Office of the Legislative Auditor - Financial Audit Division

Report Summary

Department of Human Services

Fiscal Year Ended June 30, 2003

Key Findings:

• The Department of Human Services used approximately $8.8 million of federal Medical Assistance funds for services not allowed by the program. The funding source problem occurred because of a programming error in MMIS II, the medical claims processing system.
• The department did not comply with federal regulations when allocating salaries to some federal programs. The department charged salaries to various federal programs based on job descriptions and budget information, but never compared the employees’ actual activities to the budgeted estimates.
• The department did not provide adequate tools to monitor certain high-risk eligibility transactions.
• The department did not ensure that counties timely resolved income discrepancies identified as part of the benefit eligibility process, as required by federal regulations.
• Prior to our review, the department did not draw nearly $959,000 in federal funds for allowable MAXIS computer system costs. Although the department made the necessary calculations to allocate MAXIS computer system costs to the various federal programs, it did not perform reconciliations to ensure that federal funds drawn and recorded in the state’s accounting system matched allocated costs.
• The department did not adequately control incoming receipts collected by the Special Recovery Unit.
• The department did not comply with federal regulations by performing the required number of nursing home audits for Medical Assistance. The department audited the cost reports for 4.9 percent of all cost-based homes, which is less than the required 15 percent.
• The password for one account with access to selected production data was stored unencrypted in certain computer programs.

Management letters address internal control weaknesses and noncompliance issues found during our annual audit of the state’s financial statements and federally funded programs. The scope of work in individual agencies is limited. During the fiscal year 2003 audit, our work at the Department of Human Services focused on major public assistance programs, including Medical Assistance, Temporary Assistance for Needy Families, and Food Stamps; and on certain grant programs, including federal Social Services, Community Social Services, and Child Support administrative grants. We reviewed Medical Assistance recoveries and drug rebates, and included the allocation of computer system and other costs in our scope. Finally, we performed procedures on major federally funded programs administered by the department to determine whether the department complied with certain federal requirements.