OIG Bulletin, February 2021: Oversight Responsibilities of Public Boards and Commissions

Public boards and commissions can take many forms, including boards of trustees, authority boards, town finance committees and municipal select boards. Although the form may differ, the primary duty of a public board or commission is always the same: oversight.

Overview

Whether appointed or elected to oversee a housing authority, utility district, municipality, school district, charter school or some other governmental body, boards and commissions must ensure that the entity they oversee accomplishes its mission, serves its constituents and properly manages public resources.

The Office of the Inspector General (OIG) is frequently called into action when a public board or commission fails to meet these obligations.

When public boards or commissions do not provide the necessary oversight, managers may fail to meet their own obligations, leading to waste, or they may take advantage of the opportunity to commit fraud.

Example 1: Hingham Housing Authority (HHA) Board

In December 2020, the OIG published a letter to the Hingham Housing Authority (HHA) Board that illustrates what can go wrong when a board does not properly oversee management.

The HHA executive director hired a housing inspection vendor, with whom she had a personal and financial relationship and with whom she shared a home, without conducting a fair and open procurement. The vendor used income from his inspection services company to pay the majority of the mortgage for the home he shared with the HHA executive director. The executive director thus failed to follow procurement law (see M.G.L. c. 30B, § 4), and she failed to abide by state ethics requirements that she disclose conflicts of interest (see M.G.L. c. 268A, § 23(b)(3)).

The HHA Board did not question her contracting decision or payments to this vendor for nearly ten years. The HHA also did not take any steps to ensure that the executive director followed procurement and ethics laws. This lack of oversight allowed the executive director to put her own interests before those of the housing authority. As a result, the HHA may not have received the best and most cost-effective services available for housing inspections.

Moreover, the OIG observed that the HHA Board exercised no oversight regarding the executive director’s time or attendance. Because the Board did not review the executive director’s timesheets, it could not verify the payout of close to $14,000 she received for vacation and sick time when she retired or “special pay” she requested years after performing the work.

The Board additionally paid the executive director’s legal fees without question, totaling close to $11,000, even though her legal fees were not appropriate for reimbursement by the HHA. These serious lapses in internal controls cost the HHA money that could have been used to support the HHA’s mission. (For additional information about the OIG’s HHA investigation, see Recent OIG Investigations in this issue.)

Example 2: Helen Y. Davis Leadership Academy (DLA)

Similar issues occurred at the Helen Y. Davis Leadership Academy (DLA), which the OIG documented in a public letter to its board of trustees in 2018. Like at the HHA, the executive director of the DLA retired and received a large vacation and sick time payout, in this case worth nearly $100,000. Although the DLA Board approved the payouts, board members failed to take any steps to verify that the amount of the payout was correct. Consequently, the executive director received a payout for more sick time than she could have earned. In addition, the amount was based on the assumption, rather than documented proof, that she had never taken a sick day during her 13-year tenure as executive director.

The OIG recommends that public boards and commissions evaluate their jurisdiction’s internal control framework and advise management to conduct fraud risk assessments.

Example 3: Methuen Police Department

Boards and commissions have a further responsibility to exercise due diligence regarding the actions of the managers they oversee. The failure of governing bodies to conduct this due diligence can have serious financial consequences for local jurisdictions. For example, the OIG recently published a report detailing the leadership failings that led to a costly contract between the Methuen Police Department and its superior officers.

This contract included unprecedented language that led to substantial pay increases for superior officers, with some captains set to earn over $400,000 per year. Although the former mayor and city council approved this contract, they did not review the final document before signing it, nor did they conduct a financial analysis or create a salary schedule to understand how the contract changes would affect salaries. This led to a budget crisis for the town, which the current mayor must resolve. (For more information about the OIG’s work regarding the Methuen police contract, see Recent OIG Investigations in this issue.)

The Methuen police contract is an extreme example of the waste of public funds that can occur if public leaders do not provide adequate oversight of public employees, but an important one to keep in mind as public boards and commissions approve contracts and expenditures every day.

Members of boards and commissions owe a fiduciary duty to the entity they oversee. This duty requires members to be careful, diligent and thoughtful in their roles. Therefore, it is critically important that boards and commissions review and understand materials and ask questions before approving contracts and expenditures. Put another way, boards and commissions should not have blind faith in the managers they oversee. Doing so will increase the organization’s risk for fraud, waste and abuse in the expenditure of public funds.

The OIG also recommends that board and commission members periodically review their responsibilities and ensure that they are most effectively serving the people who elected or appointed them.

Resources

The  OIG  has  multiple  resources that can help public boards and commissions ensure they are meeting their obligations:

• The OIG publishes a Guide for Members of Public Boards and Commissions. This guide outlines practices, such as upholding fiduciary principles, that will help board members understand their obligations and perform their duties effectively. The guide also provides an overview of the laws that apply to board members, including laws relating to board meetings, official communications and individual conduct.

• Additionally, the OIG offers a training class for boards and commissions through the MCPPO program. Learn more.

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Additional Resources

OIG Bulletin, February 2021, Vol. 2, #1

Guide for Members of Public Boards and Commissions

Date published:	February 25, 2021