NCDHHS has recurring issues with management of federal funds, audit finds

The North Carolina Department of Health and Human Services (NCDHHS) didn’t adequately monitor $106.5 million in federal funding passed to subrecipients for providing substance abuse prevention, treatment, and recovery services and addressing the opioid abuse crisis for the Fiscal Year ending June 30, 2024, according to the North Carolina Office of the State Auditor’s (NCOSA) 2024 Statewide Single Audit.

Auditors also questioned over $21,000 in Medical Assistance Program (Medicaid) payments the department made to providers based on inaccurate and inadequately documented eligibility determinations; as well as the lack of complete, accurate, and timely subaward information for subrecipients of the Block Grants for Prevention and Treatment of Substance Abuse to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS).

All have been recurring issues for NCDHHS.

Inadequate monitoring of millions in federal funding

NCDHHS Division of Mental Health, Developmental Disabilities, and Substance Use Services’ monitoring plan required specific monitoring activities based on the two types of subrecipients: Local Management Entity/Managed Care Organization (LME/MCO) and Financial Assistance Contract (FAC) entities.

In the first finding, auditors found that the division didn’t complete monitoring activities, including on-site visits, for six LME/MCOs, which coordinate certain services for NC Medicaid Direct beneficiaries.

They then reviewed the monitoring plan for all six LME/MCO subrecipients, which required monthly fiscal monitoring, quarterly programmatic monitoring, and one annual on-site visit. However, the division did not provide evidence to support that any of these monitoring activities were completed for all six of the LME/MCOs that received $40.4 million in substance abuse funds and $37.5 million in opioid abuse funds.

NCOSA also found the following:

• For all 35 FACs that received $27.2 million in substance abuse funds, only five (14%) had a risk assessment to determine the frequency and method of monitoring required. Furthermore, auditors found that even the minimum level of monitoring required was not completed for 34 (97%) FACs that received $26.1 million in substance abuse funds.
• For all three FACs that received $1.4 million in opioid abuse funds, only one (33%) had a risk assessment to determine the frequency and method of monitoring required. Furthermore, auditors found that even the minimum level of monitoring required was not completed for two (97%) FACs that received $1.2 million in opioid abuse funds.

Inadequate monitoring increases the risk that federal funds may not be used in accordance with federal requirements, which may reduce the funding available for providing substance abuse prevention, treatment, and recovery services and addressing the opioid crisis.

This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-018.

Auditors recommended that division management dedicate resources to ensure that the fiscal and programmatic monitoring activities are completed in accordance with the approved grant monitoring plan.

Division management agreed with the findings and recommendations and told auditors the LME/MCO and FAC fiscal and programmatic monitoring plan was not implemented due to competing priorities and changes to monitoring procedures that were not reflected in the monitoring plan, such as time-sensitive priorities, like Tailored Plan implementation, two large LME/MCO health plan consolidations, and Medicaid expansion (which also included an unprecedented influx of service-related dollars).

They told auditors they are making other changes as they clarify staff roles, refine their processes, and train newly hired contract administrators, and are partnering with risk management, compliance, and consulting to provide additional training.

Deficiencies in the Medicaid Eligibility Determination Process

In the second finding, NCOSA found that NCDHHS made Medical Assistance Program (Medicaid) payments to providers based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 3 million beneficiaries received $22.2 billion in Medicaid benefits.

Auditors said that even though eligibility is determined by county departments or the Division of Social Services (DSS), NCDHHS was responsible for ensuring compliance with the eligibility requirements.

NCOSA redetermined eligibility for a sample of 113 beneficiaries with benefits totaling $34.9 million paid on their behalf during the audit period. Auditors found eight (7%) ineligible beneficiaries due to inaccurate and/or outdated income information used in the eligibility determination. Payments totaling $28,838 (federal share $21,144) were paid on behalf of these beneficiaries.

As a result, the $28,838 (federal share $21,144) is considered questioned costs, and the department may be required to pay back the federal share.

Auditors also identified 18 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 redetermined eligibility using the correct information, the beneficiaries were found to be eligible.

In addition, there is an increased cost to the Medicaid Program for both the state and federal government, as it is jointly financed by both and is administered by the state. Medicaid was expanded by the Republican-led NC General Assembly in 2023 after a decade of opposition, adding hundreds of thousands of individuals to the program rolls.

Auditors recommended that department management should analyze each error to specifically identify why they occurred and develop additional training or establish other procedures as necessary to prevent future errors from occurring.

Department management blamed the errors on the county DSS staff’s inaccurate application of established eligibility policies. The county DSS staff utilizes NC FAST20 to input data and make eligibility determinations; however, management at the state level is responsible for establishing the eligibility determination policies, maintaining NC FAST, and facilitating training.

This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-016 and in the 2022 Statewide Single Audit.

Department management agrees with the findings and recommendations. They noted, as required by the North Carolina Legislature, the Department has delegated the administration of Medicaid eligibility determinations to the 100 local county offices of the DSS.

They have also reviewed the errors and will update, post, and track completion of mandated training for county DSS staff to ensure their correct understanding of the related eligibility policy and will enhance its review of the recipient eligibility determination audit results, as well as second-party corrective action plans to monitor, evaluate, and analyze the counties’ understanding of policy to identify any additional training needs, policy updates, and/or system fixes.

Issues with tracking and timely reporting of federal dollars

Finally, the Division of Mental Health, Developmental Disabilities, and Substance Use Services did not submit complete, accurate, and timely subaward information for subrecipients of the Block Grants for Prevention and Treatment of Substance Abuse to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS).

Auditors reviewed all 82 subawards totaling $56.8 million that were required to be reported to the FSRS during the audit period and found the following errors:

• 14 subawards totaling $15.0 million were not reported at all.
• 12 subawards totaling $6.0 million were reported inaccurately.
• 15 subawards totaling $13.0 million were reported 14 to 284 days late.

This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-019.

Division management said the FFATA reports were prepared using subaward tracking spreadsheets that were being developed during the period and were not reviewed for completeness and accuracy.

Auditors recommend that division management implement review procedures over the subaward tracking spreadsheets to ensure FFATA reporting is accurate and completed as required.

Management agrees with the findings and recommendations and that they encountered reporting inaccuracies due to a misunderstanding of the dates in the contract system and errors in the tracking logs. They have received clarification on the correct execution date to use when reporting for FFATA. Also, regarding policy tracking log errors, the FFATA policy will be updated to reflect an additional review of the monthly FFATA entries once they are entered into the reporting system. This review will require a supervisory review of the completed FFATA report for each Grant award, FFATA tracking log, and contracts/allocation letters to ensure all three items reconcile for the reporting month.

They noted that the State Fiscal Year 2025 FFATA reporting is current.

The post NCDHHS has recurring issues with management of federal funds, audit finds first appeared on Carolina Journal.