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Ex-official says health department was ‘financial time bomb’

December 20, 2017

Former Oklahoma State Health Department chief operating officer Deborah Nichols answers lawmakers' questions when she appears before members of the House Special Investigation Committee meeting at the state Capitol in Oklahoma City, Tuesday, Dec. 19, 2017. Nichols testified before the committee a few hours after Oklahoma Attorney General Mike Hunter revealed that the FBI and the U.S. Department of Health and Human Services is joining his investigation of financial mismanagement at the state Health Department. (Jim Beckel/The Oklahoman via AP)

OKLAHOMA CITY (AP) — A former top financial officer at the Oklahoma State Department of Health testified Tuesday that the agency’s top administrators were “really bad business people” and the agency was “a financial time bomb” before authorities discovered a $30 million budget shortfall earlier this year.

“We couldn’t pay the bills on time,” Deborah Nichols, the agency’s former chief operating officer, told members of a state House investigative committee. “We didn’t have really good processes in place. We had sort of this decentralized process. It’s almost incomprehensible.”

Nichols testified before the committee a few hours after Oklahoma Attorney General Mike Hunter revealed that the FBI and the U.S. Department of Health and Human Services is joining his investigation of financial mismanagement at the state Health Department.

Hunter said federal investigators will look into the use of federal funds at the agency alongside his investigators and state auditors who have already launched an investigative audit that could lead to criminal charges. Oklahoma’s multicounty grand jury is also investigating the agency.

Nichols, who was previously CEO at a national health insurance provider, said she began working at the health department in August 2015 and resigned on Nov. 30. She said she first noticed financial problems at the agency in January 2016, when a previously scheduled renovation project at the health department’s Oklahoma City headquarters was canceled because the agency did not have $8.5 million needed to do the work.

“We were looking for money so we could pay the bills and make payroll,” Nichols said. “We’re headed down a path that’s not good.”

Financial problems escalated until June 2017 when Nichols said authorities discovered the agency was facing a budget shortfall of as much as $30 million as it was about to begin a new fiscal year.

Nichols said she told former Health Commissioner Terry Cline and others in July that “the agency was on the verge of financial collapse” and would need to reduce staff and secure about $30 million in supplemental state funding, but no action was taken.

“I can tell you we are deeply frustrated. We feel like we are sitting on a financial time bomb,” Nichols said. “Literally, the grass is growing. There’s no attempt to get a supplemental.”

Cline and the agency’s senior deputy commissioner resigned in October. Since then, the agency has laid off almost 200 health department workers and the Legislature has appropriated $30 million so the agency can pay its bills.

Nichols said no single factor led to the agency’s financial problems and that there is no evidence “that anyone was putting money in their pocket.”

The agency suffered from “a lack of business discipline” and officials were “borrowing from Peter to pay Paul and never paying Paul back. That’s a lot of what occurred,” she said.

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