Legislative Joint Auditing

The standing committees and the ball legislative joint auditing committee this month. The committee to further request for staff to review administration costs of the employee benefits division until after the presentation of the he be the report in other business Mister Norman acknowledge receipt of a letter from the cochairs of the joint performance review committee that it had concluded its review of the Henderson state university audit reports for the fiscal years ended June thirtieth two thousand eighteen two thousand nineteen the committee concurred with the staff's recommendation that L. Jack retreat both treat both reports as presented. A motion was adopted to increase the reimbursement rate for all the calls from eighty dollars per hour to ninety dollars and one hundred dollars per hour for the fiscal year ending June thirtieth twenty twenty one and June thirtieth. Two thousand twenty two respectively. The committee approved canceling the object meetings scheduled on November twelfth and thirteenth twenty twenty due to a conflict with budget hearing scheduled on November twelfth. The committee approves the two thousand twenty one legislative joint auditing committee calendar with no additional business to discuss the meeting was adjourned the next meeting of the committee will be held on Thursday December fourth twenty twenty. Mister chair I moved for adoption of this report. Thank you members any questions. Seeing no questions have a motion to approve I have a second. All those in favor say aye opposed no thank you very much item to standing committee on counties municipalities Representative Watson. Thank you Mr chair. Standing committee on counties municipalities met October eighth two thousand twenty. Committee adopted the minutes of the September tenth twenty twenty meeting the committee review two hundred forty five current reports three of these were certified to the bond board. One to the Attorney General and twenty eight reports including one investigative report referred to prosecuting attorneys no officials were present to address the repeat findings in their current reports due to the Kobe nineteen health emergency the committee filed all two hundred and forty five reports Mr chair moved for adoption of this report. Alright members any questions. C. one with this is see forty nine is that you Senator Pitsch I just wanna make sure it was so much questions seeing no questions I have a motion to approve. I have a second. All those in favor say aye. All those opposed no. FOR Luzhin member state Lee are. Help me with the seats in these dividers and at least give me a little audible voice here since we're recording. six peach you're recognized Sir for committee on educationalist dished thank you Mr chair the committee reviewed a total of fifty five current audit reports in one current internal control and compliance assessment report for the year ended June thirty twenty nineteen which consisted of five higher education reports forty six school district reports three open enrollment charter school reports and to educational cooperative reports the committee also reviewed one special report for the period July one twenty seventeen through June thirty twenty nineteen the president of the Arkansas state university system and the interim chancellor Henderson state university were present and updated the committee on Henderson state university's financial aid office after the committee's review of a special report on compliance with policies and regulations in the financial aid office Henderson state university officials previously responded that they can current with the findings in the report and had implemented or work in the process of implementing corrective action the audit report of the Pocahontas school district was certified to the governmental bonding board as well as referred to the applicables prosecuting attorney the audit reports of national park college northwest Arkansas community college the case city he stand Hector Kirby mammoth springs mineral springs and southside school districts and the Wilbur D. mills education service cooperative we're all referred to the applicables prosecuting attorney the committee filed the fifty five current audit reports one current internal control and compliance assessment and one special report that were brought before it Mister chairman I move for the adoption of this report. Thank you the members any questions at all on these reports. Several these referred prosecuting attorneys. Seeing no questions I have a motion to approve I have a second all those in favor say aye all those opposed no thank you very much and next on our agenda would be senator garner for the standing committee on state agencies. Thank you Mr chair twenty six report over on the committee's agenda yesterday five reports for findings with were presented divisions were again noted in the student loan files at the department of education the department turns for our transportation for that an employee falsify travel reimbursement to win almost nine thousand dollars the board of examiners in counseling did not properly reconcile receipts to deposits or deposit receipts in a timely manner the board of dental examiners miss coated in the general ledger a transaction totaling over twenty two thousand dollars the game and fish commission report to incidents of theft of property totaling over five thousand dollars. During the meeting the committee adopted a motion to file twenty four of their current reports however. Committee to further reports for the department of higher education and the department of transportation to the committee could ask questions of the agency staff Mister chairman I move to adopt this report all rent. Members any questions on this report. And I would say if you do have one you probably just wandering in because it's a little hard to see through certain areas of these divider show seeing no questions I have a motion for adoption to have a second see a second all those in favor say aye all opposed no thank you very much Members that gets us down Adam D. and we have three different reports I believe it will be presented this morning like to recognize first Christy Sanders for the Arkansas comprehensive annual financial report fiscal year ending June thirty twenty nineteen. Thank you Mr chair. Yes this presentation covers the audit of the state of Arkansas is comprehensive annual financial report or kaffir for the year ended June thirty two thousand nineteen. The audit was completed by the staff of legislative audit the deadline for the filing of the kaffir was December thirty first two thousand nineteen. We issued two reports for the audit of the state's financial statements the first is the kaffir which includes all the financial statements and notes to the financial statements the state of Arkansas as well as our independent auditors report this should be the one with the red quo binder that you have. The second is the report of on internal control over financial reporting this report includes any findings related to the state's financial statements and is included within the single audit report also included in the single audit report are the findings related to the state's federal financial assistance which Jamie shall cover next. The cast for financial statements which were prepared by the department of finance and administration include the following entities all state agencies retirement systems higher education institutions. also three component units included in the kaffir Arkansas development finance authority or at the is a legally separate organization and component unit since the state's elected officials are financially accountable the other two component units are the youth university of Arkansas foundation and the you of a fate bill campus foundation they're also legally separate organizations and component units due to their quite close relationship with the state. We issued on modified or clean opinions on the state's two thousand nineteen kaffir. We audited all the financial statements included within the kaffir except for the following entities which were audited by private accounting firms. The three component units the university of Arkansas for medical sciences and the revolving loan funds the two largest revolving loan funds are the construction assistance revolving loan fund and the safe drinking water revolving loan fund both of these funds are administered by the Arkansas development finance authority. We're pleased to report that for the ninety year in a row there were no reportable findings related to the cap for. I will now touch on some of the financial highlights of the state's two thousand nineteen cap for the next six flights relate to the primary government of the state of Arkansas. The financial information on the six fights does not include the state's retirement system's financial information about the retirement system's is included later in the presentation. As shown on page sixteen of the report the state had total assets aging thirty two thousand nineteen of approximately twenty seven point nine billion dollars. A major categories of these assets include the following capital assets of seventeen point one billion cash investments of eight billion and other assets totaling two point eight billion which include things such as receivables and do from other government. The state's total liabilities what eleven point three billion dollars as shown on page seventeen of the report the major categories of the state's liabilities include the following. Bonds notes and leases payable three point eight billion the net pension liability of two point two billion. Other post employment benefits obligations of two point three billion. And other liabilities totaling three billion these items contain such things as claims judgments and compensated absences vendor accounts payable Medicaid's payable an income tax refunds payable. This chart shows trends regarding the state's assets and liabilities over the past five fiscal years the general increase in assets over this period was primarily due to an increase in the state's capital assets mainly infrastructure and construction in progress the increase in liabilities over the previous periods was due to an increase in the state's bonds notes and leases table. The net pension liability and the net post employment benefits payable however there was an overall decrease in liabilities in fiscal year two thousand nineteen due to the decrease in the net pension liability. The state had total revenues of twenty three point one billion dollars as shown on pages twenty and twenty one of the report the major categories of the state's revenue include the following. Grants and contributions of nine point two billion which include things this federal grants taxes of eight point four billion including income and sales tax charges for services of four point six billion and other income of nine hundred seven million. The state's expenses total twenty two point one billion the major functions or programs making up these expenses were as follows health and Human Services and nine point three billion colleges and universities four point two billion education three point eight billion general government one point seven billion transportation one billion law justice and public safety of a hundred ninety nine million the lottery four hundred twenty one million and other expenses of nine hundred two million. This chart shows the trend of the state's revenues and expenses over the past five fiscal years the primary source of the increase in revenues was due to the increases in Medicaid funding as well as an increase in taxes specifically personal and corporate income tax as well as consumer and use tax. There also was an increase in higher education for charges for services collected by the colleges and universities. The increase in expenses over this time period was significantly due to an increase spending for health and Human Services higher education also saw a gradual increase in expenditures. now says some summary financial information for the state's retirement system's as shown on page thirty three of the report states retirement system's had assets aging thirty two thousand nineteen totaling thirty point two billion dollars the major categories of these assets were as follows cache of six hundred six million investments of twenty seven point nine billion dollars securities lending collateral of one point five billion and other assets of two hundred fifty nine million. The retirement system had liabilities totaling one point seven billion also is shown on page thirty three of the report the major categories of the liabilities were as follows obligations under securities lending of one point five billion. Investment principal table a hundred twelve million and other liabilities of thirty six million. This chart shows the trend of the retirement system's assets and liabilities over the past five fiscal years the variation in assets over this period generally increasing was due to the fluctuations in the financial markets for stocks and other investments. Liabilities for the retirement system has had only slight fluctuations over this period. The retirement system had total additions of two point four billion as shown on page thirty four the major categories of the retirement system additions include the following contributions of nine hundred ninety four million net investment income of one point four billion and other additions of six million the retirement system had deductions totalling two billion with benefits paid being the main component. This last charge as the trend of the retirement system's additions induct deductions over the past five fiscal years. Primary reason for the variation in additions or revenues over this period was the fluctuation in the market value of investments from year to year. The deductions for the retirement system more steady over this time period and we're primarily benefit payments as previously mentioned. This concludes my presentation DFA representatives are here to answer committee questions thank you Mr chair. Thank you very much. Of members I'm gonna recognize C. six and I apologize I don't know who is the in that seat there you go Representative love. You have a question you and to bring someone to the yes thank you Mr chair none I don't need to bring anybody up I was just curious because can we go back to the retirement system please. I wishes interested I think we counted securities lending on both I guess in so I'm trying to. So go back yes so we have securities lending. At one point five billion in them as asset in there we also have it as a liability so I'm trying to figure this one that one out. Yes Sir if you look and then notes and your kaffir on page sixty two there's no four and explains the securities lending transactions a little more but it's it's where they basically have to put an asset and a liability on the books because of how they're investing that money and so they're investing. Is transferred that the money is the investment securities or transfer to an independent broker dealer and exchange for collateral in the form of cash and cash equivalents or letter of credit and securities that are guaranteed by the US government or an agency. And then so then I have to put the corresponding liability on the books because it's considered a liability if something was to like if they were to fall three or something on it. This state is never lost any money on this. Okay I'm this I don't know I guess I guess the you just try to be all right there we I have it as the Aston there we have it is a lot delay I'm me trying to think through them but okay thank you. Right. Members any other questions on the report one call C. sixty to resume my additional operation hands former little bit because it's hard to see but I'm will push that number if you just recognize yourself thank you chairman this is Representative Mary Bentley over here in the corner Bentley I just like to get if we can have mark white maybe from DHS come here and I just want to see some specifics if that's the biggest increase we've seen expenditures we were from last year and what he believes is the number one driving force of that to some specifics to be great thank you. All right missed what if you would make your way up Preciado. And while he's coming if I get a request a staff maybe give us a sense a copy of the slides from today I just found it very helpful as a copy wish there copies that they're it the members desks. Maybe I'm just not finding K. there is a I thank you for everybody's got it you've got the binders but you actually have the slide presentation in this I hold up by. Thank. Just he said the use the chair had it so we'll send it to you Representative Bentley if anybody else wants a copy of that and please make staff were of it being perceived. Thank Mister mark what would DHS and written billing apologize I'd I stepped out for a moment city or the entire presentation but if you would mind if you reset your question for employees as fine as staff was going over the report this to the number one increase in expenditure we had this year was DHS just wanted to hear some specifics from last year to this year and were you see in the biggest driver of that mark. Order list going to be the Medicaid program and there's a variety of expires on that and certainly get you a lot more detail as you'd like course there is number one the ongoing no medical cost inflation which we see across the healthcare industry no healthcare is not something that we're this the spending stays flat it grows from year to year as more expensive to take care of folks and so certainly we in the Medicaid program see the impact of that they're also changes around the match rates so for example we're paying more now for the chip program where is in the past that was a hundred percent federal now the state does have to kick in additional amounts for that there are funds related to the of course Medicaid expansion just a number of changes the Medicaid program in the last few years that have increased that state cost and Wilson treated towards increased expenditures. kind of follow up chairman is that okay yes ma'am one we're looking at our with it the state an increase in minimum wage to we have so we sent increase in your department due to the increase in minimum wage it has we have a number we have a number of employees who were there close towards that minimum wage amount your particular around some of some of our facilities I made a call that earlier this year in the human development centers we brought forth a plan to take some of our with employees here at the minimum wage or around there in those entry level positions to make those positions B. C. N. A.'s AS or prodding training for those employees so that they can get that certification and then providing an increase so that even though we're paying more because the minimum wage increase the state is getting something for that additional spend. If you could just email me some specifics mark this next week of it I would appreciate that thank you spent. Alright. A seat thirty four if you would please recognize yourself since I can't see. No but I see it vaguely three see through a glass demo here yeah I would need to ask the question are you having more people added to the Medicaid program. We are right now and particularly no right now we're seeing an increased match from the federal government because the pandemic but the requirement that the cash to that is we cannot remove most beneficiaries from the program simply because they become an L. folded income or something else if they if they don if they move out state we can take them off but otherwise under these temporary federal rules we have to leave folks on the program and so that is because nor enrollment to increase how long do you expect this to go on it will go on as long as the federal government maintains the state of emergency for the pandemic once that ends then the match rate will go back down to its original mailed and rule those restrictions ago way and we'll build start processing folks again off program thank you. Mister one a good quick just to question my fault as we prepare When when does that all work changes come in in the formula in Arkansas's obligations under the private option. That's that's got to be nearing us I haven't heard an update on that lately it's no less my memory is that we are at that ninety percent level so the federal government is reimbursing not percent in the state is paint ten percent of those amounts and that was for call started was a higher amount and is gradually progressed to their other any other changes in the mix for that coming or is that not for expansion or for the Arkansas works no Sir all right. six twenty. Representative rye. Thank you Mr thank you Mr chair mark that ten percent that you were mentioning there that's a tale to is that not right it can and it's not envelope any more than that in that run that's right service to present is the maximum the state has to pay for that. Thanks Sir. What we have we were just having a side bar appear. Again and I just ask this because it just struck me based on the questions that were here so I don't have any information with me right now but I think that there may be a higher percentage that we're gonna be responsible for under Arkansas works but at if we've got that wrong maybe we could we could just get somebody to report that to this if anybody knows that that you're with the team that would be great I know that there's several people are listed here that might be in the building but And I don't see by raising their hands to be a taker on that but I just I just wanted to make sure as we do proceed we really need to be thinking about that we don't need to forget exactly what that is specially I'm sure we'll get into a budget right yes Sir will will verify that but I I'm I'm fairly confident that ten percent is the maximum state obligation for Medicaid expansion that's different for other programs but I see director or secretary Gillespie. Yeah just want that but I your. Okay so that is that that is the Max that the that we would have under obligation because I knew we were on the face yes okay we'll thank you for that seat number ninety two. They retire so couple questions seeing garner without the sort Mr prohibited you but the Medicaid. The money that being set by the federal government because of the pandemic is a higher amount than we typically would get correct correct and part of that condition of that is that we have to accept nearly everybody and we can take multiple roles unless they have a very small criteria which is with moving out of state or when the other conditions right we get remittance rolls on the on the front door in terms of letting them in we still comply our same criteria have the same limitations but is once they're in Europe we cannot remove them from the program unless they pass away or move out of state indeed in your anticipation after the emergency pandemic or whatever rule making authority that is I don't know if it passed to the law or was that is good order to you know off top you had that was I believe is termination by the secretary of health and Human Services the federal level does the termination by them that's my understanding was that a termination is reversed or were allowed to go back do you anticipate these numbers stay in relatively the same or you did you do to speed decrease after we've moved past a six specially if the federal government stops matching the money and then were more obligated for the money once we get to that point and the feds to remove that emergency emergency determination then we will bill to start removing folks from the programs are no longer eligible so you should see our normal drop at that point okay thank you Mr. Thank you. Members any other questions before we move on. C. one C. twenty two is that Senate looks like senator Chesterfield actually so thank you thank you Mr chair I'm looking at the region I would entity was retirement separately here. That's what they had they had done she actually get with it could yes loaded cover I'm to find out what the rate of return is that we're getting from the you for my retirement system's in a time of the stock market seems to be going up and up I want to know if we are taking advantage of that and it's increasing the amount of money flowing into each of the retirement system's. Very good question I don't know if there's anyone here to answer that with the retirement system's this morning I don't see him on my list did you have any indication of that from the staff if they reported that to you in the actual return basis we don't have the anyone here but we can get that information okay well I think it's important Mr chair because we're talking about increasing the percentage of that that the employees are going to have to pay we're talking about increasing out of this we should be having a rate of return on investment so. I would like to know what is driving some of that thank you sure staff be happy to provide that information and I'm also sure senator that joint retirement Republic diving into that very deeply and so it's a good point and thank you for that any other questions. Seeing no other questions on that We just basically have these reports we don't need to take it we need to yes do we need take any review okay all right moving on to the next item on the agenda then we thank you very much miss Sanders for that I believe Tammy show all is going to give us the report on the federal portion of the state wide single audit. She may show you be recognized you would just. Committee for your presentation. Thank you Mr chair this presentation. On thank you thank you. Thanks. This presentation will cover the state of Arkansas single audit report for the year ended June thirty twenty nineteen. The state wide federal project was successfully finalized and submitted to the federal audit clearing house on March the eighteenth of twenty twenty. State agencies and state supported institutions of higher education this first federal funds totaling nine point four billion. From four hundred and thirteen federal aboard programs during the twenty nineteen fiscal year. The programs are Katter categorized as either type a or tight B. type ETS are the larger programs each of these programs had expenditures greater than twenty eight point two million in twenty nineteen all other programs are label tight B.. The chart on the left illustrates the breakdown of expenditures for the larger type a verses the smaller tight B. programs there were twenty type a programs with expenditures totaling eight point seven billion for the twenty nineteen fiscal year the remaining three hundred ninety three programs had expenditures totaling six hundred and eighty nine million. Based on risk assessment criteria established by federal regulations also known as uniform guidance nine of the type a programs in three of the tight B. programs were selected as the major programs reviewed for twenty nineteen. These twelve programs represented six point three billion or sixty seven percent of the state's total federal expenditures uniform guidance requires that at least forty percent of expenditures be selected for audit testing. The five state departments shown on this slide expend eighty four percent of the federal awards received by the state. The department of Human Services the Arkansas department of transportation the department of education the university of Arkansas AT fable and the Arkansas development finance authority. The state received federal awards from twenty nine different federal agencies during the twenty nineteen fiscal year the for federal agencies shown on this slide provided ninety five percent of those awards. The US department of health and Human Services the US department of education the US department of agriculture and the US department of transportation. The single audit act requires that the audit of the state be conducted to determine for objectives first are the financial statement statements of the state fairly presented miss Sanders address this objective during her presentation of kaffir. Second is the schedule of set of expenditures of federal awards or see five fairly presented. The C. Fite is a listing of all federal programs with reported expenditures we determined that the twenty nineteen C. for a is fairly presented in relation to the cap for the C. Fite and related notes are located on pages seventy one through a hundred and eight of the report. Third has the state complied with laws regulations contracts and granny Cremins that may have a direct material effect on federal awards. Fourth does the state have adequate internal controls in place to ensure compliance with the requirements of the various federal awards. Three of the major programs reviewed were not in compliance with certain laws regulations contracts in granite Cremins and did not have adequate internal controls over compliance as a result twenty one findings were issued and are located in the schedule of findings and question cost on pages eighteen through seventy a summary of the findings will be discussed later in this presentation. As the auditors our responsibility is to is to an express an opinion on compliance for each major program. The opinion is based on the results of the audit for the director material compliance requirements of each major program although several findings were reported we issued an unmodified or clean opinion on the most of the major programs. A qualified opinion is issued if an audit finding results. In an instance of not compliance that is determined to be material either individually or one aggregated with other non compliance findings in relation to the major program as a whole for the twenty nineteen fiscal year A qualified opinion was issued for two findings representing two programs the children's health insurance program commonly referred to as chip and Medicaid. In accordance with uniform guidance audit findings must include the specific information that is listed on the slide the condition in context section includes the detail of audit testing and the results of that testing the question cost section includes cost question by the auditor because of a violation of a regulation a lack of adequate supporting documentation or costs that appear and reasonable. Total question calls for twenty nineteen totaled approximately twelve million dollars. It is the responsibility of all federal warning agencies to review and provide resolution for all audit findings this includes determining if the question cost identified by the auditor require RECOUPMENT. As shown in the chart on page six of the report and summarized on this slide sixty six point four million dollars in question cost remained outstanding as of September thirtieth twenty nineteen however we received updated information regarding RECOUPMENT from one federal awarding agency in August of twenty twenty and we were able to confirm that additional RECOUPMENT have been made totaling three hundred ninety four thousand four hundred and twenty dollars and RECOUPMENT was not required for sixty four point five million dollars of these question cost. Of the twenty one current your findings forty three percent or nine of those findings were repeat findings as shown on the slide a repeat finding indicates that the agency is not taken adequate measures to correct non compliance and deficiencies in internal control over compliance reported in the previous single audit. Repeat findings were issued for the child and adult care food program chip in the Medicaid program. A summary schedule of prior audit findings is located on pages one hundred and eleven through one eighty nine of the report the summary schedule is prepared by the department of finance and administration and includes the reported status of the twenty five findings from fiscal year twenty eighteen as well as the other fifteen findings from previous reports that have not been fully corrected. The audit status for an resolved prior audit findings is located on pages one ninety one through to one of the report and gives the results of our follow up procedures regarding the corrected prior audit findings. Additional information for the trend of findings is located on page five of the report. All twenty one current your findings affect programs administered by the department of Human Services the instances of noncompliance and deficiencies in internal control affected the child and adult care food program chip and Medicaid. Six findings affected both the chip and Medicaid programs deficiencies noted in findings twenty nineteen oh two twenty nineteen oh three and twenty nineteen oh six are repeat findings. Finding twenty nineteen oh six on page twenty nine revealed continued non compliance with the provider eligibility requirements regarding fee for service claims. These requirements are developed by the agency and maintained in their provider manual the self imposed requirements include maintaining certain forms of documentation to ensure providers eligibility status is appropriately updated and remains current. Finding twenty nineteen oh seven on page thirty three is also a provider eligibility issue regarding the new managed care organization category that includes the past in dental managed care programs the non compliance identified was also related related to maintaining documentation to ensure a providers eligibility status. And and an additional thirteen findings apply only to the Medicaid program. Finding twenty nineteen seventeen on page fifty eight identifies deficiencies with the agency system for verifying that state general revenue and other non federal revenue sources used to match the federal role federal grant award were from appropriate sources in addition. The agency did not have procedures in place to adequately monitor it's state match process as a result we were unable to verify that the one point six billion dollars reported as match met the match requirements. Mister chair this concludes my presentation. All right. Up. If there's any I guess is stricter Glaspie animal who wants to speak on behalf of the the department. Members if you have a specific question please just bring in for me. Thank you secretary Glaspie I let you lead and then if you may want to pitch this to someone else but I thought it be appropriate for you just at least comment some on the findings and give us your perspective. Thank you Mr chairman and first let me say it is wonderful to see you in person again thank you I appreciate that the and thank you to ms Bradshaw and to the legislative audit team who has a. They spent a lot of time with this and it is productive time so I really do appreciate all all that they do I We'll kick this off and then we will happily take any questions many of the Findings on here this time as you noted are repeat findings these are so several of these are areas we have been working on now for several years To fix them was not just simply a matter of. New documentation or new controls I think when I particularly want to point out is provider eligibility provider eligibility is an area we started working on. Probably three years ago. Over that three year period fixing the state's provider eligibility process turned out to be far more complicated I think than any of us realized as we started to correct it. It has involved completely turning over the staff there it has involved twice. it has involve making major systems changes and major process changes had an impact on the provider community in the state. but now where we are is we do have as of. I think it was end of may of twenty nineteen we do have now a new provider eligibility process in place system operation all of that and for that I just as a point of his personal. A I do want to thank director Janet man had she not come in and put the time and attention to doing it we would not be where we are today so you see a number of findings there those do account for in this year the bulk of the financial question cost of a little over nine million. This process of going through that over the last several years has also involved CMS the federal government accepting our corrective action plan them waiving the question cost each year because we're making process of making improvements on that plan and it is our hope that since we now have completed they will in fact waive that final incremental question cost and the state will not have to pay it they are usually very good about if they see this state is actually on a path to fix something they understand it takes time and they do grant the state some leniency around that so anyway we'll be happy to talk about that as much as you want but that is the largest dollar amount in here Each each of these others we can talk through as you would like most are. Completed in terms of the corrections to them in several cases it was a matter of and not being an accountant II I recognize the importance of this but I don't totally understand it controls being in place but not documented which means that the auditors cannot tackle if we actually have the proper controls in place so getting those in place and getting them in proper in accordance with the proper accounting structures and rules and see ms Bradshaw nodding and to that's been a a piece that we've also been working. issue some of you who've been on legislative audit know about. Two years ago two and a half years ago we set up an office of security in compliance and brought in Britt Hayes who is here who is the chief of security in compliance brought him in from the Medicaid inspector general's office and his audit office now leads not only working with all audit findings but ensuring that the organization puts in place. the proper changes in order to fix any problems and so he spent a great deal of time not only with legislative audit but also with our federal partners run this and then John Harkes unit now comes behind that effort and they actually audit internally to make sure that we have made the correction are folks say we are correcting so hopefully as we continue through this we will continue to get to where we have more and fewer and fewer large issues and only small issues in a nine billion dollar program because we take seriously anything they give us as a finding and work to correct it. So with that is kind of a lead in we're we're happy to talk about any of these. Members I don't see any questions in the queue. for anybody. So it appears sector Gillespie that they may be satisfied with the the report with your comments members if you don't have any other questions we'll dismiss the. At DHS folks and say well done thank you thank you very much. All right I think we're at the. Item number three hundred D. three and thank you Michelle for the report. And this is the Arkansas state and public school employees health benefits employee benefits division. And with that Mister Welch. Thank you Mr chair. Arkansas code requires legislative audit to conduct a review of employee benefits division and the performance of the health benefit plans offer to state and public school employees the primary objective of this report was to analyze the fund balances of both plans at June thirty two thousand nineteen. Employee benefits division administers the health benefit plans for both state and public school employees. The benefits are provided to self funding omitted. By which the state takes an contributions for both employee and employer. Separate funds are set up for each plan to pay health in pharmacy claims and a service reservoirs to prevent your matic rate increases. This exhibit which is found on page two shows the plan enrollment for bill subscribers and members for each plan the term subscribers refers to both employees and retirees who enrolled in the plans. Well the term members were first to not only the subscribers but also the qualifying dependents who were enrolled. In fiscal year two thousand nineteen Arkansas state employee plan had seventy one new subscribers along with just over a hundred new members. The public school planet fifteen hundred new. Subscribers in just over thirty two hundred new members. The first plan I'm going to present is the Arkansas state employee plan. As shown in the exhibit on page three for fiscal year two thousand nineteen the plan had over to our ninety one million in revenue. The state contributions provided sixty percent of total revenue. Subscriber monthly premiums were thirty three percent or other revenues accounted for an additional seven percent. The term other revenues included performs guarantees penalties investment income pharmacy rebates. Medicare part D. subsidies and Vika tax savings. Exhibit three on page for the report shows how the Arkansas state employee fund balance was affected throughout the fiscal year. The state contributed one seven three million subscribers pay ninety seven million in monthly premiums. The reimbursement of claims expense amended to just under a hundred eighty nine million for health claims an eighty five million for pharmacy claims administration cost to the plan remained constant from the prior year it. At over twenty two million. Subscribers pay an additional thirty seven million to health care providers for health claims and twenty million two pharmacies for copays coinsurance and deductibles. This exhibit which is arrive on page five shows the changes in claims an administrative administrative cost as well springs and other revenues FOR the Arkansas state employee plan for the past five years. Overall the Arkansas state employee fund balance decrease five and half million to just under seventy six million in fiscal year two thousand nineteen. The fund continue to decline. Due to the increase in health and pharmacy costs as well as other expenditures to the plan. The next for you the next few slides will be information regarding the public school employee plan. The exhibit on page six of the report shows the plan had three hundred one five million fun revenues for fiscal year two thousand nineteen. Legislative funding provided twenty seven percent contribution from school districts ninety twenty nine percent subscribers provided thirty nine percent what other revenues delivered five percent. Page seven of the report the exhibit shows how the public school employee fund balance was affected throughout the year. In fiscal year two thousand nineteen the state contributed just over eighty eight million. Premiums schooled Princeton school districts provided ninety six million. Wall subscribers paid a hundred twenty six million in monthly premiums. The reimbursement of claims expense amount to two or twenty seven billion for healthcare claims and fifty nine million for pharmacy claims. Administrative costs rose slowly from the prior year to thirty one million. Subscribers also pay an additional thirty or excuse me seventy three and a half million to health care providers. And just over twenty five million two pharmacies for copays coinsurance and deductibles. This exhibit which is provided on page eight shows the changes in claims and administrative costs as well springs and other revenues for the public school employee plan for the past five years. The public school employee fund balance increased two hundred forty seven and a half million in fiscal year two thousand nineteen. However the funds growth rate declined from the prior year due to an increase in health and pharmacy claims. Schedule three on page thirteen provides a list of the individual health claims exceeding two hundred fifty thousand during fiscal year two thousand nineteen for both plans. The Arkansas state employee plan had eleven members with claims totaling almost five million which is similar to the prior year told. The public school employee plan had sixteen members with claims total in just under a million. This title is almost double the amount from fiscal year two thousand eighteen. We tested these claims for accuracy and timeliness ineligibility cover procedures and payment amounts. We found no discrepancies during our testing. Overview of members with curative claims exceeding five hundred thousand was also performed. These claims are tested for accuracy and timeliness of case management services. The Arkansas state employee. Plan had nonmembers. And the public school in full plan had twelve members meeting this criteria our test revealed three members who were not properly offer case manager services. By the year. For fiscal year two thousand nineteen. Employee to fit the employee benefits division internet to various contracts with outside vendors to assist in providing insurance benefits for plan participants as shown on schedule for or in schedule for on page fourteen administrative costs total twenty two million for the Arkansas state participants in thirty one million for the public school participants the schedule shows administrative costs by a vendor for each plan as well as a brief description of the services provided. Schedule two on page trouble the report provides the monthly premiums for each plan available to subscribers. Shown on this slide is the portion of the schedule related to the Arkansas state employee plan. This slide is the portion of the schedule related to the public school employee plan. As noted at the bottom of the section of the schedule premium cost to subscribers increased if members did not receive a wellness visit. I report does contain one finding. The agency may numbers accounting heirs at the end of fiscal year two thousand nineteen that extend across both the Arkansas state and public school phones including over state administrative expenses. Amounts not proper recording asus them up a county system or both. Amounts incorrectly record an asus. And over stated in understated nets net accounts receivable. Mister chair this concludes my presentation Ames represents or here to answer any questions all right we do have some questions for members so if we could have All representatives with the PD. Committee to see. And I think we have some transformation insured services I think we have and perverse the chief of staff Chris Hallett with the B. D. and then miss tolls assistant director so. Sexy six numbers seventy three so somebody seventy three there. You're not Richard Womack which is on my seat my sheet so seat number seventy three that's me. All represent shepherd all right Speaker shepherd could see you over there apologize a problem you're recognized you Mr chairman and this may be to staff in particular going back to exhibit three and four on the state employee health and pharmacy benefits. So and I guess moving for to exhibit for it showing that the claims an administrative costs. For two thousand eighteen two thousand nineteen exceed the premiums and other revenues but then when I look back at the chart or the the Kind of the spreadsheet on page four exhibit three I see how it relates to. The claims an administrative costs but I'd like to know where the premium another revenue where those numbers. Come from because it doesn't seem to match what's actually shown the spreadsheet and so if if someone could address that because actually when you look back at to exhibit three it looks like the premiums and other revenues. it exceed the claims an administrative costs. Mister Welch yes Sir. We're kind. The question of mine well basically in looking at exhibit for which is the chart. That shows expenditures and and also revenues for the past five fiscal years. If four X. for example in two thousand eighteen two thousand nineteen the claims an administrative costs were. Two hundred ninety four point three and then to ninety six and I see where that relates back to the spreadsheet exhibit three. But when you look at the premiums and other revenues of two ninety point five and two ninety one point seven. I don't see how that relates back to the the spreadsheet exhibit three where it actually looks like the. With if you included even copays it looks like the For two thousand eighteen that the. Premiums and other revenues would be three hundred and twenty four. It. I think that we're not including other revenue on an exhibit three other revenue of twenty point eight million is not included here. That meant that will make a difference if you look on the size. To learn ninety one point seven million. That that matches I believe that Senate bill. This is the. Okay and where is that found on exhibit three. The other revenue we it's not included on there okay would include that amount okay. I think Mr Speaker that their notation if I look at that right Uh this is looking on page thirty sit well at the slide I have a notation here on this information and I would ask deaf to please make this available to Speaker shepherd which is the slide presentation that you've got me looking at here Mr Speaker it says that the that exhibit that is up before she right now shows changes in claims administrative costs as well as premiums and other revenues and I think missed well she said that even though that notation is there there's a certain portion that's not included on that other slide is that right. Correct this not including on exhibit three okay and and just add the the. Subscribers copays coinsurance and up with that's not included in the five year trend analysis as well yep and no I don't want to say too much of the Speaker can continue Mr Speaker of you get some more on this now that that's the fish I just was not saying how the to related because again it's it looked as if there would there actually would be additional revenue that is not reflected thank you thank you very much as members I think it is worth noting the statement that missed wells just made is that. When you're looking at these exhibits that doesn't account for what subscriber's members paid out of pocket right correct okay which it's important to note that there is an additional thirty seven million of paid to health care providers and over twenty million to pharmacies for copays coinsurance and deductibles so what that's telling you is that all those members in addition to the premiums that they've been paying out of pocket that you see reflected on all the exhibits there was another fifty seven million dollars that those families paid out of pocket for their health care A just in the scope H. and and deductibles at center I think it's important note I'm going to go on to seat number eighty on mine it I don't think that that senator DISMANG so who do we have in seat number eighty hi it senator Irvin senator Irvin you're recognized thank you Mr chair and. Just to on exhibit three on page four. It's showing that we actually we had a deep decrease in payments to healthcare providers of three point nine million is that correct. A around and then I I see that but the pharmacy costs was higher five point three million in pharmacy costs but three point nine decrease to healthcare providers okay so my question is really on page fourteen. Since since the administrative cost of those two things are different. So the you have a administrative costs that go to that. Different from your health care I believe that's correct. From I'm looking out page fourteen. A so we that we continue to see an administrative costs go up and I'm wondering why and I'm also wondering do these vendors Are we are those part of contracts and are we able to pick and choose what we are paying for within those contracts and are we able to look at those different components to see if they're actually saving us money or not and particularly the difference Things that are listed under health advantage. Senator would you were referred to the the administrative costs portion there that you're talking about what slide were you looking at because and everybody's on fourteen and I see that but page fourteen right there game that one. A year ago but you were talking about the administrative costs increasing it was our specific area use talking about the overall cost because these are two different plans on fourteen right I'm just trying to make sure we're tracking because I think you talk about I'm sorry state and public school employee I'm I'm talking the state state employee and public school the state employee and public school employee I know that our administrative costs have gone up. And particularly more so on the state employee's side but not on the public school employees side. According to information that we've been given an insurance and commerce committee and so I'm curious as to why that's the case and my first question my second question would be can we have facts those services provided that are listed within those vendors are we checking to see if those are actually saving this money or not and if they're not. Do we have the ability ability to cut that out. Good questions I want to recognize Mr Helen miss Purvis and I'll let them decide who wants to speak. Chris how're director for the employee benefits division senator. thank you item of note is of the information that you're referencing in in a comparative analysis of the two this is a snapshot with a year ago fifteen months ago relative to the information that's been provided in the entrant's commerce the peer as well as the public health that you share those those committees all received Relative information for ninety the calendar year nineteen and part of twenty so the the driving force behind the ministry of cost most every arrangement that we have is on a per member per month basis so we're seeing an increase in the population so that'll drive some of the cost up relative to the one snapshot in time versus the other as far as by and in I recall the per member per month premium cost administrative costs for the public school employees was two dollars and fourteen cents and not was gonna remain steady and not increased but the per member per month cost for the Arkansas state employees was three dollars and fifty seven cents going up to three dollars and ninety six cents and so I want to know why there's such a difference between those two because it seems to me you would have. I want to know why is there a big difference between as per member per month costs in going initially and then one is increasing the other one is not we were responsive to that request out of the intrinsic commerce committee I don't have that with me respective to that specific question but I can resend that information to you that was provided by the plan and the actuary I know I got your email that I wanted to talk to you in a committee meeting account that so that's why I continue to ask you the questions in committee so that my other members can hear the answers and that you can present that committee. Committee like what we're doing not have that before me but I I can I'm welcome to come back sure okay and my second question is again I would appreciate that because that needs to be a dialogue that held within this committee process sure that the. Because then it's transparent and everybody can hear these answers and we can have this discussion amongst ourselves with other people participating the second one is so I'd appreciate if you would bring that back to insurance and commerce Mister chair and so we can have that discussion for everybody to be involved in it the second question was. Within these services provided with the vendor that's a contract basis correct yes ma'am and all of what you see here with the exception of third from the bottom those for the record fees which come out of the ACA that we pay into the federal government for that okay everything else is been competitively procured and FOR the one exception would be the EVR Eric's and the A con. those a longstanding partnerships that renewable each year for some analytics for the plan everything else has been competitively procured through S. P. and with that with the specter put out from the technical proposals there should meeting responses based on what we were looking for asking for that particular service so can they be dialed up or dial down yes ma'am that would be at the plans as Christian so that the plants discussion meaning EBT makes as determinations within those contracts and you review that how often do you review those contracts and you have a process to look at the contracts and say you know we're not really get our bang for the Buck here you like to cut that out and save some money on the administrative cost because we're not really getting the bang for the Buck and we would like to alter this contract when do you do that and how often do you do that and how the what's the process that you look at those individual components within that contract to see for actually getting our money's worth for it or not and in making that determination for are you just accepting what they're giving you without really taken a. Find to come to it and looking to see if we get what we what we want. respective to I guess I'll speak just a health advantage With health advantages for hours all the services they provide us we get those reports on predetermined basis sometimes monthly sometimes quarterly and we have reviews with health advantage as well as internally within the BT each and every day provides an opportunity for us to look at the services being provided just to the member engagement the things that we actually do day in and day out in serving the hundred and sixty thousand members as far as looking at. What you're what will probably end up getting to a would be and are alive that's hard to produce at any once a snapshot in time and although I cannot tell you specifically that if member A has a condition there's an engagement piece by health advantage in that condition and let's say diabetes and that member is being pharmacologic plea manages well as medically manager disease state manage what we prevented an individual from accumulating down the road searches diabetic ulcers one here all the the different claims we can look at what we've done and in the absence of progression of disease and you can look at what that average cost could be for the individual but as far as Have any that one snapshot in time that that's a little bit longer process we have to look back and a longer piece a look at what that member has done with that group of members have nine to see if there's a of value there and we have done that we've modified decisions at the board level and how we manage our diabetes and very after another patient. Okay I'll I'm a has more questions later yes ma'am in center ring thank you I'm more of a more I recognize miss Purvis here for comment here but Obviously we're going to delve deeper into a lot of these issues in our other committee because we've got we've got some work to do on that obviously specially now that the decision of been rescinded which we're grateful for to give us time to work on this but represent cheese me miss purse right I just wanna make sure that we were being responsive that we with this did go through a competitive procurement process within the last eighteen months is that we have we have got to that process is so baby this snapshot may not look like what it currently looks like but will be happy to provide that as we have on going meetings with insurance and commerce okay I would like to get you you all of course as it relates to the audit report you had one finding which was stated here and then I'm on this was I don't know if they want to go back to the slide but there's a finding right before the end of the report which said that A. B. D. made numerous accounting your errors at the end of fiscal nineteen extend across multiple funds including overstated administrative expenses amounts not properly recorded an asus it cetera so. D. is or any comments at all of yes senator thank you this gives us an opportunity the first time that we became aware as when that the findings were shared back in August completely went on a an attack mode on this issue what we came to determine was a there may not be adequate training because they transition from a private previous financial reporting system to a newer one and so we probably didn't have our our staff adequate trying to make sure they they actually post those on an ongoing bases that they reconciled where they need to reconcile so what we've done is that the comptroller FOR the department as a direct report to me we've also engage somebody that has a masters in accounting work for B. K. D. looking at these employer plans in the private sector as well he's intimately involved in the transactions we've taken it down to foundational level where everybody now has a desk reference so they know what transactions they have deposed in they know how to record basically make sure they get in the right fund and they actually have that on the reconcile bases were also wanting to get to the to the point of having monthly financial reports that are meaning full force and so those of the all the things that we we've taken into account of it'll just the last few months or aggressively addressing it. The members of you have any other questions please let me know I will squeak if there is no other questions this point on the the page fourteen and you were beginning to dig into this with senator Irvin I notice that you've got in the expenses their med impact which is the prescription drug claims administration but then you also have the E. B. R. X.. I've already B. R. X. basically was. Certainly owned the prescription drug portion of the plan but with Matt impact it's obvious that you have another provider that is providing some services because could you explain Mr out what. What each of them do that separate one other two of them maybe there has to be could you explain that. Yes Sir be glad to I don't know that it it has to be what met impact provides for the plan and that is a nontraditional model I say that because we've we've developed in sixteen about. procurement that has met impacted our pharmacy benefits manager and all they do we pay them a PM PM fee to rent their networking for them to judicata claims the E. B. R. Eckstine that's an evidence base pharmacy program to the university of Arkansas for medical sciences that program B. B. D. has a long standing interagency partnership with that group that is headed by doctor to white Davis and his team they manage our custom formula refer the health plan they manage the rebate contracts they handle those component to work hand in hand with E. B. D. as well as provide the formula three pieces up through the drug evaluation committee that this statutory will and up to the board with some of the recommendations but EBR X. in theory or in in general concept they manager formular enforcing the rebate contracting met impact specifically process at the pharmacy claims and we rent their network basically. All rights Members any other questions at this time on this I know in our other committee we're going to go much deeper on this issue I don't see anyone rainy and I just want to make a general statement here I made this yesterday in our executive committee but since you're here and this isn't directed in either one of you in terms of that but throughout this process we've you know we've gotten emails we've got calls from members across the state but specifically there has been some communication you know with board members and again. With that the not meaning any any of you but it dawns on me that there are certain calls may be from the executive into the admin from the administrative side of things into some of these board members. And I just want to caution you that you're subject to open meetings laws and regulations and they're just not need to be any specially superior involved in the executive sad that should be calling members of the board and basically steering them to decisions. The board members there are elected to EBD to serve and represent those interests are to weigh things in open meetings have open discussions and make decisions based upon that in all I wanted to do censure before we today is just make the statement now because it's very very important and to use an analogy for you you can go pull up copious amounts of news reports on quorum court across our state were they have have been put under scrutiny when they may be meeting and having discussions outside of a quorum court meeting in violation of the open meetings for wine it cetera and some of the call some of the discussions I've had could be perceived that there is pressure being made to say that this is going to be our decision we just want to call it you know. That's not really the proper way to do that needs to be discussed in open meeting and their needs not to be steering occurring trying to bring those member of your commission she's me the be the board staring into a decision so it's just a statement it's not to you because I've not heard anyone of your names in that so they want to make that very clear but I wanna make sure the message goes forth that there needs to be a discussion there about the proper way to have those those meetings and also would that not be pressuring anybody on that board they get enough pressure just with the feedback about what's going on and all of that and I just feel like I need to make that statement to you I don't know if anybody will make a complaint as it regards to that but I definitely have heard some of the feedback and so it's just a statement that I want to put out for you from my perspective with that members I don't see any other Questions and so with that we'll close out this portion on the free and we do thank you Mr Welch we thank you Mr Hallett miss purpose for being here for that thank you Sir. Members under Adam AT the next meeting of the legislative joint auditing committees we held December the third and fourth or to call the chairs seeing no other new business this meeting is adjourned.