The LePage administration has reversed a $7.8 million transfer of grant funds that ran afoul of federal law, after the BDN reported on the spending of federal welfare assistance dollars in June.

The Maine Department of Health and Human Services used the funds in 2015 to pay for services for seniors and residents with disabilities even though federal law restricted the use of those funds to services for children and their families.

After the BDN published an article June 23 detailing the spending, Health and Human Services Commissioner Mary Mayhew denied that her department had misspent federal money.

“The BDN has their facts wrong,” she told reporters on June 23. “What we’ve done is to maximize our available resources through the TANF block grant. It is a block grant to the state, which means it affords the state the flexibility. We are in fact supporting more families other than just those who are receiving benefits.”

But in early August, Maine DHHS retroactively amended documents it submitted to the federal government months earlier detailing the state’s spending under two federal grant programs in federal fiscal year 2015, which ended Sept. 30, 2015. The amended documents deleted the transfer of funds between grant accounts that paid for services not allowed under the law.

The $7.8 million in question came from one federal grant called Temporary Assistance for Needy Families, which brings $78.1 million to Maine each year to pay for cash assistance, job training and placement, and child care for low-income Maine families. Under federal law, the state can transfer up to 10 percent of that amount each year to a smaller but more flexible federal grant account, the Social Services Block Grant, which states can use to pay for a wide range of social services.

Maine will receive $6.6 million through the Social Services Block Grant this fiscal year. A transfer of $7.8 million from TANF more than doubles the spending power of the social services grant.

But the same federal law that allows the transfer specifies that the transferred funds “shall be used only for programs and services to children or their families whose income is less than 200 percent of the income official poverty line,” which works out to about $40,000 for a family of three.

In 2015, Maine DHHS reported it spent all $7.8 million of those transferred funds on services for elderly and disabled residents — consistent with LePage administration rhetoric in recent years that has emphasized serving seniors andMainers with disabilities over the “able-bodied.”

A document Maine submitted in April to the federal Office of Community Services detailing the state’s Social Services Block Grant spending for 2015 indicated that the state spent $6.2 million of the amount transferred from TANF on special services for disabled residents and $1.6 million on home-based services for elderly residents, such as personal care and help with basic household chores. The state listed no children as recipients of the services, and more than 70 percent of recipients were 60 or older.

Mayhew said in June that a firm hired by Maine DHHS to analyze the state’s federal block grant spending made recommendations to the state that informed Maine officials’ decision to transfer funds from TANF to the Social Services Block Grant and use them to pay for services for elderly and disabled residents.

But a report from the firm, Boston-based Public Consulting Group, summarizing its recommendations doesn’t include any discussion of spending the transferred funds on services for elderly and disabled residents. The report, instead, notes the legal restriction on the use of the transferred funds.

“I’m confident in how we have pursued the use of these dollars,” Mayhew said in June.

In August, however, Maine DHHS revised expenditure reporting forms for both federal programs to show that it transferred no money between the grants in 2015. The state submitted revised documentation for its TANF spending on Aug. 2 and revised reporting for the Social Services Block Grant on Aug. 15, said Patrick Fisher, a spokesman for the federal Administration for Children and Families, the U.S. Department of Health and Human Services division that oversees both grants.

Under federal rules, Maine had until Sept. 30 to undo its transfer of funds to the Social Services Block Grant for 2015 and return the money to TANF.

“Basically, (the U.S. Department of Health and Human Services) has been flexible about amending all kinds of forms, and that’s a good thing,” said Liz Schott, a senior fellow at the Center on Budget and Policy Priorities who specializes in assistance programs. “They’re trying to get good data, and that’s their highest priority. They’re not being unreasonable sticklers.”

In undoing the 2015 funds transfer, it’s unclear how Maine retroactively accounted for the funding of the services in question for seniors and residents with disabilities. A spokeswoman for Maine DHHS, whose budget accounts for more than a third of state spending, didn’t respond to questions from the BDN. The department hasn’t responded to BDN queries regarding a variety of topics for several weeks. The BDN weeks ago filed a public records request with DHHS seeking the state’s TANF expenditure documents for recent years.

“It’s not a paperwork dispute. There was a transfer, and then there wasn’t, and we don’t know why,” said Schott. “One might conclude that the scrutiny and the daylight [the BDN] brought to bear either exposed or educated them that they were anticipating using these funds in an improper way.”

Maine DHHS was on track to repeat the spending pattern in the current federal fiscal year, 2016, which ends Sept. 30. The 2016 spending plan for the Social Services Block Grant that Maine prepared for the federal government originally indicated that the state planned to use part of the transferred amount to supplement existing contracts the state holds with non-profit organizations that provide in-home services, such as Meals on Wheels and basic personal care, to seniors and residents with disabilities.

But when the BDN asked this spring how such spending conformed with federal law, Maine DHHS issued a revised spending plan for its Social Services Block Grant funds and a spokeswoman said the original version had been uploaded to the department’s website and submitted to the federal government “in error.” The revised plan eliminated the transfer of funds from TANF to the Social Services Block Grant.

The transfer of funds comes in the context of major changes to the state’s welfare cash assistance program that have taken place under the LePage administration.

Since 2012, assistance caseloads under TANF have dropped more than 60 percent, and Maine has accrued a sizable balance of federal TANF dollars since it’s spending so much less on direct assistance. According to the Legislature’s Office of Fiscal and Program Review, that balance had reached $155.5 million as of June 30.

When lawmakers asked in March how Maine DHHS planned to use the balance, the department indicated part of its plan involved transferring TANF funds to the Social Services Block Grant each year to spend on social services.

For now, the department has reversed course on two years of such transfers.