Audit of the California Department of Health Services Reporting of Medicaid Third Party Liability Recoveries for the Period July 1, 1988 Through March 31, 1991

This final report points out that the California Department of Health Services (DHS) understated its third party liability (TPL) recoveries by $2,255,239 (Federal share of $1,127,620) for the period July 1, 1988 through March 31, 1991. Also, DHS did not maintain complete records which reconciled reported amounts to the subsidiary records. Since recoveries serve as credits which reduce net expenditures, DHS effectively overclaimed Federal funds for the Medicaid program by not reporting the $2,255,239 of recoveries. We recommended that DHS refund $1,127,620 to the Federal Government. We also recommended that DHS establish internal controls to ensure that: (1) documentation is retained to support reported TPL recoveries and (2) recoveries are accurately accounted for on Federal reports. The DHS concurred with our findings and recommendations.