Department of Developmental Services Administration of Limited Unit Rate Service Agreements
April 3, 2013 · Read the full official report (PDF) ↗
Published April 3, 2013 Audit covers July 1, 2008 – June 30, 2011 Under Suzanne M. Bump · 2011–2023
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“Although LUSA funding is supposed to be used for intermittent, unanticipated services to clients as needed, DDS is not properly administering these contracts.”
Read the plain-English breakdown
This is a State Auditor review of how the Department of Developmental Services managed Limited Unit Rate Service Agreements, called LUSAs.
“The Office of the State Auditor (OSA) conducted an audit of the Department of Developmental Services’ (DDS’s) administration of its Limited Unit Rate Service Agreements (LUSAs).”
Auditors looked into LUSAs because many payments were being processed at the end of fiscal years, and past audits had already found misuse of this kind of funding.
“Based on this peculiar service utilization pattern and the fact that prior OSA audits have identified instances of the misuse of LUSA funding1, OSA initiated an audit of DDS’s administration of LUSA funding.”
The weak paperwork meant auditors could not be sure some payments were authorized, needed, reasonable, or tied to services that were actually delivered.
“As a result, there was insufficient evidence to show that these LUSA payments had been properly authorized and accounted for, that they were necessary and not excessive, and that the contractor had actually provided the LUSA services billed.”
For an ordinary taxpayer, this matters because the audit was about whether public human-service contracting money was accountable, transparent, and cost-effective.
“This audit 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.”
The Auditor found DDS used LUSAs too loosely, including for late-year funding, poorly documented payments, and purchases outside the intended purpose of the program.
“LUSA agreements are supposed to be used to provide direct services to clients.”
The Auditor recommended tighter controls so LUSA money is used only for proper purposes, documented correctly, and tracked in the state accounting system.
“DDS should take the measures necessary to ensure that all LUSA funding is expended in accordance with all applicable laws and regulations and is properly accounted for in the MMARS system.”
This was not a small paperwork issue: LUSA payments totaled more than $62 million over the three fiscal years reviewed.
“LUSA funding utilization fluctuates from year to year but has exceeded $15 million per year for the past three fiscal years, with a three-year total of over $62 million, as summarized in the following table.”
A LUSA is basically a flexible contract DDS can use to buy short-term, as-needed human services from already approved providers when a client is not covered by another contract.
“LUSAs are a form of a master contract agreement that can be used by DDS to purchase human services from a preapproved contractor on an intermittent, limited-time basis for clients who are not already covered through an existing contract.”
9 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Assess the system of internal controls DDS has established over its administration of LUSA contract funding.
- Did not comply Determine whether LUSA funding is being utilized as intended and in compliance with applicable laws, regulations, policies, and procedures by conducting audit testing of a judgmental sample of DDS human-service contractors who received significant LUSA funding.
What the Auditor found
Why it matters: Funds were distributed through discretionary year-end practices, retroactive approvals, over-encumbrances, and questionable pricing, creating risk of excessive or improper payments.
Standard: DDS policy required Authorization for Services Forms before or within three working days after service initiation; state finance law and encumbrance controls required timely, accurate documentation of obligations. ( Chapter 29, Section 66, of the Massachusetts General Laws; Chapter 266, Section 67A, of the General Laws )
2 recommendations
- DDS, in collaboration with EOHHS, should ensure all LUSA funding is properly administered under state contracting and accounting requirements.agency: agreed
- DDS should establish contractor funding needs at the beginning of each contract period and avoid using LUSAs as supplements for services that could have been included in regular contracts.agency: agreed
Agency response & Auditor reply
Agency: "DDS has implemented a series of controls designed to eliminate post-fiscal-year authorizations and is enforcing a timely authorization policy."
Auditor: "Although DDS established internal policies for that purpose during our audit period, our audit found that DDS and its contractors routinely circumvented that control system."
Why it matters: There was insufficient evidence that payments were properly authorized, necessary, not excessive, or supported by actual services.
Standard: Section 7 of the Commonwealth Terms and Conditions for Human and Social Services requires contractors to maintain records sufficient to substantiate claims for payment. ( 808 CMR 1.00 )
1 recommendation
- DDS should ensure contractors implement controls so LUSA services are performed, documented, billed, and accounted for in compliance with requirements.agency: already implemented
Agency response & Auditor reply
Auditor: "However, according to its response, DDS is taking measures to address our concerns relative to this matter."
Why it matters: Funds intended for direct client services were used for vehicles, appliances, furniture, equipment, repairs, renovations, and other non-service costs without required contracting protections.
Standard: OSD and OSC rules require capital and non-service purchases to be funded through appropriate mechanisms and separately accounted for.
2 recommendations
- DDS should ensure contractors do not use LUSA funding for non-program services.agency: already implemented
- DDS and OSD should protect the Commonwealth’s title interest in assets paid for through LUSA funding.agency: agreed
Agency response & Auditor reply
Agency: "The purchase of capital and non-service-related items through the use of a LUSA is prohibited."
Why it matters: Improper use of LUSAs caused procurement, service utilization, accounting, and documentation problems across personal support, transitional, transportation, and emergency reimbursement payments.
Standard: State regulations and policies required these transactions to be procured, amended, paid, or accounted for through mechanisms other than LUSAs.
2 recommendations
- DDS should ensure all LUSA funding is spent in accordance with laws and regulations and properly accounted for in MMARS.agency: agreed
- OSD and OSC should review the issues and strengthen oversight as appropriate.
Agency response & Auditor reply
Agency: "In our view, the current definition of the Support Services LUSA incorporates as an allowable use the provision of as-needed transportation services."
Auditor: "OSA agrees with DDS’s assertion that payments for certain as-needed transportation services fall within the scope of Support Service LUSAs."
Verified dollar findings
Identified dollar findings that do not fall in a named band.
Prior findings revisited
"Based on this peculiar service utilization pattern and the fact that prior OSA audits have identified instances of the misuse of LUSA funding1, OSA initiated an audit of DDS’s administration of LUSA funding."