2.

Recently, several states have outsourced some of the services traditionally provided by government employees. In one state, the Department of Health and Human Services (Department) has outsourced its electronic benefit transfer services to eFunds Inc. Under the contract, eFunds Inc. handles the electronic distribution of food stamp programs, including transaction processing, reporting, contract management, contract settlement, operations support, help desk services, and project management. For cost reasons, eFunds Inc. sent the work to five offshore service centers it owns in India.

A. Identify two new risks that this offshore outsourcing arrangement introduces to the states Department of Health and Human Services.

B. What role should the Departments internal audit function take to assist the Department in dealing with these risks?