Northeast Center for Youth and Families, Inc.
August 25, 2011 · Read the full official report (PDF) ↗
Published August 25, 2011 Audit covers July 1, 2004 – June 30, 2009 Under Suzanne M. Bump · 2011–2023
source
“Based on our audit, we found that during the audit period, NCYF inappropriately received state contract revenues totaling $651,221; incurred questionable staff bonuses totaling $918,422 and unallowable severance pay totaling $148,098; inappropriately used $406,360 in funding it received under its Massachusetts state contracts to pay for losses it incurred in programs it operated to serve citizens of the state of Connecticut; incurred $53,950 in nonreimbursable consultant costs; incurred $7,073 in nonreimbursable hospital, medical, and wage continuation costs relative to an insurance claim made by a staff member during a period in which NCYF had let its workers’ compensation insurance coverage lapse; and did not properly account for employee retirement plan contributions totaling $260,000.”
Read the plain-English breakdown
This is a Massachusetts State Auditor report on Northeast Center for Youth and Families, a nonprofit serving children and adolescents through therapeutic and educational programs.
“Located in Easthampton, NCYF annually serves more than 600 emotionally disturbed or mentally ill children and adolescents in Massachusetts and Connecticut through therapeutic and educational programs that include residential treatment programs, in-home support services, therapeutic foster care, individualized special education services, and after-school programs.”
The audit checked whether NCYF had proper controls, followed rules, and complied with state contract requirements from July 1, 2004 through June 30, 2009.
“The scope of our audit was to examine various administrative and operational activities of NCYF during the period July 1, 2004 through June 30, 2009.”
The report says money that should have stayed available for Massachusetts services may instead have been spent on unallowable costs.
“As a result, the Commonwealth was denied the potential opportunity to fund services for other needy consumers.”
If you are a Massachusetts taxpayer or depend on state-funded human services, the audit is about whether public money for vulnerable children was properly spent and recovered when necessary.
“For fiscal year 2009, NCYF received program funding that totaled $18,835,562, of which the Commonwealth provided $13,102,066, or approximately 70%.”
Auditors recommended that the Commonwealth recover money from NCYF for several categories of improper or unallowable costs.
“In order to address our concerns relative to this matter, the Commonwealth should recover from NCYF the $651,221 in excess revenues it received from DYS during the three fiscal years ended June 30, 2008 under the contracts in question.”
The report says NCYF should repay recoverable funds, correct reporting problems, and improve policies for bonuses, severance, consultants, insurance, and retirement contributions.
“In the future, NCYF should take measures to ensure that no Massachusetts contract revenues are used for these purposes.”
The appendix listed $1,188,097 as the net amount recoverable from NCYF after accounting for available unrestricted revenue.
“Net Amounts Recoverable from NCYF”
“Nonreimbursable costs” means expenses that cannot properly be charged to state-funded programs.
“According to state regulations, expenses such as these that are unreasonable and unnecessary are nonreimbursable under state contracts.”
9 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply To determine whether NCYF had implemented effective internal controls, including processes for planning, organizing, directing, and controlling program operations; policies and procedures to ensure that resource use is consistent with laws and regulations; and policies and procedures to ensure that resources are safeguarded and efficiently used.
What the Auditor found
Why it matters: The Commonwealth overpaid NCYF for foster care programs, creating recoverable costs and reducing funds available for other services.
Standard: DYS required NCYF to provide documentation supporting its actual costs for the underutilized contracts. ( DYS Commissioner’s letter dated May 16, 2006 )
1 recommendation
- The Commonwealth should recover from NCYF the $651,221 in excess revenues it received from DYS during the three fiscal years ended June 30, 2008 under the contracts in question.agency: disagreed
Agency response & Auditor reply
Agency: "Accordingly, no funds with respect to these programs are recoverable by the Commonwealth."
Why it matters: Bonuses were not properly controlled, board oversight was insufficient, and some employees received preferential or excessive payments.
Standard: 808 CMR 1.00 and the UFR Auditor’s Compliance Supplement require bonuses to be in written employment agreements or a written employee morale, health, and welfare policy. ( 808 CMR 1.00, UFR Auditor’s Compliance Supplement; Chapter 180, Section 6C, of the General Laws )
3 recommendations
- NCYF should remit to the Commonwealth the $20,293 in bonus payments made to staff that were not done in accordance with OSD regulation or its distribution plan.agency: disagreed
- OSD should review the remaining $898,129 in bonus funds and determine how much should be recovered.agency: disagreed
- NCYF’s Board should develop and implement a policy consistent with OSD’s UFR Auditor’s Compliance Supplement and authorize future employee bonuses.agency: already implemented
Agency response & Auditor reply
Agency: "It is perfectly appropriate for the Board of Directors of the Center to leave to management the award[ing] of bonuses, especially in the ranges involved in this case."
Auditor: "However, we did not analyze individual bonus amounts for fiscal year 2006 because we determined that NCYF’s bonus payments in total were not made in accordance with OSD’s UFR Auditor’s Compliance Supplement."
Why it matters: Massachusetts contract revenues did not benefit Massachusetts consumers and were used for unreasonable and unallowable costs.
Standard: 808 CMR 1.02, 808 CMR 1.03(7), 808 CMR 1.05, and OSD’s UFR Auditor’s Compliance Supplement restrict state contract revenues and retained surpluses. ( 808 CMR 1.02; 808 CMR 1.03(7) )
2 recommendations
- The Commonwealth should recover from NCYF the $406,360 in state program revenues used to offset out-of-state program costs.agency: partially agreed
- NCYF should ensure that no Massachusetts contract revenues are used for out-of-state program losses in the future.
Agency response & Auditor reply
Agency: "At most the Center’s cash expenditure constitutes an impermissible use of the Center’s surplus."
Auditor: "Contrary to NCYF’s response, 808 CMR 1.03(7) and the Auditor’s Compliance Supplement prohibit it from using its accumulated surpluses from Massachusetts-funded programs to pay for out-of-state program expenses."
Why it matters: State program revenues were used to fund severance payments that should have been reported as nonreimbursable.
Standard: 808 CMR 1.02 and OMB Circular A-122 require compensation, including severance, to be reasonable and conform to an established policy consistently applied. ( 808 CMR 1.02; OMB Circular A-122 )
3 recommendations
- The Commonwealth should recover from NCYF the $148,098 in state contract revenues used for severance compensation.agency: disagreed
- NCYF should establish a severance policy consistent with state and federal regulations if it wants to make severance payments available.agency: disagreed
- NCYF should amend its UFRs to properly account for nonreimbursable severance expenses.
Agency response & Auditor reply
Agency: "Each was negotiated individually, and each reflected the reasonable judgment of the Board of Directors of the Center, based upon legal advice, as to whether and in what amount, a severance payment should be made."
Auditor: "However, even if this was in fact the process that was followed in the awarding of these severance payments, this process is not consistent with applicable state and federal requirements."
Why it matters: NCYF could not show that all consultant payments were allowable, supported, or free from conflicts with employee status.
Standard: 808 CMR 1.05 and OMB Circular A-122 prohibit undocumented expenses and certain consultant costs. ( 808 CMR 1.05(22) )
2 recommendations
- The Commonwealth should recover $53,950 in state contract revenues expended on consultant services.agency: disagreed
- NCYF should prepare contracts for all consultant services, obtain adequate supporting documentation, and award consultant contracts in accordance with OSD regulations and federal guidelines.agency: disagreed
Agency response & Auditor reply
Agency: "There is no regulatory requirement that a consultant contract be in writing or that a bill have a particular level of detail."
Auditor: "Contrary to NCYF’s response, state and federal regulations require human services providers to adequately document all costs that they allocate to state contracts and federal awards."
Why it matters: NCYF had to pay medical, wage, and settlement costs that insurance should have covered, and charged some costs to state programs.
Standard: Chapter 152, Section 25A of the Massachusetts General Laws requires employers to maintain workers’ compensation insurance; 808 CMR 1.05 and OMB Circular A-122 make unreasonable or insurable losses nonreimbursable. ( Chapter 152, Section 25A, of the Massachusetts General Laws; OMB Circular A-122, Attachment B, Section 22(a)(3) )
2 recommendations
- The Commonwealth should recover from NCYF the $7,073 in state program funding used to settle this employee matter.agency: disagreed
- NCYF should ensure that it maintains necessary insurance coverage in all areas of operations.
Agency response & Auditor reply
Agency: "In this case, $7,073 was reasonably paid by the Center and is thus a reimbursable cost."
Auditor: "We do not agree that the medical expenses in question represent reasonable and therefore reimbursable costs under NCYF’s state contracts."
Why it matters: NCYF’s UFRs misstated costs and may have affected the amount of surplus revenue owed to the Commonwealth.
Standard: Generally accepted accounting principles require expenses to be recognized in the period in which they were incurred. ( Generally accepted accounting principles; 808 CMR 1.03(7) )
3 recommendations
- NCYF should amend its fiscal years 2007 and 2008 UFRs to properly account for the pension contribution.agency: agreed
- OSD should recalculate NCYF’s allowable surplus revenue retention for fiscal years 2007 and 2008 and require remission of excess funds.
- NCYF should establish annual contribution guidelines, including contribution limits, and record contributions according to GAAP.
Agency response & Auditor reply
Agency: "The Center acknowledges that its retirement plan contribution in the amount of $260,000 should have been recorded as a cost in the Center’s fiscal year 2008 UFR rather than in the Center’s fiscal year 2007 UFR."
Auditor: "NCYF’s decision to re-file its fiscal years 2007 and 2008 UFRs will ensure that its $260,000 employee retirement plan contribution is accounted for properly, and that any excess surplus funds that NCYF realized from its fiscal year 2007 state contracts are remitted to the Commonwealth in accordance with 808 CMR 1.03(7)."
Verified dollar findings
Money paid out that the audit found should not have been - overpayments, unallowable and nonreimbursable charges, improper claims.
Identified dollar findings that do not fall in a named band.