Objective

To determine whether the Office of Mental Health (OMH) ensures that the costs reported by providers such as Independent Living, Inc. (ILI) on their Consolidated Fiscal Reports (CFRs) are allowable, properly calculated, and adequately documented in accordance with Consolidated Fiscal Reporting and Claiming  Manual (CFR Manual) requirements. The audit covered the information reported on ILI’s CFR for the period January 1, 2018 through December 31, 2018.

Background

OMH regulates, certifies, and oversees more than 4,500 programs that are operated by local governments and not-for-profit providers (providers) that assist New Yorkers with their mental health needs. OMH provides funding for these programs to counties, which then contract with the providers who offer the actual programs. In certain cases, OMH also contracts directly with providers. The expenditure of these funds is governed by the Aid to Localities Spending Plan Allocation Guidelines (Guidelines), which allow for fiscal policy controls such as desk and field audits. Annually, providers are required to complete and submit to OMH a CFR that reports revenues, expenditures, and other key data by program. According to the Guidelines, OMH may perform desk reviews and field audits, as needed, including reviewing costs reported on the CFR for compliance with appendices of the CFR Manual. ILI is a not-for-profit provider serving Dutchess, Orange, Rockland, Sullivan, and Ulster Counties. On its CFR for the year ended December 31, 2018, ILI reported approximately $2.9 million in expenses associated with the 12 OMH programs it operated.

Key Findings

• OMH takes certain steps to ensure costs and other information reported by providers on their CFRs is accurate, documented, properly calculated, and allowable according to the CFR Manual. These steps include performing desk reviews that incorporate computer-assisted auditing techniques to identify areas for further review by an analyst. However, OMH generally does not perform detailed audits or field reviews of providers’ CFR information.  
• OMH officials noted they do not depend on information contained in the CFRs to make decisions on funding allocations to providers like ILI. Therefore, the impact of incorrect or overstated costs on providers’ funding is somewhat reduced. Still, OMH does use the CFR data for informational and analytical purposes and there is a risk that conclusions drawn from any inaccurate data may not be as useful as they otherwise could be.

Key Recommendation

Evaluate the potential for conducting field audits, on a risk basis, to more fully assess provider compliance with CFR Manual requirements for reporting, calculating, and documenting allowable costs on their CFRs.