Topeka ? A budget timebomb is ticking in the state welfare agency, and no one is sure when it will go off.

The federal Centers for Medicare & Medicaid Services is auditing several programs in the Kansas Department of Social and Rehabilitation Services to determine whether the agency has used improper techniques to draw down federal matching Medicaid dollars.

“That’s out there,” Gov. Kathleen Sebelius’ budget director, Duane Goossen, said. “If that doesn’t fall our way, there is potential cost to the budget.”

Goossen said the figure in dispute could reach $40 million.

The dispute is not mentioned in the more than 800-page budget that Sebelius unveiled Tuesday.

But state officials say an adverse ruling from the federal agency that oversees governmental health care would be a problem.

“To us it’s a pretty big deal,” said Lois Weeks, director of finance management for SRS.

The federal agency is reviewing how Kansas paid providers for special education services and whether there was adequate documentation for other health care services.

These kinds of reviews are going on all over the country as the Bush administration increases scrutiny of the way states get federal health care dollars, officials said. Any federal payments made in error will be disallowed from the state’s future grants, officials said.

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“We have begun to look much more closely,” said Mary Kahn, a spokeswoman for CMS. “We want to make sure Medicaid dollars are appropriately spent.”

Medicaid provides health coverage for low-income Kansans and is funded 60 percent by the federal government and 40 percent by the state. More than 250,000 Kansans receive assistance.

In recent years several states, including Kansas, found new ways to draw down federal Medicaid funds.

Goossen stands by what Kansas did, saying it is the federal government that has started “reinterpreting things.”

Health care advocates also have criticized the move by CMS, saying that the federal government is trying to curb growth in federal Medicaid spending.

“There is a question of why the federal government is doing this,” said Joan Alker, a senior researcher with the Health Policy Institute of Georgetown University. “A lot of folks say the Centers for Medicare and Medicaid Services is trying to create a climate that will lead to caps in federal funding,” she said.