FRANKFORT, Ky. (April 1, 2025) – Kentucky Auditor Allison Ball released the second volume of the annual Statewide Single Audit of the Commonwealth of Kentucky (SSWAK) for Fiscal Year 2024. The audit identified several oversight and compliance failures within the Cabinet for Health and Family Services (CHFS) and one partially attributable to the Finance and Administration Cabinet (FAC). These failures cost Kentucky money and could put its federal funding at risk.
CHFS's and FAC's combined failure affected about 90 federal programs, and CHFS's additional failures affected Medicaid, adoption assistance, and other programs.
“The Statewide Single Audit of the Commonwealth calls attention to poor oversight in the Commonwealth's largest Cabinet," Auditor Allison Ball stated. “This year's findings indicate areas where CHFS and FAC must strengthen internal controls to protect taxpayer dollars and ensure compliance with federal law. My office will continue working with these agencies to address these issues and is committed to safeguarding resources that support Kentucky's most vulnerable populations."
Our office identified six findings within CHFS and FAC. CHFS lacks several strong internal controls over federal programs that could result in its noncompliance with federal requirements and potentially jeopardize federal funds awarded to the Commonwealth.
Notable Findings and Recommendations from SSWAK II Include:
- CHFS improperly used federal funds to make adoption assistance payments. Adoption Assistance maintenance payments are made on behalf of eligible adopted children to adoptive parents. In our review of 43 cases, CHFS incorrectly used $6,034 for reimbursement in federal funds rather than state funds for an adoption case determined to be fully state funded. In another instance, CHFS incorrectly paid an adoptive parent on behalf of the adoptee $5,667 in federal funds that should not have been reimbursed. These findings indicate that the Commonwealth could have been noncompliant with federal reporting standards and faced a projected error of $3,322,830 if our auditors had not caught the mistakes.
- CHFS failed to timely conduct Medicaid-required recertification surveys to ensure Medicaid recipients are receiving safe and quality care. Long-term care facilities are required to undergo routine survey recertifications to ensure compliance with Medicaid requirements and to maintain a safe, high-quality standard of care for vulnerable Kentuckians. During the testing of 37 facilities, auditors found 15 instances where required surveys were not conducted within the mandated time frames. CHFS confirmed that out of the 269 long-term care facilities in the Commonwealth, 127 facilities have not had a re-licensure survey since before 2024, with some dating as far back as 2019. This lack of oversight jeopardizes the safety, program performance, effectiveness, and overall quality of care for the vulnerable Kentuckians living at these facilities.
- CHFS failed to acquire documentation and perform verification of immigration status for at least one Medicaid applicant. CHFS failed to detect a non-citizen receiving Medicaid benefits, in direct violation of eligibility requirements. A sample of 40 cases reviewed identified that CHFS had no documentation regarding one individual's citizenship status and lacked verification of that status. Despite the small sample size tested, the true number of individuals receiving benefits without meeting eligibility requirements remains unknown. While individuals are allowed 90 days to provide immigration documentation, CHFS did not discontinue benefits for this individual despite the absence of required documentation and verification. Due to insufficient internal controls in the Medicaid immigration status process, CHFS faces an increased risk of making payments to ineligible non-citizens, being noncompliant with federal regulations, and repeating this failure that was first detected in fiscal year 2023. This potentially signals a larger issue regarding CHFS's failure to ensure that ineligible non-citizens do not receive Medicaid benefits.
- CHFS failed to identify duplicate Social Security Numbers for Medicaid participants. In two separate instances, CHFS failed to identify two Medicaid participants who were using the same Social Security Number, impacting four Medicaid cases. The Cabinet's electronic system failed to detect and flag the duplication, indicating that there could be a larger issue of failing to detect duplicative Social Security Numbers and increasing the risk of noncompliance with federal regulations.
- CHFS lacked proper policies and procedures to sufficiently monitor drug rebate invoicing reports. Due, in part, to CHFS lacking a formal policy and procedure about documentation, CHFS did not document the monitoring of reports submitted by Pharmacy Benefit Managers (PBMs) responsible for distributing quarterly drug rebate invoices, collecting payments, and communicating with manufacturers about delinquent balances. There is no documentation of CHFS reviewing PBMs' quarterly invoice reports, and this complete lack of oversight could lead to many problems, including undetected noncompliance with federal requirements.
- CHFS failed to accurately allocate indirect costs among 90 federal programs. An update to the Commonwealth's accounting system, eMARS, maintained by FAC, caused a duplication of records, leading to improper distribution of indirect costs across approximately 90 federal programs. This issue was not detected by FAC or CHFS before the eMARS update went into production, resulting in incorrect allocations for April, May, and June of fiscal year 2024. Improperly distributing federal funds across programs can put Kentucky's federal funding in jeopardy.
This report reviews compliance with federal requirements for federal funds spent by the Commonwealth, providing assurance to both the federal government and Kentucky taxpayers regarding the management and use of federal funds, while also highlighting areas for improvement. The full audit, including management's response to each finding and accompanying recommendations for Volume I and Volume II, is available on our website.
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