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Joint | April 15, 2015 | Committee Room | Appropriations: Health and Human Services

Full MP3 Audio File

Ladies and gentlemen we're bringing the committee to meet to order. Welcome I'm Chris [xx] before we get started we will be a few introductions starting with sergeant at arms our sergeant of arms are Young Bay, Jim Ruben, Bill Moores and the senate side Ken Loise, Marcus Case, our pages we want to welcome some pages on the senate side Isaiah Davis, Goles Borow supporting senators John Davis Page Sarah [xx] raise your hands, good thank you. From Salemburg Senator Burger. On the house side, we have Julian Luis, from [xx] and Sarah Stephens representative Stephens is her sponsor. Chris Mcain, from Alamos and representative Ridewell is her sponsor and then Roman Billon from and Brown, Representative Brown is his sponsor. Alright well, there is a right on into the presentation by [xx] and Beth Woods just come up forward. Thank you Mr. Chairman, thank you members of the committee for allowing to make this presentation this morning regarding the financial statement audit that we did for the department health and human services, and I believe that each of you are having fun of your copy of those financial statements and the auditors opinion and if it's okay like to walk you through several, I think important pieces of the financial statements, and also talk about the opinion somewhat on these financials. So first if you look at the first pages the editors trans middle letter and then this pages are not numbered but if you look at the next two pages this are sort of a how to use this document that we put together a worksheet through you can see that this financial statement are are tabbed and it walks you through how to get and use each of the exhibits that we have in the statements because what happens is that we start at the very front, being a very summarized financial picture the HHS and then moves through the statements to get into more and more details and how to use this report, how to use this document almost two pages explain what we have and I will just run through this quickly on required information as independent editors report mention discussion and analysis it's obviously the independent auditor should should for his [xx] any number of financial statements, the management discussion and analysis is prepared by the on of the HHS exhibit A are the Summarized with total numbers if you were for the department and are couple of schedules there that are that I will walk through and exhibit A is a cool exhibit B is the budgetary statements in the supplementary information we get into combined statements we quoted our the financial statements as it prepared we are showing ten divisions and the HHS and so as it moves we are just talking about the combining statements will show you how each one of those divisions fed on the total picture for the HHS and again as you move through the documents it exhibits on either and those are financial statements on each individual division within the agent so let me start with the third exhibits the and this very summarized information as to move to the other it is [xx] more detailed then when you look at page it is my opinion you look at page on of the report this is the independent article report this is my opinion on this financials and I will talk about what is credit is not this years our opinion are whether or not these financial statements as presented are materially correct so I've heard over the last few days clean bill health and that kind of that's not what this opinion just said,

this opinion is telling the users and, in this case, the user is being the General Assembly. This will search always being armed and pay day this opinion is telling the leader that financial statements are materially correct. We don't make any judgement calls, we don't make any analysis on the financial stability we don't say they are healthy they are not healthy that is nothing about what this opinion means all this opinion is saying is you being users all these financials these numbers are maturely stated so performing any as you need perform whatever enquiries you need these numbers are materially correct. And also we talk about internal controls in another report, again what we are saying, we're not saying that everything that the agency is good or everything agency is bad, we're not giving any opinions on how the monies are administered if you're spending them right wrong if you are often like services again, all those things that these financial statements, the numbers are materially right and we didn't sign any issues on how they would put together that's obvious opinion of State. So, they didn't move past my opinion according to the management's discussion and analysis and that's on page 4. okay you're on the minute 49 so the first statement, the first exhibit on page ten, this is the balance sheet for the HSS in total, and we've broken out in two categories off course we've general fund which obviously is a major fund for the agency, and then if there any division, or they've any government funds are bring together and then second and then to far right gives you the total governmental terms, some numbers and this is basically there financial position as of June 30 2014, and this is a financial statement/financial position. It is few not yet, okay, and again the top part is your assessment to top section of this statement it deals there with cash receivables, we will see there account receivables, large numbers, in a larger number, and governmental receivables then we've the liability section, accounts payable, big number there. The next category is your Medicare claims payable that number is an estimate of what the State of North Carolina, as of June 30, 2014, these are it's stipends incurred for recipients of federal programs for providers. But that number as of 2014, June 30 is a 986 million. At the bottom of that page, is fund balance and the total fund balance is a negative 267 plus million dollars, we've broken funds balance down into several categories. Non spendable 11.3, restricted 59.2 committed, 52.3 assigned is 3 million and unassigned is a negative 393 million. So, again your financial picture for DHHS at the end of June 30, 2014 their net worth if you will, is at 267 million dollar deficit and again this is an accumulation it could be 20 years, it could be 5 years because this is the first time this audit's ever been done during a transfer. There's really no history to go back and say when this front balance went into a negative, how it happened and in what year. On page 11, exhibit A-2 are the financials for fiscal year ended June 30, 2013 for comparison purposes. On exhibit A- three is the revenues and expenditures and the changes in prime balance. This is for one year, the balance sheet is cumulative, this is one year of revenues and expenditures. Again, we broke the revenues down into the federal monies, the local monies, the sales and services. You're looking for State Appropriations, drop down to the bottom of the page, state appropriations are

in other financing source. OK? So your federal local money sales and services, speeds licences are in the top portion under revenues, state appropriations in the bottom at under other financing sources. Expenditures, we haven't broken out and a lot of different categories, the biggest one here, if you go down almost to the end of your expenditures numbers of grants, state aids and subsidies, these were monies that were paid out providers recipients that sort of thing under grants, state aid and subsidies, and in total that's a $17.3 billion number, and we broke the out into a lot of detail in the back and written it out in categories as well as by those ten divisions. Now, pages 11-36 are notes to the financial statements, just very quickly on call a couple of things to your attention, on page 16 in the Notes to the Financial Statements, these notes breakdown, add clarity, give more detail on the numbers that you saw on the financial statement out by the captions, [xx] captions in the numbers you will see note 1J, and if you go to 1J on page 16 under Fund Balance. So under Fund Balance we have [Note 1-J] and if you go to I-J on page 16 this is the definition of what the Fund Balance captions are. This tells you what Restrictive Fund Balances are, what committed balances are what your standpoint balances and unappropriated. So when you get back to look at those numbers and it talks about restricted numbers, it talks about the negative on a sign, this tells you the categories and the definition. So this is what the notes were meant to do on page 18 in note 3 every single one of those numbers are broken down into the different types of categories and as well as the decisions within the agency. So I'm not going to go through a lot of those numbers but again whenever you have a line on a caption and it says and it refers you to a note these are the notes he's speaking about and there's a lot more detail behind those very large numbers. Now on page 38, this is Exhibit B-1, and this is is your budget to actual statement. So exhibits A are accrual basis, exhibit B is the budget to actual and this is again presented in total for the general fund only and it's presented in total for the entire agency. So again looking at how you budget, the certified budget, the authorized budget and then the actual cash basis, these are the actual numbers and gives you an opportunity to compare them to your budget. The bottom of the page is a reconciliation between the cash basis that you see here and the accrual basis back in exhibits A. Now, for the most part that is the those are the financial statements for DHHS and the notes that help with explanations and and further detail for the clarity on these very large numbers. So if  you turn the tabs and there's combined statements and schedules and you'll see supplementary information and you go to exhibit C-1. Page 41 and 42, exhibit C-1 go to the far right, the total column is [xx] back to your exhibit A-1 in total, but what this schedule does for you, it's called a combining schedule and it shows you for all those categories I've talked about; you assets, your liabilities, your deficit fund balance, the receivables, it shows you a breakdown on where those receivables are by division.

If you look at the claims payable, again the biggest liability number, it shows you again that that is in the division for medical assistance. If you're looking at accounts payable, it showed you by the lusion[sp?] where those accounts payable are and then if you're looking for where your negative fund balance came from, again if you drop down to total fund balance, you should account for fund balance, total fund balance, you'll tie across the $267 million deficit which you will also be able to see across divisions where that deficit came from. Now, to put this in perspective when you go to the states financial statements, all agencies combined into one set of financials the fund balance is a very critical number to the Fund Rating Agencies, and we have a obviously a healthy, total fund balance, but if you're looking to monitor that fund balance, agency by agency this is how you will do it to ensure that we maintain a helping front balance. So then on the next page we have of C-2, these is the balance sheet by the division of the peaceful year averaging 30, 2013 and then on the next page it exhibit C-3, this ties to exhibit A-3, if you cling down to the total governmental funds column, now we have 2013 layer for comparison purposes we did not audit these income statement for 2013, we did audit the balance sheet for 13 and 14, but we didn't know all of the income statement for 2013, to have done maths we would have gone back and audited the balance sheet for 2012 and it just wasn't that kind of turn. So in order to a bid on the nature statement they begun income statement for 2014 they had to audit the beginning, the ending balance for 2013 which is the beginning balance for the balance sheets for 2013 but again you got your revenue, expenditures and changes in front balance statement, the total governmental funds will tie back to the exhibit a dash three but now you can see a financial picture for one yea by division across all divisions of DHHS and this again will opt into the A-3 in total for the agency anything I would point out on you got your revenues you got your expenditures there's the other financing sources which is you can see the breakdown of state appropriation across divisions you can look see the breakdown of transfers in and transfers out across division I'm not that the net change and expand ballots, he look at your total governmental funds. It was a positive change in fund balance so what I'm telling you is that the deficit in fund balance at the end of 2013 was a larger deficit than it is in the 2014 and there was a positive change in fund balance which brought the deficit down in 2014. So it had been 344 million in total for the agency it's at 267 so that was a positive improvement in fund balance for 2014. Again I'm just showing you more detail but again the exhibits A and B and C I think we'll get you pretty much a lot of great information but if you are looking to drill down more information more details I'm [xx] how to do that so if we go back to exhibit A-1 I'm sorry it's at exhibit A-3 on page 12 look down under expenditures and this

expenditure line items grants, state aid and subsidies, go across to the total for 2014 16.6 billion and then if you came back over here to exhibit D/1 and you will see to the sign it says exhibit D/1 you go over to exhibit D1 and it shows a breakdown by division of how those moneys where spend that's 17 billion dollars again if you go to your total column and you look at the bottom it a 16.6 billion that ties to A/3 that I just so that's a huge number not much detail siting on A/3 but if your looking for more detail that money and by what division, exhibit D\1 gets you there amend just getting into further detail you see the tab for central admin so on page 56 so if you wanted to just look at central administration which is one of the divisions and you wanted to look at information or just division, and go to page 56 and see the balance sheet on that division only, on page 56 E-1, and then if you want to see what the balance sheet look like for fiscal year ended June 30 2013, you just turn the page to 57 and see E-2. If you wanted to see the combining of the statement of revenues, expenditure, and changes in the fund balance you have E-3 this three statements are core[sp?], and then if want to see the project actual go to page 59E-4. So again your primary statements being A-123, B-1 and the notes and that gives you the financial picture or DHHS  looking at more details you are in your exhibits see on through the back of whatever the last exhibits is C are the combining statements so you get to see of the total number that are in exhibits A and B you get to see what the breakdown by division is  here and walls up on twitter can [xx] just a cup of other arms and schedule are you are going on the changing room and waiting 119 we are breaking time and we will be here on another schedule and the revenues from other state agencies and came to occupy the issue saying see the epdus[sp] one this would say we discuss some other state agencies tells you which those state agencies are and which divisions received those monies. And then on page 121 I'm sorry 123 transfers out by the division and it transfers in and out by division so again this is within the HHS this is within the division so things are transfers in and out by division to other divisions so this is within the HHS and between the divisions. So that concludes my presentation the financial statement already and again we have not stated any opinion opinions about the financial stability, the financial health, or anything about DHHS. What we have for raw use ficsal researchers use [xx] our financial state months that shows the credential condition of DHHS

with an opinion that says, these numbers are material correct and you may use them for the analysis that you make, that concludes my presentation Mr. Chair. Madam [xx] thank you very much for a great presentation we're going to listen to the DHHS response by [xx] Miller and then we are going to ask some questions. Tamara, you're up. Good morning Chairman and members of the committee, again I'd like to take the opportunity to say thank you for allowing me to be able to present the DHHS financial audit overview. I'd also like to also thank auditor Wood for confirming through the audit that was conducted by her and her staff by issuing the clean audit with me, [xx] DHHS that our Miss Miller, bring your microphone down please. Thank you so much Again I'd like to say that the, that the audit opinion that was issued by auditor Wood, confirms that DHHS had a clean audit on our financial statements for really the two financial statements that completed for this past fiscal year for this state fiscal year and this basically say that our financial statement are accurate sound and free of any material in the statement, under the leadership of secretary our budget is really in the best shape that it has been in, in over five years and this is recognized through basically, this last peaceful here you can see that we came here under with same cash that was averted back to the state general fund are over $105 million, and this again has been through the leadership and guidance that we've [xx] secretary, where we have implemented strong and oversight and policy changes again the financial audit, we received two clean financial audits that validated our results. As I would said, and her staff confirmed that this time is forth prepared and completed and compilers with that, the cepha planning to statement and the financial statement that had the financial statement audit that the just for free somebody completed on April the 10th, both gan will sound accurate and free of any material mistake, I keep repeating that but the difference a little bit between what the difference is between the differences and the financial report and the VHHS financial statement audit. The Cafer[sp?] which was completed on December 2nd, 2004 is an annual audit of our financial statements for the department for DHHs and for the state departments which is done every year as opposed to the financial statement audit this of course was requested to be done this fiscal year and is a more detailed audit of that financial statement and one has not been done over 20 years for at the department level the capital audit provides an over look of the financial it provides an over look of the financial statements for the state as a whole which includes all state departments as well at looking at the financial statements and presentations for [xx] I'm sorry the financial statement for the department is specifically looking at DHHS and that has nit been done in a very long time. We can go to the next five. There have been a lot questions I think that we have been hearing that have come up in regards to what is the cash basis versus the accrual basis and so we have here the actual year in cash basis year in results on a cash basis. So basic of what were saying when we say that we are operating on cash basis and that's how the state operates is were recording revenue means when you see and expenditures when payed, we all know that the general assembly budget to cash, budgets on a cash bill and then the state to operate instead on that cash basis which basically says that we know we  can't record the revenues until we receive the money and we don't record the co-avengers into the envoy because in level received and being paid. DHHS gain as this compiled by the audit, I'm delight the last statement for your the possible test the number of the that cash balance of $104 million again, that was not been by the department which included 64 million not has

been by Medicaid and that can be verified the 104 million, you can see on page 38 of the financial audit report again that 104 million was reverted back to the state general fund at the end of state fiscal year, and those of those, the both the confronted and the financial statement audit confirm those results. What we try to do to explain what a cool bases accounting is, is to show an example you would see on your slides in your hands and on the screen that the clues basically recognize revenues when they are earned and expenditures when obligated. And so what we've done is to try curve an example of Gibson everyone will concept the war we are talking about, you have let's say a person John Smith that goes into a doctor's office on June 29, to receive service and has a doctor's visit. That will doctor has up to 12 months to bill or submit an invoice to bill the Medicaid program, and so this time it gives you an idea of how the accrual process works, because at the end of June 30th when we're doing the accrues not the cash basis but when we're doing the accrues we have no idea what's out there to be paid as far as other people that could have gone into a doctors office and received services and so at that point we have to estimate what we think that that expenditure and that liability would be and that's how we've come out with our Medicaid claims, estimate liability through a methodology that's looking in our divisional medical assistance that they use. We tried to, here we're going to take through a series of slides just to kind of give you an analogy of what it it looks like now and just try to visualize from a hypothetical pinpoint what some of the numbers mean and if you would look this first line, basically the urinal alling votes as they appear in the financial statements that were just and go by out of the work and her staff, and this are police to watch some page sick day, where we are going to focus on and is actually the front balance for medicare because that seems to be the one that has gotten a lot of attention and try to cu the criticism through perspective budget by trying to bring the picture of the word yes. You see on this make slide there is nothing there and is something missing let's start to the mix line. As it was mentioned, not in this presentation but at an earlier patient auditor Wood explained ho the medicate claim is payable estimate which is one of the largest lovers in the medicate program and they are also drive, the largest driver of our front balance is calculated. When we book that medicate plane payable estimate we have to also book the federal dollars that we anticipate in season from the federal government and that's bock than the line curve inter graph from the annual receivable of $800 million what we don't book at the end of the statement fiscal year because we operate at the during the capital process while we don't book is the state's required portion or the required merge of that federal receivable we're obligated to pay those Medicaid expenditures therefore we have put the estimates on the books, we have book them as governmental receivable but we don't were not saying that our statements are wrong and our finacial statment they are not wrong by not including it there in the audit is correct by standard, it should not be correct but what we're saying is that is a required match to this program, and that it directly impacts our income balance. What happens is, if we go to next slide, let's say if you were able to put it there, not saying that we can't but if you were able to show both that receivable that we are due that the state is required to pay the support, matched to these medically claims payables, you will see a difference in what the front balance number would be. You're plugging a number and if you see that the difference is there, the financial statement again I want to point out, includes that

800 million that we're due to receive from the the feds, we approve that now, and we are showing them the statements, but what we're not again showing is that we've not showed the state receivable but that does not mean that that money that is anticipated, that is going to be received, is not being accounted for because that has been included it has been included in the budget as the most budget preparation for the next fiscal year which in this case will be our current status of the required statement those medicate claim payables of $380 million had already been included in this year budget to pay for this claims as they can do we upgrade on cash status, and that's the current business practices in operation of the state and not just the department and we are going to always have things especially in general front that you're growing  June 30th that you cannot pay at the end of June 30 because the payment is going to made in the next fiscal year [xx] been anticipated in your budget to include those amounts of the next fiscal year, the next slide is basically just a comparison of stand of two numbers side by side again the financial statement as prepared so the department were presented correctly not including to state a single book again technical this is hypothetical showing you that the state is responsible for us supporting those medicare claims, therefore the appropriations will be accounted for in the budget in the papers for year. To sum it up I want to say that the in both regards the [xx] made of correct but say the department have had it $104 million at the end of the last year of which 64 million of their was this is called the medicare program and again 350 million that is showing as a negative from balance is a great number but there is also the repeal events the states required match to those claims that are going to be paid that are already included in our budget for this current state fiscal year and also want to again thank everyone for the opportunity Again thank Adan Wood and her staff for in depth review of our financial statements as it's a lot of hard work, but it basically validated that our statements are presented fairly that they're accurate, sound, and free of any material misstatement. Thank you Thank you Miss. Norah, now we're on to Mr. Chairman if I may? Please go ahead. A couple of things that need to be cleared up and clarified it may help some questions later on go back to the presentation done by DHSS and go back to slide tune the title that the two clean financial artists validated our results again just want to make sure that everybody understands I have validated nothing. All I have said is that the financial statements as prepared that you have in front of you are materially correct and soon use them to perform any announces that you feel is necessary so just want to be careful what people mean by arm results. The other thing that I want to point out here in that left column that comprehensive annual financial report. That is the report that the officer of the state our reports together it is a financial picture of the state of North Carolina in total, so in that next phrase where it says the financial audit of DHSS and other state departments that is not a true statement. We take the financial statements for the state North Carolina and there total and we look at the largest numbers the areas of the highest risks are materiable statement and we go to whichever agency is necessary to validate that number on that financial statement, so we do it or audit of DHhhs [xx] you do spend a lot of time there that my abilities number is huge but we do not audit nor present any numbers fr DHHS or any other sate agency and it say that the third

item that we provide a little look at the Catholic providers and look of all financial health of our state departments, it provides a look at the financial health of the state of North Carolina and it's entirety and that's where my opinion is no and only thing I would bring to your attention is that materially correct is plus or minus 900 million dollars DHHS and we looked at other accounts, we looked at, we actually gained in understanding of every count on the balance sheet that was $100, 000 or more and so that in depth [xx] is not to have never been [xx] have been on ill state legacy, so again is want to paint the picture of what my opinion on the audited financial for this [xx] means and it is not necessarily what's in that first [xx] I don't think what's there is intentional I'm just not sure everybody always grasp what he capital really means and the users for that capre for [xx] agencies and the federal government we audit in quarters with those being our users when we audited DHHS in this detail audit the users we had in mind were the general assembly, PED, RSPM and fiscal research because of the in depth analysis they wanted to do in order to determine their budgets the next slide I ask you to go to is slide nine, it is true that for a crew basis of accounting that you do recognize your receivables at year end it is probable because of the 984 million of [xx] claims payables probable, that that is what we owe. It is actually estimated, it's been actually estimated for years, and then I believe which is far to stay and nothing to stay up in office with tracks what actually got pain against the pessicoup[sp] and drugs would [xx]. So what everybody needs to understand is that at the end of June 30 2014, these expenses were probably Absolutely we probably incurred this four union we owe them at the end of the year, and if things were budgeted properly, we budget revenues and expenses so that you have a zero balance, what was good anticipate is that budgeting was done properly when you get to the end of year, you would have not reverted $63 million, you would have reverted $350 million, but nobody really knows when the fund balance deficit happened because we never done this depth financial statement audit before this is very possible an accumulation of the budgeting monies rebadgeted that should have been, but again if you stop and think about this is we are budgeting 40 year our extend with the zero balance and when you get to the end of the year you should re brought not $63 million, but $350 million. So again want to print the picture that I think more clearly and I din't believes that the $350 million deficit happened in one I do think is probably accumulation by stay modern see, but again I just to want to make everybody clear because what you are, if you move forward with this concept what you are agreeing to do is pay last year's bills with next years budget, thank you. Thank you I saw a lot of heads shaking over here when I mentioned $350 million. So, I'm going to give you an opportunity to say why is there anything you want to inquire? First, let me go back to slide two, in regards to the [xx] because we didn't, the intent was not to mislead anyone. We agree, we do get a care for audit that's performed by the office of the State auditors, that audit, we are aware

that threshold for the care for the state is 900 million verses this financial audit that was done for DHHS, the materiality level was 190 million, as low as $100, 000 for some of our division, so again, this financial audit was way more detailed than the Carefree[sp?] audit that took place in the course as you would expect the time associated with it is much less with the capital as opposed to the financial audit, so I do want to clarify that it was no, we're trying to show the differences between the two of those and we recognize that a care is done at a much higher materiality level versus the financial statement audit. In regards to the 350 million for Medicare again, we operate on a cash basis. There is no way that you are able to pay those services for those Medicare claims payable by the end of June 30th so you're always accruing those expenditures as Medicare claims payable for the next year and they're included in the budget for the next year so that that is an ongoing budgeting and business practice that's being followed and again, it's being followed all over state government the reason why largest because if you're looking at the Medicaid points payable estimate we're over 984 million dollars as opposed to a couple million dollars in another state agency so I do want us to keep that in perspective we're going top move over to discussion period, and we're going to start with Senator Hise. Thank you. Mr. Chairman. I think there's a couple of questions coming out of this, I think it's obvious it's from a general perspective is kind of interesting to see how this trumpeted $69 million surplus may actually result having a billion, 50 million and claims to be paid out, 350 million of that in state dollars and somehow we've reached that as the margin of success my first question is that that number that represents $350, 000, we're having a lot of conversations about changing the payments systems of Medicaid. Going to capitated systems or others, is that number right now if we had changed as of July first, an accurate representation of additional funds the state would have to come up with to pay the back claims at the time considering the time we started paying per member per month moving forward, and I guess based at the department. [xx] with the DHHS. If I understand correctly yes. If we went to the MCO's and we're paying the PMPM that would be did you pay that, that beginning to emerge asking for services, and as with any business there's always going to be a lag in the time between our vacations occur and the actual invoices coming in and paying them, so that's the truth, this will be the amount that had been budgeted for the part of the price obligations. Follow up? [xx] And I think that would be true the ECO's or any other formation that went to these new tax payments. Saying that they would, why is the amount due to UNC hospitals, we talked a lots in the last budget session of payments that were still due out to hospitals and others, and how that fit into our estimates, why did that include lease from an earning 7 million to 116 million with help payments from year to the other and I think we heard a lot about additional payment that benefited made out on how all that was cut out, rolled up and there was it increase to over $100 million off the viewing hospital and identified results to them but not played out at the end of peaceful year. I'm urged on to the base medical assistant, in Journey there are 166 million, today in the UNC is called the UPL the payment receive we accrue that it was not paid until the following state year so it [xx] tell State it's financials. Follow up?

trying to hit this, one more right, yeah and it will go to this and it will go to several others. I get the concept were looking into vacuum in the end of this fiscal year it would fall into the next fiscal year that's coming in and why this 381 million is not included in your number. What I don't understand is it that or UNC hospital changes or other aren't included in this years number why isn't the carry over from last year included in this year number. So, this 381 million is not new the UNC payment is not new, when we came to this physical year we budgeted need to pay for things in the previous fiscal year and they are not showing up here either, that there's not some 350 million up there that says oh! yeah that's the medicaid program from last years fiscal budget year that we didn't have to make the state for yet. So where are we seeing that number and where is it coming in here it's not included here where the one from the previous year? we don't really have information here to answer that. We'll have to get back to you on the question. Continue. Yes, my final on that is that you would see it in the reversion were talking about reverting 64 million or 104 million I [but] if those numbers are true but again if you budgeted for it and I didn't spend it then we would have a cash carry forward to pay next year or I would have reverted it to be re budgeted next year thank you chairman [xx] Thank you Mr chairman I am taking this home to my CPA husband have to explain what I am walking at but I am a little bit more of kind of basic sort why the heck are we doing it this way and slide number four one that really caught my attention is it a federal requirement that we can wait for a year for someone to tell us that we have somebody to tell us that we owe them money? Do you want to retrace that I'm going to direct your finance with DNA and yes the minors are given 12 months to same claims for services rendered. Do we have any idea of what the percentage is of people who wait that long or do we have any kind of breakdown on the half pass in general we get payments in from providers? What I can do is I can prepare a schedule for you, last time I looked at this which approximately three months ago we knew that about 85% of all claims came in within two months of data service so forks are a pretty timely about filling from their the tail gets a bit longer but we do see him coming pretty quickly without too much challenge. [xx] I'm personally used to the a courier basis and I like it better but because I know what I got to stand and I know what I got to pay for it and I guess my my question is, is their any way we can encourage people to be a little bit more timely, I would think, I'm going to make my claim in about two days to get my money back in, but I think this would solve a lot of this problem of this very issue of carrying over and we are sitting in the near we don't know what now we just kind of make an educated guess which thankfully is fairly educated in keeping us out of but it's personally for me it's a sloppy way for me to do business. sir I think one of the things that has improved the situation a little bit is now the new systems pays on 50 cheque corrects per year verses the old system where making payments 42 cheque rates per year so that has improved the situation a little bit I think that additional we are training an outreach providers [xx] Representative Penilton. Thank you Mr. Chairman may I address on the honorable Mrs Wood? You may go ahead Chair I want to compliment you because you don't discriminate you go after republicans and democrats I like that, just don't go after me but anyway I've got a couple of questions here. Did the feds use a cool or cruel or cash basis account Much like we're being dealing with

day to day in our budget cash basis but there are financial will be prepared on. Okay follow up, As it matters it will pin you down in my opinion and experience and training as a certified public accountant do you think the financial controls are adequate in HHS? Financial controls put forward I will tell you controls are there to get us given numbers that you see in this report and that's all we've looked at. Okay Follow up, well will you go back and talk to the people that they are and see if you think there are any other financial controls that they need to put in place to make sure that they've got the controls they have compared to other state governments. Again if you're looking at the controls to ensure that this financial are accurate so that you we may use them when those controls are there and I would tell you we look at things like one of the issues that an auditor always look at it doesn't matter what the organization is when you see that there's $64 million cash that wasn't spend at the near the end that keeps reverted, you want to make sure that import their invoices, could be payable and just not spend the cash, does that make sense? So important pieces of any audit when you are looking at it on the cruel basis we do that, we did further them, we do in the capital audit and we didn't find any situation like that they are paying the bills time. So again it's where we can get a clean opinion on their payables number, so I'm comfortable that the controls are in place that this numbers are accurate those data and that's probably a huge issue again you look at the $64 million reversion when there have never been wanted quite a few years and you think are they parking invoices in a payable and then they are going to use then they give that cash back and make themselves look good and that was not the case at all. Thank you so much, [xx] go ahead. One more, I want to address Mrs Miller OK, is it a federal law rule or regulation that you have to get people 12 months to submit an invoice from medical payment and the same time I did want to say that in Shruts[sp?] companies only give you 90 debts, so my reason for this if it a rule or regulation we can get waver to that, it's a law obviously we can, go ahead There is a requirement over year that they have submit those coins, submit a pay coin that I have to deffer to medicate be more specific as to what those regulations are that is required if I may speak up right about the medicare of alliance within which okay it's not the claim so probably it's possible with the medical regulations as well as the primary okay we do actually a signified actions which by those is majorly the weak points, at which they would not be able to Mike okay? Okay now from here. With you during the partner you don't need the essential right now here would you go back and we are back? Isn't say its matter long to get waver for North Carolina to go along with what other commercial insurance   charge are we doing medical corns   It's a rule sir, we can go back and check and see what actions we may make with that Chairman Tucker Thanks Mr. Chairman just a couple of questions I know we were what, ten minutes out having a [xx] is that were we are. T Hat's right. Just a statement I guess to Mr Davis and Mr [xx] I'd not had the pleasure for meeting Miss Miller but thank you for your presentation, thank you madam [xx] for your staff and what you've done here I've run a business on accrued and cash basis, I still run a business today I would never have said that I had $65, 000  in cash let alone if I had million in cash to revert back if I had invoices outstanding 300 billion dollars and I would know my payables

were because most of the businesses within 60 to 90 days will submit their invoices if they're good business people. So Miss Miller to me you're on a technicality between accrual and cash basis to be able to say you had that much cash on hand when you knew you had those outstanding liabilities I suppose. Now you implied that they got 12 months, but again if they're good business people they're going to get them in here in 60 to 90 days so they can have their cash worth. I don't understand, in 2014 the accounts payable number was around 10 million and in 13 it was 404 million, I don't understand that change in accounts payable, that drastic change. Can anybody tell me why that change happened? Sir, I don't have that information with me, but it's something I can prepare for you.   Mr Chair, if he wants to get back to me on that question that's fine. follow up for this in 2014 the medical client were about 707 million and know they belong to 984 million and I think what I going to hear is no more increase is the reason for that increase do you have any other drill down response to that ever been [xx] increase I would say that is liike the contributer the general to some extent very helpful and the frezing late and taken other measures to control cost so what we have is a drastic increase in normad[sp?] and something else I would be happy to look at I can also possibly provide you a the break down of weather in roman what is happening by program A category that would be helpful  OK sir one more question go ahead Mavelle interest year in today have an expressional order, new gas here. in our budget cycle this year as we get through it. Since you had the $63 million, or four, or five million dollars you claim you had. cash frontier 350 million on the back-end. Is there any hope, that this general assembly is going going to be required to back-seal with cash between now and June 30th? Which we will come in honor under budget this year. I'd like to go back just for one second to your precious question I think we know the obsequious growth that we've seen over the last year, certainly over last year and we've had a chance to talk with all your bodies, is up here and promise spend that's been another significant growth that's something we are all watching very closely. Just by that growth and again my answer stands we will come in on or under budget this current in this program. Thank you Mr. Chairman, Senator Mc Kissick, you are up. Guess this would be to Madam Woods auditor when it comes to state agencies is each agency allowed to choose whether they're using a cruel or tech basis for accounting I mean if there's no consistent policy that's applying university if this come to each individual agency. It's really about the hearing samutuals, so the cash basis on day-to-day operational is the way to run it, but then when you get down to a year in and having financial statements since we don't hear financial statements for each agency. And have it for two decades, and so when we prepare the financials or an agency prepares a financials it would be on their cool basis, so it's just a matter of their financial had not been prepared in the past. If they did prepare them they would be on their cool basis. Okay, so the crew is acceptable and the appropriate one to do it.  OK  I could. Go ahead age 18, there is no being in the persuadable, now give me a minute to get there now if you move over to the senate category here. They touch about allowance for Duplo accounts, and then in 2004 looks like their total, about 233 million again in 2013, 248 million what is going into that category of downfall accounts, can you at any insight take us through why they are being now classified this town with accounts, and why these money is not coming, and I want also give Miss.

Miller an opportunity to speak to this Without going back and go talk with my stand, I can't but I will be glad to look into this basically go rule all auditing is their methodology and making sure that's reasonable when they write something off or they could be the Damplo counts that methodology is really principle and is in accordance with professional standards, accounting and reporting standards, so I'm going back and look into if you would had appreciated the substantial amount of money both place, there is till in three million one year to forfeit another year. Mss Miller can you help me out with an explanation there, since it appears that would had originated NHHS you're aware of why there were such a substantial amount of that were cancelling killer years. Okay we're there are doubtful counts, whereas doubtful counts for those items that are outstanding for over 180 and that's how when new quarters the rams were about for here in stone a perfect process for medicare it would be count sediments that will still in appeals process debts that are [xx] left on, or it could be that right payment that we've not received on, or something that nature, and on health is going to be the receivables from the patients and the facility that have not been collected in over 180, they say that would be the biggest grabber of that number. Sort of back up Mr chair.   Go ahead. Do you allow some type of adjustment factors in your budget for the counts, I mean are there any efforts made to actually collect these receivables, then there's this pretty substantial number and neither cage, both of these years compared to what I would expect to see. Why, yes, we follow the guidelines of the established of the statutes so we have a collection process that we're aggressively engaged in collection activity for these amounts, those that we cannot collect on our own, they are submitted to collection agencies, are turned over the attorney general's office, also for collection activity so of course they worth handle it on their behalf than that, imagining. Senator probe Mr. Chair, could you get back to us and let us know what your recruitment efforts have been as it related to that, so that it could be adjusted but I assume because some of those [xx] ultimately be received. Thank you. Senator Wales we got one more question here and we got a few more minutes. I have a quick question for [xx] Giroud. The method of accounting that we've been discussing today just based on HHS or if it were applied across state government, are we in compliant with the constitutional amendment for a balance budget I'm going to have to work into that because my off the cup answer would be that you adopt a balance budget that accordingly I don't think there's any loss about that If you stand out of balance, I don't think there's any loss for that so you do adopt a balanced budget but again once you get passed adoption of the budget I think thats where the wrong is Representative Havens. Thank you Mr. Chairman the comment has been made several times it's has been 20 years since we've done this and I guess my question is why? back in the day  when the state auditor's office did this, they were 15 years behind, on his audience. They were doing one for every department and they three years behind us is not useful information and then across the nation it became apparent that for the fund agencies Federal government they aren't users, real users are the financial statements and so states across the nations started to adopt this much more summarized financial statement presentation because I remember, I can remember when there were all this combining statements it's in the back of the report but it's because of the amount of time that went in to it talking about misusing it and it wasn't necessary for the fundraising agencies or the federal government so we just cut back on the audit efforts follow up go right ahead How long has it been since we've done our financial statements in the department of education? [xx] 20 years until recently, we have

the field work finished on DPI and we should be issuing that report within this month or the first [xx] Ms. Chair, I'd just like to make a statement. I feel like there's a tree top parts of learning when we collect this funds in state governments how would like to see how we can make statutorial requirement that there's audit, in DPI and DHHS  Go ahead There are some efforts within the General Assembly now to require GHHS, GPI department public safety, DLT[sp?], department of revenue to get an annual audit of it's definitely six agencies. Have you done any? Five I'm forgetting the fifth, the sixth one is but there are six agencies. The top six is what we're calling them, the big six within state government but there's efforts now that explains you'd be aware of. The other piece I would say is that because of the information that this has provided, I'm not so sure whether I'm legislatively mandated or not that wont continues with this effort sticks[sp?] that have been made. Thank you Miss Wood, thank you Miss Miller. This meeting has adjourned, we've got to go.