The state Department of Health overpaid the Arkansas Trauma Education and Research Foundation by $655,886 between February 2012 and June 30, 2015, a state auditor told lawmakers Friday.
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The department paid the foundation, created in June 2011 to provide trauma training courses for hospitals, nurses and doctors, $2.486 million for estimated costs rather than the $1.83 million actual costs for the courses, said Sara Sherrod, a staff auditor for Arkansas Legislative Audit. The state was the foundation's largest client and its primary source of revenue, she said.
In addition, the department's contracts with the foundation required that the equipment acquired by the foundation and reimbursed through the contract was the department's property, she told the Legislative Joint Auditing Committee.
But the foundation sold a piece of equipment for $45,000 in fiscal 2015 after it was purchased in fiscal 2012 for $74,350, and the foundation indicated that the proceeds from the sale were used for new course development and supplies, she said. The department didn't authorize the disposal of the equipment, wasn't aware of its disposal until after the contract was terminated and took possession of the remaining equipment the foundation had purchased with department funds in August of this year, she said.
Sen. Missy Irvin, R-Mountain View, said, "This is pretty amazing to me that this group owes the state of Arkansas now with the overbilling and the equipment ... $730,236."
The foundation also conducted trauma leadership conferences on Aug. 23-24, 2013, and Aug. 15-16, 2014, at Big Cedar Lodge in Ridgedale, Mo., even though the majority of the attendees and their families were from Arkansas, Sherrod said.
Although the department denied a request to increase the amount in the contract for a future trauma conference in Northwest Arkansas, the foundation still held a conference May 6-7 of this year and requested reimbursement that has not been approved or paid. Vendors are still owed $115,380 for the conference, she said.
Under state law, no public servant shall use or attempt to use his position to secure special privileges or exemptions, accept employment or engage in any public or professional activity that might require the disclosure of confidential information, or disclose any such information for personal gain or benefit, according to Sherrod.
In conflict with state law, Trauma Advisory Council members Terry Collins and Ron Robertson received payments totaling $141,975 from the foundation over four fiscal years for teaching and planning courses through the foundation's contract, auditors said.
They said Mike Sutherland, chairman of the foundation's board of directors, attended meetings, made motions and acted as a member of the Trauma Advisory Council and its finance subcommittee, although he wasn't a member of either, and he signed the foundation's fiscal 2012 contract with the department as the foundation representative. The foundation paid Sutherland $50,375 for services reimbursed by the department over four fiscal years, auditors said.
Irvin said, "That's unbelievable."
In response to the audit, Collins, Robertson and Sutherland issued a statement to a reporter. They said that "at the start of the trauma system, preventable mortality in the state of Arkansas was the highest in the country."
"Recognizing that education was essential to effectively decrease mortality, we were among subject matter experts in Arkansas that went out to teach providers across the state. We were able to decrease preventable loss of life in half. At least 150 people a year are alive as a result. This was important meaningful work that saved lives across Arkansas," they said in the statement. Collins, Robertson and Sutherland all work at the University of Arkansas for Medical Sciences.
The Department of Health notified the foundation in May that its contract would not be renewed for fiscal 2017, which started July 1, and the foundation ceased operations over the summer due to its inability to raise sufficient income to pay outstanding obligations totaling $174,322, Sherrod said. Legislative Auditor Roger Norman said the audit has been referred to Pulaski County Prosecuting Attorney Larry Jegley.
Department Director Nathaniel Smith told lawmakers that he agreed that "this is pretty amazing stuff in a bad way. All the individuals in the [trauma] program are no longer serving with the agency. I'm the only survivor in that chain of command."
Smith said the department's trauma program "was not requiring receipts and they were paying invoices for some time." He said Ann Purvis, the department's deputy director for administration, and Robert Brech, the department's general counsel, recognized the problem, pursued it relentlessly and have tried to fix it as soon as possible.
Purvis said she became concerned about the foundation holding an Arkansas conference paid with tax dollars at Big Cedar Lodge in Missouri in 2013, and she decided it would no longer happen, but she later learned the event was continued the next year, and she asked Brech to review the conference receipts.
Brech said a decision was made by the foundation, the Trauma Advisory Council, the trauma program and with one another to hold the conference at Big Cedar Lodge again in 2014, but he told the program officials that they could stay in Harrison and drive up to the lodge in Missouri.
The trauma program's new leadership in February started asking for receipts, but the foundation declined to provide them, he said.
"It was obvious that the contract was they were to be reimbursed for actual reimbursable expenses, but unfortunately the program up to that time, it simply paid for invoices at the maximum budgeted amount," Brech said.
He said he and Purvis met with an auditor for Arkansas Legislative Audit in April to report the problem. The department received receipts in May after requesting them in April, discovered the department overpaid the foundation more than $600,000, and then decided to terminate the contract, he said.
Brech said the most egregious receipts, not approved by the Health Department, included a $5,700 bar bill for alcoholic beverages at the conference, a bill for about $1,500 for s'mores and a bill for 200 or 300 meals when more than 100 people attended the conference. The foundation's staff stayed in rooms for $330 a night, and "we would have never approved that," he said.
The committee co-chairman, Sen. Jimmy Hickey, R-Texarkana, said he wants auditors to develop an investigative report to provide more details beyond the audit.
Metro on 11/05/2016