CPA Dustin Michalak, with San Antonio accounting firm Ridout, Barrett and Co. PC, presented the audit information to the court related to the item placed on the agenda by Karnes County Judge Barbara Shaw.
Michalak said his firm met with Judge Shaw and was engaged by the county for a consulting engagement for internal controls for KCEMS.
The firm gathered information regarding internal controls regarding the handling of cash, accounts receivable, accounts payable, disbursements, payroll and employee reimbursements.
Michalak said his firm planned to examine activity from July 1, 2011 through June 30, 2013, but interviews with various individuals directed their attention to review evidence through September, 2013 due to concerns related to potential fraudulent activity.
Accountant Angel Cepeda emphasized that his firm is not expressing an opinion in the audit, but only reporting observations.
Cepeda noted findings and risks detailed in the audit.
Among these findings was that on Jan. 1, 2013, Shelby Dupnik was sworn in as county commissioner, however Dupnik continued to work for Karnes County EMS. Dupnik also served as payroll clerk for KCEMS. The county later discovered that Dupnik was not legally allowed to be compensated for work performed outside his duties as commissioner.
Records indicate Dupnik was paid $8,427 through June, 2013. The amounts were reimbursed to the county on Aug. 21, 2013, but Dupnik continued to work as a volunteer and also performed payroll functions for KCEMS.
Cepeda said that in spite of these circumstances, Dupnik performed EMS services on Sept. 19, 2013 in place of his wife, Gretchen Dupnik, also an EMT, for which she was paid for the entire shift.
“Per our discussion with various other EMS personnel, there were various occasions that Mr. Dupnik performed service runs in place of Mrs. Dupnik, for which she was paid,” Cepeda said.
Cepeda noted that similar work situations arose between former KCEMS Administrator John Smart, and his wife, Norma Smart.
Dupnik regularly miscalculated payroll, Cepeda said, noting that paychecks were understated on multiple occasions.
“A shortfall in payroll compliance presents a potential liability to the county and could trigger Texas Workforce Commission and/or Internal Revenue Service audits,” Cepeda said. “Anything other than accurate payroll calculation also leaves the county open to potential future lawsuits from former and current employees of the county.”
In regards to EMS supervision and billing, Cepeda noted that former KCEMS Administrator John Smart had no accountability to the accounting office and submitted checks received for deposit as he saw fit.
“Mr. Smart also did not provide reconciliations between runs made by County EMS and runs submitted to AR Management Solutions for billing, therefore when patients or their legal representatives called for details regarding their bill, Mr. Smart was the only individual able to provide an answer,” Cepeda said.
According to Cepeda, there were reports by employees that said Gretchen Dupnik was able to access patient records from previous EMS runs that she was not directly involved in and that the information was accessed for her own purpose.
“This alleged behavior is a direct violation of the Health Insurance Portability and Accountability Act,” Cepeda said.
Regarding collection, of the $718,300 billed during the two-year period, $468,140 has not been collected, of which, $165,762 was for Medicare payments unable to be paid due to a lapse in Medicare billing certification. Including amounts billed between July 1, 2013 and Sept. 24, 2013, a grand total of $199,595 has not been collected from Medicare, Cepeda noted.
“Based on our conversations with Medicare representatives, Karnes County’s billing certification lapsed on May 15, 2012 and as of Oct. 16, 2013 was still not in good standing,” Cepeda said. “The major reason for the lapse was the failure to respond to revalidation in a timely manner.”
The county filed the form on Oct. 16, Cepeda explained, noting that it is likely the county will be able to recover most, if not all of the $199,595.
Under recommendations, Cepeda said the payroll function should be performed by county personnel outside of EMS, preferably by an employee with an accounting or finance related role. Duties for billing, deposits, cash and check handling and posting to journal should all be separate. A controlled procurement system should be created to prevent misuse or theft.
“We recommend that the county appoint an employee other than EMS director to keep track of Medicare certification and prepare forms as they come due,” Cepeda said. “A monthly reconciliation of accounts billed to Medicare should be performed in conjunction with other billing reconciliations.”
Commissioner Shelby Dupnik asked Cepeda a question following the presentation of the audit.
“According to this you talked to everybody, then why didn’t you talk to me?” Dupnik asked.
“We spoke with representatives who either reached out to us or were available to us at the time we came out here,” Cepeda responded.
“But still, answer my question, why didn’t you talk to me?” Dupnik asked.
“We talked to the employees,” Cepeda said.
“But why did you not talk to me?” Dupnik asked.
“Because you weren’t working that day,” Cepeda said.
“I have a phone,” Dupnik said.
“I was not given your phone number,” Cepeda said. “Our procedure is to talk to the employees at work that day.”