Auditors question Oklahoma Department of Human Services' use of $10 million in federal funds
The Oklahoma Department of Human Services improperly used $10 million in federal funds to make adoption assistance payments to families without first checking to see whether the adoptive parents financially qualified for the need-based aid, a state audit has found.
The federal funds in question were provided under the federal Temporary Assistance for Needy Families (TANF) program.
Auditors said the funds can be used for certain types of adoption assistance, but only if the families meet low-income eligibility requirements.
State Department of Human Services officials failed to see whether families met financial need requirements and did not specify which families received TANF funds, so auditors questioned the expenditure of the full $10 million.
Sheree Powell, spokeswoman for the Department of Human Services, said federal oversight officials won't receive a copy of the audit for 90 days, so it is not known whether they will seek repayment of some or all of the $10 million that auditors are questioning.
Regardless of what federal officials decide to do, Powell said there is no reason for adoptive families or state budget officials to be concerned.
"It's not going to have a budget impact. It's not going to have an adverse impact to adoptive families or children," Powell said.
"Should they disallow the entire $10 million, what we would simply do is just reduce our federal draw in the future," Powell said. "We have a surplus of TANF funds right now that we are not using."
The agency could continue to provide the adoption assistance payments with state tax dollars, Powell said. The state has about 2,400 fewer children in state custody than it did three years ago, which has freed up funds that could be used for that purpose, she said.
Powell said many states use the funds for foster care and adoption assistance.
"The need for the means tests for adoptive families was never brought to the attention of DHS in the past, so we assumed the eligibility of TANF followed the children into adoption like it does for federal foster care and adoption money," Powell said.
DHS has only been using the funds to assist about one-third of adoptive families — those that were not eligible for other adoption assistance, she said.
DHS officials quit using the funds to help pay for adoption assistance after funding restrictions were called to their attention, Powell said.
DHS employees are now going back to adoptive families that received the funds to see if they would have qualified if a financial means test had been applied, she said.
"We believe that many of them are probably eligible for TANF," Powell said.
Documenting how many families would have been eligible could reduce any amount that the state might be required to repay, she said.
The $10 million in questioned TANF payments were among nearly $10.9 million in federal costs by five state agencies that were challenged by the state Auditor & Inspector's Office in its State of Oklahoma Single Audit Report for fiscal year 2018.
Nearly $600,000 of the other questioned costs were related to federal funds that were improperly used to pay a portion of state retirement benefits.
Under some circumstances, it is appropriate for federal funds to be used to pay state retirement benefits because some state employees' salaries are paid with federal grant money.
However, an issue arose after Oklahoma switched from a defined benefit (traditional pension) to a defined contribution (401(K)-type) plan for new employees.
Under the new plan, agencies are required to match employee contributions into their 401(K)-style retirement accounts, said Shelley Zumwalt, spokeswoman for the Office of Management and Enterprise Services (OMES). At the same time, agencies are required to make contributions into the traditional pension system so that just as much state money per employee will go into that system, she said.
"In December 2017, the federal Department of Health and Human Services notified the state that the portion that agencies pay to the defined benefit plan (related to employees under the new program) would not be allowed for federal funding because it is not going directly to the benefit of that employee," Zumwalt said.
OMES received an appropriation to cover the overcharge to federal programs through Feb. 20, 2018, she said, adding that agencies were notified that after that date they should not charge federal programs for that portion of retirement benefit costs.
"The details are still being worked out with the federal government," Zumwalt said. "In the meantime, agencies audited through the state's Single Audit will have questioned costs ... . OMES is aware and monitoring the issue."