1. Federal Grant Contracting MALPH September 2014 Tim Becker, CPA Senior Deputy Director, Operations Michigan Department of Community Health

2. 2 Health Care Industry is Michigan’s Largest Private-Sector Employer 1 Provides more than 558,000 direct jobs 1 o Hospitals employing nearly 219,000 1 o One third of the projected fastest growing occupations are health care related 2 o Health care employment as a percentage of total Michigan employment is 10.6% 3 1 million people who collectively earn more than $48.4 billion a year in wages, salaries and benefits 1 Health Care Industry Generates $13.4 Billion in Federal, State & Local Tax Revenues 1 Health Care Spending Per Capita in Michigan is $6,618 3 Total Health Care Spending in Michigan is $64.3 Billion 3 Healthcare is an Economic Force in Michigan 1 Economic Impact of Health Care in Michigan, 8 th ed. 2 U.S. Bureau of Labor Statistics 3 Kaiser State Health Facts (2009 data)

3. 3 Mission The Michigan Department of Community Health will protect, preserve, and promote the health and safety of the people of Michigan with particular attention to providing for the needs of vulnerable and under-served populations. Vision Improving the experience of care, improving the health of populations, and reducing costs of health care. Leadership, Excellence, Teamwork Our Guiding Principles

4. 4 Supported by: Operations Policy & Planning Inspector General Commissions MDCH Service Structure Medicaid Behavioral Health, Developmental Disabilities 9.9 Million Michiganders Services to the Aging Public Health FY 2015 Budget: $17.4 billion General Fund: $2.9 billion Full Time Employees: 3,648

5. MDCH Services Statistics 5 1,900,000 older adults (aged 60+) in Michigan 85+ age group is fastest growing 10,498,348 home delivered/congregate meals provided to aging population in Michigan 6,822 caregivers for the aging that were supported by 694,401 hours 62,858 older adults received 541,393 hours/units of community services 649 children received autism diagnostic services 520 children diagnosed with Autism Spectrum Disorder 40,564 children served in Children’s Special Health Care Services (CSHCS) 254,100 eligible Women, Infants and Children (WIC) receive WIC services each month 45 Local Public Health Departments (LPHD) 12,000 live emergency department reports daily 1, 894,673 doses of vaccine in the Vaccine for Children program distributed to eligible children 22: Michigan’s 2012 rank (70.5%) based on a national childhood immunization survey 134,310 Infectious Disease Specimens Tested 122,127 Newborn Screening specimens tested 26,181 tests completed for blood lead levels and environmental lead exposure 126,000 Facilitated epidemiology responses to communicable disease cases 504,000 dollars in healthy food purchased daily from local grocers 1,000,000 hearing and vision Screenings done yearly for Pre-K and school aged kids 6,700,000 lab services provided to over 240,000 individuals. 5,604 residents test positive for gonorrhea and/or chlamydia yearly by State Lab System and Local Public Health 360,000 new vital records events recorded each year 32,000,000 records in vital records depository dating to 1867 1,779,449 Medicaid Total Average Eligibles 965,042 children served by Medicaid 347,395 disabled adults served by Medicaid 13 Medicaid Health Plans 786,629 Medicaid School-Based direct service procedures 83,200,000 Medicaid transactions processed last year 494,380 children currently enrolled in Healthy Kids Dental 37,453 currently enrolled in MI Child 1,039,000 calls handled annually by Michigan Enrolls 3,788 women using Maternal Outpatient Medical Services (MOMS) program each month 28,977 Medicaid nursing home residents 46 Community Mental Health Services Programs (CMHSP) 10 Prepaid Inpatient Health Plans (PIHPs) 242,884 people served by CMHSPs and PIHPs 5 state operated hospitals and centers 1,017 state psychiatric hospital bed capacity 1,975 licensed psychiatric beds in the community for adults; 242 for children 6,537 allegations investigated, processed, and resolved by Office of Recipient Rights 41 Developmental Disabilities Council grants 66,164 received Substance Use Disorder Services 125,277 participated in Substance Use Prevention Programs 1,563 claims paid for crime victims 79,337 cases worked by Victim Advocates in Prosecutor Offices

6. 6 Total FY 2015 Budget Recommendation (in millions) TOTALGF/GP Medical Services$10,833.6$1,586.3 Healthy Michigan Plan$2,452.9 - Behavioral Health Services$3,002.8$1,101.1 Public Health$794.6$158.7 Office of Services to the Aging$99.5$35.8 Information Technology$87.2$19.7 Policy, Planning, and Crime Victim Services Commission$57.9$7.6 Administration$46.1$29.8 FY 2015 TOTAL$17,374.6$2,939.0 FY 2014 TOTAL$16,934.5$2,747.6 NET CHANGE$440.1$191.4

7. Revenue Sources (Millions) 7 *Private and Local

8. 8 Assistance or Benefits: Money, Property, Services Transfer of value from Federal Government to entities or individuals o To accomplish a public purpose of support or stimulation o Authorized by Federal statute Formula Grants Allocation of money to states or their subdivisions Distributed through legally prescribed or administratively regulated formula For activities of a continuing nature Project Grants Funding for fixed or known periods Scholarships, research grants, construction grants Direct Payments Provided directly to individuals or private entities Receipt conditioned on specific performance or eligibility requirements Common Types of Federal Grants

9. 9 Announcement: Federal posting of grant opportunity Application: Request to Federal Government for award Award: States terms, conditions, amount, duration Accessing: Drawing down of federal funds Appropriate: Expend or Pass-through Account: Financial Status Report Assess: Monitor of programs and subrecipients Audit: Determine compliance with Federal programs Federal Grants Cycle

10. 10 Grants.Gov Find and apply for federal grants o Find Open Grant Opportunities o Browse Categories and Federal Agencies o Browse Eligibility Categories Federal Register Daily journal of United States Government Announcement of all rules and funding announcements Catalog of Federal Domestic Assistance (CFDA) Detailed program descriptions for 2,243 federal assistance programs CFDA is a 5 digit number o First 2 digits represent the funding agency o Last 3 digits represent the program o 10.557 = Department of Agriculture (10) Supplemental Nutrition Program for Women, Infant, and Children (557) o 93.778 = Health and Human Services (93) Medical Assistance Program (778) Announcement of Federal Grants

11. 11 Federal Awards Authorized by Federal Statute Medical Assistance Program (CFDA 93.778 – Formula Grant) o Authorized by Social Security Act, Title XIX and 67 Public Laws o Legislative intent expanded with Patient Protection and Affordable Care Act (PPACA) o Pre-PPACA: o Children o Pregnant Women o Aged Who Meet Income and Resource Requirements o PPACA adds the following up to 138% of Federal Poverty Level (FPL): o Parents o Caretaker Relatives o Disabled o Childless Adults o Any variances to Prescribed Federal Formula must be granted Federal Approval through a waiver as permitted in the Social Security Act State Appropriates Federal Funds and State Match Annually State Budget is Legislation authorizing the expenditure of federal awards and state resources Medicaid funds appropriated to 13 private HMOs and 10 Prepaid Inpatient Health Plans Legislative-Intended Use of Funds

12. Healthy Michigan Plan 12

13. 13 Authorized by Federal Government as a Waiver Waiver granted under Section 1115 of the Social Security Act o Federal Government may waive compliance with certain provisions to permit demonstration o Permits experimental, pilot, or demonstration project Federal Medicaid Waivers Section 1115: Research and Demonstration Projects o Permits state flexibility to test new or existing approaches to financing and delivery Section 1915(b): Managed Care Waivers o Permits state to provide services through managed care delivery systems and limit beneficiary’s choice of providers Section 1915(c): Home and Community-Based Service Waivers o Permits state to provide continuum of services to elderly and disabled Michigan Public Act 107 of 2013 Established Healthy Michigan Plan to start April 1, 2014 Healthy Michigan Plan

14. 14 Beneficiary Cost Sharing Co-pays required of all Healthy Michigan Plan members Individuals between 100% and 133% FPL pay into MI Health Account o Limited to 2% of annual income o Contributions made on a monthly basis Co-pays and contributions can be reduced through health behavior incentives Incentives for Healthy Behaviors Addressing substance use disorders Reduced tobacco use Obesity reduction Federal Waiver and Legal Intent of Healthy Michigan Improved health outcomes through preventive primary care Reduced cost burden on healthcare system through reduced emergency visits Reduced spread of costs to other payers from hospitals for uncompensated care Healthy Michigan Plan

15. 15 Healthy Michigan: 1115 Demonstration Healthy behavior incentives, premium sharing, health spending accounts Michigan Specialty Services and Support: 1915(b)(c) Mental health, substance abuse, developmental disabilities support Prepaid shared risk arrangement with prepaid inpatient health plans MIChoice: 1915(c) Adult day health, respite, personal care, home delivered meals, nursing Children with Serious Emotional Disturbance: 1915(c) Respite, community living supports, family home care training, therapeutic activities Children’s Waiver Program: 1915(c) Specialized medical equipment and supplies, specialty services for autistic children Habilitation Supports: 1915(c) Private duty nursing for individuals with developmental disabilities Comprehensive Health Care Program: 1915(b) Managed care capitated payment system Healthy Kids Dental: 1915(b) MDCH partners with Delta Dental to administer dental care using Delta Dental’s commercial model Michigan Medicaid Waivers

16. 16 OMB Circular A-102 Regulates grants and cooperative agreements with state and local governments o Pre-Award Policies o Post-Award Policies o After-the-grant Policies Requires advance public notice of awards in Federal Registry or other means Prescribes standard forms for application o SF-424: Application for Federal Assistance Non-profits, hospitals, institutions of higher education follow Circular A-110 Medicaid State Plan Comprehensive written statement of nature and scope of state’s Medicaid program Required by 42 CFR Chapter 430.10 o Code of Federal Regulations = codification of rules published in the Federal Register o CFR is divided into 50 subject matter titles o CFR titles are divided into parts (chapters) according to the issuing Federal department/agency o Chapters are divided into sub-parts covering specific regulatory areas o Title 42 = Public Health o Chapter 430 = Department of Health and Human Services, Centers for Medicare & Medicaid Services, Medical Assistance Programs o Sub-part 10 = State Plan Michigan Medicaid State Plan = 968 pages, online PDF = 39.74 MB Application for Federal Grants

17. 17 Michigan’s Medicaid Program Intent Expressed in State Plan Medicaid State Plan is an agreement between state and federal government Provides assurance that state’s Medicaid program will be administered in conformity with the specific requirements of the Social Security Act’s Title XIX and regulations Specifies the services to be provided and the means to deliver the services o Identifies the general health care services o How costs of services will be reimbursed o Eligibility policies in effect for the program’s beneficiaries Components of Michigan’s Medicaid State Plan Single state agency organization o Describes the state organization administering the program and its authority to administer Coverage and eligibility: identifies who qualifies for coverage Amount, Duration, and Scope of Services Provided o Detailed description of services covered including limitations and requirements Program administration o General program administration: reimbursement methodologies o Personnel administration: provides assurance on personnel standards and training o Financial administration: fiscal policies, accountability, cost allocation, financial participation Program Intent through Federal Agreements

18. 18 Notice of Grant Award Issued by Awarding Federal Department/Agency Authorizing Legislation Stated CFDA Number Approved Budget Period Approved Budget amounts by category o Direct costs o Indirect Costs OMB Circular A-87 Cost principles for state, local, and Indian tribal governments 5 attachments o Attachment A: General principles for determining allowable costs o Attachment B: Selected items of cost o Attachment C: State/local wide central cost allocation plans o Attachment D: Public assistance cost allocation plans o Attachment E: State and local indirect cost rate proposals Award of Federal Grant

19. 19 Michigan’s Medicaid Providers Adhere to Provider Manual Medicaid Provider Manual addresses all health insurance program provisions Document is 1,789 pages divided into 44 comprehensive chapters and 4 appendices Prescriptive Eligibility Determination and appeal rights Coordination of Benefits o Mechanism used to designate order in which multiple carriers are responsible for payment o Medicaid is the payer of last resort o Billing Medicaid prior to exhausting other insurance resources may be considered fraud under the Medicaid False Claim Act if provider is aware beneficiary had other insurance coverage for services o Subrogation: beneficiaries assign MDCH the right to seek recovery of other payments Cost Containment Through Managed Care Most Medicaid services delivered through managed care organizations (HMOs) o Payments are capitated monthly payments per member per month Fee For Service Cost Controls Predictive Modeling: screening technology to identify Medicaid claims with billing irregularities Third Party Liability Division: ensuring responsible payers meet their obligations Office of Health Inspector General: Investigating Medicaid fraud Program Intent through Contracts

20. 20 Draw Methodology Varies by Federal Granting Agency Web-Based Systems Lines of Credit Telephone Systems Advance Draws In some instances draws are permitted in advance of earned expenditure o Funds must be deposit into an interested bearing account o Interest earnings in excess of threshold limit must be remitted to Federal Government o SF-425 monitors timing of cash advances and disbursements o Submitted quarterly for most federal awards Reimbursement-Based Draws Most federal grants are drawn after an earning expenditure recorded at local level o Goal is to minimize lost interest exposure by ensuring timely draws are made Accessing Federal Funds

21. 21 Health Programs Administered Through Local Partners Medicaid administered through 13 private health plans Behavioral health administered through 10 Prepaid Inpatient Health Plans and 46 Community Mental Health Service Providers Public Health administered through 45 local public health departments Aging programs administered through 16 area agencies on aging Interim Payments and Cost Settlements Providers paid through monthly interim payments Receivables/Payables Recorded at year-end on cost reports o Final cost settlements can lag two or more years after services o Dependent on cost report submissions from locals o Can be delayed by audits or open issues under review o Medicaid accruals at year-end can be as large as $1.7B Appropriating Federal Funds

22. Michigan Medicaid Health Plans 13 accredited health plans covering medically necessary services Blue Cross Complete of Michigan CoventryCares of Michigan, Inc. HealthPlus Partners McLaren Health Plan Meridian Health Plan of Michigan Midwest Health Plan Molina Healthcare of Michigan Physicians Health Plan – Family Care Priority Health Choice Harbor Health Plan Total Health Care UnitedHealthcare Community Plan Upper Peninsula Health Plan 22

23. 23 Prepaid Inpatient Health Plan (PIHP) Consolidation Region 1 Region 2 Region 3 Region 4 Region 5 Region 6 Region 7 Region 8 Region 9 Region 10 Allegan BarryEaton Oakland Macomb Van Buren Kalamazoo Calhoun Jackson Wayne Berrien Cass Lenawee Monroe St. Joseph Branch Oceana Newaygo Mecosta Isabella Midland Bay Muskegon Montcalm Gratiot Saginaw Tuscola Sanilac St. Clair Lapeer Clinton Ionia Kent Ottawa Genesee Cheboygan Presque Isle Emmet Grand Manistee Wexford Ogemaw Iosco Mason Lake Osceola Clare Gladwin Arenac Huron Missaukee Roscommon Gogebic Ontonagon Houghton Keweenaw Iron Baraga Marquette Dickinson Alger Delta Menominee Schoolcraft Luce Mackinac Chippewa Charlevoix Antrim Otsego Leelanau Benzie Traverse KalkaskaCrawford Oscoda Alcona Alpena Montmorency Shiawassee Ingham Hillsdale Livingston Washtenaw Che boy gan Pres que Isle Emmet Regional PIHP Structure though December 2013 (18) Regional PIHP Structure Beginning January 2014 (10)

24. 24 Local Public Health Services Local Partners in Health Local Health Departments 30 County 14 District 1 City Services: ~ 5 million Visits: ~4.6 million Patients: ~1.4 million

25. 25 Michigan’s Area Agencies on Aging

26. 26 Internal Control Integrated Framework COSO Report: Committee of Sponsoring Organizations of the Treadway Commission o Provides framework to design, implement, and evaluate controls for compliance o AICPA Statement on Auditing Standard 78: Consideration of Internal Controls in a Financial Statement Audit Control Environment: Provides discipline and structure and sets organization tone Risk Assessment: Identification and analysis of risks forming basis to manage risks Control Activities: Policies and procedures that carry out management’s directives Information and Communication: Enable staff to carry out responsibilities Monitoring: A process that assesses the quality of internal control performance Period of Availability Can only charge obligations incurred during the budget/project period o Cash or accrued expenditures o Encumbrances: contracts for goods or services engaged before end of budget period Periodic Reporting to Federal Government Largest report for DCH is CMS-64 for quarterly reporting on Medicaid Accounting for Federal Funds

27. 27 Entity Type Circulars Grants-wide HHS Programs Education Institutions OMB A-21 2 CFR 220 45 CFR 74.27 State and Local Gov. OMB A-87 2 CFR 225 45 CFR 92.22 Non-Profits OMB A-122 2 CFR 230 45 CFR 74.27 Accounting for Federal Funds

28. 28 Proper accounting of costs Consistency and equity in charging Federal and non-Federal activities Expense item charged to a single Federal activity Allocate costs in accordance with relative benefit received by program COSO Internal Control Framework Control Environment o Demonstrates commitment to integrity and ethical values o Enforces accountability Risk Assessment o Identifies and analyzes risk Control Activities o Deploys through policies and procedures Information and Communication o Uses relevant information both internally and externally Monitoring Activities o Conducts ongoing evaluations Internal Controls for Not-For-Profits

29. 29 Performance Audits Conducted by Office of Auditor General on Department of Community Health Objective is to assess the effectiveness of particular programs These audits are not on a regular schedule and can cover multiple years Internal Control Evaluation Conducted by department and reviewed by internal auditors Objective is to assess the effectiveness of the internal control environment Formal evaluation is conducted on a biennial basis with ongoing interim monitoring Subrecipient Monitoring Department conducts reviews and audits of subrecipients Compliance examinations to ensure compliance with the contracts on grants Ensure that subrecipients are complying with OMB Circular A-133 Assessing Utilization of Federal Funds

30. 30 Internal Controls Pre-audit assessment through questionnaires Field testing by auditors through observation and interviews Reconcile financial status reports to accounting records Unsubstantiated costs are questioned and susceptible to disallowance Accounting records must demonstrate appropriate allocations Expenditure testing for program compliance Payroll and Building Space o Costs are to be charged in accordance with relative benefit received o Pre-determine interim allocations permissible if trued up at year-end o Time reporting should be used if staff are allocated to multiple activities Charging of direct/indirect costs o Double dipping: directly allocating overhead to a cost center while also allocating the cost indirectly through a general administrative cost pool Contract Compliance

31. 31 Assumed risk with subrecipients Staffing limitations limit ability to monitor subrecipients Financial status reports taken at face value and not sufficiently audited Failure to check contracts to compliance supplements Federal regulations updated annually through compliance supplements Limited internal audit staff and lack of training for grant accountants Vesting fiduciary responsibilities with program staff Program specialists tend to initiate grants proposals o Program staff need to be supported by strong financial analysts o Inadequate financial review leads to missed budgets and compliance issues Decentralized cost allocation methodology Loose cost allocation plans without strong central oversight tend to lead to errors in cost allocation and improper charging of indirect costs Common Errors in the Grants Process

32. 32 Single Audit Primary accountability system for use of federal funds Pre-1979: Federal agencies responsible for their own audits of their grants 1979: OMB Circular A-102: First government-wide audit requirements of grants 1984: Single Audit Act: Established organization-wide audits of states and locals o 1996 Amendment: Extended Single Audits to non-profits and universities o Increased audit expenditure threshold from $25k to $300k OMB Circular A-133 Issued pursuant to Single Audit Act 2003 Amendment: increased audit expenditure threshold from $300k to $500k Establishes policies and procedures for auditors and auditees A-133 Compliance Supplement o Provides guidance to auditors for testing federal program compliance requirements o Narrative descriptions and purpose descriptions for all federal programs o Revised annually Auditing of Federal Grants

33. 33 “Single” Audit is both a compliance and financial audit Conducted by an independent auditor State’s audit is conducted by Office of the Auditor General o Audited agencies are part of the Executive Branch o Office of the Auditor General reports to Legislative Branch Financial Statements: prepared by auditee Schedule of Expenditures of Federal Awards (SEFA) Discloses each award expended or passed through Auditor’s Opinions on Financial Statements and SEFA Auditor’s Report on internal controls and compliance Auditor’s Schedule of findings and questioned costs Auditee’s Corrective Action Plans Single Audit

34. 34 State of Michigan Statewide Single Audit: FY 2012 37 major program: 24 qualified, 9 qualified, 4 adverse $22B in federal awards for FY 2012 Data Integrity User access rights and safeguards to ensure data is secure o Implications for program costs and accuracy of eligibility determination Ensure secure data exchanges between systems Comprehensive automated data processing security program Subrecipient Monitoring Proper review of subrecipients audit reports and accounting records Investigation of variances on financial status reports Period of Availability Ensure reported expenditures are in proper period and supported by documentation Contract Compliance Expenditures are authorized in contract and incurred during contract period Administrative expenditure limits Federal regulations restrict subcontracting with debarred, suspended, excluded entities Single Audit: Common Findings

35. Website: http://www.michigan.gov/mdchhttp://www.michigan.gov/mdch Facebook: https://www.facebook.com/michigandchhttps://www.facebook.com/michigandch Twitter: @MIHealth, https://twitter.com/mihealthhttps://twitter.com/mihealth Michigan 2012 Single Audit: http://audgen.michigan.gov/finalpdfs/12_13/r000010013.pdf http://audgen.michigan.gov/finalpdfs/12_13/r000010013.pdf 35 MDCH Links