Don Behm

Milwaukee Journal Sentinel

The Wisconsin Department of Health Services will pay a $7 million penalty to the federal government to resolve allegations that the agency made false claims of low error rates in its administration of a nutrition assistance program formerly known as food stamps, federal officials said Thursday.

A federal investigation found that the agency's reported low error rates earned it performance bonuses for 2009, 2010 and 2011 that it was not entitled to, Acting U.S. Attorney Jeffrey M. Anderson for the Western District of Wisconsin said in a news release.

"At that time, Department of Health Services staff followed the guidance of a well-known and widely used consulting company, in an effort to reduce error rates," Julie Lund, the agency's communications director, said Thursday.

The agency is reviewing whether it can recover any or all of the $7 million penalty from the company, Julie Osnes Consulting, Lund said.

Osnes Consulting was hired during the administration of former Gov. James Doyle. Karen Timberlake served as DHS Secretary from 2008 to the end of 2010.

The improper practices recommended by Osnes were halted in 2011, the first year of Gov. Scott Walker's administration, Lund said. New agency leadership put in place in 2011 included then-Secretary Dennis Smith and Deputy Secretary Kitty Rhoades, and agency employees were given remedial training at that time, according to Lund.

The U.S. Department of Agriculture provides eligible low-income persons and families with financial assistance to buy nutritious food through a Supplemental Nutrition Assistance Program, known as SNAP.

The state health services agency administers the program in Wisconsin and determines whether applicants are eligible for benefits. In Wisconsin, the program is known as Food Share.

The USDA reimburses states for a portion of their administrative expenses. In return, the USDA requires the states to implement quality-control measures that ensure benefits are correctly awarded and error rates are accurately reported, officials said.

In 2008, DHS hired Julie Osnes Consulting for quality-control checks of errors reported by the agency's workers. The agency subsequently implemented improper quality-control practices recommended by the consultant that incorrectly decreased the agency's error rate reported to the USDA, according to Justice Department officials.

As a result, DHS earned the unwarranted performance bonuses, federal officials said.

Julie Osnes Consulting was paid $429,000 for its work in 2009, records show. That was 15% of the total performance bonus for low error rates awarded that year to the agency, according to Lund.

The consultant was paid $100,004 in subsequent years. The contract was terminated in 2015, Lund said.

"While I am deeply troubled that these actions happened within a state agency entrusted with assisting vulnerable and needy Wisconsin residents, I am heartened that WDHS has cleaned up its act and that it cooperated with our investigation," Anderson said. The investigation of the agency involved the USDA Office of Inspector General, the federal Department of Justice's Civil Division, and the U.S. Attorney's Office.

"This settlement reflects the Justice Department's commitment to ensuring that taxpayer funds are spent appropriately so that the public can have confidence in the integrity of programs like SNAP," Acting Assistant Attorney General Chad A. Readler of the Justice Department's Civil Division said in a news release.

This is the second settlement this year with a state for manipulating SNAP quality control findings after hiring Julie Osnes Consulting. On April 7, the Virginia Department of Social Services agreed to pay more than $7 million to resolve its liability associated with the use of Julie Osnes Consulting to improperly reduce its reported error rate, according to the Justice Department.