Nonprofit organizations and other agencies awarded grants by the Department of Health and Human Services overstated personnel costs by $870,000 because of insufficient controls over the grant award and payment process, according to a legislative audit presented to lawmakers on Wednesday.

The audit found that over the 2016 and 2017 fiscal years the department overpaid four grant recipients $176,000, and that those grantees also improperly categorized $682,000 worth of salaries as federal matching funds, thereby receiving funding they otherwise wouldn’t have qualified for. Legislative auditors said they were unable to determine overpayments for the other six grant recipients they had selected for sampling because the organizations’ grant applications did not include sufficient detail but that it is likely that overpayments occurred for other grant recipients, too.

The auditors found that the overpayments occurred at least in part because grantees were awarded funding to pay for employees whose positions were also funded through other grants, meaning that the funding from the grants paying for their position added up to more than 100 percent of the cost of their salary and benefits. According to the audit, 33 of 134 positions had more than 100 percent of the cost of their salary and benefits funded by grants.

“Overpayments occurred partially because grantees were awarded funding for the same position across multiple grants that exceeded 100 percent of the employee’s time and effort,” the audit said.

For example, one employee surveyed had 75 percent of his or her salary paid for through Family Resource Centers funding, 25 percent through the Children’s Trust Fund and 45 percent through the Supplemental Nutrition Assistance Outreach Program (SNAP), for a total of 145 percent of their salary funded. Though the employee’s salary and benefits totaled only $55,485, their employer, who is not identified by name in the audit report, received $80,453 in funds between the three grant programs for the employee’s salary.

Of the four grantees surveyed, one collected $83,118 in overpayments for 11 employees, another $51,684 for 10 employees, a third $39,042 for 22 employees and the fourth $1,986 for two employees. Each also improperly categorized anywhere from $32,173 to $404,051 of their employees' salaries as federal cost share.

The audit also took issue with the lack of detail in the grant applications reviewed, noting that 78 of 170 grant applications reviewed didn’t provide enough information, such as the name of the employee or a position number, to determine if the grantees had requested funding beyond what was necessary to pay for the position. The audit found that one grantee received more than $2 million in funding for salaries and benefits in a fiscal year but offered “only minimal detail” about the positions or employees funded.

The audit said that the overpayments were a result of the Department of Health and Human Services Director Richard Whitley’s office, which houses the grants management unit, not having a process in place to verify if allocations on grant applications and payment requests were reasonable and appropriate. It also noted that grants are awarded both directly from the director’s office and from different divisions within the department, which prevented both the office and divisions from noticiting the “unreasonableness” of the grant awards and payment requests.

“The Director’s Office needs to improve controls over grant awards and payments,” the audit said. “Grantees received payment for services that exceeded the cost to provide the service.”

Some employees who were overpaid carried out responsibilities under both state and federal grants, which were sometimes related but other times not at all. The audit concluded that some services provided may have been less than what was paid for.

In one case, the audit found that one employee’s salary and related time and effort was charged 100 percent to the federal SNAP program but the employee was also responsible for providing service to state-funded programs, too.

“Based on discussions with Office personnel, the state program activities for which the grantee was reimbursed have very little similarity with the SNAP program,” the audit said.

Two of the four grantees analyzed in depth also received overpayments of nearly $12,000 when amounts requested in June 2016 payment requests were also included on July 2016 requests. The audit said that costs were duplicated in both fiscal years because the staff reviewing payment request did not completely understand the accounting process.

The audit suggested that it may be more cost-effective for the department to adopt policies to fix these issues moving forward than to attempt to recover the overpayments. Auditors noted that it is difficult to identify which funding source an overpayment might relate to because they were widespread between different funding sources.

“Because identifying overpayments requires a detailed comparison of each payment request for multiple grants, a significant commitment of DHHS resources would be necessary to determine all overpayments,” the auditors wrote. “... We believe DHHS’s resources would be better spent taking action to correct the issues causing the overpayments than recovering past overpayments.”

During a hearing on the audit, Assembly Majority Leader Teresa Benitez-Thompson asked auditors what the “gold standard” for being able to track grant awards would be. Audit Supervisor Shannon Ryan said that auditors compiled the information in Excel to determine that some of the employees had more than 100 percent of their salaries funded through grants.

“Each grantee has to be monitored both fiscally and programatically,” Ryan said.

Other recommendations auditors proposed, all which the department accepted, include implementing a department-wide approach toward monitoring grantees, identifying and developing controls for funding interrelated state and federal activities and requiring grantees to provide detail before using state funds to obtain additional funding from other sources. In a letter, Department of Health and Human Services Director Richard Whitley promised that full implementation of the recommendations would be completed department wide no later than July 1.

In March, the U.S. Justice Department released an audit that found that the Division of Child and Family Services, housed under the Department of Health and Human Services, erred in its process of granting subawards for four victims of crime programs — which led the approval of $4 million in excess awards — and that the state could not support a total of $1.87 million in subrecipient expenses. The division administrator, Kelly Wooldridge, stepped down in April in a move the state says was unrelated to the federal audit.