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Joint | April 13, 2015 | Committee Room | Joint Legislative Program Evaluation Oversight Committee

Full MP3 Audio File

[xx] it's so quiet I thought I called the door sometime ago. Let me walk you to P. E. D oversight. Have we any remarks? Let me simply announce that we are going to have a special meeting on Monday April 27 at 3 P. M. Where Joe Coletti from the office of State Budget and Management will present the N. C. G. A report to the special meeting of this committee which has been participating in hardly any event but I want to make sure [xx] no to that. Do we have any pages? No pages, it's too early for pages and [xx] from the House, Reggie Sales, Marvin Lee, Terry McCraw, Chris McCracken and Correy Brayson, and from the Senate, Steve McKeag and Jim Hamilton. Representative Dollar? Yes, just a quick question Mr. Chairman. On the 27th, is the NC Gear Presentation let it be the only item on that agenda [xx]?   As far as we know it at this point. Yes. Thank you. We had hoped to have it perhaps today, but because of the length of what we figured this agenda we weren't going to be able to do that. Ok, I want to make sure to look at my notes. You have minutes of our last meeting, do we have any additions, corrections, modifications, suggestions or in particular do we have a motion? I think I saw that from Representative Dollar, adopt the minutes as presented. All in favor please say, Aye. Aye. Opposed no. Thank you. Now, let me introduce our State Auditor Beth Wood, who will present to us the Financial Statement Audit of DHHS, and this audit was posted to the auditor's web site at noon today, Madam Auditor. Thank you, Mr. Chairman and thank you, members of the committee for allowing me to present this Financial Statement Audit. What I'd like to do with this today is talk first about the report, what it is and what it isn't. Talk about the opinions that the State Auditor's Office rendered on the financial statements, and then I want to walk through generically how to use the report, and then I will walk you through some of the of the report issues to kind of help you see how it works. Again, this is an audit of the financial statements. So this is a presentation of the financial statements of DHHS. And we presented this, as a way to break down the department into divisions and then audit at that level, much different as I talked about in another committee meeting, about the level of audit and what that entails when we're auditing the State of North Carolina's financials as a whole. This is an audit of the financial information for DHHS that agency alone and it's not the entire state. We did render an opinion on the financial statements as they are presented, and that opinion is that the financial statements are fairly presented. In other words, the numbers that you see and this document as they're presented or accurate plus on mind as some materially levels but the bottom line is that they're materially correct. If would look first on page, it's the second page in the report but it doesn't have a page number and what I tried to do with this document was to walk you through how to use the report in case you wanted some fast, and quickly get through some sections of the report, and the report goes from very summarized at the agency level in total and then we get into some combining statement and then we get into detailed statements for each division, we did the report is broken down into 10 divisions in the second paragraph on that page we talk about the fact that there are 10 division's and that we presented this information as

we moved through the report and the final detail under divisional levels. So under required information you'll see the independent Auditor's report that talks about our opinion so in the report is the management's discussion and announces this is the agencies explanation for variances for increases and decreases in revenues and expenditure, so it's a place for the agency to talk about the changes you might see from year to year. Then we get down into again required information in exhibit A, this would be a balance sheet for the agency in total, there's a balance sheet there for 2014, there's a balance sheet for 2013 and then there is a revenue and expenditure statement and changes in front balance for the entire agency under your A exhibits. Then under exhibit B is a budget to actual comparison for the entire agency. Under supplementary information we have exhibit C and what we show you there are your balance sheet and your revenue and expenditure statement and it changes in font balance is been put together what we call a combining sheet it will show you each division with any agency separately and roles and meant to the total that then ties back to exhibit A. On the D exhibits this is the area and talking to O. S. B. M, physical research, and P. E. G there's a line idom in the expenditure Listing of the coffer and it talks about federal stay and local great glands. They're being given out and it's a huge 18-19 billion dollar number. So an exhibit D, we've broken down for you to the types of things that these monies are being spent on. E through ion exhibits will be exhibits for each individual division. So if you want to see a break down of what the balance sheet for 2014 looks like for division or you want to see what 2013 looks like the balance sheet or you want to see the Revenue Expenditure statement, then exhibits E-13 will show you that for each one of the divisions. Exhibit O presents the balance sheet and the statement of revenue, expenditure change for other governmental funds. Again, when we are presenting these financial statements, the general fund is broken out for every, for every division and then we have a total on exhibit A that talks if there's any other funds within those divisions, and so you'll see the detail of those funds on exhibit O and then exhibit P would be the transfers going from divisions and from state agencies through D. H. S. S, it may be from one division to another division or it may be from D. H. S. S to another state agency. And then in the final document you'll see in this is our report on internal controls and compliance with laws, regulations, contracts and grand agreements that could have a direct material effect on the financial statements. So if you would now go to page one and this is the auditor's opinion and if you wanted to read that at your leisure you can, and the next section is the management discussion analysis and again this is the agency's, its description their chance to talk about different variances, things that went on in the agency, why there might be increases, decreases, things that have gone on that caused certain numbers to look the way they do. So on page 10 , we're in exhibit A and this is one of the required financial statements. So, exhibit A-1 is the balance sheet for the governmental funds, first column being the general fund, the second column would be what we call Non-Major Funds, so any other funds that are in these divisions have been grouped together, rolled together in the two columns here so we're getting  entire the picture of the Agency, you'll look at the total Governmental funds, but if you're looking at just the general funds, that's first column and all the other funds rolled up into the other Governmental funds in the second column. If you look down the left side, your top portion, obviously are your assets, middle portion we have liabilities and at the bottom we have fund balance. Out to the right some of

this captions you'll see account receivable, so if you want to see a breakdown what those account receivable might be about, you can got to know three of the financial notes of definite statement in full which will come right after exhibit A. There're intergovermental receivables, again there's breakdown and you can see that is 943, 000, 000 just on the general fund. Again if you go node three you'll see not only the types of receivable, but what Governmental Agencies what federal agencies they are coming from, and so same thing down and when you get into your liabilities, there are particular notes that give you more detail on that one big summarized number, and so we have that laid out to the right of these line item captions. If you get down on the bottom of that page you'll see Fund Balance, and that's broken out into several different categories. You have a non-spendable, a restricted, a committed, an assigned under Final, unassigned. And looking at the caption out beside Fund Balance, you'll see that you have a note 1J that gives you basically the definitions of those Fund Balance descriptions into breakout, and then in note 11, I think that's where it shows us, look here real quick yeah and at note 11 gives you the descriptions by category and then it lets you know whether it's on designated undesignated or committed and then it also lets you know how much of that is by division. So that takes us through the exhibit A1 which is the balance sheet for DHHS in total, A2 is the balance sheet for 2013, A1 is for 2014 and then A3. This is a total revenue and expenditure in changes in balance for the entire Agency, you see the general fund and again all the other Governmental funds and then a total governmental funds. And then in the last  column you see total of revenues and expenditures, other financing resources and your changes in front balance for 2013 that number has been, it is not audited. So, you will see some, when you try to compare 14 to 13 you will see some things that seem they don't fit, but again 2013 was not audited. So, 2013 on page 11 is unaudited? Yes, and right under that topic or the column heading 2013, you'll see the words Unaudited. I'm obviously looking at the Papers[sp?] On page 12?   I'm sorry there's no page 11. OK. Thank you. So then, pages 13-36 are the notes to the financials and again it's more information, it's more details. So wherever you see out beside a line item caption on either the balance sheet, or the revenue and expenditure in changes in fund balance statement, you go to these notes and they'll give you more details, give you more explanations, clarifications of what goes into those numbers and why. So then if you'll turn with me to page 38 is another required statement for these financials. This is a statement of revenues and expenditures, and changes in Fund Balance. This is a budget to actual statement, it is not, this is truly budget actual. This is cash basis, and you may need to note on here two things. First, this is cash basis. Secondly, this is for the General Fund only. I talked about the General Fund, and then I said, we have some other governmental funds, well this is the General Fund only. So you may want to highlight at the top, where it says General Fund, and the fact again that it's budget to actual, so it is a cash basis, that it's done on cash basis. So the information that I think that helps everyone see better the financial perspective of D. H. S. S.  If you

look at page 41, this gives you the picture of D. H. S. S, all 10 divisions looking at the assets, the liabilities and then the change in fund balance for each individual division. And this document C-1 is for the fiscal year ended 30 June 2014. And again same thing applies to those lines and captions on the left on page 41 that there are referrals to notes, again if you're looking for more detail by division or in total, looking at breakdown of the total of those numbers you can get that detail in these notes that have made references. And then on page 43 and 44, that is for the balance sheet for June 30, 2013, and again, it's the agency as a whole broken out into the 10 divisions, and of course as you move across from left to right, this rolls up into the total that ties back to the exhibits in the exhibits A. On C- 3, this is a combining statement for revenues, expenditures in changes in fund balance. The revenues at the top, we've broken them out between federal funds, local funds, sales and services, fees, licences. There are a lot of numbers that go into these categories, but again we've broken them down into various categories so that you can get a feel for the amount of federal monies coming through the door, the sales and services type things, fees, licenses and fines. Down below, we have obviously the expenditures, personal services, employee benefits and if your drop down to almost the bottom of the expenditure grouping, you'll see grants, state aid and subsidies and if you go all the way across to the total you'll see that's a $17.3 billion expenditure and then what this gives you is a breakdown of these expenditures per division. So looking at that line item under Central Administration, you're looking at $24.6 million, under medical assistance you're looking at $11.367 billion and it moves across from left to right. as you move down, you'll see excessive revenues over or under so if there was expenditures were more than the revenues, you'll see the parenthesis, you'll look at other financing sources, so if you're looking for where the state appropriation are? That's where you're going to find them under financing sources, it's not on top as a revenue but it's down under other financing sources. Within that category also are transfers in and transfers out and then as you move down, you'll see a net change and find a balance and again you can move across and tie to the on total the far right but looking at division by division you can see the losses or excess depending on the division as you move across, you see the the final balance as of July 1, and it is based on the whatever numbers is added or substracted it gives you the fund balance for June 30, 2014. Now also bringing back up to the expenditure category, close to the bottom of that category, it says grants, state aid and subsidies. So if you to exhibit D-1 which we will get to in just a second, but that's another break down there is a huge numbers especially like on a medicaid, medical assistance is 11.7 billion  dollar one line item. So on D-1 we have broken that outer in the exhibits D, we brought the details of those grant, state aid and subsidy expenditures are. And also you'll notice

that in this report, we've tried to break this out Tabit so that if you're looking into get to a particular section quickly, that the tabs will help you do that. So the next grouping, the next tab was schedule of combined grant, state aid and expenditures. Starts on page 49 and again this is a combining financial statement and this just breaks down by division, the type of grants and state aid that are being spent, are being disbursed. So you look at the first grouping, it's medical is Medicaid and you can see who's spending the most of that or disbursing the most of that and it shows you categories of how those dollars are broken out, those expenditures are broken out. Then if you look next at social service programs you'll see that under child development, that's an area for them, they are spending or administering or public health is getting some of that money, and social services as you would expect is getting some of that money or spending some of that money. So that sort of shows you how this breaks out by division. We went even further so if you look at the bottom of page 49 and you'll look at the supplementary schedules exhibit D-2 we took some of the larger numbers and broke them into more details. So if you look at page 51 and 52, this is for the division of medical and we took, there are $11.367 billion and showed you the line items or the expenditure items under which these moneys are being administered or spent. Suplementay expenditures, skill nasic facilities and personal care, precision services, medical services, and if you move down to the bottom of the page see that 11.367 turns back on to the page before this, in total, but there's just a lot more detail here than on the priority pages, and then there's more detail on 49 and 50 than there is on the combining statement. So again working with O. S. P. M, PD and physical research, we've talked to them about what kind of information would be helpful to you and hopefully we've been able to provide that. And you can see as we move through this report, theirs goes from more summarized over to more detail. So D-3 is the division of Child Development that's a breakdown of how those monies were spent at Peru and State Aid, on page 53 and 54 you got division of Public Health, 54 you got Division of Social Services, so again, more detail on these pages then what was in D-1 and more detail in D-1, than what was in A-3. So then as we move through this, we coming into the first detail to financials on an individual division, so the person we come to is Central Admin. so if you're on page 56, this is Central Admin [xx] that division, and it shows you the financial statements, the general fund and here are the two this is a division that has a couple of other types of funds. So it has supporting capital projects [xx] supporting capital projects and then it has an infrastructure, finance fund, and then it has [xx] total central admin. So that's your balance sheet, on central admin on page 56 and then on 57, 56 is for June 30 2014 56 is June 30 2013. On 58 is just for central admin you have that schedule of revenues and expenditures, other financing sources and your changes in fund balance. So if you want to see more details about what went on at a revenue and expenditure level, then these detailed financials will do that help you do that. I would ask you to make a note here, on these statements where it says combined statement of revenues, expenditures changes in fund balance, you're going to make a note, this is on the accrued basis because on the next page 59, you have

budget the actual statement and again it's important to make a note here that it is budgetary basis, which means it's cash and again note in the title is for the general fund only. So if you're trying tie your actual cash basis expenditures back to your E-3 which is the accrued basis, you would be looking at the general funds only, if you're trying to make that connection we basically, when we were going back going back and reviewing this, got loop sided and almost pulled our hair out until we realized it was general fund and not total. So I just want to point that out to you so that you're not asking the questions that we sort of got caught on and then as you go through all of these other tabs will go through one more again, medical assistance, that's exhibit F-1, page 60 is your balance sheet for division of medical assistance only and it's G30, 2014 assets, liabilities and your fund balance at the end of June 30, 2014. On page 61, is the balanced chit for 2013, and then exhibit F-3 is your, again, your revenues and expenditures and changes in Fund Balance. This is accrual and on page 64, is the cash basis, OK? And cash basis for the General Fund only. What you see on F-4, we've included for you again that huge line item that says, Grant, State Aid and Local Subsidies, this is again a breakdown. That big line item, that 11.367 billion, that is a breakdown, and we put it here again, just say you won't have to be flipping all over the report, so that if you wanted to within this division look at. We did not include this schedule for every division, just the ones that had the bigger numbers. I want to point out a couple of things. Not to confuse you but to kind of help you get an understanding of this. If you look at page 62 and you look at federal funds which is 7.9 billion and this is accrual basis then I go over to page 64, I look at the actual column, and there're several items there. There's medical assistance payment, there's medical assistance administration and training, there's cheap and other federal grants. If you add these numbers together, they're a lot bigger then your actual on your crew the budgeting is done based on money coming in and money going out pretty much in a matter of the reporting requirements. Some of this money's are not true revenues or true expenditures are not to be treated that way for reporting purposes so some of these revenues at the top have been edited again some of the expenditures in the expenditure of 13.2 billion some of those have been added just because that's the way for a cruel basis reporting that's the way requirements works. For this statement or this division sensual admin and DSS we're going to be adding some schedules next through to help take you through what they role up in what those eliminations are but certainly my staff is equipped and certainly I think the AJJS is equipped to answer the questions you might have between page 64 and page 62 Mr chairman it's pretty much how

these statement's work we've spent a lot of time going back and forth and timeliest and certainly making sure that all of this work in this usefull information but I'm certainly prepared to answer any questions that you might have. Okay questions from the committee a representative Dolla. Thank you and thank you Madam Auditor, good to see you again as always. I just want to be at least maybe clear on one point in my mind anyway, they some what I can say summation at the end on page 125, what it speaks to there in the final paragraph if I'm interpreting this correctly, is that although everything is not necessarily reviewed in total to determine the level of certain potential deficiencies which may or may not exist. Material witnesses were not found as a part of the audit, there were deficiencies is at reading it here in internal controls the same as was noted in the single audit previously but this at least for those items and obviously a single audit is more than just these items but there's really no change with respect to review of any deficiencies, it's this audit is confirms that there were not material or at least in terms of what was found to the extent on the audit itself, there were no material witnesses, and what's noted theirs what was noted in those corresponding items in the single audit. I hope I tried to answer that question correctly. You did but I guess, yes you did answer that question correctly, in that the issues are compliance issues with federal grant requirements and we mentioned them here because they could have a direct the material effect on the financial statements if not cleared up. That's why we mentioned these several instead of all of the findings that we've found in the single audit report. So we found, you're right we didn't find anything that rose to the level of a reportable internal control issue that was over and above what we found in the single audit to that ain't true. Representative Saint. Thank you Mr. Chairman. Thank you is always persisted to really work work run a little bit behind to appreciate the presentation. Just out of curiosity, how much does it cost to produce a report such as this? This year in the report, the cost is in the back shows you how many hours that we spent on this particular audit and the money in there was about 1.4 million Turn at the back On very last page, page 127 at the bottom Follow up? Follow up. So 10, 773 added hours is that your're office and department suggest it's your office. That's my office and it's on the audit [xx] Okay. Thank you May I? Certainly. One thing I would say is that this level has not been done in to decades. and there was a lot of pulling information together and finding numbers and trying to figure out things, and because it has not been done in decades, the staff gain an understanding of every balance sheet account that was $100, 000 or more. so you have these expenses in the first year audit, but once you get all these schedules tied down and they are linked and so when you come at this again the next year there's a lot less work that will go into so I just want to make sure that you understand it's not 1.4 million every year.

And then the other piece of it is that I would say is because everybody's been accustomed to the caffer[sp?] audit and the high level that when we go into an agency and what they look at. They're not necessarily keeping schedules and back-up and things of that nature at this detailed level. So there was a lot of work on both agencies' part to pull this information together, which again, shouldn't be the case if everybody continues moving forward with managing with this document at the detailed level that it'sat right now. OK Senator Taylor. Yes thank you Mr. Chair, madam auditor, can you then kind of elaborate on that. Would you recommend that these annual audits continue and can you speak to the ability the discipline it would add to the financial reporting On several aspects, state agencies, and this is not just D. H. S. S understand that we're ready to issue our report on D. P. I and we've already started work at Department of Public Safety and everybody again the mentality or sort of the routine we've got into is making sure that we're accounting for the things that will be looked at in the financial statement audit at the [xx] level but I don't know that we've necessarily looked at a financial perspective at an agency level. The fund balances, the changes in fund balances that was not something that everybody was aware of because you can see there are some negative fund balances there's some positive fund balances. And the other piece of it is everybody is concentrating on here's my budget and do I spend all of my budget, or not spend all of my budget or I don't go over budget. But when you see the numbers in this perspective from an economical then it helps you decide, is the budget too high, is it too low, this area is losing money, this area has got your too much fund balance so by division it just gives you a better economic picture. I don't know how we can run our state government without both of these, certainly from a week to week, and a month to month you need to know where you are budget to actual. But when the General Assembly comes in town, they need to know the financial condition of every agency and every division within those agencies because I don't understand how you can decide if the budget you hand them is appropriate if you don't have the economic, the financial information to prove that and again it isn't about trying to cut budgets as much as rearranging may be the money to give a division more and another division less or finding out when you look at a lot of these numbers, we were surprised to see the spending in some areas and the lack of spending in others but again it just gives you both prospectus to deal with, always OSBM as a great job of the budget to actual, but there's nobody keeping up with the financial condition of the agency on a year to year basis, the [xx] does not do that. Follow up. Thank you Mr. Chair, madam if you can speak to a little bit because we're bouncing between a cash basis and accrual basis. One on the accrual, can you tell us when we recognize revenue and what the expense components of when that happens and how what's the complexity I'm trying to fleet going between the two methods I think one of the biggest aham to a lot of people was the Medicaids claim posible when I did the sort of the preliminary presentation a few weeks ago and we showed the 984 million medicaid claims payable everybody was like getting excited about we found the $984 million issue. It's in the financial every year that medical claims payable it's there every year but people had never seen it before because it never really been broken out before in this manner and then that's different from your accounts payable and another issue that you're going to find is from the cash prospective when we book the medicates claims payable because this is the money if we shut down business on June 30, 2014 this is what we'll had to pay out.

We recognized from the other side that the federal potion which is about 65.8% so we went ahead and are receivable what's missing is what would the States part of that be because you don't look receivable from the State so it just again show's you your financial position if you had to stop business on a particular day. Here is all the assets you have, and here is everything that you have and the cash basis does not get you there at all. You would never show that $984, 000, 000 payable on a cash basis, you've never show it one last follow up that I've made in besides the $984, 000, 000 payable, any major takeaways or things you want us, the two or three main points from this audit I think that now that the information is here, I would expect that what I would hope is that this committee and others will look through this information and start to ask questions about why a number looks this way or that way, and get comfortable with where that department is as a whole, look at where this department is division by division, and because when you get into these numbers and you break it down by division it is just a lot of information that I don't think the General Assembly has really ever truly had before. The other piece of it is, is that when you start your budgeting process and you're looking at but I think this document gives you, it gives you not only here's what we spent, here's the cash that really went out the door, but here is what we owe next year for the year we just finished out. So again being able to have that information here to take that into account and knowing what the true expenses for a year are not just the cash we put out the door. Representative Dollar, I'll get to you in just a moment. I was remiss in introducing the auditor, when I did not mention that as some of you know in October of 2004 pertaining this committee requested the auditor to conduct financial state audits, not just HHS but series of agencies largely because those audits had not taken place in roughly 20 years. There are other agencies as the editor has mentioned already, the similar audit for public construction will be complete probably by the end of this month. There will also be audits conducted, the Public Safety, Revenue, Treasury and Transportation pretty much in that order and just happens to be Alphabetical, but it was an attempt to try to get this back in some just so that we knew exactly where we were, let me just as per way background Representative Dollar. [xx] Okay. I just Mr. Chair. Certainly I know let's put a ring on certain reports, but right now page 60, I'm sorry I don't have my mic on, page 60, Medical Claims Payable as you noted, 984.5 million. Is it truth in that on page 63 and 64 is a further explanation is that the more detail or I'm I looking in the wrong place, because I can't total up that 984.5 million No 63 and 64 is not further. Not the detail of. Right, the 900 you're right, you're exactly right   So where would the detail flowing from that or is that reported? what am trying to determine, if

I may go ahead while you're working with it, is to break down on those medical medical claims where is that money broken out, to see where, cause I can't see page 63 under medical services, and that's 1.4 billion so I'm obviously not, even in the same church little loner redpute[sp?] The medical claims payable is an estimate that has been done based on prior history of what we will probably, or would be paying out in medical claims after the year end. If we start the business on June 30, this is what we would as an actuarial estimate of what the state would have. So you're not going to see a [xx] claims, it's what we would pay to the participants in the Medicare program. And this is the estimate of what we would pay Rather than take up a lot of time trying to teach me how to really read and understand, I will follow up with one of your staff or somebody on but I appreciate it thank you. Representative Dolla. Thank you, Mr. Chairman. Just a couple of quick things, one of them somewhat, maybe following up on Senator Todd a little bit, but If I'm understanding you correctly, and correct me on this part of the point of what you're talking about in this audit is to look at things maybe in some ways we haven't looked at them in a while on an accrual basis although we still come back, I would think, we still have to come back and budget or we budget on a cash basis, and the expectation of the department is not be, they can never really truly be for example in Medicaid, you can never be at zero. You would never be at zero, unless the program terminated at some point and at some point in time you paid out all the claims you would always be, if you're looking at it on an accrual basis, you're always in the process of you've got those claims, you've got money that will come in, it's kind of a rolling figure that will always be rolling but that on a budgeting basis we will still budget on a cash basis, but be cognizant of what things look like on an accrual basis. Is that fair to say, or? It is, but let me take you over to exhibit F-3. What page is it on?   62. So, if you were working with this particular statement and you're working down, when you look at the net change in Fund Balance you see that it's a positive 58.5 million. The Fund Balance starting off that year was 408 million, negative, and then the ending Fund Balance is 350 million, negative. So I guess we stepped back and said, Why is that? How does that work? Because when you book that payable, you're also booking federal revenues and then we thought OK you're not booking the accrual for the state's receivable. So then you look at the monies that got carried forward enough so, again hoping that sort of the financial position would help you understand or help the General Assembly better a budget. I lost you. No you din't lose me. Would you like to try again? I'm fine let me ask a different question. I just had a curiosity if you know how many other states, I mean obviously we're about as careful, but with respect to this level of auditing the statements because the information is obviously there but like you said it hadn't been didn't 20

years, at least like you've done today, but are other states doing this same thing? Is that the general practice or are you aware of what other states will be doing with respect to this type of audit. I looked into that also before we took on this project in other states they're having the same issue that our general assembly seemed to have and that was, we stepped back and started doing this careful audit and it was acceptable and the feds and the radiating to see say this is just fine. But at the general assembly level, fiscal research level, people were saying that information is audited at a too summarized level and so we can't have to anything in that perspective or that level. So other states are looking at doing what we've just done for the very reason that we did it is because when you audit information such a summarized level, it doesn't help the general assembly with their budgeting. They don't get a good, they don't get financial statements per agency say they don't have a feel for how those agencies are performing from a financial perspective. Other questions from the committee. Representative Harrey. Thank you Mr chair I hardly know what I ask, on the grants on page 63 and this represents monthly payments made primarily to manage care organizations also known as local management entities, and it starts on with the two billion and you start with the 11 billion, so these were grants that were given out to them these are I've started to remember it these are federal and state monies that have been paid out for the administration within programs like I guess to say your medicaid money that was spent well yeah you may need OSPM I mean a physical research to find exactly but the line bottom is. Thank you. Just we have someone from [xx] who'd like to address that. Representative Halley which page are you looking at which one? Page 63. Now we believe that includes clients as well as grants yes you can check us with physical research representative Halley.  If it's the $11 billion line item it doesn't click medicate claims payments as well. And other items so help with the line under description it's any federal state money that's paid for the benefit of recipients. I think we have a follow up. [xx] The items on this page are made up of only two things. One are all the claims that are paid directly to the providers. In addition to that, the supplemental payment plans like the Hospital Gap Plan, the Dish Plan what you call the MRI Plan, and there is additional supplemental premise. So what this page represents, are payments made directly to providers and I believe though that try we base to include here what would be [xx] for the [xx] but everything on here really is the right [xx] to providers for the most form Mr. Chairman. Mr. Turker, I believe that is the question [xx] had was, what is the Managed Care item and is that not the Local Management Entities for mental health and substance abuse? The Managed Care payments must stable on from disco resource care payments so that is monthly capitation payment made to [xx] for the array of behavioral health services that they contract with the state to provide. Okay, any other questions or comments form the committee?

Senator Clark could you have? I thought you had Yes, I'm just trying to get a grasp on these cash basis and accrual basis and I have a question in general. You say we do our budgeting on the cash basis but in my mind I'm wondering like when we do the projections for our coming up fiscal year, do we have a clear understanding of the liabilities that're going to at that particular point in time, is that reflected in the budget that we're plotting going forward? So you can asking that question to us. Anyone can answer. Well we have The auditor, we have Madam Auditor, would you like to take the stand first? I'm thinking that somebody from Budget. to answer that question because what they do we do not consider for budgeting purposes. Says who would you like to take it? Mr. Chair and members of the committee so we do look at cash, or try to project cash flow, we ask the department or work with the department to try to do that in two different ways. So figure out how we finish up the current fiscal year that we're in and how that's going to impact the forecast, cash becomes very important, and so as cash impacts how you're performing in the current fiscal year, we need to know how your cash is coming in and how that will impact your current year budget, but as we move forward and as we forecast the biennial cash is not as important as it is in trying to figure out where you are on the current fiscal year. I would defer to HHS if they have someone here from Medicare here to talk about there new model and they are project using cash or we've asked for cash forecasts as well as a budget forecast from HHS, and that is something they've been working on they may want to respond to that Mr. chair. OK. That may be a great term so segway[sp?], we had a we have from HHS, but we do not request them to make a formal response today but they have some folks here who may want to come out and respond to your neighbors question they have the opportunity to do that, Mr Shellah whom we know is here, but he has Mr. Davis, the CFO of the HSS, who may be prepared to answer some these questions or make any comments with regard to this if he chose to in someway fashion. Thank you Mr. Chairman, it's pleasure to be here and we're very pleased with the results of this audit and the [xx] for audit we sound accurate and transparent. The financial management of the taxpayer's money is very important to the department. It's something we've worked very hard to obtain, so we welcome any audit hat's going to confirm that and to let us know what it is we need to improve, as to the question that was asked about a model, we do have a new model. It's great we improved we spent a lot of time and effort developing it. It was not available at the time these clue estimates from it was made just in time for the Governor's Budget in November. So, the new budget is much more detailed then you could get the forecast are much more detailed and as far as cash forecast are concerned we do monthly detail forecast now from month to month so we have a much better record on what we're spending, what we're spending on, but in just as important we have a much better record of our receipts which I think in past years, not properly planning receipts or overbudgeting receipts or using the wrong on federal percentage is to pull in receipts which was a problem in years past but that's been corrected now. We also have Ms. [xx] as the controller, Roger Barrens from Medicare Finance and on this pick a phone, trace button see a yours full of [xx] is their anyone? Do you wish? I don't want anyone to make any further comments in this regard with regard to this. OK, do we have any other questions from the committee? Do I see you your hand senator Torent[sp?]. Your just waving, good that's useful. Madam auditor, any further comments? None, Mr. Chairman. Thank you for your assistance, we look forward to the next is to be

under construction we'll look forward to that, I think I'll indicate that way that we may be able to see his next month May I  just invite any other physical research staff or PD that want's more details about the numbers again we were trying to lay thing;s out so that again the budgeting for next year, next years budget plus or minus whatever she wants to make, so again we invite any of them to ask questions, sit down with us and look at the details behind some of these numbers OK thank you Ghana. Thank you very much. Okay next time on our agenda Kill Sholl Program Evaluator who has the presentation for the PED work plan. Thank you for everyone whose is being here for this Good afternoon committee members. I'm happy to be here to talk about the work plan, divisions work plan process. Mr. Chairman, we've a little more time than I expected I can go through very quickly the list of proposed projects on there or I can just leave that to the members read when I get to that point you'll just let me know how you want me to proceed Ms [xx], highlight me. What were you asking again. We have a list of 39 projects that are proposed for the committee to consider as you decide what you want our work plan to be and I can take the time today to go over that list, just at least to tell you the title of everything but it is the for you and you all can peruse later on, it's up to you all otherwise then I can finish the presentation much quicker, it's really how much time you want to. Good let's take about whole five minutes or so and take a look at the projects and then if you have questions. OK. We'll just be at ease for about five minutes. OK just so you can do that, you have two yellow documents, there's a longer document and there's an addendum which is an additional education project which is E10 just a briefly and I can skip over this slide as you look on. We have 39 projects, 10 education, 11 general government five HSS, two justice and public safety, seven projects related to natural and economic resources and four related to the department of transportation. I'll give you all a few minutes to kind of peruse the list. We'll just be at these for a few minutes. OK, let's go ahead if you don't mind.

Alright if you will turn to the white documents, this is the slides that I'll be going through very quickly, the graphic's that's up here describes our process for determining report topics you'll see we get them from a variety of sources including a survey of legislators from our committee members PED staff, we work on ideas, we also hear from other legislative staff, there's a process once the plan has been approved for legislators both on the committee and also committee to bring ideas to you all and at which point you start out with a proposed plan. All this ideas and then you all prioritize them and then and after that we take the data from our prioritization survey and provide you with a list of what the committee's collective top 15 projects are, show you them in rank order, at which point after reviewing that you all vote on the final plan. As I said this particular list of 39 projects came from a variety of source legislators that responded to the PED survey that was put out about six weeks ago, that included members of this committee. We had a few pending projects from the current work plan the 1315 plan and there were some ideas that were on a similar proposed project list for 13-15 that's still seen to be relevant to what's going on in State government now. And finally P. E. D and other legislative staff also had ideas. And so that's how all these ideas showed up on this list. As you see here, we have divided the list up based on appropriations, on sub-committees, education, general government, helping human services, justice and public safety, natural and economic resources and transportation. And in some cases on general government, that's where we would put particular projects to cross all State agencies and that sort of thing. General government will include things that are necessary general government agencies but that seem to be the most appropriate place to put them in categorizing projects, really what the most important thing related to this presentation is the rest of the process because we're eager to have work plan from you so we can start working working on projects they're important to this committee because you will oversee our work, so we are going to start out today you're reviewing this list of 39 projects and we're going to give you all another week because some committee members may not had time when we issued the survey to provide us with their ideas, so the deadline for you to provide me or John Turker the director and the idea that you would like to be included on this list to be considered by all committee members is next Monday. So you have a week at which point this week we will need to write up a description of each project. We will do that and then send to y'all, each member of the committee, a prioritization survey. You'll get an opportunity to rank each of the projects from one to five. One being, I have no interest in P. E. D doing this project, to five, that I'm very interested however in between. In addition the survey we'll give you an opportunity to select your top five projects. So there'll be a separate survey at the end and some of our committee members have been here a while and we will use that data to compile a list based on y'all information of the top 15 projects. And you may ask why 15? That's a good number because we know over a two year time period, the Legislature may enact legislation asking this committee to add a project to the work plan. This committee may also find that there's an important burning issue that you don't know about today, but in six months it's of importance to this committee. We had that happen with the Indian Cultural Center, and this committee directed us to do the work. The report on the ABC project that was reported in February about the campaign on underage drinking that we were asked to do that, was a special provision of the budget bill that asked y'all to help us to do that. So that's an example of things to get added so what we will end up doing more that 15 projects but, that way we ensure that we do the top 15 once that y'all want us to do. We'll give you a week to complete that survey and we will then analyse that data and then at your May 11th meeting, which would be the next time y'all would meet in May, I now there's going to be a meeting intervening from that. You will have an opportunity to

see the data, see what the top 15 projects, how everything else ranked. You can make changes to that list, we have seen that happen, where you may move things up or start, well maybe we want to do something else as opposed to what's in the top 15. The committee will discuss and the end of the meeting, you will prove the work plan has amended however you all may amend it during that meeting, and at which point we will then commence work as we complete the projects that are at the end of this project time biennium and then we will begin to work on those projects. So, that's the process and So, if you do have ideas that you want to add to this list please contact me, you can send me an email, give me a phone call. If I've got some questions, I may follow up with you to make sure we understand what your project idea is, and we will create a brief synopsis of the project and add it to this list, and then they will all be on the Prioritization Survey that you will receive on the 23rd of April, and you will have until the 30th of April to complete that. Mr. Chairman, that's all I have. OK, Chairman Horn? Thank you, Carol. What I'm curious about is, I suspect that there are some projects that will be in a study Bill of some kind that may be will be filed today or tomorrow even, asking PED to look into this, that or the other. Have you any insights on that? Do we have any of that information yet?  I believe the Director does. OK, great. I'll get it [xx] it's [xx] Well, I could very quickly tell you what they are. OK, back up on my website, this is on our website, we have legislative tracking under a certain tab there. We have Senate Bill 231 that requires a study of unified public health system, it's in the Rules and Operations of the Senate. Senate bill 389 calls to comply with Federal mandates in DPI, the institutions, extra. Senate bill 420 creates something called the Accountability for Taxpayer Investment Board. It has PED in there and a certain way to look at it so we're involved in that to a certain extent. An earlier version of that bill had the director of serving on that board I would have some problems with that. Senate bill 549 has a [xx] study of health authorities and data analytics and Senate bill 603 requires us to do a North Carolina accountability report which is a website cataloging all state programs, and doing some ratings on those programs that Senate bill 603 and Senate 420 have some of the same elements isn't it? That's all I know about Mr. Chairman. And there are two deadlines for bills to be introduced this week in the house, the 14th and the 16th, they could have items for us and we generally get something in the budget bill sometimes which we may not know about until the budget bill is public. Which is to say specific designated studies to be undertaken by specific legislation will supercede the work plan that we develope at some point in time, we don't know when that will be. Okay, great. Okay, If that's clear as mud, it's probably appropriate. Essentially what the process is that we have this list, let's you take a look at it, there may be some additions to it, rate it and then we'll come back and have a meeting and, mayor I guess it is to identify and see what those ratings are proceed from there based on some time and opportunities that we might have. [xx] we follow through on existing studies too. I don't see any, I see folks are anxious to leave, so we'll just do that, thank you for attending, it was a quite honestly much calmer than I thought it might be,

which I'm pleased to see. Thank you.  Meeting is adjourned.