Because of significanct increases in benefits paid by the Kansas medicaid program in recent years, the State legislature directed the Kansas Legislative Division of Post Audit to conduct three audits focusing on management, cost containment, and fraud problems. The investigation for fraud and abuse first designed 10 computer tests to identify potential fraud and abuse cases from 10.3 million claims paid from 1974 through 1977. Auditors then selected a sample of 583 cases for analysis, concentrating on claims for services that were not provided, not needed, or not authorized, along with claims that were paid twice. Because the State changed private claims processing firms in 1978, the auditors also evaluated the new system to determine whether problems had been corrected. Medicaid's legislative development and intent regarding the control of fraud and abuse are described, as is the organization of the program in Kansas. The audit found program abuse in 14 percent of the sample cases. Problems included payments made for unauthorized dental services and hospital stays, payments made for goods or services that were supposedly provided after a recipient died, and two payments made for the same claim. The old system used by Blue Cross-Blue Shield of Kansas failed to identify these irregularities and control their occurrences. An examination of the new system run by Electronic Data Systems Federal Corporation revealed a high rate of abuse that could cost the medical assistance program over $1 million a year. After reviewing the efforts of the department of social and rehabilitative services to identify and solve these problems, the auditors concluded that formal quality control activity had been weak. Efforts to recover incorrect payments after they had been made were hindered by inadequate penalties. Audit recommendations and a summary of the department's responses are provided. All but one involved improvements in the handling of medical assistance claims. Legislative action to authorize the department to assess penalties and interest on medical assistance payments not voluntarily returned within 60 days was proposed. The department's complete response to the audit's findings is appended. Charts are included.