Legislature(2015 - 2016)HOUSE FINANCE 519

04/14/2015 01:30 PM House FINANCE

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01:31:10 PM Start
01:31:46 PM HB80
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ A Discussion Regarding HB 148 & HB 190: State of TELECONFERENCED
Alaska Single Audit, Recommendations for the
Dept. of Health & Social Services by Kris
Curtis, Legislative Auditor, Alaska Division of
Legislative Audit
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HB 80 Out of Committee
HOUSE BILL NO. 80                                                                                                             
     "An Act repealing the requirement for secondary                                                                            
     students to take college and career readiness                                                                              
1:31:46 PM                                                                                                                    
REPRESENTATIVE  LYNN GATTIS, SPONSOR,  provided a summary  of                                                                   
the  legislation.  She summarized  that  HB 80  repealed  the                                                                   
mandate   for   student   college    and   career   readiness                                                                   
assessments:  ACT,  SAT,  or  Work Keys  exams  in  order  to                                                                   
receive  a high  school  diploma.  She highlighted  that  the                                                                   
repealer  restored $525  thousand  in funding  that could  be                                                                   
better  spent  by  the  Department  of  Education  and  Early                                                                   
Development  (DEED).   The  assessments  were   an  "unfunded                                                                   
mandate"  that   diverted  the  school  district's   time.  A                                                                   
passing  grade  was not  required  so  was not  a  conclusive                                                                   
measure  of  student  readiness. She  hoped  that  the  "true                                                                   
identifier"  of readiness  was successful  completion of  the                                                                   
curriculum  the  school  had chosen.  She  relayed  that  the                                                                   
mandate   was  adopted   in   HB  78   (EDUCATION)   [Enacted                                                                   
5/13/2014]  during the  last legislative  session. She  asked                                                                   
for the committee's support.                                                                                                    
Co-Chair Thompson OPENED public testimony.                                                                                      
ROBERT  BOYLE,  SUPERINTENDENT,  KETCHIKAN  SCHOOL  DISTRICT,                                                                   
KETCHIKAN  (via  teleconference),  spoke in  support  of  the                                                                   
assessment  testing. He  maintained  that the  tests were  "a                                                                   
positive and  constructive concept."  He elaborated that  the                                                                   
testing offered  to juniors and  seniors was beneficial.  The                                                                   
district  required  career  readiness  tests  at  the  junior                                                                   
level  and administered  the  ACT/SAT  tests to  the  college                                                                   
bound  students  as  an avenue  to  obtain  scholarships.  He                                                                   
added that the  district gained a "solid database  of student                                                                   
performance"  as a result  of requiring  all juniors to  take                                                                   
the  Work Keys  assessment. He  urged the  committee to  keep                                                                   
the program intact.                                                                                                             
ROBIN   GRAY,  SUPERINTENDENT,   YAKUTAT   SCHOOL   DISTRICT,                                                                   
YAKUTAT  (via teleconference),  testified in  support of  the                                                                   
legislation.  She   relayed  that  the  requirement   was  an                                                                   
unfunded  mandate   and  had  an  onerous  impact   on  rural                                                                   
schools. The staff  hours it took to administer  the test was                                                                   
burdensome and affected  instruction time. She felt  that the                                                                   
tests had  value but  rural schools  lacked adequate  funding                                                                   
to implement the mandate.                                                                                                       
MARGARET    GRIFFITH,    SCHOOL   COUNSELOR,    KENAI    (via                                                                   
teleconference), testified  in favor of the  legislation. She                                                                   
relayed that she  administered approximately 15  tests during                                                                   
the year;  the tests were time  consuming and took  away from                                                                   
instructional  time,  counseling services,  crisis  response,                                                                   
career  and  future  planning, etc.  She  was  supportive  of                                                                   
SAT/ACT and Work  Keys testing provided by the  community and                                                                   
encouraged all of  the students to participate.  She reported                                                                   
that  waivers  were  available for  students  who  could  not                                                                   
afford  the testing.  The  district also  supported  students                                                                   
with disabilities to take the ACT/SAT tests.                                                                                    
Representative   Guttenberg   asked  whether   Ms.   Griffith                                                                   
represented the school district.                                                                                                
Ms. Griffith  replied that  she was  testifying on behalf  of                                                                   
ERIN NEISINGER,  SELF, KENAI (via teleconference),  testified                                                                   
in support of  the legislation. She agreed with  the previous                                                                   
testimony. She  shared that she  was a school counselor.  She                                                                   
communicated that  school counselors were often  the school's                                                                   
test coordinators.  She referenced  a survey administered  in                                                                   
the Kenai  Peninsula Borough School  District by a  counselor                                                                   
named  Sara Moore  [submitted  as a  letter]  (copy on  file)                                                                   
that  concluded  that  the  level   of  direct  and  indirect                                                                   
services counselors  were able to  provide to their  students                                                                   
was impacted  due to the overabundance  of testing.  She read                                                                   
the following from the document:                                                                                                
     We found  a significant difference between  those school                                                                   
     counselors  who also  are designated  as their  building                                                                   
     test coordinator  and those who  are not. A few  results                                                                   
     of note:                                                                                                                   
     100% of  non-test coordinator  counselors frequently  or                                                                   
     routinely  counsel students  regarding academic  issues;                                                                   
     only 25% of  test coordinator counselors are  able to do                                                                   
     so at the same level.                                                                                                      
     While 40%  of non-test coordinator counselors  routinely                                                                   
     counsel  with  students regarding  personal  and  family                                                                   
     concerns;  only 13%  of test  coordinator counselors  do                                                                   
     so on a routine basis.                                                                                                     
     60% of  non-test coordinator  counselors occasionally  /                                                                   
     frequently  or   routinely  conduct  classroom   lessons                                                                   
     addressing  career development  and the  world of  work;                                                                   
     compared to 38% of test coordinator counselors.                                                                            
     And  lastly,  80%  of  non-test  coordinator  counselors                                                                   
     frequently   consult   with  school   staff   concerning                                                                   
     student behavior;  compared to  13% of test  coordinator                                                                   
Ms.  Neisinger valued  the  importance  of SAT/ACT  and  Work                                                                   
Keys testing but  she felt that administering  the additional                                                                   
tests "put a strain on school counselors."                                                                                      
LADAWN DRUCE,  SCHOOL COUNSELOR, KENAI (via  teleconference),                                                                   
spoke  in  favor  of  HB  80.    She   reported  that  school                                                                   
counselors   followed   the   American    School   Counseling                                                                   
Association   (ASCA)   national  model.   She   shared   some                                                                   
information   from   the  associations   "ASCA   Mindsets   &                                                                   
Behaviors  for Student  Success:  K-12 College-  and  Career-                                                                   
Readiness  Standards for  Every  Student". She  informed  the                                                                   
committee that counselors  utilized the standards as  a guide                                                                   
to  help  prepare   the  students  for  college   and  career                                                                   
readiness.  She  listed  six standards  that  encouraged  the                                                                   
following mindsets for all students:                                                                                            
     Belief in development of whole self, including a healthy balance of                                                        
     mental, social/emotional and physical well-being.                                                                          
     Self-confidence in ability to succeed.                                                                                     
     Sense of belonging in the school environment.                                                                              
     Understanding that postsecondary education and life-long learning                                                          
     are necessary for long-term career success.                                                                                
     Belief in using abilities to their fullest to achieve high-quality                                                         
     results and outcomes.                                                                                                      
     Positive attitude toward work and learning.                                                                                
Ms. Druce  observed that  the newly  established College  and                                                                   
Career  Readiness  (CCR)  tests  took   time  away  from  the                                                                   
students  learning and  the counselors'  time  for what  they                                                                   
deemed  were   appropriate  college   and  career   readiness                                                                   
1:43:25 PM                                                                                                                    
PATRICK  MAYER,  SUPERINTENDENT,  WRANGELL  SCHOOL  DISTRICT,                                                                   
WRANGELL  (via  teleconference),  spoke  in  support  of  the                                                                   
legislation.  He  detailed  that the  district  had  a  great                                                                   
program for  preparing students  for postsecondary  education                                                                   
in  place.  He felt  that  college  bound students  took  the                                                                   
ACT/SAT  tests   regardless  of   the  mandate.  He   favored                                                                   
assessments that  determined how  students measured in  terms                                                                   
of academic growth.                                                                                                             
STAN     VANAMBURG,    NOATAK     SCHOOLS,    NOATAK     (via                                                                   
teleconference),  spoke in  support  of HB  80. He  concurred                                                                   
with  previous  testimony  that  the   tests  detracted  from                                                                   
instructional  time. However,  he believed  that the  SAT/ACT                                                                   
and  Work Keys  testing  was  important especially  in  rural                                                                   
areas  where  access  to  testing  centers  was  limited.  He                                                                   
emphasized  that  the  state  needed   to  support  students'                                                                   
access  to  the tests.  He  discerned  that  the  assessments                                                                   
helped prepare  students "for post  high school training  and                                                                   
jobs" and  offered "accountability"  for the  schools in  the                                                                   
areas  of career  readiness. He  concluded  that although  he                                                                   
supported  the  legislation  he  wanted  to  ensure  students                                                                   
still maintained access to the tests.                                                                                           
Co-Chair Thompson CLOSED public testimony.                                                                                      
Representative  Munoz   wondered  how  students   would  gain                                                                   
access   to  a   preparatory  course   if   the  tests   were                                                                   
Representative  Gattis replied  that  rural communities  were                                                                   
interested in the  issue. She read from a  document [included                                                                   
in members  files] titled;  "Becoming an  SAT test center  is                                                                   
easy" (copy on file) by the College Board:                                                                                      
     Becoming an SAT test center is easy.                                                                                       
     The two  most important requirements  for a test  center                                                                   
     are  proper  facilities,  and   a  professional  who  is                                                                   
     qualified  and  willing  to serve  as  the  test  center                                                                   
     supervisor.  The  SAT  Program   will  provide  all  the                                                                   
     necessary   training,  testing   material  and   support                                                                   
     needed to administer the SAT.                                                                                              
Representative  Gattis  shared  that  becoming  an  SAT  test                                                                   
center was possible in rural communities.                                                                                       
Representative   Guttenberg  understood   the  concerns.   He                                                                   
wondered  how  a  school  would  know   what  it's  student's                                                                   
proficiency   were  since   the  test  were   paid  for   and                                                                   
administered privately  and the school  was not aware  of the                                                                   
scores.  He  deduced  that  there was  no  way  of  assessing                                                                   
student's proficiency  across the state without  knowledge of                                                                   
the  scores. He  wondered how  to rate  education across  the                                                                   
Representative  Gattis agreed  that when a  student paid  for                                                                   
the SAT/ACT  test only  they had  access to  the scores.  She                                                                   
relayed that  the state administered  the Alaska Measures  of                                                                   
Progress  (AMP) standardized  tests  and scores  were  shared                                                                   
across districts and linked with districts in the Lower 48.                                                                     
Representative  Guttenberg referenced  an  email he  received                                                                   
from a  superintendent that alluded  to removing the  opt-out                                                                   
provision   from   the   original    bill.   He   asked   for                                                                   
Representative   Gattis   responded  that   she   anticipated                                                                   
introducing a  Committee Substitute  (CS) that added  an opt-                                                                   
out  provision from  the  AMP  tests but  reconsidered  since                                                                   
session was almost  over and she did not want to  bog down HB
80 with  an issue  over standardized  testing. She  announced                                                                   
that another  bill was  moving through  the legislature  that                                                                   
contained the opt-out provision.                                                                                                
Vice-Chair  Saddler remarked  that tests  were important  and                                                                   
valuable and that  the SAT/ACT tests qualified a  student for                                                                   
scholarships.  He  believed  that   the  tests  provided  and                                                                   
independent   assessment   and  if   a  school   wanted   the                                                                   
information  it could  pay for  it. He  stated that  WorkKeys                                                                   
was a  valuable vocational aptitude  test. He understood  the                                                                   
concerns about the  unfunded mandate and the limited  time in                                                                   
an  instructional   day,  and  demands   on  the  staff.   He                                                                   
supported  the legislation  but encouraged  students to  take                                                                   
the tests as a "worthwhile" endeavor.                                                                                           
Co-Chair Thompson REOPENED public testimony.                                                                                    
DEENA   PARAMO,   SUPERINTENDENT,   MAT-SU   BOROUGH   SCHOOL                                                                   
DISTRICT, PALMER  (via teleconference), testified  in support                                                                   
of  the  legislation.  She believed  that  the  students  and                                                                   
their  families  should  retain the  ability  to  choose  the                                                                   
college readiness  or Work  Keys tests  that best suit  their                                                                   
future needs and  that the testing costs were not  the school                                                                   
districts  responsibility.  She  detailed  that  the  testing                                                                   
companies  and school  district covered  the fees  associated                                                                   
with  testing for  students who  could not  afford them.  She                                                                   
shared  that the  school  district  in partnership  with  the                                                                   
Rasmussen  Foundation  and  the  National  Math  and  Science                                                                   
Initiative  paid a  student $100.  for successful  completion                                                                   
of  Advanced  Placement  (AP)  testing.   She  asserted  that                                                                   
school districts  had a  vested interest  in seeing  students                                                                   
succeed  so that  removing the  revenue should  not stop  the                                                                   
district  from  taking  the  proper   course  of  action.  An                                                                   
unintended  consequence  of  requiring tests  had  created  a                                                                   
significant  burden  on  school  counselors  and  diverted  a                                                                   
"disproportionate amount  of their duties" to  testing rather                                                                   
than  counseling  duties.  She  deemed   that  schools  would                                                                   
continue  to  have  ample  opportunity  to  "facilitate"  the                                                                   
tests without  impacting instructional time with  adoption of                                                                   
HB  80. She  elaborated that  each test  had its  own set  of                                                                   
allowable accommodations  that included  students with  IEP's                                                                   
(Individual Education  Program). In  a circumstance when  the                                                                   
allowable  and acceptable  accommodations for  each IEP  were                                                                   
not followed the  assessment became invalid. She  opined that                                                                   
the Alaska Performance  Scholarship (APS) should  continue to                                                                   
require  a college  or career  assessment in  order to  apply                                                                   
and accept  funds from  the state. She  believed that  if the                                                                   
state  was  willing to  assist  in  paying for  the  testing,                                                                   
students   should  share   in  the   responsibility   through                                                                   
academic achievement  and allowing themselves to  be assessed                                                                   
on college  and career measures.  The districts should  set a                                                                   
target  and  allow  the  students  to  demonstrate  they  can                                                                   
achieve  success in  order to have  access to  the funds  for                                                                   
postsecondary   testing  instead   of   simply  offering   an                                                                   
entitlement. She  reiterated support for the bill  and wanted                                                                   
the districts  to maintain "local  control" to determine  the                                                                   
assessments   and  curriculum   requirements   that  led   to                                                                   
successful  completion of  a high school  diploma. She  added                                                                   
that districts  received aggregate  data on SAT/ACT  compared                                                                   
to other schools districts in the state.                                                                                        
1:58:10 PM                                                                                                                    
Representative Gara  referred to the  AMP tests. He  reported                                                                   
that  the  Department  of  Education  and  Early  Development                                                                   
(DEED)  contended that  if  AMP testing  was  moved to  every                                                                   
four years a penalty  would be imposed. He wondered  what the                                                                   
penalty entailed.                                                                                                               
Ms. Paramo  answered that  the penalty  was possibly  related                                                                   
to a  waiver from  the federal  No Child  Left Behind  (NCLB)                                                                   
provisions.  She revealed  that  the new  federal  Elementary                                                                   
and  Secondary Education  Act  (ESEA)  would give  the  state                                                                   
more accountability  and the  penalty may  be negated at  the                                                                   
federal  level. She  explained that  the  penalty could  fall                                                                   
under  Title One  provisions  that were  funded  entitlements                                                                   
granted to the state to carry out federal mandates.                                                                             
Representative   Gara  opined  that   the  tests  were   fake                                                                   
aptitude  tests because  scores were  improved by  completion                                                                   
of preparatory  classes. He did not  want to put  students at                                                                   
a  disadvantage on  the  SAT/ACT and  was  supportive of  any                                                                   
preparatory  coursework  districts  offered. He  wondered  if                                                                   
eliminating  the testing  requirements  would  also halt  any                                                                   
preparatory  coursework   for  students  that   the  district                                                                   
Ms.  Paramo  responded  that  each   district  "most  likely"                                                                   
provided   preparatory  courses   that   the  students   were                                                                   
interested  in taking. She  asked the  committee if prior  to                                                                   
passage   of  the   mandate  whether   any  individuals   had                                                                   
approached  the  legislature requesting  financial  help  for                                                                   
SAT/ACT  fees.  She offered  that  local  districts  provided                                                                   
support  for  the   fees  and  believed  that   "the  state's                                                                   
function" was not necessary.                                                                                                    
Representative  Gara asked whether  removing funding for  the                                                                   
assessment tests  would cause the districts to  eliminate any                                                                   
preparatory coursework a district may provide.                                                                                  
Ms. Paramo replied in the negative.                                                                                             
Co-Chair Thompson CLOSED public testimony.                                                                                      
Vice-Chair  Saddler MOVED to  REPORT HB  80 out of  committee                                                                   
with individual  recommendations and the accompanying  fiscal                                                                   
note. There being NO OBJECTION, it was so ordered.                                                                              
HB  80  was  REPORTED  out of  committee  with  a  "do  pass"                                                                   
recommendation  and  with  one  previously  published  fiscal                                                                   
impact note: FN1 (EED).                                                                                                         
2:02:33 PM                                                                                                                    
AT EASE                                                                                                                         
2:04:28 PM                                                                                                                    
^DISCUSSION:  STATE OF ALASKA  SINGLE AUDIT,  RECOMMENDATIONS                                                                 
FOR THE DEPARTMENT OF HEALTH AND SOCIAL SERVICES                                                                              
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,   ALASKA  DIVISION   OF                                                                   
LEGISLATIVE AUDIT,  referred to the audit report  provided to                                                                   
the legislature titled  "Summary of: State of  Alaska, Single                                                                   
Audit  for the  Fiscal Year  Ended  June 30,  2014" (copy  on                                                                   
file).  She reported  that  the  single audit  was  performed                                                                   
every  year as  a requirement  for  receiving federal  funds.                                                                   
Sixteen  out of  forty-three  of the  audits  recommendations                                                                   
were  directed  to  the  Department   of  Health  and  Social                                                                   
Services  (DHSS). She  notified the  committee  that she  was                                                                   
instructed   to   focus   her   discussion   on   the   eight                                                                   
recommendations related to the Medicaid program.                                                                                
Ms.  Curtis  directed  attention  to  page II  -  34  of  the                                                                   
document    and    read    the    following    recommendation                                                                   
[Recommendation No. 2014-011]:                                                                                                  
     DPA's  (Division of Public  Assistance) director  should                                                                   
     ensure  the social security  number (S  SN) of  Medicaid                                                                   
     benefit  applicants  is  verified   prior  to  providing                                                                   
Ms.  Curtis  pointed out  that  DHSS  eligibility  procedures                                                                   
included making a  copy of the physical social  security card                                                                   
for  the  case  file or  verifying  the  number  through  the                                                                   
Internal Revenue  Service's (IRS)  system prior to  providing                                                                   
benefits.  Eligibility  technicians   failed  to  verify  the                                                                   
social security  number (SSN) from  either procedure  for two                                                                   
out of  twenty-five Medicaid  applicants tested. She  relayed                                                                   
that the  department concurred  with the recommendation.  She                                                                   
moved to  the next recommendation  [Recommendation No.  2014-                                                                   
013] on page II - 37 and read the following:                                                                                    
     The  Division  of  Senior  and   Disabilities  Services'                                                                   
     (DSDS)    director    should   continue    to    improve                                                                   
     documentation   procedures  and  provide  oversight   to                                                                   
     ensure provider certification files are complete.                                                                          
Ms.  Curtis revealed  that  the recommendation  was  repeated                                                                   
from FY 2011. She read:                                                                                                         
     The  incomplete files  did  not provide  assurance  that                                                                   
     providers  and  employees  were  properly  screened  and                                                                   
     adequately  trained  prior  to  certification,  Although                                                                   
     DSDS   management   developed  procedures   to   improve                                                                   
Ms. Curtis  related that in  response to the prior  findings,                                                                   
DSDS instituted  measures  to remedy the  situation but  were                                                                   
not "effective"  in FY  2014. The  department concurred  with                                                                   
the  recommendation. She  cited page  II  - 38  and read  the                                                                   
following recommendation [Recommendation No. 2014-014]:                                                                         
     The  Division  of  Behavioral  Health's  (DBH)  director                                                                   
     should continue  to make improvements to  ensure out-of-                                                                   
     state  residential psychiatric  treatment center  (RPTC)                                                                   
     providers  are  paid  in  accordance  with  federal  and                                                                   
     state   requirements  and   that   rates  are   properly                                                                   
     In  FY 14.  Dl- ISS'  Office of  Rate Review  management                                                                   
     developed policies  and procedures for documenting  rate                                                                   
     setting  for RP)'C providers.  However, procedures  were                                                                   
     not  followed  as designed  indicating  that  additional                                                                   
     improvements are needed.                                                                                                   
Ms. Curtis stated that the recommendation was repeated.                                                                         
Representative   Gattis  wondered  how,   in  light  of   the                                                                   
proposed expansion,  the department "would get it  right this                                                                   
Ms. Curtis replied  that the Medicaid program  was "extremely                                                                   
complex"   and   it   was   "reasonable"   to   expect   some                                                                   
inadequacies.  Federal   audits  required  that   even  small                                                                   
findings   must   be  reported.   She   conveyed   that   the                                                                   
recommendations  were more  of an  "indication"  of the  need                                                                   
for  improvements   rather  than  an  indictment   "that  the                                                                   
department  was not  getting it  right." The  recommendations                                                                   
were not necessarily related to expansion.                                                                                      
Representative  Gattis  felt  that  repeated  recommendations                                                                   
from 2011 were  an indication that the department  was "still                                                                   
not   getting  it"   after  they   were   directed  to   make                                                                   
improvements. She understood that Medicaid was complicated.                                                                     
Ms. Curtis answered  that in the following year  the auditors                                                                   
often discovered  that "competing  priorities" or  "competing                                                                   
resources"  prohibited  the  department   from  correcting  a                                                                   
recommendation.  She agreed  that when  a recommendation  was                                                                   
not  addressed   after  several   years  the  situation   was                                                                   
Representative  Wilson wondered  how  often  the Division  of                                                                   
Legislative  Audit revisited  the  issues identified  in  the                                                                   
Ms.  Curtis  responded   that  the  particular   issues  were                                                                   
revisited   annually.   She   explained    that   a   federal                                                                   
requirement of  the single audit  directed DHSS to  develop a                                                                   
"schedule  of   prior  audit  findings"  that   provided  the                                                                   
current status of  the recommendations. She stated  that even                                                                   
if the  division did  not test a  finding the following  year                                                                   
the division followed  the progress through  the department's                                                                   
schedule of prior  audits, which was attached to  the current                                                                   
Representative Wilson  noted that even though  the department                                                                   
concurred  with the findings  in some  cases issues  remained                                                                   
after  several years.  She wondered  whether,  at some  point                                                                   
the  division   required  a  third-party  to   institute  the                                                                   
corrections  or if  the  division  further examined  why  the                                                                   
corrective procedures were not working.                                                                                         
2:12:30 PM                                                                                                                    
Ms. Curtis replied  that the division would  continue current                                                                   
year findings  if they  were important  enough to include  in                                                                   
the  audit report.  Typically  the department  addressed  the                                                                   
recommendations in  a timely manner.  The division  would not                                                                   
recommend  a  third-party;  corrective   action  was  usually                                                                   
attained by working with the commissioner.                                                                                      
Representative Wilson  wondered whether a penalty  was issued                                                                   
for non-compliance.                                                                                                             
Ms. Curtis  answered that the  penalty came from the  federal                                                                   
Centers for  Medicare &  Medicaid Services  (CMS). The  state                                                                   
would be  assessed "questioned costs."  Some of the  findings                                                                   
and  recommendations had  questioned  costs  and the  federal                                                                   
government  would decide whether  the state  would repay  the                                                                   
Representative  Wilson   voiced  that  the  state   paid  the                                                                   
penalties and not the department.                                                                                               
Ms. Curtis continued with recommendation 2014 on page II-                                                                       
38. She read:                                                                                                                   
 "However,   procedures  were   not   followed  as   designed                                                                   
indicating that additional improvements are needed."                                                                            
Ms. Curtis  relayed that  DHSS partially  concurred with  the                                                                   
recommendation.  The  department   maintained  that  although                                                                   
documentation was  not sufficient  the rates were  consistent                                                                   
with  the regulations  and did  not  result in  overpayments.                                                                   
She  addressed  page  II-42,  [Recommendation  NO.  2014-017]                                                                   
that stated:                                                                                                                    
     DSDS'   director   should  ensure   provider   employees                                                                   
     receive  timely,   complete,  and  approved   background                                                                   
     clearances  and  that  the  information  supporting  the                                                                   
     clearance is properly documented.                                                                                          
Ms.  Curtis detailed  that  the recommendation  was  repeated                                                                   
and  expressed concern  because the  finding  was related  to                                                                   
public safety. She read further:                                                                                                
     In   FY  14,   15   of  30   tested   Medicaid26provider                                                                   
     certification  files  were  missing   complete  criminal                                                                   
     history background checks.                                                                                                 
     According  to  DSDS management,  due  to the  volume  of                                                                   
     providers and  lack of staff resources, DSDS  staff must                                                                   
     rely on DHSS'  Background Check Unit to  ensure provider                                                                   
     employees   in   provisional   status   are   ultimately                                                                   
     approved.  By not  following  up on  the  status of  the                                                                   
     background   checks,  DSDS  staff   does  not  know   if                                                                   
     provider  employees  are  ultimately  approved  to  work                                                                   
     with  clients. Additionally,  DSDS staff  does not  have                                                                   
     procedures  to ensure barred  employees do not  continue                                                                   
     to work for providers.                                                                                                     
Ms. Curtis  reported that the  department concurred  with the                                                                   
findings. She moved  to page II-44 [Recommendation  No. 2014-                                                                   

018] and read: The Medicaid and Health Care Policy (HCP deputy commissioner and FMS assistant commissioner should improve procedures to ensure overpayments to Medicaid providers are refunded to the federal agency within the specified time frame. Ms. Curtis commented that the recommendation was repeated from FY 2013. She continued to read: In FY 1 3, an overpayment recovered from a Medicaid services provider was not refunded to the federal agency within one year. As a result, the federal agency overpaid the Slate S73, l81 thousand. In FY 14, procedures were updated; however, upon review of the procedures it was noted that they do not address all types of overpayments or recoveries. Ms. Curtis related that the division recommended that the deputy commissioner "continue to make the improvements and expand the procedures." Representative Gara communicated that over the years the committee had asked DHSS to do more with less staff and funding and focus on providing services to clients. Therefore, he believed that the types of findings identified were bound to happen. He asserted that the department was performing well enough to qualify for bonus payments from the federal government. If the same test was applied to every department issues would be discovered. He pointed out that the Department of Environmental Conservation (DEC) admitted in public that it could not meet food safety standards. He did not understand why the review was taking place. In the midst of budget cuts agencies clearly lacked enough staff to perform administrative work. Co-Chair Thompson believed it was a good way to determine what deficiencies were occurring in the departments and part of the process of reform. He suggested that an audit review should occur in every finance subcommittee for every department. Representative Gara understood the rationale and commented that if the state would not provide adequate resources the departments would continue to fail. Ms. Curtis continued on page II-45 with Recommendation Number 2014 - 019. She read: DHSS' commissioner should take action to implement effective controls to ensure Medicaid claims are processed accurately and timely. Ms. Curtis provided background information regarding recommendation no. 19 and informed the committee that it was one of three recommendations regarding the Alaska Health Enterprise (AHE) system. During FY 14. Dl 155 replaced its legacy Medicaid management information system. The Alaska Health Enterprise (AHE) system, also known as the Medicaid claims system, began operating October 1. 2013, and encountered significant widespread defects. DHSS and its system development contractor, Xerox were aware that the AHE system contained 44 defects at the time of implementation. Rather than delay implementation of the system until defects were addressed DHSS developed work around plans to manage the known system defects and they proceeded with implementation. Once implemented the known defects climbed to 546. While some of the defects were addressed during FY 14, at the end of August 2014 the system still had identified 451 unresolved defects. Ms. Curtis delineated that as one of the three recommendations the division made to address the defects recommendation no. 19 addressed the federal compliance impacts of the system defects. She read further: The AHE defects resulted in a material weakness in internal controls over the Medicaid and CHIP programs' allowable costs and eligibility compliance requirements. Due to the complexity of Medicaid program operations, we were unable to support an opinion that Medicaid and CHIP expenditures were in compliance with applicable laws and regulations without the ability to rely upon the ARE system's internal controls. Representative Gattis wondered whether more money would have cured all of the defects. Ms. Curtis deferred the question to DHSS. Representative Gattis was uncertain that money would have cured the problem. She deduced that the problem was inherent with the software itself. Ms. Curtis answered that the audit had not concluded that any amount of money was the source of the problem. Vice-Chair Saddler asked for the definition of material weakness. Ms. Curtis read the definition of material weakness: "A deficiency in internal control exists when the design or operation of the control does not allow management or its employees in the normal course of business to detect or correct misstatements. A material weakness is a deficiency or combination of deficiencies in internal control such that there is a reasonable possibility that material misstatement of the entities financial statements, or in this case, material noncompliance with the federal law would not be prevented or detected on a timely basis." Vice-Chair Saddler surmised that due to the material weakness not enough information existed to accurately assess the situation; good or bad. Ms. Curtis acknowledged that the situation was not good, but not enough evidence could be obtained to support an opinion that deficiencies were material. The division qualified its opinion on federal compliance. Vice-Chair Saddler wondered how many state programs, divisions and efforts resulted in material weaknesses. Ms. Curtis answered that the condition was rare in a federal program. Representative Gara maintained that he had never said that money could have fixed the Xerox problem. He knew of the commissioners' efforts to try and solve the problem for many years. He understood that currently claims were being paid in a timely manner, but that the department was still working on backlogs. He asked for verification. Ms. Curtis did not know the current status of the Xerox problem. She continued on page II-46 and read: We could not obtain sufficient evidence to determine the accuracy of the claims processed and conclude if eligibility requirements were applied correctly through the interface process. Ms. Curtis read the areas of non-compliance: Providers were paid for duplicate claims and were over and/or under paid due to the inaccurate claim eligibility and pricing. Identified Medicaid 3°federal questioned costs for duplicate claims totaled $10,459. Likely questioned costs are higher for this deficiency. • Claims were assigned incorrect funding codes. Four non-Medicaid recipients were identified and miscoded to Medicaid resulting in federal questioned costs of $10,970. Additionally, approximately $1.8 million was identified in claims that were incorrectly coded to CHIP. 31 Likely questioned costs are higher for this deficiency. Program errors related to the Medicare buy-in program caused incorrect payments to the federal agency including payments for ineligible recipients. Questioned costs were indeterminate. The surveillance and utilization review program 32was ineffective due to unreliable system data and inadequate staffing. Staff was reassigned from the surveillance and utilization review program to help address system defect errors. • Program integrity staff was unable to complete investigations and pursue collections of potential overpayments from providers due to unreliable system data. Ms. Curtis continued and read: Because of the defects the Al-IF system was not a fully operational or federally certified Medicaid system during FY 14. The AT IF system processed approximately S 1.1 billion in claim expenditures during FY 14 which resulted in $658.8 million in federal revenues. AHE expenditures were material to the Medicaid and CHIP federal programs. Ms. Curtis continued with the second recommendation regarding the AHE system that dealt with the financial impacts to the system. She read from Recommendation 2014- 021 on page II-50: DHSS' commissioner should work with Xerox to correct defects in the AHE system. Because of the complexity of medical claims processing, we could not determine the extent of misreporting resulting from system defects. However, since the defects affected every area of AHE system operations and the amounts processed through the AHE system are material to the financial statements, the combination of the issues above represent a material weakness in internal control and could result in a material misstatement to the financial statements. The FY 14 General Fund and Governmental Activities audit opinions were qualified in recognition of the material weakness and a lack of ability to obtain adequate evidence. Representative Guttenberg commented that the Xerox situation had been happening over a number of years. He wondered if the department had addressed the problem correctly, at adequate stages as the problems were identified. He observed that the Xerox system was impaired but the department suffered the blame. He thought the problem with the department was insufficient and untimely responses to the problems as they occurred. He asked for clarification. 2:30:51 PM Ms. Curtis answered that the audit had not evaluated the department's response or system lifecycle development of the project and noted that it was not an audit objective. She offered that it was easier to determine decisions that should have been made in hindsight. She acknowledged that department staff had worked hard to fix the errors. She could not judge whether it was a lack of the staff's ability to resolve the problems. Representative Guttenberg appreciated that the audit identified specific problems with the Xerox system and that the department moved past the initial problems and was working on "fixing" the system. Looking forward, the audit did not contain specific measures the department could take. He voiced that he could only fault the department for lack of response to problems as they developed but wanted to hear from the department before he made that conclusion. Ms. Curtis replied that audits looked backwards not forwards. She understood that committee members were interested in looking forward and wanted assurance from the department that the system was working. She stated that in FY 2015 the audit will ask DHSS if the system was certified by CMS, which indicated the system was operational. The audit would examine whether the system was subject to the "SSAE16 Report." She defined that SSAE16 stood for "Statement on Standards of at the Station Agreements" and was a report on internal controls of the system. The report was a condition of federal compliance and required for financial auditing, and part of the Xerox contract. She communicated that the division would regard the report "as evidence that the system was working." Representative Gara cited recommendation 21 on page II-50 that directed the commissioner to work with Xerox to correct the defects in the AHE system. He suspected that a company like Xerox had a legal team advising the company not to admit to any liability. He deemed that the recommendation would be problematic for DHSS to carry out. He asked for the division's assessment. Ms. Curtis responded that she did not have a view on the issue. She elaborated that audit recommendations were always addressed to the parties that could institute change. The department needed assistance from the contractor in order to address the problems thus, the recommendation was written to both parties. Representative Guttenberg wondered about a difference between Xerox LLC. versus Xerox Corporation. Ms. Curtis did not know the answer. She continued to address recommendation 21. She summarized that the division had to qualify the financial audit opinion due to the weakness and lack of ability to obtain adequate evidence. The audit listed issues relating to some of the financial aspects of system defects on page II 51. She read the following: Suspended Claims Backlog: As of the end of August 2014, the AHE system had a significant backlog of 98,736 suspended claims totaling $184 million. It is not possible to accurately identify the number and amount of claims suspended due to system defects as opposed to other non-system related reasons. Furthermore, it is not possible to determine how many of these claims will be deemed eligible and the amount paid until the claims are successfully processed by the ARE system. Since claims are not determined eligible and priced until processed by the ARE system, suspended claims delayed providers from being compensated for services provided. • Interface Issues: The AHE system has interface problems with DHSS' eligibility information system, pharmacy benefit management system, third party liability system, and the Department of Commerce Community and Economic Development's occupational licensing database. As a result of these issues, risks exist that eligible members are not receiving services and ineligible members are inappropriately receiving services; pharmacy claims are being processed incorrectly; providers without licenses are receiving payments; and private insurance reimbursements are not being collected. While Xerox and DHCS personnel are performing manual procedures to mitigate system defects, considering the volume of claims, the manual procedures are only partially effective in identifying and correcting all errors. • Payment Issues: The ARE system has numerous payment related deficiencies, including paying providers for duplicate claims, over and underpaying providers due to miscalculation of claim eligibility and pricing.… • Funding Source Issues: Claims are assigned funding sources by the ARE system which, among other things, are used to determine the percentage of federal reimbursement for which each claim is eligible. AHE system defects caused claims to be assigned incorrect codes which resulted in inaccurate federal reimbursement. • C'heck- Write Issues: Claims processed and paid through the ARE system (check-writes) should be seamlessly interfaced with the state accounting system (AKSAS). However during FY 14, the ARE interface files required manual adjustments to ensure they correctly interfaced AHE system activity with AKSAS. Ms. Curtis cited the final finding, Recommendation No. 2014-022 on page II-53 [DHSS' commissioner should ensure financial activity is properly classified in AKSAS.} that addressed the audit adjustment that was necessary in order to properly report the department's advances in the state's financial statements. She read the following from page II - 53: [DHSS incorrectly classified $131 million in advance payments to Medicaid providers as FY 14 General Fund expenditures.] During FY 14, AHE system defects prevented some providers from receiving correct and timely reimbursement for provided services. (See Recommendation No. 2014-021.) To ensure Medicaid clients continued receiving services, DHSS management advanced funds to affected providers. The practice of advancing general funds without federal reimbursement caused DHSS to encounter expenditure authorization problems as the related appropriations were funded, in large part, by federal receipts. Based on an analysis by DHSS staff55 that suspended claims supported the $ I31 million in advances, DHSS obtained approval from the federal oversight agency to draw federal funds. Federal approval was initially made under the condition that the suspended claims would be successfully processed by the end of the federal fiscal year (FFY) and recorded correctly on the CMS-64 report. Ultimately, this was not possible, and CMS oversight officials allowed DHSS to retain approximately $78 million of related federal revenues and report the advances on the CMS-64 report as expenditures for the FFY ended September 30, 2014, with the understanding that DHSS will make adjustments to correct inaccurate claiming in the future. Ms. Curtis detailed that accounting rules prohibited the corrective measures from being reported as expenditures since expenses had not occurred and revenue was also not recognized. Therefore, the division made an audit adjustment in order to properly report the activity in the state's financial statements. The division was mandated to include an audit recommendation due to the size of the audit adjustment. 2:41:24 PM Representative Gara believed one recommendation was missing. He acknowledged the hard work by the previous and current commissioners to correct the problems. He did not want to blame the department for problems caused by Xerox. He suggested a recommendation that the contractors would be fully liable for any damages for all new technology systems. He asserted that many problems developed with computer systems purchased by the state for numerous agencies. He spoke to overall damages the state would have to pay related to companies that were no longer in operation and the additional staff hires and staff time diverted to corrective measures. He thought that an "ironclad" liability provision was in order and that contractors should be fully liable for all damages in the future. He wondered if the division had looked into the issue. Ms. Curtis answered in the negative. She noted that the division examined the contract to understand the requirements. She offered that the issue raised a larger issue. She indicated that the division had encountered similar situations where the corrective action to problems was to implement a new system and a smooth application rarely occurred. She advocated that the Legislative Budget and Audit Committee (LBA) analyze what central controls the state had in place to ensure that the system procurement process and development followed industry best practices. Representative Gattis agreed and assured the division that in her capacity as Chair of the Department of Administration finance subcommittee she would examine the issue throughout the interim. Representative Guttenberg shared that because of his experience as a juror he was aware of the necessity defense. He thought that the department's situation was warranted because "breaking the law to fix the problem was agreeable because there was nothing else to do." He related that the providers were on the verge of "going out of business" because payments were halted. He wondered if there was anything in general accounting procedures that addressed this type of situation. He wondered what appropriate course of action the state had to deal with similar audits that identified violations of accounting practices and when the federal government was not living up to accepted practices. Ms. Curtis answered that general accounting practices would not specifically address the situation but looked at how the state reported the advances and financial activity it made. She did not believe federal regulations would address the issue either. She surmised that the accounting world would never address "holding parties accountable for actions that were or were not taken." Representative Guttenberg wondered whether the state took appropriate reporting action on its financial statements. Ms. Curtis replied that the financial statements were compiled and reported by the Division of Finance, DOA and included a footnote explaining the activity. She added that due to the suspended claims and backlog the division considered the situation a "contingency" for expenses incurred but not reported. Representative Gara asked for verification that the audit applied through November, 2014. Ms. Curtis answered in the affirmative. She elaborated that the division's field work lasted through November, 2014 and the period examined ended August, 2014. SANA EFIRD, ASSISTANT COMMISSIONER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, made a general statement about how seriously the department took the audit findings. She relayed that she had been with the department for two years. She shared that former Commissioner Bill Streur prioritized the monitoring of federal funds and established a section called the "Federal Allocation Management Unit." The unit consisted of three accountants that worked with the large entitlement programs who were in charge of financial reporting, coordinated the audit findings and worked actively with Ms. Efird and all of the divisions on audit findings. The department viewed audit findings as a gauge for improvement. She notified the committee that the department received over 50 percent of the federal money coming into the state mostly through Medicaid, Title 4E (foster care and adoption program), and the Temporary Assistance for Native Families (TANF). However, DHSS dealt with over 220 other federal programs with requirements that changed on an annual basis. She detailed that the federal Office of Budget and Management (OMB) Circular 133 required the department to actively address the audit findings for federal programs. She reiterated how seriously DHSS took audit findings and elaborated that she met with appropriate division directors and operations managers to address how improvements could be made. 2:52:27 PM Representative Guttenberg was concerned about a finding on page II-42, Recommendation No. 17 related to eligibility background checks. He felt that the issue was potentially serious and wondered how the department rectified the issue. DUANE MAYES, DIRECTOR, SENIOR BENEFITS SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (via teleconference), replied that the issue arose three years ago specific to the background check unit. The division had arduously worked on "the implementation of strengthened provider background check and oversight procedures. MARGARET BRODIE, DIRECTOR, HEALTHCARE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES (via teleconference), elaborated the DHSS implemented an entirely new background check program. The database was working "extremely well." In the past individuals could remain in the system without a final clearance, but the new system terminated an individual without final clearance within three months. Representative Guttenberg wondered whether she was referring to state or provider employees. He thought three months "seemed like a long time" if the wrong individual was in the system. Ms. Brodie answered that she was referring to provider employees. She explained that three months was the maximum amount of time it could take and if fingerprints were available clearance occurred within one week. Representative Guttenberg cautioned that the issue was important enough to monitor. Representative Munoz spoke to page II - 51 [Recommendation No. 21] regarding the approximately 100,000 suspended claims totaling $184 million and the identified risks concerning the interface issues. She wondered whether the possible threats to the system that had been identified had been ruled out, i.e., services to ineligible members and payment to providers without licenses. She asked the department to speak to the issue. Ms. Efird answered that under the direction of Commissioner Valerie Davidson vast improvements to the Medicaid Management Information System (MMIS) occurred since the audit. The department worked with Xerox to implement its corrective action plan. Ms. Brodie added that the suspended backlog was based on billed charges and had included many duplicate claims. Providers had not received payment and were re-submitting claims. The dollar amount was much lower than reported. Currently, the suspended claims had been reduced to less than 10 percent and the majority were addressed within 30 days of submission. She elaborated that certain claims such as school based services were supposed to suspend until a check from the school district was received. She reported that problems with unlicensed providers had been fixed for over one year. Representative Munoz asked the department to address the eligibility issue concerning individuals possibly inappropriately receiving services. Ms. Brodie answered that issues regarding "eligibility subtype" were corrected. Representative Munoz asked about the possibility of incorrectly processed pharmacy claims. Ms. Brodie replied that the problem had been corrected. Representative Munoz asked whether private insurance reimbursements were collected. Ms. Brodie replied that part of the problem was corrected and expected to have the problem fully corrected on April 25, 2015. Representative Gattis wondered what had occurred to move the corrective actions in the "right direction." Ms. Efird answered that a number of factors attributed to the fixes. She referenced Representative Guttenberg's questions about whether the department respond adequately and in a timely way. She cited attachments found in Section 4, on page 60 of the full audit that contained the litigation documents. The documents outlined the steps the department engaged in prior to litigation. She agreed that former Commissioner Bill Struer had been working diligently to fix the problems with Xerox. She discussed that the department had realized that the claims were incorrectly processed by the system and were not electronically adjudicated. The top priority for DHSS was to pay providers since delivering healthcare was the primary responsibility of the department. The Division of Healthcare Services worked diligently and devised a way to pay providers and keep the healthcare system working. She stressed that like the previous commissioner, the current commissioner was also working diligently with Xerox and the providers. The department was enforcing Xerox's corrective action plan and holding them to specific deadlines for addressing corrective actions. The department expended a lot of resources and attention directed to fixing the problems. Ms. Efird expressed uncertainty about whether more funding would have corrected the problem. Perhaps more resources would have helped the department address some of the issues. She suggested that the department seriously pursued corrective measures and that lack of resources was not an excuse. She shared that in areas with a large turnover of staff, weaknesses could have occurred. Training was very important and new hire training emphasized that policies and procedures must be explicitly followed. She suggested that at times, new staff missed the point and the department needed to diligently follow through and ensure policies and procedures were carried out. 3:04:27 PM Representative Wilson asked whether a corrective plan was written for each recommendation. Ms. Efird asked whether she was referring to Xerox's corrective plan and requested that Representative Wilson's clarify the question. Representative Wilson wanted to know if there was a plan for Xerox and also for each recommendation. She further asked whether the department had to submit corrective plans to the audit division. Ms. Efird responded in the affirmative. She reported that DHSS tracked the prior year's summary of audit findings. Corrective plans were implemented and the department followed up with the divisions' progress in achieving the corrective measures. Representative Wilson requested that the department provide a copy of the corrective measures recommended in the audit in order for the committee to follow up next year. Ms. Efird explained that contained within the audit the department responded to each of the recommendations, which included the plan for each of the findings. The department subsequently met with each division to determine whether the plan was achieved. Representative Wilson expected a more formal corrective process. She requested that Ms. Efird use the background check issue and provide an example. Ms. Efird announced that that each response contained the plan the department followed and that no other formal "signed" plan existed. She referred to page II-44 of the audit and directed attention to the agency's response. She relayed that the department concurred with the recommendation and provided a plan to strengthen its processes and what corrective measures occurred in FY 2014. She read the following, "Early in SFY 2015 procedures were adopted and implemented for individuals with a barred status including a file documentation requirement." She noted that the response continued with the steps that were implemented in FY 2015. She would meet with the division director in the future to determine the status of the plan. The department will subsequently submit the summary of prior year audit. The current year's summary was included in Section 3 on page 41 of the full audit, which described what the department achieved for each finding to date. She exemplified that on page 341, as part of the summary, notice that corrective action was taken for a specific finding and was resolved. Representative Wilson related from personal experience that childcare providers were required to have a corrective action form filled out and signed for even small issues. She thought the department should be held to the same standards of accountability. Representative Gara asked for verification that "the Xerox debacle diverted a lot of staff time." Ms. Efird agreed with the statement. Representative Gara stated that the department was in litigation with Xerox. He deduced that one of the things that slowed down the corrective process was that Xerox was slow to admit its mistakes and was "recalcitrant" in fixing mistakes they would not admit to. Ms. Efird deferred the answer to the Commissioner or Ms. Brodie. Representative Gara referred to claims that dated back years due to the broken Xerox system. He wondered if the department had reached the point where it was confident it could pay claims going forward. Ms. Efird replied in the affirmative. She elaborated that the department had reached out to a number of providers in order to make sure payments were received and continued to work closely with providers. She shared statements from providers stating support for the corrective actions by the department and shared that she had a number of emails and letters from providers claiming that the system was working. She offered that 90 percent of current suspended claims were less than 60 days old and 65 percent were less than 30 days old. She expressed confidence that the system was working well. 3:13:11 PM Representative Munoz referred to provider testimony that the system was comparable to the one it had replaced. She asked whether the goal was to have a new system that was comparable or more efficient. Ms. Efird answered that the provider had made the point that the new system was comparable to the old system with regards to timely payments. She stressed that the new system was expected to accomplish much more than the previous system. Co-Chair Thompson mentioned that 70,000 new medical billing codes would come online in July or October of 2015. He wondered whether plans were being developed to accommodate the changes and prevent the department from falling behind again. Ms. Brodie answered that the department was on track with the "ICD 10" coding system. She elaborated that with all of the issues with the Xerox system the department was aware that it "could not afford to get off track" with accommodations for the new codes. The department hired a long-term non-permanent employee to manage the implementation. She relayed that specific criteria from CMS was being met and the department "was on target." Representative Wilson asked who had been hired. Ms. Brodie replied that the employee was a long-term non- permanent employee. Representative Wilson wondered whether the hire was an expense to the state because Xerox did not accomplish what was expected. Ms. Brodie responded in the negative. She believed that the department would have needed the staff due to the complexity of the issue. Representative Guttenberg cited recommendation No. 11 on page II - 34 that related to SSN verification. He wondered whether the staff was not trained or supervised well. RON KREHER, ACTING DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, answered that the problem could be attributed to a number of issues; staff turnover was high, a training issue, and given the volume of cases processed it could have been an oversight on behalf of an eligibility technician. He communicated that the oversight was slightly unusual because typically an application could not pass through other screens because the SSN was a mandatory field in the eligibility information system. Often times the documents were viewed and not copied, but verification was mandatorily documented in the system. He did not have the detail on the particular instances mentioned in the findings so he could not identify the missing step in the process. Representative Guttenberg verified that the technician could not move on to the next screen in the application without verifying the SSN. Mr. Kreher answered in the affirmative. Representative Guttenberg surmised that if the test figure was 2 out of 25 and was multiplied by the number of beneficiaries the number of mistakes would be "significant." Mr. Kreher answered in the affirmative but felt that if a significant number of SSN's were not verified it would have resulted in a larger number of incorrect samples. Co-Chair Thompson addressed the state's IRIS (Integrated Resource Information System) conversion. He wondered if any problems were anticipated. Ms. Brodie could only speak to the Division of Enterprise Technology Services (DOA). She voiced that, "if IRIS worked the department would be able to interface with the system." Vice-Chair Saddler referred to page II-55, Recommendation No. 2014-023 [DHSS' commissioner should distribute funds in accordance with state statutes and regulations.] that related to the appropriation of $1.175 million for suicide prevention. He asked for the distinction between a sponsorship and a grant. Ms. Efird replied that grant funding was appropriated through the grants line in the budget. She explained the when utilizing grants, the grantee was providing services for the department and reports and programmatic updates were required. The funds identified in the finding were unrestricted federal dollars earned by the department for meeting specific criteria related to the children's health insurance program [SCHIP]. She elaborated that the unrestricted funding was appropriated to the department through the contractual line. She cited Attachment 3 in Section 4 on page 85 of the audit, and referred to AS. 18.05, Administration of Public Health and Related Laws and relayed that the statute defined the department's role to promote public health. She elaborated that the funding was provided to the department to support the mission of the department. The department had policies and procedures outlining what was appropriate for sponsorships. The department used the aforementioned guidelines to distribute the funding. 3:22:39 PM Vice-Chair Saddler asked how the department earned money from the SCHIP program. Ms. Efird responded that a performance bonus section under the federal program awarded the funding. She elucidated that every state had access to bonus funding based on a lengthy list of criteria. Vice-Chair Saddler asked how much performance bonus money the department had received. Ms. Efird replied that DHSS received approximately $6 million over the past three years and currently had slightly over $4 million left. She added that the department had maintained carry forward authority. Vice-Chair Saddler asked how the department planned to use the money. Ms. Efird answered that the department expended the funds for suicide prevention, homeless outreach, and for internal use. She explained that the Division of Juvenile Justice (DJJ) had an incident in Kenai related to inadequate safety needs. The department wanted to use some of the funding to respond to the safety needs identified to shore up the facility. Vice-Chair Saddler asked if there were restrictions on how the department could spend the money. Ms. Efird replied in the negative. Representative Munoz cited the fact that 44 defects were identified when the Medicaid claims system was implemented and climbed to 546 defects. She wondered how many known defects currently existed in the system. Ms. Brodie replied that currently just over 90 defects were identified in the system. Representative Munoz wondered when the CMS certification was expected. Ms. Brodie replied that the department expected to receive CMS certification in the first quarter of 2016. Ms. Efird pointed to the department's Attachment 2 in Section 4 on page 84 of the full audit. She relayed that the attachment included a letter, dated October 2013 from Xerox that claimed the system was up and operational. 3:27:45 PM Representative Munoz requested a list of the known defects. Representative Pruitt referred to Recommendation No. 23. He stated that the audit disagreed that the funding was not appropriated correctly. He asserted that the department had a "slush fund" and he "hated the concept." He wondered why DHSS disagreed with the audit finding and why the legislature should not have the authority to determine how the bonus money was spent. He was concerned that the department was skirting the legislative process. Ms. Efird answered that the legislature had appropriated the money. She reminded the committee that the funding was appropriated to the department in the budget's contractual line through the SCHIP bonus as unrestricted federal dollars. Representative Pruitt voiced that he would reconsider the appropriation next year.

Document Name Date/Time Subjects
HB 80- Letter of Support-Taryn Luskleet- 3-25-2015.pdf HFIN 4/14/2015 1:30:00 PM
HB 80
HB80 Supporting Documents - ACT SAT Students with Disabilities.pdf HFIN 4/14/2015 1:30:00 PM
HB 80
HB80 Supporting Documents - Letter Gebhart.pdf HFIN 4/14/2015 1:30:00 PM
HB 80
4-14-15 HB148 to HB190 Compare (Thompson).pdf HFIN 4/14/2015 1:30:00 PM
HB 148
HB 190
DHSS AUDIT.pdf HFIN 4/14/2015 1:30:00 PM