In the latest blow to Minnesota’s once vaunted reputation for good governance, the Office of the Legislative Auditor has identified “continued and pervasive concerns” with grant-making practices at the Behavioral Health Administration, an arm of the Department of Human Services that assists people who struggle with substance abuse and mental health.
Appearing before a panel of lawmakers on Tuesday, Jan. 6, Legislative Auditor Judy Randall outlined the findings of her office’s partial review of approximately $192 million of grants issued to 590 non-governmental entities between 2022 and 2024.
During the course of the investigation, she said, auditors “identified a number of documents that the Behavioral Health Administration either backdated or created after our audit began in response to our request for information.”
“Frankly, in the 27 years I’ve been with the OLA, we’ve never seen this before,” Randall said. “It’s very troubling. It wasn’t just one individual that created or backdated the documents. We do believe it was a systemic effort.”
Randall said such practices raise questions about the validity of the information provided by the agency, thus “undermining the integrity of the audit.”
Shireen Gandhi, acting commissioner of the DHS, told lawmakers on the Legislative Audit Commission that she was “shocked to hear this information.”
“It is absolutely unacceptable that any staff would provide anything other than accurate information of the work done to the auditor,” Gandhi said.
The audit identified other worrisome issues with the BHA’s grant-making practices, including a widespread and improper reliance on non-competitive “single source” bids; poor oversight of grantees; failure to conduct site visits; and lax documentation.
The most eye-catching detail in the report is suggestive of outright graft.
According to the audit, one unnamed grant manager with BHA approved a payment of $672,647 to a new vendor for a single month’s work, then left state employment a few days later. That grant manager subsequently provided consulting services to the provider.
“We asked BHA management whether they questioned such a large reimbursement request for just one month of work. BHA management said that due to limited information in the grant management system and the grant manager no longer being available, they could not answer this question,” the report states.
When auditors contacted two subcontractors of the aforementioned provider, the report continues, neither subcontractor was able to “provide sufficient documentation regarding who they served with the money they received from the grantee.”
One subcontractor told auditors that the grantee “told them they did not need to keep detailed participant records, such as sign-up sheets.” Absent such documentation, the report states, auditors “could not determine whether subcontractors provided the services for which they were paid.”
Lawmakers reacted to the findings with disbelief.
“I’m floored. This is incredible,” said Rep. Patti Anderson, R-Dellwood, who noted that “half the grants had some sort of backdating or falsification of the documents.”
“It wasn’t just one or two people. It was a big chunk of the staff. Someone must have told them to do that. Who told the staff to do that?” Anderson asked.
Gandhi responded that “if someone directed staff to falsify documents, it’s absolutely wrong.”
“It’s an HR matter for sure, it may be more than that,” Gandhi said.
In response to lawmakers’ queries about whether any of the issues identified in the report constituted criminal fraud, Gandhi said one internal audit conducted by DHS has been referred to law enforcement, but she provided no more details.
While Republicans on the committee were harsher in their assessment of the agency’s failures, calls for reforms were bipartisan.
Sen. Ann Rest, DFL-New Hope, the committee chair, said she expected there will be a change in law that will mandate “a cooling off period” for former department employees before they can be hired by grant recipients.
For her part, Gandhi told lawmakers that the agency was working to improve training for grant managers and increase oversight.
“I take the report seriously,” she said. “Strong internal controls are essential to protect taxpayers’ funds.”
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