ST. PAUL — Minnesota’s largest state agency broke state laws at least 55 times in the past year in connection with tens of millions of dollars in contracts, according to documents reviewed by the St. Paul Pioneer Press.
Additionally, the Department of Human Services is under scrutiny for about 150 potential violations of state procurement laws governing spending for outside goods and services.
In all, DHS has logged 205 violation reports this year among spending that totals about $52 million, state documents show. Violations often came in cases where the department allowed vendors and grantees to start work before contracts were signed, and when employees spent money on products and services without permission — although it doesn’t appear any taxpayer funds were actually misspent.
The violations, which were first reported by the Minneapolis-based Star Tribune, drew a rapid response from DHS critics, with several Republican senators announcing they would schedule hearings. They decried it as the latest example of mismanagement by the sprawling $18 billion agency, which has also come under fire recently for mishandling nearly $80 million in federal Medicaid funds.
Most violations occurred because of bureaucratic confusion; paperwork was lost, deadlines were missed, employees did not understand procedures, and the agency did not communicate with vendors in a timely manner.
“I think it is fair to say that we haven’t done as good a job as we should do on following our procedures to make sure we have fully executed contracts so we’re not going through this exception process as often as we are,” DHS Deputy Commissioner Chuck Johnson said in an interview.
In some cases, though, the department knowingly committed violations to keep vital services, such as homeless shelters, from shutting down.
The assertion that the violations put taxpayer dollars at risk, Johnson said, is a stretch too far.
“I think this is internal process, and that’s where we need to clean up, and that’s where we have work to do,” Johnson said.
Which laws were broken?
The state laws in question are designed to ensure taxpayer funds aren’t squandered. The laws say contracts can’t move forward until they’re finalized, and employees can’t use state funds to buy supplies or attend training or conferences without prior approval.
When procedures aren’t followed, a violation report is generated.
There’s a subtle distinction here: Of the 200-plus violation reports reviewed by the Pioneer Press, more than half related to employee spending without prior approval, and it’s unclear if that law was actually broken, since the employees later justified the expense as legitimate.
The law states that employee spending without prior approval may be deemed valid upon “investigation, review and approval” by the agency head, so long as the services or products that were paid for were done so in good faith and without collusion or intent to defraud.
However, in the remaining cases that comprise the bulk of the roughly $52 million, the department clearly broke state contracting law by moving ahead before the contract was finalized and signed by both parties.
Money not misspent
The majority of violations involved contracts worth less than $100,000. About 40 percent of the violations involved contracts worth less than $1,000.
The 205 violation reports logged through Sept. 18 of this year have already surpassed last year’s total. DHS logged 196 violation reports in 2018, an agency spokeswoman said.
While state laws are clear that work cannot proceed without all i’s dotted and t’s crossed on a contract, the violations reviewed by the Pioneer Press don’t paint a picture of money actually being misspent.
In fact, in cases where work begins before a contract is fully finalized, no money actually gets spent until a violation report is completed and senior DHS officials have signed off after determining the money will be spent properly.
A number of the large-dollar violations involved contracts between various layers of government where deadlines were missed, but the work itself — the services to those in need — appears to have proceeded as it always should have.
For example, negotiations for a $3.8 million contract between DHS and Hennepin County for HIV/AIDS services lasted longer than expected when Hennepin County proposed several amendments that required DHS extra time to review. DHS ultimately agreed to the changes, but the delay meant that a fiscal deadline was missed, creating the violation.
DHS’ solution: “In the future, we will have a deadline after which changes to the contract document will not be allowed.”
In some cases, violations occurred because mundane circumstances disrupted ongoing contracts.
Records show that a $2.3 million “interagency contract” between DHS and the state Department of Employment and Economic Development (DEED) was delayed because of high turnover at DEED. New workers had to be trained in the heavily bureaucratic realm of interagency contracts, wherein one state agency pays another for computer services or office space. The delay created a “violation” but didn’t change the agreement between the two agencies, or the money transferred.
Homeless shelters kept open
Sometimes the only way DHS could get timely services to those in need was to essentially violate state contract laws.
On July 1, DHS moved ahead with nearly $3.5 million in contracts for a number of homeless shelters -- before the contracts were “fully executed,” records show.
Why? So emergency homeless shelters wouldn’t have to close.
But if it was so important, why couldn’t they get the contracts done in time? Because Republican and Democratic lawmakers didn’t agree to the funding until the closing hours of a special legislative session May 25, the records show. “Staff did everything possible,” according to a violation report.
The alternative was to follow the law to the letter, which probably would have led to homeless shelters closing -- and residents getting kicked out — for a matter of weeks while paperwork was finalized.
Some “violations” are hardly lawbreaking but bureaucratic Catch-22’s.
In one case, an investigator needed to examine an autopsy report from North Dakota.
“Normally, we get autopsy reports for free,” she explained in a report. But in this case, the report arrived with a $30 bill. At that moment, a violation technically occurred because the $30 hadn’t been approved. The solution, moving forward, is that investigators will get blanket permission to pay for medical records, she wrote.
In such cases — and the majority of the violations fall into this category — Johnson explained that the violation reports act more like a “relief valve,” or an after-the-fact exception to spending laws, rather than any untoward behavior by state employees.
Republicans to hold hearing
Senate Republicans have scheduled a finance committee hearing on Nov. 13 to examine the extent of such violations across state government. Lawmakers have asked the Department of Administration to provide violation reports made by all state agencies.
“This agency is the fastest-growing part of our budget,” said state Sen. Julie Rosen, a Republican from Vernon Center who chairs the finance committee. “We’ve heard about the fraud in child care assistance, we’ve seen the waste in overpayments to the tribes, and now we have abuse by agency staff spending money without approval and filing a ‘get out of jail free’ form each time.”
State Sen. Michelle Benson, R-Ham Lake, called on Democratic Gov. Tim Walz to step in with more oversight of the agency.
“Commissioner (Jodi) Harpstead has been given an impossible task. The CFO at DHS has been trying to fix this problem, but the entrenched bureaucracy is preventing meaningful change,” said Benson, who chairs the Senate health and human services committee.