At least $7.3 million in accounts receivable and deferred revenues should have been counted in annual financial statements by Public Health — Seattle & King County, according to Washington State Auditor Troy Kelley.
Accounts receivable were misreported in the annual financial statements, Kelley said in a report issued last week, and the health department underreported deferred revenue from federal and state sources.
In response, the health department said complex medical billing rules required it to account for receivables in a way that overstates what will be received. For example, Medicaid managed-care plans pay the health department a fixed amount for each patient. At the same, Medicaid requires the health department to itemize charges for each medical service it provided.
The itemized charges “are not billable and will never be paid,” given the fixed-payment agreement, said James Apa, health department spokesman. On paper, the practice results in an overstatement of actual accounts receivable, he said.
On deferred revenue, Apa said the issue was not about any misuse of funds, but was a question of when payments should be reported — the year they were promised or the year they were received.
“Where the auditors differed with us was on what year they should be reflected as being earned in,” he said. “It doesn’t reflect that we have more or less money.”
The health department said it will use the auditor’s criteria in the future when accounting for deferred revenue from the sources in question, which are two of more than 100 revenue streams accounted for in the health department’s statements.