Can the North Carolina State Auditor audit the books of hospitals and other Medicaid vendors to verify that DHR paid them correctly, and can the auditor see records that are confidential under state public-assistance law?
Apply this to your situation
This page answers the general question as of 1979. Ask about yours and see what current North Carolina law means for your facts, with citations you can check.
Plain-English summary
State Auditor Henry L. Bridges asked whether his office could examine hospital vendors' records to check payments by the Division of Medical Assistance. He also asked whether it could inspect files containing information confidential under N.C.G.S. 108-45. The 1979 Attorney General answered yes to the first question under G.S. 147-58(16), which authorized inspection of private parties' records concerning state-agency transactions to investigate possible agency irregularities.
The answer on confidential records depended on the specific memorandum of understanding between the Auditor and the Department of Human Resources (DHR). That signed memorandum restricted the audit to records relating to state administration of funds for financial and operational review of state-administered programs. It also made the Auditor subject to the same state and federal confidentiality regulations on recipient and provider information as DHR.
The AG concluded that the audits described in the memorandum fell within the statutory and federal allowances for uses directly connected with administration of public assistance or the medical assistance plan. Its final authorization is expressly "under these circumstances" and covers audits described in the memorandum. The opinion does not approve an unrestricted audit of confidential records.
Currency note
This opinion was issued in 1979 under the quoted state and federal provisions and the described memorandum. Verify current confidentiality and audit law before applying it to a present request for records.
What this means for you
Audit staff. The general authority to examine vendor transactions and the permission to see confidential assistance information are separate questions. The opinion's confidentiality answer relies on the memorandum's restricted purpose and shared confidentiality duties.
DHR and hospital vendors. The AG authorized the audits described in that memorandum. It gave no answer about an audit outside its scope or one without comparable confidentiality terms.
Common questions
Could the Auditor inspect vendors' records at all?
Yes. G.S. 147-58(16), as quoted in the opinion, authorized examination of books and accounts insofar as they related to state-agency transactions and possible agency irregularities.
Was every vendor financial audit automatically a permitted use of confidential records?
The opinion did not say so. It found that the scope of the audits in the signed memorandum brought them within the administration purpose and noted the Auditor's agreement to the same confidentiality rules as DHR.
Did the opinion decide access for a private auditor or an audit outside the memorandum?
No. It addressed the State Auditor and the audits described in the December 3, 1979 memorandum.
Background and statutory framework
G.S. 147-58(16) gave the Auditor general inspection authority over records connected with transactions with state agencies, limited to potential agency irregularities. N.C.G.S. 108-45(a) restricted obtaining, using, or disclosing information about public-assistance applicants and recipients except for purposes directly connected with administering the program under Social Services Commission rules. The opinion quoted a parallel federal safeguard in 42 U.S.C.A. § 1396a(a)(7).
The memorandum supplied the facts that resolved the confidentiality question: a limited financial and operational review connected to state-administered programs and the same confidentiality rules binding DHR. The AG concluded that, under those circumstances, the Auditor could conduct the described vendor audits.
Citations
- G.S. 147-58
- G.S. 147-58(16)
- N.C.G.S. 108-45(a)
- 42 U.S.C.A. § 1396a(a)(7)
Source
Original opinion text
Requested By: The Honorable Henry L. Bridges State Auditor
Questions: Does the Department of State Auditor have the authority to examine the documentation and files of vendors of hospital services to determine that payments by the Division of Medical Assistance of the Department of Human Resources were in accordance with State and federal statutes, regulations and policy?
- May the Department of State Auditor, in the course of such an examination, examine files of vendors of hospital services that contain information which is confidential under the provisions of N.C.G.S. 108-45?
Conclusion: Yes.
- Yes, when as here, the examination is directly connected with the administration of programs of public assistance.
G.S. 147-58 specifies the duties and authority of the State Auditor. G.S. 147-58(16) states, in pertinent part:
"The Auditor and his authorized agents are authorized to examine all books and accounts of any individual, firm, or corporation only insofar as it relates to transactions with any department, board, officer, commission, institution, or other agency of the State; provided that such examination shall be limited to those things which might relate to irregularities on the part of any State agency."
The above-quoted statute clearly grants general authority to the State Auditor to examine the records of vendors of hospital services to determine if any irregularities are involved in the payments made by the State agency to the vendors.
A further question of the authority of the State Auditor arises when the records to be examined contain information that is deemed confidential by law.
The confidentiality of records of the Department of Human Resources pertaining to persons applying for or receiving public assistance is established by G.S. 108-45(a), which provides: "(a) Except as provided in (b) below (which exception is not pertinent here), it shall be unlawful for any persons to obtain, disclose or use, or to authorize, permit, or acquiesce in the use of any list of names or other information concerning persons applying for or receiving public assistance that may be directly or indirectly derived from the records, files or communications of the Department of Human Resources or the county boards of social services or acquired in the course of performing official duties except for purposes directly connected with the administration of the program of public assistance in accordance with the rules and regulations of the Social Services Commission."
The foregoing statute is in conformity with the requirement of 42 U.S.C.A. § 1396a(a)(7) that State plans for medical assistance involving federal funds must:
"(7) provide safeguards which restrict the use of disclosure of information concerning applicants and recipients to purposes directly connected with the administration of the plan;"
A Memorandum of Understanding Between the Department of State Auditor and the Department of Human Resources, dated December 3, 1979, and signed by the State Auditor and the Secretary of Human Resources, describes the scope and purpose of audits by the Department of State Auditor as:
"Purpose: Audit effort by the Department of State Auditor is restricted to only such records which are related to the State administration of funds for the purpose of financial and operational review as they relate to State Administered Programs."
With regard to confidentiality of records, the Memorandum states:
"Confidentiality of Information: The State Auditor's exposure to confidential information as provided by State and Federal Statute will be subject to the same State and Federal regulations concerning release of Recipient and Provider information as is the Department of Human Resources."
The scope of audits by the Department of State Auditor, as described in the Memorandum of Understanding, brings such audits within ". . . purposes directly connected with the administration of the programs of public assistance . . ." (G.S. 108-45(a)) and ". . . purposes directly connected with the administration of the plan;" (42 U.S.C.A § 1396a (a)(7)). Further, the Department of State Auditor specifically acknowledges that it is subject to the same confidentiality provisions of State and Federal Statutes and regulations as is the Department of Human Resources.
Under these circumstances, the State Auditor is authorized by G.S. 147-58 (16) to conduct audits described in the Memorandum of Understanding of records of individuals, firms, and corporations relating to transactions with the Department of Human Resources, including vendors of hospital services.
Rufus L. Edmisten
Attorney General
Henry T. Rosser
Assistant Attorney General
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