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308 Nebraska Reports

OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

OMNI Behavioral Health, a Nebraska nonprofit 

corporation, appellant, v. State of Nebraska ex rel. 

Doug Peterson, Attorney General, and the 

Nebraska Department of Health and 

Human Services, appellees.

___ N.W.2d ___

Filed March 19, 2021. No. S-19-1218.

1. Administrative Law: Judgments: Appeal and Error. A judgment or 

final order rendered by a district court in a judicial review pursuant to 

the Administrative Procedure Act may be reversed, vacated, or modified 

by an appellate court for errors appearing on the record.

2. ____: ____: ____. When reviewing an order of a district court under 

the Administrative Procedure Act for errors appearing on the record, the 

inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.

3. Judgments: Appeal and Error. An appellate court, in reviewing a district court’s judgment for errors appearing on the record, will not substitute its factual findings for those of the district court where competent 

evidence supports those findings.

4. Administrative Law: Presumptions: Proof. When challenging the 

decision of an administrative agency, the presumption under Nebraska 

law is that the agency’s decision was correct, with the burden of proof 

upon the party challenging the agency’s actions.

Appeal from the District Court for Lancaster County: 

Andrew R. Jacobsen, Judge. Affirmed.

Abbie J. Widger and Morgan C.H. Kristensen, of Johnson, 

Flodman, Guenzel & Widger, for appellant.

Douglas J. Peterson, Attorney General, and Ryan C. Gilbride 

for appellees.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

05/04/2021 08:12 AM CDT
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308 Nebraska Reports

OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

and Papik, JJ.

Papik, J.

After the Nebraska Department of Health and Human 

Services (DHHS) issued a notice to OMNI Behavioral Health 

(OMNI) that DHHS had overpaid OMNI under a contract, 

OMNI requested an administrative hearing. DHHS held an 

administrative hearing and concluded that the overpayment 

determination was proper. OMNI then sought review in the 

district court, and the district court affirmed. OMNI now 

appeals the district court decision. Finding no merit to the 

errors assigned by OMNI, we affirm the order of the district court.

BACKGROUND

OMNI’s Contract With DHHS.

In 2007, the U.S. Department of Justice began an investigation into the conditions of care and treatment of residents at 

the Beatrice State Developmental Center (BSDC), a residential 

institution operated by the State of Nebraska for individuals 

with developmental disabilities. After the completion of the 

investigation, Department of Justice officials informed State 

officials that they believed the conditions at BSDC violated 

the constitutional rights of BSDC residents. The State and the 

United States of America thereafter entered into a settlement 

agreement. In the settlement agreement, the State agreed to, 

among other things, transition residents of BSDC to integrated 

community settings, create transition plans for BSDC residents, 

monitor community-based placements to ensure consistency 

with transition plans, and expand the capacity of providers 

serving those with developmental disabilities.

The State later contracted with OMNI to assist it in complying with its obligations under the settlement agreement. The 

first contract took effect in July 2010. Several additional contracts followed. The contract at issue in this case was signed 

in April 2015 and was effective from July 2015 to June 2017.
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

Under the contract at issue here, OMNI agreed to operate a 

group home for individuals with developmental disabilities and 

to provide various other services related to serving individuals 

with developmental disabilities. In one section of the contract, OMNI agreed to provide “Mobile Intervention Treatment 

Services,” whereby OMNI would meet with developmentally 

disabled individuals, their parents or guardians, and other professionals serving that person; evaluate the individual’s disabilities, treatment, habilitation and staffing requirements; develop 

and implement a “habilitation/treatment program”; and conduct 

“adherence and fidelity checks” regarding the implementation of recommended changes to the individual’s program. 

The parties refer to these services as “ITMS,” an acronym for 

“Intensive Treatment Mobile Services.” Another section of the 

contract provided that “[i]n addition to direct ITMS services, 

[OMNI] will collaborate with DHHS to provide expanded 

fidelity and adherence processes for potential follow-up training to individuals for whom DHHS has independently contracted with for ITMS related services . . . .”

DHHS agreed to pay OMNI for its “actual approved costs” in 

performing the contract. In submitting its costs, OMNI agreed 

to comply with monthly budgets attached to the contract as an 

exhibit. One of the budgets pertained to ITMS and included 

various categories of expenses. Relevant to this appeal, the 

budget allowed OMNI to bill up to $25,000 per month for 

“Contract Labor,” up to $5,000 per month for “Staff Specific 

Training Implementation,” and up to $24,666.67 for “Fidelity 

and Adherence.” The budget also included a 22-percent charge 

on all expenses labeled “22% Admin Costs.” The total amount 

budgeted for the 2-year contract term was $7,047,252.70.

OMNI agreed in the contract that all of its records relating to work performed or moneys received under the contract 

were subject to audit by DHHS and that it would maintain 

all such records for 5 years from the date of final payment. 

OMNI also agreed that it would be liable for audit exceptions 

and would return to DHHS “all payments made under this 
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

contract for which an exception has been taken or which has 

been disallowed because of such an exception, upon demand 

from DHHS.”

Notice of Overpayment and 

Administrative Hearing.

In June 2018, DHHS issued a “Notice of Overpayment” to 

OMNI. In the notice, DHHS informed OMNI that it had determined OMNI was overpaid under the contract by $34,876.44. 

The notice informed OMNI that if it disagreed with DHHS’ 

findings, it could request a hearing. OMNI requested and 

received an administrative hearing before a DHHS hearing 

officer.

DHHS called one witness at the hearing, Joseph Dondlinger, 

the financial officer for DHHS’ Division of Developmental 

Disabilities. In that position, Dondlinger was responsible 

for financial oversight of the division’s contracts with providers, including OMNI. Dondlinger issued the “Notice of 

Overpayment” to OMNI. He testified that the review of OMNI’s 

performance under the contract was prompted by earlier audits 

completed by Nebraska’s Auditor of Public Accounts (State 

Auditor). In several reports beginning in 2016, the State Auditor 

expressed concern about how OMNI was being paid under the 

contract. Among the concerns noted by the State Auditor was 

OMNI’s inadequate documentation of costs incurred for the 

fidelity and adherence expense category of the budget. The 

State Auditor concluded that OMNI was likely double-billing 

DHHS by including the salaries of several employees as fidelity and adherence expenses when those same salaries were also 

part of the 22-percent administrative expense category.

Dondlinger testified that after the issuance of a State 

Auditor’s report in 2017, DHHS decided to do a more extensive audit of OMNI’s billing for May and June 2017. He testified that DHHS requested that OMNI provide documentation 

to demonstrate its actual costs as required by the contract for 

each of the line items corresponding to the contract’s budget. 
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

OMNI provided documentation to DHHS, but according to 

Dondlinger, DHHS determined that OMNI had not provided 

documentation demonstrating actual costs for several expenses 

for which it billed DHHS in May and June 2017.

Dondlinger identified three categories of expenses for which 

DHHS found inadequate documentation of actual costs. The 

first was a travel expense. OMNI did not and does not dispute 

that it lacked documentation for this expense.

The second category involved OMNI’s charges for fidelity 

and adherence. OMNI billed DHHS the maximum allowed 

$24,666.67 for fidelity and adherence in both May and June 

2017. DHHS determined that OMNI had not submitted any 

documentation demonstrating that it incurred actual costs for 

fidelity and adherence activities in those months.

Dondlinger testified that even though none of the over 

$49,000 in fidelity and adherence charges OMNI billed in May 

and June 2017 were supported by proof of actual costs, DHHS 

determined that it would demand that OMNI repay a lower 

amount, $29,779.26. Dondlinger explained how DHHS arrived 

at this figure. He testified that in reviewing OMNI’s records, 

DHHS determined that OMNI had billed DHHS $29,779.26 

under the categories “Contract Labor” and “Staff Specific 

Training Implementation.” The documentation OMNI submitted to support these charges showed that OMNI had incurred 

charges to host training sessions related to the system of care 

it was promoting for individuals with developmental disabilities and to provide incentives for staff to attend these training sessions. Dondlinger testified that because these expenses 

appeared to have been incurred to promote fidelity and adherence to the system of care OMNI was implementing under the 

contract, DHHS determined that those expenses should have 

been categorized as fidelity and adherence expenses. If categorized as fidelity and adherence expenses, OMNI would have 

exceeded the monthly budget for that category of expense.

Finally, Dondlinger testified that DHHS determined 

that OMNI had not submitted adequate documentation for 
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

$5,083.32 billed to DHHS for the salary of John Apala, an 

OMNI information technology employee. OMNI billed DHHS 

one-quarter of Apala’s total salary to DHHS for May and June 

2017. Dondlinger explained that other salary expenses OMNI 

billed to DHHS were documented in OMNI’s accounting system as expenses under the contract, but that Apala’s salary was 

recorded as a general administrative expense, for which OMNI 

would have been compensated by the 22-percent administrative expense category. He added that OMNI billed DHHS 

for portions of other employee’s salaries, but that for those 

“split salaries,” a portion was categorized as an expense under 

the contract.

OMNI called two witnesses at the administrative hearing. 

The first, a therapist who performed behavioral consultations 

under the contract, testified that OMNI provided staff with 

incentives to perform fidelity and adherence checks under the 

contract. She testified that staff incentives were appropriately 

billed under the “Staff Specific Training Implementation” category of the contract’s budget.

OMNI also called Dr. William Reay, OMNI’s chief executive officer. Reay testified about OMNI’s duties under its 

contracts with DHHS. He testified that one of OMNI’s duties 

was to build a new system of care and to promote fidelity and 

adherence to it. He testified regarding OMNI’s efforts to host 

various training programs related to that system. He described 

several of the trainings as fidelity and adherence processes, 

but later testified they were not fidelity and adherence activity 

under the contract. Reay testified generally about a document 

titled “Fidelity Activity - March, 2016.” Reay testified that 

the document listed various fidelity and adherence activities 

under the contract and that he, assisted by several other OMNI 

employees, performed them.

Reay also testified regarding Apala’s salary. Reay stated 

that Apala had an increased workload due to OMNI’s contract 

with DHHS.
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

Hearing Officer’s Order.

After the hearing, the DHHS hearing officer issued a written order. The order discussed provisions within the Code of 

Federal Regulations pertaining to the records contractors must 

keep to receive “Federal awards.” See, e.g., 45 C.F.R. § 75.403 

(2019). The hearing officer then found that DHHS did not err by 

finding that OMNI was overpaid in the amount of $34,876.44. 

It found that OMNI did not dispute that it was overpaid for a 

travel expense. With respect to the alleged overpayment for 

fidelity and adherence activities, the hearing officer found that 

OMNI submitted evidence that generally demonstrated fidelity 

and adherence activities but failed to demonstrate actual costs 

to support payment. The hearing officer also found that OMNI 

failed to demonstrate that Apala’s salary was directly related to 

the contract rather than an administrative cost.

Based on these findings, the hearing officer recommended 

that DHHS’ finding of an overpayment be affirmed. The director of the Division of Developmental Disabilities of DHHS 

adopted the hearing officer’s order as the final order of DHHS.

District Court.

OMNI sought review of DHHS’ order in the district court 

by filing a petition for review pursuant to the Administrative 

Procedure Act. See Neb. Rev. Stat. § 84-917 (Reissue 2014). 

The district court affirmed the DHHS order.

OMNI argued in the district court that the federal regulations mentioned in the hearing officer’s order, later adopted by 

DHHS, did not apply to payments to OMNI. The district court 

found that DHHS correctly determined that it had overpaid 

OMNI even if the federal regulations did not apply.

The district court found that there was no evidence that 

OMNI incurred actual costs for fidelity and adherence activities in May and June 2017. It noted that Reay had testified 

generally about OMNI’s efforts to “‘build systemic, statewide 

fidelity and adherence to basically a new system of care’” and 

had testified about the document discussing OMNI’s fidelity 
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Cite as 308 Neb. 692

and adherence activities titled “Fidelity Activity - March, 

2016,” but the court concluded that neither Reay’s testimony 

nor the document demonstrated that OMNI incurred actual 

costs for fidelity and adherence activities in May and June 

2017. The district court also noted that OMNI had offered 

hundreds of pages of receipts, payroll records, and other 

expense documents, but after reviewing the documents, the 

district court concluded that they also did not show that OMNI 

had incurred actual costs for fidelity and adherence activities 

in May and June 2017.

In discussing the overpayment for fidelity and adherence 

activities, the district court acknowledged that OMNI challenged Dondlinger’s conclusion that the contract labor and 

staff incentive charges should have been categorized as fidelity and adherence expenses under the contract. The district 

court found this argument was inconsistent with testimony 

by Reay that the conferences for which OMNI incurred the 

contract labor costs were related to fidelity and adherence 

processes. Ultimately, however, the district court concluded 

that it need not determine whether the contract labor and staff 

incentive charges should have been characterized as fidelity and adherence charges. The district court explained that 

because there was no evidence that OMNI incurred any actual 

costs for fidelity and adherence charges for May and June 

2017, DHHS had overpaid OMNI by at least the $29,779.26 it 

sought to recoup.

The district court also found that DHHS had overpaid OMNI 

for Apala’s salary. It found that there was no evidence that 

OMNI had actual costs under the contract for Apala’s salary 

in May and June 2017. It noted that Reay had testified that 

Apala did some work related to the contract, but that Reay 

did not testify when Apala performed the tasks or the amount 

of time he spent performing them. It also noted that OMNI 

reported Apala’s salary as an administrative expense in its 

payroll system and did not code any of his time to work under 

the contract.

OMNI appeals.
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

ASSIGNMENTS OF ERROR

OMNI assigns, restated, three errors on appeal: (1) that the 

district court erred in concluding that DHHS could find that 

it overpaid OMNI and demand repayment even if the federal 

regulations mentioned by the DHHS hearing officer did not 

apply, (2) that the district court erred by not requiring DHHS 

to prove that it overpaid OMNI, and (3) that the district court 

erred by affirming DHHS’ determination that it had overpaid OMNI.

STANDARD OF REVIEW

[1] A judgment or final order rendered by a district court in 

a judicial review pursuant to the Administrative Procedure Act 

may be reversed, vacated, or modified by an appellate court for 

errors appearing on the record. Tran v. State, 303 Neb. 1, 926 

N.W.2d 641 (2019).

[2] When reviewing an order of a district court under 

the Administrative Procedure Act for errors appearing on the 

record, the inquiry is whether the decision conforms to the law, 

is supported by competent evidence, and is neither arbitrary, 

capricious, nor unreasonable. Tran v. State, supra.

[3] An appellate court, in reviewing a district court’s judgment for errors appearing on the record, will not substitute its 

factual findings for those of the district court where competent 

evidence supports those findings. Id.

ANALYSIS

OMNI argues that the district court erred by affirming 

DHHS’ determination that it had overpaid OMNI by $34,876.44 

under the contract for the months of May and June 2017. OMNI 

argues that DHHS lacked authority to demand repayment and 

that the district court erred by failing to require DHHS to 

prove that it overpaid OMNI and by affirming DHHS’ overpayment determination. We begin our analysis by considering 

OMNI’s argument that DHHS lacked authority to demand 

repayment.
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

District Court Did Not Err by Concluding 

That DHHS Could Demand Repayment 

Even if Federal Regulations 

Were Inapplicable.

The district court concluded that DHHS could determine that 

it had overpaid OMNI under the contract and demand repayment even if the federal regulations referenced by the DHHS 

hearing officer did not apply. OMNI argues this was erroneous. 

Although it devotes most of its argument to explaining why 

the federal regulations did not apply, OMNI also asserts that 

if the federal regulations did not apply, DHHS had no basis to 

determine that it had overpaid OMNI and demand repayment. 

We disagree.

The contract provided that OMNI’s books and records relating to work performed were subject to audit. It also provided 

that OMNI would “be liable for audit exceptions, and shall 

return to DHHS all payments made under this contract for 

which an exception has been taken or which has been disallowed because of such an exception, upon demand from 

DHHS.” Even if the federal regulations did not apply, the 

contract authorized DHHS to audit OMNI’s performance and 

demand repayment for audit exceptions. The district court did 

not err by concluding that DHHS could determine it had overpaid OMNI and demand repayment even if the federal regulations did not apply.

District Court Did Not Incorrectly 

Shift Burden of Proof.

OMNI next argues that the district court erred by not placing the burden on DHHS to prove that it had overpaid OMNI. 

Here, OMNI points out that the contract provides that it is to 

be governed by Nebraska law. Nebraska law, OMNI contends, 

places the burden of proof on the party seeking to recover 

overpayments under a contract.

[4] In support of this argument, OMNI cites Hersch 

Buildings, Inc. v. Steinbrecher, 198 Neb. 486, 253 N.W.2d 310 

(1977), a case in which a party filed a counterclaim against 
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Cite as 308 Neb. 692

a contractor alleging it had overpaid the contractor. In that 

case, we did note that generally a party suing to recover an 

alleged overpayment on a contract has the burden of proving 

the overpayment and that the overpayment was involuntary. 

But in this case, DHHS did not file a lawsuit against OMNI 

alleging overpayment. Instead, DHHS determined that it had 

overpaid OMNI and made a demand for repayment under the 

contract. OMNI responded by first requesting an administrative hearing and then filing a petition for review under the 

Administrative Procedure Act. When challenging the decision of an administrative agency, in the manner OMNI did 

here, the presumption under Nebraska law is that the agency’s 

decision was correct, with the burden of proof upon the party 

challenging the agency’s actions. Tran v. State, 303 Neb. 1, 

926 N.W.2d 641 (2019). The district court was not required to 

place the burden of proof upon DHHS to prove that it overpaid OMNI.

District Court Did Not Err by Finding 

DHHS Overpaid OMNI.

Finally, OMNI argues that the district court’s factual findings were not supported by competent evidence. OMNI argues 

the district court erred by finding that OMNI failed to demonstrate that it had actual costs under the contract in May and 

June 2017 in the amounts it billed DHHS. Again, we find no 

error on the part of the district court.

OMNI challenges the district court’s finding of overpayments for both the fidelity and adherence charges and the 

charges related to a portion of Apala’s salary. With respect 

to the fidelity and adherence charges, OMNI focuses almost 

entirely on its contention that it submitted documentation demonstrating charges related to hosting training programs and 

providing staff incentives and that these costs were appropriately billed as “Contract Labor” and “Staff Specific Training 

Implementation.” In devoting near-exclusive focus to this 

argument, however, OMNI barely addresses the fact that 

DHHS relied on OMNI’s categorization of expenses related 
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OMNI BEHAVIORAL HEALTH v. STATE

Cite as 308 Neb. 692

to training programs and staff incentives as one alternative 

basis for claiming a right to repayment for amounts it had paid 

OMNI for fidelity and adherence.

As the district court observed, DHHS also took exception 

to the entirety of the amount OMNI billed in the fidelity and 

adherence category, contending that there was no showing of 

actual costs for fidelity and adherence activities in May and 

June 2017. The district court agreed with this determination of 

DHHS, finding that there was no evidence of OMNI’s actual 

costs for fidelity and adherence activities. Competent evidence 

supported this finding. Dondlinger testified regarding OMNI’s 

failure to provide evidence that it had incurred actual costs for 

fidelity and adherence activities. In addition, having reviewed 

the record, we agree with the district court that OMNI may 

have provided general evidence regarding its efforts to comply 

with the fidelity and adherence obligations under the contract, 

but it did not introduce evidence demonstrating whether and 

to what extent it incurred actual costs in doing so in May and 

June 2017.

We also find that the district court’s determination regarding Apala’s salary was supported by competent evidence. Reay 

testified generally about work Apala performed related to the 

contract, but did not testify about when he performed those 

tasks or the amount of time he spent performing them. Further, 

OMNI’s records treated Apala’s salary as an administrative 

expense, unlike the salaries of other employees for which 

OMNI billed DHHS under the contract.

CONCLUSION

Because we find no merit to the errors assigned by OMNI, 

we affirm the order of the district court.

Affirmed.

Freudenberg, J., not participating.