Purpose

The objective of our examination was to determine whether OMH properly reimbursed PSCH according to the terms and conditions of the contract. We examined $1.6 million in expenses that PSCH claimed on the Consolidated Fiscal Report (CFR) for the period July 1, 2012 through June 30, 2013.

Background

OMH entered into a contract with PSCH to provide services and housing to persons with mental disabilities and substance abuse. Contract C007377 is a net deficit-funded contract. As such, OMH reimburses PSCH the difference between the revenues PSCH collects from non-OMH sources and its expenditures up to the amount of the contract. For the year ended June 30, 2013, PSCH reported approximately $9.7 in revenues and $17.5 million in program-related expenditures. As a result, OMH reimbursed PSCH the full contract amount of almost $6.8 million, leaving approximately $1 million in unfunded expenditures.

Key Findings

We examined $1.6 million in expenses that PSCH claimed on the CFR and found that $152,680 (10 percent) in costs did not comply with the terms and conditions of the contract. These include:

• PSCH’s Board of Directors and executive staff attended a two-day conference which encompassed board meetings and staff training at the Montauk Yacht Club Resort & Marina. For this event, PSCH claimed $31,908 (more than half the total $62,858 spent on the two-day conference), as administrative expenses, including $10,723 for alcohol, $5,064 for guests that were not Board members or executive staff, $13,378 for rooms and meals after the conference ended, $2,743 for a sunset cruise, tips and candles given as gifts.
• PSCH claimed $22,901 for costs related to the entertainment of its employees at a staff picnic which is a non-allowable expenses under OMH guidelines.
• $97,871 for expenses that were not actual, reasonable and necessary in the provision of contract services. These include 64,730 in expenses that were paid twice, $20,834 in expenses that occurred in a prior year, $8,568 in expenses which were charged incorrectly, $1,355 in expenses that should have been charged to other PSCH contracts and $2,384 for travel expenses for consultants that could not be substantiated by supporting documentation.

Key Recommendations

• Ensure PSCH properly modifies its 2012-2013 CFR for the $152,680 in findings identified in this report.
• Ensure PSCH staff charge expenses in accordance with the Consolidated Fiscal Reporting and Claiming Manual.
• Ensure PSCH staff receive the training necessary to recognize costs not allowed by Appendix X of the Consolidated Fiscal Reporting and Claiming Manual (e.g. alcohol, entertainment expenses).
• Ensure PSCH staff receive the training necessary to ensure that expenses are necessary and reasonable, expenses are charged to the correct programs, and appropriate supporting documentation is maintained.
• Review all expenses claimed over the life of the contract to determine if they are allowed by Appendix X of the Consolidated Fiscal Reporting and Claiming Manual. Ensure PSCH properly accounts for expenses. OMH should recover any overpayments.