__ OFFICE OF INSPECTOR GENERAL SYLVIA HERNANDFZ KAUFFMAN TEXAS FIFAITH & HUMAN SERVICES Cofv1r4tss1oN INSPECTOR GENERA! FINAL REPORT NVESIIGAEON TYPE -- DISPOSITION CASE WJMOER - I’ Atlimmmismntive CO NTRAO PROCUREMENj F Exonerated F LE. Assist F Not Sustained W Sustained 22601 r Unfounded - —- — Admin Closure COMPLAINANT Anonvmotts REFERRALS TO: y THIS ftocni I iiiiiset - OiPSCtnerni Counsel Texas Dcpnntnt ofPut,lic Safety aJEcT OF lNvFSTIGTION [ OSK5C,ienIt’nunscT texas Dcpaniwnt ofMotor Vthicles Other. F ilonthnd Security Tnestigatiuns r Socit! Secittity AdistitcsIntiki Heidi Group (TUG), 894 Summit Street Ste. 108, Round Rock. T 78664 PERSONAL, IDENTIFIER(S) - AddiknaI Sal cct(; tlcitlUitd -CASESflflIARY On July tI, 2018, the HHSC Associate Commissioner for Contract Administration, contacted 010 requesting it investigate possible contractual issues related to THG business practices. The scope of this 010 investigation focused on TUG’s contractual fiscal compliance under the two contracts it was awarded for fiscal year 2018 and UHS Fiscal Monitoring Unit’s (FMU) discovery of SI I M in possible. questionable costs related to those contracts. The investigation showed that TUG did not comply with certain provisioit cii the contracts as described in the findings of this report. In addition. an 010 auditor and forensic accountant assigned to thts investinatlon evaluated FMU’s report findings, agreed with all findings, and identified additional areas of questionable costs. The severity ol issues’.arran!s an expanded investigation for the entire contractual period of both contracLs, but to date. prclintina’ determination of the amount 1116 owes the state for ]ack of contractual compliance is$ 1,563,247.348 In December 2014, the Sunset Commission issued the recommendation that the Texas Health and Ilutnan Sen ices agencies eoiisottdatc the women’s health care programs to improve sen-ice and efficiency for clients and providers As a result, a transition plan cas dvcIopccl by FIHSC pursuant to Texas Government Code §531.0204, to redesign the Family Planning Program (FPP) and consolidate the HI ISC’ lexas Women’s Health Program (TWUP) and the Department of State Health Sen-ices (DSHS) Expanded Primary Health Care l’roenmni to create the I leabby Texas Women (HT\’J) program. The heidi Group (THG) applied for aod received funding front two contracts associated with the aforementioned programs Request for Proposal (RFP) No. 529-16-0I0200053 and HTW under REP No. 529-16-0132-00006. - FPl’ under On July 5. 21116, TUG began to provide HTW services through a network of2O subcontractors (also referred to as “subrecipients”) across Texas. including in metropolitan areas in Arlington and San Antonio, as veIl as smaller naml areas in Laredo. McAllen. and 1 ‘Icr I he initial 111W conlract award was $1,639,531. On January 5,2017. TUG began to provide FPP services through a network ol 27 providers: the initial FPP award was $5,100,000. As of September 1, 2018. TUG had established a network of 21 subcontractors in 111W and 15 subcontractors in FPP. halt tlustrnmea ott pa e 21 t Coot in ned.. ) . CASE AGENT I DATE I” LEVELAPPROVAL DATE 2WLEVELAPPROVAL OPEN RECOF.DS r5E REPRODUCED DY DATE -‘sa%__fi DATE APFROVING 4UTIIOWITY 6-s’ I / ¾’J i I - , DATE ,‘ 1? (,1L NrERN4I. EFAB{S CASE NO; 22603.. IN SUMMARY (cant.) The majority of HHSC contractors enrolled to provide services in the FPP and HTW programs operate as traditional direct service delivery providers. In this model, a contractor delivers services through a network of its o\?n clinic sites. 1MG, however, has operated as an administrative services organization, whereby ii serves as the administrator of tUnds tuid subcontracts with a network of external independent cLinic sites 10 deliver services. Finding #1: THG paid unallowable expenses to subcontractors and failed to apportion expenses to the appropriate grants. 1KG paid subcontractors an unbudgeted $50 per claim fee in addition to the standard reimbursement and could not provide a budget amendment, adequate documentation, or a clear methodology to justi’ the added expenditure. Additionally, subcontractor expenses were paid without propcr oversight as required under the terms of the contract and TI-IC costs were allocated between the plans in a manner inconsistent with grant management standards. In addition, fee-for-service costs were not appropriately offset against contract expenses. The total preliminary recovery amount for this finding is 3768,641 .7! for KTW and $297,220.64 for FPP. Finding #2: THG used an improper method by which TUG payroll and fringe bcncfits were charged to the contracts. HaIfofTHG’s payroll and fringe benefits were charged to each contract without comparing actual costs to the budget as required by contract, based on relative benefits received, and making any necessary adjustments. The total FPP and HTW preliminary recovery amount for this finding is 3467.953.71 Additionally, there are indications professional medical servicesvere significantly overpaid tbr the level and quality ofsen’ices provided and that professional financial services were paid to individuals who lacked expertise in financial grant accounting. The quantification of the overpayment for those professional services requires additional review. Finding #3: ‘iNC charged expenses outside of the contract funding periods. THG had 320,327.47 in obligations charged to the FPP and KTW contracts which were incurred prior to the effective date of the contracts and are therefore not covered contract expenses. ‘The total preliminary recovery amount for this finding is $20,327.47. 31” Th1FRNM. AFFAIRS C%SENO: 12601-IS Finding #4: THG made unnecessary charges that were outside the scope of the HTW and VIP contracts. THO charged unallowable costs of $8,578.86 to the FPP and HTW contracts. These unallowable costs included tbod, gift cards, clothing, appliances, and retail membership fees. The total preliminary recovery amount for this finding is $8,578.86. Finding #5: TUG charged to the HTW contract, training for QuickBooks that also benefited activities separate and apart from TUG. TUG charged a QuickBooks training cost of $524.95 to the HTW contract At most, the cost should have been apportioned based on the percentage of total costs that benefited the contract. The total preliminary recovery amount for this finding is $524.95. Finding #6: THG did not have contracts with Its subcontractors as required under the HfW and FPP contracts. This is a significant contractual violation that warrants further review to quanti any potential recoveries. The preliminary findings outlined above show serious contractual violations that occurred throughout the seven-month period (September 2017- March 2018). The evidence supports frrther investigation into whether the contract violations occurred throughout the entire contract period. Accordingly, the scope of the investigation is being expanded to cover the entire contract period and is being referred to the 010 Audit Division to audit the period ofJuly 15, 2016 through December II, 2018 for the NTW contract and subsequent amendments, and from January 5, 2017 through December 11. 2018 for the FPP contract and subsequcnt amendments. _______— INTERNAL AFFAIRS CASF O: 22603-IN INTRODUCTION INTERNAL AFFAm5 Internal Affhirs (IA) conducts administrative and criminal investigations of alleged fraud, waste, and abuse by: I lealib and I luman Services (HI-is) employees; contractors, and’or sub-contractors. The legal basis Cr internal affairs investigations are found in Texas Government Code § 531, 1091bt and I Texas Administrative Code (TAC) § 37i.l305i1. Impartial investigations of complaints are conducted to ensure the integrity of Ill-iS employees. programs, and operations. IA investigations include, but are not limited to: employee misconduct: violailon ofthe Whistleblower Act; fraud or abuse of Texas vital records; and contract fraud. When investigations are completed there are six (6) possible dispositions. These investigative dispositions are: Administrative Closure, Exonerated, Sustained, Not Sustained, Unfounded, and Law Enforcement (L.F.) Assist. Sastained When the investigation discloses sufficient evidence to establish that the alleged act occurred. based upon the preponderance of evidence standard and that it constituted an administrative policy x olation. Or. when the investigation discloses sufficient evidence to establish that the alleged act occurred, based upon a probable cause standard and that it constituted a violation of criminal law, Not Sustal ned When Ue investigation discloses Ihat there is insufficient evidence to sustain the complaint or filly exonerate the accused. Unfounded When the investigation discloses that the alleged act(s) did not occur. Exonerated When the investigation discloses that the alleged act occurred, but that the act wasjustificd, lawful and/or proper. Law Enforcement Assist Reserved tar documenting investigative activities when assisting a local, state, or federal law enforcement agency (esz.. forensic analysis of a state computer or locating a state employee). Administrative Closure When continuing the investigation is no longer beneficial to an impacted agency. —- - - HE ALTIIY TEXAS WOMEN in December 2014, the Sunset Commission issued the recommendation that the Texas Health and Human Services agencies consolidate the women’s health care programs to improve service and efficiency for clients and providers. As a result, a traushionplan was developed byNHSC pursuantto Texas GovemmeutCode §531.0204 consolidating the l-IHSC Texas Women’s FIe&th Program (TWHP) and the Depwlmcnt of State Health Services tDSllS) LxpandedPrimaiy Health Care Program. On July 1,2016, a new and consolidated program launched as Flealihy Texas Women (HTW) under the governance of HFJSC. itj hops [cIiti 05 capioiicsusgovtflocs-GVlitm-G\53 I him sos stzILc Ix siaahEc :rex,eI, 3 INTERNAL AFFAIRS CASE NO: 2263-IN INVESTIGATION — INVESTIGATIVE AcTIViTIEs Referral and Allegation • • On July 11, 2018, the HHSC Associate Commissioner for Contract Administration, contacted O1G requesting it investigate possible contractual issues related to THG business practices At the time of the referral. THG received fimding from two HHSC contracts, FPP tinder RFP No. 529-16-0102-00053 and HTW under RFP No. 529-16-0132-00006). FPP is a proam dedicated to providing accessible family planning and reproductive health care to eligible women and men in Texas. HTW is a program dedicated to offering women’s health and family planning at no cost to eligible women in Texas. Contract Award In its initial proposal, THG projected having the ability to bring services to women in over 62 Texas counties, many of them underserved. The initial HTW contract was for a one-year period (July I. 2016August 31, 2017) and THG agreed to provide services to 50.610 unduplicated clients at a cost not-toexceed 51.649,53 1.00. On August 30, 2017, the HTW contract was renewed for a two-year period (September I, 2017 August 31, 2019). Through the contract, THG agreed to provide services to 50.610 unduplicated clients in FY18 and 50,610 unduplieated clients in FY19 for a total not-to-exceed amouni of 54,948.593. - On July IS, 2018, the HTW contract was amended and reduced to 35,427 unduplieated clients for each fiscal year lhr the remaining term of the contract. The not-to-exceed amount for both contract years was reduced to $3,958,875. The reduction was made because for fiscal year 2018, THO served approximately 4,700 women out of the 50,610 unduplicated clients they had initially projected. The initial FPP contract was for the period January 5, 2017- August 31. 2017 and TKG agreed io provide services to 17,895 unduplicated clients at a cost not-to-exceed $5.1 million. On August 11,2017, the FPP contract was reduced to serve 3,498 unduplicated clients for the tenu of the contract. The reduced not-toexceed amount was $996,930. The reduction in finding resulted from THG serving approximately 14,397 fewer clients than initially projected. That same month. HHSC renewed the FPP contract for a two-year term (September 1,2017 August 31, 2019) at the initial ftnding amount and the initial projected number of unduplicated clients of 17,895 at $5.1 million for each fiscal year for a total not-to-exceed amount ot $10.2 million. - 6: INTRNAL AFFAIRS CASE SO: flñUi-I8 On July 18. 2018, the FPP contract was amended and reduced to provide FPP services to a minimum of 10.656 unduplicated clients from the effective date of the contract through the end of FY18, and a minimum of7, 15$ unduplicated clients during FYI 9. The not-to-exceed cost was reduced to S5.076.93ft On December 11.2018. after completion of the FMU review, HHSC terminated THG’s NW and HTW contracts. Reimbursement Under the HTW program, enrolled clients, females aged 15-44, receive program family planning services and preventive health services. The HTW program includes both a fee-for-service component and a cost reimbursement component. The 141W Fee-For-Serviceprogram is modeled after traditional Medicaid feefor-service, whereby a provider enrolls as a Medicaid provider through the Texas Medicaid and Flcalthcare Partnership (TMHP) and then submits fee-for-service (FF8) claims to TMHP for reimbursement hr services provided to Medicaid clients. The contract awarded only the cost reimbursement component for HTW. with the stipulation that FF8 claims be applied to program expenses before any contractual cost reimbursement. Contracted organizations receive thuds to support the overall health outcomes for clients receiving 141W services. These additional services include: • • • • • Assisting individuals with enrollment into the HTW program; Individual and community-based educational activities related to 1-11W: Staff development and training related to HTW service delivery; Direct clinical care for individuals deemed presumptively eligible for the HTW program; and Upon approval by HHSC. other activities that will enhance HTW service delivery including the purchase of equipment and supplies to support the project. The Family Planning Program (FPP) provides family planning services similar to HTW covered services. to women and men, 64 years ofage and younger, with the addition of limited prenatal benefits. Like 1-11W. FPP includes a fec-for-service component as well as a cost reimbursement component, if desired by the provider that has entered into a negotiated contract to provide FPP services. Contracted organizations must he enrolled by TMHP as providers in order to provide FPP services and submit the claims to TMHP for reimbursement. Fiscal Monitoring Unit As a key component in HHSC contract administration, the Fiscal Monitoring Unit (FMU) conducts fiscal monitoring reviews of certain HHSC subcontractors/contractors to determine compliance with fiscal requirements of federal and state regulations, HHSC policies and procedures, and contract provisions. The FMU reviews a contractor’s financial operations which may include a review of internal controls for program funds in accordance with state and federal requirements. an examination of principles, laws and regulations. and a determination of whether costs are reasonable and necessary to achieve program INfERNAL. AFFAIRS CASE NIL 22603-1K objectivus. This activity is typically conducted by staff involved in pnwram operations and often involves assessments of financial statements, records, and procedures. EMU On-Site Review Prior to the refeiml to the OIG, EMU conducted an on-site review ofTHG the week of April 9-13, 2018 The review thund over $1. IM in questionable costs, of which greater than $500,000 were due to a jack of supporting documentation for costs paid to THG subcontractors. FMU’s iniLial review revealed that THG lacked basic documentation to support any of the subcontractor expenses, provided little to no fiscal oversight, and initially had only one of 34 signed contracts from its subcontractors,’ Due to the potential violations discovered during its onsite review, FMU’s scope was expanded from the original test period of September 1, 2017 through November 30, 2017. to September I. 2017 through April 13, 2018. The contract amounts for these grants for the penod September I, 2017 to August 31, 2018 are $2,040,000 for FPP and Si,15&672 for HTW. The findings and recommendations were outlmed in PMU’s Initial Report of Findings, which was provided to THG on July 12. 2018. The FMU’s review was lImited to fiscal compliance only. As part of its investigation, OIG Internal Affairs (IA) received assistance from the OIG Audit Division and retained a forensic accountant to assist in the review of FMU ‘s report regarding the fiscal year 201 8 FPP and lffW HHSC grant contracts for THG. Documents reviewed included those obtaincd by FMU and IA. (See RFI Timeline) The following summarize the preliminary findings: Background As part of its investigation, OIG Internal Affairs (IA) received assistance from the OIG Audit Division and retained a forensic accountant to assist in the review of FMU’s report regarding the fiscal year 20lX FPP and l-ITW FLF1SC grant contracts for ThG. Documents reviewed included those obtained by FMU and IA. (See RFI Timeline) The following summarize the preliminary findings: Finding #1: TilO paid unallowable expenses to subcontractors and failed to apportion expenses to the appropriate grants. Dunn, tIte OlD investteation. [lID obtained signed contracts ftj’tn 15 o[fts Err vcadt,ts cmi 6 of as IITW -cndots. WI,eo intcr in’ ed h IA, tnrn,ct Pn,gratn Di,ect,rft’rTlIO, provided that only after the FMU review chdTHG begin has4ng commas drafted for all subconrn,etors. FMU Analyst uterviewed by IA, provided that thllowing the review, the tan left TED cro with a list of items needed (vendor commels, sopp.iiting do-tumenlation In’ rcin,hurvements, pay authonzations,job descriptions and tinesliects). Since that thnc, IheTHO CEO as tried to entreat ut ever the deumcnlaüon subnained is not suIi5c cm Tht tesponse back to I-Ills was chaos 500 pages dos ua,enes It appeared to he anile, liii THO CEO polled modoun invoices to trv and cover e.spcnditunac. SI P IN7ERNAL AFFAIRS * CASE NO: 12603-IS Payments made to subcontractors for payroll, consumable supplies, and contract-related ewenses reported by THG were reviewed and two areas of concern were THO’s $50 payment per HTW and FPP claim to subcontractors and direct payments to subcontractors for staffing costs and other expenses. THO paid subcontractors a $50 fee per HTW and FPP claim, ThO claims the $50 fee was broken into 3 parts, $3.25 for consumable supplies, SI 6.75 for staff and $30 for medical personnel. The Uniform Grant Management Standards, Attachment A, C, states that to be allowable under Federal and State awards, costs must be adequately documented. More importantly, however, Is the question, whether the $50 per claim fec is an allowable cost under the HTW and FPP contracts.2 THG’s HTW and FPP contracts for fiscal year 2018 do not include a budget line item for a $50 per claim subcontractor fee. The HTW Contractual Budget Detail lists only a direct allocation ofgrant fimds to kur of TKG’s subcontractors for a total of $354,960. The F?? contact includes S192,360 in direct monthly payments to 9 of THG’s subcontractors and 51,050,738 in fec-for-service claims from 21 of THG’s subcontractors including The Heidi Group Clinic. Both the HTW and FPP contracts cite regulatory guidelines applicable to the administration of these grants. HHSC Special Conditions Version 1.0, referenced in the 113W and EPP contracts, Article ‘l. Amendments and Modifications, Section 6.0! specifically states that: — “No thiferent or additional work. services or deliverables (WSD) or contractual obligations will be authorized orpetforrned unless contemplated wish the Scope aJ’ U and memorialized in an amcndment or mod(/kation ofthe Contract that is executed in compliance wish this Article. No waiver ofany term, covenan% or condition ofthe Contract will be valid unless executed in compliance with this Article. Contractor will not be entitled to paymentfor WSD that is not authorized kv a properly executed Contract amendment or mod(ficarlon. or through the express written authorizationf KHSC” Accordingly, the $50 per claim fee is not listed as a line item in the contract budgets of either grant and no modification to contract budgets was approved by HHSC to include this cost. It is reasonable to conclude that the $50 per claim fee is a disallowed cost under the HTW and F?? contracts. Furthermore. the Grant Technical Assistance Guide, (GTAG) Section 3.3 cited in the Open Enrollment for Healthy Texas Women, Attachment A of the HTW contract, and Article W, Section 4,01 of the HHSC Uniform Tans and Conditions, cited in both contracts define an allowable cost as: HHS program managn (or the TWO cufflfl was iwcMewdby IA and .me pan of abc FMU un,siIc review in ApsiS 2058. The prwtmm n.asngcr pimided that in thefrrniew. they ddamintd dat TWO CEO incalvIzal snbcpniactoa pUb a 550 ‘barns” Fag ach tWin sibmined. This money was above and beyond what was being rdmtmrsrd by ThaW. TWO mibsainu werobllflng TMHP fin thnith and then gdllng a $50 lnmit for cad. patient seen (n.m ThO. The pn’gmm uga cxplalnel so d*THO CEO that in mda fur this nto be kgldmalc It nailed to be a’mvtqøl bak iwo the pn.am. asg tnabow at a profit to the ptcvWcn(i a used wray ptovida sabrks wifiski, efflceaqplics, cit.) Theta was no do. umcmsion from any of the s.Thcuancsan (wtIds ‘tcrnC. ThG CEO anscd in buk down this ,dmbanc..wn bit d.ebcmkdnwu was waluso.y and lackni any ducwncmcd .-a’ 9 •%**Z **.** — ‘: -I... r rr t. . IN’FERN\I.\FFSIRS (‘,SE SO: 22bP3.J$ reasonable; necessary for proper and efficient administration of the proposed project; • allocable to the project for which the contract is awarded; • consistently treated as a direct or indirect cost; • netofapplicable credits; • adequately documented; • permitted under the appropriate cost principles; not included as a cost or match under another cost objective (program); not restricted or prohibited by the terms and conditions of the contract; and • compliant with Generally Accepted Accounting Principles (GAAP). * TFIG was unable to explain the relationship of the $50 per claim fee to the conditions stated above hut instead described the fee as a reimbursement for paid patients. Moreover, TNG did not documeni this fee as necessary for the proper and efficient administration of the project. FMU requested this documentation from THG but did not receive it. Finally, this cost is already included in the fee-for-service reimbursement that was received directly by THG subcontractors under the HTW grant or reimbursed by THG under FPP. Therefore, the fee as a program cost would not comply with the condition of “not being included as a cost or match under another cost objective program”.3 THG’s subcontractors delivered HThV and FPP services to eligible patients and hilled either directly or indirectly for these services through TMHP. The fee-for-service reimbursement covers the expenses of delivering services to eligible patients, therefore there is no documented justification for adding an additional $50 patient fee on top of the lee—for—service claim reimbursement, The direct payment of subcontractor personnel costs and expenses were not being adequately documented to prove the existence of the cost nor the appropriateness of the cost fhr the benefit received by the grant programs. The Uniform Grant Management Standards, Attachment A, Section C.l.j. states that to he allowable under Federal or State awards, costs must meet the criteria that they: Be adequately documented. Documentation required mar include, bitt is not limited to, travel records, rime sheets. invoices, contractc, mileage records, billing records, telephone bills and oilier documentation that verifies the expenditure amount and appi’opria(e;wss to the grant. Additionally, under the Grant Technical Assistance Guide Version 1.0, Section 4.2: “IThen the relationship is determined to be a subcontractor the grantee assumes the Jbllowing additional contract management responsibilities for the suhaward: “I Jfl. I etm OI’rNiWcORlfl, HELl %SE A— ,tjrie j Cju&. (Cl AC) Sat, ‘n 3 “ APPI)GVINGAUThQR(TV — ... j DATE II) INtERNAL AFFAIRS CASE NO: 22603-15 • • • MOnitoring financial program activity Reporting ofprogranz peiformance; mid Financial results” Ti{G did not monitor the personnel and expense costs incurred by their subcontractors and paid them directly with grant funds. Plus, certain subcontractor expenses that THG paid were not budgeted. Accordingly. subcontractor expenses were paid without proper oversight as required under the terms of the contract. Note that both contracts cite the Grant Technical Assistance Guide for clarification of applicable laws, mles, regulations, policies and procedures pertaining to the administration and financial management of HHS grant awards. TI-lU regularly, split charged expenses evenly between the FPP and HTW contracts without consideration of the appropriate relative benefit to the services provided under each grant. FMU cites the Unifbrm Grant Management Standards, Attachment A, Section C.t.j as applicable to THU’s failure to follow grant requirements for adequate documentation. Moreover. Section 5.1 of the Grant Technical Assistance Guide, under “Allocation Base”, states that costs should be allocated according to a measurable attribute or allocation base that serves to estimate the extent of the benefits received by each affected cost objective. Cost allocation is a process of apportioning expenditures which cannot be measured precisely because they are shared between different cost objectives. THU costs were shared between two distinct grant contracts. A cost allocation plan that measures the equitable distribution between each contract based on the benefit to each contract is required under HHSC grant guidelines. An even allocation of expenses between the two contracts without justification or documcntation for the expenses does not constitute an allocation plan and is not in compliance with HKSC grant guidelines.4 The fiscal year 2018 fee-fOr-service and cost reimbursement statistics demonstrate a low percentage of clients served versus the high level of categorical reimbursement received by luG during the contract period. This contrast raises questions regarding The Heidi Group’s financial competency in managing the HTW and NW grant funds. The number of individuals served under both contracts tell short of expectations. Prcliminary statistics produced by the Health Development and Independence Services (HD1S) Data Analytics and Reporting Team (DART) for FY 201 $ show that for the HTW contract the Heidi Group served around 4,700 individuals out ofan anticipated 35,427. Statistics for the FPP contract show a similar disparity with around 2,300 individuals served out of an expected 7,1 58. Yct. The Heidi Group spent 95% of their fiscal year 2018 HTW categorical award of $1,154,672 and 82% of their FPP categorical award of$ 1,020,000 to serve far fewer eligible individuals than was agreed to in the contracts. FMU Analyst was it,teniewed by IA and provided that TG had ilu-ceGenerni j.edeem (OL). One 6jrTRG, one forHTW and one lhr FTP Each one had a scpatatc hank account. Aecotthng to TFIG CEO, eveilüng went into lEG account and would then he part1 out to either the l1flV FPP, of TuG ( FO told the FMI Analyst that a 50.50 split was done on all reimbursements. However, the FMU found instances where tote it,nntlt all rcitnhttt:niien t Caine out of the lr[W account and ether months all reimbunemeuts came farm the IPP account- luG CEO staled to FMU Analyst tint they kne’ thei, c-!rcis a:rc a nc.s and the [HG CEO took full iponsibility ftireve1hing. ii IN1 EIINAL AFFAIRS CASE NO: 22603-tB The difference in the number of recipients served and the hinds expended implies that The Heidi Group mismanaged grant hinds under both contracts. Each contract includes language directly related to the fee-for-service component of the grant program. The Ihilowing are sections from the FPP and HTW contracts which stipulate that fee-for-service income be applied first to program expenses before the cost reimbursement component of the contract is applied. Section 2.3.1 of Attachment A Family Planning Program Open Enrollment Solicitation stipulates that FPP contractors may seek reimbursement for project costs using the following methods: — 2.3.J.1 Gonteacrors will he reimbursed using the fee—/br—service reimbursement method iw submitting claims to DuMP/br direct clinical care services provided to clients, which ui/I tlicii be paid by IJHSC; and 23.11 contractors may seek cost reimbursement Jbr sen’ices that enhance the jce-toisen-ices provided to clients by submitting monthly vouchers Jbr expenses detailed in the categorical budget attached to a contractors contract. Applicants may request up to 100% of their total fimding request reimbursed through the fcc-/br—service reimbursement method or request a portion of their /imding request to he reimbursed on a cost reinthursement basis in addition to the fCe—Jbr—service reinthursenient method. liowevet; the cost reimbursement amount requested mat’ not exceed 50% ofan applicants total proposed flmthng request and ultimately, its /itncling award. Section 2.7 B., Monthly Cost Reimbursement Process, of Attachment A Healthy Texas Womcn Enrollment outlines the process that HTW contractors must follow for reimbursement of program costs. Speci/icath, HTJV contractors will seek reinthursement for project C05t5 bt sittmiitliii,g inomhly vouchers for expenses outlined in a categorical huaget approved by HHSC. Funds icil/ be disbursed through a voucher system as charges are incnrred Reimbursement nuts! he requested using a purchase voucher and providing supporiug clociunentation submitted monthly. Program income from the HTWJee-for-serviceprogran: claims payment must be expended he/bre HTW cost reimbursement funds are requested through the voucher process. Contractors will be required to submit monthly vouchers even ifprogram income equals or arceedsprogranz expenses. When program expenses exceed program income, a monthly voucher will result in payment up to the not—to—exceed amount of the contract. 12 INTERrAL AFFAIRS CASE NO: 22603-IS Chapter 6 of 11w Grant Technical Assistance Guide, which also reièrcnccs 2 CFR §200.307 and the Unifirnn Grant Management Standards, states that: Progrcnn income is defined as income generated by an HI-IS program-supported actii’in’ or earned as a direct result of the cataract during the contract period and is to be used as an offset to reduce allowable program e.xpenses fbr the same period. All these regulatory documents clearly indicate that fee-for-set-vice claims must offset grant program costs before cost reimbursement is applied. A review of the vouchers that THG submitted to HI-NC for cost reimbursement (RI 3X, 813H) indicate that THG understated monthly claims reimbursements for both contracts. A comparison of KTW claims paid by HHSC to HTW claims reported by THG on cost reimbursement vouchers from September 2017 to March 2018 indicate that THG underreported fee-for-service claims by over S200.000. HTW claims were submitted to TMHP by THG subcontractors. It was THG’s responsibility to accurately report the payment of these claims when requesting cost reimburscmcnt. [HG did not document its monitoring subcontractor fee-for-service claims submissions. As a result, over $200,000 of cost reimbursement funds were expended when they could have been offset by fcc-for-service reven ues. Under the FPP contract. THG submitted claims for their subcontractors instead of subcontractors submitting their own claims. Additionally, 1KG agreed to a $285 Statewide average cost of service split evenly between the cost reimbursement component and the fee-for-service component of the contract. In analyzing the low dollar amount ofTHG’s submitted claims, the average cost per claim was closer to 550 per claim. If THG had achieved the agreed to Statewide average per claim, S297.000 in fee- Or-sen ice income would have offset reported costs and reduced cost reimbursements. A draft report prepared by Health Development and Independence Services (HDIS) Data Analytics and Reporting Team (DART) for FY 201$ that analyzed HTW and FPP contractor perfonnance for clients sened, fee-for-service claims and cost reimbursements, show THG serving 36% of their contracted number of FPP clients and 13% of their contracted number of KTW clients. The total preliminary recovery amount for Finding #1 is determined to be $768,641.71 for F{TW and $297,220.64 fOr FPP. Finding #2: THG used an improper method by which THG payroll and fringe benefits were charged to the contracts. TI4G improperly allocated payroll and fringe benefits evenly between each contract without comparing budgeted to actual payroll and fringe for each contract, making necessary adjustments. or verit’ing that ii[ is 11 Its \L FFAIR5 I \5l 50 2261)1 IN these costs wet e of benefit to the contracts The Uniform Grant Management Standards Section 11. Attachment B, 11 h 5 e “Compensation for Personnel Sen icec” states that Budget estunales or other distribution percentages determined before the cn ices ai c pci formed do not quah/i as suppo; tJor chargev to ledetal or date an arch but mar be usLd Joe interini accounting purposes, pioi’idcd that (i) The governmental units system for establishing (lie cctii;iaW.s jn odu’_e.s i easonablc appi ovmattons o/ the adn’Th; actually per/b rmcd. .4, least quartet 1i’, comparisons of actual costs to budgeted thstrthraion.s bust S oti (a) the month/i activity ; epo;ts ate made Costs chamgcd to Federal or it.ite a ii at ds to reflect adjustments made as a result of the acuuR actual?; pet/rn med niat be i ecordcd annually if the quartet 13 comparisons shout the thfterencec bern ecu amid actual costc cue less than ten percent, and 1w) [he budget estimates a; orhet thsn-thutton percentages are rei ised at leac, quarter/i. i/ necessary, to te reflect changed eircwnswnccs Despite these standards, fHG did not produce quarterly activity reports to compare actual peisonncl costs to budgeted distributions and make necessary adjustmenb Instead, they relied on budgeted estimates foi tfl roll and fringe benefits by splitting the costs equally bets cen the FPP and HTW contracts IThe ahscnce ol detailed activity reports makes it unclear whethet THG personal costs were a duect benefit to the conti acts. Based on these findings, it is recommended that a broader examination o( Ti 10 pay roll and fringe benefit cosis, from thebeginmng ofthe contracts to termination in Dccember of2O 18 he conside’ d The total FPP and HTW prehminary recovery amount for pa roll is 5467,953,1 Finally, the OIG Auditor and Forensic Accountant noted payments of a significant amount nude to tao medical doctors, a CPA and an accounting consultant fin their contracted professional sen acs Pielunmary eudence suggests that THG also pad for professional Sen ices without adequate e idenuc of delixen ol contracted services or due care in canymg out the duties of the slated roles Ian medical doctors acre contracted by THG to serve as Medical Dnectois, one as Medical Dneetor over the I-PP and HTW programs and the other physician as medical diteetor of The Heidi Clinic THG paid the rnedie4d director of the FPP and HTW program $62,797 from September 2017 to March 2018 and the Heidi Clinics medtcal director 55.000 The IITW and FPP medical director submitted-monthly invoices to 1140 for $8,971 As Medical Director, the physician’s duties under the FPP and HTW contracts mcluded the folloa ing (ii I MCi Protrain Dnttwr reported sIte neva spoke to orsaw e,ihtr medical duttior and .ihhougl, they were to conduct silL ‘isils thL 01 dui (2) Pmsider Relations Spoaiisi ft,i I HG, slated Vial ihe HTW and FTP medical dirater vas atqipostd to go to the cimits and make too- ihe Limit ‘Lrt in coinphance hut did noi • sit the elton, On ont ut_cation the pn,vider relations pcuahst i-tnt 10 thi. inethtai dattior’s chilL in Br, in to do clitihiltit mmii’ f r thi. med:ai diraior a cinpioecs The Proider Rttam.ons Srccuiisl wok a manil , fckkr of Marx dtunua-’% for liii. indii.at d,a_imi ii ign I lie oiaii_ai dots Err igi’e1 all Vie documtno and the Protide, Reatitins Specialist took hit,,, bask to 1 HG ci) THO Qu h’ 4raii ii c. P\ Cii,, Plo-tin fli, mr nfl ided that the m.dieal direciol5 newrarre ho the ctmi’nte or show otainas PATE eTNE :Eit*zzzzz - ‘4 IN fl R% L xfl Wi” C isi Mi 22601.18 The Medical Director mats! be a licensed medical doe/at in good standing ii a/i the stale of lexas the lvfethcalDi:ectoi assumes ovei all rcspointhalhv fot clinical serxice h o/ki ing gradance and supen isron to staff of T110 WWC and medical dirt ctots of subcnnt, (ft to The Medical Director develops and nuplements policies proc edurec, and pi or esses pci taming to medical services, ens at mg that all cluucc cue an compliance ii it/i h’dct of, State, and Local inns The MedicalDu ector may asnt ii mlii protot ols’stcnithng at dci and is avudablc to staff of TI-JO, JVIVC and su&onr; aiim c fbi acsislance in the c/em ci of quality medical care lire Medical Dfreetor monitors training pi ogram.s oJ suhcont; actot to uphold the highest standard of health care, ensuring that the j,ohcies and rcgzi/unons ale bcmgpmperh implemented mmd mmii ed to success/hi ctwczl/Iail 6 P11(1 contiacted with a physician to be Medical Director of The Heidi Clinic According to the HTW and FPP contracts, the physician was budgeted at Si ,250 per month per contract for a total ol S2,500 per month ‘I here were two 52,500 payments made to the physician dunng the period of ilus ie iew Section 2 I 3 of the Family Planning Open Enrollment document states that each clinic must piox ide Family Planning Services under the purview of a Medical Director licensed in the state ofTe\as TI4G contracted with a CPA in September of 2017 for CFO seivices Prim to contiacting with THG foi CFO services, the CPA was THG’s tax preparer and prepared the organization’s Thim 000 ftdcial tax return beginning in 2008. He was THG’s consulting CFO from August through October of 2017 1 he CPA’s CFO consultancy with THG was tenmnated at the end of October of2017. ‘[he CPA bfllcd THG $1 1.500 for 65 hours of billable work perlhrmed in August. September and Octnbe i of2O l. Based on these billings, the CPA’s ax erage rate was SI 77 per hour Although the CP:\ s how t i ate was within the market range. it’s questionable whether the CPA performed the tasks typical ol a ClO Generally, a CEO has primary icsponsibihty for the planning. implementation. managing and runnin g all the financial actiwties of a company, including business planning, budgeting. Ibiecas ting and negotiations [bus, it’s reasonable to think that the CPA would have had pnmwy iesponsibility mi ensuring that the FPP and HTW contracts were admimstercd within HHSC financial guideli nes and compliant with State and Federal financial requirements Hoever, in an intemew with OIG Internal Affans, the CPA said that he had no prior experie nce with government accounting and had a limited understanding of how the FPP and HTW general lcdgcis weic maintained When asked about the FPP and HThV contracts, the CPA said he wa, not inohed with the original contracts and contract amendments, Moreover, the (‘PA stated that he had no undei standing of the financial requirements of the contracts and the role of the subcontractors. ‘FN’s &FY 9 i-kailhvTcxas WmncnprogrnaiRenewai,pg. IS, Famiiyptanrünu Progrmn,529-i6’OiOZ, rcnmA-i ApplicationNaiimkt ae2 rum ,CLs a nnue (hr contnict CEO scnccs bctwcczi SI6i and $224 pci koci. hans f/wow sabry coia’rcsa,aIr,aia’/bcnchncuL -i,utn,ai o Tic ci- I,ourl v.uagcs ——- OPFRE( RELEA DATE __ ic flTFkNT \rniRs C %O !2&fl 14 In an independent single audit of THG’s FPP and HTW contracts by a CPA firm br the year ended Detember 31, 2017, an adverse opinion was rendered citing rnatei ml eaknesses in 1 HG’s internal controls oer compliance The results of this audit clearly show that GAAP (Genera1l Accep ted Accounting Puneiples) was not followed as required by the HHSC Umfoim Terms and Conditions Grant Veision 2.12. Article VII Records, Audit and Disciosuies, Section 7.01 Books and Records Also, this iatses concern hether the THG CPA. as a CPA and CEO, iendeied due piofessional conipe tenee’ in msunng that TI IG complied ith HHSC regulations go eming slate grant awards An individual hired 1 HG assumed the role of THG CEO after the departure of the pie iou CPA 1 he ne mdi idual was not a CPA In an mten’iew uth OIG Internal Affairs the indx idual indicated that he peisonally kne’s the THG CEO through their church affiliation and thaL the THG CEO had appioa ched him to help with Ti-IC CFO responsibilities Initially. he provided CFO consulting sen ices throug h his business and charged THG $5,000 per month dming the months of No ember and Dceembei 2017 and January 201 S. In February of 2018, the mdi’ idual was lured full time as I HG CEO and paid S8.334 per month which is about $100,000 per year. The invoices furnished to THG by the new CFO do not detail the time he spent at THG nor the sen iccc he billed. Theiefore, it is not clear whether he earned out the duties of the CEO as specified in the FPP and HTW contracts The OIG Auditor and Forensic Accountant ieviewed the general ledgers loi both contiacts and the bank records during their review In theiropimon. GA4P issues cited in the indepe ndent audit of THG had not been corrected. This is ffirther evidenced by the findings of FMU’s reien The individual was CFO during the FMU review period. In tots. horn September 2017 through March 2018, THG paid 894,297 in professional sen ice fees o ihe thur mdiuduals It is recommended that the scope of review be expanded to determine it proless ional sen ices etc provided for the paid fees Finding #3: TUG charged expenses outside of the contract funding periods. ENG charged 820,327 47 in obligations to the FPP and HTV contracts outside of the tundm g period These expenses include • • • attorney fees, Cleamew Network, and personnel costs, TuG should remove these costs from the grant general ledgers and offset a subsequent claim as a refund for ai resulting oerpayment or remit a payment. The preliminary reeoxery amount is S20.32” 47 to he 1511 R% 51. 511 SIRS C 551. so 226111-IS colletted from THG if repayment has not been made Moreover, the OIG auditoi and the forensic accountant recommend that a broader examination be considered to detet mine if these conditions existed throughout all contract years. Finding #4: THG made unnecessary charges that were outside the scope of the HTW and FTP contracts. I HG chaiged costs that weie not necessan for the proper and efficient peffonmmce and admimstiation of the grant After reviess lug, it has been determined that 1HG chaxgcd unnecessai.y costs ol S8,57t 86 chai ized to the FPP and FTTW contracts These costs include • Food and/rn Mea]s. • \\ ater, • Gift Cards, • Dillard’s Women’s Clothing. a Appliances, • Amazon Membership Fees, • Sam’s Business Membership Fees, and • Bed. Bath and Beyond charges 4 TI IG should remove these costs from the grant general ledgers and offset a subsequent claim as a i cftnd foi any resulting oxerpayment or remit a payment The prehminaiy tecovery amount is $8,578.86 that should be tepaid by THG ifiepayment has not been macic Mrneover, it is recommended that a broader examination be considered to detenmac it unrelated epenscs were charged to the FPP and HTW contracts thi oughout all contract sears Finding #5: TNG charged to the HTW contract, training for Quick8ooks that also benefit ed activities separate and apart from THG. THG charged a QuickBooks training cost of $524.95 to the FFflV contract that was not net of all applicable credits and not charged in accordance with relative benefits received A $250 credit was not rccogniied by THG in relation to this charge. Additionally, the charge ssas paid out of the HTW conti act with no es idence that the training benefited the HTW program 100% THG should adjust the HI W general ledger chaiging only that portion of the expense that directly benefits the HTMl progiam and offsct ihe charge with the applicable portion of the $250 credit If the expense is not of benefit to the HTW program, then HTW should either offset a subsequent claim or remit payment ifrepayment has not already been i ccci’. ed In addition, it is recommended that an expanded examination of THG contract expenses focusing on all conti act years be conducted. E.Zzziz: H I7 INTERNAL AFFAIRS CASE NO: 226(13-Ig Ehiding #6: THC did not have contracts with its subcontractors as required under the HTW and FPP contracts. The (JIG auditor and forensic accountant verified the lack of contracts between THG and the subcontractors. At the time of the FMU review, there were no contracts between THG and its subcontractors. After inlbrming THG of this infraction, THG executed contracts with some of their subcontractors. The Uniform Grant Management Standards, specifically Chapter IV, Section D,400(d). dearly states that subcontractors of state awards need to be informed of the contract details and requirements: Additionally , these standards stipulate that grant contractors are required to monitor the activities of subcontractors to ensure they comply with grant contract requirements. A pass-through entiiy shall peform thefollowingfor the state awards it makes: (I) Jdenri/i’ slate a;iards made by iiJhrming each subrecipieni of the stare program inane and stale program number (if a number is used), CEDA title and inmther (I used to identift the s/cite program,), a/he,- relevant identifier, award name and ,nm,be,’, award year, and name of’ state agency. Wizen sonic of this information is not available, the pass—through entity shall provide the best in format ion available to describe the state cii.t’ard (2,) Advise siihreeipients of requirements imposed on theni by state laws, regulations, and tile pro visions of contracts or grant agreements as nc/I as cmv supplemental reqidrcnents imposed by the pass—through entity. The requirements shall either be stated in tile contracts or grant agreements or be included b.•’ specific reference in the contracts or grant agreements. (3,) i-fGuitar the activities of subrecipients as necessary to ensure that state a;t’ards are used/br authonzed purposes in compliance with laws, regulattons, and the provisions ofeontracts or grant agreements and that performance goals are achieved. The lack of subcontractor contracts poses a serious question on whether FPP and HTW funds were used appropriately for program related activities. Since subcontractors had no guidance on what activities were reimbursed under the contracts, there is a concern that thuds were not used in accordance with contract terms. Subcontractor expenses reimbursed under the FPP and HTW contracts shoul.d be examined and a deternilnation made on whether these expenses were for contract-related activities. This examination should be considered for all contract years. Determination The preliminary findings by the OIG auditor and the forensic accountant reveal conduct that continued throughout the seven-month period (September 1,2017-April 13, 2018) review, with no indication that IMLKNU tFFAIR’, ( sLNO. 224O N the Issues u crc tesolved. AdditionaIl3. the seven-month rciew petiod raises concerns that all pax ments eie not captured and thereibre vi11 require a revte ol the entue contract period. Accoid mgly. the scope of the matter is being expanded to cover the entue contract penod and being refened to the OlD Audit Division to audit the penod of July 15, 2016 through December 31. 2018 for the HTW contiact nd subsequent amendments, and from January 1,2017 through December 31, 2018 fin the HP contract and subsequent amendments. RELFt1E % - /l/I7 1-11W Contract kmcndment t3 [‘s\’ 8/30/2017 7’l8i2018 43339 35.127 (715183) 50.610 No change 50.610 Uiuhq;licated Qiezrtc RELEASE 3 APPBOVINDAUTHDRITY DRTE&11MEREPRODUCED Fiscal ‘(car 2018 Medical C a ins by Coi inteled i’mv tiers Report date: Jtjjy 3 20 ‘I OPE’, RECORDS DART OntO I JeaiIJty Texas Women hi I ‘;‘1i’ I IS IS Si 1 / 19 HTW Contract Amendment t2 (Renewal) 1/1)2017 211 1019 9/1 17-8’31 l) HT\V Contrdet Amendment fi I T15’2016 831 ‘I? ‘l ‘16— 8!31, 17 initial HTW Contract - C’ontruci Period 1Ides (one 117 C’.SE NO: 22603-IS RELEASED BY 8 I,09,Q I DATE 83,958,875 (78989.718) 84.943,593 (A$3,299,062) No change $1,649,531 Nor—ru—exceed Amount 2016 Healthy Texas Women Contract Siç’n u/nrc Dare INTERNAL AFFAIRS Totals are 11w unduplicated cheats actually served and hinds attributed to those clients for 0 1 ¶7-8 311 S OUIV. FY10 data is not currently available. Client and not—tu—cceed i eduction tor remamdet of FY18 & and all FY10 Not-to-exceed increase Added HTW certification and modified clinic Contract 4529-16-0132-00006 Renmurks 191 FPP Contract Amendment 42 FPP ( ontract Tenninatmn I 7/18/2018 12/11/2018 I) \i. I OtcIt riul PiA.ccIn_ OPEN RECORDS RELE ISE ‘i 9/Il” FPP Rene’n1 8/30/2017 ..il 91/17 8/31 19 FPP Contract Amendment ll I 8/11/2017 (‘Lii 115/17 Initial FPP Contract 1/5/2017 APPROVING AUTHORITY OATh S TiME REPRODUCED ar 291 S \lidi ci rLn’’ Rep ii ci.. Jut:. “Ott RELEASEDSY jOATE S1,363.05612 S5.076.930 (VS5I23070) 1 0.656 thowzh 1’’i I 8 (V7.239) 7,158 throuuh F”? 1 9 (V 10,737) 2,596” $l0.2M $996,930 (V$4,1 03.070) S5.IM Vat—to—exceed ,Imount 17895 3,498 (V 14,397) 17,895 L/,,dujilicated Clie,,tc mr. cJ I’rn’cd S/3l:19 9, I 17— 12,11 I \ ‘ - 1/5/17— 8/31/17 8/31 ‘17 Contract Period — CASE NO: 22603-1% 2016 Family Planning Program Contract Milestone Signature Date INTERNAL AFFAIRS Totals ate thr unduplicated clients acwally served and Rinds attributed to those ciiem ibr 9 :j7..q 31 ‘I s only. 1 Q dar 5 not crrrcntR 3VJU’dhIC. Client and not to r duction 11w cmamdcr oF FY I 8 & and all I Y I 9 i Client and not-to-exceed increase, Change was for remaining contract tenn. Contract #529-16-0102-00053 Remarh 20 INTLRNAL AFFAIRS CASE NO: 22(1113-IN The HeidI Group Audit Team Confirmaffon of FMU Review Period of Rtvtew September I, 2011 -Apr11 I3 2018 Findien #1 flTwSubreaptortl CorrsunrabteSuppkes $325 of tIm 550 lee per [-11W claIm Subraciplent The H&dt Group Audit Team Recommendation $1095250 —- $1075 of the 550 tee per HPNdaim 56.441 50 ill Sotepot AdU&ooa MedcaL Pe,sorgiei $3000 & th’t $50 tee per 111W ctirn — 11W The He:d. Group elitofe-, In noted [41W Sot [cc ipent Peisc,mwt Other FIR? The Kuiri, Group Ei;ierduses acootea - 10L10000 25.0344? 2d3.238•20 101 10000 250911? 26 213 13152305 $45663273 $23411?S Audi leans Estimate ot O.cipt.ynient of Cost Rrnbt,rspont rota) [-41W Recommended Recovery $54037471 $22&267C0 $766,661.71 rppsubrecspiern ConsUmabte $opr:es $3 25 of the $50 fee pcr Hiw etaim $2 803.130 CPP5,t’r’uptoi’J t,5d.LetlProvdcn sic is of the $50 fe-c per I{rwdarrn 14,47250 141;’,’ 33 25.92000 414180 25,920 nO FPP SohmupientAdtationai Mc-diolt Petsotint 53000 of ho $50 fee per F11 claim -- FOP Stt:odpientExpendlitecs (or.lDsl FPP the Heid, (Zrcntp Expenditwes as note-i iH.0D2.E5 $8103255 $17943110 Audit ft-jot. Esinuto of Cwerpaytnent of Co4 Reintsjzsemer Total FPP Recommended Recovery $ 51 f:..? 131 214 39 8297.22064 Finding #2 Heidi Gioup Payrol FOP HIW 215 Y6fl 11 24. 93011 22106760 Total FPP & [-41W Recovery 5361,95311 Finding #3 Utgadons Oode of Co unctFtmdin. Pei%od ppp ‘1491706 ‘5.41041 ‘1w-I Total FPP S HTW Recovery 541061 S20.32 7.47 FInding #4 Unnecessary Espeoses Otarged to Grin Comrads FOP 1+1W 1 17513 440313 Total FPP & HWi Recovery Finding 5 OukkDot Ttainog Crcc6t KTV9 441’’73 $8,578.86 ond Grant denebs 524:95 TOTAL $524.95 81.563.247.24 ill:., INrERNa AFFAIRS CASE NO: 22M0-IS CONCLUSiON Internal Affairs initiated this case based on a July 11, 2018, rcfe,nl from the H}JSC Associate Commissioner for Contract Administration, who contacted OIG requesting it investigate possib le contractual issues related to THO business practices. internal Aftiürs Leused on THG’s contrac tual fiscal compliance under the two contracts it was awarded for fiscal year 2018 and HHS Fiscal Monitoring Unit’s (FMU) discovery of $1.1 M in possible, questionable costs related to those contracts. The investigation showed that THG did not comply with certain provisions of the contracts as described in the finding s of this report. In addition, an O1G auditor and forensic accountant assigned to this investigation evaluated FMU’s report findings, agreed with all findings, and identified additional areas ofquestionable costs. The severity of issues warrants an expanded investigation for the entire contractual period of both contrac ts. but to date, pretiminaiy detemrination of the amount THG owes thc state for lack of contractual compliance is $1,563,247.34. The preliminary findings outlined in this report show serious contractual violations that occurred throughout the seven-month period (September 2017- March 2018). The evidence supports further investigation into whether the contract violations occurred throughout the entire contract period . Accordingly, the scope of the investigation is being expanded to cover the entire contract period and is being referred to the OIG Audit Division to audit the period of July 15, 2016 through December 11,2018 for the HTW contract and subsequent amendments, and from January 5, 2017 through December II, 201 X for the FM’ contract and subsequent amendments.