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Audit: Staff shortages at state laboratory service led to insufficient oversight of payments


Audit: Staff shortages at state laboratory service led to insufficient oversight of payments

Jun 11, 2024 | 12:05 pm ET
By Danielle J. Brown
Audit: Staff shortages at state laboratory service led to insufficient oversight of payments
The Maryland Department of Health's Laboratories Administration handles millions in fees for lab services each year, but stricter verification processes are needed, a new audit finds. Photo by Chris Hondros/Getty Images.

Staffing shortages at a state laboratory testing unit contributed to a lack of proper oversight in the handling more than $8 million in checks and the management of $463,400 of debt for outstanding lab fees, a recent audit found.

The Office of Legislative Audits report covered the period from January 2020 through October 2023 for the Maryland Department of Health’s Laboratories Administration, which provides health and environmental testing services for public and private entities. The audit found that the agency was not in compliance with the state’s Accounting Procedures Manual, which requires that money sent in for lab fees should “be verified … by an employee independent of the cash receipts functions,” but was not.

“The Administration advised us that while a review was performed, this review was completed prior to deposit and the employee responsible for performing this review was not independent of the cash receipts process,” the audit said. “Specifically, this employee had access to the collections and also had the ability to modify the initial recordation spreadsheet.”

“As a result, errors or other discrepancies could occur without timely detections and there was a lack of independent assurance that all collections had been deposited and that accounts receivable records were accurate,” the audit said.

Despite the noncompliance with state procedures, however, auditors said they sampled a dozen lab fee transactions and determined that, of those, “the collections tested were deposited intact and had proper amounts credited to reduce related account balances. ”

The audit, dated June 5 but released to the public Monday, adds on to a growing pile of audit findings on the Maryland’s Department of Health regarding “inadequate” financial oversight and documentation.

In its response, the agency pointed to staffing shortages as one reason for the “inadequate” oversight of receipts. As of last June, the Laboratories Administration had 28 vacant full-time positions, about 13.9% of available positions, according to the audit.

Health Secretary Laura Herrera Scott said the lab agency will hire staff to ensure that deposit verification are done by an employee “who does not have access to collections or related records.”

The second finding involved outstanding balances for lab fees. The audit found $463,400 in unpaid lab fees were not transferred over to the state’s debt collection agency in a manner that complied with state regulations.

If hospitals and individuals do not pay for lab services within 90 days, the lab agency is expected to refer those balances to the state’s Central Collections Unit for “additional collection efforts, such as tax refund intercepts.”

As of Nov. 16, the $463,400 that had been outstanding past the 90-day referral mark included some accounts that were over a year past due, the report found. Again, the state blamed staff shortages.

“We were advised by (Laboratories) Administration personnel that accounts were not referred timely due to a lack of sufficient personnel because of employee turnover,” the audit said.

The audit simply recommends that the lab administration adhere to the 90-day timeline in accordance with state regulations.

Herrera Scott said the state is working to do just that. She said in her response to the audit that the lab administration is developing standard operating procedures to ensure the unpaid balances are referred following the 90-day deadline.

The Health Department has been working to address low staffing levels that contribute to the inadequate financial record-keeping, said Chase Cook, communications director for the department.

“This administration is working diligently to correct the issues identified in these findings to ensure quality of care and financial accountability in our facilities. Part of that improvement includes additional staff,” he said in an email Monday.