Salem, OR. — The Oregon Secretary of State has released the Fiscal Year 2025 Statewide Single Audit Report (Report 2026-10, March 2026), exposing serious material weaknesses in financial reporting and significant noncompliance in major federal programs involving billions in taxpayer dollars.
While the state received an unmodified opinion on its basic financial statements, auditors delivered a rare adverse opinion on the Basic Health Program. The audit also identified two material weaknesses and 12 significant deficiencies in internal control over financial reporting.
The audit covers the year ended June 30, 2025, and encompasses approximately $21.1 billion in federal financial assistance. “This report encompasses the year ended June 30, 2025, and is required for the State to continue receiving federal financial assistance, which, as shown in this report, totals approximately $21.1 billion,” the auditors noted in the transmittal letter (Report 2026-10, p. 2).
Adverse Opinion on Basic Health Program
Auditors issued an adverse opinion on the Basic Health Program (ALN 93.640), Oregon’s Affordable Care Act bridge coverage for low-income residents. The opinion stemmed from two material weaknesses in eligibility determinations managed by the Oregon Health Authority’s ONE eligibility system (Findings 2025-015 and 2025-016, Report 2026-10, pp. 25–28).
In Finding 2025-015, the ONE system failed to enforce the 133% federal poverty level income threshold when the program launched in July 2024. “The lower annual income threshold of 133% was not correctly coded in the ONE system eligibility determination rules for BHP … the lower limit threshold was inadvertently removed from the testing protocol,” the report states (p. 25). This error resulted in 3,586 ineligible recipients and $8 million in known questioned costs.
Finding 2025-016 identified additional problems in a sample of 60 cases, including failure to terminate coverage when income exceeded 200% FPL, data-entry errors such as improper inclusion of alimony, and inadequate verification of employer-sponsored insurance. These issues produced $17,733 in known questioned costs and an auditors’ projection of approximately $7 million in likely questioned costs (p. 27).
The Oregon Health Authority concurs with the findings, has implemented system fixes and enhanced training, and plans full restitution to the BHP Trust Fund by February 28, 2027. The agency disputes the $7 million projected questioned costs.
Missed Kicker Refund Liability
A material weakness in financial reporting was identified at the Department of Revenue (Finding 2025-001, p. 11). The state failed to record an estimated $183.5 million liability for prior-biennium “kicker” tax refunds owed to taxpayers. The Department of Revenue incorrectly assumed the Department of Administrative Services would capture all amounts.
“The estimated payable still owed related to kickers for the 2017 to 2023 tax years was not recorded causing a $183.5 million understatement to accounts payable and an overstatement to personal income tax,” the report states.
Recurring Deficiencies in Subrecipient Monitoring
Beyond the high-profile adverse opinion, the audit flagged multiple recurring significant deficiencies in subrecipient monitoring and eligibility verification across federal programs, including block grants and the Medicaid Cluster (Report 2026-10, pp. 31, 34–36, 88).
In the Epidemiology and Laboratory Capacity program (ALN 93.323), the Oregon Health Authority failed to complete required risk assessments for many of its 21 subrecipients that expended $3.1 million in federal funds — including one subrecipient that received $3.5 million without a current assessment (Finding 2025-019, p. 31).
Similar problems appeared in the Block Grants for Community Mental Health Services and Substance Use Prevention programs, where inconsistent classification of subrecipients led to $2,157,934 and $279,367 respectively being potentially misreported (Finding 2025-021, pp. 34–36). These issues have persisted since at least 2022.
Ongoing weaknesses in provider and client eligibility documentation were also noted in the Medicaid Cluster and TANF program, with one TANF finding alone projecting $4.5 million in likely questioned costs.
Material Weakness in State Capitol Accounting
A second material weakness was identified at the Legislative Administration Committee (Finding 2025-002, p. 12). Significant discrepancies existed between the accounting system and supporting documentation for the State Capitol building asset and accumulated depreciation. Initial records showed a $174.5 million building value versus $131.2 million in the system; accumulated depreciation was overstated by $19.1 million after recalculation prompted by the audit.
The finding notes that “agency management did not dedicate sufficient time and resources to support reasonable assurance of the reliability of financial reporting.”
Broader Context and Agency Responses The Schedule of Findings and Questioned Costs lists 14 current-year financial statement findings and 17 federal program findings (Report 2026-10, p. 2). Oregon was not classified as a low-risk auditee (p. 10). Agency leaders have generally agreed with the findings and outlined corrective action plans, many of which extend into 2026 and 2027.
The complete report, including management responses, is available through the Oregon Secretary of State’s Audits Division.
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