A $750,000 grant approved ― but never funded ― by Maryland’s opioid command center to open an Eastern Shore drug rehabilitation facility on an abandoned golf course has been referred by legislative auditors to Maryland’s attorney general for a criminal investigation.
Other questionable grant spending within the three-year-old Opioid Operational Command Center should also be reviewed by criminal investigators, Legislative Auditor Gregory A. Hook wrote in a letter to lawmakers released publicly on Wednesday.
The audit was prompted by an anonymous tip to the Office of Legislative Audits fraud, waste and abuse hotline.
The allegation raised concerns about a $750,000 grant in February 2019 to a nonprofit organization to purchase a former country club and golf course in Caroline County. As described in the audit, the goal of the grant was to provide funding for drug rehab services for inmates on work release, students and the overall community by building an agricultural center that included a farm-to-table restaurant, an event venue and potentially a nine-hole golf course.
The audit found that the command center could not provide written justification for the grant or a determination that the program would be effective.
The $750,000 grant was substantially higher than any other award the Opioid Operational Command Center made to a nonprofit in 2019 ― all other awards were for $100,000 or less ― and that the jurisdiction meant to benefit, Caroline County, was home to less than 1% of the total opioid deaths in the state in 2018.
In 2018 there were 13,776 reported opioid overdoses and 2,143 reported opioid deaths in Maryland, according to state statistics.
Hook’s office was not the only one to receive complaints about the grant. The Maryland Department of Health’s Office of the Inspector General investigated the concerns and referred the issue to the chief counsel for Gov. Lawrence J. Hogan Jr. (R) and the attorney general’s criminal division.
Reached Wednesday afternoon, the attorney general’s office said it can neither confirm or deny the existence of investigations.
Ultimately, the money was not distributed “due to the complexity of executing a grant agreement that included the purchase of real estate,” according to the audit.
But that grant was not the only one questioned by Hook. The Caroline County complaint led his office to review the command center’s grant procedures as well as 18 grant awards totaling $6.1 million.
Grant money pocketed?
In a separate finding, auditors concluded that a $100,000 grant from the opioid command center to an out-of-state nonprofit was transferred to two private companies to perform the work required by the grant: to provide “multisensory educational programs on drug prevention to middle schools and high schools throughout Maryland.”
One of the companies, which received $96,100, was owned by senior management of the nonprofit; the remaining $3,900 was transferred to a company located in the Middle East. Hook’s report says that the command center wasn’t aware that the nonprofit wasn’t directly involved in providing services, in violation of terms of the grant agreement limiting the use of private contractors.
The nonprofit status of the company ― not named in the audit ― was questioned in Hook’s report.
“[T]he transfer of 96 percent of the grant funds to a private company owned by the nonprofit’s senior management raises questions as to whether the nonprofit’s activities were intended for the benefit of its senior management,” in violation of federal tax laws that say a nonprofit must not be organized or operated for the benefit of private financial interests, auditors wrote. When auditors reviewed the nonprofit’s IRS disclosures, they found that more than 86% of total revenues in 2016 and 2017 were paid to a company owned by a senior manager at the nonprofit.
In the end, the nonprofit provided fewer than half of the educational programs promised in the grant agreement after receiving the full award. While the grant stipulated two educational programs at 15 schools, 14 of the schools received only one program and the 15th did not receive any.
The same nonprofit has a $1 million grant with the state that is currently being administered by the Governor’s Office of Crime Control and Prevention to provide similar drug prevention programs. However, because that grant was unrelated to the current audit, Hook’s office did not review the propriety of that grant.
His office suggested that the opioid command center consult the attorney general’s criminal division to recover any amounts overpaid to the nonprofit.
Other grants questioned
The majority of the command center’s work is distributing grant funding.
According to the audit, of the command center’s $21.4 million in operating expenditures for the 2018 and 2019 fiscal years, more than $20 million was directed to grant disbursements.
More generally, the audit found that the command center did not have adequate written policies and procedures for the selection of grantees, amounts awarded and the monitoring of grantees. “As a result, we identified numerous deficiencies with OOCC’s grant process, which raised questions about the integrity of the awards and related payments,” Hook wrote.
While Steve Schuh, the command center’s executive director provided a written response to the audit findings, including that the center began using a committee to evaluate grants in February 2019, Hook concluded that the committee’s enhanced review procedures “were either not fully implemented or were not sufficiently comprehensive as of the time of our review.”
Hook’s review of a $62,000 grant reviewed after the creation of the committee found no documentation of each committee members’ ratings for the proposal or justification for increasing the priority of the project to “very high priority.” There also was no explanation for why the committee chose to fully fund a different grant rated as “low priority.”
For a $550,000 grant, the command center could not provide a record that the money was used to buy the Naloxone overdose drug in the city of Baltimore.
Hook also questioned a $40,959 grant a local health department to execute a grant agreement with a nonprofit organization operating a transitional sober living residence. The grant proposal requested the funding for staffing and costs related to medical treatment, however the full amount of the grant funds were instead used to purchase a box truck, a commercial lawn mower, a gas grill, and propane.
A $10,660 invoice provided for the propane purchase was scrutinized by auditors for lacking the company’s logo, website and phone number, as well as details of the purchase, including the cost and quantity of propane delivered. “Furthermore, the format and appearance of the invoice and the lack of details were not consistent with copies of invoices submitted by this vendor to other State agencies,” auditors wrote.
The audit was conducted between May 2019 and September 2019.
The Opioid Operational Command Center was created by Hogan through executive order in January 2017. The center was initially a part of the Maryland Department of Health but was later transferred to the Maryland Emergency Management Agency.
Schuh, the former county executive of Anne Arundel County, became executive director in December 2018.
“The OOCC identified the need to update existing grant award policies and procedures at the beginning of the current leadership team’s tenure and believes that no individual grant was more affected than another by any procedural shortcoming,” Schuh wrote in a response to the audit earlier this month.
While changes were in the process of being implemented during the audit period, they have since been improved further, based on insights from auditors, he wrote.
Schuh disputed other parts of the audit’s findings. For the $100,000 grant to provide educational programs, he agreed that the transfer to a private company violated the grant agreement, but said the command center has verified that 20 schools received the full amount of services the grant intended. Schuh also wrote that the command center has worked with the attorney general’s criminal division “to confirm that there are no outstanding issues related to overpayment and/or service delivery.”
In followup comments, Hook maintained that documentation from the related schools confirmed that the services were not provided.
For the $40,959 grant, specific purchases were approved by the command center to help with the sober home’s startup costs and the propane purchase was subsequently confirmed as a legitimate purchase.
On the $750,000 grant, Schuh wrote that the command center had received no complaint about the propriety of the grant application from the local health department, despite regular discussions with them.
Sen. Clarence K. Lam (D-Howard), Senate chairman of the General Assembly’s Joint Audit Committee, said Wednesday that he was “deeply concerned” about the allegations of wasteful spending.
“We have a very real public health crisis with people overdosing almost daily,” and a number of people dying, Lam said. “We need to be sure all of our resources are spent in the best ways possible. …These are funds that should be going to people trying to overcome their addictions.”
On Friday, the House Appropriations Committee is expected to hold a hearing on the audit results. Members of the Joint Audit Committee have been invited to attend the hearing.
Lam noted that the auditor’s review covered only about a third of the grants awarded by the command center.
“It could very well be just the tip of the iceberg of wasteful spending by the center,” he said.
Click here to read the audit.