A management audit of L.A. Care, the country's largest Medicaid managed care program, found a host of loose internal administrative and financial practices, including some that exposed the agency to fraud.
But agency officials say the audit by PricewaterhouseCoopers failed to uncover any actual financial losses and a series of recommendations aimed at tightening internal policies have nearly all been implemented.
The audit, ordered last spring amid a management shakeup that saw the departure of founding chief executive Anthony Rodgers and chief financial officer John Smits, found 19 policies or practices that needed improvement.
Among them, the same employee was allowed to endorse and deposit checks actions that should be conducted by two separate employees to minimize the possibility of misappropriating funds. "Numerous" employees were found to be making entries into the agency's accounting system. Auditors noticed employees "split" purchase orders in order to avoid the higher levels of authorization triggered by larger orders.
"As they grew they just overlooked a couple of things," said Randy Stone, the agency's new chief financial officer.
L.A. Care began operating in 1997 as part of a statewide policy shift to move recipients of Medi-Cal (the state's name for the federal Medicaid program that serves the poor) into managed care programs.
Most of the money that passes through L.A. Care was not at risk due to any faults found in the audit, Stone said. That money is deposited directly into an L.A. Care bank account by the state and then transferred to its contractors in a procedure that requires the signature of a board member and officer. The audit involved internal administrative operations.
Those operations were in question earlier this year after Rodgers resigned following the disclosure he had married a Blue Cross of California employee without informing the board. Blue Cross is one of L.A. Care's contractors so the marriage was seen as a conflict of interest.
Then long-time chief financial officer John Smits resigned in early May without explanation, and there were rumors that Blue Cross, where Rodgers went to work as a consultant, was interested in taking over L.A. Care. The company has strongly denied any interest.
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