Gratuities Provided to Officials Responsible for the Procurement of
Michigan School-Based Medicaid Consulting Services (Correspondence,
09/08/2000, GAO/OSI-00-14R).

Pursuant to a congressional request, GAO discussed the circumstances
surrounding the process used by a consortium of eight Michigan
intermediate school districts to contract with Deloitte Consulting LLC
for medicaid consulting services.

GAO noted that: (1) it determined that Deloitte had provided gratuities,
including meals and tickets to professional sporting and theater events,
to the school district officials responsible for awarding the contract
consulting services; (2) records provided to GAO by Deloitte show that
it spent over $170,000 for the gratuities from 1997 through 1999; (3)
officials receiving the gratuities included members of the school
district consortium's Medicaid Program Steering Committee and Contract
negotiation Committee; (4) as a result of GAO's findings, is concerned
that there is a potential violation of 18 U.S.C. section 66; (5) this
statute prohibits, under certain circumstances, anything of value being
paid to or accepted by an agent of an organization, or of a state,
local, or Indian tribal government, or any agency thereof for the
purpose of influencing a business transaction involving anything of
value of $5,000 or more; and (6) GAO therefore has referred this matter
to the U.S. Attorney's Office for the Western District of Michigan for
further action.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OSI-00-14R
     TITLE:  Gratuities Provided to Officials Responsible for the
	     Procurement of Michigan School-Based Medicaid Consulting
	     Services
      DATE:  09/08/2000
   SUBJECT:  Consultants
	     Health insurance
	     Procurement regulations
	     Gifts or gratuities
	     Bribery
	     School districts
	     Irregular procurement
	     State and local procurement
IDENTIFIER:  Medicaid Program
	     Michigan

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GAO/OSI-00-14R

Gratuities Provided to Michigan School Officials United
States General Accounting Office

Washington, DC 20548 Office of Special Investigations

B- 286188 September 8, 2000 The Honorable William V. Roth, Jr. Chairman The
Honorable Daniel Patrick Moynihan Ranking Minority Member Committee on
Finance United States Senate

Subject: Gratuities Provided to Officials Responsible for the Procurement of
Michigan School- Based Medicaid Consulting Services

In our April 2000 report, 1 we discussed the circumstances surrounding the
process used by a consortium of eight Michigan intermediate school districts
to contract with Deloitte Consulting LLC 2 for consulting and billing
services. 3 At that time, we reported that the contract awards to Deloitte
by these school districts did not adhere to standards promulgated by the
Department of Health and Human Services in its procurement regulations. 4

As a result of the media coverage that followed the Committee's April 5,
2000, hearing on Medicaid in schools, we received information alleging that
Deloitte provided gratuities to school district officials responsible for
the procurement of Michigan school- based Medicaid consulting services. Your
office requested a written summary of our investigative findings of this
allegation.

We conducted an investigation and determined that Deloitte had provided
gratuities, including meals and tickets to professional sporting and theater
events, to the school district officials responsible for awarding the
contract for consulting services. Records provided to us by Deloitte show
that it spent over $170,000 for the gratuities from l997 through 1999. 5
Officials receiving the gratuities included members of the

1 See Procurement of Michigan School- Based Medicaid Consulting Services(
GAO/ OSI- 00- 8R, Apr. 4, 2000). 2 During the procurement, the company's
name was Deloitte & Touche Consulting Group LLC.

3 School districts often contract with private firms that act as consultants
and billing agents on the schools' behalf to prepare and submit claims to
the state for reimbursement of school- based Medicaid services. 4 45 C. F.
R. sect. 74. 40.

5 About $101,000 of this amount was spent during the procurement process and
within 1 month of the contract award to Deloitte in 1998.

B- 286188

GAO/ OSI- 00- 14R Gratuities Provided to Michigan School Officials Page 2
school district consortium's Medicaid Program Steering Committee and
Contract

Negotiation Committee. For instance, in December 1997- the month that the
procurement process began- Deloitte paid $6,000 for a suite at a
professional sporting arena for the school district officials. After
Deloitte and school district officials discussed procurement issues at two
quarterly meetings, Deloitte provided these officials tickets to two other
professional sporting arenas at a cost of $39,000. We interviewed four of
these school district officials. Three officials admitted accepting the
gifts but could not recall when. The fourth declined to answer specific
questions without counsel, but acknowledged attending “some social
events” with Deloitte.

As a result of our findings, we are concerned that there is a potential
violation of 18 U. S. C. section 666. This statute prohibits, under certain
circumstances, anything of value being paid to or accepted by an agent of an
organization, or of a state, local, or Indian tribal government, or any
agency thereof for the purpose of influencing a business transaction
involving anything of value of $5,000 or more. We therefore have referred
this matter to the U. S. Attorney's Office for the Western District of
Michigan for further action.

If you have questions regarding this letter, please contact me at (202) 512-
7455 or Acting Assistant Director William Hamel at (202) 512- 6722. Andrew
O'Connell was a key contributor to this investigation.

Robert H. Hast Assistant Comptroller General

for Special Investigations

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