The state’s health department has not paid bills on time, hemorrhaged administrative employees and suffers from a poor workplace culture, a state watchdog reported Thursday.

The Virginia Department of Health has been hampered by significant, long-lasting financial mismanagement, according to the Joint Legislative Audit and Review Commission. The most glaring example is the Office of Emergency Medical Services, which misspent $33 million on off-roading vehicles and a robot. But the problems go beyond that branch.

House Majority Leader Charniele Herring, D-Alexandria, called the report “shocking and disturbing.” As a result, hospitals and nursing homes have not been properly inspected, and EMS crews have had to make do with old equipment. But the department maintained its core functions, said R. Christopher Lindsay, chief operating officer of the health department.

The problems, which developed over years and multiple gubernatorial administrations, will take years to fix. Dr. Karen Shelton, state health commissioner, said she agrees with JLARC’s recommendations and is committed to making the agency a good steward of taxpayer money.

A spokesperson for Gov. Glenn Youngkin said his administration inherited the problems and has already taken significant steps to address them.

An agency of the state government, the Virginia Department of Health employs about 3,000 workers across the state who distribute vaccines, inspect restaurants and monitor the spread of disease. The department had a budget of $1.3 billion last year, with much of its funding coming from the federal government.

F

raud, overspending, late payments

In total, JLARC found fraud, overspending, late payments to vendors and staff, poor management of federal grants and inaccurate financial reporting. A lack of awareness from agency leaders allowed the problem at the Office of EMS to grow. One senior employee, Adam Harrell, pleaded guilty to embezzling more than $4 million.

Lindsay said he was not aware of any other criminal investigations. Although the department has not terminated any employees for the mismanagement, some left on their own.

In recent years, the health department has gotten worse at paying its bills on time. Last fiscal year, it paid nearly 30% of its bills — almost 9,000 invoices — more than a month late. It made duplicative payments, including $1.3 million extra dollars paid to the Department of General Services in April.

The department’s Office of Drinking Water created a $2 million deficit by spending money it did not have, and an auditor found the department was a year late paying employees for the overtime they worked during the pandemic.

The department received about $600 million in federal grants last year, but it submitted incorrect vouchers and failed to properly report its funding. The mismanagement got so bad that the Environmental Protection Agency stopped sending Virginia its grant money up-front. Instead, the agency must pay for expenses and then ask for reimbursement.

The agency was poorly managed before the pandemic began, said Del. Mark Sickles, D-Fairfax. When COVID hit, the health department received $2 billion in federal grants and hired about 2,000 contractors. But the agency was strained by COVID and brought on no new resources to manage funds.

Another root cause was a plan formed in early 2020 to consolidate the agency’s business functions into a single unit, which led to dysfunction. The effort, called shared business services, was abandoned last year. It is unclear why the mismanagement persisted for so long.

“This is kind of a culture problem,” said Del. Anne Ferrell Tata, R-Virginia Beach. “Why has this not come to light in the past?”

Half of HR quit in a year

Staffing problems have marred the agency. Four financial management positions have been held by 13 different people in recent years. Almost half of human resources employees left their positions last year, and almost a third of financial management staffers quit their jobs.

In some cases, the department scrambled to hire contractors to fill those roles. In June, it still employed three times as many contractors as when the pandemic began.

Money is a key reason for employee dissatisfaction. More than half of employees surveyed said they were not paid well enough and that they were dissatisfied with agency leadership. A number of them also said the agency lacks accountability and a positive culture. The health department is slow to bring on new hires, and nearly 500 applicants withdrew because of delays in the hiring process. JLARC suggested hiring recruiters to write more detailed job descriptions and get applicants hired quicker.

Because of insufficient staffing, the health department has not performed state-mandated inspections of hospitals and nursing homes. As of August, the department had missed deadlines for inspecting 99% of hospitals and about 40% of nursing homes. Drew Dickinson, a project leader for JLARC, said the financial mismanagement had “broad impacts across the agency.”

But Lindsay, the chief operating officer of the department, said the agency has fulfilled its core public health functions, including maintaining clean drinking water, studying the spread of disease and administering vaccinations.

Youngkin says he inherited the financial problems

When Youngkin took office in 2022, the administration inherited significant, longstanding, troubling financial and operational issues at the health department, said Christian Martinez, a spokesperson for the governor. The administration has made significant progress addressing the issues in the report.

In 2022, Youngkin appointed the agency’s first chief operating officer, Lindsay, who improved the agency’s attention to budgets, staffing and performance, Dickinson said. The watchdog recommended codifying the position into law. Health systems are increasing splitting leadership duties between a medical expert and a business leader.

Shelton, who leads the department as state health commissioner, was hired last year. She plans to implement the recommendations but added that fixing the agency’s problems will take years. The agency is hiring a chief financial officer and controller to better monitor finances.

“While my leadership team and I did not create these challenges, we are fully committed to solving them by putting in place the appropriate financial and operational controls and hiring the right leaders to drive change in the agency,” she said.

JLARC recommended lawmakers require the agency to submit semiannual reports on its progress for the next two years. Department leadership is doing a better job of monitoring the central office, the report said, but it still lacks visibility into the 32 health districts across the state.

With new safeguards in place, the mismanagement and fraud that occurred in the Office of EMS could not happen now, Lindsay said. The finance team has worked through a backlog of unpaid invoices — including 600 never paid by the Office of EMS — and created a new software portal for handling bills.

While the health departments problems began well before Youngkin took office, Sickles said he hoped the administration would have done a better job managing the agency in the past two years.

“You’ve got a lot to do in the next 13 months here,” Sickles told the state health commissioner, referring to the remainder of Youngkin’s term.