A newly released audit of Maine’s administration of federal funds found deficiencies in several key areas, including the process for awarding outside contracts and spending on school meals and welfare benefits.

The report from the Office of the State Auditor was published online last week and includes a review of 19 federal programs that represent the bulk of $5.5 billion in federal expenditures made by Maine in the 2024 fiscal year.

Overall, the audit agreed with the state’s financial statements that Maine is in a strong financial position.

But, it also detailed over the course of 500 pages several “material weaknesses” indicating a lack of internal controls that could lead to mistakes in the state’s financial reporting, as well as less serious “deficiencies” and “serious deficiencies” in various programs.

A spokesperson for Gov. Janet Mills deferred comment on the audit’s findings to the Department of Financial and Administrative Services. Sharon Huntley, a spokesperson for the department, said in an email that the administration welcomes the audit’s findings and has systems in place to ensure issues are properly addressed and corrected. State officials disputed many of the specific deficiency findings in the report, however.

Huntley said that the number of overall deficiency findings has decreased from the last audit, with the overall count of 76 findings in the latest report representing a 22% drop from last year.

“The Administration works diligently to minimize such occurrences and address those items that are found,” Huntley said. “And that has occurred. Both count and severity of findings have declined from the last report.”

Maine Senate Republicans blasted the audit’s findings regarding state contracts and sent a letter to U.S. Attorney General Pam Bondi earlier this week asking her to launch a federal investigation into the state’s  Office of State Procurement Services.

The state spent about $2.1 billion in all contract-related payments in fiscal year 2024, although the audit only examined a sampling of contracts and agreements.

“This report reveals systemic failures in oversight, apparent violations of federal and state procurement laws, and a pervasive disregard for internal controls, jeopardizing billions in taxpayer funds, including significant federal dollars,” the senators wrote.

ISSUES RAISED WITH CONTRACT PROCESS 

In testing samples of active contracts, agreements and purchase orders, the audit found that five of 23 contracts did not contain required information and 24 of 45 others were signed after the contract start date, even though the audit points out that contracts are not valid until they are signed. The state also could not provide the required documentation about a cost analysis for any of the 45 contracts tested, it said.

The Office of State Procurement Services also awarded multiple low-cost service contracts, for goods or services less than $5,000, to vendors that were already engaged in contracts with the same department in a 12-month period, which is against state policy, the audit said.

Contracts with incomplete or inadequate terms could be declared invalid and that noncompliance with federal regulations could result in money being owed to the federal government, the audit report said. A lack of cost analysis prevents the state from ensuring it is getting the best value in contracting, it said.

The Office of State Procurement Services largely disagreed with the findings regarding contracts, saying in a response included in the report that departments can have more than one low-cost contract with the same vendor under certain conditions and that individual state agencies, not the procurement office, are responsible for federal contract management.

The office also said the audit report overlooked established processes for cost analysis and cited outdated policies. It said an updated policy manual, due for release this year, will clarify current practices.

Huntley stressed in her email that the control system governing state procurements “has extensive supervisory oversight to ensure accountability and transparency.”
“(Our response) outlines instances where the auditor overlooked established processes that provide additional documentation, including cost analysis, and did not recognize other controls that are in place as part of the overall procurement process,” she said.

SCHOOL MEALS, SNAP PROGRAM CITED

Other problems cited in the audit include overpayments of food assistance benefits and the issuing of benefits after a client’s death, as well as discrepancies in eligibility and reimbursement claims for school meals.

In a random sample of 60 households that receive benefits from the Supplemental Nutrition Assistance Program, the audit found nine overpayments of monthly benefits due to lack of documentation of eligibility or processing errors. One household received an underpayment of benefits. Another received both an over and an underpayment.

The audit also found 214 cases in 2024 when SNAP benefits were issued more than 75 days after a client’s death, a time period that the audit said allows for notification of death and cancellation. The 214 cases represent less than 0.5% of the 129,000 clients the state provided with SNAP benefits in 2024.

DHHS acknowledged “errors in calculations or documentation” in the audit and said it has developed a corrective action plan. It also said it is working to improve data related to deaths and that that issue “should be cleaned up” by the 2026 audit.

The audit also cited a need for better record-keeping around school meal eligibility and reimbursements. In one example, a sampling of 32 applications from schools for participation in the National School Lunch Program found six applications that lacked key information, like the signature of the superintendent or the program year, or were submitted after participation in the program had begun.

Management in the Maine Department of Education said they partially agreed and said they are working on taking corrective actions.

In another deficiency finding, the report says the Maine Department of Health and Human Services erroneously included indirect costs, such as expenses related to a new computer system, when reporting direct child care costs, resulting in the state failing to meet a federal grant requirement that 70% of expenditures be used for direct child care subsidies.

Over the course of two years, the audit says, the state mischaracterized $3.7 million as direct costs when that money should have been reported as indirect costs. DHHS agreed it could enhance its policies and procedures, but disagreed with the $3.7 million in questioned costs.

In her email, Huntley said the Mills administration takes each finding seriously and works with the Office of the State Controller to address deficiencies. In addition to responding to the findings, each agency is also required to submit corrective action plans.

State Auditor Matthew Dunlap said his office will prepare a report for lawmakers on areas where state agencies disagreed with the audit’s findings, which could result in lawmakers taking their own action in response. Dunlap said the Legislature should be receiving his office’s 2023 report this spring, while the report on the 2024 findings is expected to come out next year.