Report: Dysfunction at agency led to overpayments to tribes

ST. PAUL, Minn. (AP) — Minnesota's legislative auditor's office said Tuesday that it found "troubling dysfunction" at the state Department of Human Services that resulted in $29 million in overpayments of federal money to two tribes for opioid treatment programs.

"The department did not have legal authority to make the payments; it did not document why, when, and who decided it was appropriate to make the payments; no one at DHS takes responsibility for the decision; and no one at DHS can provide a rationale for the payments," the special review concluded.

And the report said the resulting financial and legal problems for the state, the White Earth Nation and Leech Lake Band of Ojibwe will be difficult to resolve.

"The fact that so many DHS management officials allowed the department to make millions of dollars in unauthorized payments over multiple years is inexcusable, as is the department's failure to document important policy decisions. We think fundamental and deep reforms within DHS are needed," the auditor's office said.

Human Services Commissioner Jodi Harpstead, who took office in September with a promise to restore trust in the troubled agency, made no attempt to defend its failures. She said the report confirmed her assumption that her agency was at fault for providing incorrect guidance to the tribes and that it did not have the internal safeguards necessary to catch the problem.

"I understand that we have significant work ahead of us to rebuild the necessary processes and internal controls that will help us to identify and prevent similar issues in the future," Harpstead wrote in an official response that accompanied the report.

Democratic Gov. Tim Walz appointed Harpstead , the former chief executive of Lutheran Social Service of Minnesota, this summer to stabilize an agency rocked by the abrupt departures of several top officials, including his original commissioner, Tony Lourey, who resigned after just six months on the job. Lawmakers have long been disturbed about fraud that the nonpartisan auditor documented earlier in the department's Child Care Assistance Program for low-income working parents, and the slow pace of an ensuing investigation into the department's inspector general that remains incomplete.

The overpayments were for tribally administered programs that use medication to ease the symptoms of withdrawal from opiates. While clients took the medications at home, the tribes, following the department's instructions, billed the state $427 a day last year and $455 this year — a rate reserved for in-clinic treatment — instead of the proper $23 daily rate.

The overpayments were made with Medicaid funds, so the state agency believes it must repay the entire $29 million, though the federal government hasn't sought a refund yet.

Harpstead said in a separate statement that she did not dispute the legislative auditor's assessment that current law requires her department to try to recover the money from the tribes, but that she hopes the Legislature, her agency and the tribal governments can reach a solution.

Taxpayers should not be forced to foot the bill, GOP state Rep. Joe Schomacker, of Luverne, said in a statement. Schomacker, the lead Republican on a House health and human services budget panel, said the department should find the money within its own $18 billion budget instead.

Republican state Sen. Michelle Benson, of Ham Lake, who chairs the Senate Health and Human Services Committee, said in a statement that several levels of managers failed miserably.

"If none of them are going to take responsibility, none of them should keep their jobs," she said.

The Leech Lake tribal government, which got a briefing Monday from Legislative Auditor James Nobles, found nothing to contest, said Lenny Fineday, its government relations attorney. He said they endorse the auditors' recommendation for changing a state law that requires the department to recover overpayments that result from its own errors.

Fineday also said the tribal government used the money only for programs to fight and prevent addiction, and probably saved the state and federal governments money in the long run.