Federal review finds big problems at the NM Dept. of Health

Nearly two years after Bob Ortiz first raised concerns about how one of the state's largest departments handles its finances, he's finally getting a response.

In July, the US Department of Agriculture’s Food and Nutrition Service conducted a financial management review, similar to an audit, of the New Mexico Department of Health. The analysis found accounting errors in the DOH’s Women, Infants and Children program—to the tune of $500,000 in fiscal year 2008. 

The WIC program, for which Ortiz was hired to help fix a $1.7 million accounting glitch in 2009, provides food and nutrition services to the state's neediest women and children. Though federally funded, WIC is managed by the DOH at the state level.

Every three years, federal authorities conduct routine reviews of how state agencies allocate and manage WIC funds. But this review was different: Its scope extended four years back, from 2006-2009—a result, Ortiz says, of his repeated complaints about fiscal practices at the DOH. In an email to SFR, FNS spokeswoman Georgina Castillo writes the review was expanded because of concerns over incorrect reporting from the state.

Castillo also writes that FNS reviewed source documents from a "judgmental sample" of the WIC program consisting of 45 transactions. Ortiz says that sample leaves out the full picture.

"It's not a true reflection of the variance," Ortiz tells SFR. He maintains the program's accounting errors amount to $1.7 million in mishandled federal funds.

Either way, with $500,000 in federal appropriations that went unaccounted in the state's reports, New Mexico will be on the hook to pay back some of that money, Wally Vette, deputy secretary for programs at DOH, tells SFR. (Vette says that, since the DOH's accounts have since been reconciled, he expects the state will have to pay back the funds at a lower rate.)

Deanna Torres, who directs the WIC program, doesn't know what the size of the analyzed sample was, but says DOH provided all of the necessary financial data.

Torres attributes most of the accounting error to a switch from paper to electronic records. Federal law requires every state to transition WIC to electronic payments by 2020. New Mexico, according to Torres, was only the second state to do so.

She adds that a majority of the errors occurred through paper checks, which the WIC program doesn't use anymore.

"When you're looking at a $45 million program and a new system, this is common," Torres tells SFR.
But Joe Newman, a spokesman for the Washington, DC-based Project on Government Oversight, says the amount of money lost is significant.

"Five hundred thousand dollars is a lot of money no matter how you look at it," Newman tells SFR.
He says the cause of the error sounds more like "sloppy bookkeeping" than deliberate fraud.

A Sept. 6 DOH press release says the accounting problems account for less than one-tenth of 1 percent of the WIC program, which each year spends $14 million in administrative costs on top of the $45 million on food. The press release also says the review found "no instances of fraud." Ortiz dismisses it as spin.

With $500,000 in federal appropriations that went unaccounted in the state’s reports,
New Mexico will be on the hook to pay back some
of that money.

"I don't buy at all that they were exonerated," Ortiz tells SFR. "[The federal authorities] weren't there to investigate fraud. They were there to look at violations of rules and found them."

Castillo confirms the review's intent isn't to investigate fraud, but to verify the state's financial information.
"However, we may find rules violations that we will work with the agency to correct," she writes.

The review's reasons for the accounting errors match some of Ortiz' initial complaints.

For one, the state's payment system wasn't in sync with the federal WIC accounting system, which Ortiz says is what he was told when he was hired to help fix the $1.7 million variance. Another is that the adjusted journal entries, or cost corrections, intended to fix accounting errors, were made without supporting documentation.

Ortiz says that, in April 2009, he met with the FNS in Dallas to request money while the DOH was fixing the problems that caused the $1.7 million error [cover story, Jan. 13, 2010: "DOH!"]. After his request was denied, Ortiz says his then-boss Michael Mulligan told him to cover the error by transferring the $1.7 million from state fiscal year 2008 to federal fiscal year 2009, which are separated from each other by three months.

Ortiz says it's an example of making cost corrections without creating a paper trail.

"At first, I complied," Ortiz says. "The next few weeks, I complained about it. It made Mike Mulligan very angry."

Ortiz, who had more than 27 years of experience handling large financial contracts at Los Alamos National Laboratory before coming to DOH, says he was then prohibited from handling money and placed in a new position for which he is paid $96,400 a year to do, as he puts it, nothing.

"I haven't had a real job for 25 months," he says. "Mostly, I just sit in my office."

Diane Moore, another DOH employee, has made similar claims about WIC.

"WIC is about starving babies," Moore tells SFR. "That's where our programs are being robbed."

Moore says the FNS audit, along with revelations that accounting errors in the Medicaid program during Gov. Bill Richardson's administration added up to $100 million, are demonstrative of the mismanagement.

"This was just a flub, they say," Moore says. "For me it's a different F-word, called fraud."

Last fall, Moore filed a lawsuit against the DOH charging nepotistic hiring and fraudulent payment practices. Around the same time, Ortiz became energized by Susana Martinez' tough stance against corruption. He contributed $1,000 to her gubernatorial campaign and says he spent five weekends making robocalls.

After Martinez won the election, Ortiz says he met with her transition team and told them his story, providing all the right documents. When Martinez took office, Ortiz quickly sent emails explaining the WIC situation to the "cut waste tips" section of her website. "Here is the waste," he wrote. "I am being paid $96,400 a year to be in 'time out' because I reported fraud."

Despite all this, Ortiz says he hasn't heard back from the Governor's Office. He's looked under the "transparency" section of Martinez' website, where she promised to repost relevant tips her office received. Ortiz' emails are nowhere to be found, and no tips have been reposted since February. The Governor's Office didn't return repeated phone calls and email messages from SFR.

Ortiz says he still believes in Martinez, but blames the inaction on the people running her office.

At the DOH, the problems with WIC are fixed, according to Torres. DOH spokeswoman Aimee Barabee says both systems are now in sync and that "technical communications, computer file processing and data transportation issues" caused the problems.

Torres says the variance for fiscal year 2010 was just 78 cents.

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