Penal Code sections 933 and 933.5 require that the following officials submit specific responses to the findings and

DRR fails to collect the hundreds of millions of dollars in outstanding debts owed to the County. Department of Revenue Recovery (DRR) Response: DRR agrees with this finding. While DRR agrees with this finding, it is critical to recognize that approximately $692 million (over 90% of the $750 million) of current outstanding debts are subject to numerous regulations which legally and conditionally bar DRR from pursuing collections. By law, DRR collection efforts are suspended until debtors meet the “ability to pay” requirement and then collection efforts are mitigated by the order of payment requirements, which are mandated by statute. Further, DRR collection efforts are constrained by programs which permit debtors to settle their accounts through non-monetary means. In addition, in order to determine ability to pay and process debts in accordance with various regulations; DRR must maintain debts in its system for what may seem an unacceptable amount of time and at a low rate of recovery, causing the total outstanding unpaid debt to grow disproportionately as compared to annual collections. Roughly $150 million (20% of the $750 million) of DRR’s entire receivables is collectable over time, of which DRR collected $44 million dollars in FY 2015-16. The remaining $106 million dollars is either collected in later years, based on ability to pay, or written-off. Amount of Outstanding Debt Governed by Regulations That Bar or Delay Collections 2016 Regulations Bar or Delay By Category (in Million $) Amount Ratio Collections (millions) Payment Priority 1 Restitution, 2 State Payment Priority 1. Surcharge, 3 Fines, Penalties, Assessments, $295 39% PC 1203.1d and 4 Service & Other fees Ability to Pay Ability to Pay: General Assistance WIC 903, and WIC 903.1-3PC 1203, 2. Repayment , Sheriff, Probation, Indigent $216 29% PC 1203.1b-c, PC 1209, Defense, & Other Fees & Payment Priority Welfare Regulations 3. Aid Overpayments $90 12% 40-030 and 44-352 May be Resolved by Non-monetary 4. Warrants $88 12% Means (court date) Other Amounts & Customer Agency Debts (Code, Building, Animal Care, Medical Care, 5. Various Conditions $61 8% court fees, judgment interest, prior write- off, etc.) Totals $750 100% DRR’s Outstanding Debt By Major Regulations Category Below are specific examples of the limitations on collection that DRR must grapple with: • $295 million of uncollected debt is subject to Penal Code 1203.1d, which governs how installment payments must be applied to court ordered amounts. The mandatory order of payment for amounts is as follows: victim restitution; state surcharge PC 1465.7; fines, penalties, assessments; and finally, if the individual has the ability to pay, other reimbursable costs, including but not limited to, Sheriff, Probation, Confinement, and Indigent Defense fees. • $216 million of debt such as General Assistance Repayment, Sheriff’s confinement and booking fees, Probation supervision and pre-sentence reports, indigent defense, and other fees are not due until the individual has met the legal “ability to pay” requirement. Debts based upon “ability to pay” are due after the debtor has met their basic living expenses for themselves and their families. Allowable expenses include but are not limited to, housing, utilities, food, transportation, medical care, child care, insurance, child support payments, student loan payments, and taxes. In addition, in cases where an individual has been ordered to pay court fines and/or victim restitution, the amounts ordered further reduce the defendant’s ability to pay reimbursable costs to the County. The following are examples of codes that govern “ability to pay:” PC 1203, PC 1203.1b-c, PC 1209, WIC 903, and WIC 903.1-3. • $90 million of debt is governed by California Department of Social Services Welfare Regulations (40-030 and 44-352) which restrict collection actions when individuals are still receiving public assistance in which case only small amounts may be deducted from the recipient’s aid as repayment. It may take several years, if ever, for a former aid recipient to get back on their feet and make regular payments. • $88 million of debt is for outstanding Failure to Pay Warrants, where the court order has no expiration date and the warrant may be cleared by setting a court date instead of payment. • $61 million are debts from departments, previously written off items, judgment interest, liens, court costs due only if collected, and other miscellaneous items. Additional regulations make it cost effective to keep certain outstanding debt on the system in automated monitoring in order to take advantage of the long period of collection opportunity. For example: • Victim Restitution Orders and certain fines are enforceable for the life of the defendant in accordance with PC 1202.4(m) and PC 1214(a). • For most felony and misdemeanor cases, in accordance with Penal Code 1203 and other codes, defendants may be ordered to serve a probationary period up to five years, or in an amount ordered by the Court. If probation is revoked and reinstated, the probationary period stops and then resumes, extending the probation end date for the case beyond the original probationary period. Since these amounts are paid in priority order subject to PC 1203.1d and payments are set based upon "ability to pay", the length of time individuals need to pay all amounts ordered may extend many years beyond the initial probationary period. • California Department of Social Services Welfare Regulations 20-403 permits the submission for state tax refund intercept of unpaid CalFresh and CalWorks overpayments for up to 10 years and IRS refund intercept with no time limit. However, welfare regulations also prohibit collections if, among many other o circumstances, benefits are being reduced to repay prior period overpayments. Deductions from aid received are typically very small versus aid owed. • Civil court judgments are valid for 10 years and may be renewed every 10 years in accordance with CCP 683.110. Liens against an individual are effective for 10 years and up, depending on the type of lien and governing code. • In accordance with the Fair Credit Reporting Act, credit reporting of eligible debts may be done for seven years from the 1st date of delinquency. Recent changes in law permit only a very small portion of DRR debts be credit reported; only those that are associated with goods or services; specifically prohibited are fines, restitution, aid overpayments, and many other debts. • Chapter 13 bankruptcy cases can last three to five years and collection must be suspended during that timeframe. Therefore, three to five years may pass before collection actions can resume.

DRR management rarely uses reports to manage collection activity and workload. Department of Revenue Recovery Response: DRR disagrees with this finding. DRR regularly uses a number of long standing reports and automated features in DMACS to manage collection activity and workload. Reports are regularly generated in order to monitor, measure, manage and distribute work to staff, evaluate the results of collection activity in relation to budget targets and revise efforts accordingly, identify changes in workload to ensure appropriate resources are directed to new, growing or shrinking caseloads, analyze cost allocation reports to manage collection activity in a cost-effective manner, identify procedural or resource changes needed to improve cost ratios and/or recovery rates, and manage, staff and work priorities based upon seasonal workload changes. Examples of other reports DRR uses to manage caseload and collection activities are as follows: • The Dashboard Report, which contains fiscal year to date information about each type of debt such as; budgeted collections, actual collections, projected collections, and variance is used to monitor collection results in order to direct collection activities and to ensure budgeted targets are met. • The AR-Recap by Fac. Code Report (Figure 2 above), which contains fiscal year to date information for each type of debt such as beginning and ending accounts receivables, net charges and payments collected, net unpaid amounts returned to the court or other agency, net write-offs, net compromise adjustments, and the Year to Date recovery rate is used to monitor trends in the data and adjust staffing or collection activities accordingly. • The Activity Report contains records by time and date, of all financial transactions, payment arrangements, data updates, phone calls, and other work completed by staff or through automated processes carried out by the system. The data is used to make decisions regarding work priorities, staff assignments, and other caseload management decisions to collect revenue efficiently and effectively. • Cost Allocation Reports for each customer agency contain monthly detail of costs for work performed by cost center, by month and year to date, the revenue collected each month, the cost to collection ratio, and the inventory activity for each customer agencies’ caseload. These reports are used to ensure work is done cost effectively and make adjustments in activity as needed. • Cisco Reports monitor dialer and staff activity and contain call volumes; call results for every 1/2 hour or other time increments such as number of contacts, messages left, average talk time, wrap up, and other data. • The DMACS Dialer Trends Report tracks call result activity such as no answer, busy, answered, answering machine, etc. • COD Reports show the value and number of amounts submitted to the FTB's Court Ordered Debt (COD) Program, activity COD has taken on cases such as notice sent, or wage garnishment or bank levy issued, and reasons uncollected amounts are being returned, such as a higher priority case exists or assets can't be found. • Inventory Reports contain data such as: charge date, original balance, current balance, date and source of last payment, pertaining to customer agency accounts, and are used to identify the most cost-effective accounts to work and direct effort accordingly. • The Skip Trace Work Queue Report contains information regarding accounts that need contact information such as phone number or address, which is used to work the accounts that are not processed by the dialer (automated outbound calling system). The report assists supervisors and managers to identify the most cost effective accounts to work first. • Aging Reports break the caseload into categories by the amount of time they have been in the system, such as 1 – 30 days, 31 – 60 days, 61 – 90 days, 91 – 180 days. The report also provides the date of last payment, account balance, and source of last payment made. This report is used to prioritize work by specific charge types if desired. The Grand Jury reported, according to IT witness testimony, there are no DMACS Reports available to identify the outstanding debt owed the county and that this was the first and only time this report was ever requested. The “Charge Source Recap Report”, which addresses outstanding debt owed the County, is already available in DMACS within the Management Report menu. The “Charge Source Recap Report” identifies the outstanding debt as it contains the net charges referred, payments, write-offs, adjustments, and ending balance for each charge type in the DMACS System, as well as for each customer department, and for the entire caseload, for any given period of time (day, week, month, year, or user specified date range). In addition, the DMACS System contains an “export” feature that allows system reports to be exported to an EXCEL file and then used in numerous ways for analysis and decision making purposes. Figure 1 below shows the location of the report in the DMACS system and then a sample of the data contained in the report follows in Figure 2 below. Figure 1 Location of Charge Source Recap Report in DMACS Figure 2 - AR-Recap by Fac. Code Report Sample

DRR management fails to work together effectively to manage the department and the revenue collection activities. Department of Revenue Recovery Response DRR disagrees partially with the finding. DRR management works together effectively to manage the department and collection activities, with regularly scheduled standing meetings, email updates, and daily communication to review, discuss, and adjust work plan priorities, system enhancements, procedure revisions, customer agency requests, and many other collection activity matters. While some communication gaps exist, the chart in Figure 3 below shows DRR management and supervisors effectively managed the department and revenue collection activities to lead the department in meeting or exceeding budgeted collection goals, identifying and implementing cost savings and collecting as much revenue with 40% less staff and 50% fewer charge referrals compared to 2008 pre-DMACS years using the CARS system. DRR has a culture of continuous improvement, encourages suggestions for improvement, and then implements the most cost effective procedural revisions and system enhancements based upon regulatory changes, client agency procedural changes, impact on operational priorities, and available resources. DRR has increased the recovery of revenue from $41 million in FY 2013-14 to $44 million in FY 2015-16. Figure 3 Comparison of Revenue Recovery the Last 3 Years using DMACS and CARS DRR Historical Data CARS DMACS 2008-09 2009-10 2010-11 2013-14 2014-15 2015-16 Net Charges (millions) 132.1 139.1 136.6 97.0 95.7 90.7 Net Payments (millions) (42.0) (42.9) (44.8) (41.0) (42.2) (44.0) Recovery Rate 32% 31% 33% 42% 44% 49% Position Budget Unit Total 105.0 106.0 101.0 58.0 57.0 57.0 Total Appropriations - Adopted (millions) 11.5 12.2 14.0 11.3 10.9 11.0 Total Appropriations - Actual (millions) 10.3 11.6 12.7 10.1 10.2 9.7 Savings 1.2 0.6 1.3 1.2 0.7 1.3

The Board and CEO have not exhibited any apparent concerns or provided adequate oversight for the collection of revenue through the DRR. County Executive Office Response The County Executive Office (CEO) disagrees with the finding. All county departments (including DRR) are required to provide the CEO’s Office of Financial Management (OFM) a budget plan which includes expenditures and revenue projections for the ensuing fiscal year. After the budget is adopted by the Board of Supervisors, OFM requires departments to submit quarterly financial status reports, documenting realistic year-end projections of their revenues and expenditures, provide explanation of anticipated variances from the approved budget, and identify if corrective actions are needed during the year. The departments are also required to provide a detailed explanation of any outstanding revenue accruals. OFM staff analyzes this documentation, specifically the major revenue sources for the fiscal year, and uses quantitative data to compare the actual collection of revenue to the budget amounts as well as to actual collections from previous fiscal years. Additionally, OFM staff monitors DRR’s expenditures and revenues throughout the year and uses all of the data to assess the current year fiscal status of DRR, and identifies any problems that may need to be addressed. Furthermore, the Chief Deputy County Executive – Internal Services (CDCE-IS) meets with the Director of Revenue Recovery on a bi-monthly basis. The CDCE-IS requires revenue collection and Accounts Receivable Efficiencies Project updates, as well as revenue collection status reports. In addition to reviewing the actual collection of revenue compared to budgeted amounts, discussions with the CDCE-IS are held regarding operational matters and initiatives that may affect collections such as increases (or decreases) in amounts, and regulatory or customer department policy issues. These regular meetings and updates to the CDCE-IS have resulted in effective monitoring of revenue collection progress to ensure DRR budget targets are met. Department of Revenue Recovery Response Department of Revenue Recovery agrees with the County Executive Office

DRR did not use a competitive bid process to secure services on the County’s behalf. The Board of Supervisors approved and awarded a $4.4 million contract for the development of the DMACs Department of Revenue Recovery Response DRR agrees with the finding. At the time of the contract, the DMACS system is/was a proprietary system that could not reasonably be competitively bid. Therefore, the requirement to competitively bid the DMACS contract and system build out did not apply. The DMACS project was originally approved as part of the May 11, 2005 Fiscal Year 2005-06 Recommended Proposed (Base) Budget package. DRR's IT Manager at the time, conducted an analysis of system replacement options, and given the County's budget situation at the time, approval of an affordable in-house project and loan funding was approved. The Fiscal Year 2007-08 Recommended Proposed (Base) Budget revealed a $33 million gap in unfunded budgetary needs. While DRR's IT Manager warned of the precarious state of DRR's then Columbia system, in that budget climate, DRR was not in a position to bring forth a funding request for a full system replacement project, particularly when the framework of the system was already built. Therefore, DRR had to move forward with the best option available at the time, which was to replace a time and materials cost model with a fixed price contract to complete a portion of the system but not an entire system due to restricted funding. Consultation with the County's Purchasing office resulted in a determination that the bid process was not practical due to the unique factors involved. The contract was developed with active oversight from the DMACS Executive Steering Committee, which was comprised of the Director Department of Revenue Recovery, the Internal Services Agency Administrator, the Chief Information Officer, and the OCIT IT Division Chief. Other considerations with the then existing system that contributed to the County’s decision to move forward with the DMACS system are as follows: • DRR had added four contract staff to supplement five DRR IT staff that were supporting and maintaining DRR’s deteriorating Columbia accounts receivable system. The cost to maintain the Columbia system and fund the DMACS project was unsustainable. • The DMACS system was already partially developed with limited allocation of funds provided in prior years. • Options at the time were evaluated – costs for vended systems were unaffordable. Columbia Ultimate had stopped providing system support to the DRR system in use, so county staff supported the system with a mix of contract and county staff. • DRR’s IT Manager at the time, reported in a memo dated 1/27/2005, that Columbia was experiencing their own difficulties with the new system Columbia had in development. • The County subsequently discovered the $1.5 million estimate Columbia Ultimate (Craig Nelson) provided to the Board in an email dated 12/06/2010 did not include $7 million in implementation costs that San Diego County paid Columbia Ultimate for a total of $8.4 million in system costs.

DRR failed to monitor its revenue recovery system and adjust collection efforts to reduce the outstanding debt. Department of Revenue Recovery Response DRR disagrees with this finding. The response to Finding 2 above discusses in detail the numerous ways DRR monitors its system to adjust and manage collection efforts in order to target the most cost effective accounts to pursue. The Figure 3 chart in Finding 3, shows DRR has collected as much revenue with DMACS as with the previous CARS system with 44 (40%) less staff, 101 then and 57 now, and $45 million (50%) fewer annual referrals, $137 million then and $91 million now. The following chart compares DRR’s Cost to Collection Ratio and revenue Recovery Rate with DMACS and CARS. CARS DMACS 2005-06 2006-07 2007-08 2013-14 2014-15 2015-16 Cost to Collection Ratio 16% 15% 17% 10% 10% 9% Recovery Rate 32% 31% 33% 42% 44% 48%

DRR has failed to meet its proposed revenue recovery collection goals of 38% and has not considered any other cost-effective revenue collection alternatives. Department of Revenue Recovery Response DRR disagrees partially with this finding. DRR did reach a 37% revenue recovery rate in 2011 and is now at 48% in 2016. The $44 million recovery value in 2016 compares rather favorably against the record high $45 million recovery value in 2008, when one considers the $45 million (50%) drop in customer agency annual referrals from $137 million in 2008 to $91 million 2016. As to the use of cost effective collection alternatives, all legal collection methods are used to collect revenue. As was detailed in response to Finding and Recommendation number 1 above, regulations and other factors limit the legal mechanisms one may use to pursue debt, depending on the type of debts at issue. DRR Historical Data - DMACS 2011-12 2012-13 2013-14 2014-15 2015-16 Net Charges (millions) 108.9 118.7 97.0 95.7 90.7 Net Payments (millions) 39.8 41.4 41.0 42.2 44.0 Recovery Rate 37% 35% 42% 44% 48% The calculation used to cite a 6% revenue recovery rate in the Grand Jury Report is not the same calculation for the 32% benchmark revenue recovery rate that DRR used in the project memos to the Board dated May 11, 2005, and May 15th 2005. DRR’s revenue recovery rate divides annual collections by annual receivables while the calculation used in the Grand Jury Report, is annual collections divided by total receivables. DRR’s calculation uses consistent time periods (annual vs. annual), and aligns more favorably with the county’s annual budget period, and better illustrates the collection effectiveness of improvements from year to year.

DRR does not have an established method for monitoring agency client accounts. Department of Revenue Recovery Response DRR disagrees with this finding. DRR uses a number of procedural and automated methods to actively monitor and manage client accounts. The Collection Enforcement Supervisors use inventory and other numerous reports generated out of DMACS and then exported to EXCEL, as described in the response to Finding 2, which contains a wide variety of data about the accounts that are used to distribute accounts for staff to work in priority order. A number of factors determine the level of monitoring and review of client agency accounts based upon characteristics of the account. Examples are as follows: • Type of charges on an account. Traffic fines are more collectable than felony or misdemeanor case fines; aid repayments are less collectable since individuals may still be receiving public assistance, have no income, or are a low wage earner, medically indigent charges are less collectable since individuals are generally low wage earners; etc.. • Amount of unpaid balance. Low balances are not cost effective to manually review as costs could easily exceed the amount owed. • Number of debts on an individual’s account. Individuals with numerous charges are generally in adverse life situations such as low wage earners, on fixed incomes such as public assistance or social security, convicted of criminal offenses, homeless, etc. • Payment history and source of payments (if any). Recent voluntary payments make the account more collectable. Involuntary payments, such as tax refund intercept, wage levy, and other miscellaneous payments make the account less collectable. • Financial condition of the individual. Factors such as owning property or gainful employment affect the collectability rate. The better the individual’s financial condition, the more collectable the account will be. In addition, account monitoring is done with DMACS automation because it is the most cost effective way to process the type and volume of debts in DRR's caseload. As described in the response to Finding 1 and Recommendation 1, a significant portion of the DRR caseload will never be collectable due to governing regulations that suspend or bar collection efforts for long periods of time, or are in perpetuity if the individual’s financial condition never meets the mandated “ability to pay” requirements. Automated monitoring methods are supplemented with report supervisors. They monitor and manage client accounts and provide direction to staff for working the most collectable accounts first. Once an account is established in the DMACS system, automated monitoring and processing begins: • If contact data or employment information is missing, the system will submit requests to Department of Motor Vehicles, Employee Development Department, and other systems in an effort to obtain the data needed, and then repeated searches by the system are done at specified intervals, significantly reducing the manual searches by staff. • Notices and statements are generated at specified intervals as are other eligibility rules. • Based upon business rules, eligible accounts with phone numbers are called by an automated dialer in an effort to make contact with the debtor. If phone numbers are missing, the system searches data sources at specified intervals to locate contact information. In addition, the accounts can be accessed by staff in the DMACS Skip-Trace Review work queue. The report can also be exported to EXCEL for additional sorting and filtering to target the most collectable accounts first. • Data updates from other systems include information such as: whether an individual is on aid, receiving wages (if any), receiving unemployment or disability benefits, deceased, out of state, and then automated business rules process the accounts as needed.

DRR does not provide its agency clients with updates of debtor account collections on a regular basis. Department of Revenue Recovery Response DRR disagrees with this finding. DRR provides regular updates to agency clients regarding debtor account collections. A comprehensive monthly financial report of the customer department's caseload activity, the Cost Allocations Summary Agency Client report, is provided to agency clients. It contains a monthly breakdown of costs by cost center category, collections by charge type, cost to collection ratio, referrals (Refer Summary tab), receivables information (ARRecap tab) such as: beginning AR balance, net charges, net payments, net adjustments, net returns to court, net write- offs and ending AR balance, breakdown of collections by charge type (Collection Summary tab), and other information. Figure 5 Cost Allocation Summary Agency Client Report Customer agencies appreciate the convenience of the self-service Client Services feature in DMACS which enables them to review their accounts at their convenience to see the account status, if the payment plan is current or delinquent, to check for payment, account balance, view transactions, and other data. In addition, customer departments have the ability to generate a payment report for any specified time period. Further opportunities for client department updates are as follows: • DRR management, supervisory, or other staff, meets regularly with customer agencies to review cases with legal action in progress, review their program's caseload information, assist with internal collection processes, revise service levels, coordinate or monitor changes in response to procedural, regulatory, or automation changes, and to maintain open channels of communication. DRR meets with customer agencies monthly, quarterly, or other frequency as desired. • Monthly meetings with Department of Human Assistance staff are held to coordinate and review operational processes. • Environmental Management Department (EMD) staff meets with DRR each quarter to review costs, collections, and specific cases in their inventory for status updates and discussion of next steps. • Monthly meetings with the Traffic Court Division and quarterly meetings with the Superior Courts are held for communication purposes, and to coordinate procedural and system enhancements. • Meetings with the Community Development Department to coordinate the semi-annual lien hearing process and other operational processes also occur.

DRR’s established payment policy guidelines are not consistently followed. Department of Revenue Recovery Response DRR agrees with this finding. DRR payment guidelines vary to fit the variety of conditions and regulations that apply to DRR debt. Different types of debt invoke different collection guidelines and policies due to the regulations associated with the type of debt. Thus, debts with the collection for which an individual’s “ability to pay” is the minimum threshold may include repayment terms that differ from court ordered conditions such as terms of probation (amount of time to pay), and have different payment requirements depending on the individual’s amount and source of income. DRR operations promote efficient collection of amounts due. Setting payment terms at large amounts when an individual is a low wage earner, is receiving Social Security benefits, or is on some other fixed income such as public assistance, inevitably results in default in payment terms, requiring follow-up, and increased costs that can be avoided by setting payment terms that are more commensurate with the debtor’s financial circumstances. Refresher training is provided in the instances where a payment amount is set too high or too low. If the individual meets “hardship” guidelines, lower payment amounts may be set and in some cases, based upon “ability to pay.”

DRR does not review debtor account activity to assess collectability or regularly use the FTB Tax Offset Program to successfully improve revenue recovery. Department of Revenue Recovery Response DRR disagrees with this finding. Prior to the Grand Jury Report, DRR has regularly used numerous reports (described in Finding 2) to review debtor account activity and assess collectability. On an annual basis, with monthly updates, DRR submits all eligible debt to the FTB tax offset program. Almost $400 million in eligible debt was submitted to FTB in FY 2015- 16.

Revenue collected by DRR with incomplete debtor account information is not being posted to debtor accounts in the DMACS when received. Department of Revenue Recovery Response DRR disagrees partially with this finding. DRR posts payments with incomplete debtor information to DMACS in a debtor account labeled for tracking of such payments or in a debtor account established in the name of the maker of the payment. The payments are researched every day and either applied to the appropriate debtor’s account, and then the funds are disbursed to the customer agency at the end of the month, or the payment remains in the Refund Trust account and the Refund Review Band, which is worked on a daily basis.

DRR does not have the tools or reports to verify daily payment transactions and/or identify payments received with inadequate debtor account information. Department of Revenue Recovery Response DRR disagrees with this finding. DRR has the Daily Transaction report, which is generated by DMACS, itemizes all of the transactions that were posted that day and is used to reconcile cash received to payments that have been posted. DMACS also produces a daily report of electronic payments where DMACS was unable to locate an existing account and posted the payment to a debtor account established using the information available with the payment. Other DMACS generated tools and reports include the Unallocated Report, which lists all debtor accounts with a credit balance, and the Refund Review work queue, where a debtor account with credit balances is held and is worked daily. Payments posted to debtor accounts in DMACS established to hold payments with inadequate debtor information are included in both the Unallocated Report and the Refund Review work queue.

DRR rarely distributes funds held in the Unallocated Trust Account to its agency clients. Department of Revenue Recovery Response DRR disagrees partially with this finding. DRR’s DMACS Unallocated Account tracks credit balance transactions. Specifically, when a credit balance is created or resolved. The debit and credit transactions are tracked in the Unallocated Account. Funds associated with these transactions are held in the Refund Trust and the Refund Review Band, which is worked on a daily basis. Refunds are issued out of the Refund Trust almost daily. Credit balances applied to unpaid charges are included in the revenue disbursements to client agencies out of the Receipts Trust on a monthly basis.

DRR does not reconcile the issues associated with the over 53,000 transactions in the Unallocated Trust Account. Department of Revenue Recovery Response DRR disagrees partially with this finding. While credit balance transactions that occurred prior to conversion to DMACS in 2009 are partially reconciled and will be completed within six months, the credit balance transactions after conversion have been reconciled through July 2016. The Unallocated Account is reconciled on a monthly basis. The account holds all debit and offsetting credit transactions in DMACS. The transaction count accumulates because the transactions serve as DRR’s permanent record of these transactions, and are never deleted from the system.

DRR does not have a policy or procedure for processing payments that are missing debtor account information. Department of Revenue Recovery Response DRR disagrees with this finding. DRR has procedures for processing payments that are missing debtor account information. Electronic payments are posted to a debtor account in DMACS established in the name of the payment maker and DMACS produces a daily report for same day research. If initial same day research by a cashier cannot locate an account number for payments posted manually, the payment is posted to a DMACS debtor account for tracking and daily cash reconciliation purposes. In both cases, additional research is done within 3 business days and if an account cannot be located, the payment remains in the debtor account established in the name of the maker of the payment and remains in the automated Refund Review Band for processing.

DRR has no plan to reconcile and close the Unallocated Trust Account. Department of Revenue Recovery Response DRR disagrees partially with this finding. DRR has reconciled all transactions in the DMACS Unallocated Account on a monthly basis since converting to the DMACS system in 2009. However, reconciliation of the transactions that occurred prior to the DMACS conversion are ongoing, and will be completed within six months. The Unallocated Account is necessary to DRR's operations as stated above, therefore it will never be closed.

The DMACS creates duplicate accounts and/or charges which DRR staff is unable to explain or resolve. Department of Revenue Recovery Response DRR disagrees partially with this finding. DRR is able to explain and resolve duplicate charges/accounts. Refresher training was provided to staff, so duplicates they cannot explain or resolve are brought to a manager's attention for resolution. DMACS uses matching criteria to determine if a new charge referred to DRR has been previously added to an account and a duplicate charge is added if the data isn't an exact match. However, instead of adding an incorrect charge to a person's account, DRR does create another account when charges with insufficient debtor information are received. This account creation is necessary because DMACS’ matching rules require at least one identifier, such as a birth date or social security number, since relatives with the same name (Joe Sr. and Jr.) or similar names (Joe A. and Joe B.) may reside at the same address.

Resolution of duplicate debtor accounts and/or charges does not appear to be a DRR priority. Department of Revenue Recovery Response DRR agrees with this finding. While DRR researches duplicate debtor accounts and/or charges on almost a daily basis, staff were not able to easily locate potential duplicates on a proactive basis.

There is evidence of debtors’ payments to DRR on duplicate accounts. Department of Revenue Recovery Response DRR agrees with this finding. Debtors with multiple accounts generally contain different charges, and payments applied to those charges are properly credited. In some instances, payment may be applied to a duplicate charge. In those circumstances, the payment is transferred to other unpaid charges on the debtor's account or a refund is issued.

Approximately 30,000 debtor accounts are due refunds in excess of $1.4 million. Director of Revenue Recovery Response DRR agrees with this finding. However, refunds are not due on all 30,000 debtor accounts. DRR accounts are reviewed daily using the Refund Review Band in DMACS, and overpayments are refunded if no other unpaid charges exist. To prevent a cash loss due to a dishonored check or other payment, refunds are issued after 45 days of payment, unless otherwise mandated. In addition, if the debtor cannot be located after thorough staff research, the overpayment will remain in the Refund Trust and the Refund Review Band. The DMACS system searches for a new address every six months and brings back to staff attention in the Refund Review Band when a new address is located. DRR processes large refunds before smaller refunds, which has resulted in the accumulation of over 10,000 credit balances in the amount of $1.50 or less.

Significant issues were identified during the DOF auditors’ initial system review, preliminary findings were discussed with DRR management but a final report was never submitted to the Board for approval. Department of Finance Response Department of Finance (DOF) agrees with the finding. Department of Revenue Recovery DRR agrees with the DOF. Of the concerns reviewed, the major concern expressed is that the DMACS does not require a second individual to record approval of financial transactions posted to DMACS, which is required in the County's COMPASS financial system. To address DOF concerns, DRR reviewed the internal controls in place, and revised procedures to ensure only authorized staff post appropriate transactions to the DMACS system.

Issues regarding potential fraud and other irregularities were identified during the DOF auditors’ subsequent system review. DRR obstructed the release of any subsequent findings and/or a subsequent final report, which should have been submitted to the Board for approval. Department of Finance Response DOF partially disagrees with the finding. DOF did not detect fraud and DRR did not obstruct the release of any subsequent findings and/or a subsequent final report. Due to staffing changes in both DRR and DOF, limited resources, priorities guided by statutes, and the DRR annual budgeted audit hours, the system review was not completed thus no report was issued. Department of Revenue Recovery Response DRR agrees with DOF. DRR did not receive a report from DOF auditors regarding the system review and did not obstruct the release of any subsequent findings and/or subsequent final report. In addition, the concern regarding potential fraud pertained to DMACS not designed to require a second individual to record approval of transactions posted to DMACS as is required in the County's COMPASS financial system, and no actual fraud was detected. DRR reviewed and discussed with DOF management the internal controls in place to ensure only authorized staff post appropriate transactions to the DMACS system.

DRR terminated any further action by the DOF auditors during both system reviews. Department of Finance Response DOF disagrees with this finding. DRR did not terminate further action by the DOF auditors. The review was not completed due to staffing changes in both DRR and DOF limited resources, priorities guided by statutes, and budgeted audit hours. Department of Revenue Recovery Response The Department of Revenue Recovery agrees with DOF.

There is no oversight of the individuals with unlimited user access rights to the DMACS. Department of Revenue Recovery Response DRR disagrees with this finding. DTech is responsible for maintaining and supporting the DMACS system and contractually responsible for managing the County IT and contract IT DMACS staff. Therefore, the DTech DMACS team lead provides oversight of four IT staff with unlimited user access rights to DMACS. The Daily Activity and Daily Transaction reports record all updates to DMACS data, both financial and non-financial data, which DRR management reviews daily to insure transactions are processed by only authorized staff. Department of Technology Response The IT team supporting DMACS consists of two County employees and three contract developers. The senior County staff (team lead) and the three contractors have full access to the production, test and development environments. The junior County staff has access to the test and development environments only. These are the only IT staff with access to DMACS. They need full system access in order to support, maintain and troubleshoot the system as needed. While it is rarely done, if they modify records or make transactions in the production system while supporting the system, the records are date and time stamped and included in the audit log. Additional IT staff has access to the servers that host DMACS; however, this is for the purpose of system management such as backups, restores, patching and performance tuning. These IT operations staff do not have access to the application or the ability to view or modify data.