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Federal audit draft: Florida owes $517-million

An audit of a Florida state government pension fund that was delayed last year while Gov. Jeb Bush was seeking re-election has concluded that Florida overcharged the federal government by $517-million in contributions to the fund.

According to a draft report of the audit findings, federal officials have recommended that Florida repay the $517-million in excess contributions or accept reduced future federal contributions to the pension fund until the overcharge is made up.

The federal government contributes to state employees' pension funds to pay a share of pension costs of employees who administer joint federal-state programs such as Medicaid, the health insurance program for the poor. The Inspector General's Office of the Department of Health and Human Services audits the state funds to ensure that the federal government is not overcharged.

The Florida audit, which was delayed at least three times at the request of state officials as Bush prepared for what appeared to be a tough re-election fight, became one of several controversies swirling around HHS Inspector General Janet Rehnquist, the daughter of Chief Justice William Rehnquist. Rehnquist, under fire from members of Congress for alleged professional misconduct, announced last week that she will leave the IG post on June 1.

The Florida audit originally was to begin last April. But the start of the audit was delayed at the request of Bush's chief of staff, Kathleen Shanahan, who spoke with Rehnquist, according to HHS officials. After at least two more delays at the request of Florida officials, the audit was begun in September, virtually ensuring that it would not be completed until after the November election, in which Bush won a second term.

Some Democratic critics have charged that delays in starting the audit were designed to shield the Florida governor, President Bush's brother, from any embarrassing findings until after the election. HHS officials have insisted that the delays were not linked to Florida politics and that, even if the audit had begun in April as originally scheduled, it would not have been completed until after the November election.

However, that assertion appeared to be undercut by documents Rehnquist made public late last year in response to questions from Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont. One of the documents was an internal HHS e-mail that said that, before the initial delay in starting the audit, a draft report of the findings was expected by Sept. 30, more than a month before the Nov. 5 election.

Gov. Bush denied Wednesday that his brother's administration stalled the federal audit.

He has said previously that his office requested the delay because the state Board of Administration, which invests the state's $80-billion pension fund, was in transition from former director Tom Herndon to Coleman Stipanovich, its new chief.

The draft audit report does not contain the kind of revelations likely to have changed the outcome of the gubernatorial election, which Bush won in a landslide. Written in the dry language of accountants, it said the Florida Retirement System developed a surplus in the late 1990s because of "exceptional" returns on its investments and that one measure state officials implemented to reduce the surplus resulted in the overcharge to the federal government.

Jill Bratina, Bush's press secretary, said state officials have been told they will receive a copy of the draft audit report by the end of March and will then have 30 days to comment on it before a final report is issued.

_ Knight Ridder Newspapers contributed to this report.

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