• This page, Testimony of State Auditor Suzanne M. Bump Before Joint Committee on Ways and Means on Fiscal Year 2015 Budget Request, is   offered by
  • Office of the State Auditor
Speech

Speech  Testimony of State Auditor Suzanne M. Bump Before Joint Committee on Ways and Means on Fiscal Year 2015 Budget Request

2/04/2014
  • Office of State Auditor Suzanne M. Bump

Media Contact   for Testimony of State Auditor Suzanne M. Bump Before Joint Committee on Ways and Means on Fiscal Year 2015 Budget Request

Mike Wessler, Communications Director

Boston — Good afternoon Chairman Brewer, Chairman Dempsey, members of the Committee. Thank you for the opportunity to testify today regarding the FY15 budget for the Office of the State Auditor.  

This is my fourth year before the Committee as State Auditor, and today, for the first time, I am asking you to increase our main administrative line item (0710-0000). For fiscal year 2015, I am requesting an investment of an additional $1.35 million in our Administration line to enable us to increase our audit staff by 25%.

The Office of the State Auditor is a champion for accountability in government. As such, I believe that investing in skills training and introducing 21st century technology enables us to produce measurably larger savings and drive still more valuable reform in the operation of government. Therefore, among other measures we have initiated, we have established a curriculum to support the development of specific competencies within the staff, and we have used operational and IT bond funds to enable us to handle complex data sets. Frankly, we haven’t yet hit our stride, but the results already have been impressive. Further, they should give you confidence that this investment in accountability will pay dividends for years to come. Simply stated, investment in our Office saves the Commonwealth money and improves government services.

The State Auditor’s Office has been allocated just under $15 million annually over the last few fiscal years in funds designated to conduct audits of state agencies, departments and authorities, as well as vendors who do business with the Commonwealth.  In other words, in the last two fiscal years, the State Auditor’s Office has been allocated $30 million to oversee more than $70 billion in budgeted funds.

In those two years, our audits have identified over $300 million in questionable and unallowable spending, fraud, variance, and savings opportunities. While not all of the questionable spending identified in audit reports will be recouped or realized in operational savings, a significant proportion already has been, and even greater savings will continue to accrue. A few recent examples highlight audits which have identified significant savings:


Medicaid drug screening - $16.5M
Our recent audit of Medicaid’s support for drug screening for its members found $16.5 million in unallowable billings, improper billing practices, and payments made for different services rendered on the same day where one should preclude the other. MassHealth referred $4.5 million of these improper billing practices to the Attorney General’s Office.

Subsequent to our audit, MassHealth has taken steps to reduce the overuse of testing, to monitor providers with unusually large numbers of claims, and to prevent the unallowable same day billings.

Two sets of system edits – changes in the payment system to reject improper billings – reduced provider payments by one third, $1.3 million and $89,000 respectively, in a six-month period when compared to the same six months prior to these changes.

From this chart, you can visually see the changes in billing practices after our audit was concluded and MassHealth implemented their edits.

LUSA  - $14.9M in undocumented, unallowable and retroactively authorized payments
Limited Unit Rate Service Agreements (LUSA) are intended only to fund unanticipated services to developmentally disabled clients. In a recent audit, Auditors found that the Department of Developmental Services had a practice of holding back funds appropriated for services and later distributing funds to vendors at the end of each fiscal year using LUSAs for purposes that are largely inconsistent with the intended use. The funds were then used for regular program overhead, furniture, equipment, facility repairs, and vehicles, expenses which the vendor could have anticipated and budgeted for, instead of unanticipated services for developmentally disabled clients.

The audit also found insufficient documentation to support more than $7.5 million in LUSA funds that were purportedly used for allowable client services. Further, the audit found that approximately $5.4 million in services were retroactively authorized after services had purportedly already been provided and over $2 million was spent for unallowable services

DDS has taken measures to ensure that there is proper authorization and prior review of LUSA agreements and that the money is spent only on allowable uses. LUSA spending has dropped from $7.8 million to $1.7 million in a year’s time.

From the chart below, you can see the impact of our audit work on the use of this vendor payment practice.

CPCS – questionable spending of $82 million
My Office also conducted an audit of the Committee for Public Counsel Services, which reported that the Probation Department was performing virtually no indigency verification checks of people assigned publicly-funded legal counsel in district courts. This finding placed into question the validity of the $82 million spent on such services.

After the audit, Probation began initiating indigency verifications and all documentation is now required to be retained. The audit led to reform legislation, Section 112 of Chapter 68 of the Acts of 2011, which amended M.G.L. Chapter 211D, Sections 2 and 2A.  This legislation gave Probation access to information at the Department of Revenue, the Department of Transitional Assistance and the Registry of Motor Vehicles. It also accelerated the time frame to complete an applicant’s financial report from 60 days to seven.

MassHealth eligibility – no specified dollar figure, but protection of system’s integrity
While providing health insurance to those in need is critical, the ability to control increasing costs is just as important for both MassHealth and the Commonwealth as the spending amounted to  $10.8 billion or more than 38% of the state budget in FY13[1].

Our audit found shortcomings in MassHealth’s verification process for people who self-reported their income or reported zero income. As a result, multiple solutions have been implemented. MassHealth connected with DOR, and now uses quarterly wage data and 14-day new hire reports in verifying and monitoring income. The Legislature, in Chapter 3 of the Acts of 2013, authorized the sharing of Lottery winner data. A larger integrated eligibility system is also being launched as part of the Affordable Care Act.

These are just a few examples of audits in which the Commonwealth’s investment in our Office resulted in a significant savings for the Commonwealth’s money and improves government services.

In most instances, while the investment was made in a single fiscal year, the resulting savings should occur annually.  For example, system edits put in place by MassHealth eliminate improper payments going forward, and not just for the year in which the audit was conducted.

Equally important are audits which allow the Commonwealth’s agencies and departments to incorporate systemic changes that protect children and other vulnerable citizens and enhance the delivery of essential government services like education and public assistance.

 

A few examples of these kinds of audits are worth noting:

EEC 
Our recent audit of the Department of Early Education and Care produced findings related to strengthening protections for children in the more than 10,000 state-licensed daycare facilities. There are over 200,000[1] children in daycare every day in Massachusetts. No parent should have to worry if their child is safe in daycare, and the value is priceless. As a result of this audit, the Legislature enacted Chapter 77 of the Acts of 2013, which, as you know, now mandates that the addresses of all licensed facilities are regularly matched against the Sex Offender Registry.

All staff, volunteers, transportation providers, and people living in a home where care is provided are required to have a sex offender background check and a fingerprint criminal background check against state and national databases. EEC is also resuming routine unannounced visits, an industry-recommended quality assurance method, as required by law.

Education Collaboratives

Chapter 43 of the Acts of 2012 ushered in a number of reforms for education collaboratives based on recommendations from our audits that disclosed

widespread operational problems and $50 million in unallowable and questionable spending.

The new law mandated vigorous reporting requirements, increased DESE’s oversight, ensured a DESE representative on each board, instituted board training, extended the certifications and licensing required of professionals in other public schools to all collaboratives, and restricted related party relationships. These changes provide better accountability for the hundreds of millions of dollars spent by education collaboratives and a better structure to serve special education students.

DTA – no specified dollar figure, but protection of the system’s integrity
In FY13, DTA administered over $2 billion in SNAP, TANF and state AFDC benefits.[1] After our audit found shortcomings in its eligibility and fraud detection systems, DTA has taken a number of steps to address these issues. DTA now uses data from DOR, RMV, DESE and Social Security, among other sources, to determine and monitor eligibility.

And DTA is now using fraud risk indicator reports that identify issues such as frequent “even dollar” transactions, full withdrawal of benefits, and usage trends.

Audit work done through this audit has made significant inroads towards ensuring system integrity for programs that support the Commonwealth’s families and individuals who are in need.

And finally, our audit of the MBTA really illustrates the importance of independent auditing.

MBTA - variance of $101.7 million
It is important for the T to protect and maximize all of its funds, given its heavy debt load, and the need to keep fares affordable for the millions of commuters that utilize it annually. Our audit found a variance of over $100 million in fare receipts between the T’s automated fare system and its cash room system. While the audit did not find that money was actually missing, the inability of the T to account for the variance spoke to a significant problem: the T cannot protect money it does not know it has.

Since the release of our audit, the T and the fare box manufacturer determined that, when the automated system was extracted from the vehicle to deposit the cash and then reinserted, it did not reset to zero. Once reinserted, the fare box would start at its previous value. The hardware problem causing this issue was addressed and rectified.

In recent years the Legislature has invested in oversight at the MBTA and in DTA (through funding to the Inspector General’s Office), and these are important investments. But independent oversight is also a critical component to an effective system of accountability. Despite internal audit functions at the MBTA,  for example, the failures in the automated fare box system did not get corrected until my Office reported on the problems as a result of an independent audit. 

Similarly, DTA has an internal audit unit, but it focuses on individual instances of fraud.  Independent, external auditing is needed to identify broader, systemic problems throughout this and other systems relied upon by state agencies and departments in administering programs which expend billions of dollars in state and federal resources.

Moreover, the OSA’s investment in data analytics, through the IT Bond, has enabled us to work more effectively in two broad areas. First, we have a system to prioritize agencies based upon risk, using data analytics and other techniques, so that we are focusing our limited resources where the greatest problems likely exist. And secondly, using data analytics tools, we can analyze all transactions in the systems we are auditing, and therefore not rely on random sampling to estimate the extent of problems identified. This capacity has made our work much more effective and our recommendations for reforms much more meaningful.

Our enabling statute requires us to audit every state agency, department and authority every three years. There are over 700 state agencies, departments and authorities.  We also have discretional authority to audit vendors of the Commonwealth, an area in which we frequently identify improper expenditures and misspend funds. Current staffing levels allow us to conduct approximately 80 audits per year. 

Given the breadth of our mandate, and the over $3 billion spent on services provided by vendors through the purchase of service system, we struggle to meet this mandate by creatively identifying issues that cross agencies and departments, and conducting statewide audits focused on those issues. 

Through the investment that I am requesting today, we will be able to deploy additional audit teams, while utilizing our data analytics work and independent auditing, to more agencies and vendors each year, maximizing the investment that has already been made by the IT bond to bring greater accountability to a larger portion of the Commonwealth’s programs.

The external audit work that my Office conducts provides crucial independent, objective analysis of the individual programs funded by the Commonwealth, and, equally important, the systems that support them. This independent audit authority, adequately staffed, is an essential component of government oversight and accountability. An additional $1.35 million for the OSA’s Administration appropriation will ensure that we have enough auditors to effectively execute this important function.

Other FY15 Maintenance Requests
My priorities for FY15 include the continued efforts to strengthen and enhance audit operations, further incorporate data analytics into all of our work in identifying fraud and systemic issues within state agencies and other entities, and identify cost savings and improved performance opportunities for these same entities.

In 2012, I worked with my leadership team to develop a strategic plan for our Office to provide a focused strategy for achieving my vision of becoming a national leader in professional government auditing. Our strategic goals of Using Resources Strategically, Promoting Professionalism, Providing Solutions, and Communicating Across Audiences provides a framework for our work and positions the Office to be the front line defense against fraud, waste, and abuse in state government and to be the state’s strongest advocate for better results. We have measured our FY13 work towards these goals and will soon have a report posted on our website that details our results thus far.

All of our units will continue incorporating data analytics into their work. In the past three years, we have been using IT Bond funding to develop the infrastructure for this effort.

Current IT Bond funds support the greater part of this increased emphasis on research, risk analysis and data mining.

While we recognize that continued Bond Funding at our current level is not guaranteed, I want to emphasize that these funds are critical in helping us broaden the ways in which we approach our work and the transformative outcomes that result.

In looking at our other appropriations, I am requesting level funding for the Division of Local Mandates as we continue to deepen the work of this unit to ensure that state government stays the course on funding legal mandates. DLM staff continues to respond to inquiries from cities and towns about potential unfunded mandates, but they are also focused on working with the Legislature to avoid these disputes. More importantly, DLM is engaged in several projects that we hope will generate savings opportunities for municipalities without requiring additional state spending, and we also hope to engage you and the public in a discussion about the relationship between the Commonwealth and its cities and towns, so that we all can be proactive problem-solvers in improving this relationship. 

The small increase that the Governor recommended for the Bureau of Special Investigations supports augmenting this unit’s staff, which investigates complaints of fraudulent claims or wrongful receipt of payment or services from public assistance programs. Six months into fiscal year 2014, from July 1, 2013 to December 31, 2013, BSI examiners have identified $4,403,413 in fraudulently obtained public benefit funds, $2,045,505 the first quarter and $2,357,907 in the second quarter. BSI investigations have led to both the prosecution of individuals and the recovery of state funds, resulting in nine convictions and $331,206 in recovered funds. The complexity of the cases that BSI’s fraud examiners are investigating has also increased dramatically -- BSI has completed investigations in 4,244 cases thus far this fiscal year -- 372 cases of identified fraud with an average of $11,037 in identified fraud per case, an increase from the FY 2013 average of $6,998 per case.  

Level funding for the Medicaid Audit Unit line item supports the staff that focuses its audit efforts on the Commonwealth’s agencies, providers and programs that spend Medicaid dollars. Over the past three years, our Medicaid Audit Unit has incorporated the use of data analytics into each new assignment, which has significantly improved the efficiency and effectiveness of our Medicaid audits. As I shared earlier, a significant audit result for this team was the drug screening audit with findings of $16.5 million in unallowable billings, improper billings and other concerns. This team will continue to identify questionable expenditures as well as potential cost savings opportunities for MassHealth. I am hopeful that FY15 IT Bond Funding will be available to continue supporting the advanced use of data analytics in this work.

I am also requesting level funding for one of our newer appropriation lines, the Enhanced Bureau of Special Investigations. The Executive Office of Administration and Finance directed this appropriation to our Office for the FY 2013 budget and was then supported by the Legislature. Staff in this unit focus exclusively on incorporating the expanded use of data analytics in the day-to-day operations of the Bureau of Special Investigations.   

The BSI Data Analytics unit has run numerous queries against millions of data records and identified multiple cases of potential fraud and abuse, while investigating fraud in several public benefits programs, including Durable Medical Equipment, Personal Care Attendants, and Food Stamp Trafficking. Thus far in FY 2014, the Data Analytics Unit has uncovered $66,477 in 21 investigations, but the unit has also uncovered as much as $2 million in overpayments in the Personal Care Assistance program over the last four years, by Personal Care Assistants billing for consumers who were in Long Term Care treatment.  

I am requesting funding for our Health Care Cost Containment Comprehensive review at the level initially requested. As you know, my Office is charged with conducting a comprehensive review of the health care cost containment law’s impact on five broad areas including costs, access, quality, workforce and public health.

The FY14 approved funding to support the work of our mandate under Chapter 224 was made at 50% of the requested amount. Combining the available funding with operational funds and IT Bond funding has allowed us to staff this work on the research and policy side, draft an initial research plan, and develop the technical capacity to support the projected large data analysis efforts. We have already begun working with the Health Policy Commission (HPC) and the Center for Health Information and Analysis (CHIA) to obtain the data necessary for our work, and to ensure that we are focusing our analysis in a way that does not overlap with work being done by others. 

In FY15, we intend to broaden the work of this team, begin to conduct analysis on the data that we have received to date, and coordinate efforts with our audit staff, who will conduct audits that complement the Chapter 224 review. We will need to hire additional staff to assist with integrating disparate sources of data into a cohesive model and to support the data documentation and analysis required with this work. We also will need to contract with subject matter experts to assist us in specific areas of this work, ensuring that we are able to perform the assessment necessary to making sound policy recommendations about this law going forward.

I have shared with you today just a few examples of the work of my Office to ensure the financial integrity of state government and more effectively identify waste, fraud and abuse in government programs. Your additional investment will reinforce our oversight capacity and broaden our work with others in the Commonwealth to support the recovery of misused funds and even more importantly, identify the necessary systemic changes that will result in greater accountability. 

I remain grateful for your support as we continue to deepen our work and remain unwavering in our efforts of making government work better.

Thank you for the opportunity to testify today. I am happy to answer any of your questions.

Media Contact   for Testimony of State Auditor Suzanne M. Bump Before Joint Committee on Ways and Means on Fiscal Year 2015 Budget Request

  • Office of the State Auditor 

    The Office of State Auditor Suzanne M. Bump (OSA) conducts audits, investigations, and studies to promote accountability and transparency, improve performance, and make government work better.
  • Help Us Improve Mass.gov  with your feedback

    Please do not include personal or contact information.
    Feedback