Draft Audit: Fla. Owes U.S. $500 Million
Wed Mar 12, 3:06 AM ET Add U.S. National - AP to My Yahoo! By LARRY MARGASAK, Associated Press Writer (P) WASHINGTON - A draft audit concludes that Florida's pension fund owes the U.S. government more than $500 million, according to federal officials familiar with the review that was delayed by Health and Human Services (news - web sites) inspector general Janet Rehnquist.

She initially postponed the audit at the request of Florida Gov. Jeb Bush's office during his 2002 re-election campaign.

The state retirement system had more money than it needed to pay its pension obligations, and part of the excess must be refunded to the federal government, the draft found.

In an excerpt provided Tuesday to The Associated Press by government officials, the draft said, "We recommend that the Florida Department of Management Services, Division of Retirement, repay" the $517.1 million U.S. share of excess funds "or reduce future contributions accordingly."

The amount owed was held by the retirement fund as of July 1, 2002, the draft said. The total of excess funds, including Florida's contributions, was more than $3 billion.

A spokeswoman for Rehnquist, daughter of Chief Justice William Rehnquist (news - web sites), said she could not comment on the draft. Judy Holtz added, however, that it takes several months before a draft audit becomes final and the amount owed is subject to change.

Rehnquist informed the White House last week that she's resigning in June to spend more time with her family and pursue other opportunities. Her decision to delay the audit was among a number of controversial actions that has led to an investigation of her management by Congress and a committee of fellow inspectors general.

Jill Bratina, Bush's spokeswoman, said the agencies involved had been told they would receive a copy of the draft at the end of the month and have an opportunity to comment. "In the meantime, we will continue to work with HHS on the audit," she said.

The Florida governor's chief of staff, Kathleen Shanahan, called to request a delay of the audit last April 15, the day it was supposed to have started.

Shanahan reportedly described her request as urgent and asked Health and Human Services officials to get the message to Rehnquist, who was at a department reception. Florida officials said the delay was necessary because the pension office was in the middle of a transition between an outgoing and incoming director.

Bush, brother of President Bush (news - web sites), was running for re-election, and Rehnquist spokeswoman Holtz had said previously that the final audit would not have been completed by election day under any circumstances. Government documents indicated, however, that the draft would have been finished before the election.

The federal government contributes pension money for employees working on programs such as Medicaid, the health insurance program for the poor which is financed with a combination of U.S. and state funds.

The contributions were in excess of the amounts reasonable and necessary to fully fund benefit obligations, the draft said.

The draft concluded that exceptional investment performance was the primary cause of the initial surplus. The state then created a contingency reserve that did not meet federal standards, which caused federal programs to be overcharged for the pension costs.

President Bush appointed Rehnquist in August 2001. As the nonpartisan HHS internal watchdog, she is responsible for investigating fraud, waste and abuse in Medicare and other social programs.

The General Accounting Office (news - web sites), Congress' investigative arm, is looking not only at the audit delay but also at a housecleaning during which top career officials left the inspector general's office.

Rehnquist also had possession of a government handgun in her office, which raised questions about whether she was authorized to have the weapon.