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We need to take a larger view on monitoring human services vendors

Alleged state credit card misuse and other financial irregularities at the Life Focus Center of Charlestown are the latest in a series of mini-scandals involving human service contractors to the Department of Developmental Services and other state agencies.

A few months ago, we learned of  financial improprieties at the Merrimack Special Education Collaborative.  Also during the past year, we heard about  the Northeast Center for Youth and Families.  And then there was Adlife Healthcare and the Greater Lawrence Community Action Council

The problem is that  in uncovering all of these mini-scandals, the state’s auditing agencies and the media seem to be focusing on the trees and overlooking the larger problem of the forest.  The approach has been decidedly piecemeal — the steady release of individual audits of individual vendors, with the details of the previous audit forgotten as soon as the next one is issued. 

As we’ve maintained many times, the state has a serious problem in monitoring its $2.6 billion human services contracting system.  A more systematic approach to dealing with it is needed than we’ve seen so far.  While state legislators appear to be interested in  cracking down on welfare recipients who use electronic benefit or EBT cards, there seems to be no such impetus to examine the widespread potential for corruption by human services contractors.

To be fair, two state lawmakers, Reps. Kevin Kuros and Sheila Harrington, last year called for legislative hearings following the Merrimack Collaborative and Greater Lawrence Community Action Council audits.  This, however, led The Nonprofit Quarterly’s investigative writer Rick Cohen to suggest that there needs to be a wider investigation:

into why the Commonwealth of Massachusetts is so deficient in its oversight of state-subsidized nonprofits that years of dysfunction and misspending could go unnoticed.

Do you suppose these hearings have yet been scheduled, by the way?  The answer would be no, according to an aide to Harrington.

State Auditor Suzanne Bump last September asked for legislation that would give her agency authority to subpoena records of nonprofits that contract with the state.  But it isn’t clear whether Bump or Attorney General Martha Coakley, whose office is investigating the Adlife Healthcare case, are taking as broad a view of the nonprofit monitoring problem as we think they should.

The Life Focus of Charlestown audit by Bump’s office illustrates problems that crop up over and over again in the vendor system.  In her March 7 report on the company, Bump stated that the audit identified $129,982 in unallowable expenses related to state-funded contracts and $1.1 million in undocumented employee compensation expenses.

Among the specific problems alleged in the audit:

  • For 114 days in which Life Focus billed DDS $239,969, there were no block schedules or other records to substantiate these billings. 
  • During fiscal years 2009 and 2010, the company’s executive director and deputy director charged 1,291 expenses totaling $123,173 against the company’s corporate credit cards.  A total of $28,436 in credit card expenses were questionable in that they were either inadequately documented or did not appear to be directly related to program activities.
  • Hundreds of thousands of dollars were spent on consulting services done by family members of company staff without competitive bidding or signed contracts.

Interestingly, a defense used by Life Focus to the audit findings was that none of these alleged problems was identified in a previous DDS licensure survey of the company.  In fact, an October 21, 2010 DDS licensure report for the Life Focus Center  called the Center “a viable and thriving community resource,”  and cited the organization for only minor problems in its operations.

However, in our view, that clean bill of health that the DDS license staff gave Life Focus may say more about the inability of the state to monitor its vendors adequately than it does about this particular company.   Moreover, it was apparently only after Bump’s audit was released that DDS started to crack down on the vendor. 

The Boston Herald reported  that DDS Commissioner Elin Howe sent a March 27 letter to the Life Focus Center’s Board of Directors, expressing “significant concerns” about Bump’s audit findings and the reportedly continuing unchecked use by John Millerick, the executive director, of the company credit card.  This is apparently the second letter Howe has written to the Board in the wake of the audit.

Howe and DDS have yet to show much concern over the larger problem of oversight of all of the department’s vendors. 

Meanwhile, while Life Focus’s Board chairman resigned in the wake of Bump’s audit, The Herald also reported that the company had hired Rasky Baerlein Strategic Communications, a PR firm, to protect the company’s image.  Whether the state pays for that cost or not, it’s money that will not be going toward direct care services.

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