Report 99020 Summary - June 2001

Department of Rehabilitation:

The Business Enterprises Program for the Blind Is Financially Sound, but It Has Not Reached Its Potential

HIGHLIGHTS

The Business Enterprises Program for the Blind (program) is financially sound. However, the Department of Rehabilitation could improve its fiscal administration of the program by taking the following steps:

  • Preparing a comprehensive business plan to better monitor and prioritize the use of its program resources.

  • Better identifying, pursuing, and collecting vending machine commissions.

RESULTS IN BRIEF

In giving qualified blind people the opportunity to be self-supporting, the Business Enterprises Program for the Blind (program) maintains two funds that are both financially sound and that adequately provide for program needs and for the blind participants' pension plan. Nevertheless, the Department of Rehabilitation (department), which administers the program and its funds, could improve its fiscal management of this program by developing a comprehensive plan outlining the program's growth and by pursuing more actively the vending machine commissions that support the participants' pension plan.

Under the department's direction, the program trains blind people to operate their own vending businesses located on state or federal property. By furnishing these individuals with ongoing consulting services, assistance with equipment maintenance, and a pension plan, the department complies with the terms of the federal Randolph-Sheppard Act and the California Welfare and Institutions Code. Federal grant money, the State's General Fund, vendor fees, and vending machine commissions fund the program. The department accounts for the receipt and use of vendor fees in the Vending Stand Fund (vending stand fund) and the receipt and use of vending machine commissions in the Vending Machine Account (vending machine fund).

Although the vending stand and vending machine funds are financially stable, the program would benefit from a comprehensive plan outlining the program's growth and its plans for the vending stand fund's reserve. The vending stand fund's assets exceed liabilities by approximately $3.8 million, of which $2.1 million-called a surplus-is available for future program purposes. However, the department has not prepared a comprehensive business plan demonstrating that its proposed uses for this surplus are appropriate and feasible. By developing such a plan, the department could better monitor and prioritize its use of this surplus.

In addition, the department could increase income in the vending machine fund by installing vending machines at additional state and federal locations and by pursuing commissions from vending machine operators or agencies that have failed to remit these payments. Although the department asserts that it lacks the resources needed to pursue and collect commissions adequately, we found that other states have composed their statutes to allow the use of certain vending machine commissions for hiring staff to help administer the program. The department's failure to collect all available vending machine commissions has a direct impact on the blind vendors' pension plan, to which the majority of these funds are allocated. The department is working on a strategic plan for the program that will address the main concerns in our report.

RECOMMENDATIONS

To improve its financial management of the program, the department should take the following actions:

  • Complete its strategic plan, including a component that outlines its proposed use of the vending stand fund surplus and that will help the department determine whether the surplus is appropriate for future program needs.

  • Finish its survey of state and federal properties to identify possible sites for additional vending machines, thus increasing the potential for vending machine commission income.

  • Identify and pursue the collection of vending machine income from agencies and vending machine operators that refuse or fail to remit commissions.

  • Verify the status of organizations that claim they are exempt from remitting vending machine commissions. Collect vending machine commissions from those that are not.
To ensure that it has the staff needed to identify and collect vending machine commissions, the department should evaluate whether it should redirect staff from other units, contract for professional services, or possibly seek legislation to amend state law so that the department can use vending machine commissions for the hiring of staff.

AGENCY COMMENTS

The department generally agrees with our conclusions and recommendations. It states that the results of our review are consistent with its current actions and plans and that it will consider our comments and recommendations as it continues the reengineering of the program. However, it continues to disagree that it should do more to pursue vending machine income from the California State University system.


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