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The Globe gets it right on nonprofit contractors
An editorial in today’s Boston Globe begins to get at an expensive and pervasive state problem — the relative lack of oversight of the state’s nonprofit human services contracting system.
The editorial calls for more power to the State Auditor and Inspector General to investigate financial practices in this system. It refers specifically to recent allegations by State Auditor Suzanne Bump and Inspector General Gregory Sullivan of financial abuses by the Merrimack Special Education Collaborative and a related nonprofit, the Merrimack Education Center. The nonprofit, the editorial notes, is subject to “far less scrutiny” than the public collaborative, and therefore has been able to “hide” millions of dollars in extra salaries, bonuses, and pensions, according to the Globe.
But the editorial expands its focus beyond just special education. Here’s the key statement in the editorial in this respect:
Massachusetts law is generous to private contractors who take state money, whether they are nonprofit or for-profit. While government agencies are subject to full financial scrubs, private subcontractors are largely outside the purview of the government’s watchdog officials, State Auditor Suzanne Bump and Inspector General Gregory Sullivan.
As much as we like to criticize government for its lack of transparency (and believe me, we’re having our problems with DDS right now in that regard), at least government agencies operate somewhat within the reach of watchdog agencies and within the public purview via the Public Records Law.
But nonprofit and for-profit contractors are largely exempt from the Public Records Law and their records are even beyond the reach of the Inspector General’s subpoena power, for instance. Nonprofits are required to file financial information with the state’s Operational Services Divsion and the Attorney General’s Public Charities Division. But, as we’ve pointed out, the information filed with those two entities doesn’t always match up. And the information available is quite limited.
Yet, it’s not as if these contractors are concerned solely with the private and for-profit sectors in which they like to be categorized. In Massachusetts, they receive billions in state and federal human services dollars every year. The Department of Developmental Services alone contracts with hundreds of such contractors to run thousands of group homes and day programs and provide other services.
We have called on Bump and Sullivan to expand their probe of the special education system to include the entire DDS contracting system. One of the things we’d like to see investigated is what we see as an expensive and risky lease program that DDS has entered into with private contractors to develop group homes around the state. There are numerous other opportunities out there for investigation as well.
This is where our money is going
Inspector General Gregory Sullivan has alleged numerous financial abuses in the state-funded Merrimack Special Education Collaborative, which coordinates special education programs among several school districts in Massachusetts.
Meanwhile, State Auditor Suzanne Bump is investigating whether the case is part of a larger pattern of abuse in the special education system in the state. And Sullivan’s findings are being reviewed by Attorney General Martha Coakley’s office.
While as many as three state agencies are now investigating this matter and potentially other special education contracts, it’s clear that state oversight of the special education system in Massachusetts has been lacking. The system has allowed one man, John Barranco, to allegedly fleece taxpayers of more than $10 million. The allegations include using a credit card for tens of thousands of dollars in personal items, gifts to a family member, and a no-show job to a lobbyst caught up in the Cognos software scandal involving former House Speaker Sal DiMasi.
We’ve just looked at the federal and state financial filings of the Merrimack Special Education Collaborative and related, nonprofit Merrimack Education Center, both of which Barranco allegedly controlled. These two organizations are clearly interrelated in a troubling way; and, as in the cases of some other contractors we’ve looked at, state and federal records don’t appear to match up with each other regarding the salaries of Barranco and other executives of the Special Education Collaborative and Education Center.
For instance, the federal IRS Form 990 for the Merrimack Education Center listed Barranco’s total compensation as $464,411 in FY 2009 and $525,198 in FY 2010.
However, the state Operational Services Division listed Barranco’s total compensation as $427,909 in FY 2009 and didn’t list any compensation for him in FY 2010 on its Uniform Financial Reports on the Merrimack Special Education Collaborative. (The OSD does not appear to have a UFR on file for the Education Center.) Is OSD unaware that Barranco apparently received more than a half million dollars in state-funded compensation in FY 2010?
According to the Globe, Barranco retired as executive director of the Special Education Collaborative in 2005 and appointed John Fletcher and Donna Goodell in 2007 as co-executive directors. Both Fletcher and Goodell were listed on OSD’s UFR for the Special Education Collaborative in FY 2009 as making over $200,000 each, and in FY 2010 as making about $150,000 each. In FY 2009, Barranco, despite his alleged retirement, was still listed on the UFR for the Collaborative as a third executive director.
The UFR and Form 990 reports raise numerous other questions about the financial accounting practices of both the Center and the Collaborative. For instance, although the OSD uses the UFR to disallow state funds for salaries of vendor executives in excess of $143,900, the 2009 UFR for the Collaborative indicates that no funds were disallowed for the Collaborative in 2009, even though five executives of the Collaborative — including Barranco, Goodell, and Fletcher — were listed as making over the threshold amount that year.
The FY 2009 and 2010 UFRs state that the Collaborative received $24.5 million from “Massachusetts local and quasi-governmental entities” (apparently the 10 member school districts in the Merrimack Valley) in FY 2009 and $15.9 million in FY 2010. In addition, the Collaborative received over $800,000 each year from the Department of Developmental Services.
Senate President Therese Murray has promised to introduce legislation to increase oversight of the special education collaboratives. But these collaboratives are only a part of the vast human services contracting industry in Massachusetts, and their alleged abuses are not unique to special education. The entire $2.6 billion vendor system needs better oversight.
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