Audit report: Austin Public Health contractor billed taxpayers $1.1 million in fraudulent claims

The Austin auditor’s office has accused local nonprofit Central Texas Allied Health Institute of fraudulently billing taxpayers for roughly $1.1 million for COVID-19 relief efforts and workforce development across three contracts with Austin Public Health.

According to the auditor's report Thursday, the institute submitted to the city's health department fraudulent financial transactions and inflated its numbers of COVID-19 vaccines distributed in order to meet a threshold that guaranteed payment. The vendor billed roughly $1.1 million, and the city paid $417,000 before the city suspected fraud and stopped making payments. The auditor found that:

• The vendor billed $406,000 for COVID-19 vaccines, of which the city improperly paid $307,000.

• The vendor billed $110,000 for workforce development and the city improperly paid that total amount.

• The vendor billed $604,000 for COVID-19 testing, but the city never paid.

Central Texas Allied Health Institute denies 'any intentional or unintentional fraudulent activity,' audit office stands by findings

The institute denied the accusations. In an email to the American-Statesman, institute President Todd Hamilton and Dr. Jereka Thomas-Hockaday said they "denied any intentional or unintentional fraudulent activity regarding community service grants received through Austin Public Health or the City of Austin. "

But both said that when they were informed about the misuse of funds, they discovered that a disgruntled employee in Hamilton’s office did provide false or manipulated documentation to Austin Public Health at first request and subsequently quit.

Additionally, they said the auditor's report mischaracterizes several things and lies about others.

"This process was not only frustrating but has caused irreparable damage to our name and reputation," Thomas-Hockaday said. "There is a long-documented history of the city of Austin having difficulties working with small minority contractors and then blaming the failures in execution on the contractors themselves."

The auditor's office said it stands by its findings.

"We have reviewed the subjects’ response and believe our findings stand," the auditor's report stated. "This investigation was conducted in a fair and objective manner and in compliance with professional standards. Our findings are supported by abundant documentary evidence. Additionally, the subjects made several false or misleading statements about our investigation."

Why an Austin Public Health contractor was under investigation

Central Texas Allied Health Institute is a nonprofit career college that provides educational programs to underrepresented community members to launch them into health care roles that they hadn’t had access to before, according to its website.

The college – founded in August 2018 – has seven programs for different health care careers that can be completed in about a year. Programs include learning to be a medical assistant, phlebotomy technician or pharmacy technician and about surgical technology.

The auditor’s office launched an investigation into the organization’s contract after Austin Public Health in October 2021 informed the city that it believed Central Texas Allied Health Institute might have provided falsified financial records to the department as part of its contract claims, according to the report.

Further, the report said Austin Public Health specifically expressed concern that the organization submitted altered or fabricated invoices, receipts and bank statements to support its claimed expenses.

From December 2019 to October 2022, Central Texas Allied Health Institute had four city contracts – one with the Economic Development Department, and three with Austin Public Health. However, the auditor’s office did not find evidence connected to the Economic Development Department contract.

The three contracts with Austin Public Health were for COVID-19 testing, workforce development and COVID-19 vaccines. The COVID-19 testing contract was deliverables-based, which meant the organization received set payment amounts as it met specific goals outlined in the agreement.

The workforce development and COVID-19 vaccine contracts worked differently. They required the organization to pay for expenses before requesting reimbursement. Between December 2020 and September 2021, the organization submitted 23 claims for reimbursement to Austin Public Health under these two contracts, the report states.

Central Texas Allied Health Institute was paid about $2.8 million in connection with its four contracts, most of which came from Austin Public Health. Austin Public Health issued its last payment to the organization in September 2021 and halted further payments after identifying potential fraud.

In June 2022, the organization signed an agreement to repay Austin Public Health more than $375,000 after the health department’s internal audits found the institute submitted “inaccurate and falsified payment requests” in two contracts.

As of March 2023, Central Texas Allied Health Institute had repaid Austin Public Health about $12,500 but had failed to pay over $68,000 in scheduled monthly payments, as laid out in its payment plan.

Additionally, auditors found evidence that two of the organization’s leaders, Hamilton and Thomas-Hockaday, produced or submitted falsified documents and directed employees to falsify contract-related records. Both denied doing so.

Thomas-Hockaday is principal founder and chief academic officer, dean of specialty programs and co-owner. She was also featured on an Austin episode of "Queer Eye" for her work with the institute and COVID-19 clinics. Hamilton is the campus president and is responsible for operations, including finances. Hamilton told the auditor that he kept the books until a bookkeeper took over.

The organization also committed fraud by submitting falsified performance reports to Austin Public Health under its COVID-19 vaccine contract. It also appears to have overstated its total vaccination numbers by 20% to 30%, which the auditor's office said made its contract performance look better than it was, and fabricated patient information. That 30% would represent about 1,000 vaccinations.

The issues were referred to the Austin Police Department.

Brian Molloy, chief of investigations for the auditor's office, said the auditor also observed a few other findings.

According to the report, the auditors has received multiple allegations that Hamilton might have embezzled money from the institute, though the city could not confirm this. Witnesses alleged that Hamilton might have stolen between about $30,000 and $60,000 from the institute by transferring funds from one of the organization's bank accounts to his personal bank account, the report said.

Financial records from the institute's accounting system and bank account confirm Hamilton received large sums from one of the institute's bank accounts outside of normal payroll procedures, according to the report.

Hamilton denied to the city auditors stealing from the institute and described the allegation as “hilarious.”

While Thomas-Hockaday said she approved Hamilton’s contractor arrangement, the institute's explanations and tax forms for Hamilton’s contractor payments do not match financial records, the report states.

The report stated that the institute was also misrepresenting information to the state's COVID-19 records agency.

In July 2021, a state of Texas government agency — which the report didn't name — determined the organization “knowingly and intentionally provided false information” by “misrepresenting the location” of its training facility. Specifically, in May 2021, it told the state agency it was no longer holding trainings at an unapproved location.

The state agency determined this statement was inaccurate and imposed $2,000 in administrative penalties against the institute for this issue and for operating without a certificate of approval.

Additionally, the report found some oversight issues with Austin Public Health's procedures.

In practice, Austin Public Health did not require the institute to submit general ledgers that met the terms of its contracts. Specifically, these contracts state that for reimbursable agreements, vendors must provide “a report of … expenditures generated from the Grantee’s financial management system.”

The report states that the institute's exemption from this requirement might have enabled it to seek payment for expenses that did not match its actual general ledger.

In response, Austin Public Health in April 2020 revised its Social Service Contract Terms and Conditions to update the supporting documentation required for each reimbursement request and ensure specific language was added for potential reimbursements from the federal government related to the pandemic.

In an email to the city auditor, Austin Public Health officials said it would continue to provide ongoing training to staff and technical assistance to contracted agencies to ensure compliance with the terms and conditions of the contracts.

New processes for contract managers to verify a sample of expenses at least quarterly will be implemented by Aug. 1.

"Austin Public Health monitors all contracts to ensure compliance with terms and conditions," a spokesperson with the health department told the Statesman. "During annual monitoring visits, staff identified areas of concern. APH also received a formal complaint, which was referred to the City Auditor for further investigation. APH continues to collaborate with and support the City Auditor's investigation."

This article originally appeared on Austin American-Statesman: Audit finds Central Texas Allied Health Institute committed fraud