Table of Contents
Ready to See Results?
From strategy through execution, Atlantic Health Strategies integrates compliance, operations, and growth into durable, measurable results. Let’s put our expertise to work for your organization.
Answer First: What the OLA Found, and Why Minnesota Grantees Should Care Right Now
If you hold a Minnesota DHS behavioral health grant, read the January 6, 2026 Office of the Legislative Auditor performance audit as a roadmap for how the Behavioral Health Administration will tighten grantee oversight in 2026. OLA concluded that BHA “did not comply with most requirements tested for mental health and substance use disorder grants and did not have adequate internal controls over grant funds.”
DHS distributed more than $425 million in grants to 830 grantees between July 1, 2022, and Dec. 31, 2024. The 72-page performance audit outlined 13 findings of inadequate internal controls, including improper grant agreements, grant payouts prior to agreements being finalized, and grant overpayments.
Legislative Auditor Judy Randall told the Legislative Audit Commission she had never seen documents backdated or created during an audit. “This was definitely the most egregious thing I have seen, maybe in my whole time working at OLA,” Randall said. That single sentence tells every operator in Minnesota how surveyors will approach files this year.
The Specific Numbers Minnesota Operators Should Have on the CFO's Desk
Forget the high-level summary. The numbers are what matter when a founder sits down with the CFO and the grants administrator.
- Of 51 grant agreements, more than half of the progress reports were missing or past due.
- BHA could not prove it completed 27 of 67 required monitoring visits, and for 24 visits involving 11 grantees, it could not provide any documentation.
- A grantee received $672,647 from BHA for one month’s work but could not provide any documentation or proof that any work was actually completed, and the grant manager who approved this payment left the agency only days after approving the grant to take a job with the recipient.
- Incomplete financial reconciliations for 63 of 71 grant agreements.
- In a survey of employees at the Behavioral Health Administration, 73% of respondents said they did not receive sufficient training to manage grants.
If you operate in Minnesota, assume every one of these findings becomes a focus area when BHA staff next show up at your door. As Randall put it plainly to lawmakers about the fabricated records: “It wasn’t just one individual that created or backdated the documents. We do believe it was a systemic effort.”
The Conflict-of-Interest Pattern Will Draw Federal Attention
One case in the audit reads like a compliance training slide. A BHA grant manager approved the $672,647 single-month payment, quit state employment days later, and then billed the same grantee for consulting work. Sen. Ann Rest, DFL-New Hope, chair of the Legislative Audit Commission, said she expected a change in law to mandate a cooling-off period before former department employees can be hired by grant recipients. Operators should assume that statute passes and structure vendor and consultant relationships accordingly.
The story is not just a state story. On January 23, 2026, the U.S. House Committee on Oversight and Government Reform wrote directly to Judy Randall, opening an investigation into “reports of widespread fraud in Minnesota’s social services programs” and requesting documents related to OLA’s review of DHS. When a state agency backdates records and federal Medicaid fraud investigations run in parallel, HHS-OIG, the U.S. Attorney’s Office, and CMS start asking different questions of grantees, not just of the state.
The enforcement backdrop is not theoretical. The U.S. Attorney’s Office for the District of Minnesota has charged 78 defendants in the Feeding Our Future scheme, which prosecutors describe as the largest COVID-19 fraud scheme in the country, with losses of more than $250 million. That is the environment your Minnesota grant now sits inside.
What Minnesota Grantees Should Do Before BHA Tightens Up
Acting Commissioner Shireen Gandhi has already told operators what is coming. She told lawmakers that “the findings provide us with a road map for our focus going forward to continue strengthening oversight and integrity of behavioral health grants.” Read between the lines. BHA will catch up by pushing the documentation burden onto grantees.
Here is what AHS tells Minnesota clients to do this quarter, before that wave hits:
- Reconcile every open grant agreement line by line. Confirm the effective date, the deliverables, the reporting cadence, and whether any payments were issued before the agreement was fully executed. OLA already found BHA paid some grantees for work performed before it fully executed the grant agreements. If that describes your file, document the timeline now.
- Rebuild your progress report calendar. With more than half of statewide progress reports missing or late, BHA will start enforcing deadlines hard. Map every FY 2026 due date and assign a named owner.
- Reconstruct the monitoring file. Do not rely on the state’s file. Build your own. For three visits to one grantee, documentation was created in February 2025, after the audit began, despite the visits supposedly occurring in May 2024, October 2024, and January 2025. If BHA’s file was fabricated, yours is the only real record.
- Tighten conflict-of-interest disclosures. Board members, executives, and grant managers all need documented relationships (or non-relationships) with any current or former DHS or state employee.
- Reconcile expenditures against your approved budget every month. Unsupported costs and missing financial reconciliations were repeat OLA findings. Do not let them repeat in your file.
If your team cannot do this in 30 days with current staffing, that is an operational backbone problem, and it is solvable. It is not solvable after a clawback notice arrives.
The Wider Signal for Behavioral Health Operators Outside Minnesota
Minnesota is the loudest state right now, and that matters for operators in Florida, Texas, and Ohio, where Medicaid fraud investigations and legislative audits are running in parallel. The House Oversight letter flagged the same OLA pattern in the 2019 Childcare Assistance Program review and the 2024 Oversight of Feeding Our Future report. When those histories stack, federal prosecutors read the audits.
The funding side is also shifting. In late March 2025, SAMHSA’s abrupt termination of pandemic-era grants resulted in the cancellation of around $27.5 million from DHS’ Behavioral Health Administration, covering school-based mental health services, naloxone access, and treatment and recovery supports. A federal judge in Rhode Island temporarily blocked the cuts, and the Trump administration eventually moved to restore roughly $2 billion in federal grant money for mental health and addiction programs nationwide. The volatility is the point. When federal dollars contract and state oversight tightens at the same time, operators who keep their grants are those with clean files, current reports, and a documented monitoring trail.
OLA writes audits. Federal prosecutors read them. Plan accordingly.
Frequently asked questions
How much grant money did the Minnesota OLA audit actually cover?
The audit examined behavioral health grant activity from July 1, 2022 through December 31, 2024. During that window, DHS distributed more than $425 million to 830 grantees, per CBS Minnesota’s reporting on the OLA findings. The full 72-page report is published by the Minnesota Office of the Legislative Auditor.
What were the most serious findings against the Behavioral Health Administration?
OLA issued 13 findings of inadequate internal controls. The most consequential were progress reports missing or past due on more than half of 51 tested agreements; 27 of 67 required monitoring visits BHA could not verify; a $672,647 single-month payment BHA could not support with documentation; incomplete financial reconciliations for 63 of 71 grant agreements; and documents that BHA staff backdated or created after the audit had already begun. An internal survey found 73% of BHA respondents said they did not receive sufficient training to manage grants.
Does this audit affect grantees, or only DHS?
Both. The findings are formally against BHA, but Acting Commissioner Shireen Gandhi told lawmakers the findings “provide us with a road map for our focus going forward to continue strengthening oversight and integrity of behavioral health grants.” In practice, BHA will push tighter documentation, monitoring, and reporting requirements onto grantees. Operators holding current Minnesota DHS behavioral health grants should expect a more aggressive monitoring posture in FY 2026.
What should a Minnesota behavioral health operator do right now?
Reconcile every open grant agreement against actual payments and deliverables; rebuild a progress report calendar with named owners for every FY 2026 due date; reconstruct your own monitoring file for every BHA site visit rather than relying on the state’s records; refresh conflict-of-interest disclosures, especially any relationships with current or former DHS staff; and run a monthly expenditure-to-budget reconciliation. Grantees who keep funding through the next cycle will be those whose files stand on their own, without depending on BHA records that OLA has already flagged as unreliable.
References
- Minnesota Office of the Legislative Auditor, Department of Human Services: Behavioral Health Administration Grants Performance Audit (Jan. 6, 2026)
- CBS Minnesota, “Audit of Minnesota DHS grant programs finds ‘widespread failures in oversight’” (Jan. 7, 2026)
- U.S. House Committee on Oversight and Government Reform, Letter to Legislative Auditor Judy Randall (Jan. 23, 2026)
- KARE 11, “Legislative auditor on document fabrication: ‘The most egregious thing I’ve seen’” (Jan. 2026)
- Minnesota Senate Republicans, “OLA audit finds widespread failures, fabricated documentation at DHS’ Behavioral Health Administration” (Jan. 6, 2026)
- FOX 9, “Feeding Our Future: 78th person charged” (Nov. 2025)
- Minnesota DHS, Statement from Temporary Commissioner Shireen Gandhi on termination of SAMHSA grants (March 2025)
- NPR, “24 hours of chaos as mental health grants are slashed then restored” (Jan. 15, 2026)
- KAXE, “Auditor zeros in on drug, mental health grants” (Jan. 7, 2026)