Review of Medicaid School-Based Administrative Costs in Minnesota From July 1, 2003, Through June 30, 2004

EXECUTIVE SUMMARY:

Our objective was to determine whether the State agency's Medicaid claims for certain school districts' school-based administrative costs were allowable in accordance with Federal and State requirements. Of the $26,852,175 ($13,426,088 Federal share) claimed for the 60 school districts reviewed, $19,479,000 ($9,739,500 Federal share) was unallowable in accordance with Federal requirements. In calculating its claims for Medicaid school-based administrative costs, the State agency used county proportional Medicaid share ratios that included children and adults instead of children only, included indirect costs that were allocable to other Federal non-Medicaid grants, and used school district cost reports that contained errors, omissions, and misstatements. 

We recommended that the State agency (1) refund $9,739,500 to the Federal Government; (2) use proportional Medicaid share ratios that comply with Federal requirements to recalculate all State fiscal year 2004 claims for the unaudited school districts, public health agencies, and correction agencies and refund any differences; (3) require school districts, public health agencies, and correction agencies to report indirect costs in accordance with Federal requirements; and (4) develop procedures to verify the accuracy of cost report data submitted by school districts, public health agencies, and correction agencies. The State agency agreed that costs may be allocated only to the extent that they relate to Medicaid-eligible children and said that it had changed its allocation formula to be consistent with the expectations in the CMS guidance, but did not agree with our other recommendations.