Legislative audit finds repeated grant-management failures at Minnesota DHS behavioral health unit

The Office of the Legislative Auditor told a State Agency Oversight Committee that its performance audit of the Department of Human Services’ Behavioral Health Administration (BHA) uncovered systemic grant-management weaknesses that put taxpayer dollars and program integrity at risk.

"We had a number of findings," OLA Deputy Legislative Auditor Lori Liason told the committee, summarizing the January 6, 2026 report. The audit reviewed grant activity from July 1, 2022, through Dec. 31, 2024, during which BHA spent more than $425 million on behavioral-health grants, including almost $192 million to non‑governmental organizations.

The audit flagged multiple problems: the agency frequently used single‑source awards without adequate justification (OLA questioned roughly $3.1 million in single‑source payments), paid some grantees for work done before grant agreements were executed (OLA identified more than $915,000 in such payments), and missed required financial reconciliations and site visits. In a sample of 44 payments the auditors tested, they identified issues at 11 grantees and questioned nearly $296,000 in payments.

Longstanding closeout and monitoring requirements were often not met, OLA said. The auditors reviewed 55 grant agreements and determined BHA should have conducted 67 site visits but could not show it completed 27 of those visits; many recorded visits were not in‑person. The report also described multiple instances in which final grant evaluations were missing or completed long after final payments were issued.

At the hearing, former and current DHS staff and public testifiers described broader concerns about oversight and culture. "I don't see that anything has changed," said Faye Bernstein, who identified herself as a 20‑year and current DHS employee, alleging that someone had falsified the department's "audit tracker" and marked findings as resolved when corrective work had not been completed. Bernstein said that practice allowed problems to recur.

Commissioner Shireen Gunn told the committee she agreed with the audit's findings and accepted responsibility. "We agree with all the audit findings," she said, and described steps already under way: creation of a Central Grants Office (funded by the Legislature in 2023), elevated leadership for behavioral health in 2024, standardized contract templates, and targeted training for grant staff. She said DHS has added compliance and quality‑assurance positions and is investigating allegations that staff provided false or backdated documents to the auditor; where appropriate, DHS has referred information to the Bureau of Criminal Apprehension.

Committee members pressed the commissioner on when DHS withholds payments, how the agency enforces required documentation during site visits, and whether the department has enough administrative staff to manage hundreds of grants. Commissioner Gunn said DHS is working to strengthen supervisory review and that if staff fail to meet responsibilities after being resourced and trained, "that can include firing" following applicable personnel rules. She also told the committee that many corrective actions are at varied stages of completion and pointed to a 16‑page response DHS provided to OLA describing timelines and assigned responsibilities.

The auditors recommended that the Legislature clarify whether certain legislative appropriations that were treated as payments (rather than grants) should be subject to Office of Grants Management policies or identify what oversight is expected. OLA also recommended that DHS strengthen internal controls, perform timely financial reconciliations, complete required monitoring, and improve training and supervisory oversight for grant managers.

The committee did not take formal policy votes at the hearing on audit recommendations; members called for continued oversight and regular reporting as DHS implements corrective actions. The committee also requested additional follow‑up on specific grant amendments that showed large increases from original award amounts.

The Legislature and DHS will track implementation of the audit recommendations; DHS told the committee most actions are expected to be completed by midyear and all on track by the end of the year, subject to reporting back to the committee.