The state office responsible for ensuring government funds are used according to law has determined that the Maine Department of Health and Human Services misspent $13.4 million in federal welfare money.

The state auditor’s finding, released Tuesday, follows the Bangor Daily News’ reporting in June that found DHHS spent funds earmarked for low-income families with children on seniors and disabled Mainers.

The department “took an overly aggressive approach” that signals “troublesome” practices when it comes to managing federal grant awards, wrote Maine State Auditor Pola Buckley in a rare report highlighting “improper management of funds at the agency level that should rise to the attention of the Governor, the Attorney General and the Legislature.”

In addition, she wrote, DHHS was aware its use of the $13.4 million was “questionable,” but it went ahead with the spending anyway. It relied on its “ability to return the Federal funds if the use of these funds was later questioned, rather than first determining if the intended use was allowable,” the auditor’s report states.

The $13.4 million, spent over the course of two years, originated in one federal grant, Temporary Assistance for Needy Families, or TANF, which brings $78.1 million to Maine each year to pay for cash assistance, job training and placement, and child care for low-income Maine families with kids.

Federal law allows the state to transfer up to 10 percent of the $78.1 million each year to a smaller but more flexible federal grant, the Social Services Block Grant, which states can use to pay for a wide range of social services.

But they are required to spend the money on low-income families with children, not the elderly, as the LePage administration did. Federal law specifies that the transferred funds “shall be used only for programs and services to children or their families whose income is less than 200 percent of the income official poverty line,” which works out to about $40,000 for a family of three.

In 2015, Maine DHHS reported to the federal Office of Community Services that it spent the transferred funds — $7.8 million — on services for elderly and disabled residents. The following year, the auditor’s office found, the department spent $5.6 million it transferred from TANF to the Social Services Block Grant on the same types of services for elderly and disabled residents, such as home-delivered meals and in-home personal care.

Maine DHHS transferred the money back to TANF and retroactively covered the expenditures with state taxpayer dollars after the BDN reported on the misuse of funds in a June article. The agency met a Sept. 30 deadline for reversing the transfer of the 2015 funds.

In response to the BDN’s initial reporting on the misuse of TANF funds, Maine DHHS Commissioner Mary Mayhew said, “The BDN has their facts wrong. What we’ve done is to maximize our available resources through the TANF block grant. It is a block grant to the state, which means it affords the state the flexibility. We are in fact supporting more families other than just those who are receiving benefits.”

But the auditor’s report, following the BDN’s finding last month that Maine DHHS had reversed the fund transfers in question, offers further evidence that the state’s health and human services department erred in spending funds earmarked for low-income families with kids on seniors and disabled residents.

“DHHS made an effort to maximize federal funds to cover services for the elderly and disabled, sought clarification from the federal government on technical issues throughout the process and ultimately withdrew our spending plan well within allowable timeframes when we couldn’t determine whether the spending plan would be approved,” DHHS spokeswoman Samantha Edwards wrote in an email.

In its official response to the auditor’s finding, DHHS said the fund transfers “had no net effect” because the department reversed them within the time frame allowed by the federal government.

DHHS also questioned why the state auditor’s office issued an audit finding outside its normal schedule for publishing audit results. Most audit findings appear in the annual single audit report, which the auditor’s office issues each winter in advance of a March 31 federal government deadline.

“Such timing raises serious concerns about the politicization of the State Auditor process and of this matter,” DHHS wrote in its response.

But Buckley noted in the audit report that state law requires the state auditor to “immediately” notify the governor and the Legislature of any “evidences of improper transactions, or of unacceptable practices in keeping accounts or handling funds or of any other improper practice of financial administration.”

“The finding has an unusual character, and I think others need to consider it,” said Buckley, who said the auditor’s office, as far as she knows, has never before issued an audit finding in the way it released the report on the transfer of TANF funds.

“The decision to spend Federal funds on costs unallowed by Federal regulations with the intent of returning the funds to the Federal government if and when the unallowed costs are questioned, does not represent a valid system of internal controls over Federal awards,” the auditor’s office wrote in its six-page report, in addressing DHHS’ response.

“Furthermore, there is no allowable time period where DHHS is permitted by the Federal government to spend grant funds on unallowable costs. The fact that DHHS considers this acceptable is troublesome.”

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News.

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