Audit of ServiceNet, Inc.
November 6, 2019 · ServiceNet, Inc. · Read the full official report on mass.gov ↗
Published November 6, 2019 Audit covers July 1, 2016 – June 30, 2018 Under Suzanne M. Bump · 2011–2023
source
“ServiceNet charged $38,278 in nonreimbursable expenses against its state contracts.”
Read the plain-English breakdown
This is a Massachusetts State Auditor performance audit of ServiceNet, Inc., a nonprofit human services agency, covering July 1, 2016 through June 30, 2018.
“I am pleased to provide this performance audit of ServiceNet, Inc.”
The audit checked whether ServiceNet followed state rules for documenting and reporting program and administrative expenses paid under state contracts.
“In this audit, we examined ServiceNet’s compliance with Section 1 of Title 808 of the Code of Massachusetts Regulations regarding the documentation and reporting of programmatic and administrative expenses.”
If you are a Massachusetts resident, this audit is about whether public contract money was properly documented and spent on allowed program costs.
“ServiceNet should amend its policies and procedures to ensure that all expenses charged to state programs are properly documented and establish internal controls to ensure that these policies and procedures are adhered to.”
The auditor recommended that ServiceNet work with the state Operational Services Division and repay any costs that OSD decides must be returned.
“ServiceNet should cooperate with OSD to resolve the identified issues regarding nonreimbursable costs and should reimburse the Commonwealth for any such costs that OSD determines must be repaid.”
The audit found two main problems: improper charges to state contracts and weak controls over cash payments, increasing the risk that unallowable costs could be paid.
“Unless all expenses are properly reviewed and approved and appropriate documentation is maintained, there is a higher-than-acceptable risk of ServiceNet processing payments for nonreimbursable expenses, such as those discussed in Finding 1.”
“Nonreimbursable” means costs that state rules do not allow to be paid with state contract money, such as undocumented expenses, fundraising costs, late fees, luxury items, and non-program expenses.
“Further, 808 CMR 1.05 details specific costs that are nonreimbursable to contractors and cannot be charged to state contracts:”
3 figure(s) pending source verification - not shown
What the Auditor found
Why it matters: State contract funds could have been used for expenses that were not documented, not reasonably incurred, or not program-related.
Standard: 808 CMR 1.04(1), 808 CMR 1.02, 808 CMR 1.05, Federal Office of Management and Budget Circular A-122, Chapter 64H, Section 6(e) of the Massachusetts General Laws, and AU-C 500.05. ( Section 1.04(1) of Title 808 of the Code of Massachusetts Regulations; 808 CMR 1.05; Section 6(e) of Chapter 64H of the Massachusetts General Laws )
2 recommendations
- ServiceNet should cooperate with OSD to resolve the nonreimbursable cost issues and reimburse the Commonwealth for any costs OSD determines must be repaid.agency: disagreed
- ServiceNet should amend its policies and procedures to require proper documentation for expenses charged to state programs and establish internal controls to ensure compliance.agency: disagreed
Agency response & Auditor reply
Agency: "ServiceNet should not be required to reimburse the Commonwealth."
Auditor: "During our audit period, ServiceNet charged $38,278 in nonreimbursable expenses against its state contracts, a fact not disputed by the agency."
Why it matters: There is a higher-than-acceptable risk that ServiceNet could process payments for nonreimbursable expenses.
Standard: ServiceNet’s Cash Disbursement Memo and 808 CMR 1.04(1). ( 808 CMR 1.04(1) )
2 recommendations
- ServiceNet should establish internal controls to ensure that check requests are approved and expenses are reimbursable and properly reported.agency: partially agreed
- ServiceNet should ensure that supporting documentation is retained for all expenses.agency: partially agreed
Agency response & Auditor reply
Agency: "While we believe our internal controls are strong and consistently followed and monitored, there is always room for improvement."
Auditor: "Based on its response, ServiceNet is taking measures to address this issue."