AUDIT COMMITTEE MEETING

Board of Governors

May 29, 2020 ● 8:30 AM

L.A. Care Health Plan

1055 W. 7th Street, Los Angeles, CA 90017

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5/28/2020 12:49 PM

AGENDA Audit Committee Meeting

Board of Governors Friday, May 29, 2020, 8:30 A.M. L.A. Care Health Plan, 1055 West 7th Street, 10th Floor, CR1025, Los Angeles

California Governor issued Executive Order No. N-29-20, which among other provisions amends the Ralph M. Brown Act and Executive Order No. 33-20, ordering all residents to stay in their

homes, except for specific essential functions. Accordingly, members of the public should now participate in this meeting via teleconference as follows:

Teleconference Call-In Information/Site Call (844) 907-7272 or (213) 438-5597 Participant Access Code #73259739

Members of the Executive Committee or staff may also participate in this meeting via teleconference. The public may listen to the Audit Committee’s meeting by teleconference. The

public is encouraged to submit its public comments or comments on Agenda items in writing. You can e-mail public comments to BoardServices@lacare.org, or send a text or

voicemail to: 213 628-6420.

The text, voicemail, or email should indicate if you wish to be identified or remain anonymous, and should also include the name of the item to which your comment relates.

Comments received by voicemail, email or text by 8:30 am on May 29, 2020 will be provided to the members of the Board of Governors that serve on the Audit Committee. Public comments submitted

within this timeframe shall be read for 3 minutes into the record.

Once the meeting has started, voicemails, emails and texts for public comment should be submitted before the item is called by the meeting Chair. If you wish to submit public comment on an item, you must

submit it at any time prior to the time the Chair announces the item and asks for public comment. The Chair will announce when public comment period is over.

All votes in a teleconferenced meeting shall be conducted by roll call.

If you are an individual with a disability and need a reasonable modification or accommodation pursuant to the Americans with Disabilities Act (“ADA”) please contact L.A. Care Board Services staff prior to the

meeting for assistance by text to 213 628-6420 or by email to BoardServices@lacare.org.

Welcome Alvaro Ballesteros, Chair

1. Approve today’s Agenda Chair

2. Public Comment Chair

3. Approve January 21, 2020 meeting minutes

Correction to January 22, 2018 meeting minutes

Chair

4. Chairperson’s Report

Chair

5. Chief Executive Officer / Chief Financial Officer Reports

John Baackes Chief Executive Officer Marie Montgomery Chief Financial Officer

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Audit Committee Meeting Agenda May 29, 2020 Page 2 of 2

5/28/2020 12:49 PM

Committee Issues

6. Audit Firm Proposal Process Marie Montgomery

Adjournment Chair

Please keep public comments to three minutes or less.

The order of items appearing on the agenda may change during the meeting.

If a teleconference location is listed at the top of this agenda, the public can participate in the meeting at that location or by calling

the teleconference call in number provided. If teleconference arrangements are listed at the top of this Agenda, note that the arrangements may change prior to the meeting. To confirm details with L.A. Care Board Services staff prior to the meeting call

(213) 694-1250, extension 4183 or 4184.

THE PUBLIC MAY ADDRESS THE BOARD OF GOVERNORS BEFORE DISCUSSION OF EACH ITEM LISTED ON

THE AGENDA BY FILLING OUT A “REQUEST TO ADDRESS” FORM AND SUBMITTING THE FORM TO L.A. CARE

STAFF PRESENT AT THE MEETING BEFORE THE AGENDA ITEM IS ANNOUNCED. YOUR NAME WILL BE CALLED WHEN THE ITEM YOU ARE ADDRESSING WILL BE DISCUSSED. THE PUBLIC MAY ALSO ADDRESS THE

BOARD ON OTHER L.A. CARE MATTERS DURING PUBLIC COMMENT.

ACTION MAY NOT BE TAKEN ON ANY MATTER RAISED DURING THE PUBLIC COMMENT PERIODS UNTIL THE

MATTER IS SPECIFICALLY LISTED ON A FUTURE AGENDA, according to California Government Code Section 54954.2

(a)(3) and Section 54954.3.

NOTE: THE EXECUTIVE COMMITTEE CURRENTLY MEETS ON THE FOURTH MONDAY OF MOST MONTHS AT

2:00 P.M. POSTED AGENDA and PRINTED MEETING MATERIALS ARE AVAILABLE FOR INSPECTION AT Board Services, 1055 W. 7th Street – 10th Floor, Los Angeles, CA 90017.

Any documents distributed to a majority of the Board Members regarding any agenda item for an open session after the agenda

has been posted will be available for public inspection at Board Services, L.A. Care Health Plan, 1055 W. 7th Street, 10th Floor, Los Angeles, CA 90017, during regular business hours, 8:00 a.m. to 5:00 p.m., Monday – Friday.

AN AUDIO RECORDING OF THE MEETING MAY BE MADE TO ASSIST IN WRITING THE MINUTES AND IS RETAINED FOR 30 DAYS.

Meetings are accessible to people with disabilities. Individuals who may require any accommodations (alternative formats – i.e., large print, audio, translation of meeting materials, interpretation, etc.) to participate in this meeting and wish to request an alternative format for the agenda, meeting notice , and meeting packet may

contact L.A. Care’s Board Services Department at (213) 694-1250. Notification at least one week before the meeting will enable us to make reasonable

arrangements to ensure accessibility to the meetings and to the related materials.

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APPROVED

BOARD OF GOVERNORSAudit Committee Meeting Minutes – January 21, 20201055 W. 7th Street, Los Angeles, CA 90017

Members Management/Staff GuestsAlvaro Ballesteros, Interim Chairperson John Baackes, Chief Executive Officer Khurram Siddiqui, Partner, Deloitte & ToucheLayla Gonzalez Augustavia J. Haydel, Esq., General Counsel Angelica Kocharova, Audit Sr. Manager, Deloitte & ToucheStephanie Booth*, MD Marie Montgomery**, Chief Financial Officer

* Absent ** Teleconference

AGENDAITEM/PRESENTER MOTIONS / MAJOR DISCUSSIONS ACTION TAKEN

CALL TO ORDER

Alvaro Ballesteros

Alvaro Ballesteros, Committee Chair, called the meeting to order at 1:04 pm.

He announced that members of the public may address the Committee on eachmatter listed on the agenda before or during the Committee’s consideration of theitem, or on any other topic at the Public Comment section.

PUBLIC COMMENT There were no public comments.

APPROVE MEETINGAGENDA

Alvaro Ballesteros

Today’s Agenda was approved as submitted. Approved unanimously.2 AYES (Ballesteros andGonzalez)

APPROVE MEETINGMINUTES

Alvaro Ballesteros

The August 20, 2019 meeting minutes were approved as submitted. Approved unanimously.2 AYES

CHAIRPERSON’S REPORT There was no report from the Chairperson.

CHIEF EXECUTIVEOFFICER/CHIEFFINANCIAL OFFICERREPORT

Marie Montgomery, Chief Financial Officer, summarized the materials sent to theCommittee prior to the meeting.

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Audit Committee Meeting MinutesJanuary 24, 2019 / Page 2 of 3

APPROVED

AGENDAITEM/PRESENTER MOTIONS / MAJOR DISCUSSIONS ACTION TAKEN

COMMITTEE ISSUES

Review of Audit Report forFY 2017-18

Khurram Siddiqui and Angelica Kocharova, of Deloitte & Touche (D&T),referenced the documents provided in the meeting packet. There were nosignificant changes to accounting policies. The incurred but not reported (IBNR)claims were reviewed by D&T actuary and L.A. Care estimates were close to themid-point.D&T also closely reviewed provider claim settlements and talked to legal counsel.An estimated $30 million has been set aside.A review of the fair value of investments and revenue assumptions was alsoconducted and the resulting estimates were agreed to by D&T and L.A. Care.There were no disagreements, no questions with management regarding thefinancial statements. D&T received full cooperation and appreciated the easyavailability of L.A. Care management.

Motion AUD A.0119To accept the findings of the Deloitte & Touches’ audit of L.A. Care’sfinancial statements for the fiscal year ended September 30, 2019, aspresented.

Approved unanimously.3 AYES (Ballesteros, Boothand Gonzalez-Delgado)

2020-21 Audit Planning Ms. Montgomery reported that the committee has previously directed staff toconduct a competitive bidding (RFP) process to invite other firms to proposeproviding audit services to L.A. Care. Staff has agreed to go forward with an RFP,but due to unique circumstances in 2019, Deloitte continued as the outside auditorfor one more year. An RFP will be conducted for the 2019-20 Fiscal Year audit.Ms. Montgomery also noted that this committee typically would have planningmeeting in July but may need to be earlier with a new firm. Finance will puttogether a timeline in order to complete the audit on time.

COMMITTEE CHAIRELECTION

Augustavia J. Haydel, Esq.

The election was tabled to a future meeting.

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Audit Committee Meeting MinutesJanuary 24, 2019 / Page 3 of 3

APPROVED

AGENDAITEM/PRESENTER MOTIONS / MAJOR DISCUSSIONS ACTION TAKEN

ADJOURNMENT The Chair adjourned the meeting at 11:30 am.

Respectfully submitted by: APPROVED BY:Victor Rodriguez, Board Specialist IILinda Merkens, Senior Manager, Board Services ________________________________

Al Ballesteros, MBA, Interim ChairpersonDate Signed: ___________________________

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APPROVED

BOARD OF GOVERNORS

Audit Committee Meeting Minutes – January 22, 2018 1055 W. 7th Street, Los Angeles, CA 90017

Members Management/Staff Guests Hector De La Torre, Chairperson John Baackes, Chief Executive Officer Khurram Siddiqui, Partner, Deloitte & Touche Alvaro Ballesteros, MBA Augustavia J. Haydel, Esq., General Counsel Angelica Kocharova, Audit Sr. Manager, Deloitte & Touche Stephanie Booth, MD * Marie Montgomery, Chief Financial Officer

* Absent ** Teleconference

AGENDA ITEM/PRESENTER

MOTIONS / MAJOR DISCUSSIONS

ACTION TAKEN

CALL TO ORDER Hector De La Torre

Hector De La Torre, Committee Chair, called the meeting to order at 10:10 am.

He announced that members of the public may address the Committee on each matter listed on the agenda before or during the Committee’s consideration of the item, or on any other topic at the Public Comment section.

APPROVE MEETING AGENDA

Hector De La Torre

Today’s Agenda was approved as submitted. Approved unanimously. 2 AYES (Ballesteros and De La Torre)

PUBLIC COMMENTS

There were no public comments.

APPROVE MEETING MINUTES

Hector De La Torre

The July 20, 2017 meeting minutes were approved as submitted.

Approved unanimously. 2 AYES

CHAIRPERSON’S REPORT

There was no report from the Chairperson.

CHIEF EXECUTIVE OFFICER/CHIEF FINANCIAL OFFICER REPORT

John Baackes, Chief Executive Officer, provided an update regarding the termination of SynerMed* Employee Health Systems (EHS) contract with L.A. Care.

L.A. Care’s contract with EHS and 2 other IPAs were also terminated because they have the same ownership as SynerMed.

*A factual error was brought to our attention in May, 2020, through public comment and the text above was corrected. Additional clarifying corrections were also made below.

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Audit Committee Meeting Minutes January 22, 2018 / Page 2 of 3

APPROVED

AGENDA ITEM/PRESENTER

MOTIONS / MAJOR DISCUSSIONS

ACTION TAKEN

The Department of Managed Health Care (DMHC) and Department of Health Care Services (DHCS) has revised their Corrective Action Plan (CAP) to include cease and desist order.

A whistleblower has reported an additional fraud, that SynerMed suppressed access to through SynerMedm that EHS has removed certain “high-cost” EHS providers which is a violation of the Knox-Keene Act’s prohibition against “economic profiling”. No additional action is required from L.A. Care.

Affected members will be migrated to IPAs/providers contracted with L.A. Care.

L.A. Care is also discussing with providers who were in the SynerMed/EHS network, to contract with L.A. Care or with IPAs in L.A. Care’s network.

This is an opportunity for L.A. Care and other health plans to reinforce their oversight of delegated authority.

Updates will be provided at the next Board meeting.

COMMITTEE ISSUES

Review of Audit Report FY 2016-17

Khurram Siddiqui, Partner, for Deloitte & Touche presented the results of the onsite audit of L.A. Care’s FY 2017-18 financial statements. (A copy of the report may be requested by contacting Board Services.)

No significant changes in previously adopted accounting policies during the year ended September 30, 2017.

Significant accounting estimates reflected in the Organization’s 2017 financial statements include 1) Reserves for Incurred but not Reported Claims, 2) Provider Settlement Liability, and 3) Collectability Assessment related to Risk Corridor Receivables. There are no significant changes in accounting estimates, except for the changes in prior year IBNR estimates as disclosed in the combined financial statements. Favorable development of approximately $141 million, net of provision for adverse development and negative provider settlement recast is primarily due to: o Certain provider settlement successfully negotiated during the year contained

“cliff date” provision, which reduced the payout compared to the estimated reserves, with an impact on the reserves estimated at $80 million.

o The remaining difference is due to a change in estimate resulting from the inpatient and outpatient costs emerging at lower than estimated levels.

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Audit Committee Meeting Minutes January 22, 2018 / Page 3 of 3

APPROVED

AGENDA ITEM/PRESENTER

MOTIONS / MAJOR DISCUSSIONS

ACTION TAKEN

No material weaknesses or deficiencies were found in L.A. Care’s financial operations or internal controls,

The audit went smoothly and,

There were no material adjustments to the financial statements reviewed.

Committee members briefly met with the Auditors without L.A. Care management and staff present.

Motion AUD A.0118 To accept the findings of the Deloitte & Touche audit of L.A. Care’s financial statements for the fiscal year ended September 30, 2017, as presented.

Approved unanimously. 2 AYES

ADJOURNMENT The Chair adjourned the meeting at 10:50 am.

Respectfully submitted by: APPROVED BY: Malou Balones, Committee Liaison Linda Merkens, Manager, Board Services ________________________________ Hector De La Torre, Chairperson Date Signed: ___________________________

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External Audit Services RFP

Vendor SummariesMay 29, 2020

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Vendor Evaluation Summary

2

L.A. Care Health Plan

External Audit Services RFP

Category BDO

Deloitte &

Touche

Grant

Thornton Moss Adams

COMPANY EVALUATION (Stability, References)

20% of Total Score 0.16 0.18 0.15 0.16

INDUSTRY KNOWLEDGE/EXPERIENCE

20% of Total Score 0.16 0.19 0.15 0.17

AUDIT APPROACH

20% of Total Score 0.14 0.19 0.14 0.14

QUALITY CONTROL (Review Protocols , Oversight)

20% of Total Score 0.15 0.20 0.16 0.16

GENERAL QUALIFICATIONS (Privacy Standards, Contract Exceptions)

10% of Total Score 0.08 0.09 0.08 0.08

COST/PRICING

10% of Total Score 0.06 0.08 0.07 0.08

Grand Total 0.75 0.93 0.75 0.80

Pricing - 3 Year Total BDO

Deloitte &

Touche

Grant

Thornton Moss Adams

Financial Statement Audit $1,311,150 $1,181,392 $974,994 $867,625

A-133 Compliance Audit $50,900 $87,488 0* $41,015

Total Fees $1,362,050 $1,268,880 $974,994 $908,640

* Included in Financial Statement Audit Fees.

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