The Attorney General may settle a case by conducting negotiations with a party under investigation, and then terminate the investigation or action upon acceptance of a settlement agreement or an assurance of voluntary compliance agreement.  Our audit covered the period February 2004 through January 2005 and disclosed the following regarding Department procedures for settling cases and processing resulting payments.

Finding No. 1:     The Department did not document the methodology used, and its case files did not document the factors considered, in its decisions to direct settlement contributions for purposes and to entities having no apparent relationship to the causes of action and associated injured persons.  Additionally, settlement agreements did not include mechanisms to permit verifications that contributions were used for the intended purposes.  The Legislature should provide statutory guidance as to the factors to be considered in directing such settlement contributions.

Finding No. 2:     The Department had not established written general guidelines for the process of settling cases.  Additionally, the Department did not always retain appropriate documentation reflecting that fees and costs were properly calculated or that settlement proceeds were distributed in accordance with the terms of the settlement agreement.

Finding No. 3:     Department program offices did not always provide Finance and Accounting with complete and accurate information to enable the proper recording of payments in the accounting records.

Other Matters

Finding No. 4:     The Department had no formal procedures that addressed its statutory responsibilities for the identification and classification of controlled substances, including notification to the Legislature of the adoption of Department rules that scheduled substances that had potential for abuse.

The Department's written response is included in this report as Exhibit B.