Biennial Audit Bureau Report Highlights Fraud, Waste, and Mismanagement Hotline

The Legislative Audit Bureau has released its biennial report summarizing the LAB’s statutory responsibilities and highlighting audits and reports completed between January 1, 2011 and December 21, 2012. According to the report, the LAB published more than 60 reports during the given time period, including 24 financial audits report and 21 program evaluation reports and reviews.

The report highlights the activities of LAB’s Fraud, Waste, and Mismanagement Hotline, which was established in April 2008 and provides the public, state employees, and contractors with a confidential method of reporting potential fraud, inefficiencies, abuse, and other improper activities in state agencies or programs.

From April 2008 through December 2012, 472 reports were made to the hotline. In 2011 and 2012, LAB received 162 hotline reports, of which 112 were specific to state agencies or programs. These reports involved a variety of issues, such as allegations of improper receipt of public assistance benefits and inadequate state agency oversight of programs.

Any individual may report concerns related to state government activities to LAB by calling the toll-free hotline at 1-877-FRAUD-17, by mail, or through a secure online reporting form available at By law, the identity of the individual making the report will remain confidential.

The Biennial Report also summarizes LAB’s responsibilities and recent noteworthy findings, including those related to inappropriate expenditures, areas in which additional oversight was warranted, and policy issues likely to be of ongoing legislative concern.

In 2011 and 2012, we questioned the appropriateness of expenditures in several areas, including for programs in which recipients were ineligible to receive services. For example:

  • We identified 152 FoodShare assistance groups that had purchases exceeding $500 that were made exclusively outside of Wisconsin and more than 50 miles from their reported Wisconsin residences. These assistance groups made purchases totaling $324,187. We also identified 334 instances in which a FoodShare card was used to make a purchase in Wisconsin on the same day that the card’s account number was entered manually to make a purchase in a noncontiguous state (for details, see report 12-3, FoodShare Benefits Spent Outside of Wisconsin).
  • We identified 1,639 individuals who received FoodShare benefits even though they were ineligible because they were incarcerated in state prisons, were fleeing to avoid prosecution or confinement for a felony offense, or were in violation of a condition of probation or parole (for details, see report 12-8, FoodShare Wisconsin).
  • We identified 59 individuals who received unemployment benefit payments even though they were incarcerated in state prisons. These individuals received at least $221,889 in benefit overpayments and, as a result of our work, were assessed more than $300,000 in forfeitures related to future unemployment benefits (for details, see report 11-4, State of Wisconsin FY 2009-10 Single Audit).

We also identified a number of areas in which additional oversight was warranted. For example:

  • The rate-setting process the Department of Health Services used to establish foster care payments included costs that were unallowable under federal program requirements, causing us to question nearly $185,000 in federal reimbursements over two years (for details, see report 12-6, State of Wisconsin FY 2010-11 Single Audit, and report 11-4, State of Wisconsin FY 2009-10 Single Audit).
  • The increased use of surplus positions, which are intended to be temporary, to address overtime costs may have limited the Legislature’s awareness of staffing levels at the departments of Corrections and Health Services and may have circumvented its oversight authority (for details, see Overtime in State Agencies and UW System, published in May 2011).
  • Overcharging state agencies for centrally provided administrative services, as well as lapsing federal funds to the General Fund, lead to a requirement for the Department of Administration to return approximately $7.0 million in federal funds to the federal government that otherwise could have been used by state agencies for federal grant programs (for details, see report 12-6, State of Wisconsin FY 2010-11 Single Audit).
  • Although state agencies generally complied with federal grant requirements, we provided 58 recommendations to improve the State’s administration of federal funds (for details, see report 12-6, State of Wisconsin FY 2010-11 Single Audit).
  • We identified up to $12.0 million in federal funds the Legislature could either spend on specific public assistance programs or lapse to the General Fund in the 2011-13 biennium (for details, see Budgeting Issues, published in March 2011).

Several policy issues we analyzed in 2011 and 2012 are likely to be ongoing legislative concerns. For example:

  • UW System institutions and other public entities receive internet services from WiscNet, which is a nonprofit association. In FY 2011-12, WiscNet’s fees were generally lower than those of commercial providers. Inadequate documentation prevented us from determining whether all payments made between WiscNet and UW System were sufficient and appropriate. Continued monitoring will be necessary to assess UW System’s compliance with 2011 Wisconsin Act 32, which affects its future involvement with WiscNet and grant-funded networks (for details, see report 12-18, UW System’s Role in WiscNet and Grant-Funded Networks).
  • From January 2007 through March 2012, UW System and state agencies on Central Payroll hired 2,783 Wisconsin Retirement System annuitants who had terminated employment from 2007 through 2011. Local agencies responding to our survey indicated that they hired 2,599 annuitants from January 2011 through March 2012. Because statutes provide few restrictions on annuitants returning to work, we provided several options for legislative consideration (for details, see report 12-17, Wisconsin Retirement System (WRS) Annuitants Hired by Employers Participating in the WRS).
  • State spending on economic development in the 2009-11 biennium was an estimated $226.5 million, but state agencies did not track or publicly report complete information about program results. To improve accountability and increase compliance with statutory requirements, we recommended the Wisconsin Economic Development Corporation work with state agencies to develop goals and accountability measures for economic development programs. As required by statutes, we will conduct an audit in 2013 to assess Wisconsin Economic Development Corporation’s financial management and evaluate its programs (for details, see report 12-11, State Economic Development Programs).
  • The Health Insurance Risk-Sharing Plan (HIRSP), which provides medical and prescription drug insurance for individuals who are unable to obtain coverage in the private market or who have lost employer-sponsored group health insurance, will be affected by the implementation of the federal Patient Protection and Affordable Care Act (see report 12-9, Health Insurance Risk-Sharing Plan Authority).
  • The Department of Health Services’ budgeting and financial management practices did not keep pace with the growth and increasing complexity of the Medical Assistance program, which had expenditures of $7.5 billion in FY 2010-11. The Department was not able to readily produce the type of management information desired by legislators and needed for effective management. In addition, the Department relied heavily on vendors to help it administer the program, and we found vendor oversight and contract monitoring could be improved. We highlighted concerns with the Department’s efforts to contract for administrative services in our review of the Enrollment Services Center, which the Department established to manage the daily operations of certain public assistance programs (for details, see report 11-15, Medical Assistance Program, and Enrollment Services Center, published in June 2011).
  • Several of the managed care organizations participating in the Family Care program incurred operating deficits, and the Department of Health Services and the Office of the Commissioner of Insurance identified three that were at an increased risk for insolvency. Despite increases in the capitation rates paid to managed care organizations, which work with participants to develop individual care management plans and contract with providers for the delivery of program services, concerns remained regarding whether rates were sufficient to pay for an increasing number of participants with high-cost needs (for details, see report 11-5, Family Care).
  • The Contract Sunshine website, which is intended to include contracts, requests for bids and other competitive proposals, and purchase orders totaling $10,000 or more in a fiscal biennium, is of limited value in providing the public with clear, comprehensive, and useful information. In 2011 Wisconsin Act 32, the Legislature directed the Department of Administration to establish a new publicly accessible website that will report all executive, legislative, and judicial branch expenditures for state operations exceeding $100. If that website can be successfully implemented, it will surpass the Contract Sunshine website in scope and potential usefulness to the public. We offered several recommendations for improving the Contract Sunshine website if the Legislature chooses to retain it (for details, see report 11-11, Contract Sunshine Act).