Report 2021-046 All Recommendation Responses
Report 2021-046: Proposition 56 Tobacco Tax: The Department of Health Care Services Is Not Adequately Monitoring Provider Payments Funded by Tobacco Taxes (Release Date: November 2022)
Recommendation for Legislative Action
To better protect Medi-Cal beneficiaries, the Legislature should consider amending state law to permit DHCS and the boards that license Medi-Cal providers to execute agreements that would allow those licensing boards to provide DHCS with timely information from the notifications sent to the licensing boards when Medi-Cal providers are arrested and the arrest involves a credible allegation of fraud or indicates the provider is under investigation for fraud or abuse.
Description of Legislative Action
As of January 23, 2023, the Legislature has not taken action to address this specific recommendation.
- Legislative Action Current As-of: January 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #2 To: Health Care Services, Department of
To ensure that managed care plans pay Proposition 56 supplemental payments to the appropriate providers, DHCS should require managed care plans to submit Medi-Cal beneficiary identification information with their quarterly reports by June 2023. Once DHCS obtains this information, it should reconcile those reports to medical encounter data and then recover any overpayments it identifies.
1-Year Agency Response
DHCS released technical guidance to Medi-Cal managed care plans (MCPs) 03/01/23 requiring submission of beneficiary level information in their Proposition 56 (Prop 56) expenditure reporting on a semi-annual basis (see Attachment 3 in Substantiation folder). All MCPs submitted the data leveraging the new dataset beginning on 05/15/23. Furthermore, all Prop 56 APLs have been updated to incorporate the adherence to the technical guidance requirement, the first APL was issued on 04/28/23 and the last was issued on 07/25/23 (see Attachments 4 through 9 in Substantiation folder).
DHCS will continue to identify and address material discrepancies and, where appropriate, to require MCPs to pay remittances under the terms of the applicable Prop 56 directed payment arrangements for future data submissions based on each program year after accounting for appropriate data reporting lag.
- Completion Date: July 2023
- Response Date: December 2023
California State Auditor's Assessment of 1-Year Status: Partially Implemented
DHCS issued an all-plan letter directing managed care plans to submit a client index number with their required reports for directed payment programs. However, DHCS did not provide evidence to substantiate that it has received that information, reconciled those reports to medical encounter data, and recovered any overpayments. Thus, this recommendation is partially implemented.
- Auditee did not substantiate its claim of full implementation
- Auditee did not address all aspects of the recommendation
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #3 To: Health Care Services, Department of
To ensure that managed care plans issue Proposition 56 supplemental payments only when providers have actually performed the services in question, DHCS should do the following:
-By June 2023, investigate those instances in which managed care plans were unable to provide evidence that the medical services we reviewed were provided. After determining why the managed care plans lacked this evidence, it should use its corrective action plan process to implement additional monitoring and oversight of those managed care plans.
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #4 To: Health Care Services, Department of
To ensure that managed care plans issue Proposition 56 supplemental payments only when providers have actually performed the services in question, DHCS should do the following:
-By June 2023, begin annually selecting a sample of Proposition 56 supplemental payments of a sufficient size to ensure that it can project the results of its review to the population of services that receive supplemental payments, and requesting the underlying medical records to confirm that the services were provided.
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #5 To: Health Care Services, Department of
To comply with state law, reduce the amount of time it takes to suspend providers from delivering Medi-Cal services, and better protect Medi-Cal beneficiaries from potentially ineligible providers, DHCS should, by June 2023, begin issuing temporary provider suspensions or temporary payment suspensions when permissible or required by state law while it engages in the process of issuing a mandatory provider suspension.
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #6 To: Health Care Services, Department of
To prevent providers from billing for services performed by other providers that have been suspended, DHCS should, by June 2023, revise its policies and billing system to assess all service-rendering providers included in claim data and verify that they have not been suspended.
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #7 To: Health Care Services, Department of
To ensure that it reports accurate information to the public, DHCS should institute a more robust management review process for posting Proposition 56 expenditure information on its website beginning with the information it reports for fiscal year 2021-22.
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #8 To: Tax and Fee Administration, California Department of
To ensure that other tobacco product manufacturer-distributors pay the appropriate amount of OTP taxes, CDTFA should obtain sufficient documentation to verify the accuracy of those entities' wholesale costs. If these manufacturer-distributors refuse to provide necessary documentation, CDTFA should compel them to do so using the mechanisms existing in state law, such as administrative subpoenas, and it should consider referring them for criminal prosecution.
6-Month Agency Response
Audit selection for fiscal year 2022/2023 focusing on CDTFA tobacco manufacturer and importer accounts is now complete. Three audits are in process and are anticipated to be completed by December 31, 2023.
Detailed training was provided to our Audit Examination Branch team members on January 18, 2023. This training covered items such as, but not limited to, other tobacco products (OTP) wholesale cost calculation methods, methods for obtaining records (including criminal prosecutions), and a review of Regulation 4076, Wholesale Cost of Tobacco Products , for alternative methods to assign wholesale costs when records are inadequate and/or nonexistent.
- Estimated Completion Date: December 31, 2023
- Response Date: May 2023
California State Auditor's Assessment of 6-Month Status: Pending
We have requested copies of the training that CDTFA provided to determine whether it addresses the concerns described in our recommendation. We look forward to reviewing those documents, the procedures CDTFA established for performing the audits currently in progress, CDTFA's audits of manufacturer-distributors' wholesale costs, and the supporting documentation CDTFA used to verify the accuracy of the amounts manufacturer-distributors used to calculate their wholesale costs.
60-Day Agency Response
A supplemental audit selection for fiscal year 2022/2023 which focuses on CDTFA tobacco manufacturer and importer accounts, is in process and is anticipated to be completed by the end of January 2023. Three audits are currently in progress and should be completed by December 2023.
Refresher training covering Requests for Records and the Subpoena Process was provided to team members on December 13, 2022. Additional detailed training covering OTP wholesale cost calculation methods, methods for obtaining records (including the subpoena process, obtaining third-party records, and criminal prosecution), proper comment writing for documenting the
request(s) for records, and review of Regulation 4076, Wholesale Cost of Tobacco Products, for alternative methods to assign wholesale costs when records are inadequate and/or nonexistent, is scheduled for January 18, 2023.
- Estimated Completion Date: December 31, 2023
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Pending
We will look forward to reviewing the results of CDTFA's audits of manufacturer-distributors' wholesale costs and the supporting documentation that CDTFA uses to verify the accuracy of the amounts manufacturer-distributors use to calculate their wholesale costs.
In addition, we will request CDTFA's training materials to confirm the nature of the training it provides.
Recommendation #9 To: Public Health, Department of
To ensure that it reports accurate information to the public, CDPH should compile the expenditure information for each of its Proposition 56 programs using the same type of accounting report beginning with the information it reports for fiscal year 2021-22.
60-Day Agency Response
CDPH used the Financial Statement Detailed Fund Balance (DF-303) Report to generate financial data to report Proposition 56 expenditure activities for fiscal year 2021-22. Proposition 56 expenditures are available online at https://www.cdph.ca.gov/Programs/CCDPHP/Pages/Proposition-56-Fiscal-Reporting.aspx. CDPH will continue to use this report going forward.
- Completion Date: December 2022
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
Although the fiscal year 2021-22 expenditure information that CDPH published on its website does not exactly match the amounts of funds transferred into its accounts according to the State Controller's Office's report of funds transferred, the numbers are materially similar and CDPH compiled the numbers for each of its Proposition 56 programs using the same type of report. Thus, we consider this recommendation fully implemented .
Recommendation #10 To: Tax and Fee Administration, California Department of
To provide more accurate information to the public, CDTFA should report on its website the amount of Proposition 56 funds that it actually received beginning with the information it reports for fiscal year 2021-22.
60-Day Agency Response
CDTFA amended the Proposition 56 table on our website (https://www.cdtfa.ca.gov/taxes-and-fees/prop-56-summaryrev-and-exp.htm) to include a column that displays the amount of funding transferred to Fund 3319 and amended the Total Amount Received column to include the full transfer amount to Fund 3319 and the expenditure amount from Fund 3304.
- Completion Date: January 2023
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The link CDTFA provided is incorrect, the correct URL is: https://www.cdtfa.ca.gov/taxes-and-fees/prop-56-summary-rev-and-exp.htm
The amount of Proposition 56 funds that CDTFA reported that it received in fiscal year 2021-22 differs from the amount that the State Controller reported transferring into CDTFA's account, but it is materially accurate.
Recommendation #11 To: Education, Department of
To provide more accurate information to the public, Education should report on its website the amount of Proposition 56 funds that it actually received beginning with the information it reports for fiscal year 2021-22.
60-Day Agency Response
Fully Implemented. On December 13, 2022, Education published on its website the fiscal year 2021-22 Proposition 56 funding information, which identified the actual amounts received. As recommended by the CSA, the following reports were utilized to source the information posted:
1. For Funds Received: Report 15 and the State Controller's Office Agency Reconciliation Report; and
2. For Funds Spent: Report 6.
The Proposition 56 funding information is posted and available on the CDE's website at https://www.cde.ca.gov/ls/he/at/prop56expendreport2122.asp.
- Completion Date: December 2022
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
Although the fiscal year 2021-22 information that Education published on its website does not exactly match the amounts of funds transferred into its accounts according to the State Controller's Office's report of funds transferred, the numbers are materially similar. Thus, we consider this recommendation fully implemented.
Recommendation #12 To: Public Health, Department of
To provide more accurate information to the public, CDPH should report on its website the amount of Proposition 56 funds that it actually received beginning with the information it reports for fiscal year 2021-22.
60-Day Agency Response
CDPH has reported on its website the amount of funds received from Proposition 56 per the Financial Statement Detailed Fund Balance (DF-303) Report. It has discontinued reporting on closed periods and will only report on the most recent budget year per Revenue and Taxation Code, Section 30130.56(c). The Proposition 56 funding report is available at https://www.cdph.ca.gov/Programs/CCDPHP/Pages/Proposition-56-Fiscal-Reporting.aspx.
- Completion Date: December 2022
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
Although the fiscal year 2021-22 information that CDPH published on its website does not exactly match the amounts of funds transferred into its accounts according to the State Controller's Office's report of funds transferred, the numbers are materially similar. Thus, we consider this recommendation fully implemented.
Recommendation #13 To: Health Care Services, Department of
To provide more accurate information to the public, DHCS should report on its website the amount of Proposition 56 funds that it actually received beginning with the information it reports for fiscal year 2021-22.
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #14 To: Justice, Department of
To provide more accurate information to the public, Justice should report on its website the amount of Proposition 56 funds that it actually received beginning with the information it reports for fiscal year 2021-22.
60-Day Agency Response
As recommended, DOJ's fiscal year 2021-22 annual report, including the cash transfer amount, has been published on the AG's website as "CA DOJ Summary of Expenditures (FY 2021-22) for Funds Received" as a part of The California Healthcare, Research and Prevention Tobacco Tax Act of 2016 - Tobacco - Prop 56. Moving forward, the published annual reports will include the cash transfer amounts.
- Completion Date: November 2022
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
Justice reported on its website the amount of Proposition 56 funds that it actually received for fiscal year 2021-22.
Recommendation #15 To: Tax and Fee Administration, California Department of
When CDTFA posts information to its website about the amounts of Proposition 56 funds it has received and spent, it should also post links to that information on its social media platforms to increase transparency.
60-Day Agency Response
On Dec. 22, 2022, CDTFA's Financial Management Division (FMD) alerted the External Affairs Division (EAD) via email that the "Proposition 56 Summary of Revenues and Expenditures" had been posted to the Department's website at https://www.cdtfa.ca.gov/taxes-and-fees/prop-56-summary-rev-and-exp.htm. EAD had posted the link and a variation of the following language to its Facebook, Twitter, and LinkedIn accounts: "CDTFA administers CA's cigarette and tobacco products
taxes, including Prop 56, the Healthcare, Research & Prevention Tobacco Tax Act of 2016, which helps fund healthcare programs/services; youth prevention programs; & medical research."
Going forward, EAD is adding a reminder to its annual social media calendar at the end of December for the Proposition 56\Summary of Revenues and Expenditures post.
- Completion Date: December 2022
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
CDTFA implemented the recommendation by posting on a social media platform a link to its website about the amounts of Proposition 56 funds that it received and spent in fiscal year 2021-22.
Recommendation #16 To: Education, Department of
When Education posts information to its website about the amounts of Proposition 56 funds it has received and spent, it should also post links to that information on its social media platforms to increase transparency.
60-Day Agency Response
Fully implemented. On December 16, 2022, Education published the fiscal year 2021-22 Proposition 56 funding information on its social media page; the links to the post are as follows, Tobacco-Use Prevention Education Program - Home | Facebook and https://www.cde.ca.gov/ls/he/at/tupefunding.asp.
- Completion Date: December 2022
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Fully Implemented
CDE implemented the recommendation by posting on a social media platform a link to the website on which it describes the amounts of Proposition 56 funds it has received and spent in fiscal year 2021-22.
Recommendation #17 To: Health Care Services, Department of
When DHCS posts information to its website about the amounts of Proposition 56 funds it has received and spent, it should also post links to that information on its social media platforms to increase transparency.
1-Year Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: Unknown
- Response Date: November 2023
California State Auditor's Assessment of 1-Year Status: No Action Taken
6-Month Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: October 2023
California State Auditor's Assessment of 6-Month Status: No Action Taken
60-Day Agency Response
Health Care Services did not submit a response to this recommendation.
- Estimated Completion Date: unknown
- Response Date: March 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #18 To: Finance, Department of
To ensure that Education receives its proportional share of Proposition 56 funds, the Department of Finance (Finance) should determine the amount of fiscal year 2017-18 Proposition 56 funds that Education is owed and arrange for the transfer of those funds from CDPH to Education by June 2023.
6-Month Agency Response
Consistent with the California State Auditor's (Auditor) recommendations in Report 2021-046, the Department of Finance has determined the California Department of Education (Education) is owed $17,910,930.19 for its proportional share of Fiscal Year 2017-18 Proposition 56 funds.
Executive Order NO. E 22/23-135 transferring $15,233,233.08 to Education was submitted to the California State Controller on January 20, 2023. To complete the audit recommendation and consistent with the plan Finance provided to the Auditor in Finance's November 4, 2022 response to the audit and 60-day Implementation update, Finance will transfer $1,338,848.56 from Fund 3322 to Fund 3321 on July 1, 2023, and $1,338,848.55 from Fund 3322 to Fund 3321 on July 1, 2024.
- Estimated Completion Date: 7/1/2024
- Response Date: May 2023
California State Auditor's Assessment of 6-Month Status: Partially Implemented
The Department of Finance has determined the amount owed to Education and has transferred a portion of those funds to Education. We will consider the recommendation to be fully implemented after Finance transfers the remaining funds to Education's account.
60-Day Agency Response
Consistent with the California State Auditor's recommendations in Report 2021 046, the Department of Finance has determined the California Department of Education (Education) is owed $17,910,930.19 for it's proportional share of Fiscal Year 2017-18 Proposition 56 funds.
Executive Order NO. E 22/23-135 transferring $15,233,233.08 to Education was submitted to the California State Controller on January 20, 2023. Finance has notified Education the funds are available to be spent. To complete the audit recommendation, Finance will transfer $1,338,848.56 from Fund 3322 to Fund 3321 on July 1, 2023, and $1,338,848.55 from Fund 3322 to Fund 3321 on July 1, 2024.
- Estimated Completion Date: 7/1/2024
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Pending
The Department of Finance has determined the amount owed to Education and states that it has transferred a portion of those funds to Education.
Recommendation #19 To: Finance, Department of
To ensure that Education can spend the funds that it was allocated in prior fiscal years, Finance should transfer the unspent portion of these funds to an account that Education can access by June 2023. Further, it should inform Education the funds are available to be spent.
6-Month Agency Response
Consistent with the California State Auditor's (Auditor) recommendations in Report 2021-046, the Department of Finance has determined the California Department of Education (Education) is owed $17,910,930.19 for its proportional share of Fiscal Year 2017-18 Proposition 56 funds.
Executive Order NO. E 22/23-135 transferring $15,233,233.08 to Education was submitted to the California State Controller on January 20, 2023. To complete the audit recommendation and consistent with the plan Finance provided to the Auditor in Finance's November 4, 2022 response to the audit and 60-day Implementation update, Finance will transfer $1,338,848.56 from Fund 3322 to Fund 3321 on July 1, 2023, and $1,338,848.55 from Fund 3322 to Fund 3321 on July 1, 2024.
- Estimated Completion Date: 7/1/2024
- Response Date: May 2023
California State Auditor's Assessment of 6-Month Status: Partially Implemented
Executive Order E 22/23-135 transferred to Education approximately $15 of the $17 million in funds Education is owed, and Finance has notified Education that the funds are available to be spent. We will consider the recommendation to be fully implemented after Finance transfers the remaining funds to Education's account.
60-Day Agency Response
Consistent with the California State Auditor's recommendations in Report 2021 046, the Department of Finance has determined the California Department of Education (Education) is owed $17,910,930.19 for it's proportional share of Fiscal Year 2017-18 Proposition 56 funds.
Executive Order NO. E 22/23-135 transferring $15,233,233.08 to Education was submitted to the California State Controller on January 20, 2023. Finance has notified Education the funds are available to be spent. To complete the audit recommendation, Finance will transfer $1,338,848.56 from Fund 3322 to Fund 3321 on July 1, 2023, and $1,338,848.55 from Fund 3322 to Fund 3321 on July 1, 2024.
- Estimated Completion Date: 7/1/2024
- Response Date: January 2023
California State Auditor's Assessment of 60-Day Status: Partially Implemented
We obtained Executive Order E 22/23-135 from Finance. This executive order transferred to Education approximately $15 of the $17 million in funds it is owed. Further, Finance notified Education that the funds are available to be spent. Once Finance transfers the remaining funds to Education's account, the recommendation will be considered fully implemented.
All Recommendations in 2021-046
Agency responses received are posted verbatim.