The Legislative Audit Committee released a performance audit on the Department of Public Health and Environment'9s Health Facilities and Emergency Medical Services Division on July 1, finding the division has not adequately planned how to spend recent appropriations, has manual and error-prone fee processes, and cannot reliably show it completes state licensure surveys within established time frames.

Why it matters: The division licenses hospitals, nursing homes, assisted living residences and home health agencies; licensing fees flow into three dedicated cash funds that pay for the state'9s licensure program. The audit found those funds received about $7 million annually from roughly 2,500 facilities, but fund balances rose after the division requested and received one-time appropriations it was not prepared to spend.

The audit, introduced by Michelle Collin, deputy state auditor, said the division requested and received $3.1 million in one-time funding across fiscal years 2023 and 2024 that it did not have a written plan to spend. "The Division requested and received $3,100,000 in one time funding across fiscal years 2023 and 2024 and was not prepared to spend it," the report says. Exhibit figures in the report show combined unspent balances rising to about $4.5 million in fiscal year 2024. The auditors projected three scenarios for future balances: if staffing stays the same, balances could grow to roughly $20.2 million by fiscal year 2029; if all planned positions are filled quickly, balances could fall to about $240,000; a steady hiring scenario projects about $7.8 million in unspent revenue by 2029.

The auditors recommended the division develop a written plan to spend down fund balances; improve its licensing data systems to quantify workload and staffing needs; and adopt written policies guiding budget requests. The auditors also suggested the General Assembly may need to reevaluate ongoing funding levels or fee increases established by "House Bill 24 14 17," which the audit identifies as changing how fee amounts are set in statute.

On fee accuracy, auditors found the division'9s online licensing system relies on facilities to calculate fees and on staff to correct fees after payment, creating errors and refunds. A sample of 20 FY2024 payments showed seven were calculated incorrectly; the division issued refunds for about 16% of the roughly 3,300 fee payments that year but does not consistently document refund reasons. The audit recommended automating fee calculations or invoicing facilities, standardizing payment reason data, and implementing secondary review of payments and refunds.

On licensure surveys, auditors reported the division could not provide aggregate data to confirm it performs surveys required by state law. Statute requires annual surveys for assisted living residences (ALRs); the audit'9s sample showed the division did not perform annual surveys for any of the 10 ALRs sampled from FY2020'25. For other facility types, the division'9s informal approach generally targeted surveys at least once every three years; the audit found 10 of 50 sampled facilities received no licensure surveys during the five-year review and six lacked supporting documentation. Auditors recommended that the division ensure its new licensing system can track surveys from assignment to completion, adopt data-entry guidelines and scheduling policies, and assess resources needed to complete required surveys.

Department response: Eric Sheminski, chief operating officer for the department, and Division Director Elaine McManus agreed with the recommendations and told the committee they were already taking steps. Sheminski said the division is developing a written spending plan, creating a modern licensing data system funded by $1.5 million from the Capital Construction Fund, and planning a formal budget policy to be implemented in January 2026. He said the division estimates planned staffing initiatives will cost roughly $2 million annually and currently has about 204 filled positions and 35 vacancies (239 positions total), noting the division historically creates more positions than appropriated expecting some to remain vacant. "We agree with all of the recommendations," he told the committee.

McManus emphasized that complaint investigations have been prioritized during lean staffing years and that all complaints with jurisdiction require an on-site investigation; she agreed routine surveys suffered as a result of those priorities and vacancies and said the division will restore routine surveys as staffing and systems allow.

Committee actions: The committee voted to release the public audit and later moved into executive session to review a confidential finding that the public report did not include. The public report lists four findings and notes a confidential version of the fourth finding will be discussed in executive session.

What comes next: Auditors recommended the General Assembly consider policy actions if the division cannot implement the recommendations, including phasing out general fund appropriations as fee revenue increases or adjusting statutory fee increases. The department told the committee it will work with the governor'9s office and the Joint Budget Committee to balance staffing and revenue decisions, and it said it hopes to complete major IT procurement and fill positions over the next two years.

Ending: The audit provides a timetable of recommended steps and indicates the division has begun implementing several. The committee reserved further review of a confidential finding for executive session.