The Minnesota Office of the Legislative Auditor says a program run within the state Department of Human Services does not have appropriate oversight of funds it is disbursing.
The report presented to a committee of lawmakers earlier this week found that the Behavioral Health Administration did not comply with certain requirements and did not have adequate internal control over grant funds.
The Behavioral Health Administration is a division of Human Services responsible for administering grants to programs meant to help children and adults treat different mental health conditions and substance abuse disorders. BHA partners with counties, providers and tribes to deliver services. The division has more than 200 employees.
During OLA’s audit, which spanned from July 2022 to December 2024, auditors visited different program sites, reviewed finances and spoke to BHA staff members. Within that time period, BHA managed 830 unique grant agreements that received $426 million in state and federal funding.
Key findings
Key findings include:
• BHA paid nearly $1 million to grantees for work performed before BHA completed its grant agreements.
• A majority of the grant recipients surveyed had missing or past-due progress reports.
• One grantee could not provide OLA with detailed invoices or data to support a payment of nearly $700,000 from BHA for a single month of work. The BHA grant manager who approved the payment left the agency a few days after approving the grant. The former BHA grant manager now works for the same grant recipient for whom they approved the nearly $700,000 grant.
• In a survey, the majority of staff said they did not receive sufficient training to manage grants.
• BHA paid nearly $300,000 to 11 grantees for unsupported costs and reimbursement requests with errors.
• BHA was not able to demonstrate that it had conducted required site visits to monitor how grant funding was disbursed.
‘It is frankly unacceptable’
Judy Randall, the state’s legislative auditor, noted that her team identified a number of documents BHA either backdated or created after the audit began. Because of this, OLA said they could not fully rely on documentation provided by the department.
“It is frankly unacceptable for the agencies we audit to do this type of activity,” Randall said. “In the 27 years I’ve been with OLA, I have never seen this before.”
During the hearing, temporary commissioner Shireen Gandhi said DHS is working to implement recommendations presented by OLA.
“The findings provide us with a roadmap for our focus going forward to continue strengthening oversight and integrity of behavioral health grants,” she said. “I take the report seriously, I accept responsibility for the findings.”
Gandhi could not answer specifically whether all BHA grantees were providing services to people who need it, but said DHS has the authority to cancel any contracts suspected of being fraudulent.
“The work that we’re doing now to shore up the internal controls is going to give me much greater confidence in the future in answering that question,” she said. “I think we strive to always achieve outcomes, and we are putting in tighter internal controls so that we can, with more confidence, tell you that we are achieving that with the dollars we’re spending.”
Questions on MN social service programs
The findings in the OLA come amid questions surrounding the integrity of Minnesota’s social service programs. On Monday, Gov. Tim Walz announced he would not seek a third term as allegations of fraud in child care centers garnered national attention.
Some members of the Legislative Audit Commission signaled the audit findings could be indicative of more fraud in another program run by DHS.
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“We have another rogue agency that is acting not in the spirit and manner of the law but is rogue and working outside of the law,” said Sen. Steve Drazkowski, R-Mazeppa. ”I just can’t believe what we have in this state government in the state of Minnesota.”
Last March, the Department of Human Services lost nearly $30 million in grant funding through Trump administration federal funding cuts. The grants included drug prevention programs in schools, treatment and recovery programs for mental health and substance use, and harm reduction strategies amid the nation’s opioid epidemic.
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