Policy Documents

Administering Overpayment Recovery Audits in the State of Texas

Texas Comptroller’s Report to the 82nd Legislature –
December 31, 2010

Introduction and Procurement Summary

The Texas Comptroller of Public Accounts is legally required to contract with one or more consultants to perform overpayment recovery audits at state agencies and, before Jan. 1 of each odd-numbered year, to report to the Legislature the audit results received during the state fiscal biennium ending on Aug. 31 of the previous year.

The Comptroller issued a request for proposals (RFP) for recovery audit services on Oct. 21, 2005. A contract was signed with Horn & Associates, Inc. on March 13, 2006, for a contingency fee of 13.5 percent of all recovered funds. The state’s negotiated rate was substantially lower than the industry average of 20 to 40 percent, as cited in the Legislative Budget Board’s (LBB’s) January 2005 Staff Performance Report. The Comptroller exercised three contract renewal options, with the latest expiring on June 30, 2010.

Project Status

The recovery audit program consisted of two separate audits, a review of qualifying agency accounts payable transactions and a review of the state’s Medicaid program. A total of $13.6 million from the two programs has been recovered and deposited in the Treasury.

Accounts Payable

Thirty-six agencies were subject to an overpayment recovery audit of their accounts payable transactions based on qualifying criteria in Texas Government Code Chapter 2115. Of these, 34 agencies were audited; two already had recovery audit programs and were omitted to prevent duplication of effort. The consultant was required to complete the accounts payable audits within 18 months of the audit entrance conference, including fieldwork and collections. Transactions totaling $57.6 billion have been analyzed, with $1.08 million recovered and deposited in the state treasury.

Medicaid

A Medicaid recovery audit program was developed to review claims paid to providers. This audit was performed by PRGX USA, Inc. as a subcontractor for Horn. The audit scope was limited to inpatient hospital claims submitted for payment from 2005 through 2008, accounting for $1.8 billion or roughly 10 percent of all inpatient Medicaid spending. To date, $12.79 million in overpayments have been identified and $12.55 million recovered and deposited in the state treasury.