DHS Clown Car

Governor Asa Hutchinson has been focused on combining small state agencies into bigger agencies to make management of agencies easier.

But, his big problem has not been the small agencies.  It is his large agency, Department of Human Services (DHS).

The most recent of many embarrassments to the Governor is an annual audit that found DHS spent $57 million in “questioned costs” in Arkansas’ Medicaid program. These expenditures can be characterized as not being supported by adequate documentation, made in violation of federal rules, or were not reasonable.

Even if DHS can eventually document and justify all or most of the expenditures, it shows the agency is spending tens of millions of dollars without knowing for sure whether it is for proper expenditures.

This latest failure by DHS is not an isolated event. According to a report by the Democrat-Gazette, “Similar discrepancies have been found in the annual audits for the past four years.“In fiscal 2017, the audit flagged almost $127 million in Medicaid spending. So far, however, the state has only been required to repay about $616,000.” The amount repaid so far is only the federal share of the improper expenditure and does not include the amount of wasted state matching funds that were improperly spent.

DHS Director Cindy Gillespie assured legislators corrections are being made through changes in leadership and more controls within the agency. But DHS has fed legislators the same line in previous years without producing real change.

What can the legislature do? The legislature does not have a budget process that includes agency performance in setting agency budgets.  That means legislators are basically left with putting on angry faces when such reports are made.

The only significant difference this year from the audit hearing of one year ago was that Director Cindy Gillespie actually showed up for this hearing.  She didn’t last year.

The continual failure to ensure that expenditures are properly made is only the tip of the iceberg of DHS woes. The news media has reported on many failures by DHS, but to provide examples we only need to give three examples CFA has previously written about.

  • When Arkansas had to start paying part of the cost of Obamacare Medicaid Expansion (Arkansas Works) DHS had a verification backlog of more than 140,000 Medicaid eligibility cases. How bad was their failure? Almost 60% of the backlog were found not to be eligible but had been receiving benefits anyway.
  • Hutchinson’s DHS botched the effort to implement a computer system. DHS spent tens of millions of dollars on a computer verification system that didn’t work. DHS paid $32 million to a computer contractor who DHS eventually had to fire from the project in 2015. DHS had to get another contractor which meant the estimated cost of the computer system doubled from $100 million to $200 million.
  • In August 2017, Governor Asa Hutchinson pushed through DHS’s award of a contract for information technology services to the highest bidder. The contract was given to Deloitte Consulting, who bid $75.3 million over three years, which was $20.9 million more than the bid by Northrop Grumman. To score the Deloitte bid higher the formula used minimized the importance of cost by making it less of a factor than is common in such formulas.

The only bright spot for state government is that the staff of the Division of Legislative Audit has continually done a good job in spotting problems – problems that DHS seems to be blind to.

With the continual spending problems at DHS we wonder if the root of the problem is a philosophy of spending as much as possible as quickly as possible. Spend, spend, spend and figure it out later, even if that means some expenditures are not allowable and federal funds must be paid back. After all, DHS can rely on Arkansas taxpayers who have to pick up the tab for improper or sloppy spending.