Our audit supplements the financial audit of the Department of Military Affairs for the period October 1, 1991 through September 30, 1993 for the Department's compliance with federal laws and regulations in accordance with the Single Audit Act of 1984, Audits of State and Local Governments. During our audit period, both the Grand Rapids Home for Veterans and the D.J. Jacobetti Home for Veterans were directly responsible for the administration of their federal financial assistance programs.

Executive Reorganization Order 1991-7 transferred administration of the homes from the Department of Public Health to the Department of Military Affairs in September 1991. A Board of Managers establishes operating policies for the homes under the direction of the Department. During the audit period, the homes were directly responsible for administration of their federal financial assistance programs.

As of September 30, 1993, GRHV had 140 beds for domiciliary care and 623 beds for nursing care. As of the same date, GRHV had 73 residents in domiciliary care and 529 residents in nursing care. As of September 30, 1993, GRHV had 468 employees. For the fiscal year ended September 30, 1993, the total expenditures and operating transfers out for GRHV were $26,440,486.

As of September 30, 1993, JHV had 59 beds for domiciliary care and 184 beds for nursing care. As of the same date, JHV had 28 residents in domiciliary care and 179 residents in nursing care. As of September 30, 1993, JHV had 139 employees. For the fiscal year ended September 30, 1993, the total expenditures and operating transfers out for JHV were $8,495,918.

Conclusion: Our assessment of the internal control structures did not disclose any material weaknesses. However, our assessment did disclose reportable conditions in the areas of expenditure processing, vendor invoice controls, time and attendance reports, gross pay adjustment approvals, and inventory control (Findings 1 through 5).

Our assessment included internal control areas which we also reviewed in our performance audits of GRHV and JHV. Our assessment disclosed that GRHV did not separate the duties of payroll document preparation, approval, entry, and reconciliation. This issue is more fully explained in our report on the performance audit of GRHV, dated April 25, 1995. In addition, our assessment disclosed that JHV's internal control structure could be improved in the areas of approval of payroll and personnel transactions, reconciliation of the daily transaction control log, and inventory reconciliations. These issues are more fully explained in our report on the performance audit of JHV, dated March 22, 1995.

Audit Objective: To assess GRHV's and JHV's compliance with both State and federal laws and regulations that could have a material effect on either their financial schedules or their major federal financial assistance programs.

Conclusion: Our assessment of GRHV's and JHV's compliance with laws and regulations did not disclose any instances of noncompliance that could have a material effect on their financial schedules. However, we determined that the Veterans Administration (VA) found, in its October 1992 and October 1993 inspections, that GRHV did not comply with VA standards for minimum nursing care staffing levels. In addition, the VA inspection report for October 1993 found that GRHV did not comply with VA standards for use of physical restraints and for controlled access to medications for domiciliary care residents. These issues are more fully explained in our report on the performance audit of GRHV, dated April 25, 1995. The VA inspection report for 1994 found that GRHV was in compliance with the VA standards. Our audit did not disclose any questioned costs related to GRHV's and JHV's federal financial assistance programs for the audit period.

Audit Objective: To audit GRHV's and JHV's financial schedules for the fiscal years ended September 30, 1993 and September 30, 1992.

Conclusion: We expressed an unqualified opinion on GRHV's and JHV's financial schedules for the fiscal years ended September 30, 1993 and September 30, 1992.