Delta Projects, Inc. and Affiliates Administration of Limited Unit Rate Service Agreements

This is a supplemental audit report about Delta Projects, a nonprofit contractor paid by the Department of Developmental Services through Limited Unit Rate Service Agreements, or LUSAs.

“This supplemental report presents the results of our testing specific to Delta’s accounts-payable- period LUSA transactions and should be read in the context of our overall report on DDS’s administration of LUSA agreements.”

The Auditor looked at these payments because the state was reviewing human-service contracting to check accountability, transparency, and whether public money was being used cost-effectively.

“The overall audit of DDS was conducted as part of OSA’s ongoing efforts to audit human-service contracting activity by state agencies and to promote accountability, transparency, and cost effectiveness in state contracting.”

If LUSA money pays for services already covered by another contract, the contractor could be paid twice or paid too much with taxpayer funds.

“As a result, if a LUSA agreement is erroneously used to pay for services that have already been effectively reimbursed through a regular contract, the contractor may improperly receive excessive or duplicative reimbursement of program costs.”

For an ordinary taxpayer, this matters because the audit covered state payments to human-service contractors and found problems in how money meant for special, limited client services was controlled.

“Our overall audit of DDS’s administration of LUSAs included a review of $16.6 million in LUSA funding provided to 15 human-service contractors during fiscal years 2009 through 2011.”

The audit’s bottom line is that the Auditor questioned $1,093,673 in Delta-related LUSA funding.

“The unduplicated amount of questioned funding is $1,093,673.”

The Auditor said Delta should strengthen its controls so LUSA services are properly done, documented, billed, and accounted for under the rules.

“In accordance with the recommendations of the overall report and the testing results specific to Delta, Delta should implement appropriate control measures to ensure that all LUSA services are performed, documented, billed, and accounted for in compliance with applicable requirements.”

The findings are significant because the report says DDS was using LUSA contracts in ways that did not match their intended purpose and led to unnecessary or excessive payments to contractors.

“Instead DDS Regional and Area Office staff have used LUSA contracts to provide additional year-end funding to some DDS human-service contractors for various purposes, many of which are not consistent with the intended use of these funds and resulted in unnecessary and excessive compensation to contractors.”

A LUSA is a flexible state contract tool that lets DDS buy short-term or occasional services from an approved provider when a client is not already covered by another contract.

“LUSAs are a form of a master contract agreement that can be used by DDS to purchase services from a preapproved contractor on an intermittent, limited-time basis for clients who are not already covered through an existing contract.”