A State Audit Report released on Friday, February 12, 2016 states that "the DHHS Bureau of Developmental Services (BDS) did not effectively manage Medicaid appropriations to ensure adults with acquired brain disorders (ABD) and developmental disabilities (DD) timely received needed services during State fiscal years 2014 and 2015." According to the report, BDS didn't spend nearly $40 million of state and federal dollars specifically earmarked to help people with developmental disabilities, despite a list of more than 100 people waiting for services at the end of this two-year period. This is disturbing news to all of us, and the case of these lapsed budget funds deserves a deeper explanation to families and stakeholders.

To that end, we have posted a copy of the State Audit Report (50+ pages, downloadable pdf) on the MDS website. Also available is the Audit team’s Executive Summary with Recommendations.

I personally want to provide you with clarification and some perspective on what this is all about. In last summer's Clipboard newsletter, I gave a general overview of the lapse, "The Lapse and Its Consequences", that gave background on what was happening with this situation – and which in fact foretold this audit report. You might want to re-read that piece, which is posted below.

According to the audit report, close to $40 million dollars went unspent in Fiscal Years 2014-15 – $20 million in state funds, plus matched federal dollars. Funding was increased by 15% for that budget period, but the BDS delivery system was unable to spend those funds, for a number of reasons as outlined in the report.

During the 2014-15 period, the Area Agency system actually removed 694 people from the Wait List – 20 more than was planned. However, the period ended with 109 people on the ABD and DD Wait Lists. By the end of that fiscal period, not all appropriated Wait List funds had been spent, and so they lapsed.

It is important to keep in mind that the Wait List is fluid, with people being added and removed on a regular basis, so that a number at any point in time is only a snapshot.

It is also important to note that in the midst of this period, two major circumstances occurred. The first was a delay in all Wait List allocations because of impending budget cuts by the State Legislature. Second was in a change in BDS leadership: Matthew Ertas retired after many years of service, and a new administrator, Lorene Regan, took the reins.

This situation is not about people not doing their jobs, nor is it about misappropriation of funds within the DD system. Rather it is about how the Bureau (and thus Area Agencies) have been ineffective in authorizing, accounting for, planning, and tracking funding and/or requests for services. The system has flaws – the report details these. Some of these challenges are regulatory, some are in the area of management controls; other issues are timing and hiring related at the individual service level.

In essence, what has happened is that rules for spending Wait List dollars have become increasingly complicated. These rules, administered by BDS, govern our ability to best utilize available resources. If someone passes away, we can't reallocate their dollars to use for anyone else. If someone needs new or additional services that are projected to cost less than $10,000, we can't use Wait List dollars, which is unfortunate: often a small investment "now" can greatly reduce the much greater cost "later".

Hopefully we are now on the way to adjusting things so that appropriate services are provided to all who need them in a timely way. That adjustment will take some time, but it is already in process. We will keep you updated as things progress.

Links to learn more:

 --------

The Lapse and Its Consequences – July 2015 (from MDS Clipboard Summer 2015)
This summer at the State House, the Bureau of Developmental Services (BDS) in Concord, and in Area Agency offices around the state, heated conversations are going on about the Lapse. What does it mean? Why is it an issue all of a sudden? How does it affect you?

First, this is a complex, behind-the-scenes financial issue, so anything here will be a generalized overview at best.

Second, interpretations and viewpoints of "Why the Lapse?" are being debated furiously, because BDS believes the lapsed funds number is especially high this year. Questions are being asked as to why so much money wasn't spent by Area Agencies – do we really need the money if we aren't spending it?

Finally, how we view and treat lapsed funds, as they are being discussed in today's financial climate, directly affects being able to provide quality, cost-effective services for individuals. It's not likely something you'll want to discuss at the dinner table or parties, but it is important to understand. It will affect your services and your funding.

What is the Lapse? Lapsed funds are not anything new. Our budgets are constructed based on the maximum available dollars for each service we expect to deliver to those we serve. It only makes sense that any deviation from this budget will result in us getting less than that maximum. Many situations come up that can cause us to deviate from the original budget. People can die, relocate, or otherwise leave services – historically these types of changes have resulted in what are called frozen vacancies. Also, Wait List money may lapse because of delays in program startups because of complexities, staffing issues, or family complications. There are other sources of lapsed funds as well, but these have made up the largest proportion.

Until recently, some lapsed funds were set aside by the State to allocate among Area Agencies for emergency situations in that same year – for "advanced authorizations" and such. Also, in the past, Area Agencies could sometimes shift unused funds to others in need, or allocate to provide money for unfunded expenses. That is no longer the case, and we are feeling the effects.

Why is lapsed funding such a hot issue this year? The lapsed funds number is quite high this year, in part due to quirky reasons that were set up by BDS. Recent changes in how the State allows use of these lapsed funds and in how we budget for certain items have created larger identifiable lapse pools. No longer can we shift funds from frozen programs. In fact, money that used to result in frozen vacancies now gets pulled back by BDS fairly quickly. All unused funds from Self-Directed Services budgets now go directly back to the State. However Wait List budgeting changes have probably contributed the most to the increase in the Lapse.

Historically, with respect to the Wait List, we would create budgets based on when we projected a person was expected to begin service. For instance, if a person turned 21 on April 1, we would create a budget for the last three months of that fiscal year, which ends June 30. However, a few years ago, we were told to create all Wait List budgets as if the person would be in program for that entire fiscal year, regardless of start date. Under these new rules, for the example above, we would need to budget for all 12 months, even though we knew that at most we would use only one quarter of that amount.

Thus at the end of the year, there are "lapsed" Wait List funds, not because we haven't provided the services required, but rather because we were told to forecast based on annualized expenses. Having lapsed Wait List funds sounds dismal, especially given how much time and effort have gone into preserving this funding – everyone wonders who has been left behind. In fact, the underspending is the result of this changed accounting process. For this fiscal year that started on July 1, BDS has instructed us to go back to the old manner of creating Wait List budgets. This means that we should not have the same extent of lapse again.

It's not fully clear yet how the lapsed funds question will be resolved. What is clear, what we have been experiencing in the past year or two, is that we have limited flexibility in reallocating funds on an as-needed basis. Advanced authorizations for crisis funding are on hold, and we have no idea for how long.

With Managed Care on the horizon, the situation can only become more difficult. These managed care companies will be looking for reasons to save money, rather than for ways to spend money more effectively. It does not bode well for those we serve, whose well-being is based on access to these funds and the care they provide.