No one here can know if your attorney is correct because he is the one with the knowledge about your particular case. Ask your attorney for the documentation and an explanation as to what his reasoning. It is not likely that he is lying. You can also check with DPW and look at the actual lien paperwork. Generally speaking, DPW liens on proceeds are possible, but this does not mean that this is what happened in your case. This is also not to say that it didn't. Unfortunately, I am not in a position to second guess someone who has been handling your case from the inception.
Maybe right or wrong. You need to see an attorney who works in the field and ask them if your attorney followed proper procedure