Stanislaus County

STANISLAUS COUNTY Audit Report HANDICAPPED AND DISABLED STUDENTS PROGRAM Chapter 1747, Statutes of 1984, and Chapter 1274, Statutes of 1985 July 1, 2000, through June 30, 2002 S W TEVE ESTLY California State Controller March 2006 S W TEVE ESTLY California State Controller March 30, 2006 The Honorable Larry D. Haugh Auditor-Controller Stanislaus County P.O. Box 770 Modesto, CA 95353-0770 Dear Mr. Haugh: The State Controller’s Office audited the costs claimed by Stanislaus 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, 2000, through June 30, 2002. The county claimed $5,032,859 ($5,033,859 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that $3,117,727 is allowable and $1,915,132 is unallowable. The unallowable costs occurred because the county overstated treatment and administrative costs and understated revenue offsets. The State paid the county $2,970,983. The amount paid exceeds allowable costs claimed by $146,744. If you disagree with the audit findings, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (COSM). 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 COSM’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, Compliance Audits Bureau, at (916) 323-5849. Sincerely, Original Signed By: JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/jj:vb The Honorable Larry D. Haugh -2- March 30, 2006 cc: Dan Souza, Director Department of Behavioral Health and Recovery Services Stanislaus County Linda Downs, Assistant Director Department of Behavioral Health and Recovery Services Stanislaus County James Tilton, Program Budget Manager Corrections and General Government Department of Finance Zoey Todd Special Education Program Department of Mental Health Cynthia Wong, Manager Special Education Division California Department of Education Stanislaus County Handicapped and Disabled Students Program Contents Audit Report Summary............................................................................................................................ 1 Background........................................................................................................................ 1 Objective, Scope, and Methodology................................................................................. 2 Conclusion.......................................................................................................................... 2 Views of Responsible Official........................................................................................... 2 Restricted Use.................................................................................................................... 3 Schedule 1—Summary of Program Costs............................................................................ 4 Findings and Recommendations........................................................................................... 6 Attachment—County’s Response to Draft Audit Report Steve Westly • California State Controller Stanislaus County Handicapped and Disabled Students Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Stanislaus 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, 2000, through June 30, 2002. The last day of fieldwork was April 13, 2005. The county claimed $5,032,859 ($5,033,859 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that $3,117,727 is allowable and $1,915,132 is unallowable. The unallowable costs occurred because the county overstated treatment and administrative costs and understated revenue offsets. The State paid the county $2,970,983. The amount paid exceeds allowable costs claimed by $146,744. 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 that counties participate in the mental health assessment for “individuals with exceptional needs,” participate on 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 (COSM) determined that Chapter 1747, Statutes of 1984, resulted in state- mandated costs that are reimbursable pursuant to Government Code Section 17561. Parameters and Guidelines establishes the state mandate and defines reimbursement criteria. COSM adopted Parameters and Guidelines on August 22, 1991, and it was last amended on August 29, 1996. In compliance with Government Code Section 17558, the SCO issues claiming instructions for mandated programs to assist local agencies in claiming reimbursable costs. Parameters and Guidelines states 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 those 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). As a result, allowable mental health treatment costs for Stanislaus County increased by $2,374,464 during the audit period ($1,214,804 for FY 2000-01 and $1,159,660 for FY 2001-02). Steve Westly • California State Controller 1 Stanislaus County Handicapped and Disabled Students Program 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, 2000, through June 30, 2002. 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 Section 17558.5. 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. For the audit period, Stanislaus County claimed $5,032,859 ($5,033,859 less a $1,000 penalty for filing a late claim) for costs of the Handicapped and Disabled Students Program. Our audit disclosed that $3,117,727 is allowable and $1,915,132 is unallowable. For FY 2000-01, the State paid the county $1,463,237. Our audit disclosed that $1,677,057 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $213,820, contingent upon available appropriations. For FY 2001-02, the State paid the county $1,507,746. Our audit disclosed that $1,440,670 is allowable. The county should return $67,076 to the State. Views of We issued a draft audit report on September 30, 2005. Larry Haugh, county Auditor-Controller, responded by letter dated October 19, 2005. Responsible The county’s response is included as an attachment to this final audit Official report. Steve Westly • California State Controller 2 Stanislaus County Handicapped and Disabled Students Program Restricted Use This report is solely for the information and use of Stanislaus 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 Steve Westly • California State Controller 3 Stanislaus County Handicapped and Disabled Students Program Schedule 1— Summary of Program Costs July 1, 2000, through June 30, 2002 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2000, through June 30, 2001 Assessment and case management costs $ 994,295 $ 994,295 $ — Administrative costs 103,164 100,730 (2,434) Finding 2 Offsetting revenues: Short-Doyle/Medi-Cal funds (FFP) (278,954) (278,954) — EPSDT funds — (177,957) (177,957) Finding 3 State categorical funds (SEP) (208,244) (208,244) — Other funds (102,595) (102,595) — Net assessment and case management costs 507,666 327,275 (180,391) Treatment costs 2,494,930 2,319,792 (175,138) Finding 1 Administrative costs 144,923 127,245 (17,678) Finding 2 Offsetting revenues: Short-Doyle/Medi-Cal funds (FFP) (619,224) (580,453) 38,771 Finding 1 EPSDT funds — (376,223) (376,223) Finding 3 Other funds (157,382) (140,579) 16,803 Finding 1 Net treatment costs 1,863,247 1,349,782 (513,465) Total costs 2,370,913 1,677,057 (693,856) Less late penalty — — — Total reimbursable costs $ 2,370,913 1,677,057 $ (693,856) Less amount paid by the State (1,463,237) Allowable costs claimed in excess of (less than) amount paid $ 213,820 July 1, 2001, through June 30, 2002 Assessment and case management costs $ 1,092,083 $ 1,092,083 $ — Administrative costs 121,019 106,765 (14,254) Finding 2 Offsetting revenues: Short-Doyle/Medi-Cal funds (FFP) (428,719) (428,719) — EPSDT funds — (318,979) (318,979) Finding 3 State categorical funds (SEP) (208,244) (208,244) — Other funds (89,747) (89,747) — Net assessment and case management costs 486,392 153,159 (333,233) Treatment costs 3,329,422 3,282,321 (47,101) Finding 1 Administrative costs 183,094 158,683 (24,411) Finding 2 Offsetting revenues: Short-Doyle/Medi-Cal funds (FFP) (1,188,031) (1,166,248) 21,783 Finding 1 EPSDT funds — (841,884) (841,884) Finding 3 Other funds (147,931) (144,361) 3,570 Finding 1 Net treatment costs 2,176,554 1,288,511 (888,043) Total costs 2,662,946 1,441,670 (1,221,276) Less late penalty (1,000) (1,000) — Total reimbursable costs $ 2,661,946 1,440,670 $ (1,221,276) Less amount paid by the State (1,507,746) Allowable costs claimed in excess of (less than) amount paid $ (67,076) Steve Westly • California State Controller 4 Stanislaus County Handicapped and Disabled Students Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 Summary: July 1, 2000, through June 30, 2002 Assessment and case management costs $ 2,086,378 $ 2,086,378 $ — Administrative costs 224,183 207,495 (16,688) Finding 2 Offsetting revenues: Short-Doyle/Medi-Cal funds (FFP) (707,673) (707,673) — EPSDT funds — (496,936) (496,936) Finding 3 State categorical funds (SEP) (416,488) (416,488) — Other funds (192,342) (192,342) — Net assessment and case management costs 994,058 480,434 (513,624) Treatment costs 5,824,352 5,602,113 (222,239) Finding 1 Administrative costs 328,017 285,928 (42,089) Finding 2 Offsetting revenues: Short-Doyle/Medi-Cal funds (FFP) (1,807,255) (1,746,701) 60,554 Finding 1 EPSDT funds — (1,218,107) (1,218,107) Finding 3 Other funds (305,313) (284,940) 20,373 Finding 1 Net treatment costs 4,039,801 2,638,293 (1,401,508) Total costs 5,033,859 3,118,727 (1,915,132) Less late penalty (1,000) (1,000) — Total reimbursable costs $ 5,032,859 3,117,727 $ (1,915,132) Less amount paid by the State (2,970,983) Allowable costs claimed in excess of (less than) amount paid $ 146,744 _________________________ 1 See the Findings and Recommendations section. Steve Westly • California State Controller 5 Stanislaus County Handicapped and Disabled Students Program Findings and Recommendations FINDING 1— The county claimed treatment costs for medication support and crisis Ineligible treatment intervention that are ineligible. costs claimed Parameters and Guidelines for the mandated program specifies that only the following treatment services are reimbursable: individual therapy, collateral therapy and contacts, group therapy, day treatment, and the mental health portion of residential treatment in excess of California Department of Social Services payments for residential placement. As a result, we have adjusted claimed treatment costs and related revenue offsets as follows. Fiscal Year 2000-01 2001-02 Total Treatment costs: — Medication support $ (130,024) $ — $ (130,024) Crisis intervention (45,114) (47,101) (92,215) Subtotal, treatment costs (175,138) (47,101) (222,239) Offsetting revenues: Short-Doyle/Medi-Cal funds 38,771 21,783 60,554 Other funds 16,803 3,570 20,373 Subtotal, offsetting revenues 55,574 25,353 80,927 Audit adjustment $ (119,564) $ (21,748) $ (141,312) 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 believes that medication support services are reimbursable costs, and that the Commission on State Mandates (COSM) will confirm this belief. The county requests that the SCO reduce the Finding 1 audit adjustment to $29,910 for fiscal year (FY) 2000-01 and $21,748 for FY 2001-02. SCO’s Comment We agree with the county that medication support costs should be allowable in FY 2001-02. In December 2005, the COSM ruled that medication support services are reimbursable as of July 1, 2001. Therefore, we have reduced ineligible costs to $21,748 for FY 2001-02 as noted in the schedule above. However, the ineligible amount for FY 2000-01 remains as stated in the draft audit report. Steve Westly • California State Controller 6 Stanislaus County Handicapped and Disabled Students Program FINDING 2— The county claimed administrative costs that did not include offsets for all related sources of revenue. Claimed administrative costs Parameters and Guidelines specifies that only actual increased costs overstated incurred in the performance of the mandated activities are reimbursable. We recomputed the administrative cost rates based on administrative cost data contained in the county’s annual cost reports submitted to the California Department of Mental Health, and adjusted claimed administrative costs as follows. Fiscal Year 2000-01 2001-02 Total Administrative costs: Assessment and case management costs $ (2,434) $ (14,254) $ (16,688) Treatment costs (17,678) (24,411) (42,089) Audit adjustment $ (20,112) $ (38,665) $ (58,777) Recommendation We recommend that the county ensure that applicable revenue sources are offset against claimed administrative costs. County’s Response The county agrees that claimed administrative costs were not offset by administrative revenues and were therefore overstated. Also, the county proposes increasing allowable administrative costs to reflect the adjustment of medication support costs in FY 2000-01 and FY 2001-02. SCO’s Comment We agree with the county’s contention that administrative costs should be increased for FY 2001-02 based on the increase in medication support costs. However, we do not agree that FY 2000-01 administration costs should be increased by $11,131, because medication support costs are allowable only from July 1, 2001, forward. For FY 2001-02, the county calculated its administrative costs based on the audited FY 2000-01 rate of 8.5675% rather than the audited FY 2001-02 rate of 8.0107%. Therefore, the county’s proposed additional administrative costs for FY 2001-02 should be $17,353 rather than $18,560. This correction changes the total FY 2001-02 administrative adjustment, related to medication support, from the $37,458 proposed by the county to $38,665. Also, we agree with the county’s computation of allowable administrative Federal Financial Participation costs in the amounts of $74,211 for FY 2000-01 and $87,810 for FY 2001-02. The total amount of changes to Finding 2 related to both medication support and Federal Financial Participation is reflected in the attached schedule and results in audit adjustments of $20,112 for FY 2000-01 and $38,665 for FY 2001-02. Steve Westly • California State Controller 7 Stanislaus County Handicapped and Disabled Students Program FINDING 3— The county did not report state-matching funds received from the California Department of Mental Health under the Early Periodic Revenue offsets Screening, Diagnosis, and Treatment (EPSDT) Program, which partially understated reimburses the county for the cost of services provided to Medi-Cal clients. Parameters and Guidelines specifies that any direct payments received from the State that are specifically allocated to the program, and any other reimbursement received as a result of the mandate, must be deducted from the claims. As a result, we have adjusted claimed revenue offsets as follows. Fiscal Year 2000-01 2001-02 Total Offsetting revenues: EPSDT funds: Assessment and case management costs $ (177,957) $ (318,979) $ (496,936) Treatment costs (376,223) (841,884) (1,218,107) Audit adjustment $ (554,180) $ (1,160,863) $ (1,715,043) Recommendation We recommend that the county ensure that all applicable reimbursements received are offset against costs claimed. County’s Response The County’s position is to recognize the Early Periodic Screening, Diagnosis and Treatment (EPSDT) as State matching funds only to the extent it exceeds the baseline amount established for each fiscal year. For FY 2000-01, total Medi-Cal generated for SB 90 services was $1,656,752, which is less than the FY 2000-01 baseline amount of $2,231,011. No EPSDT funds are being used to offset the SB 90 claim for FY 2000-01. For FY 2001-02, total Medi-Cal generated for SB 90 services was $3,057,880. Since the FY 2001-02 Medi-Cal exceeds the baseline amount of $2,318,049, EPSDT funds should have been used to offset the SB 90 claim for FY 2001-02. The county is proposing an offset in the amount of $111,952 for FY 2001-02. SCO’s Comment For FY 2000-01 and FY 2001-02, the EPSDT settlement data provided by the State Department of Mental Health (SDMH) show that the county’s EPSDT settled baseline costs exceeded the county’s EPSDT costs. SDMH’s baseline amounts include all programs and the SCO included all programs in computing the revenue offsets. Since the county’s EPSDT baseline costs exceeded the EPSDT costs, the State-matching EPSDT funds received from the SDMH should be offset against mandated program costs. Steve Westly • California State Controller 8 Stanislaus County Handicapped and Disabled Students Program We did not change the finding to reflect the county’s proposed adjustments. However, we changed the schedule above to reflect additional EPSDT revenue offsets that relate to the additional medication support costs that we allowed in Finding 1 for FY 2001-02. Steve Westly • California State Controller 9 Stanislaus County Handicapped and Disabled Students Program Attachment— County’s Response to Draft Audit Report Steve Westly • California State Controller State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, California 94250-5874 http://www.sco.ca.gov S05-MCC-017