Scathing State Audit Finds Possible Fabrication and Major Oversight Failures in Minnesota DHS Behavioral Health Grants

A comprehensive audit by the nonpartisan Office of the Legislative Auditor (OLA) identified widespread control failures and troubling practices within the Minnesota Department of Human Services' (DHS) Behavioral Health Administration (BHA) grant program. The report raises questions about missing oversight, incomplete monitoring, and documents that appear to have been created or altered after auditors began their review.

Key Findings

According to the OLA report, between July 1, 2022, and Dec. 31, 2024, DHS distributed more than $425 million in grant funding to 830 organizations, most of them nongovernmental. Many of the grants were intended to support people with substance use disorders and mental health needs.

Auditors noted multiple missing progress reports and said BHA could not demonstrate that it completed required monitoring visits; some monitoring events had no documentation at all. Investigators also identified records that appeared to be backdated or created only after the audit began, which could indicate attempts to retroactively manufacture evidence of compliance.

The audit highlights a specific case in which a grant manager approved more than $600,000 in payments to a grantee and later left the agency to work for that same organization, raising conflict-of-interest concerns.

'The OLA report shows a complete breakdown in how DHS’s Behavioral Health Administration manages hundreds of millions in taxpayer-funded grants,' Republican State Sen. Mark Koran said in a press release. 'BHA failed to verify that grantees were providing the services they were paid for, failed to put basic financial controls in place, and then created documentation after the fact to mislead auditors.'

Employee Feedback and Institutional Concerns

An internal employee survey cited in the report found that 73% of responding staff said they had not received the training necessary to administer grants effectively. One staff comment included in the report said executive leadership 'repeatedly shows staff that they won’t take the staff’s concerns or questions seriously until something serious happens or it makes the news.'

The OLA concluded that the state did not comply with most of the requirements tested for mental health and substance use disorder grants and lacked adequate internal controls over grant funds.

Political and Public Reaction

Lawmakers from the Republican caucus called for immediate answers and accountability. Republican House Speaker DeMuth described the report as 'shocking' and demanded investigation of the apparent backdating and potential falsification of documents. Critics urged leadership changes and stronger oversight.

The report arrived amid a broader fraud investigation in Minnesota that prosecutors have said could involve substantial sums. That larger probe has increased scrutiny of state agencies and political leaders.

'I take the report seriously. I accept responsibility for the findings,' Acting DHS Commissioner Shireen Gandhi said on Monday, adding that the report 'provides us with a roadmap for our focus going forward to continue strengthening oversight and integrity of behavioral health grants.'

Fox News Digital sought comment from Gov. Tim Walz's office. The report and its findings were also widely circulated on social media, including by an X account run by current and former DHS staffers and by commentators calling the audit a 'bombshell.'

Next Steps

The audit recommends strengthening training, improving internal controls, completing required monitoring, and ensuring documentation integrity. Lawmakers and the DHS face pressure to implement reforms and to investigate possible conflicts of interest and the origins of questionable documentation.

The OLA report stops short of alleging criminal wrongdoing; its findings focus on compliance failures, documentation gaps, and control weaknesses that warrant further review and corrective action by DHS and oversight bodies.