REPORT OF WHISTLEBLOWER INVESTIGATION DEPARTMENT OF SOCIAL AND HEALTH SERVICES DIVISION OF MENTAL HEALTH NO.

06-008 AUGUST 3, 2006

Notice of Filing and Transmittal August 3, 2006 Attached is the official report on whistleblower case No.06-008 with the Department of Social and Health Services. This report is transmitted by the State Auditors Office pursuant to Chapter 42.40 of the Revised Code of Washington, the Whistleblower Act. Questions about this report should be directed to, Senior Investigator Sandra Miller at (360) 902-0378, or Director of State Agency and Higher Education Audits Jim Brittain at (360) 902-0372. BRIAN SONNTAG, CGFM STATE AUDITOR cc: Robin Arnold-Williams, Secretary, Department of Social and Health Services Kathy Brockman, Chief Administration Officer, Department of Social and Health Services Susan Harris, Executive Director, Executive Ethics Board

The State Auditors Office received an assertion of improper governmental activity at the Department of Social and Health Services. This assertion was submitted to us under the provisions of Chapter 42.40 of the Revised Code of Washington, the Whistleblower Act. We investigated the assertion independently and objectively through interviews and by reviewing relevant documents. This is the result of our investigation. Assertion: A Supervisor with the Mental Health Division of the Department of Social and Health Services issued a client services contract without authorization or justification. We found no reasonable cause to believe a Supervisor with the Mental Health Division issued a client services contract without authorization or justification. However, we did find reasonable cause to believe an improper governmental action occurred when the previous Director of the Mental Health Division directed that money be paid to a contractor without documentation that services had been performed. RCW 43.88.160(3) Fiscal Management-Powers and duties of officers and agencies. It shall be unlawful for the treasurer to disburse public funds in the treasury except upon forms or by alternative means duly prescribed by the director of financial management. These forms or alternative means shall provide for authentication and certification by the agency head or the agency heads designee that the services have been rendered or the materials have been furnished;...The responsibility for recovery of erroneous or improper payments made under this section shall lie with the agency head or the agency heads designee in accordance with regulations issued pursuant to this chapter... RCW 42.52.160 Use of persons, money, or property for private gain. (1) No state officer or state employee may employ or use any person, money or property under the officers or employees official control or direction, or in his or her official custody, for the private benefit or gain of the officer, employee, or another. On September 24, 2004 The Department of Social and Health Services entered into a client service contract with a psychiatric hospital to ensure the hospital continued operations.

We reviewed the contract and correspondence between the previous Director of the Mental Health Division and other Department staff along with the Chief Executive Officer of the Hospital. We found the previous Director of the Mental Health Division directed the Supervisor of the Mental Health Division to enter into a contract on September 24, 2004. The contract stated the contractor would be paid a maximum of $310,000 for services as outlined in the statement of work, including: Maintain operations of the hospital. Keeping licenses current for staff. Maintain hospital accreditation with the Joint Commission on Accreditation of Hospitals. Maintain documentation of the orientation provided to each new employee. Provide staff with ongoing in-service education. Ensure staff has cardiopulmonary resuscitation and emergency first aid training. Provide services to clients who have been referred. The general terms and conditions of the contract state: A. The Department shall not make any payments in advance of or in anticipation of the delivery of services. B. The Department shall pay the contractor only for authorized services provided in accordance with the contract. We found that the one-time payment of $310,000 was made to the hospital on September 28, 2004, prior to services being delivered. The contract stated that as part of the $310,000 payment the hospital would provide services to clients who were referred for treatment. We found no documentation to show if any Department clients were referred. The contract contained no provisions regarding how the Department was to review performance, monitor progress, or evaluate services being provided. During an interview, the previous Director, stated no one instructed him to give these funds to the hospital as he had the authority to make the decision. The Director further acknowledged that the named subject of this assertion was not involved in the negotiations of the contract until it was time to sign the contract. The Director also stated no documentation was kept to ensure the state received a service for the one-time payment of $310,000. Therefore we found reasonable cause to believe an improper governmental activity occurred. AGENCY PLAN OF RESOLUTION The Health and Recovery Services Administration (HRSA) has made the following organizational changes to improve its contracting practices and provide oversight for compliance with department and division policy: HRSA hired a seasoned contracts professional in February 2006 to serve as the Contracts Administrator. This position will oversee the contracting practices for all divisions in HRSA, including the MHD. The Contracts Administrator is well aware of this issue and is implementing procedures to ensure this does not happen again. HRSA centralized its contracts function, creating a new layer of oversight for its contracts processes.

The HRSA Director of Legal Services recently hired to address risk management issues within the administration, reviews contracting issues for potential risks and informs the Deputy Assistant Secretary of needed policy or practice changes. Additional improvements made to internal contracts processes within the MHD: Fiscal staff now reviews contract language to ensure the contract requires that services are delivered before payment is made and that invoices submitted for payment include adequate supporting documentation of the services delivered. This review is completed before the contract is sent to the contractor for signature and before the contract is executed by the MHD contracts officer. Fiscal, program, and contracts staff are increasing their use of performance based measures and tying expectations on service delivery requirements to payments in their contracts, making it clearer that payment is authorized for services rendered. Program Managers and Fiscal staff now ensure that proper documentation is in each contract file for review prior to payment approval. Additional action steps currently in process but not yet completed include: Providing division wide training for all MHD staff by the HRSA Contracts Administrator in September 2006. The training will focus on sound principals of contract management including the prohibition against making payments in advance of services, department requirements for contract monitoring, and the receipt and review of proper documentation prior to payment. Implementing a new MHD Contract Request Tracking Form in August 2006 to capture the review and approvals of Fiscal/Budget staff and supervisors as part of the contract review process. Of further note we would like to clarify that the Director of the MHD at the time the misconduct occurred, September 2004, is no longer employed by the MHD or DSHS. AUDITORS CONCLUDING REMARKS We appreciate the cooperation and courtesies extended to our Office by the Department during this investigation.