Seven Hills Family Services, Inc. Administration of Limited Unit Rate Service Agreements

The State Auditor was reviewing DDS human-service contracting to see whether public money was being used properly, transparently, and 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.”

The audit says DDS was not properly managing these contracts, and that some contractors got year-end money for purposes that did not match what the funds were supposed to cover.

“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.”

For taxpayers and families who rely on state disability services, the issue is whether money meant for client services was properly approved, documented, and spent.

“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.”

The auditors found problems across the full amount they tested: retroactive approvals, weak paperwork, purchases that were not services, and payments that should have gone through other contracts.

“The unduplicated amount of questioned funding is $1,752,292.”

The audit says oversight agencies should review the issues, and Seven Hills should improve controls so LUSA services are properly done, documented, billed, and tracked.

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

The report is significant because the auditors said the paperwork gaps were so broad that they could not reasonably estimate how much of the payment may have been excessive.

“Because these deficiencies were so extensive, it was not possible to perform the analysis and testing required to reasonably estimate the extent to which the compensation DDS provided to SHFS was excessive.”

A LUSA was a DDS contract tool for buying limited, as-needed services from an approved provider when a client was 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.”