LOFT report highlights decade of poor budgeting at state mental health department

A new report from the Legislative Office of Fiscal Transparency reveals poor budgeting and a lack of clarity were the cause of the financial crisis at the Oklahoma Department of Mental Health and Substance Abuse Services.

Among dozens of reasons, investigators say the agency spent funds not authorized by the legislature and still paid out raises while in a budget shortfall.

LOFT also says the "poor budget practices appear to have been in place for at least a decade..."

The report gives several recommendations to the department and the state legislature.

Recommendations for the department include:

1. Create an operational budget based on the agency’s statutorily defined duties and that also reflects costs per facility managed by the agency.
2. Execute a policy for the agency to create a continuing revolving fund for the purpose of ensuring that funds are available to pay providers for all contracted services. As the agency must budget against a consumption-based variable, it is prudent policy to maintain some funds in reserve.
3. Create and maintain a master list of contracts depicting, on a county-by-county level, what service is being provided, by whom, for how much, with the contract number and vendor name.
4. Create new internal purchasing procedures that include requiring every transaction to attach supporting documentation into the State accounting system and ensure that ratifications are rarely used.
5. Submit drafts of contracts and contract amendments to OMES Central Purchasing for review and input to ensure terms are clearly stated and cost limits are established.
6. Review all sole source contracts and consider putting the services out for competitive bidding.
7. Establish a system to effectively track spending in accordance with legislative directives, such as services for children in crisis.
8. Establish a review process for determining the cost/benefit of contracts for professional services as well as recording expected outcomes of the contracted services.
9. Ensure that expenditures are recorded to the fiscal year in which services are received, not when the invoice is paid. Additionally, the agency should ensure that invoices are paid within 45 days of receipt.

Recommendations for the state legislature include:

1. Establishing a dedicated class fund for Title XIX Medicaid reimbursements.
2. Eliminating the reimbursement process and payment lag times for Title XIX by delegating management of the State share of Title XIX to the Oklahoma Health Care Authority.
3. Establishing a dedicated class fund for any legislatively directed spending.
4. Determining whether the State should subsidize private providers for a portion of the costs incurred from providing services to clients who are not eligible for Medicaid, and if so, also determining the amount of annual State funds to budget for this expense.
5. Establishing statutory consequences for an agency that fails to address financial or purchasing deficiencies that are identified in a State audit.
6. Requiring any plan to construct a new facility or expand an existing facility be accompanied by an operational plan that includes cost projections.
7. Requiring any new spending or programs that are initiated by federal funds to include a plan for how the agency will support the program after the federal funds are reduced or eliminated.

State Attorney General Gentner Drummond released a statement on the report saying in part, "The LOFT report confirms what I said throughout the legislative session: Gov. Stitt needed to fire Allie Friesen. Instead of acting in the best interests of Oklahoma taxpayers, he acted in the best interest of a failing bureaucrat who never had a good answer for why or how tens of millions of dollars went missing. Thankfully, the Legislature was willing to remove Ms. Friesen so the State Department of Mental Health could benefit from new, more qualified leadership."

Drummond went on to say he has met with Interim Commissioner Retired Rear Admiral Gregory Slavonic and has offered to help department leadership find and recover missing funds.

Oklahoma House Speaker Representative Kyle Hilbert of Bristow issued a statement on the report saying in part, "This report is a critical piece in our joint House and Senate investigation into what went wrong at this agency and gives us a roadmap to improve budgeting practices not just at ODMH, but across all state agencies.”