For Immediate Release - April 03, 2013

Audit: State Improperly Administered Payments to Human Service Vendors

BOSTON, MA — State Auditor Suzanne M. Bump today released an audit of the Department of Developmental Services (DDS) which found the human service agency improperly distributed millions of reserve funds designated for specific human services.

The audit focused on specific contractor payments, referred to as Limited Unit Rate Service Agreements (LUSA), which are intended only to fund unanticipated human services to consumers. Auditors found that DDS would hold back money appropriated for services and then distribute it at the end of each fiscal year for purposes which are largely inconsistent with their intended use. The funds were being used for regular program overhead, furniture, equipment, facility repairs, and vehicles, instead of services to developmentally disabled clients.

This funding approach is contrary to spending guidelines, and was also done in an illogical and subjective manner, the audit found. Financial statements showed that a large majority of contractors sampled in the audit were generating a surplus when granted additional LUSA funds. Several contractors reported that they requested the funding only after being invited to do so by the agency.

“This agency is entrusted with spending scarce dollars to care for our family members with developmental disabilities. This consistent pattern of simply giving away money at the end of the year outside program guidelines violates the best interests of the agency and the taxpayers,” said Auditor Bump. “At best it is a sloppy practice that represents a failure to adequately fund contracts at the outset.  At worst it is a means of funneling money to favored contractors with no accountability. Surplus-generating contractors should not receive end of year bonuses, nor should cash-strapped contractors have to be complicit in this improper practice just to receive funding for basic operations. I hope that DDS will recognize the error behind this practice and curtail it immediately.”

In a sample of 15 vendors over a three year period, the audit found insufficient documentation to support more than $7.5 million in LUSA funds that were actually used for allowable client services. Further, the audit found that approximately $5.4 million in services were retroactively authorized after services had purportedly already been provided and over $2 million was spent for unallowable services including:

  • $280,179 inappropriately used to purchase capital items such as vehicles, appliances, furniture, and other maintenance services.
  • $473,654 inappropriately used for transportation services
  • $1,460,321 inappropriately used for normal anticipated human services.
  • $408,632 inappropriately used to pay for other unallowable costs such as staff overtime and administrative costs. 

Today’s audit is part of Auditor Bump’s continuing priority to promote truth in government budgeting.

“It is my hope that this audit will highlight the continuing systemic need for further truth in budgeting,” said Auditor Bump. “Agencies must be open and honest about the real costs of public services, rather than relying on back-door payment mechanisms outside the normal channels of review and scrutiny. Public trust can only be maintained through transparency.” 

Auditor Bump has called on DDS to improve its oversight of how state contractors use LUSA funding and to establish appropriate funding for its contractors, rather than relying on LUSA funds as a regular budget supplement. DDS has responded positively toward audit findings and has acknowledged it is implementing new policies in line with the Auditor’s recommendations. 

The Office of the State Auditor conducts technical and performance assessments of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.

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Audit: Department of Developmental Services Administration of Limited Unit Rate Service Agreements pdf format of    Department of Developmental Services