Federal Reports

Medicare contractors are required to separately account for the Medicare segment pension plan assets based on the requirements of Cost Accounting Standards 412 and 413. The U.S. Department of Health and Human Services, Office of Inspector General (OIG), Office of Audit Services, Region VII pension audit team reviews the Medicare segment pension assets to ensure compliance with Federal regulations.

The VA Office of Inspector General (OIG) conducted an inspection in response to a request from Senator Richard Blumenthal to review issues related to Surgical and Sterile Processing Services (SPS) within the VA Connecticut Healthcare System (system). The request came after an unannounced survey of the system by The Joint Commission (TJC) in February 2018 and a subsequent site review by VHA’s National Program Office for Sterile Processing (NPOSP) in May 2018. Both reviews found deficiencies in the system’s SPS. System leaders began an immediate reduction in SPS reprocessing of instruments and limited Surgical Services procedures to focus efforts on correcting the SPS deficiencies. This inspection focused on the implementation of TJC and NPOSP recommendations; SPS standard operating procedures (SOPs), training, competence, and staffing; surgical cancellations and outsourcing to the community; patient safety and undue burden; and surgical and post-operative infection rates. The OIG team identified additional concerns related to leaders’ decision-making and actions, how the current infrastructure (specifically aging buildings) impacted remediation, and the residency program. The OIG made two recommendations to the Veterans Integrated Service Network Director related to oversight of timely completion of the OIG’s recommendations and hiring actions. The OIG made nine recommendations to the System Director related to inclusion of operating room, surgery, and SPS clinical leaders in remediation efforts; an action plan to establish communication, foster collaboration, and restore trust in system leaders; oversight for the timely completion of pending projects impacting Surgical Services; the development, review, and revision of SOPs and a sustainable SOP maintenance process; SPS staff training and competencies; SPS staffing plan maintenance; readiness evaluation of supplies and equipment prior to anesthetizing a patient; evaluation of the impact and identified needs of the residency programs; and collaboration between the System and Veterans Integrated Service Network 1 Director.

This Comprehensive Healthcare Inspection Program provides a focused evaluation of the quality of care delivered at the VA Connecticut Healthcare System, covering leadership, organizational risks, and key processes associated with promoting quality care. Focused areas were Quality, Safety, and Value; Medical Staff Privileging; Environment of Care; Medication Management: Controlled Substances Inspections; Mental Health: Military Sexual Trauma Follow-Up and Staff Training; Geriatric Care: Antidepressant Use among the Elderly; Women’s Health: Abnormal Cervical Pathology Results Notification and Follow-Up; and High-Risk Processes: Emergency Department and Urgent Care Center Operations. At the time of the OIG site visit, the executive team, except for the acting chief of staff, had been working together for over two years. The facility average for selected survey leadership questions was generally similar to the VHA average. All four patient survey results reflected better care ratings than the VHA average. The OIG’s review of the facility’s accreditation findings, sentinel events, disclosures, and patient safety indicator data did not identify any substantial organizational risk factors. The leadership team should continue to take actions to sustain and improve performance of measures contributing to the Strategic Analytics for Improvement and Learning “5-star” and community living center “1-star” quality ratings. The OIG issued 13 recommendations for improvement: (1) Medical Staff Privileging • Focused and ongoing professional practice evaluation processes (2) Controlled Substances Inspections • Appointment limits of controlled substances inspectors • Rotation of controlled substance areas for inspection • Reconciliation of controlled substances dispensed from and returned to pharmacy • Routine inspections by controlled substances coordinator • Review of override reports (3) Military Sexual Trauma Follow-up and Staff Training • Primary care and mental health providers’ training (4) Antidepressant Use among the Elderly • Patient/caregiver education and understanding of medications • Medication reconciliation (5) Abnormal Cervical Pathology Results and Follow-Up • Patient notification of abnormal results

For the third year in a row, an independent audit of CNCS’s consolidated Fiscal Year 2019 financial statements resulted in a disclaimer of opinion, the worst possible outcome for a financial statement audit. CNCS cured none of the ten material weaknesses and two significant deficiencies from the prior year audit. Three of the material weaknesses and one significant deficiency were first identified in the FY 2017 audit. In short, CNCS’s financial statements were unauditable and CNCS was unable to support some of its largest transactions and liabilities. The financial statements published by CNCS likely contain widespread material errors and should not be relied upon.Key audit findings were:• Disclaimer of Opinion: CNCS was unable to provide adequate evidential matter to support a significant number of transactions and account balances due to inadequate processes and controls to support transactions and estimates and incomplete records to support accounting for transactions in accordance with the generally accepted accounting principles. The independent auditors were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. In addition, CNCS did not provide the documentation necessary for the auditors to assess the accuracy and completeness of certain year-end balances.• Material weaknesses and significant deficiencies in CNCS’s internal control over financial reporting included: Material Weaknesses: Internal Controls Program: The system of internal controls failed to identify numerous and pervasive material weaknesses that the auditors found in financial reporting and in specific material line items on the financial statements; Financial System and Reporting: CNCS’s financial reporting was hindered by limitations in its financial system and the timing and difficulties arising from insufficient accounting staff and inadequate internal controls; Trust Obligations and Liability Model: There were inconsistencies between the assumptions used and how those assumptions were applied in the estimation of the Trust obligations and liabilities. The revised Trust model used to establish the liability included calculation errors and lacked quality controls, which impair significantly the accuracy of the reported liability; Grants Accrual Payable and Advances: CNCS excluded estimated “incurred but not reported” costs from the accrued expenses and liability for at least $23.3 million as of June 30, 2019. It has not validated the method used to calculate the estimate as reasonable; Undelivered Orders and Accounts Payable – Procurement: There were flaws in CNCS’s accounts payable accrual methodology. It also did not have adequate internal controls to ensure the accuracy of obligated balances or to de-obligate stale and invalid obligations related to contracts and purchase orders; Property and Equipment: CNCS did not timely capitalize and failed to support its Software-in-Development and tenant improvement amortization costs, including a write-off of $33.8 million dollars for an unsuccessful software development project; Undelivered Orders – Grants: Auditors found significant unexplained disparities between CNCS’s accounting records and its grant records regarding grant expenditures and grant award amounts; Recoveries of Prior Year Obligations: CNCS was unable to provide any documentation to support more than half of the sampled transactions; and Other Liabilities: CNCS was unable to provide any supporting documentation for approximately $2.4 million reported as of June 30, 2019.o Significant Deficiencies:Information Technology Security Controls: Auditors found new and recurring weaknesses in the information security program with respect to configuration management, access control and security management; and Accounts Receivable and Allowance for Doubtful Accounts: CNCS did not follow its Debt Management Policy by writing off Accounts Receivable items delinquent for two years or more. An instance of noncompliance with provisions of laws and regulations with respect to Single Audits, which could have a direct and material effect on financial statement accounts and disclosures. CNCS did not adequately monitor the effectiveness of nor fully develop performance metrics to track the CNCS single audit monitoring process.The audit report made 75 recommendations to CNCS, including immediate corrective actions to address pervasive material weaknesses and significant deficiencies.CNCS’s response asserts that it has “invested significant time and effort . . . responding to previous audit recommendations” and “continues to demonstrate its commitment to improving financial management reporting and operations.” Though stating that CNCS “partially concurs with the conditions and recommendations in the report,” CNCS did not respond to specific findings. The sole exception concerns the National Service Trust, where CNCS’s response reflects a misunderstanding of the auditors’ concern, which CNCS-OIG will remedy. Finally, CNCS notes that it will be migrating to shared services for accounting at the beginning of FY 2021 and “will incorporate [the auditors’] recommendations where appropriate.”The independent accounting firm of CliftonLarsonAllen LLP, performed the audit of the CNCS FY 2019 consolidated financial statements, under contract with CNCS-OIG.

For the third year in a row, an independent audit of CNCS’s National Service Trust Fund Fiscal Year 2019 financial statements resulted in a disclaimer of opinion, the worst possible outcome for a financial statement audit. CNCS cured none of the three material weaknesses and one significant deficiency, which were first identified in the FY 2017 audit. In short, CNCS’s financial statements were unauditable and CNCS was unable to support some of its largest transactions and liabilities. The financial statements published by CNCS likely contain widespread material errors and should not be relied upon.Key audit findings were: Disclaimer of Opinion: CNCS was unable to provide adequate evidential matter to support a significant number of transactions and account balances due to inadequate processes and controls to support transactions and estimates and incomplete records to support accounting for transactions in accordance with the generally accepted accounting principles. The independent auditors were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. In addition, CNCS did not provide the documentation necessary for the auditors to assess the accuracy and completeness of certain year-end balances. Material weaknesses and significant deficiency in CNCS’s internal control over financial reporting included:o Material Weaknesses:Internal Controls Program: The system of internal controls failed to identify numerous and pervasive material weaknesses that the auditors found in financial reporting and in specific material line items on the financial statements; Financial System and Reporting: CNCS’s financial reporting was hindered by limitations in its financial system and the timing and difficulties arising from insufficient accounting staff and inadequate internal controls; Trust Obligations and Liability Model: There were inconsistencies between the assumptions used and how those assumptions were applied in the estimation of the Trust obligations and liabilities. The revised Trust model used to establish the liability included calculation errors and lacked quality controls, which impair significantly the accuracy of the reported liability; o Significant Deficiency:Information Technology Security Controls: Auditors found new and recurring weaknesses in the information security program with respect to configuration management, access control and security management. An instance of noncompliance with provisions of laws and regulations with respect to Single Audits, which could have a direct and material effect on financial statement accounts and disclosures. CNCS did not adequately monitor the effectiveness of nor fully develop performance metrics to track the CNCS single audit monitoring process.The audit report made 37 recommendations to CNCS, including immediate corrective actions to address pervasive material weaknesses and significant deficiency.CNCS’s response asserts that it has “invested significant time and effort . . . responding to previous audit recommendations” and “continues to demonstrate its commitment to improving financial management reporting and operations.” Though stating that CNCS “partially concurs with the conditions and recommendations in the report,” CNCS did not respond to specific findings. The sole exception concerns the National Service Trust, where CNCS’s response reflects a misunderstanding of the auditors’ concern, which CNCS-OIG will remedy. Finally, CNCS notes that it will be migrating to shared services for accounting at the beginning of FY 2021 and “will incorporate [the auditors’] recommendations where appropriate.”The independent accounting firm of CliftonLarsonAllen LLP, performed the audit of the CNCS’s National Service Trust Fund FY 2019 financial statements, under contract with CNCS-OIG.

This report presents the results of the audits of Commodity Credit Corporation’s (CCC) financial statements for the fiscal years ending September 30, 2019 and 2018. The report contains an unmodified opinion on the financial statements, as well as an assessment of CCC’s internal controls over financial reporting and compliance with laws and regulations.