An audit of the Minnesota Department of Human Services’ Behavioral Health Administration grant programs found “widespread failures in oversight,” according to a state watchdog.
The Office of the Legislative Auditor says the department “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.”
According to the audit, the Department of Human Services distributed more than $425 million in grants to 830 grantees between July 1, 2022, and Dec. 31, 2024.
Of 51 grant agreements, the report says more than half of the progress reports were missing or past due. The agency also could not prove that it completed 27 of 67 required monitoring visits, and for 24 visits involving 11 grantees, it could not provide any documentation.
One auditor noted that several documents were created by the Behavioral Health Administration only after the audit began and had been backdated in response to document requests.
Two grantees were overpaid, and the Behavioral Health Administration paid some grantees for work performed before it fully executed the grant agreements, according to the audit. The agency also made payments to grantees for costs that were either not incurred or not properly supported by source documents.
In a survey of employees at the Behavioral Health Administration, the report says 73% of respondents said they did not receive sufficient training to manage grants.
“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,” one employee wrote in the survey.
State Sen. Mark Koran, R-North Branch, a member of the Legislative Audit Commission, says the audit shows that Department of Human Services leadership “failed at every level.”
“The OLA report shows a complete breakdown in how DHS’s Behavioral Health Administration manages hundreds of millions in taxpayer-funded grants,” Koran said. “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.”
Temporary commissioner for the Department of Human Services, Shireen Gandhi, said she was “shocked” to learn the information included in the audit.
“With respect to the audit report, while it’s upsetting that DHS has findings in areas we have placed concerted effort, the OLA’s report highlights the importance of the grant compliance work already underway at the department. And the findings provide us with a road map for our focus going forward to continue strengthening oversight and integrity of behavioral health grants,” Gandhi said. “I take the report seriously, I accept responsibility for the findings, and I will ensure DHS closes the findings.”
The report comes amid a widening fraud scandal in the state. Criticism about Minnesota’s fraud caused Gov. Tim Walz to announce on Monday that he is dropping his bid to be reelected to a third term.
On Sunday, the Trump administration began a massive deployment of hundreds of DHS agents to the Twin Cities area. Agents deployed from Homeland Security Investigations are expected to look into alleged fraud cases following last month’s investigation by federal agents in Minneapolis that DHS Secretary Kristi Noem said was for “child care and other rampant fraud.”
More than 90 people face federal charges as a result of fraud schemes that have been uncovered in Minnesota since 2021. Prosecutors estimate the total amount of fraud could reach $9 billion. The scandal started with a $250 million COVID-era scheme involving a nonprofit called Feeding Our Future, which was accused of stealing from the Federal Child Nutrition Program.
Since then, federal prosecutors have uncovered “large-scale fraud” in a housing program for seniors and people with disabilities, and a program that provides services to children with autism. The Trump administration is also probing claims of fraud by day care centers in Minnesota, which gained national attention after a conservative YouTube personality named Nick Shirley posted a video that showed him visiting federally backed child care centers around Minneapolis and finding no children there.
CBS News visited several of the centers named by Shirley and found that all but two of the facilities have active licenses, according to state records, and all active locations were visited by state regulators within the last six months.
contributed to this report.
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