CLERK OF THE CIRCUIT COURT AND COMPTROLLER

DavidR. Ellspermann

l\1EMORANDUM

TO: The Honorable Board ofCounty Commissioners, individually

FROM: David K Ellspem1ann, Clerk of the Circuit Court and Comptroller~

DATE: February 17, 2015

RE:

Enclosed please find the Internal Audit Division follow-up review regarding debt collection services provided by a former vendor on behalf ofMarion County Fire Rescue Department.

This report will be presented on the consent agenda at the next meeting of the Board of County Commissioners.

Should you have any questions or require more information, please let me know.

Enclosure

c: Bill Kauffman, County Administrator

Marion County Clerk ofthe Circuit Court and Comptroller Board ofCounty Commissioners Internal Audit Division Wallace K Watford, Internal Auditor

Post Office Box 1030 •Ocala Florida 34478-1030 • Telephone (352} 671-5604 •Facsimile (352) 671-5625 •

www.marioncountyclerk.org

http:www.marioncountyclerk.org

CLERK OF THE CmCUIT COURT AND COMPTROLLER David R. Ellspermann

MEMORANDUM

To: M. Stuart McElhaney, Assistant County Administrator-Public Safety

-FROM: David R. Ellspermann, Clerk of the Circuit Court and Comptroller~

DATE: February 17, 2015

RE: AUDIT REPORT 2015-01: FIRE RESCUE DEBT COLLECTION AGENCY FOLLOW-UP REVIEW OF NCSPLUS, INCORPORATED

The Internal Audit Division completed a follow-up review of a former contracted debt collection services vendor, NCSPlus, Incorporated (Vendor). This Vendor provided collection services for Marion County Fire Rescue (MCFR) department ambulance billings from June l, 2010 through January 26, 2013. We had performed a special review of the Vendor activities in 2012, as reported in our Report #2012,.10 dated December 5, 2012. We determined the amounts due and obtained agreement from MCFR and Vendor.

Backgfound We had not intended to perform this follow-up review because we knew the Vendor's Agreement had been completed shortly after we issued our report. However, we recently completed a review of the successor vendor and issued our report 2014-07 dated June 27, 2014. During that review, we became aware that NCSPlus continued to collect on delinquent accounts assigned to it at contract termination. We found that invoicing and other communication from Vendor had been sporadic and that Vendor had not submitted payments nor patient payment reports for months.

Activities MCFR staff stated that Vendor claimed that this lack of invoicing and communication resulted from MCFR owing money to Vendor. Internal Audit reviewed this issue and we disagreed. MCFR settled with Vendor for the amounts due that we determined in Report 2012-10 and became current. We found the claim not feasible. Vendor continued to collect on the assigned accounts and therefore had a continuing fiduciary obligation to report all transactions to MCFR regardless of which entity owed a net amount. We noted that Vendor's lack of reporting of patient payments did not allow MCFR to update its database of amounts owed. This finding prompted us to examine the issue further and to expand our audit scope in order to assist MCFR to determine amounts owed and by whom. The results of our initial analysis as identified in our reporting memorandum dated August 1, 2014 (attached) disclosed that Vendor had not reported 19 months ofcollection activities since January 2013.

Marion County Clerk ofthe Circuit Court and Comptroller Board ofCounty Commissioners- Internal Audit Division- Wallace K. Watford, Internal Auditor

Post Office Box 1030 •Ocala Florida 34478-1030 •Telephone (352) 671-5604 •Facsimile (352) 671-5625 • www.marioncountyclerk.org

http:www.marioncountyclerk.orghttp:2012,.10

FIRE RESCUE DEBT COLLECTION REVIEW-FOLLOW UP TO NCSPLUS, INC

We promptly met with MCFR management and staff to discuss the memorandum. We recommended that MCFR contact Vendor with the demand that it appropriately account for all collection activity after the County had satisfied the outstanding balance due at termination of the agreement. This was subsequently obtained and reviewed.

We thereafter assisted MCFR staff to determine what amounts were owed and by whom. Our assistance is detailed in the attached pages. This determination was made very difficult by the many months of unreported transactions and other events. In summary, we determined the net amount due from Vendor was $6,831 (See Table 1).

Table 1: Summary of Quantifiable Results based on Internal Audit Review # of Missing Months of Patient Payment Activities Recovered 19 months Identified Patient Payments to MCFR I $13,476 Identified Patient Payments to Vendor $26,233

Total Identified Payments Collected I $39,709

Revenue Recovery, Net of Contractual Fees I $6,378 Bank Fee Recovery $453

Total Cash Recovery for MCFR I $6,831

Conclusion and Recommendations We concluded that Vendor must make appropriate efforts to stay current on reporting of patient payment activities as required in the Agreement. We concluded that MCFR did not adequately monitor and follow up with Vendor during the periods it neglected to report and claimed MCFR owed money. MCFR is dependent on Vendor reporting in order to update the patient payment records. Failure by Vendor to report such activities inhibits MCFR from updating its patient records and providing accurate information to the patients when inquired.

We therefore recommend that MCFR closely monitor Vendor reporting and follow up timely when Vendor lapses in monthly reporting. (Update-Billing Supervisor informed us that Vendor was current in reporting as of January 26, 2015.) We further recommend that MCFR ensure collection of the Vendor balance due. (Update-We con.firmed that Vendor had paid the balance due.)

The lead auditor ofthis review was Sachiko Le6n, Assistant Internal Auditor, assisted by Heather May, Staff Auditor, under the direction ofWallace Watford, Internal Auditor.

We would like to express our appreciation to Department management and staff, Assistant County Administrator and County Attorney for their cooperation and assistance with our review.

c: Bill Kauffman, County Administrator Shari Hall, EMS Division Chief Matthew "Guy" Minter, County Attorney John Garri, Finance Director

Report 2015-01 Page 2

FIRE RESCUE DEBT COLLECTION REVIEW-FOLLOW UP TO NCSPLUS, INC

ADDITIONAL AUDIT COMMENTS

Objectives and Activities Performed The objectives of this review were to: 1) assist the EMS Division in obtaining outstanding payment reports from Vendor to update the patient records; 2) identify and assist collections of amounts due to MCFR from Vendor.

Our review included reviews of our past Audit Report 2012-10 (dated December 26, 2012) and the Vendor agreement with Marion County to re-familiarize ourselves with the past issues involving this particular Vendor. It also included meeting with EMS Billing Division management (EMS Division Chief Shari Hall and Nikki McNeil, Billing Supervisor) and staff who were involved in debt collection activities, collecting information from MCFR staff and conferring with MCFR staff at various times to ascertain accuracy of the data provided and collected. We also reviewed Vendor database to the extent possible, examination of certain records and transactions to gain an understanding of the issues, and created various analyses to estimate the total of patient payments. We also conferred with Vendor as necessary.

Our analysis period in estimating the collected amounts was between October 29, 2012 and July 9, 2014. We selected October 29, 2012 as the beginning date of this review because of the availability of significant data and because MCFR had paid Vendor for the final amount of invoiced activities up to September 30, 2012. We extracted financial information from the Vendor database on July 9, 2014; therefore, it became the end of the audit period. The Vendor database is not equipped to query or pull reports from the client end, which limited our capabilities to estimate only without invoices provided by Vendor.

Findings and Observations We issued an interim reporting memorandum (attached) on August 1, 2014 at the conclusion of estimating the patient payment total. We reported our preliminary findings: Vendor had not reported 19 months of activities; an estimated total collection by MCFR and Vendor was $35,110 at maximum between October 29, 2012 and July 9, 2014, of which Vendor may not have reported in the range of $13,261 to $30,025; potential amounts due from Vendor to be in a range of $6,630 to $15,012, net of Vendor's contractual fee, which is 50% of the collection; we confirmed that MCFR had collected $3,871 and that Vendor had reported $1,214 during the audited period; Vendor had neglected to routinely and timely send monthly statements to MCFR as it collected payments from patients; MCFR staff did not adequately or timely request that Vendor provide documentation of amounts owed.

MCFR had been aware of this matter since the NCSPlus agreement was completed. Section 4.8 of the agreement states "Vendor must remit Phase II collections to the County within thirty (30) days of receipt." Although the agreement had been completed, Vendor did not return the remaining patient accounts submitted to it, and had continued to collect payments from the patients on behalf of Marion County. We therefore concluded Vendor had the fiduciary obligation to follow the same agreement requirement. We recommended MCFR contact Vendor with the demand that it appropriately account for all collection activity after the County had satisfied the outstanding balance due per invoice dated January 8, 2013, which included activities only up to September 30, 2012.

Report 2015-01 Page 3

FIRE RESCUE DEBT COLLECTION REVIEW-FOLLOW UP TO NCSPLUS, INC

MCFR management subsequently contacted the Vendor Representative and communicated our findings. Vendor agreed that MCFR did not owe any money and that it was behind on reporting as well as payments to MCFR.

MCFR eventually received the 19 monthly reports of patient payments through July 30, 2014. Auditor, Billing Supervisor and a Vendor staff member held two teleconferences to discuss findings, identify discrepancies in reporting and reconcile amounts owed. All parties agreed that, between October 1, 2012 and July 31, 2014, Vendor had collected $26,233 while MCFR had collected $13,476, totaling $39,709. We also agreed that Vendor owed MCFR $6,378, which is the net ofthe contractual fees.

Upon reaching the agreement on the amount owed, the Vendor staff member informed us that Vendor CEO wished to pay back MCFR in installments due to owing money to other clients as well, but she did not disclose the exact payment terms. Auditor verbally recommended that MCFR send an invoice with demand to Vendor for any outstanding amount.

We noted that MCFR's current EMS billing software, RescueNet, was unable to extract payment information specific to Vendor. MCFR was able to confirm $3,871 only as collected by MCFR by going through their emails and other pertinent documents. Internal Audit used the confirmed amount in the analysis of estimating the patient payments. MCFR, however, had received $13,476 during the audited period. This discrepancy is due to a limitation of the RescueNet capabilities to create a detailed report specific to the Vendor and lack of a reporting process within the MCFR staff members. Although review of each account shows a payment status and to which debt collection agency the account belongs, it would be more useful if there were a systemic way to collect such data, which could be used for an internal purpose and to confirm data Vendor may provide. We intend to follow up with this issue when we schedule an EMS Ambulance Billing audit in the near future.

Subsequent Events On October 6, 2014, Vendor representative hand-delivered 15 individual checks totaling to $8,010 to MCFR, which exceeded the agreed amount of $6,378 by $1,632. He did not offer any explanation for the overpayment. MCFR thereafter sent a check to Vendor for the excess amount paid which was promptly deposited and cleared. MCFR processed the 15 Vendor checks through its lock box service (MCFR's normal practice). Three of the 15 checks, totaling $2,769, cleared; however, the lock box vendor later notified MCFR that 12 of the 15 checks bounced: one check on October 17, 2014 due to a "Stop Payment" placed by Vendor; and 11 checks on October 21, 2014 due to ''Non-Sufficient Funds." The total amount of the bounced checks was $5,241. Additionally, MCFR incurred $453 in bank service fees. Vendor therefore owed MCFRa totoal of$5,694.

On November 5, 2014, Internal Audit met with Assistant County Administrator, County Attorney, EMS Division Chief and Billing Manager to explore options to recover money for the bounced checks and bank fees. The group reached a consensus that EMS Division Chief would contact Vendor Representative first to find out Vendor's intention before proceeding to any legal action. The EMS Division Chief promptly contacted him on November 7, 2014; he stated Vendor's intention was to make good the bounced checks as well as reimburse the bank fees incurred. MCFR received a single check for $5,694 from Vendor on November 13, 2014, which was the total amount of the bounced checks and the associated bank fees.

Report 2015-01 Page 4

CLERK OF THE CIRCUIT COURT AND COMPTROLLER

David R. Ellspermann

TO: Stuart McElhaney, A$istant County Administrator-Public Safety

Shari Hall, E~~~iyfhief

FROM: Wall~r~~Auditor DATE: August 1, 2014

.,.... RE: Debt Collection Services Provided by NCSPius-Updated Review 0

I IO .,.... 0 We have perfonned subsequent activities following our Debt Collection Agency review as reported in N audit report 2014-07. We performed a follow-up review of services provided by the former contracted

~ debt collection agency, NCSPlus, Incorporated (Vendor). Vendor has continued to provide delinquent 0 accounts debt collection activities related to accounts that had been turned over during the Vendor's a.. contract period. However, Vendor claimed that MCFR owed money to it, which did not seem feasible w to us. During the June 23n1 Exit Conference on the audit report, we mentioned the need to confirm if0::

the Vendor had collected payments that were still due to Marion County. We decided to assist MCFR0 staff to accomplish this review. II Our concern was prompted when we became aware that Vendor had not routinely communicated to z w MCFR after the agreed upon outstanding amount due had been satisfied. We published the first review ~ of Vendor activities on December 5, 2012 in audit report 2012-10. Vendor thereafter reported I collection activities through September 30, 2012 in an invoice dated January 8, 2013. In this invoice,

Vendor NR showed $5,611.94 outstanding and MCFR cut a check for the amount (check dated January 17, 2013). ~ Subsequently, Vendor reported collection activities that occurred during January and June 2013. MCFR thereafter received another invoice on June 30, 2014 for activities occurring during May 2014 while we were planning for this follow-up review. We therefore concluded that Vendor has not reported 19 months worth of collection activities. (See Attachment A)

We performed our analysis with the knowledge that we have limited capability to extract data from Vendor database and our understanding of Vendor's unusual method of accounting for the patient accounts that are settled for less than the original amount.

Our review was conducted by Sachiko Leon and Heather May. It included examination of available Vendor invoices, review of Vendor database to the extent possible, collecting information from MCFR staff and conferring with MCFR staff at various times to ascertain accuracy of the data provided and collected. Our review period was from October 29, 2012 through July 9, 2014. We selected October 29, 2012 as the beginning date of this analysis because of the availability of significant data and because MCFR had paid Vendor for the final amount of invoiced activities up to September 30, 2012.

Marion County Clerk ofthe Circuit Court and Comptroller Boan! ofCowity Commissioners - Internal Audit Division - Wallace K. Watford, Internal Auditor

Post Office Box 1030 •Ocala Florida 34478-1030 •Telephone (352) 671-5604 •Facsimile (352)671-5625 • www.marioncountyclerk.org

We estimated the amount of Vendor collections which could have been collected since our previous audit of NCSPlus. We then subtracted what had been reported by Vendor and the payments MCFR had received directly, as well as other variables ofwhich we were aware.

The service arrangements for Vendor are unusual in the debt collection industry. County's agreement with Vendor was to pay in advance a set amount per account (Phase I) for a specific number of collection accounts, after which Vendor would perfonn specified collection activities before concluding with reporting to credit reporting bureaus. In addition, Vendor originally accepted thousands of "old" delinquent accounts and then subsequently accepted other "old" delinquent accounts for which it received 50% of amounts collected (Phase 2). Due to FY 2012 budgetary constraints, an agreement was later reached to apply amounts collected from Phase 2 accounts against newly submitted Phase I accounts.

We detennined that all amounts due to the Vendor had been paid off at January 17, 2013 for invoiced activities through September 30, 2012; therefore, any amounts MCFR has since collected for Phase 1 are to be fully retained by MCFR and any amounts collected for Phase 2 should have been evenly split between MCFR and Vendor. We therefore limited our review to Phase 2 collections only.

We were able to calculate an estimated range ofpotential amounts due from and to Vendor. Based on our analysis of Phase 2 accounts, collections between October 29, 2012 and July 9, 2014 by MCFR and Vendor could have been as much as $35,110.39, of which MCFR was aware of $5,085.37. We concluded therefore that NCSPlus may have not reported a maximum of $30.025.02 it collected, of which $15,012.51 would be due to MCFR. However, this amount could be less because of Vendor's unique method of accounting for accounts that were settled for less than the original referred amount. Vendor's database reports such accounts as if they were paid in full, even though settlement amounts were reduced based on various reasons. We therefore subtracted those "settled" accounts from the computed amount to arrive at the minimum total collection amount of$13,260.61, ofwhich $6,630.30 would be due to MCFR. (See Attachment B)

We concluded that Vendor has neglected to routinely and timely invoice MCFR for Phase 2 amounts it collected from patients. Vendor has only randomly invoiced for Phase 2 amounts and perhaps only when the result is MCFR would owe an amount to Vendor. Vendor has claimed that MCFR still owes some amount and has therefore applied the 50% due MCFR against that still owing amount. Internal Audit disagrees. Vendor has neither supplied any evidence that any such amount exists nor what the outstanding balance is.

We concluded that MCFR staff did not adequately or timely request that Vendor provide documentation of amounts owed. MCFR has been aware of this matter since the NCSPlus agreement was terminated. Such documentation should have been in the same manner as was provided during the contract tenn.

We recommend that MCFR contact NCSPius, Incorporated with the demand that it appropriately account for all collection activity after the County had satisfied the outstanding balance due per invoice dated January 8, 2013, which included activities only up to September 30, 2012.

We look forward to reviewing this issue with you.

Page 2 of 4

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Note: Oucollectio

AITACHMENT A AITACHMENT B

List of Invoices Due

Since Audit Report Issued ou December S, 2012 Difference

Analysis of Estimated Collection during the

between October 29, 2012 to July 9, 2014 As of 7.9.2014 As of 10.29.2012 period

Phase II Phase II 84501-0ld Phase 2 Original Balance 3,533,882.99 3,S33,882.99

Invoice Missing Current Balance 3,470,228.00 3,476,9S3.83 Last Listing Date Provided Invoice Difference 63,654.99 S6,929.16 6,725.83

Reversed Accounts during the periodOctober-12 x 2,538.22 Possible Max. Payments Collected-Old Phase 2 9,264.05 November-12 x December-12 x 84502-New Phase 2

x Original Balance 3,469,882.T7 3,469,882.77 January-13 Current Balance 3.388,219.02 3,414,913.03 February-13 x Difference 81,663.7S 54,969.74 26,694.01 March-13 x Reversed Accounts during the period l,13S.01 April-13 x Reduce: Difference between Original and Settled In Full

(1,982.68)

Possible Max. Payments Collected- New Phase 2 25,846.34

May-13 x June-13 Estimated Maximum Collectlon (MCFR & NCSPlus) during the period 35,110.39 I x July-13 x Subtract: Confirmed Phase 2 Collection at MCFR (MCFR/NCS Records agree) August-13 x Last Listings 1/31/13 (919.90) September-13 x Last Listings 6/30/13 (602.80)

x Last Listings 5/31/14 (862.15)

October-13 Subtract: Payments at MCFR not yet invoiced by NCS (1,398.28) November-13 x Subtract: Payment on a Settled in Full account 10.30548 (88.00)

(3,871.13) December-13 x

x Estimated Maximum Collectlon by NCSPlus during the period 31,239.26

January-14Reported:

February-14 x Subtract: Last Listings 1/31/13 (S00.50)

March-14 x Subtract: Last Listings 6/30/13 (240.00)

April-14 x Subtract: Last Listings 5/31/14 (473.74)

x Subtract: Repotf2d Tomi (1,214.24) May-14 June-14 x Estimated Maximum Collection by NCSPlus NOT nTReported: 30,ozs.02 I July-14 x Max. Cosh R«overy After 511% Commlssion 1s,012.51 I

Total 3 19 Possible Reduction: 84501 "Settled In Full" as of 7.9.2014 per NCS website (8,659.05)

84502 Actual Amount Due on "Settled In Full" per MCFR 7 .16.2014 (8,501.36)

Reverse: Payments to NC5Plus not reported to MCFR

r analysis was limited to October 29, 2012 to July 9, 2014. Vendor should report ALL 84S02, 11-6109, 10/28/13 396.00 n activities from October l, 2012 to the current date.

Adjusred Maximum Collection by NCSPlus NOT nTReported 13,260.611

Adj. Max. Cosh Rea>veryAfter 511% Commission 6,63o.3o I

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