MgmtCase

Rep Letter
4:08-cv-01496-JEJ-TMB Document 115 Filed 07/17/2010 Page 1 of 2 1 of2
Page

From: Ottenberg, Douglas M.

Sent: Tuesday, May 29,2007 7:23 PM (GMT)
To: B ianco, Edward L. <ebianc o @aftorneygeneral. gov>
Subject: FW: Mgmt Rep Letter

Ed.

Ton Kimmett had some heaftburï over the representation letter. I rvent over each point rvith hin. I did sonie
research and found that#3 u'as wriften the rvay it was because of Sarbanes-Oxley. Once rve discussed that he
seerned OK rvith #3.

He does take exception to the "4. We are not aware of any fraud . . . " representation. I'rn not sure rvhy because we
are clearly not arvare of any fraud. We found gross nrismanagement, but no fi'aud, He'll want to discuss this rvith
you, He is saying that the level of mistrauagetnent equates to fi'aud. I'd have to disagree rvith him.

He might rvrite a qualification for #8 because of the co¡nmissions paid outside the PCA holding period and unpaid
illterest.

We probably need to discuss this before our 2 p.m. meetìng rvith hirn.

Doug

t. We have provided to you all available records and related data requested by your auditors to
perform the audit. YES

2. We acknowledge our offrce's understanding of the objectives, evaluation criteria and scope
of the audit as stated in your engagement letter dated August 8, 2005. YES

3. Vy'e acknowledge our responsibility for the design and implementation of programs and
controls to prevent and detect fraud. By saying YES we are stating that management is
responsible for the internal controls. Now that Sarbanes-Oxley requires effective internal
controls to "Prevent and Detect Fraud", this is a fair representation for the auditors to ask. I
don't know that we'd have the right to re-word it.

4. We are not aware of any fraud involving management or employees who have significant
roles in management controls, or any fraud involving others that could have an effect on the
functions. While I think Jill's close personal relationship with senior managers of the private
collection agencies is inappropriate and the mismanagement of dockets is grossly obvious,
we have not uncovered any fraud. Could it exist? Absolutely, but I am not aware of any
fraud. In my opinion, the FES state fits the definition of gross mismanagement.

Definitions:

Fraud. Misfeasance. Nonfeasance or Malfeasance. Fraud, misfeasance, nonfeasance, or

malfeasance should be considered broadly as any alleged deliberate action which is
apparently in violation of Federal statutes and regulations. This category includes, but is not
limited to, indications of bribery, forgery, extortion, embezzlement, theft of participant
checks, kickbacks from participants, intentional payments to a contractor withouf the
expectation of receiving services, payments to ghost enrollees, misuse of appropriated funds,
and misrepresenting information in official repofts.

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Rep Letter
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Gross Mismanagement. Gross mismanagement should be considered as actions or situations

arising out of management ineptitude or oversight, leading to major violations of FES
processes, regulations, or contractlgrant provisions which could severely hamper the
accomplishment of program goals. These include situations which lead to waste of
Government resources and could jeopardize the project or reputation of the agency. This
category includes, but is not limited to, unauditable records, unsupported costs, highly
inaccurate fiscal and/or program reports, and the lack of good intemal control procedures.
'We
5. are responsible for the compliance with all laws and regulation applicable to the
functions. YES

6. We have identified and disclosed to the auditors all laws and regulations that have a direct
and material effect on the functions. YES

7. We have responded fully to all your inquiries during your audit. YES and very candidly

8. There are no outstanding sanctions, litigation or disallowances of costs pending or under

appeal that would have a material effect on the individual program. YEs...however,
depending on how you're going after the commission payments made outside the holding
period and the unpaid interest, this might have to be qualified.

From¡ Bianco, Edward L.

Sent: Friday, May 11, 2007 Bz42 AM
To: Ottenberg, Douglas M,
Subjectr FW: Mgmt Rep Letter
Impoftance: High

Ed

From: Bitting, Daniel fmailtordbitting@state.pa.us]

Sent: Friday, May 11, 2007 B:30 AM
To: Bianco, Edward L.
Cc: Simons, Phllip
Subject: Mgmt Rep LetLer
ImpoÊance: High

Mr. Bianco,

As we discussed yesterday, here is a copy of the Management Representation Letter for someone in your office
to sign. Thanks

<<Mgmt Rep Letter.doe>

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