Molina Medicaid Solutions - DHHR

e10vksystems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and reporting.Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management usedthe criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.Our management’s evaluation did not include an assessment of the effectiveness of internal control over financial reporting at Molina Medicaid Solutions, which wasacquired on May 1, 2010. The assets and net assets of Molina Medicaid Solutions at December 31, 2010 were approximately $175.6 million and $133.1 million, respectively.Total revenue and net income of Molina Medicaid Solutions included in our consolidated results of operations for the year ended December 31, 2010 were approximately$89.8 million and $1.8 million, respectively. Our management has not had sufficient time to make an assessment of this subsidiary’s internal control over financial reporting.Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2010, based on thosecriteria.The effectiveness of the Company’s internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm,as stated in their report appearing on page 115 of this Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of the Company’s internalcontrol over financial reporting as of December 31, 2010.Item 9B.None.Other Information114Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholdersof Molina Healthcare, Inc.We have audited Molina Healthcare, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2010, based on criteria established in InternalControl — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management isresponsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included inthe accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control overfinancial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions ofthe assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that couldhave a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectivenessto future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or proceduresmay deteriorate.As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectivenessof internal control over financial reporting did not include the internal controls of Molina Medicaid Solutions (acquired May 1, 2010), which is included in the 2010 consolidatedfinancial statements of Molina Healthcare, Inc. and constituted $175.6 million and $133.1 million of total and net assets, respectively, as of December 31, 2010, and$89.8 million and $1.8 million of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of Molina Healthcare, Inc.also did not include an evaluation of the internal control over financial reporting of Molina Medicaid Solutions.In our opinion, Molina Healthcare, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on theCOSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of MolinaHealthcare, Inc. as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in theperiod ended December 31, 2010 and our report dated March 8, 2011 expressed an unqualified opinion thereon.Los Angeles, CaliforniaMarch 8, 2011/s/ ERNST & YOUNG LLP115Table of ContentsPART IIIItem 10.Directors, Executive Officers, and Corporate Governance(a)Directors of the RegistrantInformation concerning our directors will appear in our Proxy Statement for our 2011 Annual Meeting of Stockholders under “Proposal No. 1 — Election of ThreeClass III Directors.” This portion of the Proxy Statement is incorporated herein by reference.(b)Executive Officers of the RegistrantPursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, information regarding our executive officers is provided in Part Iof this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant,” and will also appear in our Proxy Statement for our 2011 Annual Meeting ofStockholders. Such portion of the Proxy Statement is incorporated herein by reference.(c)Corporate GovernanceInformation concerning certain corporate governance matters will appear in our Proxy Statement for our 2011 Annual Meeting of Stockholders under “CorporateGovernance,” “Corporate Governance and Nominating Committee,” “Corporate Governance Guidelines,” and “Code of Business Conduct and Ethics.” These portions of ourProxy Statement are incorporated herein by reference.(d)Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to filereports of ownership and changes in ownership with the SEC, and to furnish us with copies of the forms. Purchases and sales of our equity securities by such persons arepublished on our website at www.molinahealthcare.com. Based on our review of the copies of such reports, on our involvement in assisting our reporting persons with suchfilings, and on written representations from our reporting persons, we believe that, during 2010, each of our executive officers, directors, and greater than ten percentstockholders complied with all such filing requirements on a timely basis.Item 11.Executive CompensationThe information which will appear in our Proxy Statement for our 2011 Annual Meeting under the captions “Compensation Committee Interlocks,” “Non-EmployeeDirector Compensation,” and “Compensation Discussion and Analysis,” is incorporated herein by reference. The information which will appear in our Proxy Statement underthe caption “Compensation Committee Report” is not incorporated herein by reference.http://sec.gov/Archives/edgar/data/1179929/000095012311023069/a58840e10vk.htm[1/6/2012 11:08:51 AM]