By David Farmer,Staff Writer
Auditor says Maine has improved but that serious problems remain

LEWISTON – Federal investigators are looking into at least one accounting problem discovered by an audit of the state’s books for 2005.

The audit identified $8.1 million in costs associated with foster care case management that could come under increased scrutiny.

Additionally, the audit found that in a number of instances the state lacks the internal controls to appropriately account for federal and state money.

The audit, which examined records from the fiscal year that ended June 30, 2005, reviewed 25 major federal programs that account for about $2.46 billion in federal aid the state receives. The audit found 71 instances of control deficiencies or noncompliance with federal requirements.

Three areas in particular were singled out for scrutiny: The way the state accounts for its fixed assets, a discrepancy between the state and a contractor over the lottery and inadequate controls to manage and report Medicaid financial activity.

Of the three, the last is the most significant and involves the failed installation of a new computer system at the Department of Health and Human Services. The computer problems forced the state’s Office of MaineCare Services to make about $300 million in estimated payments to service providers in lieu of payments for actual claims. The breakdown meant that some providers were overpaid while others were underpaid, creating serious cash flow problems for them.

“Data was unavailable, incomplete or unreliable after the system activation in the third quarter of the fiscal year,” the audit said.

Much work, effort and money has been expended to resolve the problem, which was identified in 2005, but it will continue to linger in audit reports for 2006 and 2007, said Becky Wyke, commissioner for the Department of Administrative and Financial Services.

“Other than the (computer) failure, which is significant, there’s actually an improvement, in general, in what I’ve seen,” said Neria Douglass, the state auditor. “Overall, there’s been some improvement, but it’s hard to tell how much because there’s been so much movement in the Department of Health and Human Services, where most of these programs are.”

DHHS was created when the Department of Human Services merged with the Department of Behavioral and Developmental Services in July 2004. Of the 25 federal programs reviewed, 11 fall under DHHS, accounting for 76 percent of the dollars audited.

In addition to the DHHS computer problems, Douglass cited other areas of concern, including more than $8 million spent on foster care case management.

In examining a sample of 19 claims, 11 did not provide enough detail for auditors to determine if money was appropriately spent. While identifying about $6,500 in “known questionable costs,” Douglass said that the state’s auditors extrapolated that $8.1 million could be questioned.

“A federal team has been looking into this finding,” Douglass said, which could mean the state would be responsible for paying back some part of that amount.

“In the past, DHHS has always negotiated these things,” Douglass said. “What’s the final figure? I don’t know.”

Wyke said she didn’t expect any trouble from the findings in the audit.

“This kind of finding draws the feds’ attention,” Wyke said, “but generally they don’t look for these kind of findings to be repaid. … Our federal partners want to know what’s being done to fix it.”

The audit also uncovered two other issues, which Douglass said were troubling. The first involves the way the state administers the Home and Community-based Services Waiver Program. The program provides support for people with mental retardation to live outside of institutions. According to the audit, the state spent about $193 million in state and federal funds on the program. Of that, $168 million was spent for residential training and personal support services. The audit found that some of the money was spent on things that aren’t allowed, but because of inconsistent procedures and data, it was impossible to determine how much.

“Many of these people need 24-hour, seven-day-a-week care,” Douglass said, “But it was impossible for us to determine a generic rate because there wasn’t enough detail. … What the state looked at was quality of care, which is great. What we need to pay closer attention to is the cost.”

Finally, Douglass cited a problem between the state and the company that operates the lottery that puts the two at odds over how much money the state is owed.

“We’re showing that we’re owed more money than they’re showing,” Douglass said. “We’re not able to recognize why we’re showing a difference of $1.5 million. … I’m concerned with it because of the nature of the lottery system. The discrepancy arises because they don’t have the right reporting mechanisms, and I think they should.”

Concerns with the state’s fixed assets, however, aren’t significant, Douglass said. The problem comes when state agencies try to determine the value of their building and sometimes miscategorize improvements.

“I think the state has made significant progress in terms of the accounting issues and the approach to centralize much of the accounting under the Department of Administrative and Financial Services, where they can get more eyes on the reports,” Douglass said. “But there continues to be some … significant problems.”