A preliminary audit by the state Controller's Office rattled administrators at the San Mateo County Health System in May, accusing them of filing more than $9 million in "disallowed" claims for special-education programs. Although health care officials disputed some of those numbers at a Board of Supervisors meeting last week, they conceded that the bulk of the money must be replaced.
The audit said that a whopping $9,470,772 of the $12,497,348 in claims filed by the Health System between 2006 and 2010 were null — a result of duplicate filings, incorrect provider rates and programs that no longer warrant reimbursement.
After meeting with budget experts, the department came up with numbers of its own, Health System chief Jean Fraser wrote to the Board of Supervisors. In its revision, the county whittled its "disallowed cost" deficit down to a more manageable $6,534,606.
"We will be disputing many of the audit's preliminary findings," Fraser said.
Nonetheless, the system will now have to replace the disallowed sum using various sources. The bulk of it will come from general-fund reserves, with some additional funds coming from the In-Home Supportive Services Public Authority, which provides elder care and services for people with disabilities.
The good news is that this won't affect San Mateo County residents, since the health department keeps reserves in hand to deal with potential audits. Administrators framed it as a one-time cost that would merely offset revenue projections for the coming year, and said that by digging into Health System coffers exclusively, they won't have to scrounge from the county pot.
But there's also a rub: Many disputed costs arose not from accounting errors, but from "social-skills training" for special-education students, which the state no longer wants to cover. Those programs might be imperiled going forward. A Health System spokeswoman said the county would work with local school districts to solve the issue.
Two years ago, the Commission on State Mandates determined that county spending on such programs shouldn't be reimbursed by the state, even if included as part of another state-covered service. County officials said the state retroactively applied that decision to social-skills training provided before 2011.
Controller's Office spokesman Jacob Roper didn't want to comment on an audit that was still being debated. He said it's standard procedure for the Controller's Office to monitor claims on state-mandated programs and then give local agencies a chance to refute its findings. Although the state is obliged to pay for any social service programs it foists on local governments, it also carefully monitors those programs and sometimes quibbles with counties over bookkeeping.
For instance, the state often audits school districts when they file claims to recoup the cost of notifying families about student truancy.
"There's a state mandate on how you notify families," Roper explained. If schools don't abide by the procedure, they might never see the money.
San Mateo County has a relatively sanguine view of its future audits, including one more from the 2009-10 fiscal year that might drain an additional $550,000 from county reserves. Administrators say it won't occur for several years, and they'll build an ample nest egg in the meantime. They believe that at least half of all future audit disputes will be reversed in the county's favor.