Agency’s cash crunch investigation widens
The state’s multicounty grand jury is looking into allegations of financial mismanagement at the Oklahoma State Department of Health as top officers continue to resign or get forced out in the wake of the agency’s sudden cash crunch.
Officials with Attorney General Mike Hunter’s office, which convenes the multicounty grand jury, declined to comment Thursday. The health department’s chief financial officer, Mike Romero, and its new general counsel, Julie Ezell, were seen leaving the attorney general’s office around lunchtime. Both declined to comment.
The multicounty grand jury recessed until January after its foreman gave a brief update to District Judge Thomas E. Prince at the Oklahoma County courthouse.
Meanwhile, a bipartisan House committee formed to investigate the health department and other agencies will begin meeting Dec. 18. Rep. Josh Cockroft, R-Wanette, the committee’s chairman, sent wide-ranging subpoenas Thursday to top budget officials and aides to Gov. Mary Fallin.
Cockroft said the House committee investigation was not criminal in nature. But he noted the House has broad authority under the state Constitution and House rules to subpoena witnesses, compel testimony and produce evidence.
The committee sent subpoenas to Preston Doerflinger, Fallin’s finance secretary and interim commissioner of the health department; Denise Northrup, acting director of the Office of Management and Enterprise Services; and Chris Benge, Fallin’s chief of staff.
“The committee will focus its investigation into the finances, state appropriations and other financial resources of the Department of Health and how they were managed,” Cockroft said in a news release. “The scope of the committee’s investigation could expand to other agencies.”
In a statement, Gov. Mary Fallin said her office is reviewing the subpoenas but wants to make sure any responses won’t interfere with other investigations and audits by Hunter and State Auditor and Inspector Gary Jones. She said legislative leaders have continued to be briefed about the issues with the health department.
The multiple investigations come as top leaders continue to resign or be forced out at the health department. Earlier this week, Chief Operating Officer Deborah Nichols resigned, and the agency’s human resources director, Jacqueline Pettit, was fired, a spokesman confirmed.
Their departures follow the resignations of former Commissioner Terry Cline, Senior Deputy Commissioner Julie Cox-Kain and Felesha Scanlan, a top lieutenant of Cox-Kain who was business planning director. Former general counsel, Don Maisch, and another top attorney, Patricia Cantrell, also left the agency. Meanwhile, Internal Auditor Jay Holland is on administrative leave.
Doerflinger earlier said mismanagement at the health department stretches back to 2011 and involved multiple funds being moved around to cover shortfalls and present a balanced budget to lawmakers and state budget officials.
Among other issues, auditors and investigators are looking at the way contracts were drawn up in 2011 that advanced a total of $8.5 million in health department funds to the Tobacco Settlement Endowment Trust. (In a 2000 statewide ballot initiative, voters gave the trust authority to use interest earnings from a national legal settlement with tobacco companies to go toward tobacco prevention, cancer research or health programs.) The health department contract with TSET in 2011 was for the Certified Healthy Communities and Schools grant programs, which require participants to develop healthy policies and strategies.
The contract arrangement to provide such a large amount of money up front is highly unusual in state finance, several officials familiar with contract arrangements told Oklahoma Watch. The first contract was signed in May 2011 and provided $3.5 million for the communities program. The contract was then amended in December 2011 to provide another $5 million for the schools program.
TSET officials referred questions about the contract to the health department but said the Certified Healthy program was passed by the Legislature in 2010. Since 2011, TSET has made $4.9 million in Certified Healthy grants to communities, schools and school districts.
“Criteria for the grant program was created in conjunction with OSDH,” TSET spokeswoman Julie Bisbee said in an email. “TSET promoted, staffed and administered the execution of the program, as TSET’s primary function as a state agency is to make grants to improve health.”
The three-year contract term expired at the end of 2013, but both the health department and TSET continued making grants and providing administrative support for the grant programs until the programs were suspended this year.
Tony Sellars, health department spokesman, conceded the contract was not properly monitored.
“The money was transferred pursuant to the terms of the original contract which called for a ‘pro-forma’ payment,” Sellars said in an email. “The originators of the contract are no longer with OSDH.”
Oklahoma Watch has requested additional financial information and emails regarding the expenditure of grant funds and the TSET contracts, but that information has not been provided, with health department officials saying documents are under legal review.
The cash crisis at the health department reached a critical point in August as former leaders scrambled to find money to make up shortfalls in several internal accounts. Officials canceled recently renewed contracts for child abuse prevention programs and federally qualified health centers. They billed consolidated city-county health departments in Oklahoma and Tulsa counties new charges for sexually transmitted disease testing and medication costs. They also asked for and received about $3 million left in the account at TSET for the Certified Healthy Communities and Schools grant programs.
As it finished an eight-week special session to deal with other budget matters, the Legislature approved a $30 million supplemental appropriation to the health department so it could make its payroll, reimburse funds from restricted accounts and close out accounts from prior budget years. But lawmakers conditioned the emergency funding on a 15 percent cut in the agency’s appropriation for the 2019 fiscal year.
Furloughs are still in effect at the health department for employees making more than $35,000 per year, although a planned reduction in force has been put on hold. The agency has about 2,000 employees.
“The $30 million supplemental appropriation did not eliminate the need for additional actions,” Sellars said in an email Thursday. “No timetable has been established for those actions at this point.”