Taxpayers Against Fraud

I work with a group of school districts on their internal audit work. Lately, I’ve been helping districts reduce risk in the area of their Medicaid billing. Medicaid is a federal program administered by the states. School districts receive financial help with Medicaid eligible students that receive services such as physical therapy, speech therapy, nursing services, occupational therapy and transportation to those services. Extensive record keeping is required in order to properly submit claims.

In recent years, school districts have had a very fine line to walk in regard to these claims. They’ve been under scrutiny by the New York State Comptroller’s Office and the federal Medicaid Inspector General’s Office. Audits by those two agencies have opposing goals. 

The State Comptroller’s Office audits for under claiming Medicaid dollars because NYS receives a share of school district claims. When the Comptroller’s Office finds additional funds that could have been claimed it issues a press release to alert taxpayers of a district where federal dollars should have been claimed and were not. There’s always the insinuation that local taxpayers paid more because these federal dollars were not received.

The Office of the Medicaid Inspector General audits for over claiming Medicaid dollars. It’s charged with finding claims that were paid that do not meet all the standards for payment. Until recently the Office of the Medicaid Inspector General did not regularly audit school districts. Shortly after these audits began districts were advised that no Medicaid claims at all could be filed and that changes were coming in what could be claimed and the documentation required for a proper claim.

What caused this audit risk, regulatory change and freeze on claims in a program that’s been in place for decades? It was a fraud case.

In the late 1990s, a speech therapist named Hedy Cirrincione from Watertown filed a qui tam suit under the False Claims Act. She claimed that her services had been improperly billed to Medicaid by the school district and by Jefferson County.

The False Claims Act dates back to civil war times and was enacted to prevent taxpayer dollars being fraudulently spent during the war for false claims in connection with troop supplies and other war costs. It includes an ancient legal device called the qui tam provision, which is Latin slang for “he who brings a case on behalf of our lord the King, as well as for himself.”

It allows an individual who knows of a fraud against the federal government to sue on the government’s behalf. This individual, the whistleblower, is entitled to a reward of up to 30% of the recovered funds which include compensatory damages, civil penalties and triple damages.

This suit caused the DOH to audit a decade’s worth of NYS county and school district Medicaid claims. The audits found a substantial potential for fraud and that the vast majority of claims did not meet requirements. In many instances, there was no documentation of any services provided. The audit ultimately confirmed statewide billing problems.

Initial reports have NYS and NYC settling with the federal government for approximately half a billion dollars. This is a record recovery for the Medicaid program.

The False Claims Act is a powerful collaboration between the public and private sectors to uncover fraud and recover funds for the U.S. Treasury. It gives private citizens the tools to stop a fraud, deter similar frauds and help all taxpayers by returning taxpayer dollars to the Treasury. 

The False Claims Act was amended most recently in 1986 and applies to any federal payment including grants, contracts, government programs, bailout fraud and TARP fraud. I find it most often applies to the three Ms, Medicare, Medicaid, and military fraud. It does not apply to tax fraud, but the Internal Revenue Service has a similar program for reporting tax evasion and income tax fraud. Many states have their own version of the False Claims Act for state tax dollars.

If you work in a business where you see the abuse of federal tax dollars you should gather documents and electronic evidence that are legally accessible. Document any discussion you’ve heard in meetings or just in passing associated with the fraud. There are technical requirements to meet and mistakes to avoid to file a successful qui tam case under the False Claims Act. So contact a qui tam attorney early.

The Department of Justice has a backlog of hundreds of qui tam cases so it takes a very long time to resolve any case. In the NYS Medicaid case it took about a decade.

Successful whistleblowers are like folk heroes. Under the qui tam provision of the False Claims Act it gets even better. A whistleblower can return taxpayer dollars to U.S. taxpayers and earn a reward of up to 30%. Hedy Cirrincione is reported to be receiving a reward of $10 million.

Gina Bliss, CPA, CFE, is a senior manager at EFP Rotenberg, LLP, Certified Public Accountants and Business Consultants, who specializes in internal audit, fraud audit, and forensic accounting. She may be reached at (585) 295-0536 or by e-mail at gblissefprotenberg [dot] com