Institutional Federal Compliance Report 2021

2019-002

Finding: Insufficient level of precision in the State’s review of the year-end Medicaid accrual calculations

Severity of Control Deficiency: Material Weakness (Unremediated as of March 31, 2019)

Background

New York State’s Medicaid program is responsible for providing health insurance to millions of New York residents who would not otherwise have coverage due to low-income or high need for medical services. In the preparation of the basic financial statements, management is required to make a number of estimates and assumptions relating to the Medicaid program and the reported amounts of other receivables, accrued liabilities, due from Federal government, payable to local governments, deferred inflows of resources, Federal grant revenue and public health expenditures and the disclosure of contingent assets and liabilities at the date of the basic financial statements. The Medicaid program is generally funded 50% by the Federal government and 50% by the State government and Localities. Therefore costs are recognized in the Federal Special Revenue and the General Fund for Medicaid estimates along with the government-wide financial statements. Observations During the fiscal year ended March 31, 2019 audit, we identified the following issues resulting in the noted impact to the Medicaid estimates reported in the government-wide financial statements: • Federal Medical Assistance Program (FMAP) Liability properly included 2017, 2018 and 2019 outstanding liability however management erroneously recognized the related 2017 and 2018 expenditures again in FY’19 resulting in Federal Grant Revenue and Public Health Expenditures were overstated $248M as of March 31, 2019 and corrected by management • Incurred but not reported (IBNR) Claims Liability for Medicaid – Public Health Expenditures and Accrued Liabilities were understated $197M and Due from Federal government and Federal Grant Revenue were understated $131M as of March 31, 2019 and were corrected by management • Incurred but not reported (IBNR) Claims Liability for the Local Share of Medicaid funding above to local cap for FY’19 were not recognized as State Liabilities – Public Health Expenditures and Accrued Liabilities were understated $867M as of March 31, 2019 and were corrected by management • Medicaid Manufacturer Drug rebate receivable – Other receivables were understated and Public Health Expenditures was overstated by $732M and Federal Grant Revenue and Due from Federal government were overstated by $378M as of March 31, 2019 and were corrected by management. • Delivery System Reform Incentive Program (DSRIP) High Performance Fund Liability – Public Health Expenditures and Accrued Liabilities were understated $352M, and Due from Federal government and Federal Grant Revenue were understated $176M as of March 31, 2019 and were corrected by management. • Medicaid Rate Appeal Liability – Public Health Expenditures and Accrued Liabilities were understated $44M, and Due from Federal government and Federal Grant Revenue were understated $28M as of March 31, 2019 and were corrected by management • Claims Cycle payment cut-off – Accrued Expense, Public Health Expenditures, Federal Grant Revenue and Due from Federal government were overstated $1,825M as of March 31, 2019 and were corrected by management.