State Auditors of Public Accounts is faulting the Department of Social Services for entering into three vendor contracts, totaling $54.7 million, without going out for competitive bids.
“We are not saying to the agency, ‘You broke the law.’ But for the public and the amount of tax dollars expended, we believe you should go out to competitive bid and get competitive quotes so you can get the best deal for the taxpayer,” said state Auditor Kevin Johnston.
The auditors said DSS followed the letter of the law, but not the spirit.
OPM Signoff
“[DSS] did go through the legal process and received a waiver of the bidding process,” he said. “And [the Office of Policy and Management] did approve it. OPM doesn’t reject waiver requests very often. … But [DSS] has expanded the contracts for years and years, and we think it can do a better job and can get a better result.”
One of those contracts, began in 1999 for $57,100 and eventually grew to $11.2 million, a 20,000 percent increase, following 11 amendments. DSS extended the duration of the contract by nearly eight years, to July 30.
Another contract that cost $11.3 million more than doubled to $22.8 million because the agency amended it numerous times, again without going out to bid, the audit report found.
A third contract, also entered into without competitive procurement, totaled $20.6 million.
Even if the DSS did not go out to a sealed bid process, competitive negotiations would have been a way to “keep the companies honest and would have required the agency to negotiate the best deal,” Johnston said.
“At least one or more of these contracts are replacements,” he said, adding, “So I guess, there are probably other companies that could provide this.”
Notably, the agency is now in the process of obtaining competitive bids for two of the three contracts, which Johnston says supports the report’s finding that more than one vendor was available to provide the particular services for the agency.
The DSS does not agree with Johnston or the auditors’ findings.
“Although the DSS is keenly aware of the benefits to a competitive bidding process, there are times when the benefits of such a process may be outweighed by various factors that make it more programmatically advantageous or cost effective to forego that procurement method,” the agency responded. “The legitimate use of these other [procurement] methods, absent any evidence of fraud or other improper actions by the agency, should not result in an audit citation.”
The auditors identified 19 items in their report where the Department of Social Services could possibly have saved money and improved upon its management of the more than $4 billion it spends annually. The DSS is the state’s largest budgeted state agency.
Notably, 13 of the 19 items are repeat recommendations from a previous audit.
Lost Money
In another citation, the auditors found that DSS failed to claim indirect administrative costs for 19 federal programs it administered, resulting in a loss of revenue to the state.
For example, DSS was unable to collect $281,458 under the Medicaid program because it failed to file a claim within the two-year time limit to make such a claim.
The DSS disagrees, and maintains that since DSS staff did not work on 18 of the 19 federal programs identified in the audit, the agency was not eligible to claim indirect costs.
Monitor Vendors
In another audit finding, the auditors found that DSS failed to closely monitor its vendors’ activities. In one case, the DSS was not aware that a housing services’ contractor was transferring agency funds into an interest-bearing account. Although the vendor transferred back the funds, including interest, to the state, the auditor said that the additional funds should be used by the state to provide additional housing services.
In another case, the auditors found that the DSS rental assistant program contractor was not in compliance with state requirements. A sample of the department’s on-site inspections of 10 tenant files identified noncompliance in all of its reviews.
The DSS agreed with this finding.
Poor Records
Also, the audit found that the DSS did not provide documentation to substantiate the deletion of $3.6 million in agency equipment from its inventory. This is a repeat finding, and DSS agreed with the finding.
The agency said it is making changes to the way it keeps its records to improve its inventory data system.
In another unrelated finding, the auditors found that DSS sometimes paid for the medical transportation for individuals who didn’t really need it — they had died.
“DSS is not catching up with the fact that the clients died, and they are sending the checks to an address where somebody knows they are dead,” Johnston said. “There is no attempt to recover the money.”
As a result, improper payments of $4,572 were made to transport people following their death, the audit report found.
DSS explained that sometimes the agency is not notified about a client’s death until significantly later.
