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  • Writer's pictureTheresa Opeka

Audit: NCDHHS mismanaged millions in federal funds


The North Carolina Department of Health and Human Services (NCDHHS) was found to have mismanaged millions of dollars in federal funding for the Fiscal Year ending June 30, 2023, according to the North Carolina Office of the State Auditor’s Statewide Single Audit.

NCDHHS blamed reporting errors on employee turnover and placed blame on county DSS staff for not applying policies correctly. In all accounts, NCDHHS agreed with the findings, and said steps to correct the deficiencies have already or will be completed. 


Among the findings:

NCDHHS incorrectly used Foster Care Title IV-E funds to reimburse counties. 

The department reimbursed counties approximately $28.8 million to cover care costs for 5,834 beneficiaries. Auditors reviewed the $28.8 million in foster care reimbursement payments and found that the Division of Social Services (DSS) used foster care funds to reimburse a county for a beneficiary who was also receiving Supplemental Security Income (SSI). The Title IV-E state plan does not allow a beneficiary who is receiving SSI to also receive Title IV-E foster care funding. Payments totaling $35,504 ($26,050 federal share) were reimbursed to the county for the beneficiary. 


As a result, the cost of the foster care program for both the state and the federal government increased. In addition, NCDHHS may be required to pay $26,050 back to the federal government.


According to NCDHHS management, the error occurred because of the county DSS staff’s inaccurate application of established eligibility policies.


Auditors recommended that NCDHHS management analyze the error to identify why it occurred and develop additional training or establish other procedures to prevent future errors. They should also determine if the foster care funds should be recouped.


They also say NCDHHS did not submit complete and timely subaward information for subrecipients of the Foster Care Title IV-E Program to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 329 subawards totaling $88.5 million that were required to be reported to the FSRS during the audit period and found the following errors:

  • 246 subawards totaling $65.2 million were not reported at all.

  • 83 subawards totaling $23.3 million were reported 134 days late.


NCDHHS management blamed turnover in the Division of Social Services Business Operations Section for the issue. 


Auditors say a contingency plan should be put in place to make sure FFATA reporting is completed when employee turnover occurs. 


The audit also revealed that NCDHHS made Adoption Assistance Title IV-E benefit payments to adoptive parents based on inaccurate eligibility determinations. 


Approximately 13,500 beneficiaries received $72.3 million in adoption assistance benefits. Although county DSS departments are given the task of determining eligibility for the program, NCDHHS was responsible for ensuring compliance with the eligibility requirements. Auditors redetermined eligibility for a sample of 93 beneficiaries that had benefits totaling $611,796 paid to adoptive parents on their behalf during the audit period and found one (1.01%) beneficiary that did not meet the program’s special needs eligibility requirements.

While evaluating the eligibility error, auditors also identified a sibling of the beneficiary who received adoption assistance benefits. After reviewing the sibling’s case file, auditors determined that the sibling did not meet the program’s special needs eligibility requirements. 

Payments totaling $12,336 ($9,042 federal share) were paid to adoptive parents on behalf of these ineligible beneficiaries. The error increased the cost to the adoption assistance program for both the state and the federal government.


Even though the tests identified only $12,336 ($9,042 federal share) that was paid on behalf of ineligible beneficiaries, if tests were extended to the entire population, questioned costs could be greater than $25,000, and NCDHHS may be required to pay the federal share back to the federal government.

 

NCDHHS blamed the errors on the county DSS staff’s inaccurate application of established eligibility policies. The county DSS staff utilize the Child Placement and Payment System (CPPS) to input data and make eligibility determinations, but NCDHHS is responsible for establishing the eligibility determination policies, maintaining CPPS, and facilitating training.

Auditors recommended that management analyze each error to see why they occurred and develop additional training or establish other procedures to prevent future errors. They should also determine if the adoption assistance funds should be recouped. 


MEDICAID ELIGIBILITY PROCESS UNDER SCRUTINY

The audit also questioned the Medicaid eligibility process. According to the audit, NCDHHS made Medical Assistance Program (Medicaid) payments to providers based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 2.3 million beneficiaries received $18.6 billion in Medicaid benefits.


Auditors re-determined eligibility for a sample of 111 beneficiaries who had benefits totaling $34 million paid on their behalf during the audit period. Auditors found two (1.8%) beneficiaries that were ineligible because they moved out of state and continued to receive benefits they were not entitled to. Payments totaling $7,982 (federal share $5,894) were paid on behalf of these beneficiaries.


They also identified 38 beneficiaries whose case files were either missing required eligibility documentation, such as self-employment verification, or inaccurate calculations and household composition were used. However, when auditors re-determined eligibility using the correct information, the beneficiaries were found to be eligible. As a result, there is an increased cost to the Medicaid program for both the state and federal governments. The program is jointly financed by these two governments and is administered by the state.

Even though the tests only identified $7,982 (federal share $5,894) that was paid on behalf of ineligible beneficiaries, if tests were extended to the entire population, questioned costs could be greater than $25,000. Although $7,982 ($5,894 federal share) resulted from the errors identified, the amount of Medicaid funds paid to ineligible beneficiaries is likely greater. 


NCDHHS management again blamed the errors on the county DSS staff’s inaccurate application of established eligibility policies. The county DSS staff utilize NC FAST13 to input data and make eligibility determinations; however, the department is responsible for establishing the eligibility determination policies, maintaining NC FAST, and facilitating training.


Auditors previously reported the same finding in the 2022 Statewide Single Audit.

They recommend that NCDHHS management analyze each error to find out why they occurred and develop additional training or establish other procedures as necessary to prevent future errors from occurring.


INCOMPLETE PAPER TRAILS AND INADEQUATE MONITORING

The audit also found that NCDHHS didn’t complete the reporting of 85 subawards totaling $16.8 million for the required Federal Funding Accountability and Transparency Act (FFATA) for the Low Income Household Water Assistance Program (LIHWAP) or the 30 subawards totaling $35.9 million for the State Opioid Response grant program. 


NCDHHS said unfilled vacancies and staff turnover are to blame for the non-reporting.


Other findings include:

NCDHHS didn’t adequately monitor the $39.1 million in federal funds passed to subrecipients to address the opioid abuse crisis. Auditors found no reviews were completed for eight (89%) subrecipients receiving $38.9 million in Opioid funds. They also didn’t adequately monitor $59.6 million in federal funds passed to subrecipients for providing treatment and prevention services for substance abuse through Substance Abuse Block Grant (SABG) funds. Auditors found that no reviews were completed for 34 of 36 (94%) subrecipients that received $58.6 million in SABG funds.


In both accounts, NCDHHS management said they implemented a pause in monitoring due to the coronavirus pandemic; however, management did not get approval from the federal oversight agency. 


The finding for the monitoring of substance abuse funds was previously reported in the 2022 Statewide Single Audit.


Auditors recommended obtaining federal oversight agency approval to deviate from required processes and procedures. 

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