Life Focus Center of Charlestown, Inc.
March 7, 2012 · Read the full official report (PDF) ↗
Published March 7, 2012 Audit covers July 1, 2008 – December 31, 2010 Under Suzanne M. Bump · 2011–2023
source
“Our audit identified various problems relative to $1,237,105 in expenses, including $129,982 in unallowable expenses related to LFC’s state-funded contracts during the audit period.”
Read the plain-English breakdown
This is a Massachusetts State Auditor review of Life Focus Center’s operations and finances from July 2008 through December 2010.
“The scope of our audit was to examine various administrative and operational activities of LFC during the audit period July 1, 2008 through December 31, 2010.”
The audit checked whether the organization followed laws, contract rules, and sound administrative practices when using public funds.
“Rather, our report was intended to report findings and conclusions on the extent of LFC’s compliance with applicable laws, regulations, and contractual agreements, and to identify any operational and administrative processes, methods, and internal controls that could be made more efficient and effective.”
Public money paid for services to people with disabilities, so weak documentation and oversight make it hard to know whether taxpayers got what they paid for.
“Because LFC’s board is not meeting all of its oversight responsibilities, the Commonwealth cannot be assured that LFC is meeting all of its objectives in the most economical and efficient manner.”
If you are a taxpayer, caregiver, or community member, this matters because the organization received public funding to serve people with disabilities in the Boston area.
“Located in Charlestown, LFC provides consumers with disabilities and their family members residing in the Boston area with social, vocational, educational, and community-based residential and support services.”
The auditor questioned whether large amounts of money were properly billed or spent, including more than $1.1 million in undocumented payroll costs.
“We also found inadequate oversight by LFC’s Board of Directors and inadequate internal controls over LFC’s time, attendance, and payroll-related activities, resulting in over $1.1 million in undocumented employee compensation expenses.”
The auditor recommended that state agencies seek repayment for some unsupported or improper costs and that LFC improve its policies, records, and controls.
“At the conclusion of our audit, LFC officials provided us with a draft copy of an internal control plan that LFC was developing to address many of the issues we identified during our audit.”
The biggest issue was not just one bad receipt or mistake; the report describes repeated gaps in billing records, credit card controls, payroll documentation, consultant oversight, board oversight, bonuses, and vehicle costs.
“As a result of these issues, LFC and the Commonwealth cannot be assured that all of the $200,644 in payments that LFC provided to these consultants and charged against its state contracts during the period covered by our audit were proper or that the $17,636 in compensation that LFC provided to the two individuals who performed maintenance services was properly reported to the IRS and the DOR by these individuals.”
“Unallowable” or “nonreimbursable” means the state should not pay for those costs under the contract, especially when records do not prove the expense was proper.
“According to state regulations, these inadequately documented expenses are unallowable and nonreimbursable under state contracts.”
10 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Whether LFC had implemented effective management controls over certain activities, including staff time and attendance, credit card expenditures, payroll expenses including fringe benefits, and contracting and billings for program services.
- Did not comply Whether LFC’s business practices complied with applicable laws, rules, regulations, and fiscal and programmatic requirements of its state contracts.
- Did not comply Whether expenses were reasonable, allowable, and allocable to LFC’s state contracts.
What the Auditor found
Why it matters: The Commonwealth could not confirm the accuracy of LFC’s billings, including payments for consumers recorded as absent.
Standard: 808 CMR 1.05(26) and 801 CMR 21.08 ( 801 CMR 21.08 )
1 recommendation
- DDS should recover at least $14,665 in unsubstantiated billings, review at least five fiscal years of billing records with OSD, and LFC should implement written consumer attendance record policies.agency: partially agreed
Agency response & Auditor reply
Agency: "LFC kept daily attendance records in electronic form as permitted under GAAP and AICPA standards and, therefore, in compliance with the requirements of the Commonwealth’s OSD."
Auditor: "However LFC has been unable to demonstrate that any of its systems contain the necessary controls to ensure that the Commonwealth is being billed only for services actually performed, as required by state law and regulations."
Why it matters: Undocumented or non-program credit card costs may have been improperly reimbursed with state contract funds.
Standard: 808 CMR 1.05(26), 808 CMR 1.05(12), and 808 CMR 1.04 ( 808 CMR 1.04 )
1 recommendation
- LFC should establish effective controls over credit card use; DDS should recover $28,436 and review at least five fiscal years of other credit card expenditures with OSD.agency: partially agreed
Agency response & Auditor reply
Agency: "LFC acknowledges that, in hindsight, its policy of not keeping backup for credit card purchases was not the best policy, and LFC now understands how someone from the outside inspecting LFC’s books and records would find it difficult to understand the nature and purpose for some of the purchases."
Auditor: "However, by its own admission, LFC did not have formal, written policies and procedures relative to the use of these credit cards and did not maintain any documentation to support the business nature of these expenditures."
Why it matters: State funds were used for purposes outside the stated contract payment purpose.
Standard: 808 CMR 1.05(12), 808 CMR 1.05(26), and 801 CMR 21.08 ( 801 CMR 21.08 )
1 recommendation
- DDS should recover $48,809, and LFC should work with DDS to ensure state funds are used for intended purposes.agency: disagreed
Agency response & Auditor reply
Agency: "OSA’s concern with DDS for permitting LFC to use $48,809 of certain designated funds for other purposes is not a failing of LFC and has no relevance to OSA’s assessment of LFC’s operations or programs."
Auditor: "To the contrary, LFC knew it was not appropriate to use these funds for these purposes and therefore should not have requested these funds for inappropriate purposes."
Why it matters: LFC and the Commonwealth could not be assured that $200,644 in payments was proper or that maintenance compensation was reported to tax agencies.
Standard: 808 CMR 1.03(8), 808 CMR 1.05(26), 808 CMR 1.05(22), IRS Form 1099-MISC requirements, and DOR requirements ( 808 CMR 1.03(8) )
1 recommendation
- LFC should follow OSD and federal procurement rules, enter written contracts, document consultant services, and issue required IRS Forms 1099-MISC.agency: partially agreed
Agency response & Auditor reply
Agency: "LFC acknowledges that it did not retain sufficient records from this hiring process and will change that procedure going forward."
Auditor: "Although we do not dispute that the consultant and contractors in question provided some services to LFC during our audit period, because LFC did not establish adequate controls over these services, there is inadequate assurance that all the payments LFC made to these individuals were necessary and proper."
Why it matters: There was inadequate assurance that $1,150,801 in compensation was proper.
Standard: General Contract Conditions, 808 CMR 1.04(1), UFR Auditor’s Compliance Supplement, and 808 CMR 1.05(26) ( Terms and Conditions for Human and Social Service Contracts; 808 CMR 1.04(1); UFR Auditor’s Compliance Supplement )
1 recommendation
- LFC should establish controls over time, attendance, payroll changes, independent payroll reconciliation, and paid leave balances.agency: agreed
Agency response & Auditor reply
Agency: "However, LFC welcomes OSA’s suggestion in the Draft Report to improve its internal controls regarding time and attendance on payroll-related activities, and LFC has begun the process of developing the policies and procedures recommended."
Auditor: "For reasons previously noted, we do not agree with LFC’s assertion that the internal controls it had established over its payroll-related activities were adequate."
Why it matters: LFC could not be assured that it was meeting objectives economically and efficiently.
Standard: Chapter 180, Section 6A of the General Laws; General Contract Conditions; Attorney General’s Guide for Board Members of Charitable Organizations ( Section 6A of Chapter 180 of the General Laws; General Contract Conditions )
1 recommendation
- LFC should ensure its board composition and activities comply with bylaws, General Contract Conditions, and Attorney General guidelines.agency: agreed
Agency response & Auditor reply
Agency: "LFC takes seriously and welcomes the recommendations of OSA contained in the Draft Report regarding the composition and activities of its Board of Directors."
Auditor: "However, there was no documentation to substantiate this assertion, and the board was clearly not composed in a manner consistent with OSD regulations."
Why it matters: The $35,100 in bonuses represented questionable expenses against state contracts and may have been distributed discriminatorily.
Standard: 808 CMR 1.05(9)(a), OSD August 1997 guidance, and OSD UFR Audit and Preparation Manual ( 808 CMR 1.05(9)(a); OSD August 1997 guidance; OSD UFR Audit and Preparation Manual )
1 recommendation
- OSD should decide whether bonus funds should be recovered, and LFC’s board should adopt a bonus policy consistent with OSD guidance before awarding bonuses.agency: disagreed
Agency response & Auditor reply
Agency: "The Draft Report incorrectly characterizes bonuses as a form of fringe benefit within the meaning of 808 CMR 1.05(a)(9)."
Auditor: "Since the bonuses provided by LFC during the period covered by our audit report did not meet either of these criteria, they are therefore unreasonable and clearly represent unallowable costs against LFC’s state contracts."
Why it matters: Vehicle fringe benefit costs were charged to state contracts without documentation separating business and personal use or required tax reporting.
Standard: 808 CMR 1.05(9), IRS Regulation 713, and DOR requirements ( 808 CMR 1.05(9); IRS Regulation 713, Fringe Benefits )
1 recommendation
- LFC should remit $38,072 to the Commonwealth and ensure it does not charge unallowable vehicle expenses to state contracts in the future.agency: partially agreed
Agency response & Auditor reply
Agency: "The Executive Director and Deputy Director each required transportation to perform their services on behalf of LFC."
Auditor: "However, by its own admission these two vehicles were provided to the staff members in question for their personal as well as business use."
Verified dollar findings
Identified dollar findings that do not fall in a named band.