

04/18/11

Jan 11 – June 11 pay

7,891.40

1,865.20

49,490.57

12/30/11

July 11 – Dec 11 pay

7,480.67

2,275.33

42,009.90

03/28/13

Jan 12 – Mar 28, 13

42,009.90

3,425.21

-

$ 83,484.00

13,985.71

Total

$ 83,484.00

The equipment lease specified 2 payments were due prior to June 30, 2009, payments of
approximately $20,000.00 were due each year from 2009 through 2012 “on or about July 15” and
the final payment of approximately $16,000.00 was due “on or about July 15, 2013.” As
illustrated by the Table, the District did not make all payments to CCIA in a timely manner. In
addition, the payments were not made in the amounts specified in the equipment lease.
The Table and invoices from CCIA to the District specify $13,985.71 of interest charges were
incurred by the District related to the equipment lease with CCIA. While the lease agreement did
not specify an interest rate or mention CCIA charging the District interest, the lease stated the
District agreed to pay CCIA a total of $97,566.00 during the period of the lease for the vehicles
which cost $83,484.00. The District paid a total of $97,469.71 to CCIA.
We obtained a copy of an invoice from CCIA to the District for the payment the District issued on
March 28, 2013. Based on the invoice, CCIA charged the District an interest rate of 6.555% from
December 31, 2011 through March 28, 2013. According to the Federal Reserve System, interest
rates in May 2009 were 6.72% at a commercial bank for an auto loan and 3.47% at an auto
finance company.

36

In addition to the CCIA equipment lease agreement, DOC’s internal review determined the District
entered into loan agreements with Ford Credit and GM Credit for 2 vehicles in 2011. According to
DOC representatives, there are no provisions in the Code of Iowa which allow or disallow the
District to enter into loans to purchase vehicles. Also, according to a DOC representative, there
are no written guidelines provided to the Districts regarding financing of vehicles. As a result, we
have not included any costs in Exhibit A regarding the District’s practice of financing vehicles
through Ford Credit and GM Credit.
Table 20 summarizes the vehicles purchased by the District through financing and the purchase
amounts. According to a District representative, the Ford F250 and Chevrolet Malibu were paid
off in May 2013.
Table 20
Purchase
Amount

Vehicle Description
2011 Ford F250

$ 26,734.00

2011 Chevrolet Malibu
Total

19,229.43
$ 45,963.43

We also reviewed the District’s auto insurance to determine if only District employees were
covered by the District’s auto insurance. As a result, we determined the District has 15
employees from AmeriCorps and CCIA listed as covered drivers. However, according to a District
representative and a CCIA representative, CCIA does not reimburse the District for any auto
insurance expenses. In addition, CCIA does not reimburse or cover the fuel or maintenance
expenses for using the District’s vehicles. According to the CCIA representative, the District and
CCIA have always operated under this verbal agreement.
Table 21 summarizes the annual auto insurance premiums the District paid for fiscal years 2009
through 2012 and payments made through August 20, 2012 in fiscal year 2013.
Table 21
Date
10/03/08

Amount

Amount

799.00

08/05/11

19,557.00

11/26/08

7,506.12

12/30/11

665.00

02/23/09

5,798.49

04/06/12

647.00

04/17/09

1,208.00

04/27/12

(199.00)

Fiscal year 2009 subtotal

$

Date

15,311.61

Fiscal year 2012 subtotal

20,670.00

09/04/09

1,733.00

08/03/12

10,397.00

11/16/09

21,618.00

08/20/12

1,437.00

Fiscal year 2010 subtotal

Fiscal year 2013 subtotal*

23,351.00

Total
07/09/10

23,253.00

10/15/10

2,403.00

Fiscal year 2011 subtotal

25,656.00

11,834.00
$ 96,822.61

* - Through August 20, 2012

37

According to the District’s insurance agent, the District’s premium is not determined by the
number of drivers. Rather, it is calculated based on the number of vehicles the District owns. As
a result, we have not identified any questionable costs. However, it appears the District maintains
more vehicles than would otherwise be necessary because CCIA uses some of the vehicles. Poor
financial decisions made by District officials, such as owning vehicles and paying insurance on
vehicles used by CCIA, contribute to the District’s poor financial position. Because CCIA is a
legally separate entity, CCIA should own and maintain its own fleet of vehicles and be responsible
for paying the expenses associated with ownership of the vehicles.
Cell Phones - During our review of the District’s bank statements, we identified payments issued
to US Cellular and Verizon. As a result, we reviewed the monthly bills for US Cellular and Verizon
for the period July 1, 2008 through June 30, 2012 to determine if any non-District employees
were provided cell phones by the District and the entity responsible for paying for the cell phones.
Based on the District’s monthly bills, we determined CCIA was assigned 4 to 8 cell phones for the
period January 1, 2009 through June 30, 2012. We requested supporting documentation from
CCIA and the District to determine if CCIA reimbursed the District the entire expense for the
plans its employees use or a portion of the expense. The supporting documentation available
shows reimbursements to the District by CCIA were made on a sporadic basis. The amounts were
not consistent and the reimbursements were not supported by adequate documentation. As a
result, we were unable to determine if CCIA reimbursed the District for all costs associated with
the cell phones used by CCIA from January 1, 2009 through June 30, 2012.
Table 22 summarizes information from the available invoices and the amounts the District
received from CCIA for the reimbursement of cell phone expenses.
Table 22
Fiscal
Year

Number of
Phone Lines

Reimbursement
Amount

2009

5

$ 3,900.46

2010

4

7,794.91

2011

5

3,637.04

2012

8

2,852.93

Total

$ 18,185.34

As part of our review, we determined the District incurred additional charges when District
employees and CCIA employees exceeded usage plans for data, texting, voice services and for
downloading and/or subscribing for games or applications. The additional charges identified on
the invoices available for our review are summarized in Table 23. The invoices available include
the period July 1, 2008 through June 30, 2012.
Table 23
Description

Amount

Texting

$ 4,319.40

Plans w/ zero usage
Data Plans

6,408.03
683.07

Apps/Games

489.31

Phones/Accounts

908.48

Late Payment Fees

15.00

Voice Overages

1,128.59

Total

$ 13,951.88

38

As illustrated by the Table, a total of $13,951.88 in additional charges were incurred. Based on
supporting documentation available from the District, CCIA was billed $441.85 for additional
charges, such as usage and text messages, for the period January 1, 2009 through June 30,
2012. However, due to the lack of supporting documentation, we were unable to determine if the
remaining $13,510.03 of additional charges were incurred by District or CCIA employees. As a
result, additional cell phone charges are not included in Exhibit A.
Out-of-State Travel - During our review of the Board of Director’s meeting minutes, we identified
several discussions of upcoming out-of-state travel to attend conferences and/or training events
for various District employees. Due to the volume of out-of-state travel claims, we reviewed all
out-of-state travel claims for District employees for fiscal year 2012. In addition, we reviewed the
funding source used to pay for the District employees to attend the out-of-state conferences or
training events.
We reviewed 14 travel claims for District employees for the period July 1, 2011 through June 30,
2012. Of the 14 travel claims, 3 claims did not have any costs associated with the event because
the District employee was an invitee of the forum or college. For the remaining 11 claims, 5
claims were paid by the District and 6 claims were paid by CCIA. According to Mr. Hinzman,
CCIA pays for innovative training or conferences for District employees.
Table 24 summarizes the 5 claims paid by the District, including dates, number of employees
attending, reason for travel, location of travel and amount.
Table 24
Travel Dates

# of
Employees

07/08/11 – 07/15/11

1

07/16/11 – 07/22/11

Reason for Travel

Location

Amount

PCSOT* Certification Course

Philadelphia, PA

$ 629.06

1

SAMHSA^ Drug Court Meeting

Washington, D.C

424.24

07/30/11

1

Return visitors from Poland to Chicago, IL

Chicago, IL

213.27

08/22/11 – 08/25/11

4

Federal BOP~ Contractor’s Training

Minneapolis, MN

1,715.45

05/29/12 – 06/02/12

3

SAMHSA^ Grantee/Drug Court Meeting

Nashville, TN

3,201.54

Total

$ 6,183.56

* - Post Convicted Sex Offender Testing
^ - Substance Abuse and Mental Health Services Administration
~ - Bureau of Prisons

We reviewed the District’s programs and grants to determine if the travel was necessary to
continue providing services to the community. As a result, we determined the travel was required
as part of a District program or to maintain the funding for the contract for 4 of the 5 claims paid
by the District. The travel on July 30, 2011 was discussed further with a District representative
to determine the reasonableness of the expense. According to a District representative, the
expense to return Poland visitors to Chicago, IL should have been paid by CCIA and not the
District. As a result, we identified $213.27 of improper disbursements which are included in
Exhibit A.
Table 25 summarizes the 6 claims paid by CCIA, including dates, number of employees attending,
reason for travel, location of travel and amount.

39

Table 25
Travel Dates

# of
Employees

Reason for Travel

Location

Amount

07/18/11 – 07/20/11

1

Working with Native Americans

Omaha, NE

$ 281.05

07/22/11 – 07/27/11

13

APPA* Training and Leadership

Chicago, IL

8,799.80

09/05/11 – 09/10/11

1

Motivational Interviewing Network of Trainers

Sheffield, England

3,260.85

10/24/11 – 10/28/11

1

Summit on Victim Offender

Niagara Falls, NY

02/24/12 – 02/29/12

5

APPA* Winter Training and Leadership

San Diego, CA

03/08/12 – 03/09/12

1

Mental Health in Corrections

St. Louis, MO

Total

798.05
7,498.44
302.90
$ 20,941.09

* - American Probation and Parole Association

As illustrated by the Table, the costs paid by CCIA ranged from $281.05 to $8,799.80. Based on
documents we reviewed, CCIA did not incur any airfare or other transportation costs for the trips
to Niagara Falls or St. Louis. We also did not identify any indication the District paid these costs.
As a result, we are unable to determine how staff traveled to these locations or who incurred the
related costs.
According to Mr. Hinzman, CCIA provides funding for key District employees to maintain their
leadership skills and keep informed of current practices, knowledge, and trends used to guide
operations of the District. In addition, by using CCIA to fund this training, the general training
funds of the District can be used for other training opportunities for District employees.
We also reviewed the minutes to determine if the out-of-state travel was approved by the District’s
Board of Directors prior to the travel. Of the 14 travel claims, we identified 1 was approved by the
Board after the travel had occurred and 1 was never approved by the Board. The remaining 12
claims were approved by the Board prior to the travel dates.

ADDITIONAL INFORMATION
CCIA Tax Documents - We obtained CCIA’s 990 tax returns for calendar years 2009, 2010, and
2011 to determine funding sources, assets owned, and any related organizations.
During our review of CCIA’s 990 tax returns, we determined there were some inconsistencies
between years on how questions were answered and what forms were completed. As a result, we
contacted the Certified Public Accounting firm which was listed as the preparer, TD&T Financial
Group (TD&T), to discuss the inconsistencies. The inconsistencies we discussed with a TD&T
representative and their responses are summarized in the following paragraphs.


Schedule R, Related Organizations and Unrelated Partnerships, was included in the
2011 tax return and reported the District as an organization related to CCIA.
However, Schedule R was not included in CCIA’s 2009 and 2010 tax returns. The
District has been a related organization to CCIA since the inception of CCIA in 1991
and should have been included on Schedule R each year. According to a TD&T
representative, TD&T have been “slowly starting to increase their accuracy of the 990
tax forms” and began listing supporting organizations.



Schedule R, Part V, Transactions with Related Organizations, provides a list of certain
types of transactions for the preparer’s consideration. This Schedule was completed
as part of CCIA’s 2011 tax return. However, TD&T only identified 2 types of
transactions which CCIA and the District engage in. The 2 types identified by TD&T

40

were performance of services or member or fundraising solicitations for related
organization and sharing of paid employees with related organization.
Based on financial transactions we identified between CCIA and the District, TD&T
should have identified an additional 3 types of transactions between these 2 entities
as follows:
o

TD&T should have included loans or loan guarantees to or for a related
organization because CCIA and the District established a loan agreement
for the purchase of the HRU vehicles.

o

TD&T should have included sharing of facilities, equipment, mailing lists
or other assets with a related organization because CCIA office space is in
the District’s administrative building and CCIA does not reimburse the
District for the cost of the space. According to the TD&T representative,
they only look at CCIA’s financial transactions when preparing the tax
return. Because there was no exchange of funds, the sharing of facilities
would not have been identified. However, the Schedule does not ask the
tax preparer to list the type of transactions which have a financial aspect
with the related organization, but rather any type of transactions engaged
in with the related organization.

o

TD&T also should have included reimbursements paid to a related
organization for expenses. CCIA issued reimbursement checks to the
District every month for the period of July 1, 2008 through July 31, 2012
for health and dental insurance. Because these are expenses incurred by
CCIA, TD&T should have identified this type of transaction based on the
representative’s response that only financial transactions are considered.
Because TD&T has also performed CCIA’s annual audit, it is unclear why
they were not aware of the relationships between CCIA and the District.

Because, according to the TD&T representative, financial transactions were the only types of
transactions identified for tax reporting purposes, we asked what type of information was reviewed
by TD&T when preparing the 990 tax returns and related schedules, such as the general ledger or
audit reports. According to the TD&T representative, they use the audit report when preparing
the tax returns. We compared the audit reports to the 990 tax returns and identified transactions
in the audit reports which illustrated the financial transactions between CCIA and the District,
such as advances to the District and payments from the District. However, these transactions
were not included in the tax returns.
Based on our review and discussions with a TD&T representative, the 990 tax returns submitted
to the Internal Revenue Service (IRS) by CCIA were inaccurate and not in compliance with IRS
regulations. In addition, the minutes of CCIA Board meetings available for our review did not
include a notation the Board or designated representatives reviewed and verified the accuracy of
the tax returns prior to submittal. As a result, the inconsistencies were not identified by the CCIA
Board or Executive Director.
State Public Policy Group (SPPG) Report – We reviewed the results of an examination performed
by SPPG which was completed in November 2012, which was concurrent with the period of our
review. According to Mr. Hinzman, CCIA paid for the review. However, we were unable to
determine the cost. CCIA officials did not provide an explanation of why the study was
commissioned.
The report includes a disclosure which states, “In March of 1992 the Board of Directors of the
Sixth Judicial District Department of Correctional Services entered into a written agreement
where, among other provisions, 6JD [the District] agreed ‘to provide staff support to manage the
Community Corrections Improvement Association’.”
41

We were not provided a copy of the agreement referred to. However, based on our observations, it
is apparent the District continued to provide staff support to manage CCIA operations through
fiscal year 2013. It should be obvious to District officials and the District’s Board it is not
appropriate to use District funds to support the operations of any entity other than the District
without a contract requiring documented benefits of equal value in return. Doing so is to the
financial detriment of the District.
The report did not address any specific financial information. However, it includes a number of
recommendations. Specifically, the report states, in part:


The CCIA Board should provide close and detailed oversight of the accounting of
CCIA resources, particularly related to the transfer of funds to the District and funds
received from the District.



The role of Executive Director of CCIA should be separated from that of Director of
the District.



Create a separate space for CCIA records, property, and staff. Location in a different
building than the District’s administrative offices would be ideal.



While CCIA may want to work out its contractual relationship with the District to
cover the space and basic furniture (desk, chairs, file cabinets, etc.), CCIA should
invest in its own computer system.



CCIA’s e-mail is currently part of the Iowa Department of Corrections system. This
inherently confuses anyone communicating with CCIA and leads them to believe
CCIA and the District are one and the same. CCIA should have its own Internet
access and e-mail system.



A tracking system needs to be established, likely with the accounting system which
also needs to be established, where grant funds, transfers, and other financial
transactions are easily tracked.



Time spent by all employees on CCIA business should be tracked.

We determined the individual who performed the review previously performed work for or with the
District and CCIA. Because of the prior relationship, SPPG does not appear to be an independent
reviewer.
Fundraising – As previously stated, CCIA’s articles of incorporation state CCIA’s purpose is to
“maintain, develop, increase and extend the facilities and services of community based
correctional service agencies (CBC) of the State of Iowa.” This indicates CCIA intended to support
the Districts’ operations (emphasis added). The articles of incorporation also state CCIA’s purpose
is “to perform the functions of or carry out the purposes of and assist in providing services” of
community based correctional service agencies in the State of Iowa. This indicates CCIA intended
to also operate in a similar capacity as the Districts (emphasis added).
As a result, it would be reasonable for CCIA to carry out fundraising activities in an attempt to
help financially support the District’s operations and programs. According to CCIA’s fiscal officer,
CCIA carries out fundraising activities to support programs such as Children of Promise and
Foster Grandparents. The programs supported by fundraising are administered by CCIA. We
were unable to determine what amount, if any, of the funds collected as a result of the fundraising
activities were provided to the District in financial support of District programs.
Comparable District Data - During our review, we determined the First, Fifth, and Sixth Judicial
Districts are comparable in size, which allowed us to review their programs and various other data
for comparative purposes. As a result, we summarized fiscal years 2010, 2011, and 2012 data for
the First, Fifth, and Sixth Judicial Districts, which was obtained from the Districts’ annual reports
and discussions with District officials, in Table 26.
42

As illustrated by the Table, the state appropriations received by the First and Sixth Judicial
Districts are comparable in size. The Table also illustrates both the First and Fifth Judicial
Districts provide services to a greater number of counties than does the Sixth Judicial District.
However, the First and Sixth Judicial Districts each served between 4,200 to 4,799 offenders
during fiscal years 2010 through 2012. While the First and Sixth Judicial Districts serve a
comparable number of offenders, the Sixth Judicial District had a fleet of 35 to 37 vehicles while
the First Judicial District had only 12. The Sixth Judicial District also had more vehicles than the
Fifth Judicial District which reported 32 to 35 vehicles during fiscal years 2010 through 2012.
However, the Fifth Judicial District serves 16 counties as opposed to 6 by the Sixth Judicial
District and approximately 8,200 offenders as compared to the 4,250 served by the Sixth Judicial
District.
Table 26
5th

Judicial
District

Judicial
District

1st
Category

6th

Judicial
District

2010:
Counties Served

11

FTEs
Number of Offenders
Number of Residential Facilities
Number of Beds

16

6

175.41

258

202.88

4,753

8,199

4,200

3

2

3

278

288

228

Number of Vehicles

12

32

37

State Appropriation

$ 12,066,497

$ 18,023,311

$ 13,613,012

Expenditures

$ 15,648,632

$ 21,820,841

$ 17,508,763

14

21

18

Number of Programs
2011:
Counties Served
FTEs
Number of Offenders
Number of Residential Facilities
Number of Beds

11

16

6

176.91

247

194.88

4,799

8,305

4,200

3

2

3

278

288

228

Number of Vehicles

12

35

37

State Appropriation

$ 11,920,098

$ 18,407,129

$ 12,709,753

Expenditures

$ 15,881,995

$ 23,295,300

$ 17,800,213

11

21

18

11

16

6

176.41

257

185.44

4,776

8,305

4,300

3

2

3

Number of Programs
2012:
Counties Served
FTEs
Number of Offenders
Number of Residential Facilities
Number of Beds

278

288

237

Number of Vehicles

12

35

35

State Appropriation

$ 12,658,088

$ 18,897,467

$ 13,712,506

Expenditures

$ 16,710,882

$ 24,398,906

$ 18,157,683

11

21

17

Number of Programs

43

Using the information presented in Table 26, we calculated the average expenditures based on
the number of offenders reported. The calculated averages are summarized in Table 27.
Table 27
Fiscal
Year

1st Judicial
District

5th Judicial
District

6th Judicial
District

2010
2011
2012

$ 3,292.36
3,309.44
3,498.93

2,661.40
2,804.97
2,937.86

4,168.75
4,238.14
4,222.71

As illustrated by Table 27, the average total expenditures per offender served are much greater for
the Sixth Judicial District than those incurred by the First and Fifth Judicial Districts.

44

Recommended Control Procedures
As part of our review, we reviewed the procedures used by the District to allocate payroll, process
claim, administer grants, and prepare reports. An important aspect of internal control is to
establish procedures that provide accountability for assets susceptible to loss from error and
irregularities. These procedures provide the actions of one individual will act as a check on those
of another and provide a level of assurance errors or irregularities will be noted within a
reasonable time during the course of normal operations. Based on our findings and observations
detailed below, the following recommendations are made to strengthen the Sixth Judicial District’s
internal controls.
A.

Oversight – The Board has a fiduciary responsibility to exercise authority over its funds,
efficiently and effectively achieve its mission, provide oversight of the District’s
operations and maintain the public trust. Oversight is typically defined as the
“watchful and responsible care” a governing body exercises in its fiduciary capacity. In
addition, the Board is responsible for taking appropriate action when employees do not
comply with procedures established by the Department of Corrections.
Based on our observations and procedures performed, we determined the Board failed
to exercise proper fiduciary oversight.
District officials, specifically the District Director and Division Manager, also have a
fiduciary responsibility to report timely and accurate financial and operating
information to the Board, exercise authority over District funds, efficiently and
effectively achieve its mission and maintain the public trust. We identified a number of
poor decisions made by District officials which negatively impacted the District’s
financial condition, some of which were presented to the Board for approval. Other
decisions do not appear to have been presented to the Board. For example, we
determined:


Budget and other financial information provided to the Board by District
officials was frequently incomplete and/or inaccurate. Similar information
presented to the Board at subsequent meetings was often significantly
different.
It did not appear the information presented to the Board
consistently included accurate forecasts of financial activity for the short term
future. Minutes from Board meetings do not document Board members asked
questions regarding budgeting practices when budgeted amounts were
consistently not met.



District officials and the Board approved significant revenue increases without
corresponding new funding sources or expanded District facilities. In addition,
District officials and the Board did not identify any measures to significantly
reduce spending when budget deficits were identified.



The District’s budgets were not prepared in a consistent manner, which made
it difficult to compare budgeted information to actual.



The internal report stated the Board approved, on June 24, 2011, noncontract pay raises of 2% on July 1, 2011 and 1% on January 1, 2012 despite
being informed of a projected deficit and knowing the pay increases were not
funded by DOC. As a result, the District absorbed the increased payroll costs.



Because vacation and sick leave were accrued at higher rates for management
employees than allowed by State law, the District’s financial position was
negatively impacted.

45



The District paid the full salary for 4 management employees even though
each employee spent a portion of their day working on CCIA responsibilities.
Had the District sought reimbursement from CCIA for these employees, the
District’s financial condition would have improved.



District officials did not require reimbursement from CCIA for fuel expenses,
insurance coverage or maintenance of District vehicles used by CCIA
employees or volunteers.

The lack of appropriate fiduciary oversight and the failure to ensure implementation of
adequate internal controls permitted an employee to exercise too much power over the
operations of the District and its related organization, CCIA. The lack of appropriate
fiduciary oversight which allowed implementing salary increases and increased leave
accruals, against State law, for paid time off caused the District to go further into a
deficit position.
In addition, the operations of the District are not consistently distinct from those of
CCIA. Because of decisions implemented by the former District Director, including the
sharing of staff and how certain costs are paid, what should be distinct lines between
the District’s operations and CCIA’s operations are blurred.
Recommendation – Adequate fiduciary oversight is essential and should be an ongoing
effort by all members of the Board. In the future, the Board should exercise due care
and require and review pertinent information and documentation prior to making
decisions affecting the financial health of the District and other District operations.
Appropriate policies and procedures should be adopted, implemented and monitored to
ensure compliance with established and improved policies and procedures. District
officials should implement changes which ensure a clear separation from CCIA’s
operations, including assignment of staff and ensuring each entity is responsible for its
own operating costs. In addition, procedures should be implemented to ensure all
District costs are paid for with District funds and the District does not pay for costs
incurred by or on behalf of CCIA.
B.

Job Duties - After reviewing job descriptions for several key employees within the
District and CCIA, we identified the following concerns:


Several District employees are administering programs for CCIA and/or
assisting with day-to-day operations, such as signing checks, making
deposits, reviewing bank reconciliations and writing grants.



These employees do not maintain timesheets which document how their
time is allocated between the District and CCIA. According to 2 employees,
because their time on CCIA activities is minimal, they complete their CCIA
duties during work but do not record the time. However, according to
another employee, she spends at least 50% of her time on CCIA duties. The
District is not reimbursed by CCIA for the time spent by the employees.



CCIA established an employment contract with Cindy Engler, who retired
from the District on May 31, 2012. The contract was effective from July 1,
2011 through June 30, 2012 and described the job duties as management
of the programmatic requirements of the Bureau of Prisons contract.
According to the District Manager, Ms. Engler performed the same job
duties for the District as those described in the contract with CCIA.

46

In accordance with the terms of the contract, CCIA compensated
Ms. Engler. Because the District reimbursed CCIA for the costs associated
with her employment contract after she retired from the District and was
receiving IPERS benefits, it appears the District employed her “through”
CCIA in an effort to circumvent IPERS’ reemployment rule.
Recommendation - The District should implement procedures to ensure timesheets are
completed, reviewed, and maintained.
In addition, the District and CCIA should implement policies and procedures to ensure
independence is established by separating the 2 agencies in staffing, financial
transactions and records. The District should discontinue allowing District employees
to administer CCIA grants/programs and functions.
Because Ms. Engler’s employment contract with CCIA, which was effectively paid for
with District funds, may not comply with IPERS reemployment regulations, we have
filed a copy of this report with IPERS for its review.
C. Vacation and Sick Leave Accruals – Individuals employed by the State’s 8 Judicial
Districts are State employees. The Districts operate primarily on appropriations from
the State of Iowa and funding is provided by the State for payroll costs. While most
State employees’ payroll is processed by DAS, each District processes payroll for its
employees. Processing payroll includes determining net pay, accruing vacation and sick
leave benefits and ensuring employees contribute the appropriate amount for their
health, dental, and other benefits.
We determined the District has established policies which allow management employees
to earn vacation and sick leave at a rate greater than non-management employees,
other State employees and employees of other Judicial Districts. DAS and DOC officials
we spoke with were not aware the District had increased the accrual rates.
We determined 10 employees used more vacation than they would have accrued if the
appropriate rates had been applied. Because the employees used more vacation than
should have been accrued, the District paid $40,336.06 more in employee salaries for
their paid time off than appropriate. In addition, the value of 20 management
employees’ vacation recorded by the District at April 30, 2013 totaled $272,187.03 more
than their vacation would be valued at if appropriate vacation accrual rates had been
used. The difference has not been paid by the District, but is an on-going liability.
When the employees leave the District’s employment, the District will be obligated to
pay for their unused vacation balances.
We also determined the District calculated account values for employees who enrolled in
the Sick Leave Incentive Program (SLIP) which were $66,520.74 greater than
appropriate.
Recommendation – District officials should ensure paid time off for employees is
accrued at the appropriate rate for all employees. Specifically, all District employees
should accrue vacation and sick leave at the rate authorized for all other State
employees. In addition, District officials should consult with the appropriate parties to
determine how to properly adjust the current leave balances of management employees
which have not been properly calculated.
In addition, District and DOC officials should consult with legal counsel and DAS
representatives to determine the necessary adjustments for current employees and
individuals participating in SLIP.

47

D. Compensatory Time – The American Federation of State, County and Municipal
Employees (AFSCME) contract specifies if community based corrections employees are
unable to utilize earned compensatory time by June 30, the employees will be paid for
all unused compensatory time. During our review of benefits received by employees, we
determined the District established an agreement with the local union to allow eligible
employees to carry compensatory time into July and August of the following fiscal year.
This practice and agreement is not in compliance with the AFSCME contract.
The District did not properly record the liability for compensatory time balances carried
forward into the following fiscal year for fiscal years 2010 through 2012.
Recommendation – According to District officials we spoke with, the District has
discontinued allowing employees to carry compensatory time balances into the following
fiscal year. District officials should implement procedures to ensure the policy is not
reinstated. In addition, all liabilities at fiscal year-end should be properly recorded.
E. Health and Dental Insurance Benefits – CCIA reimbursed the District for health and
dental insurance for all CCIA employees who were eligible for the benefits. By reviewing
District payroll records, we determined CCIA employees were included in the payroll
records. According to District staff we spoke with, the CCIA employees were included in
the District’s payroll records exclusively for the purpose of receiving the same health
and dental insurance benefits provided to District employees. Because CCIA employees
are not State employees, the District should not include CCIA employees on the State’s
health and dental insurance plans.
Recommendation – According to District officials we spoke with, the District
discontinued including CCIA employees in the District’s payroll records in July 2013,
which also discontinued allowing CCIA employees to receive the same health and dental
benefits District employees receive. We observed an e-mail communication between
representatives of DOC and DAS which confirmed the employees have been removed
from the District’s payroll records and insurance coverage administered by DAS. The email also stated DOC officials would continue to monitor the payroll records to ensure
the CCIA employees were not added back at a future date.
F. FEMA Grant – The District did not follow DOC’s instructions on how to bill Linn County
for housing prisoners during the 2008 flooding which occurred in the Cedar Rapids
area. Other facilities providing similar services billed Linn County based on actual
costs rather than a per diem rate in accordance with DOC’s instructions. Instead, the
District charged the County based on a per diem rate. District officials were unable to
provide support for the amounts billed to the County.
In addition, the District retained $573,609.25 of the payments from the County rather
than remitting them to DOC in accordance with DOC’s instructions. Of this amount,
the District spent $328,981.88 to repair damages to the residential facilities, which left
$244,627.37. District officials were unable to support the amount retained.
Recommendation – District officials should work with DOC officials to determine what
amount should be reverted to DOC. District officials should also ensure policies and
procedures are implemented which ensure DOC instructions are complied with. In
addition, District officials should ensure appropriate documentation is maintained
which support financial information, such as the per diem rates charged, the amounts
remitted to DOC and the amounts retained by the District.
In addition, DOC officials should perform periodic reviews which provide assurance
DOC instructions are being complied with.
If instances of non-compliance are
identified, corrective action should take place in a timely manner.
48

G. District Grants – Supporting documentation was not maintained for all expenses for
District grants. In addition, sales tax was paid on a purchase.
Recommendation – The District should implement policies and procedures to ensure all
supporting records are properly retained for grants administered by the District.
Policies and procedures should also be implemented to ensure sales tax is not paid for
purchases made by the District.
H.

CCIA Grants – Supporting documentation was not always maintained for expenses for
CCIA grants. In addition, grants include in-kind matches from the District for use of
space and/or District staff.
In addition, several District employees work on CCIA programs.
According to
Mr. Hinzman, this occurs because CCIA staff cannot handle the workload associated
with all the programs CCIA administers.
Recommendation – If the District continues to work with CCIA in administering grants
which benefit the District, District officials should ensure CCIA staff retain appropriate
documentation for the grants. In addition, the District and CCIA should discontinue
the use of in-kind matches of District staff because the agencies are separate from each
other.
If District staff are available and capable of administering a program or grant, the
program or grant should be administered by the District rather than CCIA.

I.

Office Space Rent – We determined CCIA does not pay the District rent for the offices
used by CCIA employees. Based on our review of records available and discussions
with District and CCIA staff, we also determined CCIA does not reimburse the District
for a portion of the costs of maintaining the building or building services, such as
electricity and telephone costs. However, CCIA did reimburse the District for a portion
of the custodian costs incurred.
Recommendation – District officials should ensure policies and procedures are
implemented which ensure CCIA reimburses the District for operating costs, including,
but not limited to, rent for office space, a portion of utility cost, and maintenance costs.
In addition, District officials should ensure CCIA operations are physically separated
from District operations in a manner which allows operating costs, to be easily
identifiable or allocated.

J.

Capital Assets-Vehicles – The District maintains a fleet of vehicles. The number of
vehicles maintained by the District is higher than those maintained by other Judicial
Districts. We determined the vehicles maintained by the District are used by CCIA
employees. CCIA does not reimburse the District for any vehicle costs, such as fuel,
repairs, insurance, and replacement.
Mileage logs are not required to be maintained and are not consistently submitted for all
District vehicles.
Recommendation – District officials should ensure CCIA staff are no longer allowed to
use District vehicles.
In addition, the District should develop a policy and implement procedures which
require mileage logs be maintained and submitted for all District vehicles. An
independent person should review the mileage logs for reasonableness. On a periodic

49

basis, an independent person should ensure the amount of mileage recorded on the logs
agrees with the car’s odometer.
The District should reduce the number of vehicles maintained to only those which are
necessary.
K.

Travel Claims – During our review of travel claims, we identified the following:


Certain District employees periodically travel out-of-state, although certain
travel is funded by CCIA. According to the former District Director, CCIA
pays for innovative training or conferences for District employees.



On 1 occasion, the expenses should have been paid from CCIA funds
rather than District funds.



Travel was not approved by the Board on 1 occasion and travel was
approved after the travel occurred on another occasion.

Recommendation – The District should implement procedures to ensure the District
Board approves of all innovative training or conferences attended by District employees
prior to the event and pre-approves all out of state travel.
L.

Cell Phones – During our review of cell phone bills paid by the District, we identified
additional charges when plans were exceeded for texting, voice services, and use of the
data plan. We also identified charges for applications and games, phone and accessory
charges and late payment fees. In addition, we determined the District paid for several
phone plans each month which were not used.
We also determined the costs for cell phones paid by the District include cell phones
used by CCIA staff. We were unable to determine if reimbursements to the District by
CCIA for the cell phones were sufficient to cover all charges incurred by CCIA.
Recommendation – The District should review monthly cell phone statements to ensure
all charges are proper. In addition, the District should implement a policy for cell phone
usage. The District should also evaluate each plan to determine its necessity.
In addition, District officials should discontinue the practice of paying for cell phones
used by CCIA and then seeking reimbursement.

M. CCIA Tax Documents – During our review of CCIA, we identified inconsistencies in
CCIA’s 990 tax returns for calendar years 2009, 2010, and 2011. The following
inconsistencies were noted:


Schedule R, Related Organizations and Unrelated Partnerships, was
included in the 2011 tax return documenting the District as a related
organization but was not included in the 2009 and 2010 tax returns. Since
the inception of CCIA in 1991, the District has always been a related
organization and should have been included on this schedule each year.



Schedule R, Part V, Transactions with Related Organizations, was
completed as part of the 2011 990 tax return. However, TD&T only
identified 2 types of transactions which CCIA and the District engage in.
The 2 types identified by TD&T were performance of services or member or
fundraising solicitations for related organization and sharing of paid
employees with related organization. Based on the relationship between

50

CCIA and the District, TD&T should have identified an additional 3 types of
transactions between these 2 entities.


Because financial transactions were the only types of transactions identified
by TD&T for tax reporting purposes, discussion was held regarding what
information was reviewed by TD&T when preparing the 990 tax returns and
related schedules, such as the general ledger or audit reports. According to
the TD&T representative, they always use the audit report when preparing
the tax returns. We compared the audit reports to the 990 tax returns and
identified transactions in the audit reports which illustrated the financial
transactions between CCIA and the District, such as advances to the
District and payments from the District.

Because the CCIA Executive Director was also the District Director, these
inconsistencies and inaccuracies should have been identified and corrected in a timely
manner.
Recommendation – District officials should consult with CCIA to ensure the relationship
between the 2 entities is accurately disclosed in CCIA’s annual tax return.

51

Exhibits

52

Exhibit A
Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Summary of Findings
For the period July 1, 2008 through June 30, 2012

Description

Exhibit/
Table/Page

Amount

Improper disbursements:
Vacation accrual:
Value of vacation used before earned
Improper payouts
Incorrect sick leave accrued balance

Table 8

$ 40,336.06

Exhibit C

170,178.78

Page 21

Subtotal

$ 210,514.84
2,088.61
212,603.45

CCIA costs paid by the District:
Payroll (calculated)

Table 17

443,900.00

Office space rent (estimated)

Page 35

119,000.00

Out-of-state travel

Page 39

213.27

Subtotal of CCIA costs paid by the District

563,113.27

Total improper disbursements

$ 775,716.72

Potential improper liabilities:
Sick leave accrual for SLIP participants:
Incorrect conversion rates

Table 11

$ 93,662.04

Incorrect accrued balances

Page 21

64,432.13

Total potential improper liabilities

$ 158,094.17

53

Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Excess Vacation Hours Accrued for Management Employees as of April 30, 2013
For the period July 1, 2008 through June 30, 2012
Employee
Name
Mark Achey
Jerry Allen

District
Number of
Hours
Rate
563.10 $ 39.35

Amount
22,157.99

121.72

37.40

4,552.33

Bob Anderson

594.85

39.35

23,407.35

Sam Black

576.23

41.20

23,740.68

36.47

21.06

768.06

Randy Cole

649.65

39.35

25,563.73

Cynthia Dennis

574.72

39.35

22,615.23

Greg Fitzpatrick

643.71

39.35

25,329.99

Wendy Fowler

391.66

24.49

9,591.75

Cathy Franzenburg

405.69

39.35

15,963.90

Dave Garner

350.96

39.35

13,810.28

Melinda Lamb

203.28

47.40

9,635.47

Brenda Larkey

209.97

29.69

6,234.01

Sharee Lind

615.21

29.69

18,265.58

Kim McIrvin

253.14

39.35

9,961.06

95.68

43.21

4,134.33

213.12

33.18

7,071.32

Angela Brubaker

Robert Metzger
Shari Miller
Bobbie Peters

55.91

43.26

2,418.67

Brenda Powers

408.96

31.96

13,070.36

Todd Roberts

283.51

35.81

10,152.49

Shannon Ryan

474.36

39.35

18,666.07

497.07

37.77

18,774.33

@ Deb Schmidt

Carolyn Scheer

117.46

19.14

2,248.18

Kelly Schultz

202.13

30.26

6,116.45

Melanie Steffens

584.28

37.40

21,852.07

Laura Strait

295.77

39.35

11,638.55

Rhonda Tang

436.57

37.44

16,345.18

Theresa Tometich

640.10

37.40

23,939.74

Bruce VanderSanden

506.68

47.40

24,016.63

Greg Wright

459.52

45.32

Total

20,825.45
$ 432,867.23

^ - Balance calculated using accrual rates established by
DAS rules.
@ - The District accrued vacation for the employee at a rate
which agreed with DAS rules. However, the District did not
increase the employee's accrual rate at the date they
became eligible. There was a delay of a few pay periods.

54

Exhibit B

Calculated^
Number of
Hours
Rate
Amount
221.19 $ 39.35
8,703.83
(118.52)

37.40

-

Difference
in Hours
Variance
341.91 $ 13,454.16
240.24

4,552.33

212.75

39.35

8,371.71

382.10

15,035.64

273.17

41.20

11,254.60

303.06

12,486.08

(129.30)

21.06

341.36

39.35

13,432.52

165.77

768.06

308.29

12,131.21

227.45

39.35

8,950.16

347.27

13,665.07

403.16

39.35

15,864.35

240.55

9,465.64

336.62

24.49

8,243.82

55.04

1,347.93

9.70

39.35

381.70

395.99

15,582.20

16.48

39.35

648.49

334.48

13,161.79

(78.90)

47.40

-

282.18

9,635.47

243.32

6,234.01

283.34

(33.35)

29.69

29.69

8,412.36

-

331.87

9,853.22

56.06

39.35

2,205.96

197.08

7,755.10
4,134.33

(123.00)

43.21

-

218.68

(16.34)

33.18

-

229.46

7,071.32

(298.29)

43.26

-

354.20

2,418.67

302.48

31.96

9,667.26

106.48

3,403.10

87.37

35.81

3,128.72

196.14

7,023.77

554.42

18,666.07

249.32

9,416.81

(80.06)

39.35

-

247.75

37.77

9,357.52

122.07

19.14

2,336.42

(36.57)
277.71

30.26
37.40

10,386.35

(4.61)

(88.24)

238.70

6,116.45

306.57

11,465.72

54.60

39.35

2,148.51

241.17

9,490.04

301.58

37.44

11,291.16

134.99

5,054.02

(145.25)

37.40

785.35

23,939.74

-

133.26

47.40

6,316.52

373.42

17,700.11

432.00

45.32

19,578.24

27.52

1,247.21

$ 160,680.20

$ 272,187.03

55

Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Value of Excess Vacation Hours Accrued for Departed Employees as of April 30, 2013
For the period July 1, 2008 through June 30, 2012
District
Employee
Name
Larry Bergrud
~

Kristine Chiafos
Deb Drahos

@

Number of
Hours
Rate
656.00 $ 36.36

Amount
23,852.16

Payout per
District
23,852.16

15.79

24.93

393.64

393.64

258.77

39.74

10,283.52

10,283.52

Bob Dvorsky

27.35

36.21

990.34

990.34

Cindy Engler

653.31

45.11

29,470.81

29,470.81

John Hannaford

308.27

45.32

13,970.80

13,970.80

#

Gary Hinzman

611.94

60.07

36,759.24

36,759.24

~

William Hoekstra

20.73

14.42

298.93

298.93

589.17

39.74

23,413.62

23,413.62
3,571.61

Gail Juvik
Bruce Kittle
#

95.37

37.45

3,571.61

Steve Konarske

254.25

37.45

9,521.66

9,521.66

Jean Kuehl

635.64

47.87

30,428.09

30,428.09

Jane Mason

42.11

23.30

981.16

981.16

Mike Meeks

656.00

39.21

25,721.76

25,721.76

Nicole Pizzini

233.31

34.06

7,946.54

7,946.54

Beth Skinner

233.78

28.75

6,721.18

6,721.18

Steve Street

656.00

36.36

23,852.16

23,852.16

Total

$ 248,177.22

^ - Balance calculated using accrual rates established by
DAS rules.
# - Employee retired after April 30, 2013. The vacation balances
shown are as of their retirement date.
~ - The District accrued vacation for the employee at a rate which
agreed with DAS rules. However, the District accrued only 3.51
hours for William Hoekstra for the pay period ended 11/26/09
instead of 3.69 hours.
@ - The District accrued vacation for the employee at a rate which
agreed with DAS rules. However, the District did not increase
the employees' accrual rate at the date they became eligible.
There was a delay of a few pay periods.

56

Exhibit C

Calculated^
Number of
Hours
Rate
Amount
411.98 $ 36.36
14,979.59

Difference
in Hours
244.02

15.79

24.93

393.64

-

-

39.74

-

258.77

38.61

36.21

1,398.07

137.41

45.11

6,198.57

-

45.32

378.98

60.07

22,765.33

20.91

14.42

301.52

114.82

39.74

4,562.95
-

(11.26)

$

Variance
8,872.57
10,283.52
(407.73)

515.90

23,272.24

308.27

13,970.80

232.96

13,993.91

(0.18)
474.35

(2.59)
18,850.67

-

37.45

57.42

37.45

95.37

3,571.61

196.83

7,371.28

-

47.87

-

23.30

-

635.64

30,428.09

-

42.11

91.48

39.21

3,586.93

981.16

564.52

22,134.83

182.52

34.06

6,216.63

50.79

1,729.91

14.93

28.75

429.24

218.85

6,291.94

412.97

36.36

15,015.59

243.03

8,836.57

2,150.38

$ 77,998.44

$ 170,178.78

57

Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Excess Sick Leave Hours Accrued for Retired Management Employees
For the period July 1, 2008 through June 30, 2012

Sick Leave Balance in Hours
Employee Name
Retired employees:
Larry Bergrud

District

Calculated^

Difference

1,672.75

1,495.55

271.00

271.00

Gary Hinzman

2,669.20

1,831.00

838.20

Steve Konarske

1,070.25

813.55

256.70

~ Bob Dvorsky

177.20
-

Retired employees participating in SLIP:
Deb Drahos

1,867.50

1,445.70

421.80

Cindy Engler

2,334.00

1,670.35

663.65

Gail Juvik

1,802.20

1,288.30

513.90

Jean Kuehl

1,918.45

1,470.45

448.00

Jane Mason

576.61

427.21

149.40

Mike Meeks

2,350.00

1,749.05

600.95

Steve Street

1,991.70

1,691.05

300.65

18,523.66

14,153.21

4,370.45

Total

^ - Calculated using accrual rates established by DAS rules.
~ - The District accrued sick leave for the employee at a rate
which agreed with DAS rules.

58

Exhibit D

Sick Leave Conversion Rate
District

Calculated^

Difference

-

-

-

-

-

-

-

-

-

-

-

-

100%

80%

20%

100%

100%

100%

80%

20%

100%

80%

20%

60%

60%

-

100%

100%

-

100%

100%

-

-

59

Exhibit E
Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Excess Sick Leave Hours for Current and Former Management Employees
For the period July 1, 2008 through June 30, 2012

Sick Leave Balance in Hours
Employee Name

District

Calculated^

Difference

Mark Ache y

1,852.00

1,458.74

393.26

Je rry Allen

1,376.70

1,149.68

227.02

Bob Anderson

1,782.00

1,478.70

303.30

Sam Black

2,236.50

1,673.15

563.35

@ Angela Brubaker

689.66

693.34

~ Kristine Chiafos

248.68

248.68

Randy Cole

2,562.50

1,953.30

609.20

Cynthia Dennis

2,201.85

1,628.15

573.70

Greg Fitzpatrick

2,558.90

1,757.70

801.20

We ndy Fowler

1,161.25

873.17

288.08

Cathy Franze nburg

1,695.25

1,276.05

419.20

Dave Garne r

2,190.50

1,527.70

662.80

John Hannaford

1,191.04

1,034.90

156.14

@ William Hoekstra

155.35

166.29

(10.94)

~ Bruce Kittle

362.00

362.00

-

@ Me linda Lamb

202.96

207.98

Brenda Larkey

1,189.10

950.60

238.50

Share e Lind

1,449.25

1,151.80

297.45

Kim McIrvin

940.50

875.78

64.72

@ Robe rt Me tzge r

240.88

242.72

75.79

72.11

3.68

Bobbie Pete rs

1,460.00

1,052.80

407.20

Nicole Pizzini

195.00

191.48

3.52

2,089.00

1,535.10

553.90

587.80

585.96

1.84

Shannon Ryan

1,384.00

964.80

419.20

Carolyn Sche e r

1,867.75

1,462.55

405.20

Deb Schmidt

752.36

734.84

17.52

@ Ke lly Schultz

216.75

218.59

(1.84)

@ Be th Skinner

502.32

517.08

(14.76)

Shari Miller

Brenda Powers
Todd Robert

60

(3.68)
-

(5.02)

(1.84)

Exhibit E
Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Excess Sick Leave Hours for Current and Former Management Employees
For the period July 1, 2008 through June 30, 2012

Sick Leave Balance in Hours
Employee Name

District

Calculated^

Difference

Melanie Steffens

1,319.50

1,066.54

252.96

Laura Strait

1,408.31

1,115.03

293.28

Rhonda Tang

1,681.00

1,267.32

413.68

Theresa Tometich

1,739.40

1,400.95

338.45

Bruce VanderSanden

2,402.40

1,716.00

686.40

922.22

893.62

28.60

44,890.47

35,505.20

9,385.27

Greg Wright
Total

^ - Calculated using accrual rates established by DAS rules.
~ - The District accrued sick leave for the employee at a rate which
agreed with DAS rules.
@ - The District accrued sick leave for all management employees at
a rate of 12 hours per month, regardless of the employee's
accumulated sick leave. However, the accrual rates established
by DAS rules are affected by the employee's accumulated sick
leave. Based on these employees'sick leave balances, they should
have accrued more than 12 hours of sick leave per month.

61

Report on a Review of the
Sixth Judicial District
Department of Correctional Services
Staff

This review was performed by:
Annette K. Campbell, CPA, Director
Melissa J. Knoll-Speer, Senior Auditor II
Justin M. Scherrman, Senior Auditor
Kaylynn D. Short, Assistant Auditor

Tamera S. Kusian, CPA
Deputy Auditor of State

62

Appendix

63

Appendix 1
Report on a Review of the
Sixth Judicial District
Department of Correctional Services
E-mail message from Gary Hinzman

64

 

 

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