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Legislative auditors report employee fraud, forged state warrant and missing assets at DHS
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Summary
Auditors presented three findings in the Department of Human Services FY2024 audit: apparent employee thefts from disaster SNAP and Medicaid benefits, an altered $610,000 warrant cashed and later recovered, and gaps in fixed‑asset accounting; DHS described corrective steps and case statuses.
Auditors told the Legislative Audit Committee that the Department of Human Services (DHS) FY2024 audit contained three findings, including employee misuse of benefit programs, an altered state warrant cashed for almost $610,000, and missing or mis‑documented capital assets.
The audit report, read to the committee by Mr. Bullington, said the agency notified auditors of "the apparent theft of almost $8,000 from the Disaster Supplemental Nutrition Assistance Program" and that "by providing false or incomplete information to the agency, 13 employees received disaster temporary food assistance benefits related to the 03/31/2023 tornadoes that impacted Pulaski County." The report said those employments were terminated and the cases were referred to the Pulaski County Prosecuting Attorney; auditors also reported an improper Medicaid benefit payment of about $5,800 to one employee that was similarly referred.
DHS officials who answered questions at the table included Renee Eichard, chief fiscal officer, and Brett Hayes, chief deputy counsel. Hayes told the committee the office had followed up on the 13 SNAP‑related referrals: seven cases closed with restitution ordered (total restitution $4,165; DHS has collected $3,408), four cases remain pending with the Pulaski County Prosecutor's Office, and two were dismissed and returned to DHS, which is issuing notices of overpayment to recover funds.
On the second finding, auditors reported that on 07/31/2024 the Treasurer's Office notified the agency that a state warrant payable to the University of Arkansas at Little Rock (UALR) had been altered and cashed; auditors said DHS did not notify legislative audit until 08/21/2024, about 15 business days later. The report said the payee line on the redeemed warrant had been changed to a private business while the warrant amount and number remained the same. Mr. Bullington said the Deputy Director and State Controller at DFNA notified the FBI on 08/20/2024; UALR completed a forged‑warrant affidavit on 08/22/2024, the bank was notified on 08/23/2024, and the State's forgery claim was honored with funds deposited into the Treasurer's account on 11/13/2024.
Committee members pressed DHS about the 15‑day notification lag. DHS said the delay resulted from a misunderstanding in the agency's finance unit about whether the Treasurer's notification included notification to legislative audit. As corrective action, DHS said it has instructed its accounts‑payable unit that the first call for similar events must be to the chief fiscal officer so that legislative audit is notified promptly.
The third finding described capital‑asset observation results: in a sample of 50 items (total sample purchase cost nearly $59,000) five could not be physically located or properly identified. DHS told the committee three of those items were old IT servers likely disposed of when no longer used, one was sewage‑treatment equipment that has since been tagged and documented in ACES, and one was a vehicle previously transferred to M and R that had not been updated on the fixed‑asset listing. Auditors also noted 10 of the 50 sampled items had not been inventoried in two or more years, some items were not capitalized at the correct amount, and DHS paid over $17,000 in sales tax on four tax‑exempt vehicle purchases; DHS said it is working with DFNA to recover the sales tax and that later vehicle purchases have not incurred sales tax.
The committee deferred further follow‑up to the next meeting so DHS can return with documentation that new notification procedures are written into policy and training.
