Internal Audit of Minnesota DHS Confirms Allegations of Whistleblower Who Was Retaliated Against


An internal audit released Tuesday of the Minnesota Department of Human Services’ Behavioral Health Division confirms some of the allegations raised by a whistleblower last year.

Faye Bernstein, formerly a compliance officer for the Behavioral Health Division (BHD), said during an August Senate hearing that she was retaliated against by DHS bureaucrats for expressing concern over “substandard and noncompliant” state contracts approved by the agency.

“That’s why I exist at DHS. It is just my job to notice these things and to then point them out,” she said during the hearing. “The history had been that when I would point out those errors—again, typical errors—they would be handled by management. Normally my recommendations probably would be followed.”

According to Bernstein, she was eventually escorted from her office, temporarily banned from DHS property, and was placed on leave pending an investigation. She has since been reassigned to other responsibilities.

But Tuesday’s audit seems to at least partially vindicate Bernstein.

The internal audit found that “BHD lacked internal controls to prevent a high number of violations of Minnesota Statutes 16A.15 and 16C.05 related to expenses and contract obligations.”

“We found that BHD incurred over sixty violations of two Minnesota Statutes which govern state agency payments for expenses and contracts during State Fiscal Year 2019. According to these statutes, payments may not be made prior to an obligation, and work may not begin on a contract until an encumbrance is recorded for the amount of the contract liability,” states the audit.

The audit also found that BHD management did not always follow Minnesota law or DHS policies when it came to conflicts of interest, did not have a sufficient process for verifying that conflicts of interest forms were completed or that “real or perceived” conflicts of interest were properly vetted, and developed their own conflicts of interest process.

“We discovered during our review that several conflicts of interest may exist between BHD staff, vendors, and third-party businesses outside of DHS,” the report explains. “According to the DHS Ethics Officer, BHD staff and management did not disclose other potential conflicts of interest that we identified during our review as required by statute and BHD procedure. In addition, BHD management did not properly mitigate any of the potential conflicts that we identified.”

Additionally, the audit found that “BHD did not ensure that managers, supervisors and staff received adequate training on grant management.”

“We learned in our interviews with BHD personnel, which included entry level staff up to senior management, that BHD did not have a process to confirm that employees have received appropriate training on grant management,” the audit states. “In addition, BHD did not have an onboarding process for new employees to guide them in how to manage contracts or grants, or how to comply with OGM policies.”

Other key findings of the audit include:

  • BHD approved a grant for an “entity that was not registered with the Secretary of State.” The division did not “verify that a grantee was in good standing with the Secretary of State prior to approving a contract” and approved a grant for “an organization which was dissolved by the Minnesota Secretary of State in March 2018.” Rather than contracting under the name of the dissolved organization, BHD revised the final contract to list the organization’s owner as the grantee.
  • The division did not “conduct due diligence when approving advances to grantees.” In 14 instances, BHD demonstrated a “lack of diligence and scrutiny” that “exposes DHS to risk of unrecoverable advances to financially unstable grantees and is contrary to direction provided by the Office of Grants Management and their federal counterpart, the Office of Management and Budget.”
  • BHD lacks internal controls to prevent “double-billing by Women’s Recovery Services grantees.” The Women’s Recovery Services grant provides services to women with substance use disorders who are pregnant or have children under the age of 19. According the audit, BHD management does not have “controls in place” to prevent grantees from billing both Medicaid and the grant for the same service.

The audit revealed that BHD funded approximately $361 million in Fiscal Year 2018 and $354 million in Fiscal Year 2019 for chemical dependency and mental health services. The vast majority of the funding sources for BHD are state dollars.

The full audit can be viewed below:

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Anthony Gockowski is managing editor of The Minnesota Sun and The Ohio Star. Follow Anthony on Twitter. Email tips to [email protected].
Photo “Minnesota Capitol” by Gabriel Vanslette. CC BY 3.0.







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