Federal Grant Contracting
MALPH
September 2014
Tim Becker, CPA
Senior Deputy Director, Operations
Michigan Department of Community Health
Healthcare is an Economic Force in Michigan
Health Care Industry is Michigan’s Largest Private-Sector
Employer1
• Provides more than 558,000 direct jobs1
o
o
o
Hospitals employing nearly 219,0001
One third of the projected fastest growing occupations are health care related2
Health care employment as a percentage of total Michigan employment is 10.6%3
• 1 million people who collectively earn more than $48.4 billion a year in wages,
salaries and benefits1
Health Care Industry Generates $13.4 Billion in Federal, State
& Local Tax Revenues1
Health Care Spending Per Capita in Michigan is $6,6183
Total Health Care Spending in Michigan is $64.3 Billion3
2
1 Economic Impact of Health Care in Michigan,
2 U.S. Bureau of Labor Statistics
3 Kaiser State Health Facts (2009 data)
8th
ed.
Our Guiding Principles
Vision
Improving the experience
of care, improving the
health of populations, and
reducing costs of health
care.
Mission
The Michigan
Department of
Community Health will
protect, preserve, and
promote the health and
safety of the people of
Michigan with particular
attention to providing for
the needs of vulnerable
and under-served
populations.
Leadership, Excellence, Teamwork
3
Behavioral Health,
Developmental
Disabilities
Public
Health
FY 2015 Budget: $17.4 billion
General Fund: $2.9 billion
Full Time Employees: 3,648
9.9 Million
Michiganders
Medicaid
MDCH Service
Structure
Services to the
Aging
Supported by:
•
•
•
•
Operations
Policy & Planning
Inspector General
Commissions
4
MDCH Services Statistics
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
1,900,000 older adults (aged 60+) in Michigan
85+ age group is fastest growing
10,498,348 home delivered/congregate meals provided to aging
population in Michigan
6,822 caregivers for the aging that were supported by 694,401
hours
62,858 older adults received 541,393 hours/units of community
services
649 children received autism diagnostic services
520 children diagnosed with Autism Spectrum Disorder
40,564 children served in Children’s Special Health Care Services
(CSHCS)
254,100 eligible Women, Infants and Children (WIC) receive WIC
services each month
45 Local Public Health Departments (LPHD)
12,000 live emergency department reports daily
1, 894,673 doses of vaccine in the Vaccine for Children program
distributed to eligible children
22: Michigan’s 2012 rank (70.5%) based on a national childhood
immunization survey
134,310 Infectious Disease Specimens Tested
122,127 Newborn Screening specimens tested
26,181 tests completed for blood lead levels and environmental
lead exposure
126,000 Facilitated epidemiology responses to communicable
disease cases
504,000 dollars in healthy food purchased daily from local
grocers
1,000,000 hearing and vision Screenings done yearly for Pre-K
and school aged kids
6,700,000 lab services provided to over 240,000 individuals.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
5,604 residents test positive for gonorrhea and/or chlamydia
yearly by State Lab System and Local Public Health
360,000 new vital records events recorded each year
32,000,000 records in vital records depository dating to 1867
1,779,449 Medicaid Total Average Eligibles
965,042 children served by Medicaid
347,395 disabled adults served by Medicaid
13 Medicaid Health Plans
786,629 Medicaid School-Based direct service procedures
83,200,000 Medicaid transactions processed last year
494,380 children currently enrolled in Healthy Kids Dental
37,453 currently enrolled in MI Child
1,039,000 calls handled annually by Michigan Enrolls
3,788 women using Maternal Outpatient Medical Services
(MOMS) program each month
28,977 Medicaid nursing home residents
46 Community Mental Health Services Programs (CMHSP)
10 Prepaid Inpatient Health Plans (PIHPs)
242,884 people served by CMHSPs and PIHPs
5 state operated hospitals and centers
1,017 state psychiatric hospital bed capacity
1,975 licensed psychiatric beds in the community for adults; 242
for children
6,537 allegations investigated, processed, and resolved by Office
of Recipient Rights
41 Developmental Disabilities Council grants
66,164 received Substance Use Disorder Services
125,277 participated in Substance Use Prevention Programs
1,563 claims paid for crime victims
79,337 cases worked by Victim Advocates in Prosecutor Offices
5
Total FY 2015 Budget Recommendation (in millions)
TOTAL
Medical Services
$10,833.6
GF/GP
$1,586.3
-
Healthy Michigan Plan
$2,452.9
Behavioral Health Services
$3,002.8
$1,101.1
$794.6
$158.7
$99.5
$35.8
Public Health
Office of Services to the
Aging
Information Technology
$87.2
$19.7
Policy, Planning, and Crime
Victim Services Commission
$57.9
$7.6
Administration
$46.1
$29.8
FY 2015 TOTAL
$17,374.6
$2,939.0
FY 2014 TOTAL
$16,934.5
$2,747.6
$440.1
$191.4
NET CHANGE
Policy,
Planning, and
Crime Victims
0.3%
Public
Health
4.6%
Office of
Services to
the Aging
0.6%
Information
Technology
0.5%
Administration
0.3%
Behavioral
Health Services
17.3%
Healthy
Michigan Plan
14.1%
Medical
Services
62.4%
6
Revenue Sources (Millions)
20,000
18,000
16,000
14,000
12,000
Total
10,000
8,000
Federal
6,000
4,000
General Fund
2,000
State Restricted
0
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
Federal
5,534
6,043
6,709
7,226
8,949
9,474
8,987
9,691
11,620
11,942
General Fund
2,952
2,940
3,125
3,096
2,309
2,422
2,771
2,817
2,748
2,939
State Restricted*
1,807
2,176
2,175
2,171
1,785
2,175
2,477
2,508
2,557
2,484
Total
10,326
11,196
12,048
12,533
13,092
14,124
14,241
15,026
16,935
17,375
*Private and Local
7
Common Types of Federal Grants
Assistance or Benefits: Money, Property, Services
• Transfer of value from Federal Government to entities or individuals
o
o
To accomplish a public purpose of support or stimulation
Authorized by Federal statute
Formula Grants
• Allocation of money to states or their subdivisions
• Distributed through legally prescribed or administratively regulated formula
• For activities of a continuing nature
Project Grants
• Funding for fixed or known periods
• Scholarships, research grants, construction grants
Direct Payments
• Provided directly to individuals or private entities
• Receipt conditioned on specific performance or eligibility requirements
8
Federal Grants Cycle
Announcement: Federal posting of grant opportunity
Application: Request to Federal Government for award
Award: States terms, conditions, amount, duration
Accessing: Drawing down of federal funds
Appropriate: Expend or Pass-through
Account: Financial Status Report
Assess: Monitor of programs and subrecipients
Audit: Determine compliance with Federal programs
9
Announcement of Federal Grants
Grants.Gov
• Find and apply for federal grants
o
o
o
Find Open Grant Opportunities
Browse Categories and Federal Agencies
Browse Eligibility Categories
Federal Register
• Daily journal of United States Government
• Announcement of all rules and funding announcements
Catalog of Federal Domestic Assistance (CFDA)
• Detailed program descriptions for 2,243 federal assistance programs
• CFDA is a 5 digit number
o
o
o
o
First 2 digits represent the funding agency
Last 3 digits represent the program
10.557 = Department of Agriculture (10) Supplemental Nutrition Program for Women,
Infant, and Children (557)
93.778 = Health and Human Services (93) Medical Assistance Program (778)
10
Legislative-Intended Use of Funds
Federal Awards Authorized by Federal Statute
• Medical Assistance Program (CFDA 93.778 – Formula Grant)
o
o
o
Authorized by Social Security Act, Title XIX and 67 Public Laws
Legislative intent expanded with Patient Protection and Affordable Care Act (PPACA)
Pre-PPACA:
o
o
o
o
PPACA adds the following up to 138% of Federal Poverty Level (FPL):
o
o
o
o
o
Children
Pregnant Women
Aged Who Meet Income and Resource Requirements
Parents
Caretaker Relatives
Disabled
Childless Adults
Any variances to Prescribed Federal Formula must be granted Federal Approval through a waiver
as permitted in the Social Security Act
State Appropriates Federal Funds and State Match Annually
• State Budget is Legislation authorizing the expenditure of federal awards and state
resources
• Medicaid funds appropriated to 13 private HMOs and 10 Prepaid Inpatient Health Plans
11
Healthy Michigan Plan
Healthy Michigan Plan fills the gap between current coverage
and private health insurance coverage offered on the Exchange
400%
350%
% of federal poverty level
300%
Medicare
250%
Exchange
Expansion
200%
Current
150%
100%
50%
12
0%
Children
0-6
Children
7-18
Parents Caretaker 19-20 year Elderly
Relatives
olds
Disabled Childless
Adults
Healthy Michigan Plan
Authorized by Federal Government as a Waiver
• Waiver granted under Section 1115 of the Social Security Act
o
o
Federal Government may waive compliance with certain provisions to permit
demonstration
Permits experimental, pilot, or demonstration project
Federal Medicaid Waivers
• Section 1115: Research and Demonstration Projects
o
Permits state flexibility to test new or existing approaches to financing and delivery
• Section 1915(b): Managed Care Waivers
o
Permits state to provide services through managed care delivery systems and limit
beneficiary’s choice of providers
• Section 1915(c): Home and Community-Based Service Waivers
o
Permits state to provide continuum of services to elderly and disabled
Michigan Public Act 107 of 2013
• Established Healthy Michigan Plan to start April 1, 2014
13
Healthy Michigan Plan
Beneficiary Cost Sharing
• Co-pays required of all Healthy Michigan Plan members
• Individuals between 100% and 133% FPL pay into MI Health Account
o
o
Limited to 2% of annual income
Contributions made on a monthly basis
• Co-pays and contributions can be reduced through health behavior incentives
Incentives for Healthy Behaviors
• Addressing substance use disorders
• Reduced tobacco use
• Obesity reduction
Federal Waiver and Legal Intent of Healthy Michigan
• Improved health outcomes through preventive primary care
• Reduced cost burden on healthcare system through reduced emergency visits
• Reduced spread of costs to other payers from hospitals for uncompensated care
14
Michigan Medicaid Waivers
Healthy Michigan: 1115 Demonstration
• Healthy behavior incentives, premium sharing, health spending accounts
Michigan Specialty Services and Support: 1915(b)(c)
• Mental health, substance abuse, developmental disabilities support
• Prepaid shared risk arrangement with prepaid inpatient health plans
MIChoice: 1915(c)
• Adult day health, respite, personal care, home delivered meals, nursing
Children with Serious Emotional Disturbance: 1915(c)
• Respite, community living supports, family home care training, therapeutic activities
Children’s Waiver Program: 1915(c)
• Specialized medical equipment and supplies, specialty services for autistic children
Habilitation Supports: 1915(c)
• Private duty nursing for individuals with developmental disabilities
Comprehensive Health Care Program: 1915(b)
• Managed care capitated payment system
Healthy Kids Dental: 1915(b)
•
MDCH partners with Delta Dental to administer dental care using Delta Dental’s commercial model
15
Application for Federal Grants
OMB Circular A-102
• Regulates grants and cooperative agreements with state and local governments
o
o
o
Pre-Award Policies
Post-Award Policies
After-the-grant Policies
• Requires advance public notice of awards in Federal Registry or other means
• Prescribes standard forms for application
o
SF-424: Application for Federal Assistance
• Non-profits, hospitals, institutions of higher education follow Circular A-110
Medicaid State Plan
• Comprehensive written statement of nature and scope of state’s Medicaid program
• Required by 42 CFR Chapter 430.10
o
o
o
o
o
o
o
Code of Federal Regulations = codification of rules published in the Federal Register
CFR is divided into 50 subject matter titles
CFR titles are divided into parts (chapters) according to the issuing Federal department/agency
Chapters are divided into sub-parts covering specific regulatory areas
Title 42 = Public Health
Chapter 430 = Department of Health and Human Services, Centers for Medicare & Medicaid
Services, Medical Assistance Programs
Sub-part 10 = State Plan
• Michigan Medicaid State Plan = 968 pages, online PDF = 39.74 MB
16
Program Intent through Federal Agreements
Michigan’s Medicaid Program Intent Expressed in State Plan
• Medicaid State Plan is an agreement between state and federal government
• Provides assurance that state’s Medicaid program will be administered in conformity
with the specific requirements of the Social Security Act’s Title XIX and regulations
• Specifies the services to be provided and the means to deliver the services
o
o
o
Identifies the general health care services
How costs of services will be reimbursed
Eligibility policies in effect for the program’s beneficiaries
Components of Michigan’s Medicaid State Plan
• Single state agency organization
o
Describes the state organization administering the program and its authority to administer
• Coverage and eligibility: identifies who qualifies for coverage
• Amount, Duration, and Scope of Services Provided
o
Detailed description of services covered including limitations and requirements
• Program administration
o
o
o
General program administration: reimbursement methodologies
Personnel administration: provides assurance on personnel standards and training
Financial administration: fiscal policies, accountability, cost allocation, financial participation
17
Award of Federal Grant
Notice of Grant Award
•
•
•
•
•
Issued by Awarding Federal Department/Agency
Authorizing Legislation Stated
CFDA Number
Approved Budget Period
Approved Budget amounts by category
o
o
Direct costs
Indirect Costs
OMB Circular A-87
• Cost principles for state, local, and Indian tribal governments
• 5 attachments
o
o
o
o
o
Attachment A: General principles for determining allowable costs
Attachment B: Selected items of cost
Attachment C: State/local wide central cost allocation plans
Attachment D: Public assistance cost allocation plans
Attachment E: State and local indirect cost rate proposals
18
Program Intent through Contracts
Michigan’s Medicaid Providers Adhere to Provider Manual
•
•
•
•
Medicaid Provider Manual addresses all health insurance program provisions
Document is 1,789 pages divided into 44 comprehensive chapters and 4 appendices
Prescriptive Eligibility Determination and appeal rights
Coordination of Benefits
o
o
o
o
Mechanism used to designate order in which multiple carriers are responsible for payment
Medicaid is the payer of last resort
Billing Medicaid prior to exhausting other insurance resources may be considered fraud under
the Medicaid False Claim Act if provider is aware beneficiary had other insurance coverage for
services
Subrogation: beneficiaries assign MDCH the right to seek recovery of other payments
Cost Containment Through Managed Care
• Most Medicaid services delivered through managed care organizations (HMOs)
o
Payments are capitated monthly payments per member per month
Fee For Service Cost Controls
•
•
•
Predictive Modeling: screening technology to identify Medicaid claims with billing irregularities
Third Party Liability Division: ensuring responsible payers meet their obligations
Office of Health Inspector General: Investigating Medicaid fraud
19
Accessing Federal Funds
Draw Methodology Varies by Federal Granting Agency
• Web-Based Systems
• Lines of Credit
• Telephone Systems
Advance Draws
• In some instances draws are permitted in advance of earned expenditure
o
o
o
Funds must be deposit into an interested bearing account
Interest earnings in excess of threshold limit must be remitted to Federal Government
SF-425 monitors timing of cash advances and disbursements
o
Submitted quarterly for most federal awards
Reimbursement-Based Draws
• Most federal grants are drawn after an earning expenditure recorded at local level
o
Goal is to minimize lost interest exposure by ensuring timely draws are made
20
Appropriating Federal Funds
Health Programs Administered Through Local Partners
• Medicaid administered through 13 private health plans
• Behavioral health administered through 10 Prepaid Inpatient Health Plans and 46
Community Mental Health Service Providers
• Public Health administered through 45 local public health departments
• Aging programs administered through 16 area agencies on aging
Interim Payments and Cost Settlements
• Providers paid through monthly interim payments
• Receivables/Payables Recorded at year-end on cost reports
o
Final cost settlements can lag two or more years after services
o
o
o
Dependent on cost report submissions from locals
Can be delayed by audits or open issues under review
Medicaid accruals at year-end can be as large as $1.7B
21
Michigan Medicaid Health Plans
• 13 accredited health plans covering medically necessary services
• Blue Cross Complete of Michigan
• CoventryCares of Michigan, Inc.
• HealthPlus Partners
• McLaren Health Plan
• Meridian Health Plan of Michigan
• Midwest Health Plan
• Molina Healthcare of Michigan
• Physicians Health Plan – Family Care
• Priority Health Choice
• Harbor Health Plan
• Total Health Care
• UnitedHealthcare Community Plan
• Upper Peninsula Health Plan
22
Prepaid Inpatient Health Plan (PIHP) Consolidation
Regional PIHP Structure though
December 2013 (18)
Regional PIHP Structure
Beginning January 2014 (10)
Keweenaw
Houghton
Ontonagon
Baraga
Gogebic
Marquette
Luce
Alger
Iron
Chippewa
Schoolcraft
Dickinson
Mackinac
Delta
Menominee
Emmet
Emmet
Pres
Che
Cheboygan
que
boy
Presque Isle
Isle
gan
Charlevoix
Alpena
Otsego
Montmorency
Antrim
Leelanau
Grand
Traverse Kalkaska Crawford Oscoda Alcona
Benzie
Wexford
Manistee
Ogemaw Iosco
Missaukee
Roscommon
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Arenac
Mason
Lake
Osceola Clare
Gladwin
Huron
Oceana
Newaygo
Mecosta Isabella Midland
Bay
Tuscola
Gratiot
Muskegon
Ottawa
Ionia
Kent
Barry
Allegan
Van Buren
Genesee
Lapeer
Shiawassee
Clinton
Eaton
Ingham
Calhoun
Kalamazoo
Jackson
Livingston
Cass
Branch
Hillsdale
Oakland
Washtenaw
St. Joseph
Berrien
Sanilac
Saginaw
Montcalm
St. Clair
Macomb
Wayne
Monroe
Lenawee
23
Local Public Health Services
Local Partners in Health
Local Health
Departments
30 County
14 District
1 City
Services: ~ 5 million
Visits:
~4.6 million
Patients: ~1.4 million
24
Michigan’s Area Agencies on Aging
25
Accounting for Federal Funds
Internal Control Integrated Framework
• COSO Report: Committee of Sponsoring Organizations of the Treadway Commission
o
o
•
•
•
•
•
Provides framework to design, implement, and evaluate controls for compliance
AICPA Statement on Auditing Standard 78: Consideration of Internal Controls in a
Financial Statement Audit
Control Environment: Provides discipline and structure and sets organization tone
Risk Assessment: Identification and analysis of risks forming basis to manage risks
Control Activities: Policies and procedures that carry out management’s directives
Information and Communication: Enable staff to carry out responsibilities
Monitoring: A process that assesses the quality of internal control performance
Period of Availability
• Can only charge obligations incurred during the budget/project period
o
o
Cash or accrued expenditures
Encumbrances: contracts for goods or services engaged before end of budget period
Periodic Reporting to Federal Government
• Largest report for DCH is CMS-64 for quarterly reporting on Medicaid
26
Accounting for Federal Funds
Entity Type
Circulars
Grants-wide
HHS Programs
Education Institutions
OMB A-21
2 CFR 220
45 CFR 74.27
State and Local Gov.
OMB A-87
2 CFR 225
45 CFR 92.22
Non-Profits
OMB A-122
2 CFR 230
45 CFR 74.27
27
Internal Controls for Not-For-Profits
Proper accounting of costs
• Consistency and equity in charging Federal and non-Federal activities
• Expense item charged to a single Federal activity
• Allocate costs in accordance with relative benefit received by program
COSO Internal Control Framework
• Control Environment
o
o
Demonstrates commitment to integrity and ethical values
Enforces accountability
• Risk Assessment
o
Identifies and analyzes risk
• Control Activities
o
Deploys through policies and procedures
• Information and Communication
o
Uses relevant information both internally and externally
• Monitoring Activities
o
Conducts ongoing evaluations
28
Assessing Utilization of Federal Funds
Performance Audits
• Conducted by Office of Auditor General on Department of Community Health
• Objective is to assess the effectiveness of particular programs
• These audits are not on a regular schedule and can cover multiple years
Internal Control Evaluation
• Conducted by department and reviewed by internal auditors
• Objective is to assess the effectiveness of the internal control environment
• Formal evaluation is conducted on a biennial basis with ongoing interim monitoring
Subrecipient Monitoring
• Department conducts reviews and audits of subrecipients
• Compliance examinations to ensure compliance with the contracts on grants
• Ensure that subrecipients are complying with OMB Circular A-133
29
Contract Compliance
Internal Controls
• Pre-audit assessment through questionnaires
• Field testing by auditors through observation and interviews
Reconcile financial status reports to accounting records
• Unsubstantiated costs are questioned and susceptible to disallowance
• Accounting records must demonstrate appropriate allocations
Expenditure testing for program compliance
• Payroll and Building Space
o
o
o
Costs are to be charged in accordance with relative benefit received
Pre-determine interim allocations permissible if trued up at year-end
Time reporting should be used if staff are allocated to multiple activities
• Charging of direct/indirect costs
o
Double dipping: directly allocating overhead to a cost center while also allocating the cost
indirectly through a general administrative cost pool
30
Common Errors in the Grants Process
Assumed risk with subrecipients
• Staffing limitations limit ability to monitor subrecipients
• Financial status reports taken at face value and not sufficiently audited
Failure to check contracts to compliance supplements
• Federal regulations updated annually through compliance supplements
• Limited internal audit staff and lack of training for grant accountants
Vesting fiduciary responsibilities with program staff
• Program specialists tend to initiate grants proposals
o
o
Program staff need to be supported by strong financial analysts
Inadequate financial review leads to missed budgets and compliance issues
Decentralized cost allocation methodology
• Loose cost allocation plans without strong central oversight tend to lead to errors in
cost allocation and improper charging of indirect costs
31
Auditing of Federal Grants
Single Audit
•
•
•
•
Primary accountability system for use of federal funds
Pre-1979: Federal agencies responsible for their own audits of their grants
1979: OMB Circular A-102: First government-wide audit requirements of grants
1984: Single Audit Act: Established organization-wide audits of states and locals
o
1996 Amendment: Extended Single Audits to non-profits and universities
o
Increased audit expenditure threshold from $25k to $300k
OMB Circular A-133
•
•
•
•
Issued pursuant to Single Audit Act
2003 Amendment: increased audit expenditure threshold from $300k to $500k
Establishes policies and procedures for auditors and auditees
A-133 Compliance Supplement
o
o
o
Provides guidance to auditors for testing federal program compliance requirements
Narrative descriptions and purpose descriptions for all federal programs
Revised annually
32
Single Audit
“Single” Audit is both a compliance and financial audit
Conducted by an independent auditor
• State’s audit is conducted by Office of the Auditor General
o
o
Audited agencies are part of the Executive Branch
Office of the Auditor General reports to Legislative Branch
Financial Statements: prepared by auditee
Schedule of Expenditures of Federal Awards (SEFA)
• Discloses each award expended or passed through
Auditor’s Opinions on Financial Statements and SEFA
Auditor’s Report on internal controls and compliance
Auditor’s Schedule of findings and questioned costs
Auditee’s Corrective Action Plans
33
Single Audit: Common Findings
State of Michigan Statewide Single Audit: FY 2012
• 37 major program: 24 qualified, 9 qualified, 4 adverse
• $22B in federal awards for FY 2012
Data Integrity
• User access rights and safeguards to ensure data is secure
o
Implications for program costs and accuracy of eligibility determination
• Ensure secure data exchanges between systems
• Comprehensive automated data processing security program
Subrecipient Monitoring
• Proper review of subrecipients audit reports and accounting records
• Investigation of variances on financial status reports
Period of Availability
• Ensure reported expenditures are in proper period and supported by documentation
Contract Compliance
• Expenditures are authorized in contract and incurred during contract period
• Administrative expenditure limits
• Federal regulations restrict subcontracting with debarred, suspended, excluded entities
34
MDCH Links
Website: http://www.michigan.gov/mdch
Facebook: https://www.facebook.com/michigandch
Twitter: @MIHealth, https://twitter.com/mihealth
Michigan 2012 Single Audit:
http://audgen.michigan.gov/finalpdfs/12_13/r000010013.pdf
35