- Associated Press - Wednesday, February 4, 2015

FRANKFORT, Ky. (AP) - During Kentucky’s first year of Medicaid expansion, state health officials were plagued by a series of accounting errors that resulted in overstating how much it cost to run the agency as a whole by more than $500 million, according to an audit released Wednesday.

The report by Democratic Auditor Adam Edelen said the Cabinet for Health and Family Services did not thoroughly review its finances before reporting them to the state’s Finance and Administration Cabinet. While many errors were caught before the state issued its final report, several mistakes did get through, including overstating $500 million in state and federal expenses and overstating federal revenue by $424 million.

“These are serious accounting errors that are frankly unacceptable,” Edelen said in a news release.

State health officials agreed with Edelen’s findings and pledged to take steps to correct the problems. A Cabinet spokeswoman did not return a request for comment. But in its official response to the audit, the agency suggested the errors were “overlooked” because of the extra work staff had to do in the first year of reporting on the Medicaid expansion.

The errors were not large enough to cause a problem with the state’s financial report. However, Edelen said “the magnitude of the errors and the agency’s failure to detect the errors” suggests the agency could make other errors in its financial reporting.

Cabinet for Health and Family Services spokeswoman Jill Midkiff said the agency takes the report seriously, but noted that no money was inappropriately spent and the errors have been fixed.

“In fact, the Cabinet self-reported one instance to the Auditor’s office,” she said, adding that the Cabinet will train its accountants to better understand the agency’s reporting requirements.

Kentucky was one of 29 states that chose to expand Medicaid under the federal Affordable Care Act. State officials estimated the expansion would add about 206,000 people to the state’s Medicaid program. Instead, twice that many signed up. The federal government reimbursed the state for 100 percent of those new enrollee’s medical expenses.

The findings were just one of 49 Edelen’s office found in its annual report of the state’s finances. Auditors also found the Department of Workforce Investment spent $21 million more than it said it did in its final report. For the third time, auditors found numerous problems at the Department of Juvenile Justice, including some workers using state cars to commute to work and the purchase of a $233 digital camera that was not approved by a supervisor.

“What concerns me is when an agency has repeat findings that indicate a lack of controls over cash, pro cards and travel,” Edelen said of the Department of Juvenile Justice in a news release. “That’s often a red flag that there are systemic problems and a lax culture.”

In its official response, the department noted it would review its policies and develop new ones to address Edelen’s concerns.

Auditors also discovered at least eight state agencies did not “fully protect all sensitive and confidential data.” Edelen said auditors at one unidentified agency were able to view sensitive files on 32 machines. Edelen declined to give details about these problems because he said doing so “could potentially increase the risk that agency security is compromised.”

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