More than a decade of faulty budgeting practices and mismanagement at the Oklahoma Department of Mental Health and Substance Abuse Services contributed to the agency's recent financial crisis, according to an investigative report.
The report was requested by Senate Pro Tempore Lonnie Paxton, R-Tuttle, and House Speaker Kyle Hilbert, R-Bristow, after department officials asked for supplemental funds to make it through the last few months of the fiscal year. It was one of multiple investigations spurred by the discovery of the agency's $30 million shortfall.
Lawmakers made an emergency appropriation to the department but never received a straightforward answer from executive staff about how the budget gap came to be. And, as frustration peaked, they overwhelmingly voted to remove former Commissioner Allie Friesen from her post at the head of the department.
Conducted by the Legislative Office of Fiscal Transparency, the June report reveals a myriad of systemic financial issues, starting before and continuing through Friesen's year-long tenure, contributing to the agency's current financial struggles.
Identified problems include "unrealistic" budgeting, poor expense tracking and increased expenditures on services auditors found were unaligned with the agency's mission.
Often, actual spending did not match the agency's budget projections, the report found. The department budgeted $110 million for all Medicaid reimbursements for fiscal year 2025, despite an anticipated total of more than $170 million.
The department also "overencumbered" certain budget line items or intentionally inflated expected costs to create artificial flexibility. According to its former chief financial officer, padding budget items was a traditional practice at the agency, and leftover funds would be redirected to external providers through pended payments.
The agency also struggled to track whether funds went to the right projects, the report said. In one case, lawmakers dedicated $18.5 million for crisis care for children. Auditors found less than $900,000 had been spent through the department code assigned to the initiative.
The department later estimated an additional $2.2 million had been spent toward the effort in other various departments in the agency, but couldn't verify the figures. According to the report, it is unclear how much of the restricted funds for child crisis care remain.
The report also flagged spending on services that fall outside the agency's core mission, which is "to provide services for Oklahomans who are indigent and without a means to pay," according to its website.
Since 2018, spending on professional services, like advertising and public relations, grew 200%, while total agency expenses only increased by 29%. In one example, a former communications director spent a mix of state and federal funds on a hip-hop adaptation of The Nutcracker, complete with dancers, catering and a limited theater release.
Between 2022 and 2024, the agency spent $8 million to promote the 988 mental health crisis line, including a Super Bowl commercial, but auditors found the fixed-rate contracts lacked transparency, with identical invoices and little itemization. One purchase order designated $300,000 for social media "influencers" and another $100,000 for "community/leadership outreach," with no further breakdown.
"[The department's] lack of financial planning and financial discipline created a domino [effect] of spending problems, which were exacerbated by poor accounting and limited oversight," the report said.
Copyright 2025 KOSU
