CARSON CITY -- The Clark County School District must pay the state $5.5 million by Feb. 22 because a federal audit found it submitted several improper bills for Medicaid funds, legislators were told Tuesday.

There were so many "egregious" violations of regulations, the Dec. 22 audit found, the district must return $5.5 million of the $12 million it received from the state in Medicaid funds in 2003 and 2004, said Chuck Duarte, administrator of the state Division of Health Care Financing and Policy.

He told a joint Senate-Assembly committee that the school district might owe an additional $3.4 million for more recent improper billings.

Duarte said he needs the money quickly to repay the federal government, which provides most of the money for Medicaid, the health care program for the poor and disabled.

In an interview after the hearing, Duarte said the school district can receive Medicaid money for providing aid to children and their families in applying for Medicaid.

But he said the school district even billed for Medicaid money to cover a part of its debt service on building construction and operations costs.

"Don't they know what is not allowed?" asked Sen. Barbara Cegavske, R-Las Vegas.

"They understand full well the requirements," Duarte replied. "We are working with Clark County to get the money back."

"The federal audit found a significant number of inappropriate claims," Duarte said. "They have to pay back the state, and I have to pay back the feds. They have told me several times that it won't be a problem."

But in a telephone interview, Jeff Weiler, chief financial officer for the school district, said the district is considering appealing the audit decision to the Centers for Medicare and Medicaid Services, the federal agency that administers the programs.

While the appeal is pending, Weiler said, the federal agency will withhold from the state the money it wants the school district to return.

He said the district hired Maximus, a private consulting firm, to review its request for Medicaid funds from the state. He said the company has done similar work in other states and was thought to understand what Medicaid funds the school district could request.

"We don't dispute that we overclaimed," he said. "The question is how clear were their guidances."

If Clark County loses or decides against an appeal, Weiler said, the district would not repay any money to the state.

He said that instead, when the district turns in claims , it will not be reimbursed for the first $5.5 million.

"We don't have that kind of money laying around. That would be much more acceptable to us. It's not like we need to write a check."

During the hearing, Duarte admitted his agency failed to calculate $9.6 million it will need over the two years to cover payments to hospitals. The money must be added on to the nearly $3 billion, two-year Medicaid budget request made by Gov. Jim Gibbons.

Legislators were unhappy about his admission.

"I'd like some assurances on the integrity of your accounting methods," said Sen. Bob Beers, R-Las Vegas.

After the hearing, Duarte said he hopes he can make up the shortfall through current funds because the Medicaid caseload has fallen far below projections.

About 170,000 residents received Medicaid during the 2006-07 fiscal year, down about 2,300 from the previous year. The division had projected the Medicaid caseload would top 193,000. Latest estimates are the caseload will reach 183,000 in 2009.