Audit of The Key Program Incorporated Objectives, Scope, and Methodology

An explanation of what The Key Program Incorporated audit examined and how it was conducted.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of The Key Program Incorporated for the period July 1, 2013 through June 30, 2016.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer and the conclusion we reached regarding each objective.

Objective	Conclusion
Did Key use the Commonwealth’s resources exclusively for Massachusetts programs?	Yes
Did Key allocate the correct amounts of administrative and indirect costs to its Massachusetts and out-of-state programs?	Yes

 

To achieve our audit objectives, we gained an understanding of the internal controls we determined to be relevant to those objectives and tested the controls’ operating effectiveness over revenue, direct expense documentation, and allocation of administrative and indirect expenses.

In addition, we performed the following procedures:

• We selected 10 out of 83 staff training expenses incurred by Key during our audit period that were charged to Massachusetts programs and evaluated them to ensure that they were properly documented and were posted to the correct programs. We also reviewed personnel files to verify that the assigned work locations and home addresses of Key employees who attended these training sessions were in Massachusetts. We performed similar tests for 20 out of 196 charges to Key’s Rhode Island programs. The combined amounts reviewed in both tests totaled $31,015 out of $796,647 in staff training expenses.
• We reviewed 20 out of 186 travel expenses, totaling $3,986 out of $1,787,049, paid by Key during the audit period and reviewed them for mathematical accuracy, purpose of travel, and coding to the proper program.  
• We selected 20 out of 206 disbursements for temporary help (nurses, case workers and social workers, and trainers) made to Massachusetts programs and 5 out of 48 made to Rhode Island programs. We reviewed timesheets for hours worked, worker signatures, work locations, and signatures of supervisors assigned to those locations. We reviewed the supervisors’ personnel records to determine whether they were assigned to the corresponding work locations and to determine their home addresses.
• We reviewed a sample of 21 out of 103 billings Key submitted to the Commonwealth and compared client names on the invoices to records maintained by Massachusetts that indicated who was to receive services in the corresponding programs. We examined the invoices for proper coding and posting and examined copies of checks Key received in payment for services it provided. We performed a similar procedure for a sample of 12 out of 99 billings from Rhode Island programs.
• We analyzed Key’s accounting records to determine whether losses from its Rhode Island programs were charged to its Massachusetts programs or whether other non-Massachusetts state contract funds were available to cover these losses.  
• We selected two monthly administrative cost-allocation worksheets from each fiscal year of the audit period and compared the amounts on these worksheets with Key’s accounting records. We also assessed the method Key used to allocate its administrative and indirect costs to its programs to make sure that this method was allowable and that the allocations were correctly calculated.  

To assess the reliability of the data obtained, we interviewed Key’s chief financial officer regarding access controls, authorized users, system crashes, and backup policies. We also counted hard copies of all invoices for various expense categories and traced them back to the general ledger to verify the completeness of the accounting data. We then traced nine approved and paid invoices back to the general ledger and nine general ledger disbursements back to invoices and canceled checks. Our testing showed that the data generated by the accounting system were sufficiently reliable for the purposes of this audit.

We used nonstatistical judgmental sampling to select our samples and therefore did not project the results of our audit tests to the total populations.

Date published:	January 11, 2018