California Code of Regulations › Title 28 - Managed Health Care › Division 1 - The Department of Managed Health Care › Chapter 2 - Health Care Service Plans › Article 12 - Reports › Section 1300.84.5 - Public Entity Plans

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) A plan which is a public entity or
				  political subdivision shall be subject to the provisions of this section.
(1) Financial statements of a plan which is a
				  public entity or political subdivision, including financial statements or
				  reports of specific funds or groups of accounts where health plan activity is
				  recorded, which are required to be submitted pursuant to Section
				  1351(h) or
				  1384(c) of the
				  Act or by rule, order or request of the Director, shall be accompanied either
				  by an opinion of a certified public accountant or public accountant or by a
				  report of a government audit organization.
(2) For the purposes of Sections
				  1351 and
				  1384, governmental auditing
				  standards are defined to include the standards set forth in this item. Every
				  audit which results in the opinion or report referred to in Item (1) of this
				  subsection shall be conducted in accordance with the governmental auditing
				  standards indicated below:
(A) General
				  Standards:
(i) The auditors assigned to
				  perform the audit must collectively possess adequate professional proficiency
				  for the tasks required.
(ii) In all
				  matters relating to the audit work, the audit organization and the individual
				  auditors, whether government or public, must be free from personal or external
				  impairments to independence, must be organizationally independent, and shall
				  maintain an independent attitude and appearance.
(iii) Due professional care is to be used in
				  conducting the audit and in preparing related reports.
(B) Standards of Field Work:
(i) The work is to be adequately planned and
				  assistants, if any, are to be properly supervised.
(ii) There is to be a proper study and
				  evaluation of the existing internal control as a basis for reliance thereon and
				  for the determination of the resultant extent of the tests to which auditing
				  procedures are to be restricted.
(iii) Sufficient competent evidential matter
				  is to be obtained through inspection, observation, inquiries, and confirmations
				  to afford a reasonable basis for an opinion regarding the financial statements
				  under examination.
(C)
				  Standards of Reporting:
(i) The report shall
				  state whether the financial statements are presented in accordance with
				  generally accepted accounting principles.
(ii) The report shall state whether such
				  principles have been consistently observed in the current period in relation to
				  the preceding period.
(iii)
				  Informative disclosures in the financial statement are to be regarded as
				  reasonably adequate unless otherwise stated in the report.
(iv) The report shall either contain an
				  expression of opinion regarding the financial statements, taken as a whole, or
				  an assertion to the effect that an opinion cannot be expressed. When an overall
				  opinion cannot be expressed, the reasons therefor should be stated. In all
				  cases where an auditor's name is associated with financial statements, the
				  report should contain a clear-cut indication of the character of the auditor's
				  examination, if any, and the degree of responsibility he is
				  taking.
(D) Additional
				  Standards and Requirements on Examination and Evaluation for Government
				  Financial and Compliance Audits.
(i) Planning
				  shall include consideration of the requirements of all levels of
				  government.
(ii) A review is to be
				  made of compliance with applicable laws and regulations.
(iii) A written record of the auditors' work
				  shall be retained in the form of working papers.
(iv) Auditors shall be alert to situations or
				  transactions that could be indicative of fraud, abuse, and illegal expenditures
				  and acts and if such evidence exists, extend audit steps and procedures to
				  identify the effect on the entity's financial statements.
(E) Additional Standards and Requirements on
				  Reporting for Government Financial and Compliance Audits.
(i) Written audit reports are to be submitted
				  to the appropriate officials of the organization audited and to the appropriate
				  officials of the organizations requiring or arranging for the audits unless
				  legal restrictions or ethical considerations prevent it. Copies of the reports
				  should also be sent to other officials who may be responsible for taking action
				  and to others authorized to receive such reports. Unless restricted by law or
				  regulations, copies should be made available for public inspection.
(ii) A statement in the auditors' report that
				  the examination was made in accordance with generally accepted government
				  auditing standards for financial and compliance audits will be acceptable
				  language to indicate that the audit was made in accordance with these
				  standards.
(iii) Either the
				  auditors' report on the entity's financial statements or a separate report
				  shall contain a statement of positive assurance on those items of compliance
				  tested and negative assurance on those items not tested. It shall also include
				  material instances of noncompliance and instances or indications of fraud,
				  abuse, or illegal acts found during or in connection with the audit.
(iv) The auditors shall report on their study
				  and evaluation of internal accounting controls made as part of the financial
				  and compliance audit. They shall identify as a minimum:
(a) the entity's significant internal
				  accounting controls,
(b) the
				  controls identified that were evaluated,
(c) the controls identified that were not
				  evaluated (the auditor may satisfy this requirement by identifying any
				  significant classes of transactions and related assets not included in the
				  study and evaluation), and
(d) the
				  material weaknesses identified as a result of the
				  evaluation.
(v) Either
				  the auditors' report on the entity's financial statements or a separate report
				  shall contain any other material deficiency findings identified during the
				  audit not covered in (ii) above.
(vi) If certain information is prohibited
				  from general disclosure, the report shall state the nature of the information
				  omitted and the requirement that makes the omission
				  necessary.
(3)
				  Financial statements, including reports of specific funds or groups of
				  accounts, which are to be submitted pursuant to this section must be previously
				  approved as to form by the Director. When all health plan activity has been
				  separately controlled and accounted for in an Enterprise Fund, the financial
				  statements or reports of such funds are presumptively approved as to form for
				  purposes of this subsection.