Lutheran Community Services, Inc.

This is a Massachusetts State Auditor performance audit of Lutheran Community Services, Inc., a Worcester nonprofit that provided human and social services, including refugee and adoption services.

“LCS provides various human and social services, including refugee services and adoption services.”

The auditor reviewed whether selected costs charged to Massachusetts contracts were allowed and properly tied to those contracts, whether refugee-program goals were met, and whether related-party transactions were proper.

“The objectives of our audit were to (1) determine whether certain LCS expenses charged to Massachusetts contracts were reasonable, allowable, and allocable to these contracts in accordance with regulations promulgated by the state’s Operational Services Division (OSD); (2) determine whether LCS achieved all of the performance-goal standards stipulated in its contract with the Massachusetts Office for Refugees and Immigrants (MORI); and (3) analyze selected transactions conducted between LCS and a related party, LSS, to determine whether they were reasonable, allowable, and allocable to LCS’s state contracts.”

Public money may have paid for costs that lacked required proof or were not allowed, and state agencies may have received unreliable information about program performance.

“As a result, LCS cannot support the reported performance results, and state oversight agencies may be relying on incorrect information.”

For an ordinary taxpayer, the issue is whether state contract money was spent only on documented, allowable services and whether agencies had accurate information to oversee those services.

“Therefore, LCS overcharged its state contracts by as much as $5,279 for these expenses, and OSD should recover all state funds that were used to pay for these unallowable charges.”

The audit found unsupported payroll costs, unallowable travel costs, and weak documentation for refugee-program performance reporting.

“We assessed these relevant controls and identified deficiencies related to the first three items as discussed in the Detailed Audit Results and Findings section of this report.”

The report says the state should recover unsupported or unallowable costs, and LCS should improve documentation, approval, travel, and case-file procedures.

“OSD should recover the $5,701 we identified as unsupported costs against its MORI contracts.”

The dollar amounts in the findings were relatively small compared with total program revenue, but the audit points to oversight weaknesses that affect accountability for state-funded services.

“Below is a summary of LCS’s revenue for the fiscal year ended June 30, 2012.”

“Nonreimbursable” means the state should not pay back or cover a cost if the organization cannot properly prove it or if it is not related to the program.

“According to OSD regulation 808 Code of Massachusetts Regulations (CMR) 1.05(26), undocumented costs are nonreimbursable program costs, as follows:”