Grand Jury: Financial Crisis at Oklahoma Health Agency Never Existed

May 19, 2018

The six-month investigation into financial mismanagement at the Oklahoma State Department of Health is complete — and no criminal charges will be filed.

A grand jury started probing the agency in November after officials reported a sudden budget shortfall. The resulting financial crisis led to the layoffs of nearly 200 employees and an emergency infusion from lawmakers of $30 million to help the agency stay solvent.

The grand jury said the financial crisis wasn’t real. The grand jury blamed the agency’s antiquated internal financial system and found evidence of misconduct, but none considered illegal under state laws.

State Auditor and Inspector Gary Jones said the agency had enough money to pay its bills, but internal restrictions made its own board of directors think the agency was insolvent.

“While it appears to be a ponzi scheme, it was only a ponzi scheme within themselves. They created their own crisis,” Jones said.

Jones added that $30 million dollars remains in what the grand jury report calls a “slush fund” with money made up primarily of federal appropriations and county millage dollars the agendy set aside over a period of years.

“Leadership at the department of health was able to build discretionary funds in a federal account out of sight of the agency’s board, the Legislature and the governor’s office,” said Oklahoma Attorney General Mike Hunter. “Using these improper accounting practices, the agency was able to show a ‘balanced budget.’”

Hunter called the grand jury’s findings “reprehensible,” but said no state or federal money was embezzled or stolen.

Hunter supported a grand jury recommendation use the $30 million to investigate other state agencies. He declined to comment on whether a parallel investigation by the FBI is still moving forward.

Hunter said it’s up to the agency to decide whether or not to rehire laid off employees. In March, the state Board of Health named Tom Bates, a former first assistant attorney general, to head the embattled health department.

Bates is the fourth interim commissioner in the last year, following Preston Doerflinger’s resignation in February after past spousal abuse surfaced in media reports and Terry Cline’s resignation last October, when the financial mismanagement became public. The agency’s federal policy director led the agency in an interim capacity between Doerflinger and Bates’ appointment.