a

GAO

United States General Accounting Office

Report to the Ranking Minority Member, 

Permanent Subcommittee on 

Investigations, Committee on 

Governmental Affairs, U.S. Senate

December 2001 CIVIL FINES AND 

PENALTIES DEBT

Review of CMS’ 

Management and 

Collection Processes

GAO-02-116
Page i GAO-02-116 CMS' Civil Monetary Penalties Debt

Contents

Letter 1

Results in Brief 2

Scope and Methodology 4

Background 5

Increase in Fraud and Abuse Debt Is the Primary Reason for 

Reported Growth in CMP Debt 9

CMP Receivables Have Similar Financial Accountability and 

Reporting Issues as Non-CMP Receivables 10

Incomplete and Unreliable CMP Data Limited the Determination of 

Overall Adequacy of CMP Debt Collection Policies and 

Procedures 13

OMB’s and Treasury’s Roles in the Oversight and Monitoring of CMP 

Debt 14

Conclusion 15

Recommendations 15

Agency Comments and Our Evaluation 16

Appendixes

Appendix I: Briefing to the Permanent Subcommittee on Investigations, 

Senate Committee on Governmental Affairs 18

Appendix II: Comments From the U.S. Department of Health and Human 

Services’ Centers for Medicare and Medicaid Services 68

GAO Comments 73
Page 1 GAO-02-116 CMS' Civil Monetary Penalties Debt

United States General Accounting Office

Washington, D.C. 20548

A

December 31, 2001 Letr

The Honorable Susan M. Collins

Ranking Minority Member

Permanent Subcommittee on Investigations

Committee on Governmental Affairs

United States Senate

Dear Senator Collins:

On December 14, 2001, we briefed your office on our review of selected 

federal agencies’ management and collection of civil fines and penalties 

debt.1

 As agreed with your staff, this work focused on the debt collection 

processes and procedures used by the Department of the Treasury’s U.S. 

Customs Service, the Department of Interior’s Office of Surface Mining, and 

the Department of Health and Human Service’s (HHS) Centers for Medicare 

and Medicaid Services (CMS).2

This report summarizes the information presented in our December 14, 

2001, briefing related to CMS’ collection of civil fines and penalties debt, 

referred to as civil monetary penalties (CMP) debt. The briefing slides are 

included in appendix I. We will separately report on our work on the U.S. 

Customs Service and the Office of Surface Mining. As discussed with your 

staff, our original objectives were to determine (1) the primary reasons for 

the growth in CMS’ reported CMP debt, (2) whether CMS’ CMP receivables 

have similar financial accountability and reporting issues as its non-CMP 

receivables, (3) whether adequate processes exist to collect CMP debt, and 

(4) what roles, if any, the Office of Management and Budget (OMB) and 

Treasury play in overseeing and monitoring CMS’ collection of CMP debt. 

However, for the third objective, incomplete and unreliable CMP 

information limited the determination of the overall adequacy of the CMP 

debt collection policies and procedures. Instead, as agreed with your staff, 

we performed limited tests of CMS’ debt collection policies and 

procedures. Specifically, we selected and reviewed all delinquent CMP 

1

This work was part of a broad review that also looked at the management and collection of 

criminal fines and penalties at the Department of Justice and the U.S. Courts. See Criminal 

Debt: Oversight and Actions Needed to Address Deficiencies in Collection Processes 

(GAO-01-664, July 16, 2001).

2

Formerly the Health Care Financing Administration (HCFA).
Page 2 GAO-02-116 CMS' Civil Monetary Penalties Debt

debts (over 60 days delinquent per CMS records) with a recorded 

receivables balance as of September 30, 2000, greater than $2 million (12 

debts). We also analyzed long-term care CMP assessment and settlement 

data for fiscal years 1999 and 2000 for all cases where the settlements were 

reached at three selected CMS regional offices. These regional offices 

accounted for 76 percent of the reported cases opened in this 2-year period. 

Results in Brief The primary reason for the growth of CMS’ CMP receivables was the 

expansion of fraud and abuse detection activities from fiscal year 1995 

through fiscal year 1997 that significantly increased fraud and abuse debts 

in fiscal year 1997. This is supported by CMS’ accounting records, which 

revealed that about $255 million of the $260 million CMP receivables 

balance as of September 30, 2000, related to fraud and abuse debts. For the 

$255 million in receivables, about $172 million remained outstanding from 

fiscal year 1997.

Our analysis of CMS’ CMP receivables data revealed similar financial 

accountability and reporting issues as those identified for non-CMP 

receivables by CMS’ external financial statement auditors. We found that 

CMS does not have formal written policies and procedures for reconciling 

CMP receivables, recording CMP receivables in the general ledger, and 

determining the allowance for uncollectible accounts related to CMP 

receivables. As a result, we identified (1) unreconciled differences of tens 

of millions of dollars in the CMP receivables balances reported by HHS and 

CMS for fiscal years 1997 through 1999 and (2) an unreconciled net 

difference of about $22 million between the CMP receivables balance in 

CMS’ general ledger and the detailed subsidiary systems as of September 

30, 2000. We also found that certain long-term care CMP receivables were 

not being recorded in the general ledger, which contributed to the 

unreconciled difference between the general ledger and the subsidiary 

systems. In addition, our testing of selected CMP debts as of September 30, 

2000, found that CMS incorrectly recorded certain CMP debts in the 

general ledger by not removing debts paid in full and misclassifying current 

debts as delinquent. We further found that CMS’ allowance for 

uncollectible accounts is not calculated based on a systematic analysis of 

the collectibility of the outstanding receivables balance as required by 

Statement of Federal Financial Accounting Standards (SFFAS) No. 1, 

Accounting for Selected Assets and Liabilities. 

The data reliability issue noted above limited us from determining the 

overall adequacy of the CMP debt collection policies and procedures. 
Page 3 GAO-02-116 CMS' Civil Monetary Penalties Debt

However, our limited tests showed that debt collection policies and 

procedures were followed for 11 of the 12 selected delinquent debts. We 

could not determine whether debt collection policies and procedures were 

followed for one selected debt because supporting documentation was not 

available. In addition, in analyzing long-term care CMP cases and 

settlement data for fiscal years 1999 and 2000, we noted one debt collection 

matter in which debt collection policies and procedures can be 

strengthened. The matter relates to CMS often settling at amounts that 

exceeded the 35-percent discount threshold established by CMS 

management. We found that CMS reduced the assessed long-term care 

CMP amounts by more than 35-percent for 89 out of 215 cases settled by 

three selected regional offices in fiscal years 1999 and 2000, resulting in 

reduced potential collections of about $2.9 million. According to CMS 

officials, other matters can develop while a hearing is pending that can 

affect the settlement amount, and, as such, it may be in CMS’ best interests 

to settle for less. However, CMS’ policies and procedures do not require 

that specific documentation be maintained to support that such 

settlements were warranted. While not required, we noted that one out of 

the three selected regional offices was maintaining documentation to 

support such settlements.

OMB and Treasury are provided with information useful in performing 

CMP debt oversight roles. However, OMB stated that it has broad oversight 

responsibility in monitoring and evaluating governmentwide debt 

collection activities. OMB further stated that it is the specific responsibility 

of the agency to monitor, manage, and collect CMP debt and the 

responsibility of the agency’s Office of Inspector General (OIG) to provide 

oversight through audit of the agency’s debt collection activities. In 

addition, Treasury stated that it relies on the agencies to determine what 

debt should be referred to Treasury for collection action, as required by the 

Debt Collection Improvement Act of 1996 (DCIA). However, not all eligible 

CMP debts are currently being referred.

Our recommendations are designed to improve the accounting, reporting, 

and collection of CMP receivables. In commenting on a draft of the 

briefing slides, CMS agreed with all but one of our eight recommendations. 

CMS did not agree with our recommendation to establish and implement 

debt collection policies and procedures for long-term care CMP 

settlements in which a discount greater than 35-percent is allowed. 

According to CMS, flexibility is needed in the settlement process and 

issuing policies and procedures on settlements would add rigidity to the 

process. It was not our intent that a rigid process for determining 
Page 4 GAO-02-116 CMS' Civil Monetary Penalties Debt

settlement amounts would be implemented. However, consistent with 

good management practices and the Standards for Internal Control in the 

Federal Government,

3

 when exceptions to a stated management policy 

occur, typical control practices are to document, review, and approve such 

exceptions to ensure that management’s objectives are being met.

Scope and 

Methodology

To determine the primary reasons for the growth in reported CMP debt at 

CMS and whether CMS’ CMP receivables have similar financial 

accountability and reporting issues as its non-CMP receivables, we 

obtained and reviewed CMS’ audited financial statements, HHS’

accountability reports, and other financial reports that relate to CMS’ CMP 

and non-CMP collection activities.

We also analyzed CMS’ reported CMP receivables and related accounts and 

information for fiscal years 1997 through 2000 and compared CMS’ CMP 

accounting records to detailed subsidiary tracking records. We did not 

independently verify the completeness or accuracy of the subsidiary 

system data or test information security controls over the systems used to 

compile these data.

We interviewed officials in CMS, HHS OIG, and Department of Justice’s 

(DOJ) Executive Office for U.S. Attorneys (EOUSA) to obtain explanations 

for identified significant trends, similarities with non-CMP receivables, 

material internal control weaknesses, findings and exceptions, as well as 

unsupported/unreconciled amounts.

To determine whether adequate processes exist to collect CMP debt, we 

obtained an understanding of CMS’ CMP debt collection policies and 

procedures that relate to CMS’ long-term care, HHS OIG, and DOJ cases, as 

well as applicable federal laws and regulations. Because CMS could not 

provide complete and reliable CMP information, a random sample was not 

selected from CMP receivables as of September 30, 2000, and CMP 

receivables cases closed in fiscal years 1999 and 2000. However, as agreed 

with your staff, we performed limited tests of CMS’ debt collection policies 

and procedures.

3

GAO/AIMD-00-21.3.1, November 1999.
Page 5 GAO-02-116 CMS' Civil Monetary Penalties Debt

Specifically, we selected and reviewed all delinquent CMP debts (over 60 

days delinquent per CMS records) with a recorded receivables balance as 

of September 30, 2000, greater than $2 million (12 debts). This represented 

57 percent of the delinquent CMP debt balance and 27 percent of the total 

CMP debt balance per CMS records.4

 We interviewed DOJ’s EOUSA 

officials to obtain explanations for identified findings and exceptions.

We also analyzed long-term care CMP assessment and settlement data for 

fiscal years 1999 and 2000 for all cases in which the settlements were 

reached at three selected CMS regional offices. According to CMS’ Civil 

Monetary Penalty Tracking System, the long-term care cases opened at 

these regional offices represented approximately 76 percent of all longterm care CMP cases opened during this 2-year period. For identified 

findings and exceptions, we developed and submitted questions to CMS’

regional offices. We obtained and analyzed the regional offices’ written 

responses to our questions.

To determine what roles, if any, OMB and Treasury play in overseeing and 

monitoring the government’s collection of civil debt, we interviewed OMB 

and Treasury officials.

We performed our review in Washington, DC and Atlanta, GA from March 

2001 through August 2001 in accordance with U.S. generally accepted 

government auditing standards. Prior to our December 14, 2001, briefing to 

your office on the results of our work, we provided CMS, HHS OIG, DOJ’s 

EOUSA, Treasury, and OMB with a draft of our detailed briefing slides, 

which contained recommendations to the Administrator of CMS, for review 

and comment. The comments received are discussed in the “Agency 

Comments and Our Evaluation” section of this report and on the “Agency 

Comments” slide in Appendix I or incorporated into the report as 

applicable. CMS’ letter is reprinted in appendix II.

Background As of September 30, 2000, HHS reported that CMS’ CMP receivables totaled 

about $260 million. CMP debt results from deficiencies at long-term care 

nursing facilities or fraud and abuse and is collected by three separate 

groups. CMS’ regional offices are responsible for the long-term care debt, 

and HHS OIG and DOJ are responsible for fraud and abuse debt. DOJ fraud 

4

The 12 selected debts were fraud cases managed by DOJ.
Page 6 GAO-02-116 CMS' Civil Monetary Penalties Debt

debt accounted for about 88 percent of the reported $260 million 

receivables balance as of September 30, 2000, while OIG fraud and abuse 

debt accounted for approximately 11 percent and CMS’ long-term care debt 

accounted for about 1 percent of the reported balance.

For the long-term care debt, Sections 1819 (42 U.S.C. Sections 1395i-3) and 

1919 (42 U.S.C. Section 1396r) of the Social Security Act establish 

requirements for surveying nursing facilities to determine whether they 

meet the requirements for participation in the Medicare and Medicaid 

programs. A survey must be conducted at each nursing facility within 15 

months of the previous survey by a state survey agency. In addition, the 

statewide average interval between surveys must be 12 months or less. 

Remedies, of which CMP is one, may be used when a nursing facility is not 

in substantial compliance with the requirements for participation in the 

Medicare and Medicaid programs. 

A CMP is imposed either for the number of days ($50 to $10,000 per day) or 

for each instance ($1,000 to $10,000 per instance) that a nursing facility is 

not in substantial compliance with the participation requirements. The 

amount depends on the severity of the deficiency. A written notice of the 

CMP is sent to the nursing facility. The facility has 60 days from the date of 

the notice to either waive its right to an administrative hearing and receive 

automatically a reduction of 35-percent in the CMP amount or request an 

administrative hearing. At any time prior to an administrative hearing, the 

nursing facility may enter into a settlement of the CMP amount. Once 

there is an administrative hearing decision or a settlement, the final CMP 

receivable amount is determined.

According to CMS’ State Operations Manual, if a decision is made to settle, 

the settlement should not be for a better term than had the nursing facility 

opted for a 35-percent reduction. To track assessments and collections, 

CMS’ regional offices use the Civil Monetary Penalty Tracking System for 

fiscal year 1999 and later CMP cases and spreadsheets for fiscal year 1996 

through fiscal year 1998 CMP cases.5

 In addition, CMS’ regional offices use 

the long-term care system to track CMP cases.

5

Regulations implementing the imposition of long-term care CMP were effective July 1, 

1995. The first long-term care CMP assessment was made at the beginning of fiscal year 

1996.
Page 7 GAO-02-116 CMS' Civil Monetary Penalties Debt

For civil health care fraud matters, DOJ generally uses the False Claims 

Act, as well as common law fraud remedies, payment by mistake, unjust 

enrichment, and conversion to recover amounts from those who have 

submitted false or improper claims to the United States. Civil health care 

fraud matters are referred directly from federal or state investigative 

agencies, or result from filings by private persons known as “relators,” who 

file suits on behalf of the federal government under the 1986 qui tam 

amendments to the False Claims Act. The False Claims Act (31 U.S.C. 

Sections 3729-3733) provides that anyone who “knowingly” submits a false 

claim to the government is liable for a penalty from $5,000 to $10,000 plus 

up to three times the amount of damages sustained by the government. 

A court judgment or settlement establishes amounts due by violators. DOJ 

prepares a Health Care Fraud Tracking Form,6

 which is submitted to HHS 

OIG and CMS’ Office of Financial Management, and establishes the debt in 

a tracking system. If the health care violator does not pay the fraud debt, 

DOJ’s U.S. Attorney Offices (USAO) have several options to pursue 

collection, including contacting the debtor, securing or executing upon a 

judgment, filing liens or garnishments, and referring the delinquent debt to 

Treasury. To track assessments and collections of civil health care fraud 

cases, DOJ’s USAOs use either the Tracking Assistance for the Legal Office 

Network or the Collection Litigation Automated Support System, and DOJ’s 

Civil Division uses the Debt Collection System.

HHS OIG also pursues fraud and abuse cases. According to HHS OIG data, 

since 1988, about 90 percent of its CMP assessments relate to the 

requirements of Section 1867 of the Social Security Act (42 U.S.C. Section 

1395dd). This statute specifies that a hospital’s emergency department 

must provide an appropriate medical screening examination within the 

capability of the hospital’s emergency department to any individual who 

comes to the department with a request for examination or treatment of a 

medical condition. In addition, if the hospital determines that the 

individual has an emergency medical condition, the hospital must either 

stabilize the medical condition or transfer the individual to another medical 

facility. This statute provides for a maximum penalty of $50,000 per 

violation. According to HHS OIG data, since 1988, approximately 10 

percent of its CMP assessments relate to violations of the statutory 

provisions applicable to false or fraudulent claims submitted to federal 

6

In documenting a judgment or settlement, DOJ uses this form to note the judgment or 

settlement amount and the recipients to be paid from the collected debt.
Page 8 GAO-02-116 CMS' Civil Monetary Penalties Debt

health care programs in Section 1128A of the Social Security Act (42 U.S.C. 

Sections 1320a-7a). This law provides that for false, fraudulent, or 

otherwise improper claims, HHS may impose a penalty of not more than 

$10,000 for each item or service and an assessment of no more than triple 

the amount claimed for each item or service in lieu of damages. HHS OIG 

uses spreadsheets to track assessments and collections of CMP cases.7

CMS’ Office of Financial Management is responsible for the accounting and 

reporting of CMP receivables in the general ledger using the Financial 

Accounting Control System. This office is also responsible for determining 

the allowance for uncollectible receivables. According to CMS, an 

allowance is calculated as the amount of CMP debt delinquent for 60 days 

or longer that is considered to be inactive and truly delinquent based on a 

case-by-case review of each receivable.

HHS OIG’s Office of Audit Services stated that due to the immateriality of 

the CMP receivables balances in relation to CMS’ total accounts receivable 

balance, CMS’ external financial statement auditors have not performed 

any detailed audit work on CMP receivables. However, these auditors have 

identified various reporting, internal control, and accountability issues 

related to Medicare (non-CMP) receivables. These issues resulted in a 

qualified opinion on CMS’ financial statements for fiscal year 1998 and a 

material weakness on non-CMP receivables during fiscal years 1998 

through 2000.8

 The external financial statement auditors reported that 

CMS’ lack of an integrated financial management system continues to 

impair its ability to adequately support the reported non-CMP receivables 

activity and balances. The external financial statement auditors also 

identified deficiencies in the non-CMP receivables activity, including

• incorrectly reported activity by non-CMP contractors and 

• inability of non-CMP contractors to reconcile reported ending balances 

to the contractors’ subsidiary records.

7

According to HHS OIG, collections being received through payment plans for CMP 

assessments under Section 1128A of the Social Security Act are sent directly to CMS. HHS 

OIG does not track collections for these cases.

8

CMS’ financial statements and related auditor reports referred to in this report were issued 

under CMS’ former name (HCFA).
Page 9 GAO-02-116 CMS' Civil Monetary Penalties Debt

The external financial statement auditors’ recommendations included

• establishing an integrated financial management system for use by nonCMP contractors and CMS’ central and regional offices and 

• ensuring that all non-CMP contractors develop and implement control 

procedures to provide independent checks of the validity, accuracy, and 

completeness of the amounts reported to CMS, including a 

reconciliation with the contractors’ supporting documentation, and 

periodic review of contractors’ control procedures over reconciliations.

Increase in Fraud and 

Abuse Debt Is the 

Primary Reason for 

Reported Growth in 

CMP Debt

The primary reason for the growth of CMS’ CMP receivables was the 

expansion of fraud and abuse detection activities from fiscal years 1995 

through 1997 that significantly increased fraud and abuse debts in fiscal 

year 1997. This is supported by CMS’ accounting records, which revealed 

that about $255 million of the $260 million CMP receivables balance as of 

September 30, 2000, related to fraud and abuse debts.9

 For the $255 million 

in receivables, about $172 million remained outstanding from fiscal year 

1997. 

In 1995, under authority to use trust fund money to develop or demonstrate 

improved methods for investigating and prosecuting fraud, HHS launched 

Project Operation Restore Trust. The project targeted fraud and abuse in 

three high-growth areas of the health care industry: home health agencies, 

nursing homes, and durable medical equipment suppliers. In addition, the 

passage of the Health Insurance Portability and Accountability Act 

(HIPAA) in 1996 expanded funding for HHS’ fraud and abuse detection 

activities by establishing the Fraud and Abuse Control Program, a program 

designed to combat fraud and abuse committed in the health plans (both 

public and private). By January 1, 1997, HHS OIG and DOJ had jointly 

implemented the Fraud and Abuse Control Program, as required by HIPAA. 

HHS reported, in fiscal year 1996, that Project Operation Restore Trust 

combined with the upgraded funding provided by HIPAA would enable 

HHS to more aggressively detect and prevent fraud, waste, and abuse. In 

addition, DOJ’s EOUSA stated that DOJ’s health care fraud activities were 

expanded in fiscal years 1996 and 1997, and with the implementation of the 

Health Care Fraud Tracking Forms in December 1996, DOJ began 

9

DOJ is responsible for collection activity for the majority of the fraud and abuse debt.
Page 10 GAO-02-116 CMS' Civil Monetary Penalties Debt

submitting health care fraud debts to CMS during fiscal year 1997. Prior to 

this time, only fraud and abuse debts submitted by HHS OIG were recorded 

and reported by CMS.

CMP Receivables Have 

Similar Financial 

Accountability and 

Reporting Issues as 

Non-CMP Receivables

As discussed above, no detailed audit work on CMP receivables has been 

performed by CMS’ external financial statement auditors due to the small 

balance of CMS’ CMP receivables in relation to CMS’ total accounts 

receivables, which consist primarily of non-CMP Medicare receivables. For 

example, as of September 30, 2000, CMS’ CMP receivables were reported to 

be about $260 million, or 3 percent, of total reported accounts receivables 

of approximately $8.1 billion, of which non-CMP Medicare receivables 

totaled more than $7.7 billion. 

Our analysis of CMS’ CMP receivables data revealed similar financial 

accountability and reporting issues as those identified for non-CMP 

receivables by CMS’ external financial statement auditors. We found that 

CMS does not have formal written policies and procedures for the 

reconciliation of CMP receivables, recording CMP receivables in the 

general ledger, and determining the allowance for uncollectible accounts 

related to CMP receivables. As a result, we found (1) unreconciled 

differences between CMP receivables amounts on HHS’ accountability 

reports and CMS’ audited financial statements, (2) unreconciled 

differences between CMP receivables amounts in CMS’ general ledger and 

the detailed subsidiary systems, (3) incorrect recording—not removing 

debts paid in full and misclassifications between delinquent and current—

of CMP receivables in the general ledger, and (4) lack of an adequate 

collectibility analysis for uncollectible accounts relating to CMP 

receivables. 

• CMS does not have policies and procedures requiring it to compare CMP 

receivables reported in its audited financial statements and HHS’

accountability report. According to HHS, CMS is the only HHS 

component that has CMPs. Therefore, the CMP receivable amounts 

reported in HHS’ accountability report and CMS’ audited financial 

statements should be the same. However, our work identified that yearend CMP receivables balances for fiscal year 1997 through fiscal year 

1999, differed by tens of millions of dollars between HHS’ accountability 

report and CMS’ audited financial statements. 

For example, CMS’ fiscal year 1997 financial statements reported a CMP 

receivables balance of about $243 million; however, HHS’ accountability 
Page 11 GAO-02-116 CMS' Civil Monetary Penalties Debt

report for fiscal year 1997 reported approximately $191 million—a 

difference of about $52 million. The beginning balance for CMP 

receivables in HHS’ fiscal year 2000 draft accountability report was 

adjusted by approximately $50 million to agree with CMS’ accounting 

records. As a result of the adjustment, the fiscal year 2000 beginning 

balance in HHS’ fiscal year 2000 accountability report differed from the 

ending balance in its fiscal year 1999 accountability report. After we 

brought this difference to HHS’ attention, a statement identifying the 

difference was added to HHS’ fiscal year 2000 accountability report’s 

overview; however, the statement did not explain the cause of the 

difference. 

• Similar to the accountability and reporting issues reported for non-CMP 

receivables by CMS’ external financial statement auditors, CMS also 

does not have policies or procedures for reconciling CMP receivables 

balances in the general ledger to detailed support maintained in the 

subsidiary systems. As discussed above, three separate groups (CMS’

long-term care, HHS OIG, and DOJ) collect CMP debt. Each group 

maintains at least one subsidiary system to track its CMP cases. As of 

September 30, 2000, the CMP receivables balance in the general ledger 

and the detailed subsidiary systems differed by a net of about $22 

million, with the difference for each group ranging from what appears to 

be an understatement of about $35 million to a possible overstatement 

of about $29 million. 

The difference between the general ledger and the subsidiary systems 

for the long-term care CMP debt totaled about $17 million. The primary 

reason for the long-term care difference is that, beginning in fiscal year 

1999, all new long-term care CMP receivables are no longer recorded in 

the general ledger until a collection is made. This practice is not in 

accordance with SFFAS No. 1, Accounting for Selected Assets and 

Liabilities, and SFFAS No. 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting. These statements require a receivable to be 

recognized once amounts that are due to the federal government are 

assessed, net of an allowance for uncollectible amounts. CMS stated 

that the general ledger does not include all potentially valid long-term 

care CMP receivables because of the unreliability of the long-term care 

CMP accounts receivable amounts in the Civil Monetary Penalty 

Tracking System. CMS stated that the long-term care CMP receivables 

would be reviewed for validity and recorded in the general ledger as part 

of the planned upgrade of the subsidiary system.
Page 12 GAO-02-116 CMS' Civil Monetary Penalties Debt

In addition, according to CMS’ accounting records, of the 12 selected 

delinquent debts we reviewed, 2 totaling about $24 million were the 

responsibility of HHS OIG. However, upon further research by DOJ, 

these debts were actually the responsibility of DOJ and were included in 

DOJ’s subsidiary system on September 30, 2000, as uncollected. This 

misclassification appears to explain a portion of the difference between 

the general ledger and HHS OIG’s and DOJ’s subsidiary systems.

• In addition to CMS’ lack of policies and procedures relating to the 

reconciliation of CMP information, CMS stated that Division of 

Accounting staff responsible for the recording of information in the 

general ledger use notes and knowledge gained during training provided 

by staff previously responsible for the duties to record CMP receivables 

in the general ledger. However, these informal policies and procedures 

do not (1) contain specific guidance on recording due dates for 

payments being made through payment plans or recording collections 

against established receivables and (2) address control procedures to 

ensure the accurate recording of CMP receivables in the general ledger, 

such as review and approval of transactions by a supervisor. Our testing 

identified instances, in addition to the above misclassification between 

HHS OIG and DOJ receivables, in which CMP receivables were recorded 

in the general ledger incorrectly. 

For the 12 selected delinquent debts with receivable balances totaling 

about $70 million, 7 debts totaling approximately $32 million were 

recorded incorrectly in the general ledger. For four of the debts totaling 

about $23 million, CMS failed to remove the debts from CMP receivables 

even though collections of these debts were received prior to September 

30, 2000. In addition, CMS incorrectly classified three of the debts 

totaling about $9 million as delinquent, instead of current, even though 

collections were being received in accordance with the due dates of the 

respective payment plans. Further, for the 12 selected delinquent debts, 

documentation supporting one of the debts with a balance of about $3 

million could not be located by DOJ. The status of receivables—

current, delinquent, or paid—should be properly noted since it affects 

the accuracy of the allowance for uncollectible accounts, which is 

netted against gross CMP receivables reported on HHS’ and CMS’

financial statements. In addition, these errors could possibly have been 

avoided if there was appropriate review and approval of such 

transactions.
Page 13 GAO-02-116 CMS' Civil Monetary Penalties Debt

• Lastly, CMS does not have formal written policies and procedures for 

determining its allowance for uncollectible accounts. As previously 

noted, CMS stated that its allowance for uncollectible accounts 

represents the balance of all CMP debt delinquent for 60 days or longer 

that is considered to be inactive and truly delinquent based on a case-bycase review of each receivable. According to SFFAS No. 1, losses due to 

uncollectible amounts should be measured through a systematic 

methodology with an analysis of both individual accounts and a group of 

accounts as a whole. Individual account analysis should be based on 

factors such as the debtor’s ability to pay and the probable recovery of 

amounts from secondary sources. Group analysis should be performed 

using a method such as statistical estimation by modeling or sampling 

and should take into consideration such factors as historical loss 

experience and recent economic events. However, CMS’ allowance for 

uncollectible accounts is not based on a systematic analysis of the 

collectibility of the outstanding receivables balance.

Incomplete and 

Unreliable CMP Data 

Limited the 

Determination of 

Overall Adequacy of 

CMP Debt Collection 

Policies and 

Procedures

CMP debt collection policies and procedures have been established by 

CMS for the long-term care debt and by HHS OIG and DOJ for the fraud and 

abuse debt. However, incomplete and unreliable CMP information limited 

us from determining the overall adequacy of the CMP debt collection 

policies and procedures. As a result and as agreed with your staff, we 

performed limited tests of CMS’ debt collection policies and procedures. 

We found that debt collection policies and procedures were followed for 11 

of the 12 selected delinquent debts. We could not determine whether DOJ 

followed its debt collection policies and procedures for the remaining 

selected debt because DOJ was unable to locate supporting 

documentation.

In analyzing long-term care CMP cases and settlement data for fiscal years 

1999 and 2000, we noted one debt collection matter in which debt 

collection policies and procedures can be strengthened. The matter relates 

to CMS often settling at amounts that exceeded the 35-percent discount 

threshold established by management. At the three selected regional 

offices, we found that CMS reduced the assessed long-term care CMP 

amounts more than 35-percent for 89 out of 215 cases (41 percent), or 

about $8.4 million out of about $11.4 million (73 percent) in assessments 

settled in fiscal years 1999 and 2000. For the 89 cases, a 35-percent 

discount on approximately $8.4 million in assessments results in possible 

collections of about $5.5 million. However, CMS actually discounted these 

cases in total by about 69 percent, reducing potential collections by about 
Page 14 GAO-02-116 CMS' Civil Monetary Penalties Debt

$2.9 million. According to CMS officials, other matters can develop while a 

hearing is pending that can affect the settlement amount, such as 

unavailability of witnesses and new information related to the deficiencies. 

In these cases, according to the officials, it may be in CMS’ best interests to 

settle for less, given the cost of litigation and the risk of not collecting 

anything. However, CMS does not have debt collection policies and 

procedures for instances in which a discount greater than 35-percent is 

allowed. Of the three selected regional offices, one regional office was 

maintaining documentation to support that such settlements were 

warranted, while two regional offices were not maintaining documentation. 

Consistent with good management practices and the Standards for 

Internal Control in the Federal Government, when exceptions to a stated 

management policy occur, typical control practices are to document, 

review, and approve such exceptions to ensure that management’s 

objectives are being met. 

OMB’s and Treasury’s 

Roles in the Oversight 

and Monitoring of CMP 

Debt

OMB and Treasury are provided with the information useful in performing 

their debt oversight roles through the agencies’ reporting of CMP 

receivables and referral of CMP debt to Treasury for collection. With 

respect to the reporting of CMP receivables, beginning with fiscal year 

1997, CMS and HHS have annually disclosed CMP receivables information 

in their financial reports.10 In accordance with requirements of DCIA and 

Treasury guidance, CMS reports receivables information quarterly, which 

includes CMP, to Treasury in the Report on Receivables Due from the 

Public. 

However, in discussions with OMB officials, they emphasized that OMB’s 

oversight is broad and consists of monitoring and evaluating 

governmentwide credit management, debt collection activities, and federal 

agency performance. OMB also stated that it is the specific responsibility 

of the agency Chief Financial Officer and program managers to manage and 

be accountable for the debt collection of their agency’s credit portfolios in 

accordance with applicable federal debt statutes, regulations, and 

guidance. OMB further added that it is the role of each agency to 

specifically monitor and collect its civil penalty debt regardless of dollar 

magnitude and the responsibility of each agency’s OIG to provide oversight 

through audit of the agency’s debt collection activities.

10The information reported to OMB and Treasury needs to be considered in light of 

the reliability issues we identified.
Page 15 GAO-02-116 CMS' Civil Monetary Penalties Debt

Regarding referral of CMP debt to Treasury, Treasury stated that it relies on 

the agencies to determine what debt should be referred to Treasury for 

collection as required by DCIA. DCIA requires federal agencies to transfer 

eligible nontax debt or claims11 over 180 days delinquent to Treasury for 

collection actions. DOJ stated that referral to Treasury was one type of 

debt collection tool used by USAOs when pursuing collection of fraud 

cases.12 However, CMS is not referring long-term care CMP debt to 

Treasury for collection actions. CMS stated that it plans to refer eligible 

long-term care CMP debts to Treasury in the future and is currently 

researching the issue. 

Conclusion The expanded fraud and abuse detection activities and resulting growth in 

fraud and abuse debt is the primary reason for the increase in CMP 

receivables over the last several years. In addition, our work found similar 

financial accountability and reporting issues as those reported for nonCMP receivables and that a CMP debt collection policy and procedure can 

be strengthened. As long as CMP receivables continue to be considered 

immaterial in the judgment of CMS’ external financial statement auditors, 

minimal audit coverage will be provided in this area. Therefore, CMS 

management needs to take steps to improve the accounting and reporting 

of CMP receivables.

Recommendations In order to improve CMS’ accounting, reporting, and collection of CMP 

receivables, we recommend that the Administrator of CMS establish and 

implement formal written accounting and reporting policies and 

procedures for

• comparing CMP receivables reported in CMS’ audited financial 

statements and HHS’ accountability report,

• reconciling CMP receivables between CMS’ general ledger and the 

detailed subsidiary systems, 

11Claims include debts owed to the United States or debts being collected by the 

United States on behalf of others.

12HHS OIG stated that, as of September 30, 2000, it did not have any eligible 

delinquent CMP debt for the cases in which the OIG tracks collections.
Page 16 GAO-02-116 CMS' Civil Monetary Penalties Debt

• recording of long-term care receivables in the general ledger since longterm care CMP receivables currently are not recorded in the general 

ledger until a collection is made, and

• ensuring the accurate recording of information into the general ledger.

We also recommend that the Administrator of CMS

• determine an approach for assessing the collectibility of outstanding 

amounts so that a meaningful allowance for uncollectible accounts can 

be reported and used for measuring debt collection performance and

• establish formal written policies and procedures to ensure that the 

allowance for uncollectible CMP debts is properly determined using 

such an approach.

We further recommend that the Administrator of CMS establish and 

implement formal written debt collection policies and procedures for

• handling instances in which a discount greater than 35-percent is 

allowed, including the documentation, review, and approval of such 

settlements and 

• referring eligible long-term care CMP debt to Treasury as required by 

DCIA.

Agency Comments and 

Our Evaluation

A draft of the briefing slides was provided to CMS, HHS OIG, DOJ’s 

EOUSA, OMB, and Treasury for their review and comment. CMS’ letter is 

reprinted in appendix II. CMS, HHS OIG, DOJ’s EOUSA, OMB, and 

Treasury also provided us with technical comments that we considered and 

addressed, as appropriate. The following discussion addresses these 

agencies’ comments and our evaluation.

CMS agreed with all but one of our recommendations. CMS did not agree 

with our recommendation to establish and implement debt collection 

policies and procedures for instances in which a discount greater than 35-

percent is allowed. According to CMS, flexibility is needed in the 

settlement process and issuing policies and procedures on settlements 

would add rigidity to the process. It was not our intent that a rigid process 

for determining settlement amounts would be implemented. However, 

consistent with good management practices and the Standards for 

Internal Control in the Federal Government, when exceptions to a stated 

management policy occur, typical control practices are to document, 
Page 17 GAO-02-116 CMS' Civil Monetary Penalties Debt

review, and approve such exceptions to ensure that management’s 

objectives are being met.

CMS also stated that the non-CMP issues reported by CMS’ external 

financial statement auditors have no correlation to the CMP issues 

discussed in the report. We disagree. Even though these are two different 

types of debt, the underlying financial accountability and reporting issues 

are similar. For example, as discussed earlier, the external financial 

statement auditors reported that non-CMP contractors are unable to 

reconcile reported ending balances to the contractors’ subsidiary records. 

Our review also found reconciliation problems with the CMP receivables. 

As discussed in this report, as of September 30, 2000, the CMP receivables 

balance in the general ledger and the detailed subsidiary systems differed 

by a net of about $22 million.

We are sending copies of this report to the Chairman of the Permanent 

Subcommittee on Investigations, Senate Committee on Governmental 

Affairs, as well as the Chairman and Ranking Minority Member of the 

Senate Committee on Governmental Affairs. We will also provide copies to 

the Secretary of Health and Human Services; the Administrator, Centers for 

Medicare and Medicaid Services; the Attorney General; the Inspector 

General of the Department of Health and Human Services; the Secretary of 

the Treasury; and the Director, Office of Management and Budget. Copies 

will also be made available to others upon request. 

If you have any questions about this report, please contact me at (202) 512-

3406 or Steven Haughton, Assistant Director, at (202) 512-5999. Additional 

contributors to this assignment were Dawn Simpson, Suzanne Murphy, 

Rathi Bose, and Marshall Hamlett.

Sincerely yours,

Gary T. Engel

Director

Financial Management and Assurance
Page 18 GAO-02-116 CMS' Civil Monetary Penalties Debt

Appendix I

Briefing to the Permanent Subcommittee on Apendxies

Investigations, Senate Committee on 

Governmental Affairs ApendxiI

1

Financial Management and Assurance Team

Review of the Centers for Medicare and

 Medicaid Services’ Management and

Collection of Civil Monetary Penalties

Briefing to the Permanent Subcommittee on Investigations,

 Senate Committee on Governmental Affairs

December 14, 2001
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 19 GAO-02-116 CMS' Civil Monetary Penalties Debt

2

Contents

• Objectives

• Overview

• Background

• Scope and Methodology

• Increases in Fraud and Abuse Debt is Primary Reason for Reported Growth in CMP Debt

• CMP Receivables Have Similar Financial Accountability and Reporting Issues as Non-CMP Receivables

• Incomplete and Unreliable CMP Data Limited the Determination of Overall Adequacy of CMP Debt Collection Policies and Procedures

• OMB’s and Treasury’s Roles in the Oversight and Monitoring of CMP Debt

• Conclusion

• Recommendations

• Agency Comments
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 20 GAO-02-116 CMS' Civil Monetary Penalties Debt

3

Objectives

• In discussions with you and your staff about reported material

weaknesses related to non-civil monetary penalties (non-CMP)

receivables at the Centers for Medicare and Medicaid Services

(CMS),1 you also expressed concern over the growth of reported CMP

debt.

• You requested that we determine

• the primary reasons for the growth in CMS’ reported CMP debt,

• whether CMS’ CMP receivables have similar financial

accountability and reporting issues as its non-CMP receivables,

1Formerly the Health Care Financing Administration (HCFA).
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 21 GAO-02-116 CMS' Civil Monetary Penalties Debt

4

Objectives (cont’d)

• whether adequate processes exist to collect CMP debt, and

• what roles, if any, the Office of Management and Budget (OMB) or

the Department of the Treasury play in overseeing and monitoring

CMS’ collection of CMP debt.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 22 GAO-02-116 CMS' Civil Monetary Penalties Debt

5

Overview

• We found the following.

• Increases in fraud and abuse debt was the primary reason for the reported growth in CMP debt.

• CMS’ CMP receivables have similar financial accountability and reporting issues as those identified for non-CMP receivables by its

external financial statement auditors.

• Incomplete and unreliable CMP data limited the determination of overall adequacy of CMP debt collection policies and procedures.

Instead, as agreed with your staff, we performed limited tests of

CMS’ debt collection policies and procedures and found that one

policy and procedure, relating to settling at amounts that exceed a

35-percent discount threshold, can be strengthened.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 23 GAO-02-116 CMS' Civil Monetary Penalties Debt

6

Overview (cont’d)

• OMB and Treasury are provided with information useful in

performing CMP debt oversight roles. However, OMB stated that

it has broad oversight responsibility in monitoring and evaluating

governmentwide debt collection activities. OMB further stated that

it is the specific responsibility of the agency to monitor, manage,

and collect CMP debt and the responsibility of the agency’s Office

of Inspector General (OIG) to provide oversight through audit of

the agency’s debt collection activities. In addition, Treasury stated

that it relies on the agencies to determine what debt should be

referred to Treasury for collection action, as required by the Debt

Collection Improvement Act of 1996 (DCIA). However, not all

eligible CMP debts are currently being referred.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 24 GAO-02-116 CMS' Civil Monetary Penalties Debt

7

Background

• As of September 30, 2000, the Department of Health and Human Services (HHS) reported that CMS’ CMP receivables totaled about

$260 million. CMP debt results from deficiencies at long-term care

nursing facilities (LTC) or fraud and abuse and is collected by three

separate groups. CMS is responsible for the LTC debt and HHS’ Office

of Inspector General (OIG) and the Department of Justice (DOJ) are

responsible for fraud and abuse debt.

Source: CMS Account Receivable -

Aging Report as of 9/30/00

1% 11%

88%

CMS' LTC

HHS' OIG

DOJ
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 25 GAO-02-116 CMS' Civil Monetary Penalties Debt

8

Background (cont’d)

• CMP receivables relate to two categories of violations: (1) LTC and

(2) Fraud and Abuse.

• LTC

• Sections 1819 (42 U.S.C. Sections 1395i-3) and 1919 (42

U.S.C. Section 1396r) of the Social Security Act require

standard surveys of nursing facilities to determine whether they

meet the requirements for participation in the Medicare and

Medicaid programs.

• A survey must be conducted at each nursing facility within 15

months of the previous survey by a state survey agency. In

addition, the statewide average interval between surveys must

be 12 months or less.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 26 GAO-02-116 CMS' Civil Monetary Penalties Debt

9

Background (cont’d)

• Remedies, of which CMP is one, may be used when a nursing

facility is not in substantial compliance with the requirements

for participation in the Medicare and Medicaid programs.

• CMP is imposed either for the number of days ($50 to $10,000

per day) or for each instance ($1,000 to $10,000 per instance)

that a nursing facility is not in substantial compliance with the

participation requirements. The amount depends on the

severity of the deficiency.

• A written notice of the CMP is sent to the nursing facility. The

facility has 60 days from the date of the notice to either waive

its right to an administrative hearing and automatically receive

a reduction of 35-percent in the CMP amount or request an

administrative hearing.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 27 GAO-02-116 CMS' Civil Monetary Penalties Debt

10

Background (cont’d)

• At any time prior to an administrative hearing, the nursing

facility may enter into a settlement of the CMP amount. Once

there is an administrative hearing decision or a settlement, the

final CMP receivable amount is determined.

• According to CMS’ State Operations Manual, if a decision is

made to settle, the settlement should not be for a better term

than had the nursing facility opted for a 35-percent reduction.

• To track assessments and collections, CMS’ regional offices

use the Civil Monetary Penalty Tracking System (CMPTS) for

FY 1999 and later CMP cases and spreadsheets for FY 1996

through FY 1998 CMP cases.2 In addition, CMS’ regional offices use the LTC system to track CMP cases.

2Regulations implementing the imposition of LTC CMP were effective July 1, 1995. The first LTC CMP

assessment was made at the beginning of FY 1996.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 28 GAO-02-116 CMS' Civil Monetary Penalties Debt

11

Background (cont’d)

• Fraud and Abuse

• DOJ

• For civil health care fraud matters, DOJ generally uses the

False Claims Act, as well as common law fraud remedies,

payment by mistake, unjust enrichment, and conversion to

recover amounts from those who have submitted false or

improper claims to the United States.

• Civil health care fraud matters are referred directly from

federal or state investigative agencies, or result from filings

by private persons known as “relators,” who file suits on

behalf of the federal government under the 1986 qui tam

amendments to the False Claims Act.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 29 GAO-02-116 CMS' Civil Monetary Penalties Debt

12

Background (cont’d)

• The False Claims Act (31 U.S.C. Sections 3729-3733)

provides that anyone who “knowingly” submits a false claim

to the government is liable for a penalty from $5,000 to

$10,000 plus up to three times the amount of damages

sustained by the government.

• A court judgment or settlement establishes amounts due by

violators. DOJ prepares a Health Care Fraud Tracking

Form,3 which is submitted to HHS OIG and CMS’ Office of

Financial Management, and establishes the debt in a

tracking system.

3In documenting a judgment or settlement, DOJ uses this form to note the judgment or settlement

 amount and the recipients to be paid from the collected debt.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 30 GAO-02-116 CMS' Civil Monetary Penalties Debt

13

Background (cont’d)

• If the health care violator does not pay the fraud debt,

DOJ’s U.S. Attorneys’ Offices (USAO) have several options

to pursue collection, such as contacting the debtor,

securing or executing upon a judgment, filing liens or

garnishments, and referring the delinquent debt to

Treasury.

• DOJ uses one of the following systems to track

assessments and collections of civil health care fraud

cases.

• USAOs use either the Tracking Assistance for the Legal

Office Network or the Collection Litigation Automated

Support System.

• The Civil Division uses the Debt Collection System.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 31 GAO-02-116 CMS' Civil Monetary Penalties Debt

14

Background (cont’d)

• HHS OIG

• According to HHS OIG data, since 1988, about 90 percent of

its CMP assessments relate to the requirements of Section

1867 of the Social Security Act (42 U.S.C. Section 1395dd).

This statute specifies that a hospital’s emergency

department must provide an appropriate medical screening

examination within the capability of the hospital’s emergency

department to any individual who comes to the department

with a request for examination or treatment of a medical

condition. In addition, if the hospital determines that the

individual has an emergency medical condition, the hospital

must either stabilize the medical condition or transfer the

individual to another medical facility. This statute provides

for a maximum penalty of $50,000 per violation.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 32 GAO-02-116 CMS' Civil Monetary Penalties Debt

15

Background (cont’d)

• According to HHS OIG data, since 1988, approximately 10

percent of its CMP assessments relate to violations of the

statutory provisions applicable to false or fraudulent claims

submitted to federal health care programs in Section 1128A

of the Social Security Act (42 U.S.C. Sections 1320a-7a).

This law provides that for false, fraudulent, or otherwise

improper claims, HHS may impose a penalty of not more

than $10,000 for each item or service and an assessment

of no more than triple the amount claimed for each item or

service in lieu of damages.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 33 GAO-02-116 CMS' Civil Monetary Penalties Debt

16

Background (cont’d)

• HHS OIG uses spreadsheets to track assessments and

collections of CMP cases.4

• CMS’ Office of Financial Management is responsible for the accounting

and reporting of CMP receivables in the general ledger using the

Financial Accounting Control System (FACS). This office is also

responsible for determining the allowance for uncollectible receivables.

According to CMS, an allowance is calculated as the amount of CMP

debt delinquent for 60 days or longer that is considered to be inactive

and truly delinquent based on a case-by-case review of each

receivable.

4According to HHS OIG, collections being received through payment plans for CMP assessments under

 Section 1128A of the Social Security Act are sent directly to CMS. HHS OIG does not track collections

 for these cases.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 34 GAO-02-116 CMS' Civil Monetary Penalties Debt

17

Background (cont’d)

• HHS OIG’s Office of Audit Services stated that due to the immateriality

of CMP receivables balances, no detailed audit work has been

performed on CMP receivables by CMS’ external financial statement

auditors. However, these auditors have identified various reporting,

internal control, and accountability issues related to Medicare (nonCMP) receivables.

• These issues resulted in a qualified opinion on CMS’ financial

statements for fiscal year 1998 and a material weakness on nonCMP receivables during fiscal years 1998 through 2000.5

• The external auditors reported that CMS’ lack of an integrated

financial management system continues to impair its ability to

adequately support the reported non-CMP receivables activity and

balances.

5CMS’ financial statements and related auditor reports referred to in the slides were issued under

 CMS’ former name (HCFA).
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 35 GAO-02-116 CMS' Civil Monetary Penalties Debt

18

Background (cont’d)

• The external auditors also identified deficiencies in non-CMP

receivables activity, including the following:

• incorrectly reported activity by non-CMP contractors and

• inability of non-CMP contractors to reconcile reported ending

balances to the contractors’ subsidiary records.

• The external auditors’ recommendations included (1) establishing an

integrated financial management system for use by non-CMP

contractors and CMS’ central and regional offices and (2) ensuring

that all non-CMP contractors develop and implement control

procedures to provide independent checks of the validity, accuracy,

and completeness of the amounts reported to CMS, including a

reconciliation with the contractors’ supporting documentation, and

periodic review of contractors’ control procedures over reconciliations.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 36 GAO-02-116 CMS' Civil Monetary Penalties Debt

19

Scope and Methodology

• To accomplish our objectives, we:

• Obtained and reviewed CMS’ audited financial statements, HHS’

accountability reports, and other financial reports that relate to

CMS’ CMP and non-CMP collection activities.

• Analyzed CMS’ reported CMP receivables and related accounts

and information for fiscal years 1997 through 2000.

• Compared CMS’ CMP accounting records to detailed subsidiary

tracking records.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 37 GAO-02-116 CMS' Civil Monetary Penalties Debt

20

Scope and Methodology (cont’d)

• Obtained an understanding of CMS’ CMP debt collection policies

and procedures that relate to LTC, HHS OIG, and DOJ cases, as

well as applicable federal laws and regulations.

• Did not select a random sample, due to incomplete and unreliable

CMP information, from CMP receivables as of September 30, 2000,

and CMP receivable cases closed in fiscal years 1999 and 2000.

However, as agreed with your staff, we performed limited tests of

CMS’ debt collection policies and procedures, including the

following.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 38 GAO-02-116 CMS' Civil Monetary Penalties Debt

21

Scope and Methodology (cont’d)

• Selected and reviewed all delinquent CMP debts (over 60 days

delinquent) with a recorded receivable balance as of

September 30, 2000, greater than $2 million (12 debts), which

represented 57 percent of the delinquent CMP debt balance

and 27 percent of the total CMP debt balance per CMS’

records.6

• Analyzed LTC CMP assessment and settlement data for FY

1999 and 2000 for all cases settled at three selected CMS

regional offices. According to CMPTS, the LTC cases opened

at these regional offices represented approximately 76 percent

of all LTC CMP cases opened during this 2-year period.

6The 12 selected debts were fraud cases managed by DOJ.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 39 GAO-02-116 CMS' Civil Monetary Penalties Debt

22

Scope and Methodology (cont’d)

• Interviewed officials in CMS, HHS OIG, and DOJ’s Executive Office

for U.S. Attorneys (EOUSA) to obtain explanations for identified

significant trends, similarities with non-CMP receivables material

internal control weaknesses, findings and exceptions, as well as

unsupported/unreconciled amounts.

• Interviewed OMB and Treasury officials to determine what roles, if

any, OMB and Treasury play in overseeing and monitoring the

government’s collection of civil debt.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 40 GAO-02-116 CMS' Civil Monetary Penalties Debt

23

Scope and Methodology (cont’d)

• Did not independently verify the completeness or accuracy of the

subsidiary system data or test information security controls over the

systems used to compile these data.

• Provided CMS, HHS OIG, DOJ’s EOUSA, OMB, and Treasury with

a draft of our detailed briefing slides, which contained

recommendations to the Administrator of CMS, for review and

comment. The comments received are discussed on the “Agency

Comments” slide or incorporated into the slides as applicable.

• Performed our review in Washington, DC and Atlanta, GA from

March 2001 through August 2001 in accordance with U.S. generally

accepted government auditing standards.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 41 GAO-02-116 CMS' Civil Monetary Penalties Debt

24

Increases in Fraud and Abuse Debt is the Primary

Reason for Reported Growth in CMP Debt

• Between FY 1995 and 1997, fraud and abuse detection activities were

expanded that significantly increased fraud and abuse debts in FY

1997. This was the primary reason for the growth of CMS’ CMP

receivables.7

• In 1995, under authority to use trust funds money to develop or

demonstrate improved methods for investigating and prosecuting fraud,

HHS launched Project Operation Restore Trust (ORT). ORT targeted

fraud and abuse in three high-growth areas of the health care industry:

home health agencies, nursing homes, and durable medical equipment

suppliers.

7DOJ is responsible for collection activity for the majority of the fraud and abuse debt.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 42 GAO-02-116 CMS' Civil Monetary Penalties Debt

25

Increases in Fraud and Abuse Debt is the Primary

Reason for Reported Growth in CMP Debt (cont’d)

• In 1996, the passage of the Health Insurance Portability and

Accountability Act (HIPAA) expanded funding for HHS’ fraud and abuse

detection activities. In FY 1996, HHS reported that ORT combined with

the upgraded funding provided by HIPAA would enable HHS to more

aggressively detect and prevent fraud, waste, and abuse.

• With the establishment of HIPAA, HHS OIG and DOJ jointly

implemented, by January 1, 1997, the Fraud and Abuse Control

Program to combat fraud and abuse committed in the health plans (both

public and private).
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 43 GAO-02-116 CMS' Civil Monetary Penalties Debt

26

Increases in Fraud and Abuse Debt is the Primary

Reason for Reported Growth in CMP Debt (cont’d)

• A DOJ EOUSA official stated that health care fraud activities were

expanded in FY 1996 and FY 1997, and, with the implementation of the

Health Care Fraud Tracking Forms in December 1996, DOJ began

submitting health care fraud debts to CMS during FY 1997. Prior to this

time, only fraud and abuse debts submitted by HHS OIG were recorded

and reported by CMS.

• CMS’ accounting records revealed that about $255 million of the

$260 million CMP receivables balance as of September 30, 2000,

related to fraud and abuse debts. Of the fraud and abuse debts, about

$172 million remained outstanding from FY 1997.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 44 GAO-02-116 CMS' Civil Monetary Penalties Debt

27

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables

• Our analysis of CMS’ CMP receivables data revealed similar financial

accountability and reporting issues as those identified for non-CMP

receivables by CMS’ external financial statement auditors.

• Nonetheless, using HHS’ accountability reports, the following is a

summary of CMS’ key CMP financial information for FY 1997 through

FY 2000:

• CMS’ outstanding CMP receivables increased from about

$41 million, as of September 30, 1996, to about $260 million, as of

September 30, 2000.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 45 GAO-02-116 CMS' Civil Monetary Penalties Debt

28

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• CMS annually reserved, in an allowance account, from 14 to 29

percent of the outstanding CMP receivables balance for the

estimated amounts that it deemed collection was doubtful.

• There were no write-offs of CMS’ CMP receivables during the 4-

year period.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 46 GAO-02-116 CMS' Civil Monetary Penalties Debt

29

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• CMS does not have policies and procedures requiring it to compare

CMP receivables reported in its audited financial statements and HHS’

accountability report. The following differences between such reported

balances have been identified.

• According to HHS, CMS is the only HHS component that has CMP.

However, FY 1997 through FY 1999 ending balances reported for

CMP receivables differed by tens of millions of dollars between

HHS’ accountability reports and CMS’ audited financial statements.

• FY 2000 beginning balance for CMP receivables in HHS’ draft

accountability report was adjusted by approximately $50 million to

agree with CMS’ accounting records.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 47 GAO-02-116 CMS' Civil Monetary Penalties Debt

30

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• As a result of the adjustment, the beginning balance in HHS’ FY

2000 accountability report differed from the ending balance in its FY

1999 accountability report. After we brought this difference to HHS’

attention, a statement identifying the difference was added to HHS’

FY 2000 accountability report’s overview; however, the statement

did not explain the cause of the difference.

• According to HHS OIG’s Office of Audit Services, no detailed audit

work on CMP receivables has been performed by CMS’ external

financial statement auditors due to the small balance of CMS’ CMP

receivables in relation to CMS’ total accounts receivables, which

consists primarily of non-CMP Medicare receivables.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 48 GAO-02-116 CMS' Civil Monetary Penalties Debt

31

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• As of September 30, 2000, CMS’ reported CMP receivables were about

$260 million, or 3 percent, of total reported accounts receivables of

approximately $8.1 billion, of which non-CMP Medicare receivables

totaled more than $7.7 billion.

• Similar to the accountability and reporting issues reported for non-CMP

receivables by CMS’ external financial statement auditors, CMS also

does not have policies or procedures for reconciling CMP accounts

receivables balances to detailed support maintained in the subsidiary

systems.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 49 GAO-02-116 CMS' Civil Monetary Penalties Debt

32

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• For FY 2000, the amounts reported in HHS’ and CMS’ financial reports

differed significantly from the underlying subsidiary ledgers. As of

September 30, 2000, CMP receivables balance in FACS and the

detailed subsidiary systems differed by a net of about $22 million.

(Dollars in Subsidiary

 thousands) FACS Systems Difference

LTC $ 3,687 $ 21,109 ($ 17,422)

HHS OIG 28,922 87 28,835

DOJ 226,443 261,393 (34,950)

Interest 1,437 0 1,437

Totals $ 260,489 $ 282,589 ($ 22,100)

Sources: FACS: CMS Account Receivable - Aging Report as of 9/30/00

 Subsidiary Systems: Data files provided by CMS, HHS OIG, and DOJ
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 50 GAO-02-116 CMS' Civil Monetary Penalties Debt

33

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• Statement of Federal Financial Accounting Standards (SFFAS) No. 1,

Accounting for Selected Assets and Liabilities, and SFFAS No. 7,

Accounting for Revenue and Other Financing Sources and Concepts

for Reconciling Budgetary and Financial Accounting, state that a

receivable should be recognized once amounts that are due to the

federal government are assessed, net of an allowance for uncollectible

amounts.

• However, CMS stated that beginning in FY 1999, all new LTC CMP

receivables are no longer recorded in FACS until a collection is made

due to the unreliability of the accounts receivable amounts in CMS’

subsidiary system--CMPTS. CMS stated that the LTC CMP

receivables would be reviewed for validity as part of the planned

upgrade of CMPTS. As a result, FACS does not include all potentially

valid LTC CMP receivables. This appears to be the primary reason for

the LTC difference between FACS and the subsidiary system.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 51 GAO-02-116 CMS' Civil Monetary Penalties Debt

34

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• Of the 12 selected delinquent debts that we reviewed, 2 totaling about $24 million were the responsibility of HHS OIG according to CMS’

accounting records. However, upon further research by DOJ, these

debts were actually the responsibility of DOJ and were included in

DOJ’s subsidiary system on 9/30/00 as uncollected. This

misclassification appears to explain a portion of the difference between

FACS and HHS OIG’s and DOJ’s subsidiary systems.

• CMS does not have formal written policies and procedures for

determining its allowance for uncollectible accounts. CMS stated that

the allowance represents the balance of all CMP debt delinquent for 60

days or longer that is considered to be inactive and truly delinquent

based on a case-by-case review of each receivable.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 52 GAO-02-116 CMS' Civil Monetary Penalties Debt

35

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• According to SFFAS No. 1, losses due to uncollectible amounts should

be measured through a systematic methodology with an analysis of

both individual accounts and a group of accounts as a whole. Individual

account analysis should be based on factors such as the debtor’s ability

to pay and the probable recovery of amounts from secondary sources.

Group analysis should be performed using a method such as statistical

estimation by modeling or sampling and should take into consideration

such factors as historical loss experience and recent economic events.

• However, CMS’ allowance for uncollectible accounts is not based on a

systematic analysis of the collectibility of the outstanding receivables

balance.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 53 GAO-02-116 CMS' Civil Monetary Penalties Debt

36

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• For the 12 selected delinquent debts with receivable balances totaling about $70 million, 7 debts totaling approximately $32 million were

recorded incorrectly in FACS.

• CMS failed to remove four of the debts totaling about $23 million from CMP receivables even though collections of these debts were

received prior to September 30, 2000.

• CMS incorrectly classified three of the debts totaling about $9 million

as delinquent, instead of current, even though collections were being

received in accordance with the due dates of the respective payment

plans.

• For the 12 selected delinquent debts, documentation supporting one of the debts with a balance of about $3 million could not be located by

DOJ.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 54 GAO-02-116 CMS' Civil Monetary Penalties Debt

37

CMP Receivables Have Similar Financial

Accountability and Reporting Issues as Non-CMP

Receivables (cont’d)

• CMS stated that Division of Accounting staff responsible for the recording of information in FACS use notes and knowledge gained during training

provided by staff previously responsible for the duties to record CMP

receivables in the general ledger. However, these informal policies and

procedures do not (1) contain specific guidance on recording due dates

for payments being made through payment plans or recording collections

against established receivables and (2) address control procedures to

ensure the accurate recording of CMP receivables in the general ledger,

such as review and approval of transactions by a supervisor.

• The status of receivables—current, delinquent, or paid—should be properly noted since it affects the accuracy of the allowance for

uncollectible accounts, which is netted against gross CMP receivables

reported on HHS’ and CMS’ financial statements. In addition, these

errors could possibly have been avoided if there was appropriate review

and approval of such transactions.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 55 GAO-02-116 CMS' Civil Monetary Penalties Debt

38

Incomplete and Unreliable CMP Data Limited the

Determination of Overall Adequacy of CMP Debt

Collection Policies and Procedures

• CMS (LTC, HHS OIG, and DOJ) has established debt collection policies

and procedures. However, incomplete and unreliable CMP information

limited us from determining the overall adequacy of the CMP debt

collection policies and procedures. As a result and as agreed with your

staff, we performed limited tests of CMS’ debt collection policies and

procedures and found the following.

• For 11 of the 12 selected delinquent debts, DOJ followed its debt

collection policies and procedures.

• For four cases, DOJ had followed its procedures and had

collected the debts in full.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 56 GAO-02-116 CMS' Civil Monetary Penalties Debt

39

Incomplete and Unreliable CMP Data Limited the

Determination of Overall Adequacy of CMP Debt

Collection Policies and Procedures (cont’d)

• For three cases, DOJ was following its procedures for collecting

the debts in accordance with the respective payment plans.

• Four cases remained delinquent, but DOJ was following its

procedures for pursuing collection of unpaid debt.

• We were unable to determine whether DOJ followed its debt

collection policies and procedures for one case since DOJ was

unable to locate supporting documentation.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 57 GAO-02-116 CMS' Civil Monetary Penalties Debt

40

Incomplete and Unreliable CMP Data Limited the

Determination of Overall Adequacy of CMP Debt

Collection Policies and Procedures (cont’d)

• For LTC CMP debt collection policies and procedures, we noted

one debt collection matter in which such policies and procedures

can be strengthened. The matter relates to CMS often settling at

amounts that exceeded the 35-percent discount threshold.

• At the three selected regional offices, CMS reduced the

assessed LTC CMP amounts more than 35-percent for 89 out of

215 cases (41 percent), or about $8.4 million out of about $11.4

million (73 percent) in assessments settled in fiscal years 1999

and 2000.

• For the 89 cases, a 35-percent discount on approximately

$8.4 million in assessments results in possible collections of

about $5.5 million. However, CMS actually discounted these

cases in total by about 69 percent, reducing potential collections

by $2.9 million.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 58 GAO-02-116 CMS' Civil Monetary Penalties Debt

41

Incomplete and Unreliable CMP Data Limited the

Determination of Overall Adequacy of CMP Debt

Collection Policies and Procedures (cont’d)

• According to CMS, other matters can develop while an

administrative hearing is pending that can affect the settlement

amount, such as unavailability of witnesses and new information

related to the deficiencies. In these cases, according to CMS, it

may be in CMS’ best interest to settle for less, given the cost of

litigation and the risk of not collecting anything.

• However, CMS does not have debt collection policies and procedures for instances in which a discount greater than

35-percent is allowed. Of the three selected regional offices, one

regional office was maintaining documentation to support that

such settlements were warranted, while two regional offices

were not maintaining documentation. Consistent with good

management practices and the Standards for Internal Control in

the Federal Government,

8 when exceptions to a stated management policy occur, typical control practices are to

document, review, and approve such exceptions to ensure that

management’s objectives are being met.

8GAO/AIMD-00-21.3.1, November 1999.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 59 GAO-02-116 CMS' Civil Monetary Penalties Debt

42

OMB’s and Treasury’s Roles in the Oversight and

Monitoring of CMP Debt

• Reporting of CMP Receivables9

• Beginning with fiscal year 1997, CMS and HHS have annually

disclosed CMP receivables information in their financial reports.

• In accordance with requirements of DCIA and Treasury guidance,

CMS reports receivables information quarterly, which includes

CMP, to Treasury in the Report on Receivables Due from the

Public.

9The information reported to OMB and Treasury needs to be considered in light of the reliability

 issues we identified (see slides 27-37).
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 60 GAO-02-116 CMS' Civil Monetary Penalties Debt

43

OMB’s and Treasury’s Roles in the Oversight and

Monitoring of CMP Debt (cont’d)

• OMB and Treasury are provided with information useful in

performing CMP debt oversight roles. However, in discussions with

OMB officials, they emphasized that OMB’s oversight is broad and

consists of monitoring and evaluating governmentwide credit

management, debt collection activities, and federal agency

performance. OMB also stated that it is the specific responsibility of

the agency Chief Financial Officer and program managers to

manage and be accountable for the debt collection of their agency’s

credit portfolios in accordance with applicable federal debt statutes,

regulations, and guidance. OMB further added that it is the role of

each agency to specifically monitor and collect its civil penalty debt

regardless of dollar magnitude and the responsibility of each

agency’s OIG to provide oversight through audit of the agency’s

debt collection activities.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 61 GAO-02-116 CMS' Civil Monetary Penalties Debt

44

OMB’s and Treasury’s Roles in the Oversight and

Monitoring of CMP Debt (cont’d)

• Referral of CMP Debt to Treasury

• DCIA requires federal agencies to transfer eligible nontax debt or

claims over 180 days delinquent to Treasury for collection action.

• DOJ stated that referral to Treasury was one type of debt collection

tool used by USAOs when pursuing collection of fraud cases.10

• CMS stated that CMS is not referring LTC CMP debt to Treasury for

collection actions. CMS stated that it plans to refer eligible LTC

CMP debts to Treasury in the future and is currently researching the

issue.

10HHS OIG stated that, as of September 30, 2000, it did not have any eligible delinquent CMP debt

 for the cases in which the OIG tracks collections.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 62 GAO-02-116 CMS' Civil Monetary Penalties Debt

45

OMB’s and Treasury’s Roles in the Oversight and

Monitoring of CMP Debt (cont’d)

• Treasury stated that it relies on the agencies to determine what

debt should be referred to Treasury for collection action, as required

by DCIA.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 63 GAO-02-116 CMS' Civil Monetary Penalties Debt

46

Conclusion

• The expanded fraud and abuse detection activities and resulting growth

in fraud and abuse debt is the primary reason for the increase in CMP

receivables over the last several years. In addition, our work found

similar financial accountability and reporting issues as those reported

for non-CMP receivables and that a CMP debt collection policy and

procedure can be strengthened. As long as CMP receivables continue

to be considered immaterial in the judgment of CMS’ external financial

statement auditors, minimal audit coverage will be provided in this area.

Therefore, CMS management needs to take steps to improve the

accounting and reporting of CMP receivables.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 64 GAO-02-116 CMS' Civil Monetary Penalties Debt

47

Recommendations

• We recommend that the Administrator of CMS take the following

actions.

• Establish and implement formal written accounting and reporting

policies and procedures for

(1) comparing CMP receivables reported in CMS’ audited financial

statements and HHS’ accountability report,

(2) reconciling CMP receivables between CMS’ general ledger and

the detailed subsidiary systems,

(3) recording of LTC receivables in FACS since LTC CMP

receivables currently are not recorded in FACS until a

collection is made, and

(4) ensuring the accurate recording of information into FACS.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 65 GAO-02-116 CMS' Civil Monetary Penalties Debt

48

Recommendations (cont’d)

• Determine an approach for assessing the collectibility of outstanding

amounts so that a meaningful allowance for uncollectible accounts

can be reported and used for measuring debt collection

performance. In addition, establish formal written policies and

procedures to ensure that the allowance for uncollectible CMP debts

is properly determined using such an approach.

• Establish and implement formal written debt collection policies and

procedures for

(1) handling instances in which a discount greater than 35-percent

is allowed, including the documentation, review, and approval

of such settlements, and

(2) referring eligible LTC CMP debt to Treasury as required by

DCIA.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 66 GAO-02-116 CMS' Civil Monetary Penalties Debt

49

Agency Comments

• In commenting on these briefing slides, CMS agreed with all but

one of our recommendations.

• CMS did not agree with our recommendation to establish and

implement debt collection policies and procedures for instances in

which a discount greater than 35-percent is allowed. According to

CMS, flexibility is needed in the settlement process and issuing

policies and procedures on settlements would add rigidity to the

process. It was not our intent that a rigid process for determining

settlement amounts would be implemented. However, consistent

with good management practices and the Standards for Internal

Control in the Federal Government, when exceptions to a stated

management policy occur, typical control practices are to

document, review, and approve such exceptions to ensure that

management’s objectives are being met.
Appendix I

Briefing to the Permanent Subcommittee on 

Investigations, Senate Committee on 

Governmental Affairs

Page 67 GAO-02-116 CMS' Civil Monetary Penalties Debt

50

Agency Comments (cont’d)

• CMS also stated that the non-CMP issues reported by CMS’

external financial statement auditors have no correlation to the

CMP issues discussed in the slides. We disagree. Even though

these are two different types of debt, the underlying financial

accountability and reporting issues are similar. For example, as

discussed on slide 18, the external financial statement auditors

reported that non-CMP contractors are unable to reconcile reported

ending balances to the contractors’ subsidiary records. Our review

also found reconciliation problems with the CMP receivables. As

discussed on slide 32, as of September 30, 2000, CMP receivables

balances in FACS and the detailed subsidiary systems differed by a

net of about $22 million.
Page 68 GAO-02-116 CMS' Civil Monetary Penalties Debt

Appendix II

Comments From the U.S. Department of 

Health and Human Services’ Centers for 

Medicare and Medicaid Services ApendxiI

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix.
Appendix II

Comments From the U.S. Department of 

Health and Human Services’ Centers for 

Medicare and Medicaid Services

Page 69 GAO-02-116 CMS' Civil Monetary Penalties Debt
Appendix II

Comments From the U.S. Department of 

Health and Human Services’ Centers for 

Medicare and Medicaid Services

Page 70 GAO-02-116 CMS' Civil Monetary Penalties Debt

See comment 1.
Appendix II

Comments From the U.S. Department of 

Health and Human Services’ Centers for 

Medicare and Medicaid Services

Page 71 GAO-02-116 CMS' Civil Monetary Penalties Debt

See comment 1.

See comment 2.

See comment 3.
Appendix II

Comments From the U.S. Department of 

Health and Human Services’ Centers for 

Medicare and Medicaid Services

Page 72 GAO-02-116 CMS' Civil Monetary Penalties Debt
Appendix II

Comments From the U.S. Department of 

Health and Human Services’ Centers for 

Medicare and Medicaid Services

Page 73 GAO-02-116 CMS' Civil Monetary Penalties Debt

The following are our comments on the Centers for Medicare and Medicaid 

Services’ letter dated August 30, 2001.

GAO Comments 1. We subsequently combined recommendations 1 and 3 together under 

recommendation 1 in order to group related topics. CMS agreed with 

both recommendations.

2. Recommendation 4 was subsequently renumbered as recommendation 

3 due to the combining of recommendations 1 and 3. 

3. See the “Agency Comments and Our Evaluation” section.

191021
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