For Immediate Release - May 06, 2014

Audit: Springfield Nonprofit Charged State for $700,000 in Non-reimbursable Expenses

BOSTON, MA — The Office of the State Auditor today released an audit of the New England Farmworkers’ Council Inc. (NEFWC) which found a Springfield nonprofit used more than $700,000 in state funds for non-reimbursable expenses. The report also questions whether NEFWC’s board of directors, many of whom also sit on boards of several related organizations under the umbrella of Partners for Community, can provide proper independent fiscal oversight.

NEFWC is a nonprofit which provides job training, day care, and other services to low-income persons on behalf of the Commonwealth. The agency is one of a group of companies affiliated with an organization called Partners for Community Inc., also located in Springfield. The audit reviewed fiscal years 2010 through 2012 and found that NEFWC failed to ensure all expenses paid for with Commonwealth funds were supported by adequate documentation. Without supporting documentation, it is impossible to determine if these $700,000 in expenses are properly reimbursable. 

“The question,” according to State Auditor Suzanne Bump,” is not whether NEFWC should have engaged in these activities. It is whether they should have been paid for with state resources.”

Identified expenses included:

  • $162,590 paid for consulting services without the use of a procurement process or the retention of proper supporting documentations as required by state regulations. Further, some of these payments may have been for lobbying services, which the state specifically does not allow.
  • $454,871 in salary payments over three years to its chief executive officer (CEO) without adequate supporting documentation. In addition, according to financial reports, NEFWC’s CEO received compensation from state sources that exceeded established limits, was reported as being a full-time employee for more than one company, and the CEO’s total compensation from all sources was not accurately reported in NEFWC’s state financial filings.
  • $32,377 in unallowable travel allowances paid to its CEO.
  • $35,750 in interest payments on a loan used to purchase a building not associated with any of NEFWC’s state-funded programs.
  • $11,692 for charges at a restaurant which were inadequately documented and/or used for activities not related to state-funded programs.
  • $41,495 paid for repair and maintenance services which were inadequately documented or not directly related to NEFWC’s state funded-programs.

“This audit makes a fairly simple point – if you want to do business with the state you follow the state’s rules,” said Auditor Bump. “Proper documentation of all expenses is absolutely necessary to ensure that public resources are being used for a real public purpose.”

In addition, the audit found that the composition of NEFWC’s board of directors did not meet the requirements of the terms and conditions of its state contracts because 40% of its members were management-level employees of NEFWC – the contractual limit is 30%. Moreover, the audit noted that all of NEFWC’s related parties within the Partners for Community organization share common board members. Such a board composition, the audit says, may have lacked the independence necessary to fully meet its oversight abilities, particularly over transactions between the Partners for Community entities.

“The issues we identified throughout this report are primarily the result of a board not adequately fulfilling its role as fiscal overseers,” said Auditor Bump. “To ensure proper arm’s length transactions, New England Farmworkers’ Council should consider changing its board membership to include more independent members not related to other affiliated organizations.”

The audit recommends that NEFWC should cooperate with the state’s Operational Service Division to resolve the non-reimbursable expenses identified in the report and to improve its documentation of identified expenses.

The Office of the State Auditor conducts technical and performance audits 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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