Purpose

To determine the extent of implementation of the three recommendations included in our initial audit report, Drug and Alcohol Treatment Program: Provider Claiming of Depreciation Expense (Report 2015-S-84).

Background

The New York State Office of Alcoholism and Substance Abuse Services (OASAS) oversees the nation’s largest and most diverse addiction treatment system. Its mission is to provide accessible, cost-effective, quality services that strengthen communities, schools, and families through alcohol and drug prevention and treatment and to meet clients’ individual needs through specialized services. OASAS enters into agreements with providers for delivery of specific alcohol- and drug-related services. OASAS reimburses the providers for the net costs they incur to provide the services for each contracted program, up to the maximum budgeted amount. The costs are reported via an annual Consolidated Fiscal Report (CFR), which is commonly used by several State agencies to monitor and oversee service providers’ financial activity. According to the Consolidated Fiscal and Reporting Manual (Manual), OASAS providers are not allowed to budget for or claim any type of depreciation expense for reimbursement. OASAS’ oversight responsibility includes ensuring provider compliance with the Manual when submitting reimbursement claims.

Our initial audit report found that OASAS was not effectively monitoring Drug and Alcohol Treatment program contracts to ensure provider claims did not include State reimbursement for depreciation expenses. We found providers inappropriately claimed $2,675,045 in depreciation expenses between January 1, 2010 and June 30, 2014, of which $2,220,807 was funded by OASAS and $454,238 could potentially have been used for inappropriate increases to providers’ future program budgets. We also identified opportunities for improved monitoring controls to ensure provider claims do not include depreciation expenses.

Key Finding

We found that OASAS has implemented all three recommendations contained in our original audit report.