Overview
During the audit period, UMass Memorial Health Care (UMMH) received two payments, totaling $6.2 million, in grant funding from the Executive Office of Health and Human Services (EOHHS), which was authorized through Chapter 102 of the Acts of 2021. While the $6.2 million in state grant money was spent, UMMH could not provide us accounting records to show how this grant revenue was spent. After our exit conference with UMMH on November 22, 2024, UMMH’s outside counsel from Ropes and Gray LLP informed us that the $6.2 million was used to reimburse UMMH for money spent on employee bonuses during 2020 and 2021 and provided us with a spreadsheet prepared by UMMH’s vice president of internal audit that shows the bonus amounts for each employee, totaling $10.6 million. However, UMMH did not provide us any accounting records to corroborate that grant revenue was used to offset these bonus expenses. The employee bonuses that were reimbursed were paid to 13,520 UMMH employees and ranged between $125 and $500 per employee. We find the lack of source documentation troubling, as the stated reimbursement would occur via one or more distinct transactions, effectuating a known policy decision at UMMH. Documentation should be available to support these claims. We further note that reimbursement of employee bonuses, though permissible, does not appear to be consistent with the intent of the payment agreement between UMMH and EOHHS.
On September 23, 2023, UMMH closed the maternity center located at its HealthAlliance Clinton Hospital’s Leominster Campus, citing a shortage of obstetricians, nurses, and other clinical professionals needed to operate the center. UMMH could have used the $6.2 million of EOHHS grant funding to invest in the clinical workforce it needed to operate and maintain the maternity center, thereby supporting the operation of an existing hospital facility. This would have provided a public benefit related to the expenditure of $6.2 million of taxpayer funding, rather than reimbursing itself for UMMH expenditures incurred in prior years. By not investing this money in its maternity center workforce, UMMH has created a health disparity for its patients, of whom 20% are MassHealth members, because of a lack of access to maternity care in the central Massachusetts region. This is just one example of a loss of a service that may have been prevented if grant funds were used in a different way.
We note here that, given UMMH’s contention that it used the $6.2 million in grant funds to reimburse itself for bonuses paid to employees in prior years, it is difficult to believe that UMMH lacks source documentation of the use of funding in this way, as it stipulated to us.
Authoritative Guidance
Section 71(d) of Chapter 102 of the Acts of 2021 stated the following:
All expenditures from the fund shall support hospitals and affiliated hospital health care providers to prevent, prepare for and respond to the 2019 novel coronavirus, also known as COVID-19. The secretary shall award grants to hospitals and affiliated health care providers through an application process. An application for a grant submitted by a hospital or hospital health system shall include, but not be limited to: (i) healthcare-related expenses or lost revenues that are attributable to COVID-19 for the hospital and affiliated health system providers; and (ii) amounts of funding used to support the hospital and affiliated health system providers that have served communities disproportionately affected by COVID-19 related to the public health emergency. A recipient shall certify that it shall not use any grant payment received to reimburse expenses or losses that have been reimbursed from another source or that another source is obligated to reimburse.
Section 2 of the Payment Agreement between EOHHS and UMMH states,
By executing this Agreement, the Recipient is attesting that: . . .
c. The Recipient agrees to produce, upon request by EOHHS, all data or documents that EOHHS determines, in its sole discretion, that it needs: . . .
ii. to determine how the Recipient expended the payment described in this Agreement; . . .
d. That all payments under this Agreement are subject to validation, reconciliation, and audit by EOHHS; and . . .
f. The Recipient will use all funds received under this Agreement for . . . eligible purposes, which may include, but are not limited to, the following:
i. Mitigating financial hardship due to declines in revenue or profits by supporting payroll costs and compensation of employees, returning to full staffing, or supporting operations and maintenance of existing hospital facilities.
Reasons for Issue
In an email to the Office of the State Auditor on December 11, 2024, UMMH’s attorney stated, “In November 2020 and in September 2021, UMMH paid special retention bonuses to its employees in recognition of their efforts in addressing the COVID-19 pandemic. The amounts of those bonuses and the employees to whom they were paid are reflected in the attached spreadsheet. The [American Rescue Plan Act] funds that UMMH received through EOHHS were used to mitigate these special bonus payments, which constituted ‘increased costs of . . . workforce’ under the Payment Agreements governing the payment of these funds.”
Recommendations
- UMMH should maintain detailed accounting records and maintain an audit trail to show when state or federal grant revenue is received and what expenses are incurred in association with grant revenue. This is a requirement of the grant agreement executed by UMMH with the Commonwealth.
- When accepting taxpayer-funded grants from the Commonwealth, UMMH should use those funds to invest in maintaining operations of essential services. For example, UMMH could have considered allocating those funds to maternity care or other critical healthcare services, rather than spending these taxpayer-funded grants to reimburse itself for UMMH’s prior year expenditures, such as employee bonuses.
- UMMH should reassess the need for maternity care in the communities served by HealthAlliance Clinton Hospital and work toward mitigating health disparities caused by a lack of access to maternity care in that region.
Auditee’s Response
The Auditee respectfully disagrees with Finding 1. The Office’s draft report states the Auditee “did not maintain documentation to support the expenditures” from the grants received. This finding is soundly refuted by the record. The Auditee produced the two Payment Agreements that provided for the payment of the federal government’s American Rescue Plan Act of 2021 (“ARPA”) funds to [the Office of the State Auditor (OSA)] on August 29, 2024. Under these Payment Agreements, which were administered by the Massachusetts Executive Office for Health and Human Services (“EOHHS”), UMMH was required to provide quarterly reports of its operating margin, non-operating margin, and total margin on a form created by EOHHS. UMMH timely met all of the reporting obligations from EOHHS and provided the reports submitted by UMMH to EOHHS on August 29, 2024. As UMMH noted when providing these reports to OSA, because EOHHS had not provided any guidance regarding specific documentation of use of these funds, UMMH had not prepared any such analysis at that time. After OSA nevertheless requested more specific documentation regarding use of these grant funds than had been required by or provided to EOHHS, the Auditee provided the OSA with a spreadsheet that set forth Covid appreciation bonuses paid by UMMH to thousands of front-line employees, including nurses and other caregivers, recognizing their dedication and sacrifices during the Covid pandemic, including the specific employees to whom they were paid.
While the draft report acknowledges the receipt of this Covid appreciation bonus spreadsheet, it nevertheless asserts that the Auditee failed to provide “accounting records” regarding these Covid appreciation bonus payments. As an initial matter, the Auditee notes that the OSA never submitted requests to UMMH for such “accounting records” and it is unclear what those would be other than the previously provided materials. As noted above, the Auditee believes that it produced all materials that OSA requested in connection with the response to EOHHS spending requests.
The Auditee further disagrees with the Office’s recommendation that UMMH could have used the grants to maintain the Leominster maternity ward. First, and most critically, it is outside the authority of the OSA to recommend such a specific management action by a private entity. Second, the closure of the maternity ward was not due to COVID-19 and, thus, directing COVID-19 grant funds to keep it open would not have been permissible under the Payment Agreements.
And contrary to the OSA’s note suggesting otherwise, the use of these grant funds to offset Covid appreciation bonuses paid to retain 13,520 front line workers, including nurses and other caregivers, during an unprecedented global health crisis was in line with both the “intent” and plain language of the Payment Agreement. The funds were used to mitigate UMMH’s financial strain from COVID-19 and support the compensation of UMMH’s employees, which were clearly permitted and appropriate uses of the funds.
Response from EOHHS-MassHealth
EOHHS agrees that maintaining accounting records was a requirement of the grant agreement with UMMH. EOHHS has not conducted independent verification to determine if UMMH has maintained such records for the $6.2 [million] grant referenced by the [Office of the State Auditor (OSA)].
The $6.2 [million] grant payments to UMMH referenced by the OSA was made pursuant to Section 71 of Chapter 102 of the Acts of 2021. Said Section 71 required that “[a]ll expenditures from the fund shall support hospitals and affiliated hospital health care providers to prevent, prepare for and respond to the 2019 novel coronavirus, also known as COVID-19.” This funding was specifically classified as “revenue replacement” under the American Rescue Plan Act (ARPA) for losses experienced due to the COVID-19 pandemic. Section 71 also specified that hospitals could apply and show their need for the grant through “lost revenues that are attributable to COVID-19.” There were minimal state or federal restrictions on the permissible use of funds. There were no restrictions on using the funds for lost revenue due to staffing cost increases. EOHHS has no evidence suggesting that UMMH used the $6.2 [million] grant amounts inappropriately.
EOHHS takes no position on [Recommendation 3] as it relates to the $6.2 [million] grant funding. While supporting maternity care in communities served by HealthAlliance Clinton Hospital would likely have been a permissible use of the funds (for example, to “mitigate financial hardship due to declines in revenue or profits by . . . supporting operations and maintenance of existing hospital facilities,” per the grant agreement), UMMH was also permitted to use the funds for other uses (such as “mitigating financial hardship due to declines in revenue or profits by supporting payroll costs and compensation of employees,” per the grant agreement).
Auditor’s Reply
In its response, UMMH asserts, “First, and most critically, it is outside the authority of the OSA to recommend such a specific management action by a private entity.”
We find this statement troubling, as we have found UMMH’s unprecedented, more than year-long resistance to our audit. As UMMH knows, UMMH’s expenditure of state funding is subject to audit by the Office of the State Auditor. This is clearly authorized by Section 12 of Chapter 11 of the General Laws. As part of any audit, there is a process of findings and recommendations, in which auditors discover deficiencies, understand them, and report them. In this case, as public sector auditors, we report these deficiencies and recommendations to the state government and to the general public. Specific management action is recommended because we found specific deficiencies that need to be addressed. This is consistent with every audit our office conducts, whether of a public entity, quasi-public entity, or private entity receiving public funding.
In its response, UMMH states that EOHHS did not provide guidance regarding specific documentation for the use of grant funds. It is UMMH’s duty under Section 16.01(b) of Chapter 156D of the Massachusetts General Laws, not EOHHS’s, to “maintain appropriate accounting records,” and should be doing so in all areas of its business beyond the $6.2 million grant under our review. This may violate Section 2 of UMMH’s funding agreement with EOHHS, dated December 23, 2022, which states that:
- 2. By executing this Agreement, the Recipient is attesting that: . . .
c. The Recipient agrees to produce, upon request by EOHHS, all data or documents that EOHHS determines, in its sole discretion, that it needs: . . .
ii. to determine how the Recipient expended the payment described in this Agreement.
In this case, UMMH has stipulated to us that it does not have records that indicate how the $6.2 million in grant funding was spent. It has, after the exit conference from our audit, had its external law firm provide a spreadsheet purported to be from its director of internal audit, which itself purports to represent how this grant money was spent. As explained, this spreadsheet is not evidence of any expenditure—of the $6.2 million in grant funding or any other spending—as it is a spreadsheet without back-up or source documentation. If UMMH is unable to produce data or documents to us “to determine how the Recipient expended the payment described in this Agreement,” we are concerned that it could not do so if asked by EOHHS. This would indicate that UMMH is unable to fulfill at least some of its reporting and accountability obligations under its grant funding agreement.
Additionally, in its response, UMMH states that we never submitted requests to UMMH for accounting records relative to the grant funds received. This is not the case, as on July 16, 2024, we requested that UMMH provide “documentation to support UMMH’s spending of $6,200,807 which was paid to UMMH by the Executive Office of Health and Human Services (EOHHS).” In response to our request, UMMH provided an Excel spreadsheet containing bonuses for 14,834 employees during 2020 and 2021, which totaled $10,639,375. Further, the Excel spreadsheet provided by UMMH was created on December 3, 2024, well after the date of our request and the audit period. This Excel spreadsheet did not contain an audit trail that could provide objective evidence that the bonuses contained within were funded by the $6.2 million grant under our review. From an audit perspective, the spreadsheet provided to us is information that lacks proof or supporting documentation; we cannot merely accept an auditee’s representation of information as accurate without proof that it is.
In its response, EOHHS agrees that maintaining accounting records was a requirement of the grant agreement with UMMH. EOHHS also states that it has not verified whether UMMH maintained any records to account for the $6.2 million it paid to UMMH. We urge EOHHS to conduct its own independent review of UMMH’s spending regarding this grant in order to determine whether UMMH made expenditures in accordance with its payment agreement with EOHHS.
In its response, UMMH also disagreed with our recommendation that it not use grant funding to reimburse its prior expenditures, especially when it could have used that funding to preserve critical healthcare services to the communities it serves. We note that UMMH has not demonstrated to us that it used grant funding to provide bonuses to frontline healthcare workers. UMMH has provided no proof of payments made to these employees. After our audit exited, UMMH’s attorneys provided a spreadsheet that is purported to be a record of these payments, but this is not evidence that these payments were made. An example of valid evidence in this regard would be actual payroll records that demonstrate the payment of these bonuses to the stated employees. A spreadsheet—which could have been generated after the fact, by non-payroll personnel, such as UMMH’s outside law firm—does not constitute evidence that these payments were made.
We also note that the grant funding agreements between UMMH and EOHHS were very broad as to the permissible purposes for which this funding could be used. The state law (via special act) that authorized this funding was also very broad. Expenditure was not at all limited to the payment of appreciation bonuses to employees, which UMMH contends it spent this money on (but of which it has provided no proof). While reimbursement for bonuses may be permitted, the general public, whose tax dollars were spent, would likely have been better served had this money been used to ensure community access to critical healthcare services, such as maternity care.
The American Rescue Plan Act, which funded the state appropriation, authorized “premium pay” (though, notably, not bonuses) and “grants to employers with essential workers.” In closing the maternity ward, UMMH cited staffing shortages. These taxpayer funds could have been used to offer premium pay to essential workers such as maternity care workers, who UMMH was reportedly having difficulty recruiting. Paying to preserve these important public services would be a valid expenditure of government funding for healthcare, and we believe a better decision than a private entity (UMMH) reimbursing itself for spending it indicated that it had already made. This does not call into question the validity of these bonus payments but rather how UMMH chose to reimburse itself for them, rather than preserving services for the public.
| Date published: | November 4, 2025 |
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