Audit Report On The Human Resources Administration’s Fiscal Oversight Of Personal Care Service Providers

AUDIT REPORT IN BRIEF

This audit assessed the adequacy of the Human Resources Administration’s (HRA’s) efforts to monitor the fiscal activities of contracted personal care service providers and their compliance with fiscal provisions of their HRA contracts.

HRA’s Home Care Services Program (HCSP) provides Medicaid-funded, non-institutional, long-term care options designed to help the elderly or disabled remain at home rather than in a nursing home or other institution. One such option, the Personal Care Program, provides home attendant and/or housekeeping services to Medicaid-eligible clients who are in stable medical condition, but who have difficulty with daily life activities, such as walking, cooking, cleaning, bathing, or using the bathroom.

HRA contracts with not-for-profit and for-profit personal care agencies to provide personal care services to eligible individuals. In Fiscal Year 2008, HRA had 93 contracts with different personal care agencies to provide home attendant and housekeeping services to approximately 47,000 individuals at a cost of more than $2 billion, half funded by the Federal government and half funded by New York State.

Audit Findings and Conclusions

HRA has a number of activities in place to monitor the fiscal affairs of contracted personal care providers. However, these activities are nullified by HRA’s failure to act decisively and promptly. The audit found severe delinquencies in the completion of independent CPA audits and in HRA closeouts of personal care agencies’ annual financial statements. These delinquencies occurred because of HRA delays in contracting for CPA audit services and resulted in significant delays in the annual HRA closeouts and the recovery of overpayments made to service providers. Consequently, the State and the City lost the use of those funds and could have lost up to an estimated $25 million in interest revenue on a total of $203 million in outstanding overpayments that remained with the personal care agencies.

Although the contracts of personal care providers require them to safeguard government funds, HRA does not expressly require the agencies to maintain their cash balances in accounts insured by Federal Deposit Insurance Corporation (FDIC) coverage or to secure the accounts through collateralization or other acceptable means. This matter is of great concern, especially when considering that on June 30, 2008, providers held $255 million in bank balances of which an estimated $233 million was not secured at that time by FDIC insurance or through a collateralization arrangement. Although, on October 14, 2008, the FDIC implemented a program to provide unlimited coverage of funds held in non-interest-bearing transaction accounts, the program is temporary and scheduled to expire on December 31, 2009.

The audit also disclosed that HRA Fiscal Managers do not perform field visits on a routine basis, nor do they make visits to all contracted personal care programs each year. Further, HRA’s annual performance evaluations of its contracted personal care programs are not based on complete information or information relevant to the contract year. Also, the Director of the Fiscal Operations unit performed and oversaw several key functions, some of which were not adequately segregated. Lastly, HCSP’s formal operating procedures do not reflect all current fiscal monitoring policies and procedures followed by the Fiscal Operations unit.

HRA, however, has established cost containment and control policies for service providers to follow and incorporated these measures in its performance monitoring and evaluation of contractors. In general, we found that the service providers adopted these policies. In addition, we noted that the personal care provider rates for Fiscal Year 2008 calculated by HRA and approved by New York State Department of Health appeared reasonable and justified.

Audit Recommendations

To address these issues, we make 12 recommendations, among them that HRA should:

• Ensure that contracts for CPA audit services are established sufficiently in advance of the end of each fiscal (contract) year to ensure that personal care provider financial activities will be audited in a timely manner.

• Require personal care providers to issue their financial statements within a set period of time after the end of each fiscal year.

• Perform timely closeouts for all contracts at the end of each contract year.

• Establish and distribute to all contracted personal care providers a policy statement expressly requiring them to maintain cash deposits in bank accounts that are secured by FDIC insurance and secure the funds exceeding FDIC limits through collateralization or other acceptable methods. The policy should include periodic reporting requirements for the providers’ financial institutions and standardization of the information to be reported.

• Implement a formal audit cycle requiring that each service provider undergo an audit or targeted review by Fiscal Mangers at least once every cycle.

• Review the HCSP Contract Management System Procedures Manual, identify deficiencies, and update policies to reflect procedures implemented since the manual was last updated. Prospectively, the manual should be updated periodically to address newly implemented or revised policies and operating procedures.

Agency Response

In their response, HRA officials agreed with 10 of the audit recommendations and disagreed with two.