(Cross-posted from the COFAR Blog)
The state improperly reimbursed the May Institute, a corporate provider to the Department of Developmental Services, for hundreds of thousands of dollars paid to company executives in excess of a regulatory cap on their salaries, according to the state auditor.
The auditor’s findings confirm concerns we raised in April and May 2011 that the state may have paid Walter Christian, the CEO, and other executives of the May Institute more than the state’s approximately $143,000 regulatory limit on individual executive salaries.
The auditor also found that Christian was improperly paid roughly $140,000 for a home health aide for his wife, day care fees for a grandson, the use of a minivan in Georgia, and a separate vehicle that he used when visiting Massachusetts. Christian, who retired in January, had been living in Georgia for a decade while running the Massachusetts-based company, according to the audit report.
Our blog posts in 2011 specifically noted that the May Institute appeared to be under-reporting Christian’s and other executive salaries as well as the number of people receiving those salaries, on Uniform Financial Reports (UFRs) submitted to the state Operational Services Division.
The two posts also noted that the same under-reporting of salaries appeared to be the case with Vinfen and Seven Hills, two other DDS providers. The state auditor focused solely on the May Institute, however.
The state auditor’s report noted that a state regulation capped state reimbursements to providers for salaries and other compensation paid to their executives at $143,986 in FY 2010 and $149,025 in FY 2011. Providers can pay their executives more than those amounts in salaries and other compensation, but the state is permitted to reimburse the providers only up to the threshold amount in a given year. The state attempts to keep track of those payments via the UFR’s, which the providers are required to submit to the Operational Services Division on a yearly basis.
We noted in our April 2011 post that the May Institute’s UFR listed only Christian and one other executive as making over the state salary threshold in 2009. Yet, a federal tax form, which was filed by the May Institute with the IRS for the same fiscal year, listed 13 individuals in the company as making over $150,000 each.
An OSD official maintained at the time that the state agency allows the state to pay costs in excess of the salary limit for clinicians working for providers. However, COFAR’s May 2011 post noted that all 13 May Institute employees who made over $150,000 were not listed on the IRS form as clinicians, but as executive-level employees, starting at senior vice presidents on up to the president and CEO.
In its report, the state auditor also found that several May Institute employees who were paid over the threshold amounts were managers and not clinicians.
We think this report by the state auditor lends strong support to our call for a comprehensive, independent study of outsourcing of care by DDS. The auditor’s findings also support the need for more funding for state-operated group homes for the developmentally disabled as an alternative to provider-operated residences.
But as I noted in a previous post, House leaders last month rejected budget amendments that would have both authorized a study of the DDS system and restored cuts made by the House Ways & Means Committee in the governor’s budget for state-operated residences. There is one more chance for these amendments coming up in the Senate, of course.
We applaud the state auditor for examining the May Institute’s payments to its executives. We hope, though, that Auditor Suzanne Bump expands her review to include additional providers in the wake of our concern that this is a potentially wider problem than just one company.
Overpaying out-of-state CEOs, denying grade school children lunches because the for-profit vendor had their accounts as delinquent. Gotta love those privatization advocates reasoning.
It does seem it might be the tip of the iceberg and I’ll keep my fingers cross that the auditor won’t stop at one.
It also seems like the perfect example of why COFAR has been begging for an independent study.
Even if somebody in DDS signed off, the Comptroller’s office should not have paid out beyond the cap. When an agency with a contract sends bills, even though the remittance may be a single amount, the money comes from different ‘pockets’ – Salary Acct. 102, Supplies Acct. 360, etc. There are caps on may types of reimbursement.
So setting aside billing more than entitled in a category – why were the checks cut?
but the Operational Services Division, which is located within the Executive Office of Adm and Finance. OSD relies on the providers to report their expenses on complex reports called UFRs.
In this case, the May Institute appears to have failed to list the total number of executives earning over the threshold amount on its 2010 and 2011 UFRs. As a result, the $143,000 threshold was not applied to those executives, and the state reimbursed the May Institute for paying their full salaries.
Our suspicions that this had happened were raised when we looked at the 2009 UFR for the May Institute and saw the $143,000 threshold was applied only to two executives listed on the report. When we looked at the company’s nonprofit federal tax filing for the same year, we saw there were 13 executives listed on that report as making over the threshold. The state auditor apparently had access to a lot more information on this and confirmed that the threshold had not been applied to at least some of those executives on the 2010 and 2011 UFRs.
Anyway, the bottom line is that the state signed off on payments beyond the cap because the OSD was apparently not aware it was being overcharged. My guess is the OSD is very understaffed and is unable to scrutinize the UFRs in a timely or thorough way.