Audit: Department of Human Services must better scrutinize federal programs

Minnesota needs tighter scrutiny over federal programs that supply billions of dollars annually to help families in need, including Medicaid and child-care subsidies, according to a state audit released Thursday.

Legislative Auditor James Nobles found that the state Department of Human Services (DHS) has not adopted proper controls to ensure that recipients meet eligibility requirements. The agency also failed to properly monitor county workers when they override eligibility rules, raising the risk for fraud or payment errors, the report found.

Some of the problems were identified years ago by auditors and DHS still has not corrected them.

"We need to redouble our efforts and do a better job in getting to work on those issues so we're not seeing those findings repeat," said Chuck Johnson, DHS's deputy commissioner for policy and operations.

Other weaknesses identified in the audit include failure to properly review fraud-detection efforts in child-care subsidies and failure for several years to recover roughly $139 million in Medicaid payments the state was due from the federal government.

Human Services Commissioner Lucinda Jesson said in a written response to Nobles that she agreed with the nine audit findings and that her agency "is working hard to resolve the issues noted." The agency is developing new data analysis tools to identify patterns of fraud in all the programs, Johnson said.

Auditors concluded that the DHS is "generally complying" with certain requirements of the federal programs. But efforts to resolve some of the oversight problems have been delayed, in part, because of the size and complexity of the programs, said Johnson. Medicaid, for example, costs roughly $9 billion annually in Minnesota, counting federal and state contributions, and covers more than 700,000 people.

"It has taken time to make sure we are doing it in the right way," Johnson said.

The agency has made progress, Johnson said, but is still at least two years from a resolution. The current estimate for getting the comprehensive plan in place is Dec. 31, 2015.

"It's discouraging when I see their response to finding we've been saying since 2009 — that you need to do something here because the federal government expects you to have these controls," said Cecile Ferkul, deputy legislative auditor who oversaw the review. "We're still that far away from completion."

The annual federal compliance audit comes on the heels of a special review by Nobles' office in March, which cited failures by the DHS to properly vet applicants for a taxpayer-subsidized health insurance program despite a decade of warnings that the state was breaking state and federal law. The DHS said it is launching a computer system this year as part the state's new health insurance exchange that should fix the problem, but Nobles in March said he remained skeptical that the long-standing issues would be corrected so easily.