Review of California's Controls Over Reporting of County Medicaid Administrative Expenditures

EXECUTIVE SUMMARY:

Our objective was to evaluate the adequacy of the California Department of Health Services's (the State agency) financial and compliance controls over reporting of the counties' Medicaid administrative expenditures. We identified weaknesses in the State agency's controls. Specifically, the State agency did not have financial controls to ensure that (1) the counties' Medicaid expenditures reported on the expense claim were allowable for federal reimbursement and (2) coding instructions in and changes made to the expense claim template were reviewed for accuracy and compliance with Medicaid requirements. In addition, the State agency did not have a compliance control to ensure that it established a written agreement with the Department of Social Services (DSS) detailing their relationship and respective responsibilities for gathering, reviewing, and reporting the counties' Medicaid expenditures for eligibility determinations.

We recommended that the State agency establish financial controls to ensure that it (1) verifies that county Medicaid expenditures reported on the expense claim are allowable and (2) reviews coding instructions in and changes made to the expense claim template. In addition, we recommended that the State agency establish a written agreement with DSS detailing their relationship and respective responsibilities for gathering, reviewing, and reporting the counties' expenditures. The State agency agreed with the recommendations and stated that it would implement necessary changes.