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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Financial Audit Division

Report Summary
Department of Human Services

Financial Audit For the
Fiscal Year Ended June 30, 1996


Public Release Date: May 7, 1997 No. 97-25


The Department of Human Services (DHS) is the largest agency in state government, both in terms of the number of employees and total expenditures. The agency's main function is to administer various benefit programs to eligible Minnesotans. Minnesota Statutes, Chapters 256 through 256G, prescribe the types of aid the state provides and the eligibility criteria. Federal regulations and state plans approved by the federal government also control program activity. Ms. Maria Gomez was the DHS commissioner during fiscal year 1996. She resigned effective June 30, 1996. Mr. John Petraborg served the department as acting commissioner until Mr. David Doth was appointed commissioner by the Governor effective October 28, 1996.

Audit Scope and Conclusions

Our audit scope was limited to those activities material to the state of Minnesota's Comprehensive Annual Financial Report or the Single Audit for the year ended June 30, 1996.

In testing the medical assistance program for compliance with federal regulations, we found three instances of noncompliance. The department paid some claims that were beyond the one year limit imposed by federal regulations. It did not accurately complete certain required federal reports. DHS also did not accurately account for its drug rebate accounts receivable or collect drug rebates in accordance with the federal drug contract.

It was not our objective to render an opinion on internal controls over the health care programs. However, we found some weaknesses in DHS's administration of these programs. For example, DHS overpaid a provider approximately $6.2 million, due to an error in the MMIS II manual pricing logic. It also has not resolved three findings concerning the health care programs cited in our last audit report. Although the department needs to resolve these problems, they are not individually or collectively material to the health care programs as a whole.

We found no weaknesses or instances of noncompliance during our audit of the income maintenance programs.

We found that DHS generally complied with federal requirements for cash management. We found, however, that the state lost an estimated $3 million as a result of not requesting federal funds for the Medical Assistance Program as timely as allowed. In addition, we found significant weaknesses in DHS's processing and accounting for receipts. In particular, we found that the department did not adequately safeguard receipts in either the mailroom or the cashier's office.

DHS funded several "revenue maximization" projects during fiscal year 1996. At the end of fiscal year 1996, DHS retained more in this account than permitted by state law.