There is a lack of transparency in spending, budgeting discrepancies and longstanding financial mismanagement at the Oklahoma Department of Mental Health and Substance Abuse Services, according to an independent legislative investigation into the agency.
Findings were reported by Regina Birchum, Director of the Legislative Office of Fiscal Transparency, in front of the House of Representatives' select committee Monday morning.
The hearing was the third in a series hosted by House lawmakers as they try to get a clearer picture of the department's current financial standing, its future appropriation needs and whether fulfilling a $6.2 million supplemental request will be enough to keep it running until July.
"It's a breath of fresh air to have someone who actually has answers and numbers and reasoning and logic," Rep. Dell Kerbs, R-Shawnee, said during the meeting.
The agency's interim chief financial officer, Skip Leonard, testified before the committee last week, but lawmakers grew visibly frustrated as he failed to provide substantive answers to questions about the budget he is tasked with overseeing.
The day after Leonard's appearance, a new job posting for a full-time CFO appeared on the department's website.
Birchum said the department of mental health has been cooperative, but her investigation's timeliness has been impacted by its inability to obtain materials, which may be a result of the large number of new personnel on staff. The mismanagement goes back for years, she said, suggesting many of the financial issues currently under investigation were "inherited" by the new administration.
'Unexplained' shortfall calculation
Leonard and Department Commissioner Allie Friesen testified that when they were first made aware of a budget deficit, the department was short $67.3 million. They both said the number was brought down to $43 million with cost-saving measures, but have not been able to clearly demonstrate how.
Select committee chair Rep. Mark Lawson, R-Sapulpa, said lawmakers want to verify the difference so the legislature can make an informed decision about the department's true financial needs, this fiscal year and beyond.
Birchum said LOFT investigators were only able to account for part of the reported savings.
"We've been able to identify $33.6 million coming off the original $63.7 million budget shortfall," she said. "That leaves $27.4 million in unexplained savings."
The department has requested $6.2 million from the legislature to stay afloat until July, and that calculation is likely based on its overall shortfall calculation, reiterating the importance for accuracy.
'Significant' discrepancies between budget, actual expenditures
Birchum said the agency needs a new budget that "reflects reality," unintentionally drawing laughs from lawmakers in the room.
Rep. Marilyn Stark, R-Bethany, asked whether she believes the agency needs to create a budget "from scratch."
"I think we need to go back to basics," Birchum said. "Take a look at what the agency is statutorily or constitutionally required to provide, get an estimate on those actual costs, and start building out line items for what they have to do."
LOFT reports the department incorrectly budgeted all but about a dozen of its accounts last fiscal year, with 115 accounts given a total of $29.3 million more than their actual need and 66 accounts requiring a total of $57.6 million more than they were given.
Birchum said the agency is a "prime candidate" for a zero-based budget, which requires justifying every expense, including recurring ones, based on their current need and value, rather than simply using the previous year's budget as a baseline.
"The agency's budget on paper does not correspond with how they actually spend money," she said.
She said there is a "high degree of fungibility" at the department and money isn't always used for its intended purpose, often used to backfill previous years' budgets or repurposed for different accounts. Birchum said the issue is exacerbated by the agency's lack of an official revolving fund.
"The agency does not have a revolving fund in which it carries over monies from one fiscal year to the next. The agency has stated that this is intentional, that they believe that every extra dollar they have should go out to providers," Birchum said. "But we would note that the agency, in practice, has been having a revolving fund by over-encumbering funds to different account codes. And I suspect the reason that an agency might do something like that is to give themselves budget flexibility."
Lawmakers noted the agency underwent an audit in 2020, but Bircum said recommendations from its findings don't seem to have been taken into consideration.
"In our opinion, it doesn't seem like much changed," she said.
Title XIX funds
Birchum recommended lawmakers consider moving management of Title XIX funds to the Oklahoma Healthcare Authority, or OHCA, a suggestion also posited by Rep. Kyle Hillbert, R-Bristow, at last week's meeting.
Title XIX are federal funds, authorized by the Social Security Act, that states receive to partially cover the cost of their Medicaid programs.
In Oklahoma, the OHCA pays Medicaid claims upfront and then requests reimbursement from the Department of Mental Health and Substance Abuse Services for the state share.
LOFT reports it sometimes took the department up to six months to pay OHCA back.
Birchum also said the department's request for Title XIX reimbursements for the 2025 Fiscal Year was $40 million less than it spent during the previous 12-month period, substantially underestimating its need.
What happens next
LOFT is expected to keep looking into the department's finances, along with the state auditor and a "special investigator" Gov. Kevin Stitt has yet to name.
House select committee hearings will continue this week. Still on the docket to testify are the department's former chief of staff, the state's CFO and mental health care service providers.
Session ends on the last Friday of next month.
Copyright 2025 KOSU
