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January 14, 2008

DiNapoli: Springbrook NY, Inc. Steered State-funded
Contracts Through Fictitious Bids

New York State Comptroller Thomas P. DiNapoli today released an audit that found that Springbrook NY, Inc. submitted at least 60 fictitious bids for 36 projects in order to direct State Preservation Funds to specific vendors. Auditors and investigators uncovered the fraudulent bids during an unannounced audit of Springbrook. The audit was conducted at the request of the New York State Office of Mental Retardation and Developmental Disabilities (OMRDD). DiNapoli’s office has referred the audit findings to the Broome County District Attorney’s Office.

“Submitting false bids is not only against the law, it also undermines public confidence in the use of state funds,” DiNapoli said. “Springbrook management had a responsibility to ensure that its internal controls were working as intended. The lack of oversight opened the door for this fraud.”

“When it comes to conducting agency business, transparency is a top priority,” said OMRDD Commissioner Diana Jones Ritter. “And regularly reviewing internal controls is an essential aspect of our oversight role. I’m pleased we were able to bring this to the attention of the Comptroller’s office and successfully work with them to resolve this problem.”

The New York State OMRDD contracts with Springbrook to provide services to people with developmental disabilities. The State provides funds to maintain and preserve facilities used by the people they serve. Springbrook is a not-for-profit provider that obtains and awards funds on behalf of the Broome County and the Central New York Developmental Disabilities Services Offices.

From July 1, 2003 to June 18, 2007, Springbrook received funding totaling $512,513 for 67 Preservation Fund projects. Auditors reviewed files for all 67 projects and found 60 fictitious bids; 25 of which appeared to be created by either Springbrook’s facilities manager at that time or a member of his staff using vendor bid templates that auditors found on Springbrook computers. Audit findings indicate that this former facilities manager or his staff member may have created the remaining 35 fictitious bids as well. Springbrook’s chief financial officer did not periodically review the work of the former facilities manager, who had complete control over the bidding process and was able to create fictitious bids without detection. OSC auditors also discovered that the chief financial officer became aware of the existence of potential improprieties shortly after the termination of the facilities manager but did not try to determine the extent and magnitude of these improprieties and did not advise higher-level Springbrook officials of the situation.

OMRDD requires that all agencies using Preservation Funds provide evidence that vendors are given a fair opportunity to provide the needed goods and services and that a reasonable price is paid for the service. The audit examined Springbrook’s procurement practices and found:

  • Of the 36 projects that had fictitious bids, 17 were awarded to the same vendor totaling $80,389 and were all under the Broome Office’s jurisdiction. The other 19 projects were awarded to various other vendors totaling $155,316.
  • The vendor awarded 17 projects also owned 2 other companies that bid on Springbrook projects. Auditors found that 1 of these companies bid on 15 of the 17 projects, which effectively resulted in this vendor bidding against itself.
  • Six fictitious bid documents created for one vendor used the same bid estimate amount and five of the six (totaling $28,704) came from the fax number of the winning bidder.
Among other actions, DiNapoli recommended that Springbrook and its Board of Directors develop and implement adequate internal controls regarding the selection of vendors for Preservation Fund projects. He also recommended that Springbrook:
  • Determine any necessary actions that should be taken with respect to the Chief Financial Officer based on lack of oversight of the bidding activities of the former facilities manager.
  • Award contracts only after soliciting proposals from legitimate prospective vendors.
  • Distribute the procurement policy to all pertinent staff and conduct training to ensure the policy is fully understood.
  • Assess the integrity of all vendors identified as having conducted unscrupulous procurement activities and determine the appropriateness of commencing or continuing any contract arrangements with them.

DiNapoli noted that OMRDD and Springbrook officials agree with the audit’s findings and recommendations, and have already taken actions to implement them. The audit found no bidding infractions prior to the hire of the former Manager of Facilities or subsequent to his termination. A full written response from both entities is included in the audit.

Click here for a copy of the audit.


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