Internal Reports Identify Lack of Oversight in Centralia School District Medicaid Program


A pair of internal reports detailing the failures that led the state Attorney General's Office to find the Centralia School District had fraudulently obtained federal dollars outline a lack of oversight that began with administrators and trickled down to those requesting the money. 

The reports — one produced by investigator Alan Key and another by interim Superintendent Steve Warren — were released at a Centralia School Board meeting Thursday night. 

They deal with the Medicaid Match Program, and more specifically the use of the initiative in Centralia that led the Attorney General's Office to ask for a repayment of $1.65 million before settling on an agreement of $372,000.

The exhaustive, eight-month investigation comes nearly two years after former Edison Elementary principal and current school board member Neal Kirby helped bring the issue to light in interviews and subsequent stories published in the The Chronicle. 

The major difference in the two reports is that Key said Kirby did not fit the definition of a whistleblower, while Warren found that he did. 

Two years after the first inklings of improprieties, the reports released this week show a system without a designated leader, one that allowed some schools to absorb thousands of dollars of misappropriated funds without much in the way of questioning. 


What is the Medicaid Match Program?

The Medicaid Administrative Claiming program is part of the federal Medicaid system and provides funds to reimburse employees’ time spent within school districts performing administrative activities that benefit the program. 

The activities predominantly involve referring both students and families to the Medicaid program, addressing health needs that impact students’ educational progress and assisting families in accessing those services.

Under the program, employees were selected at random to report their time and how they spent it in relation to Medicaid issues, generally covering over five days per quarter. 

The program is optional and allows school districts to obtain reimbursement for assuming the activities that help address health issues that could negatively impact students’ educations. Only the activities school personnel perform in the normal course of their duties are eligible for reimbursement if they meet Medicaid match program standards. 


No One in Charge

Steve Bodnar, the superintendent in place at the time of participation in the Medicaid match program, announced in May 2014 that he would resign from his position at the end of the school year. As the superintendent since 2007, he accepted a position in Yelm, while other members of the district also submitted their resignations.

None cited the investigation as reason for their departures.  

Warren’s investigative report found there was no one delegated to assume responsibility for overseeing the program, a Health Care Authority requirement the school district should have fulfilled. 

During the deposition portion of the internal investigation, at least six administration-level staffers who supposedly had oversight roles said they thought the work had been delegated to someone else. 

In the end, there wasn’t a person identified to handle the claims and all of the paperwork required for the federal program. 

The report also found that building coordinators reviewed forms from their respective buildings, but that all compliance questions were referred to JT Educational Consultants, or JTEC, which is located in Wenatchee.

The consulting firm has since been sued by the state Attorney General’s Office. 

The lawsuit claims JTEC trained school districts around the state — including Centralia, which drew the most from the program — to illegitimately garner millions of dollars in Medicaid reimbursement claims.

Warren’s report makes clear that the district relied too heavily on JTEC in administering the program.

“Simply stated, no one district administrator was clearly in charge of this program, responsible for understanding its requirements, or assumed responsibility for its operations,” stated Warren’s report. 

Although those involved, including school principals and staff, were said to have largely followed the training standards and advice provided in “good faith,” one district employee is now facing a separate personnel investigation process.

Centralia Middle School Principal Greg Domingos was cited in an Attorney General’s letter as claiming more reimbursable time than any middle school principal in the state, creating significant liability risks for the district. According to Key’s report, Domingos almost always had the largest number of reimbursable time in the district.

“The alarming part was when his normal, pre-planned schedule was compared to the time study days,” stated the Key’s report. “This comparison would lead a reasonable person to believe there was no way he could accomplish everything on his schedule and still handle the MAM (or Medicaid match) reimbursable activities he claimed within the eight-hour structure of the time study day.”

The report also stated the principal pushed the limits regarding the reimbursable events he claimed. 

An email sent out by Domingos on March 25, 2011 titled, “Big Money! Big Money! Big Money!” was referred to in Warren’s report as encouragement for middle school staff to participate in the Medicaid match program. The report completed by Key stated the email provided “information that on its face, appears inappropriate and even false,” and was deemed “certainly misleading” in comparison to the rules of the program.  

Warren told The Chronicle the results of the personnel investigation process should be completed by May 15. 


Kirby’s Involvement

According to Key’s report, then-principal of Edison Elementary and current school board member Neal Kirby “almost immediately” expressed concerns regarding the inequity of the process, stating Edison received far less money per student than other buildings throughout the school district. 

His concerns about fraud came later, Kirby told The Chronicle Friday, ehcoing the findings of both reports. 

Kirby asked for more equitable distribution of the money, a concern the report stated was founded on sound reasoning. Compared to the $68.86 per student Centralia Middle School was receiving at one point, Edison was only getting $9.65 per student. His inquiries later shifted in August of 2012 to questioning whether reporting practices were an abuse of the intent of the Medicaid program. 

It wasn’t until Dec. 10, 2012, that Kirby made allegations of questionable practices after he sent an email to his personal attorney questioning the motives of certain individuals, including Domingos. 

Kirby’s inquiries into possible abuse of the system were largely overlooked, and Key’s report stated he “was perceived as an agitator who repeatedly attempted to impose his thoughts and ideas on others.” 

After contacting his personal attorney after a June 20, 2013, meeting, Kirby asked where he should report his concerns regarding the program. The report states his attorney suggested he contact the Attorney General’s Medicaid Fraud Unit to make a “whistleblower” report. 

Kirby did not make the call and instead communicated with Alan Himsl at the HCA after being contacted by the organization following inquiries from The Chronicle. 

In Key’s report, Kirby had said he was not the first to report concerns to the newspaper, though he eventually began working with former Chronicle reporter Amy Nile.

Had he instead reported directly to the HCA or the Attorney General’s Office, he could have been eligible for protection. The investigator found that other apparent attempts to discredit him did not fall during the time of his employment, or in other cases were not the work of district employees. 

In Warren’s report, however, Kirby was said to have made “whistleblower reports” to Bodnar on March 29, 2013 and June 20, 2013. 

“The finding that he was a whistleblower is very technical,” Warren told The Chronicle. “Neal’s initial concerns, and then finally outright expressions of those concerns, ultimately were well founded.” 

Kirby told The Chronicle he felt like a whistleblower and experienced much of what a whistleblower would go through, including personal animosity. 

“I feel like what I did is what a principal who was in my position should have done,” Kirby said. “I was looking at stuff that looked inappropriate to me.”

Although Kirby said Warren’s report was well done, and based heavily on documentation, he hoped verbal information he shared would have been looked into. 

As for Key’s report, Kirby said certain characterizations of himself were put into the report that he thought were “unfair.”

“I had been told that Alan Key was a top notch investigator, that we would have a really good report out of him, and I just didn’t see that,” he said.

Something neither of the reports touched on, according to Kirby, was how monitoring practices within the school district should change to allow better oversight into system operations. 

Throughout the process, Kirby said the only regret he had was leaving his job earlier than he had planned. It was clear to him that claims of insubordination through his rocky relationship with Bodnar — a dynamic said in the report to have “desensitized” Bodnar to Kirby’s claims —  could lead to his termination as principal of Edison Elementary.

Not knowing whether he wanted another job in the future, Kirby decided to step aside, he said. His retirement did, however, allow him to speak publicly on the Medicaid program without worrying about speaking negatively about his employer, Kirby said. 


What Happens Next?

In his report, Warren recommended the district not submit claims from the 2013-14 school year and also recommended the district not resume participation in the Medicaid match program until the 2015-16 school year at the earliest. If participation in the program continued, Warren said it should be after the administration reviews the final HCA proposal for a more accountable and simpler system the authority intends to implement for that year. 

“Before any resumption of participation is recommended for board approval, the administration should present a thorough plan for an effective oversight system, internal controls, compliance review, and distribution of program revenue, all of which must be based on an accurate understanding of applicable HCA requirements,” stated the report. 

Warren told The Chronicle he believes not participating in the program was the right decision. Now with the reports released, the interim superintendent hopes the district and the community can move forward.

“I want the system to heal,” Warren said. “I want the community to heal. I want the trust restored, and I know that it takes time.”