The September 9, 2004, meeting of the Program Review and Investigations Committee was held at 10:00 AM, in Room 131 of the Capitol Annex. Senator Katie Stine, Co-chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Stine, Co-chair; Representative Charlie Hoffman, Co-chair; Senators Charlie Borders, Brett Guthrie, Ernie Harris, Vernie McGaha, Joey Pendleton, and Dan Seum; Representatives Adrian Arnold, Sheldon Baugh, Dwight Butler, Rick Nelson, Ruth Ann Palumbo, Dottie Sims, and Jim Thompson.
Guests: Eugene H. Foster, Ed.D., Undersecretary for Children and Family Services, Cabinet for Health and Family Services; Wanda Kinnaird, Department for Community Based Services, Division of Child Support, Cabinet for Health and Family Services; Gail Wells, Internal Policy Analyst, Division of Child Support, Department for Community Based Services, Cabinet for Health and Family Services; Ed C. Ross, Controller, Finance and Administration Cabinet; Mack Gillim, Department of Revenue, Finance and Administration Cabinet; Michael Inman, Commissioner, Commonwealth Office of Technology, Finance and Administration Cabinet; Mark Rutledge, Executive Director, Office of Infrastructure Services, Commonwealth Office of Technology, Finance and Administration Cabinet; and Dodd Harris, General Counsel, Commonwealth Office of Technology, Finance and Administration Cabinet.
LRC Staff: Greg Hager, Committee Staff Administrator, Rick Graycarek, Tom Hewlett, Margaret Hurst, Van Knowles, Erin McNees, Cindy Upton, and Susan Spoonamore, Committee Assistant.
Minutes of the August 12, 2004 meeting were approved, without objection, by voice vote upon motion made by Sen. McGaha and seconded by Rep. Sims.
Sen. Stine asked Program Review staff members Cindy Upton and Rick Graycarek to proceed with presenting Chapters 4 and 5 of the report Uncollected Revenues and Improper Payments Cost Kentucky Millions of Dollars a Year. (Chapters 1 and 2 were presented at the July 8 meeting; Chapter 3 was presented at the August 12 meeting.)
Mr. Graycarek stated that the establishment and enforcement of child support orders affected eligibility and participation in public assistance programs. He said that due to uncollected child support, state spending was being affected by the number of families who qualified for food stamps, the Kentucky Transitional Assistance Program (K-TAP) and Medicaid. He stated that uncollected child support payments also included unfulfilled medical support orders, which cost the state Medicaid programs $2.4 million to $11 million a year. Mr. Graycarek stated that uncollected child support also increased state funding of public schools through the Support Education Excellence in Kentucky (SEEK) formula.
He said that the Division of Child Support, located in the Department for Community Based Services in the Cabinet for Health and Family Services (CHFS), administers Kentucky’s child support enforcement program. The cabinet contracts with local officials, usually county attorneys, to provide services such as establishing paternity, establishing child support and medical support orders, and enforcing and collecting support obligations. He stated that the state reimburses local officials at an hourly rate, and enforcement expenses are reimbursed up to a pre-determined amount.
He said that Kentucky collects approximately 55 percent of the current obligated child support each year, and that child support staff handles more than 300 cases each, which represents more cases per worker than the national average. He stated that from FY 1999 to FY 2003, the number of open child support cases increased by approximately 10 percent to more than 310,000 cases.
Mr. Graycarek stated K-TAP is impacted by child support. He stated that K-TAP costs were offset because recipients were required to assign their child support income to the state. He said that as of FY 2002, there was $159 million in lost income to the state owed to K-TAP or foster care recipients. He said that many states allow parents to keep some or all of the child support payments in order to encourage child support payments.
Mr. Graycarek stated that unenforced medical support orders increased Medicaid costs. He said that a non-custodial parent was required to provide health insurance if health insurance was available through an employer at a reasonable cost. He stated that more than 94 percent of the orders to provide health insurance in Kentucky went unfulfilled in FY 2002. He stated that the Commonwealth could have saved $2.4 to $11.0 million in state funding in FY 2003 if non-custodial parents with access to health insurance had provided it.
He stated that unfulfilled child support payments also affect SEEK funding by allowing more students to become eligible for the federal free school lunch program and thus defined as at-risk. He said that under the SEEK formula, school districts received additional state funding for each at-risk student.
In conclusion, he stated that the recommendations contained in Chapter 4 of the report were designed to improve collections by (a) re-examining the costs and benefits of providing financial incentives to county child support offices for improving enforcement of child support orders, (b) examining the consequences of allowing custodial parents who receive K-TAP to keep some or all of their child support payments, and (c) determining whether non-custodial parents who cannot provide dependent health insurance should be required to provide some financial assistance for dependent medical care.
Sen. Stine asked why the number of medical support orders issued in Kentucky from FY 2001 to FY 2003 increased by 29 percent to nearly 75,000.
Mr. Graycarek stated that the federal government had been active in encouraging states to include medical support when establishing paternity and child support orders.
Sen. Stine asked if the cabinet would have to become more actively involved to help increase the establishment and enforcement of medical support orders.
Mr. Graycarek stated that through the combined efforts of the cabinet and the courts, and by increasing financial incentives to the local contracting officials, it could help increase the number of medical support orders.
Sen. Stine asked why some counties performed better than others did when it came to enforcing collections and establishing paternity and court orders. She also asked if staff had a breakdown of each county, and if so, what were the 20 counties with the worst performance records.
Mr. Graycarek stated that he did not have the names of the 20 worst performing counties.
Rep. Baugh asked if court orders were monitored for non-compliance, and what mechanism was in place to enforce the orders.
Mr. Graycarek stated that when a non-custodial parent was ordered to pay medical support, a notice was sent to the non-custodial parent’s employer, provided that the non-custodial parent was employed. He stated that it was the responsibility of the local contracting official to enforce the orders.
Rep. Baugh asked if the local contracting officials were enforcing the orders.
Mr. Graycarek stated that the unwritten primary function of local officials was to establish paternity and child support for the custodial parent. He said that even though medical support was important, it was not enforced on a regular basis. He stated that local officials were having a hard time trying to keep up with paternity and child support orders due to the lack of manpower.
Rep. Baugh asked if it was to a school’s advantage to enroll students in the free lunch program.
Mr. Graycarek stated that a school could receive an additional $478 under the SEEK formula for each eligible student, plus additional Tier 1 funding.
Sen. McGaha stated that the report mentioned that there was $159 million in uncollected child support in FY 2002. He asked for the total amount of child support that was being paid.
Mr. Graycarek stated that the $159 million figure was cumulative to the beginning of the child support program. He said that the total amount of all unpaid child support was approximately $1.3 billion.
Sen. McGaha asked what the difference was between the $159 million and the $1.3 billion.
Mr. Graycarek stated that the $159 million included only the custodial parents who were currently receiving K-TAP or foster care services; $1.3 billion is all cumulative unpaid child support.
Rep. Butler asked Mr. Graycarek to explain the duties and incentives involved in contracting with local officials.
Mr. Graycarek stated that the Cabinet for Health and Family Services contracted with local officials, mostly county attorneys, to operate and oversee the local child support offices. He stated that the federal government provided most of the funding for operating the child support program. He said that in FY 2002, the state received $8.1 million in federal incentives. In addition to federal funding, Kentucky uses restricted and general funds. He explained that Kentucky reimburses local contracting officials for program expenses at an hourly rate up to a predetermined total amount, and child support enforcement expenses were reimbursed at 100 percent, but are capped.
Rep. Butler asked if the local contracting officials were receiving incentives based on establishing and collecting medical support orders.
Mr. Graycarek stated that he was not aware of local officials receiving additional incentives for enforcing medical support orders.
Cindy Upton stated that Chapter 5 focused on the new responsibilities of the Finance and Administration Cabinet (Finance), other state agencies, and the judicial branch for preventing improper payments and collecting debts under the requirements of two laws enacted by the 2004 General Assembly. She stated that Senate Bill 228 provided new requirements for preventing improper payments. She said that both Senate Bill 228 and House Bill 162 provided new requirements for collecting debts.
She stated that Finance was required to:
· develop a system of internal controls and preaudit policies and procedures to prevent and detect errors, fraud, and abuse before a payment is made; and
· collect debts referred from state agencies and the courts.
She stated that some of the new policies and procedures would take years to implement and would require more staff and resources, but the potential benefit to the Commonwealth’s economic condition should justify the effort.
Ms. Upton stated that the following recommendations were made in the spirit of cooperation to help implement the new laws and best practices from other states and the federal government:
Recommendation 5.1 is that Finance should establish a formal risk assessment work group to address improper payments of state money and collection of state debts.
Recommendation 5.2 is that state agencies identified as being most at risk of making improper payments or not collecting debts should take specific actions and report the results.
Recommendation 5.3 is that the judicial branch should take specific actions to correct problems with debt collection and report the results.
Recommendation 5.4 is that Finance and the State Budget Director should issue specific guidance to agencies to help them satisfy targets for reducing improper payments and collecting debts.
Recommendation 5.5 is that the General Assembly should consider requiring Finance to report annually on state agencies’ improper and unnecessary payments. Unnecessary payments include the additional costs of Medicaid and public school funding because of unenforced child support orders.
Ms. Upton stated the federal government recently announced an initiative to reduce improper payments in the Medicaid program. She said that each state must estimate its error rate and improper payments and report the results to the Centers for Medicare and Medicaid Services.
Recommendation 5.6 is that Finance and the State Budget Director should work with state agency officials to help them implement the action plans, internal controls, and preaudit policies and procedures developed to reduce improper payments and to collect debts.
Recommendation 5.7 is that Finance, the State Budget Director, the State Treasurer, and the Court of Justice should explore the use of all available collection methods and require or seek authority to require state agencies and the courts to implement all cost-effective methods.
Recommendation 5.8 states that Finance should research best practices of other states with central collection units to gain the benefit of their knowledge and experience.
Recommendation 5.9 states that Finance and the State Treasurer should develop a statewide policy to ensure that collections are deposited on the day they are received by state agencies.
Sen. Stine asked if state and federal agencies were working together to improve the prevention of improper payments and the collection of debts as required under the federal Improper Payments Information Act of 2002.
Ms. Upton stated that state and federal agencies were working together to estimate error rates in food stamps and other federal public benefit programs. She stated that the federal government was in the process of looking at all its benefit programs.
Sen. Stine asked if Kentucky’s State Auditor had made any effort to identify businesses that owed the state for unpaid debts. She asked if there was someone from the auditor’s office in the audience to respond to this question.
Ms. Upton stated that to her knowledge the auditor’s office had not conducted any audits or identified any businesses that owed the state for unpaid debts. She stated that more states were taking an interest in revoking business licenses for unpaid debts or prohibiting renewal of professional licenses for failure to pay state income taxes.
Sen. Stine asked if the auditor’s office or any other state agency had expressed an interest in implementing a statewide policy for requiring same-day deposits.
Ms. Upton stated that staff was unable to determine if deposits were being made in a timely manner. She said that recommendation 5.9 was made in order to ensure that same-day deposits were being made just in case it was not happening in a timely manner.
Sen. Stine stated that a newspaper article reported that the Clinton County Sheriff had underpaid the county’s tax districts by approximately $108,000 and had also neglected to deposit more than $34,000 in collected taxes. She asked if that same problem could be occurring in other counties.
Ms. Upton stated that it was her understanding that the auditor’s office was responsible for auditing county sheriffs, but that the auditor’s office had the option of contracting with a private accounting firm to perform audits if necessary. She said she would not be surprised to find that past audit reports indicated internal control weaknesses within the Clinton County Sheriff’s office.
Sen. Seum stated that in Kentucky all taxes, including local taxes, had to be paid before a beer or liquor license could be renewed. He said he was surprised to learn that the same requirements were not in place for renewing professional licenses.
Sen. McGaha asked if staff had any ideas for encouraging the judicial branch to implement the recommendations concerning actions to correct their debt collection process.
Ms. Upton explained that report recommendations were always formed on the basis of the laws in the Commonwealth, and staff stood by their recommendations that the court system work with Finance to figure out which agency is going to do what in collecting the debts owed to the courts.
Sen. McGaha asked if staff had any specific recommendations.
Ms. Upton stated that because the new legislation was less than one year old, staff were aware of the agency struggles in figuring out their plan of action. She stated that staff wanted to give the judicial branch and the finance administration a chance to work it out, and then report back to the committee on their joint efforts.
Sen. Stine introduced Eugene H. Foster, Ed.D., Undersecretary for Children and Family Services, Cabinet for Health and Family Services; Wanda Kinnaird, Director, Division of Child Support, Department for Community Based Services, Cabinet for Health and Family Services; and Gail Wells, Internal Policy Analyst, Division of Child Support, Department for Community Based Services, Cabinet for Health and Family Services.
Dr. Foster, in addressing recommendation 4.1, stated that the Cabinet uses an equity formula based on the performance of the local contracting official and the county’s per capita income. He stated that the Cabinet believed that the equity formula was a better approach for allocating funds among the counties and wished to maintain that formula. He stated that the Cabinet recommended using performance as one factor, but not the only factor, in allocating funds to the county offices. He said that if additional funds became available, the Cabinet would be interested in providing additional incentives. The Cabinet would also continue to evaluate its ability to build additional incentives into the program.
Sen. Stine asked if the Cabinet had a breakdown of the top performing and worst performing local contracting officials.
Dr. Foster stated that the following 20 counties were listed as the worst performing: Warren, Garrard, Magoffin, Edmonson, McCreary, Jefferson, Mercer, Lewis, Boyd, Webster, Calloway, Fulton, Jackson, Elliott, McCracken, Knox, Spencer, Whitley, Laurel, and Owsley.
Sen. Stine asked if the Cabinet had any ideas as to why those counties were so low in performance and if the Cabinet had any recommendations to add to the report.
Dr. Foster stated that many of the lowest counties were the poorest, with the highest unemployment. He stated that the Cabinet continually provides support to the contracting officials, and if officials consistently refused to cooperate, then the Cabinet has no choice but to pull the contract.
Sen. Pendleton asked if any of the 20 counties mentioned were under contract as a friend of the court.
Dr. Foster stated that with the exception of two contracts, most of the contracts were with the county attorneys.
Sen. Pendleton asked if friends of the court were doing a better job of collecting child support than county attorneys.
Ms. Kinnaird stated that the Cabinet had very few contracts with friends of the court. She said that based on past and current statistics, there had not been any significant difference between using a county attorney or friend of the court.
Sen. Pendleton stated that he would like to see that information.
Sen. Seum asked if the child support employees of the local contracting officials were classified as state or local employees.
Ms. Kinnaird stated that employees working in the county attorney’s office were generally considered county employees.
Sen. Seum asked if any of the employees working in the county attorney’s office would be considered a state employee.
Ms. Kinnaird stated that there were some state employees assigned to a county, but they did not actually work for the county attorney. She said they had a separate location and were responsible for administrative duties unrelated to the county attorney’s office.
Sen. Seum asked how many child support collection agencies there were in the state.
Ms. Kinnaird stated that the Cabinet had contracts with 106 contracting officials, some of which cover multiple counties.
Sen. Seum asked if the costs of the contracts and the ability to collect child support had been examined over the last ten years. He also asked if there was an incentive for the local child support enforcement offices to do a better job.
Dr. Foster stated that local officials can receive an additional incentive of 20 percent of the base contract for performing well.
Sen. Seum asked if incentives were based on the amount of child support collected, and asked where the funding comes from.
Ms. Wells stated that the majority of funding came through the federal government, some from the general fund, and some from TANF collections and federal incentives.
Sen. Seum asked if the child support division charged the non-custodial parent or the recipient a fee for their services.
Ms. Wells stated that no one was charged a fee for child support services.
Sen. Seum asked how Kentucky compared to other states in collecting child support.
Dr. Foster stated that he could not recall if the report contained that information, but if it did not then the Cabinet would provide the committee with that information.
Sen. Seum asked if the increase in child support collections was related to child support enforcement divisions doing a better job, or because they had hired more people.
Dr. Foster stated that the Cabinet would research that question and make the information available to the committee.
Sen. Stine stated that it was interesting to note that some of the top 20 counties were not necessarily wealthy. She asked if a buddy system could be developed by putting the worst 20 counties with the top 20 counties so they could learn how to collect child support.
Dr. Foster stated that the Cabinet passed on any information gained from the performance of the top 20 counties to the other remaining counties. He stated that after the implementation of the equity formula in 2003, some of the very poorest counties that performed poorly were now doing a much better job.
Sen. Stine stated that non-custodial parents not providing child support and/or medical support were having an immense effect on Medicaid costs and the educational system through the SEEK formula. She stated that it causes a negative impact for those who really need the services.
Rep. Arnold asked if it was impossible to collect child support from non-custodial parents who lost their jobs.
Dr. Foster stated that was true, although non-custodial parents did have the right to petition the court for a reduction in their child support payments.
Dr. Foster stated that the Cabinet agreed with recommendation 4.3 concerning the non-custodial parents’ responsibility to pay health care costs of their children. He said that the Cabinet saw this as an opportunity to help reduce the state’s burden for Medicaid, K-TAP, food stamps and other programs. He stated that the Division of Child Support and the Cabinet had recently established a medical support enforcement project working cooperatively with the Department of Medicaid and the Medicaid contractor known as the Public Consulting Group. He said that so far the program has been fairly successful in identifying children who were already enrolled on a parent’s health care plan. He stated that for every child identified as being on a parent’s health care plan, it saved the Medicaid program approximately $1,260.
He also noted that the Cabinet recently implemented other programs designed to improve child support collections or reduce the costs related to collecting child support.
Sen. Seum asked how much was budgeted, including state and federal dollars, for child support collections.
Dr. Foster stated that the total budget enacted was $57 million. He said that $38 million of that was from federal funds, $4.6 million was from the state’s general fund and $14.5 million from agency funds.
Rep. Palumbo stated that she did not understand how the non-custodial parent, the custodial parent and the dependent children would be better off if the non-custodial parent did not provide medical support.
Dr. Foster explained that the staff report says that the current program does not have incentives for the custodial parent to cooperate in identifying medical insurance that the non-custodial may have for the child. He stated that in some instances it might be more beneficial for the custodial parent if the child was covered by Medicaid services. He said that some non-custodial parents would opt to pay the custodial parent the extra money they saved from paying premiums.
Rep. Palumbo stated that custodial parents might provide information if their child support money was withheld.
Rep. Palumbo asked if there were other measures that could be taken to encourage custodial parents to report medical insurance information.
Ms. Kinnaird stated that in many situations, non-custodial parents were unemployed and unable to pay their children support or their medical support obligation, which made it difficult to enforce orders under those circumstances.
Rep. Hoffman introduced Ed C. Ross, Controller, Finance and Administration Cabinet and Mack Gillim, Department of Revenue, Finance and Administration Cabinet.
Mr. Ross presented the response of the Finance and Administration Cabinet to Chapter 5 of the report (a copy of the response can be found in its entirety in the LRC Library file). He stated that Finance agreed with Recommendation 5.1. He stated that the Cabinet would develop separate workgroups to focus on improper payments and debt collection with one steering committee. He stated that Finance would also work with the Office of the State Budget Director to study and implement the appropriate work groups.
He stated that Finance agreed with Recommendation 5.2 and had already begun to implement portions of the recommendation.
He said that Finance agreed with Recommendation 5.3 and would be willing to work with the Court of Justice.
He said that Finance agreed with Recommendations 5.4 and had already begun to implement portions of the recommendation.
He stated that Finance disagreed with Recommendation 5.5 because it was not feasible to identify every improper payment and any error rate provided would not be statistically significant. He stated that Finance could report on known improper payments. He said the annual report could also contain preventive measures taken by Finance and other agencies. He stated that Finance had already taken steps to enhance the information for the annual report.
Mr. Ross stated that Finance agreed with Recommendation 5.6 and had begun working with agencies.
He stated that Recommendations 5.7 and 5.8 were related to debt collection.
He said that Finance agreed with Recommendation 5.9 if there was a dollar threshold. He said that it might not be efficient for an agency to immediately deposit $5 if it was the only money collected during the day.
In concluding, Mr. Ross stated that the Cabinet was committed to collecting all money due to the state and making sure that the payments were proper and necessary. He stated that the Cabinet was in the process of strengthening the pre-audit function within state agencies so payments could be reviewed before they were actually paid.
He stated that the Cabinet had taken steps to reduce employee travel expenses, reduce the number of procurement cards, and have a stricter view of procurement card purchases. He stated that the number of cellular phones has been reduced and cell phone usage was being monitored.
He said that the Cabinet was in the process of implementing the cost saving measures contained in House Bill 269, and per Senate Bill 268, the Cabinet was in the process of writing administrative regulations for all of the cabinets.
Rep. Hoffman asked Mr. Ross to expand on the pre-audit process.
Mr. Ross stated that in Chapter 45 there is a statute that requires the Finance and Administration Cabinet to be responsible for the pre-audit of any payments before the issuance of a warrant to the State Treasurer to write the check. The statute also allows Finance to delegate pre-audit authority to the agencies. He stated that it was the Finance’s responsibility to make sure that the agencies were properly pre-auditing documents before making the payment.
Sen. Stine asked if Kentucky had a statewide policy for depositing funds to the state treasury.
Mr. Ross explained that KRS 41.070 states that funds should be deposited promptly and efficiently in the state treasury. He stated that his definition of promptly is to make deposits every day if there is a sufficient amount of funds to be deposited. He stated that the Cabinet does need to address that issue with a simple policy regulation.
Sen. Stine asked how quickly could the Cabinet conform to Recommendation 5.5 should the General Assembly require that Finance make annual reports on state agencies’ improper and unnecessary payments.
Mr. Ross stated that the Cabinet would attempt to make a annual report on the improper payment issue. He stated that in his opinion the Cabinet needed to focus more on prevention.
Sen. Pendleton asked how many new employees had been hired by Finance.
Mr. Gillim stated that the Cabinet had hired a total of 31 additional employees to address the collection of delinquent receivables, child support, and so forth.
Mr. Ross stated that through the recent reorganization process, the Cabinet had moved individuals into the internal audit area. He said that the Cabinet had not hired new employees.
Sen. Pendleton asked if travel expenses would increase with additional employees being placed in the internal audit area.
Mr. Ross stated that the internal audits would be mostly confined within the Frankfort agencies so there would be a limited amount of travel across the state.
Rep. Palumbo asked if Finance would be prepared to report to the General Assembly by October 1, 2004, on the amount, type, and age of debts referred by state agencies for collection; the amounts collected, and the amounts deemed not cost-effective to collect.
Mr. Gillim stated that the Cabinet expected to have the report ready by October 1, 2004.
Rep. Palumbo asked if the Cabinet would be able to report on which agencies needed assistance by the October meeting of the Program Review and Investigations Committee.
Mr. Gillim stated that the Cabinet would have a general idea by then of which agencies needed assistance. He stated that the Cabinet was already working with the Division of Child Support to help reduce outstanding receivables, and so far they had been able to reduce receivables by approximately $4 million. He stated that last month the Cabinet collected approximately $168,000 in delinquent child support.
Sen. Seum stated that he thought local officials were responsible for collecting child support, not Finance.
Mr. Gillim stated that the local officials did do the majority of collections, but the Department of Revenue was assisting the Division of Child Support in reducing old outstanding receivables. He stated the Department of Revenue had collection resources only available to them that could help in collecting receivables.
Sen. Seum asked if local officials benefited from the collections that the Department of Revenue collected.
Mr. Gillim stated that local officials did not benefit from the Department’s collections. He said that the Department sent all money that they collected directly to the Division of Child Support.
A motion made by Sen. Stine and seconded by Sen. Pendleton to incorporate the ranking of the child support performance into the report in the form of an appendix passed, without objection.
The report Uncollected Revenues and Improper Payments Cost Kentucky Millions of Dollars a Year was adopted by roll call vote upon motion made by Sen. Pendleton and seconded by Rep. Palumbo.
A motion made by Sen. Stine and seconded by Rep. Hoffman to provide the Health and Welfare Committee, the Judiciary Committee, and the Appropriations and Revenue Committee copies of the report passed, without objection.
Co-chair Stine stated that Program Review staff members Greg Hager and Van Knowles would be presenting the report Appropriate Management and Technology Can Reduce Costs and Risks of Computer Use by State Employees (a copy of which can be found in its entirety in the LRC Library file).
Dr. Hager stated that on December 17, 2003, the Program Review and Investigations Committee authorized a study of inappropriate computer use by state employees. He stated that the study was prompted by a state auditor’s report of security lapses, and access to pornographic web sites by some Transportation Cabinet employees.
Dr. Hager stated that over the past year, Kentucky had taken great strides in recognizing problems related to computer misuse and implementing solutions. He stated that the Commonwealth Office of Technology was in the process of setting up a centralized system, which would, among other tasks, block access to inappropriate Internet sites. He said that improved management and the use of technology would make it much more difficult for a repeat of the 2003 Transportation scandal to occur.
He said that acceptable use could be defined as any use of computer resources for legitimate business purposes, conducted in a safe and secure manner; and incidental personal use, if permitted.
Dr. Hager stated that inappropriate use of computers by employees created significant real and potential costs to the state. He said that the five major categories of improper use were as follows:
§ Loss of goodwill — adverse publicity not only harms the reputation of the agency and its officials, but also that of state government and its employees in general.
§ Loss of productivity could be the greatest financial cost associated with improper computer use. Employees using computers for personal activity on work time means that they are not doing their jobs, and it also ties up computer resources, such as slowing email and network access.
§ Unnecessary Purchase of Equipment and Services is another financial cost to the system, which can result in state government paying for more computer resources than would be necessary if all use were work-related.
§ Computer systems and data can be damaged in the course of legitimate or inappropriate activity, such as increasing the risk of viruses.
§ Computer use increases exposure to legal liability since, under certain circumstances, state government can be held legally liable for the actions of its employees.
Van Knowles, Program Review staff, continued the presentation. He stated that based on a comparison of existing policies in other states and institutions, and best practices, staff made recommendations for managing employee computer use. He stated that effective management of the opportunities and risks identified require a clear, comprehensive acceptable use policy, which can be easily understood and readily accessible to employees.
He stated that staff found that Kentucky’s existing policies were commendable. He stated that the new Content Security Management system (CSM) had state-of-the-art control over Internet and email use. He said that existing policies compared favorably with best practices. He said an administrative regulation on acceptable Internet and email use would be implemented, which would give the policy the force of law.
He stated that an acceptable use task force had been formed, consisting of members from the Commonwealth Office of Technology, Personnel Cabinet, Finance and Administration Cabinet, and the Governor’s Office.
He stated that in April 2004, the Commonwealth Office of Technology signed a five-year $1.9 million contract with the Webwasher Content Security Management system (CSM), which should be fully implemented by the end of September. He stated that CSM software looked for key words or phrases in email to identify questionable messages. He said that CSM could block entire categories of websites, such as porn sites, and it could also identify and trap spam and keep it from interfering with normal work. He stated that CSM systems usually include anti-virus and firewall protection against hackers. He stated that software was able to report to management as needed.
He stated that in 1996, the state implemented an acceptable use policy, which focused mainly on Internet and email use, leaving out other important computer use issues.
He stated that based on staff’s research the following recommendations were offered:
Recommendation 3.1: The acceptable use task force should consider making some specific additions or improvements to the Internet and email acceptable use policy and all related policies.
Recommendation 3.2: The acceptable use task force should review the applicability of acceptable use policies to cover all possible users of executive branch computer resources.
Recommendation 3.3: The Personnel Cabinet and the personnel staff of each agency should implement an ongoing process to establish and promote a culture of proper use of Commonwealth computer resources. The agencies should consider including the following items from the best practices model: supervisor education, employee education, feedback to and from employees, uniform enforcement, problem reporting systems, and environmental strategies.
Recommendation 3.4: The Personnel Cabinet should assure that the Kentucky Employee Handbook section related to use of information technology resources is always as accurate and comprehensible as possible.
Recommendation 3.5: The Commonwealth Office of Technology and the information technology office of each agency should consider taking actions to manage file storage, local network capacity, and workstation security.
Recommendation 3.6: The Finance and Administration Cabinet should consider allowing access to non-work-related Internet sites that are appropriate for personal use, consistent with the overall philosophy of the acceptable use policy.
Recommendation 3.7: The Personnel Cabinet should design outcome measures to determine the effectiveness of acceptable use management on employee knowledge and behavior, including employee knowledge and support of the policy and inappropriate use incidents and their disposition.
Recommendation 3.8: In addition to bandwidth use, the Commonwealth Office of Technology should retain and archive adequate information about web access and email use to track important factors over time.
Recommendation 3.9: The Commonwealth Office of Technology should conduct periodic tests of agencies’ computer measures and the content security management system.
Recommendation 3.10: The Personnel Cabinet and the Finance and Administration Cabinet should review acceptable use policies and procedures at least annually.
Recommendation 3.11: The Personnel Cabinet, Finance and Administration Cabinet, and Governor’s Office should formalize the acceptable use task force as a permanent entity with responsibility to review all policies and procedures related to acceptable computer use on a regular basis, oversee their management, and communicate their status to the Governor and to executives in all agencies.
Sen. Harris asked if there was some way to block access to unauthorized websites.
Mr. Knowles stated the Content Security Management system takes two approaches. The first approach is that they have a database of websites that have known content, such as shopping sites or pornographic sites. He stated that the database is continually updated. Webwasher software creates a report that is sent back to content security management of all the sites that anyone may have tried to visit that are not classified or included in the database. He stated that Content Security Management system looks for keywords and phrases and will flag websites accordingly.
Sen. Stine asked which agencies were doing a good job at managing computer use.
Mr. Knowles stated that the Department of Justice had done well.
Dr. Hager noted that some agencies had done better than others in the past, but everybody should be doing a better job in the future because of the new technology and policies.
Rep. Sims asked if state agencies and universities shared one server.
Mr. Knowles stated that the Kentucky Information Highway serves state government, local government, schools, KCTCS, some university functions, and local libraries, along with other entities.
Rep. Sims asked how long it took for the system to determine if someone was using the computer inappropriately.
Mr. Knowles stated that if someone tried to go to a pornographic website that was blocked, then that hit was automatically forwarded to the kentucky.gov website. He stated that depending on how the CSM system was set up, it was capable of providing reports on a daily basis.
Rep. Baugh asked if there was a way to block unwanted emails.
Dr. Hager stated that there was software to help control spam.
Mr. Knowles explained that spam-blocking software was capable of corralling emails in one place so it could be processed quickly.
Co-chair Stine introduced Michael Inman, Commissioner, Commonwealth Office of Technology, Finance and Administration Cabinet; Mark Rutledge, Executive Director, Office of Infrastructure Services, Commonwealth Office of Technology, Finance and Administration Cabinet; and Dodd Harris, General Counsel, Commonwealth Office of Technology, Finance and Administration Cabinet.
Mr. Inman stated that the Commonwealth Office of Technology (COT) agreed with the recommendations in the report. He stated that before some of the recommendations could be implemented, it would have to be decided who had the oversight to make the effective changes. He stated that it was COT’s responsibility to provide resources and support to help agencies meet their business objectives, and at the same time allow COT to meet their objective of keeping the Commonwealth’s Information Technology (IT) resources secure.
Mr. Inman stated that before COT could address each recommendation, a detailed cost analysis would be needed to determine what the cost would be for implementing the recommendations. He stated that COT would complete the implementation of the Content Security Management system for the executive agencies, then evaluate the effectiveness of the system before committing to any costly solutions. He stated that he was confident that the CSM system would be able to block access to inappropriate sites. He also stated that COT had not addressed spam issues yet, but it would be a part of the CSM solution that would be implemented at the end of September.
Mr. Rutledge stated that earlier efforts of each agency to monitor their own content had not been effective, so a new centralized approach had been taken by COT. He stated that the CSM systems could delegate authority back to the agency so that the agency could decide the appropriate level of computer use.
Mr. Inman stated that some of the most frequent inappropriate computer uses are online shopping, gaming, and management of investments. He stated that pornography was a very small part of inappropriate computer use.
Sen. Stine asked if political use was a problem.
Mr. Rutledge stated that the policy invoked at Finance prohibits special interest political sites, not what is typically thought of as political.
Mr. Inman stated that you could still receive an email message that was political in tone, but political activities could be limited.
Rep. Arnold asked what type of discipline was issued for the 46 Transportation Cabinet employees who were found to be using their computers for inappropriate use.
Mr. Rutledge stated that some employees were dismissed, some were reprimanded, and some were demoted. He stated that because it was an internal investigation, COT had little or no participation in the matter.
Co-chair Stine asked if whistleblower provisions were in place to protect an employee for reporting inappropriate computer use.
Mr. Inman stated that this policy did not address whistleblowers. He stated that COT focuses specifically on technology areas.
Sen. Guthrie asked how the system defined incidental use.
Mr. Inman stated that for example, the Legislative Research Commission employees used newspaper research as part of their job, so within LRC newspaper research would not be classified as incidental because it is an inherent part of the job. He stated that the Kentucky State Police has a broader perspective because of the types of crimes investigated. He said that the Content Security Management system gives managers the ability to control the content for their employees.
The report Appropriate Management and Technology Can Reduce Costs and Risks of Computer Use by State Employees was adopted by roll call vote upon motion made by Sen. Harris and seconded by Rep. Arnold.
Sen. Stine announced that the next Program Review meeting would be a joint meeting with members of the Judiciary Committee and the Health and Welfare Committee on October 19. She stated that Program Review staff would be presenting the second part of the Adult Protective Services report.
Meeting adjourned at 12:35 p.m.