Performance Audit cites Medicaid Office for improper use of QPOs

Pago Pago, AMERICAN SAMOA — The American Samoa Medicaid State Agency “is using direct payment vouchers beyond their authorized use” — is one of the findings cited by the Territorial Audit Office (TAO) following its Performance Audit of the Medicaid Agency for the three fiscal years ending September 30, 2022.

However, the Medicaid Agency — commonly referred to as the ASG Medicaid Office — defended the use of this payment process, which is also known as Quick Purchase Order (QPO), which was allowed by the former Lolo Administration and carried on by the current Administration.

In the part two of the performance audit report, the Samoa News story, looks at the use of the QPOs. (See Samoa News edition last Friday on the first story regarding the performance audit, which is the first-one that TAO had ever conducted on the Medicaid Office.

TAO audit report explained that ASG accounts payable policies and procedures manual state that "To expedite certain payments a direct payment voucher or quick purchase order (OPO) can be utilized at the discretion of the Department Director or Agency Head. The QPO may be used under specific conditions but never to avoid Procurement and Property Management policies or the Federal Common Rule for purchases under grants or federal award."

In 2018, the Medicaid Agency requested the use of QPOs to accommodate urgent medical, transport/ airline expenses needed to give medical assistance to Agency approved patients and this was endorsed by the former Gov. Lolo M. Moliga.

Further discussions with the Medicaid director and the team found that the decision to use the QPO was a part of management's strategy to respond to significant delays in processing payments, the TAO report said and noted that current ASG Procurement purchase order payments requires about five to six approvals before a payment is finalized.

“It follows a lengthy routing process that place patients on urgent and/ or life-threatening medical conditions at risk as providers in the past specifically in Hawaii have suspended their services to American Samoa people because of significant outstanding payments,” the TAO report said.

TAO acknowledged the work by the Medicaid Agency to protect the reputation of the ASG and also to maintain good relationship with the medical vendors; “however, our review of payments noted that the QPO was also used to process payments for administrative supplies, equipment and vehicles.”

The report cited three-examples of capital items acquired using QPOs. In one example, a QPO totaling $42,000 was used to purchased “14 computers MacBook Pro” in 2021.

TAO said “our audit team was concerned with the extension of QPO as a procurement practice to be applied to all expenses as it exposes the Agency to potential purchasing and procurement risks.”

For instance, the risks of bypassing the underlying principles as encouraged by the following controls as stipulated by the ASG Treasury:

•           Direct payment vouchers will not be accepted for any equipment payments as such payments need to be routed through Procurement;

•           Departments are not responsible for documenting that item received;

•           Use of Purchase Requisitions (PR) to strengthen control and monitoring of expenses and items procured using public funds;

•           Purchase of assets to go through the Office  of Property Management and proper approval pursued before funds are disbursed;

•           Document application of safeguards against potential or actual conflict of interest; and,

•           Encourage and promote open and fair market for competition.

TAO auditors argued that the key principles encouraged by existing policies aim to protect ASG from wasteful, unjustified, and substandard purchases and attempts to hold ASG agencies accountable for all items purchased.

“Our main concern with the use of QPOs to purchase items unrelated to medical services is that it increases the risks of having unrecorded capital items as they do not go through Procurement,” TAO explained.

In addition, without going through the bidding process, it avoids other checks and balances and allows employees to award contracts/ purchases uncontrollably with whomever they choose and not using any guidelines and proper procedures.

Furthermore, because assets and other properties were bought using QPOs, it also then makes it difficult to monitor the condition of these items — damaged, broken or missing — and actually justify ownership of asset as it is not tagged as a government asset or property.

TAO auditors recommended the Medicaid Office review the current process and coordinate with other relevant departments on key controls it may need to consider and/ or possible exceptions that could be granted to ensure that they are performing their functions in accordance with ASG governing rules and processes.

Once a thorough review is completed and after consultation with relevant ASG departments, the Medicaid Office needs to formally document and approve its modified Account Payable and Purchase manual, TAO further recommended.

MEDICAID REPLY

In its response, Medicaid management agrees in part and distinguished some unique circumstances.

“It is important to note that Medicaid needs to utilize the QPO to make Medicaid provider payments in order to protect the credit of the Medicaid program and ensure the continuation of Medicaid services outside of LBJ,” Medicaid said.

Based on the history of the off-island medical referral program, failure to make timely payments to off-island vendors resulted in the termination of the ASG off-island medical referral program in Hawaii around 2006.

More recently in 2018 during the Lolo Administration, when Medicaid reinstated the Off-island medical referral program administered under Medicaid Office, the significant delays in timely payments through the Procurement Office “threatened the continuation of the current Medicaid referral program and Medicaid was forced to utilize the QPO”, according to the management’s response.

Medicaid Office further explained that the use of the QPO was approved and used in the previous Lolo administration, when then Lt. Gov. Lemanu P.S. Mauga was the Secretary of State who oversees the Medicaid program.

Additionally, this policy and practice carried on in this current Lemanu administration and a memo (Jan. 27, 2021) to Gov. Lemanu was sent and verbally approved.

“We agree that the QPO should only be used for payment of Medicaid services provided for under the Medicaid State Plan — transportation, accommodations and medical,” Medicaid Office said. “Because Medicaid is a reimbursement program that pays Medicaid providers after medical services are provided, it is imperative that payments are made on a timely basis and within 30 days.”

“This internal policy has helped to rebuild confidence of off-island vendors with the American Samoa Government's off-island medical referral program administered by Medicaid,” said Medicaid management. “This is allowing the Medicaid program to make inroads with Hawaii vendors to reinstate Medicaid referrals to the State of Hawaii but it continues to be a slow and uphill challenge.”

The Medicaid Agency points out that it worked very hard to re-establish credit off-island for ASG.

“The work of building our credit continues and depends on timely payments to vendors who are not required to serve our beneficiaries, but do so under a contract built on the full faith and credit of the Medicaid agency,” Medicaid management declared.

Additionally, a “fundamental objective in the administration of the Medicaid program is to protect the credit of the Medicaid State Agency in order to maintain referral services not only to off-island providers, but to the new providers in the private sector.”

With administrative purchases, “Medicaid notes that it does currently follow some procurement procedures within certain thresholds as set by ASG and needs to improve internal procedures for procurement,” according to the management’s response.