OKLAHOMA CITY (OBV) – The Legislative Office of Fiscal Transparency’s (LOFT) investigation into the Oklahoma Department of Mental Health and Substance Abuse Services’ (ODMHSAS) financial practices found gross mismanagement of funds that resulted in a deficit of tens of millions of dollars.
Senate President Pro Tempore Lonnie Paxton, R-Tuttle, said LOFT’s report exposes serious financial mismanagement within ODMHSAS and shows that the State Legislature was justified in firing Allie Friesen from the position of ODMHSAS Commissioner.
“The LOFT report confirms the Legislature made the right decision in removing the former director responsible for the mismanagement at the Department of Mental Health,” Paxton said. “These were not isolated incidents. They reflect a broader failure to effectively manage an agency that serves some of Oklahoma’s most vulnerable citizens. I appreciate LOFT’s thorough and diligent work in bringing these issues to light. I’m confident that, with new leadership and the implementation of these recommendations, the agency can regain stability and refocus on its core mission. LOFT’s work gives us the transparency and insight needed to ensure mental health services are supported with integrity and fiscal responsibility.”
House Speaker Kyle Hilbert, R-Bristow, said LOFT’s report is essential to the overall investigation into ODMHSAS’ financial mismanagement.
“This report is a critical piece in our joint House and Senate investigation into what went wrong at this agency and gives us a roadmap to improve budgeting practices not just at ODMH, but across all state agencies,” Speaker Hilbert said. “This report lays the foundation lawmakers need to make informed decisions moving forward and highlights the importance of sound financial practices in every state agency. I appreciate LOFT’s work in digging into this and the new leadership at the agency for providing answers during this investigation. These are critical services Oklahomans need, and we must get this right.”
The Oklahoma Senate and Oklahoma House of Representatives approved SCR 12, written by Sen. Paul Rosino, R-Oklahoma City, and Rep. Josh West, R-Grove, to remove Friesen from her ODMHSAS commissioner role. The Senate voted 43-1 for the removal, with only Sen. Shane Jett, R-Shawnee, voting to keep Friesen in the position. The House voted 81-5 for the removal.
Oklahoma Attorney General Gentner Drummond, who previously criticized Gov. Kevin Stitt for not firing Friesen, also cited the LOFT report as confirmation that Friesen needed to be fired. He issued the following statement:
“The LOFT report confirms what I said throughout the legislative session: Gov. Stitt needed to fire Allie Friesen. Instead of acting in the best interests of Oklahoma taxpayers, he acted in the best interest of a failing bureaucrat who never had a good answer for why or how tens of millions of dollars went missing. Thankfully, the Legislature was willing to remove Ms. Friesen so the state Department of Mental Health could benefit from new, more qualified leadership.
While I have met with the interim director and have had pleasant discussions, I still do not have any definitive explanation on the millions of missing tax dollars. I have offered to assist the department leadership in any way possible to find and recover these funds. My office stands ready to support them however we can.”
Attorney General Gentner Drummond
LOFT reviewed ODMHSAS’ existing contracts and finances to provide a third party perspective on how the agency has handled state-appropriated money.
ODMHSAS’ financial management failures are listed as follows in LOFT’s report:
- Failing to accurately budget key operational areas
- Treating funds as fungible
- Over-encumbering funds
- Failure to track when funds are expended for a purpose other than originally budgeted
- Failure to reconcile budget to actuals
- Violating the balanced budget requirement by deferring payment for current fiscal year obligations until the next fiscal year
- Billing purchases in the current fiscal year to the prior year’s budget
- Poor purchasing controls
- Increased spending on areas extraneous to the agency’s mission
- Poor contract management
- Lag times in making payments and reimbursements
- Expending funds in ways not authorized by the Legislature
- Failure to track expenditures in relation to legislative direction
- Failure to correct deficient financial practices identified in past financial and purchasing audits
- Increasing spending on administrative staff after identifying a budget shortfall
“LOFT observed numerous poor budgeting practices within [the Department of Mental Health] that contributed to the agency’s lack of understanding about its finances and allowed it to exceed its budget, resulting in a request for supplemental funds to support agency operations through the end of the fiscal year. Collectively, these practices also obscured visibility into the agency’s expenditures,” the report states.
LOFT’s full report is as follows:
The Department of Mental Health’s finances fell under intense scrutiny in March when Friesen, who was commissioner of ODMHSAS at the time, notified Stitt that the agency could not afford to pay the State’s share of Medicaid due to a structural budget deficiency, according to LOFT’s report.
ODMHSAS officials initially estimated that the agency had a $63.7 million through the end of FY25. That shortfall estimate changed over the next two months, ranging from $43 million to $6.2 million.
A wide range of investigations probed the department’s financial practices.
In addition to LOFT’s investigation, an Oklahoma House of Representatives select committee was created to review finances at the Department of Mental Health.
Stitt appointed attorney Robert McCampbell as special counsel to conduct a full, independent investigation into ODMHSAS.
Also, an audit requested by Stitt and conducted by State Auditor and Inspector Cindy Byrd found “glaring financial and systemic issues” within ODMHSAS.
The various investigations came to consensus by mid-May that ODMHSAS needed approximately $30 million in additional funds for FY25, with figures ranging from $27.4 million to $29.9 million.
LOFT’s review of ODMHSAS’ finances found the shortfall could vary day by day, as the agency was in the process of a rebudgeting exercise that included assessing purchase orders and outstanding obligations.
“Changes identified through this process could result in encumbered funds being released as well as previously available funds becoming encumbered,” the LOFT report states.
The select committee reviewed the following issues:
- Reports of using current fiscal year funds to cover prior year expenses
- The cancellation of Certified Community Behavioral Health Clinic (CCBHC) contracts and its impact on service continuity
- The agency’s request for FY25 supplemental funding
- The unexplained allocation of $5 million for an electronic medical records (EMR) system that was never implemented
- Long-term budget planning for FY26
- Updates related to the federal court-ordered consent decree impacting ODMHSAS
“With just over a month remaining in the legislative session, this investigation is a top priority,” Hilbert previously said. “Our goal is to understand the department’s financial practices, ensure accountability and determine whether additional funding is truly necessary before the session concludes.”
Friesen testified before the committee during the first day of hearings. She said in her testimony that the department had a $43-million deficit. She said that amount was reduced from an originally discovered $63-million shortfall.
“Likely, within the last year and a half, I have shared a similar concern and questions,” Friesen said regarding concerns over the Department of Mental Health’s finances. “I am hopeful we all will leave today with clear alignment as to the current situation of the Department of Mental Health and Substance Abuse Services, how we got here and where our vision is moving forward.”
Friesen said the deficit was discovered after she was alerted to some potential concerns over ODMHSAS’s Title 19 funding, and was told the department was potentially short of the amount of funds needed for Fiscal Year 2025.
Friesen was asked by committee members if she could identify the source of the deficiency.
“The initial concern was that the true amount that the department required was not originally requested. At a high level, it seems as if, historically, the required Title 19 funds that the Department of Mental Health needed in order to pay the Healthcare Authority for our portion of the costs was not adequately requested,” she said.
Friesen said during the hearing that her goal is for the Department of Mental Health to be a reliable, accountable and transparent organization.
“Unfortunately, that is not what this administration inherited,” she said. “We realize that the communications and the coverage and the rumors that are flying around are not positive. And we have been very open with that. We want to shine a light on the things that have been seen before. And that is not to have some kind of witch hunt, that’s not to get anybody in trouble. That is to fix the system so that we can be accountable, and that this legislative body feels comfortable and confident in appropriating dollars [to the Department of Mental Health and Substance Abuse Services], knowing that they are going to where they are supposed to go.”
She described the situation at the Department of Mental Health as “chaotic.”
“Frankly, we are moving towards a much more stable, confident place as an organization,” she said.
Friesen said during the hearing that she’s not a politician and has failed to “understand how all these pieces fit together.”
“I own that and am trying to learn from smarter people around me as to how to better navigate through that,” she said. “My priority has been and will always be ensuring access to high-quality care. We have made mistakes and we have tried to quickly own those mistakes as quickly as humanly possible.”
Stitt began pursuing an investigation following “disturbing discoveries” related to the previous ODMHSAS leadership’s finances and contracting practices.
“I’ve had frustrations with the mental health department for years and now that we have Commissioner Allie Friesen putting a fresh set of eyes on the department, it’s clear there are problems that need special attention,” Stitt previously said. “What we need is an independent third party who can focus all their energy on shining light on this agency and rooting out bad actors.”
Stitt’s investigation looked into the Department of Mental Health’s finances, employment records and contracting practices to see if any laws were broken, according to officials from the governor’s office.
The governor previously said Friesen found points of concern after she fired the Department of Mental Health’s chief financial officer as well as other lieutenants within the agency.
“Sometimes, when you have people at agencies who have been there for 30-40 years, they’re moving the ball pretty good, they understand how this building works and they’re paying every invoice so nobody squawks,” Stitt said.
CPA David Greenwell sent an initial financial examination report on ODMHSAS to Stitt.
Greenwell worked with ODMHSAS and the Oklahoma Office of Management and Enterprise Services (OMES) to examine financial practices, evaluate short term funding needs, and give recommendations for future procedures.
The report showed that ODMHSAS has a projected $29.9 million supplemental funding need for FY2025. It also made 52 recommendations to strengthen internal controls, financial accountability and service delivery at ODMHSAS.
“This report is the signal for a new beginning for the department,” Stitt said. “I’m grateful to David Greenwell for his quick work and to Commissioner Friesen and her team for their cooperation.”
Greenwell’s report made the following recommendations:
- Hiring a Chief Financial Officer and internal auditor with deep public sector experience
- Adopting OMES-approved accounting systems for better interoperability
- Using advanced analytics to prevent fraud and improve decision-making
- Expanding training to promote a culture of ethical conduct and accountability
- Enhancing transparency through real-time dashboards and public reporting
“I’ve worked with many entities facing similar challenges,” Greenwell said. “Nothing about this department is permanently broken. With intentional adjustments to procedures, ODMHSAS will be able to get back to the business of caring for the most vulnerable Oklahomans.”
Prior to the legislature firing Friesen, Stitt said changes were being made at ODMHSAS that would prioritize ethical standards, modern accounting systems, and improved reimbursement protocols.
“No one signs up for a job like this thinking they’ll have to take on decades of financial mismanagement. Commissioner Friesen has navigated this challenge admirably and has kept me and my team informed every step of the way,” Stitt said. “Oklahomans will be better off now that we have a handle on this department.”
Stitt previously outlined the following three actions to stabilize ODMHSAS operations:
- A nationally respected, independent financial expert will be brought in to take temporary control of the department’s finances. This expert will assess the agency’s financial shortfall and produce an accurate and credible supplemental budget request for the Legislature.
- As previously announced, the Governor will name a well-regarded attorney with experience in complex investigations to conduct a full and independent review of ODMHSAS. The investigator will report directly to the Governor’s Office and will have full authority to follow the facts wherever they lead.
- The Governor has directed Oklahoma Healthcare Authority CEO Ellen Buettner, along with ODMHSAS officials, to conduct a top-to-bottom review of all Medicaid and federally funded functions within the agency. This effort will evaluate whether these responsibilities should be administered by a different agency or in a different manner to ensure greater accountability and efficiency.
Stitt recently appointed retired Rear Admiral Gregory Slavonic to serve as interim Oklahoma Department of Mental Health and Substance Abuse Services (ODMHSAS) commissioner after the legislature removed Friesen from the position.
“It is no secret that the Department of Mental Health has long been in need of reform,” Stitt said. “It is imperative that Admiral Slavonic is allowed to do the hard work needed to remove corruption and conflicts of interest without political interference. There are brighter days ahead for this department and those that rely on its services. I’m grateful to Admiral Slavonic for his willingness to set another Oklahoma agency on the right course.”
Slavonic was previously Stitt’s director for the Oklahoma Department of Veterans Affairs. He served in the Navy for 34 years and was deputy and principal assistant to the secretary of the Navy and chief operating officer and chief management officer for the Department of the Navy. He was also assistant secretary of the Navy for manpower and reserve affairs, appointed by President Donald Trump.
“I’m grateful that Governor Stitt is so keenly focused on rooting out corruption and ensuring that government is working first and foremost for the citizens we are tasked with serving,” Slavonic said. “The Department of Mental Health brings much needed services to many Oklahomans, and I look forward to ensuring that they have the tools needed to provide those services. I thank Governor Stitt for trusting me with this effort.”
Stitt, who appointed Friesen ODMHSAS commissioner in January 2024, blasted the legislature for removing Friesen. He directly criticized the resolution’s authors, Rosino and West, and suggested that Rosino’s wife was in part responsible for the financial issues that plagued the Mental Health Department and led to Friesen being fired.
“From the start, this was nothing more than a politically motivated witch hunt. I tasked Allie Friesen with bringing accountability and transparency to the agency. She disturbed the status quo and questioned long-held practices at the agency. An agency rife with sweetheart deals and criminal elements was disrupted, and now, elected officials are quickly working to set the apple cart right for those who seek to get rich off of Oklahoma taxpayers. Josh West and Paul Rosino need to first answer what they stand to gain from Allie Friesen being removed. What are they trying to keep covered up? What conflicts of interest are they trying to hide? Is Senator Rosino trying to help his wife avoid responsibility for her role in the finance department there? Oklahomans deserve answers.”
Gov. Kevin Stitt
Paxton sharply criticized Stitt for his statement, taking special exception with the governor’s remarks regarding Rosino’s wife.
“Governor Stitt has crossed a line. His recent attempt to smear the good name of Senator Rosino’s wife, is not just petty—it’s disgraceful. Senator Rosino’s wife is a part-time administrative employee. Instead of attacking a public servant’s spouse, the governor should be addressing the real problem – his own failed appointee.
This isn’t an isolated failure—it’s part of a pattern. The executive branch continues to produce multimillion-dollar disasters that are routinely dumped in the Legislature’s lap to clean up. The legislature entrusted this governor with more control of this agency, and he has wrecked it in record time.
After months of serious discussions, even with the governor, I asked Senator Rosino to file this resolution, as he is the Senate Chairman of Health and Human Services, also because the department deserves real leadership—not an unqualified appointee who is in over her head. For Governor Stitt to retaliate by targeting a Senator’s spouse is beneath the dignity of his office.”
Pro Tem Lonnie Paxton
