Santa Cruz County

SANTA CRUZ COUNTY Audit Report HANDICAPPED AND DISABLED STUDENTS PROGRAM Chapter 1747, Statutes of 1984, and Chapter 1274, Statutes of 1985 July 1, 2001, through June 30, 2004 J C OHN HIANG California State Controller September 2007 J C OHN HIANG California State Controller September 28, 2007 Mary Jo Walker Auditor-Controller Santa Cruz County 701 Ocean Street Santa Cruz, CA 95060 Dear Ms. Walker: The State Controller’s Office audited the costs claimed by Santa Cruz County for the legislatively mandated Handicapped and Disabled Students Program (Chapter 1747, Statutes of 1984, and Chapter 1274, Statutes of 1985) for the period of July 1, 2001, through June 30, 2004. The county claimed $2,398,283 ($2,399,283 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that the county supported $2,398,283 in allowable costs. The State paid the county $152,279. The State will pay allowable costs claimed that exceed the amount paid, totaling $2,246,004, contingent upon available appropriations. Our audit also disclosed that the county understated claimed costs by $486,753 for the audit period by using incorrect rates to calculate service unit costs, administrative costs, and Medi-Cal revenue offsets. However, the county can no longer claim for these costs because statutory filing deadline has expired. Government Code section 17561 stipulates that the State will not reimburse any claim more than one year after the filing deadline specified in the SCO’s claiming instructions. If you disagree with the audit findings, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (CSM). The IRC must be filed within three years following the date that we notify you of a claim reduction. You may obtain IRC information at CSM’s Web site, at www.csm.ca.gov (Guidebook link); you may obtain IRC forms by telephone, at (916) 323-3562, or by e-mail, at csminfo@csm.ca.gov. If you have any questions, please contact Jim L. Spano, Chief, Mandated Cost Audits Bureau, at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits Mary Jo Walker -2- September 28, 2007 JVB/vb:wm cc: Leslie Tremaine, Ed.D., Director Mental Health Division Santa Cruz County Carolyn Stewart, Deputy Director Mental Health Division Santa Cruz County Rama Khalsa, Director Health Services Agency Santa Cruz County Todd Jerue, Program Budget Manager Corrections and General Government Department of Finance Robin Foemmel-Bie Special Education Program Department of Mental Health Cynthia Wong, Manager Special Education Division California Department of Education Santa Cruz County Handicapped and Disabled Students Program Contents Audit Report Summary............................................................................................................................ 1 Background........................................................................................................................ 1 Objective, Scope, and Methodology................................................................................. 2 Conclusion.......................................................................................................................... 2 Views of Responsible Officials.......................................................................................... 3 Restricted Use.................................................................................................................... 3 Schedule 1—Summary of Program Costs............................................................................ 4 Findings and Recommendations........................................................................................... 7 Attachment—County’s Response to Draft Audit Report Santa Cruz County Handicapped and Disabled Students Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Santa Cruz County for the legislatively mandated Handicapped and Disabled Students Program (Chapter 1747, Statutes of 1984, and Chapter 1274, Statutes of 1985) for the period of July 1, 2001, through June 30, 2004. The last day of fieldwork was February 14, 2006. The county claimed $2,398,283 ($2,399,283 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that the county supported $2,398,283 in allowable costs. The State paid the county $152,279. The State will pay allowable costs claimed that exceed the amount paid, totaling $2,246,004, contingent upon available appropriations. Background Chapter 26 of the Government Code, commencing with section 7570, and Welfare and Institutions Code section 5651 (added and amended by Chapter 1747, Statutes of 1984, and Chapter 1274, Statutes of 1985) require counties to participate in the mental health assessment for “individuals with exceptional needs,” participate in the expanded “Individualized Education Program” (IEP) team, and provide case management services for “individuals with exceptional needs” who are designated as “seriously emotionally disturbed.” These requirements impose a new program or higher level of service on counties. On April 26, 1990, the Commission on State Mandates (CSM) determined that this legislation imposed a state mandate reimbursable under Government Code section 17561. The program’s parameters and guidelines establish the state mandate and define reimbursement criteria. The CSM adopted the parameters and guidelines for the Handicapped and Disabled Students Program on August 22, 1991, and last amended it on August 29, 1996. In compliance with Government Code section 17558, the SCO issues claiming instructions to assist local agencies and school districts in claiming for mandated program reimbursable costs. The parameters and guidelines for the Handicapped and Disabled Students Program state that only 10% of mental health treatment costs are reimbursable. However, on September 30, 2002, Assembly Bill 2781 (Chapter 1167, Statutes of 2002) changed the regulatory criteria by stating that the percentage of treatment costs claimed by counties for fiscal year (FY) 2000-01 and prior fiscal years is not subject to dispute by the SCO. Furthermore, this legislation states that, for claims filed in FY 2001-02 and thereafter, counties are not required to provide any share of these costs or to fund the cost of any part of these services with money received from the Local Revenue Fund established by Welfare and Institutions Code section 17600 et seq. (realignment funds). -1- Santa Cruz County Handicapped and Disabled Students Program Furthermore, Senate Bill 1895 (Chapter 493, Statutes of 2004) states that realignment funds used by counties for the Handicapped and Disabled Students Program “are eligible for reimbursement from the state for all allowable costs to fund assessments, psychotherapy, and other mental health services . . . ,” and that the finding by the Legislature is “declaratory of existing law.” (Emphasis added.) On May 26, 2005, the CSM adopted a statement of decision for the Handicapped and Disabled Students II Program that incorporates the above legislation and further identified medication support as a reimbursable costs effective July 1, 2001. The CSM adopted the parameters and guidelines for this new program on December 9, 2005, and made technical corrections to it on July 21, 2006. The parameters and guidelines for the Handicapped and Disabled Students II Program state that “Some costs disallowed by the State Controller’s Office in prior years are now reimbursable beginning July 1, 2001 (e.g., medication monitoring). Rather than claimants re-filing claims for those costs incurred beginning July 1, 2001, the State Controller’s Office will reissue the audit reports.” Consequently, we are allowing medication support costs commencing on July 1, 2001. Objective, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Handicapped and Disabled Students Scope, and Program for the period of July 1, 2001, through June 30, 2004. Methodology Our audit scope included, but was not limited to, determining whether costs claimed were supported by appropriate source documents, were not funded by another source, and were not unreasonable and/or excessive. We conducted the audit according to Government Auditing Standards, issued by the Comptroller General of the United States, and under the authority of Government Code sections 12410, 17558.5, and 17561. We did not audit the county’s financial statements. We limited our audit scope to planning and performing audit procedures necessary to obtain reasonable assurance that costs claimed were allowable for reimbursement. Accordingly, we examined transactions, on a test basis, to determine whether the costs claimed were supported. We limited our review of the county’s internal controls to gaining an understanding of the transaction flow and claim preparation process as necessary to develop appropriate auditing procedures. Conclusion Our audit disclosed instances of noncompliance with the requirements outlined above. These instances are described in the accompanying Summary of Program Costs (Schedule 1) and in the Findings and Recommendations section of this report. -2- Santa Cruz County Handicapped and Disabled Students Program For the audit period, Santa Cruz County claimed $2,398,283 ($2,399,283 less a $1,000 penalty for filing a late claim) for costs of the Handicapped and Disabled Students Program. Our audit disclosed that the entire amount is allowable. Our audit disclosed that the county supported $2,398,283 in allowable costs. The State paid the county $152,279. The State will pay allowable costs claimed that exceed the amount paid, totaling $2,246,004, contingent upon available appropriations. Our audit also disclosed that the county understated claimed costs by $486,753 for the audit period by using incorrect rates to calculate service unit costs, administrative costs, and Medi-Cal revenue offsets. However, the county can no longer claim for these costs because statutory filing deadline has expired. Government Code section 17561 stipulates that the State will not reimburse any claim more than one year after the filing deadline specified in the SCO’s claiming instructions. Views of We issued a draft audit report on May 27, 2007. We contacted the Auditor-Controller on August 22, 2007, regarding a response to the draft Responsible audit report. Leslie Tremaine, Ed.D., Director of Mental Health Officials responded by letter on August 29, 2007, stating Santa Cruz County agrees with the audit findings. This final audit report includes the county’s response. Restricted Use This report is solely for the information and use of Santa Cruz County, the California Department of Finance, and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits -3- Santa Cruz County Handicapped and Disabled Students Program Schedule 1— Summary of Program Costs July 1, 2001, through June 30, 2004 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2001, through June 30, 2002 Assessment and case management costs $ 132,530 $ 136,342 $ 3,812 Finding 1 Administrative costs 23,185 24,542 1,357 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (28,750) (28,724) 26 Finding 1 EPSDT and County Match — (2,059) (2,059) Finding 3 State Categorical Funding (27,224) (27,224) — Other (9,177) (9,177) — Net assessment and case management costs 90,564 93,700 3,136 Treatment costs 1,253,376 1,353,302 99,926 Findings 1, 2 Administrative costs 201,347 233,048 31,701 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (292,179) (265,721) 26,458 Findings 1, 2 EPSDT and County Match — (20,791) (20,791) Finding 3 State Categorical Funding (256,830) (256,830) — Other (80,130) (80,130) — Net treatment costs 825,584 962,878 137,294 Subtotal 916,148 1,056,578 140,430 Less late claim penalty (1,000) (1,000) — Subtotal 915,148 1,055,578 140,430 Less allowable costs that exceed costs claimed 2 — (140,430) (140,430) Total program costs $ 915,148 915,148 $ — Less amount paid by the State (152,269) Allowable costs claimed in excess of (less than) amount paid $ 762,879 July 1, 2002, through June 30, 2003 Assessment and case management costs $ 147,763 $ 318,197 $ 170,434 Finding 1 Administrative costs 18,324 35,574 17,250 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (67,081) (51,288) 15,793 Finding 1 EPSDT and County Match — (11,747) (11,747) Finding 3 Other (8,218) (8,218) — Net assessment and case management costs 90,788 282,518 191,730 Treatment costs 1,230,453 1,409,704 179,251 Findings 1, 2 Administrative costs 143,498 151,328 7,830 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (297,200) (280,586) 16,614 Findings 1, 2 EPSDT and County Match — (52,602) (52,602) Finding 3 Other (73,271) (73,271) — Net treatment costs 1,003,480 1,154,573 151,093 -4- Santa Cruz County Handicapped and Disabled Students Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2002, through June 30, 2003 (continued) Subtotal 1,094,268 1,437,091 342,823 Less allowable costs that exceed costs claimed 2 — (342,823) (342,823) Total program costs $ 1,094,268 (1,094,268) $ — Less amount paid by the State (10) Allowable costs claimed in excess of (less than) amount paid $ 1,094,258 July 1, 2003, through June 30, 2004 Assessment and case management costs $ 219,456 $ 401,963 $ 182,507 Finding 1 Administrative costs 22,814 42,729 19,915 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (87,569) (51,191) 36,378 Finding 1 Other (48,550) (48,550) — Net assessment and case management costs 106,151 344,951 238,800 Treatment costs 983,207 765,813 (217,394) Finding 1 Administrative costs 97,691 78,040 (19,651) Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (151,399) (149,654) 1,745 Finding 1 Other (646,783) (646,783) — Net treatment costs 282,716 47,416 (235,300) Subtotal 388,867 392,367 3,500 Less allowable costs that exceed costs claimed 2 — (3,500) (3,500) Total program costs $ 388,867 388,867 $ — Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 388,867 Summary: July 1, 2001, through June 30, 2004 Assessment and case management costs $ 499,749 $ 856,502 $ 356,753 Finding 1 Administrative costs 64,323 102,845 38,522 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (183,400) (131,203) 52,197 Finding 1 EPSDT and County Match — (13,806) (13,806) Finding 3 State Categorical Funding (27,224) (27,224) — Other (65,945) (65,945) — Net assessment and case management costs 287,503 721,169 433,666 -5- Santa Cruz County Handicapped and Disabled Students Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 Summary: July 1, 2001, through June 30, 2004 (continued) Treatment costs 3,467,036 3,528,819 61,783 Findings 1, 2 Administrative costs 442,536 462,416 19,880 Finding 1 Offsetting revenues: Short Doyle Medi-Cal (FFP) (740,778) (695,961) 44,817 Findings 1, 2 EPSDT and County Match — (73,393) (73,393) Finding 3 State Categorical Funding (256,830) (256,830) — Other (800,184) (800,184) — Net treatment costs 2,111,780 2,164,867 53,087 Subtotal 2,399,283 2,886,036 486,753 Less late claim penalty (1,000) (1,000) — Subtotal 2,398,283 2,885,036 486,753 Less allowable costs that exceed costs claimed 2 — (486,753) (486,753) Total program costs $ 2,398,283 2,398,283 $ — Less amount paid by the State (152,279) Allowable costs claimed in excess of (less than) amount paid $ 2,246,004 _________________________ 1 See the Findings and Recommendations section. 2 Government Code section 17561 stipulates that the State will not reimburse any claim more than one year after the filing deadline specified in the SCO’s claiming instructions. That deadline has expired for FY 2001-02 and FY 2002-03. -6- Santa Cruz County Handicapped and Disabled Students Program Findings and Recommendations FINDING 1— The county used incorrect rates to calculate service unit costs, administrative costs, and Medi-Cal revenue offsets, understating costs by Misstated rates $577,881 for the audit period. The county understated claimed costs by $425,017 for the audit period because of errors in service unit rates. The rates claimed by the county for Short-Doyle services differed from the rates in the county’s database and in its annual cost reports submitted to the California Department of Mental Health. The county understated administrative costs by $58,402 for the audit period. The rate used by the county for claiming administrative costs did not agree with the administrative rate in the cost report. As the claimed costs for services were based on the cost report, it is consistent to base the administrative rate on the cost report rate, as well. The county overstated Medi-Cal federal financial participation (FFP) share revenue by $94,462 for the audit period. The claimed reimbursements from Medi-Cal did not agree with the amounts in the cost reports. The audited offsets were calculated using the actual unit reimbursement rate times the actual reimbursement percentage. The Handicapped and Disabled Students Program’s parameters and guidelines specify that only increased costs incurred in the performance of the mandated activities and adequately documented are reimbursable. The Handicapped and Disabled Students Program’s parameters and guidelines state that any offsetting savings or reimbursements received by the county from any source as a result to the mandate shall be identified and deducted from the claim. As a result of the county’s use of incorrect rates, costs and revenues have been adjusted as follows. Fiscal Year 2001-02 2002-03 2003-04 Total Assessment and case management costs: Service unit rates $ 3,812 $ 170,434 $ 182,507 $ 356,753 Administrative rates 1,357 17,250 19,915 38,522 Medi-Cal FFP revenue offsets 26 15,793 36,378 52,197 Subtotal 5,195 203,477 238,800 447,472 Treatment costs: Service unit rates 105,433 180,225 (217,394) 68,264 Administrative rates 31,701 7,830 (19,651) 19,880 Medi-Cal FFP revenue offsets 24,140 16,380 1,745 42,265 Subtotal 161,274 204,435 (235,300) 130,409 Audit adjustment $ 166,469 $ 407,912 $ 3,500 $ 577,881 -7- Santa Cruz County Handicapped and Disabled Students Program Recommendation We recommend that the county ensure that all costs claimed are eligible increased costs incurred as a result of the mandate and are supported by appropriate documentation. County’s Response The county concurs with the finding. FINDING 2— The county overstated treatment costs by $3,929 for the audit period. The county claimed treatment costs for therapeutic behavioral services and Ineligible treatment crisis intervention, which are not reimbursable under the program costs guidelines. The Handicapped and Disabled Students Program’s parameters and guidelines specify that only the following treatment services are reimbursable: one-time revision of interagency agreements related to individual education plans (IEP), mental health referrals and assessments, transfers and interim placements, IEP participation, case management of residential care pupils, payment authorization for out-of- home residential care providers, and psychotherapy. The Handicapped and Disabled Students II Program allows medication monitoring beginning in FY 2001-02. As a result, we have adjust claimed treatment costs and related revenues as follows. Fiscal Year 2001-02 2002-03 Total Therapeutic behavioral services $ (3,180) $ — $ (3,180) Crisis intervention (2,327) (974) (3,301) Total costs (5,507) (974) (6,481) Related indirect costs 2,318 234 2,552 Audit adjustment $ (3,189) $ (740) $ (3,929) Recommendation We recommend that the county ensure that costs claimed are eligible increased costs incurred as a result of the mandate. County’s Response The county concurs with the finding. FINDING 3— The county understated revenue offsets by $87,199 for FY 2001-02 and Unclaimed revenue FY 2002-03. The county did not report state matching funds received from the State Department of Mental Health under the Early Periodic offsets Screening, Diagnosis, and Treatment (EPSDT) Program The Handicapped and Disabled Students Program’s parameters and guidelines specify that any direct payments received from the State that -8- Santa Cruz County Handicapped and Disabled Students Program are specifically allocable to the program, and any other reimbursement received as a result of the mandate, must be deducted from the claims. The resulting adjustment is based on the county’s determination of the correct allocation of EPSDT funds to the Medi-Cal services. Fiscal Year 2001-02 2002-03 Total Assessment and case management $ (2,059) $ (11,747) $ (13,806) Treatment (20,791) (52,602) (73,393) Audit adjustment $ (22,850) $ (64,349) $ (87,199) Recommendation We recommend that the county ensure that all applicable reimbursements received are correctly offset against costs claimed. County’s Response The county concurs with the finding. -9- Santa Cruz County Handicapped and Disabled Students Program Attachment— County’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, California 94250-5874 http://www.sco.ca.gov S06-MCC-013