Report 93031 Summary - August 1995

Department of Rehabilitation:

Business Enterprise Program for the Blind Financial Report Year Ended June 30, 1994

The financial condition of the Department of Rehabilitation's Business Enterprise Program for the Blind (program) is sound. Specifically, during fiscal year 1993-94, the program's revenues exceeded its expenses by approximately $1 million. In addition, at June 30, 1994, the program had approximately $4 million in cash and pooled investments, and its total assets exceeded its total liabilities by approximately $14 million. The principal source of funding for the program is state and federal grants, which accounted for approximately 58 percent of revenues during fiscal year 1993-94. The remaining revenue came principally from vending stand fees, vendor contributions, and vending machine commissions.

Although the financial condition of the program is sound, we noted certain weaknesses in its internal control structure. Specifically, we noted the following:

  • The department does not ensure it receives all monthly operating reports, fees, and loan payments due from blind vendors.
  • It does not ensure it receives all vending machine commissions available to the program.
  • It improperly used federal funds to pay for parts and materials associated with equipment repair.
  • It did not accurately report its liabilities at June 30, 1994.
  • It has improved controls over fixed assets, but more improvement is needed.
  • It has not adequately separated certain incompatible duties.
  • It is not required to prepare financial statements summarizing all of the program's activities such as those presented in this report. However, to better assess the program's financial condition and to facilitate future audits, we recommend it prepare such financial statements.

These issues are described further in the Appendix. We will follow up on these issues during fiscal year 1995-96 when we conduct a programmatic review of the program in accordance with the California Welfare and Institutions Code, Section 19640.5.

Agency Comments

In its response, the department generally agrees with the findings and recommendations and discusses the actions it has taken or plans to take to address the deficiencies.