The Office of the Legislative Auditor (OLA) today released a performance audit of the Department of Human Services’ (DHS) Behavioral Health Administration (BHA) grant programs, finding widespread failures in oversight and internal controls. The OLA found that BHA “did not comply with most requirements tested for mental health and substance use disorder grants and did not have adequate internal controls over grant funds.”
Legislative Auditor Judy Randall noted systemic issues, including documents created by BHA only after the audit began and backdated in response to document requests.
Senator Mark Koran (R-North Branch), a member of the Legislative Audit Commission, issued the following statement:
“The OLA report shows a complete breakdown in how DHS’s Behavioral Health Administration manages hundreds of millions in taxpayer-funded grants,” said Sen. Koran. “BHA failed to verify that grantees were providing the services they were paid for, failed to put basic financial controls in place, and then created documentation after the fact to mislead auditors.
“Minnesotans deserve integrity from state agencies. Fabricating evidence after an audit begins is unacceptable. It obstructs the OLA’s work and prevents DHS from correcting its failures. The finding that a DHS manager approved a large grant and later became a paid consultant for that same grantee is a blatant conflict of interest. This kind of misconduct erodes public trust and undermines the effectiveness of grant programs.
“The audit makes clear that DHS leadership has failed at every level. Employees were not properly trained, oversight was ignored, and accountability was missing, from Governor Walz, to Temporary DHS Commissioner Gandhi, to BHA managers. DHS needs a full reset, starting with leadership, training, ethics, and oversight.”
Key findings from the OLA report include:
Between July 1, 2022, and December 31, 2024, DHS distributed more than $425 million in grants to 830 grantees, 590 of them nongovernmental organizations.
Missing or past-due progress reports for 27 of 51 grant agreements.
BHA could not demonstrate that it completed 27 of 67 required monitoring visits.
For 24 visits involving 11 grantees, BHA could provide no documentation.
For three visits to one grantee, documentation was created in February 2025, after the audit began, despite the visits supposedly occurring in May 2024, October 2024, and January 2025.
Incomplete financial reconciliations for 63 of 71 grant agreements.
A grant manager approved $672,647.78 in payments and later left BHA to work for the grantee.
An internal employee survey showed deep concerns within BHA:
73% of respondents said they did not receive sufficient training to manage grants.
Survey response from BHA employee: “Executive leadership has repetitively shown staff that they won’t take the staff’s concerns or questions seriously until something serious happens or it makes the news.”
The full OLA report can be viewed here.