Crossroads mishandled federal funds, investigation finds

More than $180,000 of federal funds were flagged by the state auditor’s office in an investigation into Creston’s Crossroads Behavior Health Services.

Iowa State Auditor Rob Sand released a report last Tuesday on a special investigation into Crossroads. The report says Crossroads misappropriated funds from state and federal grants and improperly disbursed funds from county opioid funding from Adams and Union counties.

The report identified $167,716.23 of questioned cost incurred, $14,167.91 of improper disbursements and $194.72 of unsupported disbursements. The investigation came after a request from Iowa Department of Health and Human Services officials.

The investigation analyzed internal control and supporting documentation on Crossroads’ finances, including bank ledgers and payrolls, and conducted interviews with their officials. Analyzing two fiscal years from 2022-2024, the investigation sought to find how Crossroads misappropriated state and federal funding.

Crossroads Director Brittany Palmer said the report’s findings were accurate but did not fully represent the situation facing Crossroads at the time. Palmer, who joined Crossroads in November 2021, said the administration at the time of the investigation had large administrative and control issues.

Background

Crossroads operates several mental and behavioral health programs within areas of Southwestern Iowa, operating in Creston and a satellite location in Osceola. These programs tackle local issues such as psychiatric services, problem gambling, substance use disorder and other community support programs.

Iowa DHHS makes contracts with organizations like Crossroads in order to create local programs. These can include mental health services, food assistance, aging services, Medicaid and more.

DHHS made a contract with Crossroads for five services: Zero Suicide Iowa, Iowa’s Emergency COVID-19 Project, State Opioid Response, ARPA Integrated Provider Network Supplement and Substance Use and Problem Gambling Services Integrated Provider Network.

To accomplish the creation of three of these programs (SOR3, ARPA Integrated Provided Network Supplement and Substance Use and Problem Gambling Services Integrated Provider Network), Crossroads partnered with a subcontractor in Zion Behavioral Services as allowed by the grant contract with DHHS.

For the two years investigated by the auditor’s office, Crossroads received about $661,000 in federal grant funding, portions of which were to be paid to Zion.

Zion operates similarly to Crossroads, offering behavioral health services to various counties including Adair, Cass, Dallas, Fremont, Montgomery and Page. (Zion would later open a Union County location after the period investigated).

As part of the contract with Crossroads, Zion was to invoice Crossroads on a monthly basis for services rendered as a subcontractor, which Crossroads would pay within 45 days.

Failure to pay

Palmer said the issue was two-fold, saying a larger issue stemmed from DHHS’ inability to properly reimburse Connections the funds they were awarded. Palmer said DHHS was at times “upwards of eight months” delayed in paying Crossroads.

When the money was delivered to Crossroads, it was deposited into the organization’s operational account rather than the specific account to be used for reimbursing Zion. Palmer said this led to the federal dollars being used for Crossroads’ operational expenses rather than its intended purpose.

Additionally, Crossroads at the time of the investigation used outsourced billing for the grants. When the payments would eventually arrive at Crossroads, Palmer said they were unable to pay Zion out of Crossroads’ accounts.

“We can’t rebuttal because we did receive the funds,” Palmer said. “By the time we received the money, we were in financial straits. We used it to help Crossroads keep their doors open. They weren’t paying us timely.”

Beginning in August 2023, Zion began communicating with Crossroads regarding missed payments since January 2023. By January of 2024, Zion compiled a summary of unpaid invoices and requested Crossroads to pay.

After a meeting of Crossroads’ executive board, they concluded they would be unable to pay the amount Zion requested and instead offered a payment plan of 18 months with monthly payments to cover the unpaid invoices.

Zion informed DHHS of $200,000 worth of unpaid services they had performed as a subcontractor for Crossroads. Additionally, on Feb. 5, 2024, Zion did not approve the 18-month payment plan and requested the full payment of $212,477.75 within 30 days, with Zion saying they could be forced to cease services if left unpaid for their coverage area.

DHHS concluded Crossroads was receiving reimbursements for services that would have been paid to Zion. Due to this, DHHS suspected mishandling of these funds and requested the investigation.

Findings

The investigation identified $167,716.23 in questioned costs from the three programs Crossroads received federal and state funding to distribute. In order for Crossroads to receive these grants, they must submit a budget and expenses they will incur, assuring financial commitment to the program.

Crossroads can only reimburse a subcontractor, in this case Zion, after they receive the money from DHHS for performing the program’s services.

The investigation found 39 instances of questioned claims from these three programs in which Crossroads were reimbursed but did not pay Zion, expenses which were over the approved budgeted line amount and payment for an employee not approved in the budget.

Nine of these 39 claims were unrelated to paying Zion. The remaining 30 instances which were meant to be paid to Zion are still outstanding. An additional 39 instances were noted where Crossroads did reimburse Zion for their services but after 45 days of receiving Zion’s invoice.

Since informing Crossroads of the audit office’s investigation, $10,000 has been paid to Zion in the time since. Crossroads still owes Zion $155,713.73 for services rendered.

Crossroads informed DHHS officials multiple times that they were unable to pay the outstanding balance to Zion due to sufficient funds. Without the payment plan offered to Zion, Crossroads says they have no other way to pay.

County opioid funding

As part of the investigation, the auditor’s office identified funding from Adams and Union counties during the fiscal year 2023-24 which were requested for opioid remediation funds. Counties receive funding from the state to create an opioid fund after the country settled a national case with several medical companies.

Both Adams and Union counties, through their opioid funds, gave money to Crossroads to perform opioid remediation services. Adams County reserved a requested $18,796.83 of their fund for Crossroads, and Union County reserved $60,000 for a total of $78,796.83 through county opioid funding.

However, Crossroads would request higher totals than these budgeted amounts. Crossroads requested $20,010.54 of expenses for Adams County and $60,022.08 for Union County, totaling $80,032.62 of expenses.

Of those expenses, the investigation noted $15,182.24 were improper disbursements related to payroll. A difference of $12,254.94 was identified for Union County, and $2,927.34 for Adams. The investigation also identified $216.55 of unsupported disbursements, which had conflicting details in financial documents.

Palmer said the information presented in the report in regards to the opioid funding was inaccurate, saying Crossroads has documentation supporting the disbursements. The report said Crossroads did not have proper documentation or control at the time of the investigation.

Crossroads’ official statement on the matter was read during a recent Union County Board of Supervisors meeting.

“Crossroads has received the state’s audit report and is carefully reviewing its findings,” the statement reads. “We are committed to full cooperation with all agencies as they conduct their reviews.

“Our focus is to understand the concerns raised and take the appropriate steps to address them. Throughout this process, Crossroads remains dedicated to serving our clients with the same level of care and professionalism that our community expects from us.”

Administrative issues

As a part of the investigation, the auditor’s office noted several administrative issues which exasperated the issues Crossroads faced in being unable to make payments.

Eleven instances of returned and unprocessed checks were noted. This occurs when Crossroads’ bank accounts have insufficient funds to cover the expense. Crossroads during the period had 77 instances of overdraft fees, totaling $5,074.

The investigation also criticized DHHS officials for not providing “sufficient subrecipient monitoring of its financial transactions.” DHHS did not ensure Zion was paid in compliance with the federal grant agreement.

In the time since the period of the investigation, Crossroads has cut most partnerships with subcontractors or outsourced work in favor of in-house operation. Palmer said the internal control issues found in the investigation have had steps taken to be solved.