Auditors find more than $13 million in uncashed checks at Nebraska Department of Health and Human Services office

LINCOLN — More than $13 million in checks piled up, uncashed, this summer in a small safe in an office of the Nebraska Department of Health and Human Services.

State auditors discovered the stash last month as part of their annual audit of federal funds coming into Nebraska.

According to a report from State Auditor Charlie Janssen’s office, the safe held 192 checks when the auditors counted them on Sept. 1.

The checks came from drug manufacturers participating in the Medicaid drug rebate program.

None had been deposited to the state treasury, although a few of the checks dated back to June 1. The majority were between two and three months old, the report said.

Among them were 57 checks, adding up to about $6.8 million, that had not been marked for deposit only.

One check, which turned out to be for $229,225 was in an envelope postmarked Aug. 2 that had never been opened.

HHS officials said Monday that, for the short term, they have assigned additional workers to clearing up the backlog. For the long term, they are reviewing how the checks are processed.

The Auditor’s Office labeled the finding a “significant deficiency,” meaning that it was important enough to merit attention from HHS leadership.

“Due to the significance of the dollars and risks involved, the agency needs to take immediate action to remedy the situation,” the report said, noting that the situation increased the chances of loss or theft of funds and cost the state interest earnings.

Nebraska law requires that checks be deposited in the state treasury within three business days of receipt if they are for $500 or more.

Checks under $500 must be deposited within seven days.

HHS officials agreed with the audit findings, according to an agency response included with the report.

But the officials said that it is difficult to get checks deposited within the time frame set out by state law because of the cumbersome process used to reconcile the checks against state records.

If the checks do not match, it takes time to research and identify corrections, the officials said.

HHS staff told the auditors that the backlog built up after one accountant retired in April and a second one went on medical leave in June.

That left the department without any accountants familiar with the drug rebate program and how to process the checks.

The problem with the checks came to light when state auditors were checking quarterly reports for the Medicaid drug rebate program.

They found $1,540 in checks that had been recorded by HHS staff as having been received on June 24 but had not been deposited in the state treasury as of Aug. 18.

Further questions led to the discovery of the checks in a small safe beneath an employee’s desk.

According to the report, the safe was locked at night but unlocked during the day. The employee said she tried to remember to lock the safe if she left her desk but admitted that she did not always do so.

Under federal law, drug manufacturers must agree to give rebates to state Medicaid programs on their prescription drugs in exchange for Medicaid coverage of the drugs.

The rebates are paid quarterly to the states and are shared between the states and the federal government to offset the cost of outpatient prescription drugs for Medicaid patients.

About 600 drug manufacturers currently participate in the program, along with all 50 states and the federal Centers for Medicare and Medicaid Services.