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EXECUTIVE SUMMARY:
The objective of this audit was to determine whether costs claimed for school-based indirect administrative activities by the State of Rhode Island (State agency) were allowable under the terms of the State Medicaid plan and applicable Federal regulations. For State fiscal year 2001, we found that the State agency did not allocate administrative indirect costs using a Medicaid share percentage that accurately reflected Medicaid benefits received as required by Office of Management and Budget Circular A-87. As a result, the State agency overstated its Medicaid claim for reimbursement by a net amount of $123,010 (Federal share). We recommended that the State agency take steps to improve its monitoring of contractor processing of the quarterly Medicaid claims; request that each local education agency review contractor quarterly claim calculations before attesting to the accuracy of the claims; refund the overpayment; and recalculate Medicaid share percentages for all of the local education agencies for the audit period as well as subsequent periods and submit adjusted claims to the Centers for Medicare and Medicaid Services as necessary. The State agency generally agreed to the procedural recommendations but disagreed to make a financial adjustment.