Audit Finds Questionable Use of State Funds at BCArc
BOSTON — An audit released by the Office of State Auditor Suzanne M. Bump on Monday showed questionable use of state funding at the Berkshire County Arc Inc. (BCArc), a nonprofit organization located in Pittsfield.
"The questionable practices and the amounts involved in this apparent misuse of state funding is made worse by the fact that these dollars should have been supporting the agency's disabled clients," Bump said. "Our audit makes clear that those in leadership fell short of meeting their oversight and fiduciary responsibilities. Decisive action is needed to remedy this situation and build trust in this critical Berkshires institution upon which so many families and individuals rely."
BC Arc serves children and adults with intellectual and developmental disabilities and individuals who need assistance with daily living.
The audit identified $777,844 in improper spending by the human service provider, including expenses made on 48 credit cards that were unallowable under state regulations. The audit, which examined the period of July 1, 2017, through June 30, 2019, notes that some of the inappropriate spending came at the direction of those in management positions at the organization.
The audit found BC Arc charged $651,540 in unallowable expenses against its state contracts for maintenance expenses, bookkeeping, and capital improvements made to buildings owned by an affiliated organization called Berkshire Omega.
Berkshire Omega operates exclusively for the benefit of BC Arc, and its board of directors has five members who were appointed by BC Arc's board. Under state regulations, this type of spending is unallowable because the costs are non-program related and do not directly benefit the nonprofit's clients.
Additionally, BC Arc employees used organization credit cards to pay for $124,247 in expenses that were non-reimbursable under its state contracts because they were either not related to the nonprofit's programs, were specifically prohibited by state regulations, or were inadequately documented.
The audit found BC Arc's president and chief executive officer used credit card reward travel miles earned by BC Arc for his personal use which is inconsistent with state regulations and the organization's own policy. Auditors also determined, the president and CEO's spouse, who was working as a consultant to BC Arc, used or benefited from the organization's credit cards for $2,057 in trips, meals and gifts for a BC Arc conference.
Further, the audit notes, BC Arc charged its client funds accounts $43,192 in credit card purchases for which it did not have the required documentation.
To address these issues, the audit recommends BC Arc's board and those in management establish monitoring procedures to hold employees accountable for spending and a system of oversight for credit card use to ensure spending is appropriate and documented.
In its response, BCArc stated that its board of directors has made some revisions to the credit card use policy. The audit also recommends the organization end the practice of using state funds to pay for Berkshire Omega's capital improvements and to work with the state on all unallowable costs that should be repaid.
In fiscal year 2019, BC Arc received over $25 million in funding from state agencies including the Department of Developmental Services, the Rehabilitation Commission, and the Commission for the Blind.
Audit Report: Berkshire County Arc Inc by iBerkshires.com on Scribd
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