Delaware's Prescription Opioid Settlement Distribution Commission (POSDC) says another grant recipient could be sent to the DOJ for investigation, which would mark the second referral of an opioid abatement grant recipient.
POSDC is in charge of distributing funding awarded to the State of Delaware through legal challenges against opioid manufacturers and distributors, which is anticipated to accumulate to $250 million by 2038.
Organizations can apply for funding in an effort to support a wide variety of strategies to combat the opioid crisis.
The First State's distribution process of opioid settlement funds came under scrutiny after the Auditor of Accounts (AOA) flagged Kent County nonprofit Code Purple for potential fraudulent use of funds in June 2024, just one year after the organization was granted $290,000.
AOA referred Code Purple to the Delaware Department of Justice (DOJ) — the organization is still under investigation while the department attempts to claw back the distributed funds — after State Auditor Lydia York concluded an audit could not be completed.
Following Auditor York's report, she announced 12 additional grant recipients, selected based on high grant amounts, would be audited to reveal if there is cause for further concern within the grant program.
POSDC Executive Director Brad Owens and AOA now confirm there are 15 organizations, in addition to Code Purple, that are being audited.
AOA says some grant recipients have been added and removed from the audit list based on the office's criteria in its risk assessment.
Following the referral of Code Purple, the state opted to freeze the distribution of additional opioid abatement funding while POSDC hired an outside contractor to evaluate the commission’s grant process and then implement new guardrails to ensure better grant distribution policies and procedures.
One year later, the POSDC approved $13 million in a new round of grant funding this July, but close to an additional $1 million is leftover from previous cycles.
Owens had previously aspired to distribute funding this month, but he says the commission is still working on developing scopes of work with grantees and hopes that payments will hit throughout Q4 in October, November and December.
Amid the latest grant cycle process, the auditor has been staggering releases of the promised audit reports.
Auditor York released the first round of performance audits in February of this year and found that three of the four organizations analyzed were in compliance with their grant agreements.
The fourth organization, Higher Ground Outreach, was unable to provide supporting financial documentation to monitor grant expenditures, but Auditor York explained the lack of reporting did not correlate to fraudulent use of funds.
The auditor released three additional audits in August, finding two grant recipients to be in full compliance, but flagging Congo Legacy Center (CLC) for financial inconsistencies.
CLC was awarded $475,000 to renovate a facility that would serve as a resource hub for youth and their families to be educated on opioid misuse and prevention.
But Auditor York found the majority of expenditures made by CLC were not consistent or in compliance with the agreed upon scope of work.
Owens explained at the POSDC's quarterly meeting Tuesday that half of the money was approved for renovations and the other half for programming, but it appears CLC spent the bulk of money on construction when costs were higher than anticipated.
The concerns prompted POSDC to pause an additional $80,000 awarded to CLC, and Chair Joanna Champney says decisions around those funds are underway.
“What we could commit to is to keep this commission posted about what the recommendation is, so of the $80,000, how much of those expenditures are we able to validate and how much do we propose to then pay that provider?” Champney told members of the commission.
POSDC has been ramping up staffing, which Champney says could help expedite the review process.
Despite CLC's financial discrepancies, the auditor's office found no evidence of fraud and did not refer the case to DOJ for further investigation, but rather recommended financial reporting requirements be improved.
But Owens told members of the commission that the announcement of at least one other grant recipient being referred to DOJ for investigation could be on the horizon.
“You might very well see another organization be referred to the DOJ. We have yet to get final word from the auditor's office but [we will] certainly keep you updated," Owens said during the meeting.
AOA did not comment on Owens’ implication that another organization could be flagged for fraudulent activity, but the office says five more audit reports are expected next month with potentially more expected later on.
Eight more audit reports are needed to complete the full sample size, and if AOA cannot complete an audit, the organization could be referred to DOJ for further investigation — similar to the instance with Code Purple.
