Legislative watchdog reveals widespread violations at DHS

It would be difficult to overstate the level of bureaucratic bungling and mismanagement at Minnesota’s largest government agency revealed in a scathing new state auditor’s report. The Star Tribune rattled off a long list of the troubling findings including waste of taxpayer funds and lack of accountability at the Minnesota Department of Human Services that led to the state investigation.

For nearly three years, the Minnesota Department of Human Services (DHS) doled out tens of millions of dollars in grants for mental health and substance abuse services without providing adequate oversight over the grant-making process, according to a state Legislative Auditor report released Monday.

The audit by the state’s top internal watchdog found extensive mismanagement and violations of state legal requirements in the handling of grants awarded by the department’s Behavioral Health Division, which has a staff of 140 and made grant expenditures of about $134 million in fiscal year 2019.

The 56-page report by the Office of the Legislative Auditor, a nonpartisan arm of the Legislature, concluded that the Behavioral Health Division’s grant-making process failed to comply with a “significant number” of state policy and legal requirements, and did not ensure that employees had the appropriate skills, knowledge and job descriptions to manage grants in compliance with state and federal requirements.

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The hard-hitting criticism follows years of turmoil at DHS, the state’s biggest agency by a long shot with a $21 billion budget, some 7,000 plus employees and responsibility for overseeing health care programs for more than one million Minnesotans.

The DHS is still trying to recover from revelations nearly 18 months ago that it made more than $100 million in unauthorized Medicaid payments to Indian tribes and counties for substance-use treatment services, which had to be repaid to the federal government.

A 2019 review by the Legislative Auditor found “troubling dysfunction” at DHS, including instances in which individuals were allowed to make decisions to spend Medicaid funds without review and approval from department officials responsible for the state’s Medicaid program.

“Every time an audit comes out, DHS insists that the issues have been addressed, yet every time the [Legislative Auditor] seems to uncover new problems,” said Rep. Tony Albright, R-Prior Lake, a member of the House Human Services Finance and Policy Committee, in a written statement. “We need real reform and real accountability, not more excuses, slogans, and window dressing.”

Even now, a year and a half into her tenure at the top, Human Services Commissioner Jodi Harpstead admits she’s got a long way to go in solving the chronic problems identified in the report.

The agency has repaid the federal government $103 million in Medicaid overpayments to Indian tribes and counties, and completed a review that found no further payment errors in 2020.

“I would say we’re in the second inning of a nine-inning ballgame,” Harpstead said of the process-control improvements. “It’s not all fixed and behind us. It’s all figured out. And we know what to fix and we’re working through the steps to fix it.”

For the record, here’s the list of violations detailed in the state auditor’s probe.

DHS and the Behavioral Health Division lacked effective oversight of BHD grant administration to ensure compliance with Office of Grant Management policies and related legal requirements.

The DHS Behavioral Health Division did not have adequate internal controls or comply with legal requirements to make and preserve documentation related to grant management.

DHS Behavioral Health administrators did not ensure that employees had the appropriate skills, knowledge, and job descriptions to manage grants in compliance with state and federal requirements.

The DHS Behavioral Health Division did not comply with state requirements to document and retain conflict of interest disclosures.

The DHS Behavioral Health Division issued requests for proposals that omitted required information.

The DHS Behavioral Health Division did not always use a required standardized scoring process when evaluating grant applications through a competitive bid process.

The DHS Behavioral Health Division did not comply with state requirements to determine whether grant recipients were financially stable prior to awarding the grant.

For some competitive bid grants, the DHS Behavioral Health Division did not demonstrate it complied with state requirements when selecting grantees.

The DHS Behavioral Health Division did not ensure that appropriate staff approved advance payments to grantees and, for some grants, document required rationale for the payments.

The DHS Behavioral Health Division did not ensure grantees submitted required progress reports, and grant managers did not withhold payments to grantees whose reports were past due.

The DHS Behavioral Health Division did not always obtain required documentation or approval for payments to grantees.

The DHS Behavioral Health Division did not conduct and document required monitoring visits of grantees.

The DHS Behavioral Health Division did not conduct and document required financial reconciliations of grantees’ expenditures.

The DHS Behavioral Health Division did not complete required closeout evaluations of grantees.