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Illinois Auditor General William Holland was so angry
over the Department of Healthcare and Family Services’ delays in
submitting information over the past year, he told them he was suspending
all activity on his audit and wouldn’t resume until the
“delinquent information” was provided. “For the first
time in 15 years, I walked away from an audit,” Holland said in an
interview. “I said, ‘You guys are just not being
responsive.’ ”
The 2007 fiscal year audit, finally completed and
released last week, reports 15 significant “findings,” problems
with how the state’s largest department handles its finances. The
primary problem, however, was foot-dragging: “The department did not
provide the auditors with timely and accurate financial statements.”
In the body of the report there is strong language: “The
department’s actions resulted in significant delays in the financial
reporting process, were dilatory, and were a disservice to the users of the
state’s financial reports.”
The incident shows how sensitive the Blagojevich
administration is to the large Medicaid deficit the state carries, at a
time when the governor is trying to expand health-care programs. Last month
the auditor general released a separate audit, this one showing that the
amount the state has owed medical providers at the end of the last four
fiscal years has averaged a whopping $1.5 billion. But if the
administration hadn’t lost its accounting fight with the auditor
general, the Medicaid deficit at the end of fiscal 2007 would have been only $851 million, the
lowest in years. Instead, the official audited books show the deficit at
$2.184 billion, the worst in years. At issue was how the new Hospital Provider Fund would
be shown on the books. An invention of the federal government, the program
collects money from hospitals, matches it with federal funds, then pays
nearly all of it back to hospitals, leaving the state with a small
“profit” for administering what is essentially a pass-through
program. HFS was authorized to distribute $2.4 billion through the program
in 2007, but the General Assembly only appropriated $1.2 billion for that
year. So at the end of the year did the state “owe” the other
$1.2 billion that was authorized but not appropriated? Though the comptroller’s office and the
Governmental Accounting Standards Board agreed with the auditor general
that the amount should be counted as a liability, the administration went
to great lengths, resulting in long delays, to keep it off the books.
According to the audit report, HFS brought in both a private law firm and a
top private accounting firm to work on this issue, in addition to its own
in-house legal counsel, a consultant from the governor’s office, and
the chief internal auditor. “They spent untold amounts” to make
their point, Holland says. The delay seemed intentional. On the very day
Holland made his final demand for records, HFS contracted with the
accounting firm to get another opinion. The financial statements for the
year ended June 30, 2007, weren’t submitted until March 2008. In the
end, the department conceded the point rather than settle for a
less-than-favorable opinion on the audit. “They must have realized
that their credibility was not so hot,” Holland says. All this seems like a childish spat until you reflect
on how the Medicaid funding mess hurts both providers and recipients. HFS
had a point but lost, and continuing to fight so hard over accounting seems
obsessive and political. If the Blagojevich administration would spend as
much time and energy working on real solutions as it did trying to make
itself look better on the books, the administration would be more
appreciated and the state would be better off. Accounting disputes and
delays don’t get the job done.
Contact Fletcher Farrar at ffarrar@illinoistimes.com.
This article appears in Jun 19-25, 2008.
