January 6, 2009
DiNapoli: $1 Million in Fraud and Bid Rigging at
Central New York DDSO
Excessive Prices Paid for Repairs on Group Homes
New York State Comptroller Thomas P. DiNapoli today announced that his auditors identified more than $1 million in purchases made through improper collusion with vendors and bid rigging at the Central New York Developmental Disabilities Services Office (DDSO). DiNapoli referred the findings of the audit to the Oneida County District Attorney Scott D. McNamara.
Auditors found that physical plant staff colluded with at least nine favored vendors, some of whom were family and friends of staff, who would submit fake bids for sham entities, and even legitimate companies, to receive state business. In some cases, the state paid at least 40 percent more for work done at group homes than it should have. The physical plant supervisor appears to have personally benefited from the misuse of state funds.
“This is at minimum a flagrant disregard for the law,” DiNapoli said. “These employees are supposed to protect taxpayers, not make up phony bids as part of some bid rigging scheme to funnel a million taxpayer dollars to favored vendors. And they were so blatant they didn’t even try to cover their tracks. Any misuse of public dollars is unacceptable, but it’s particularly offensive when those funds are intended to repair group homes for disabled New Yorkers. My office will continue to work with District Attorney McNamara to ensure that those who acted inappropriately are held accountable.”
During two prior audits of the Central NY DDSO, released in 2007, questionable information arose regarding the practices of the physical plant staff. That led auditors to start the audit released today. In one of those prior audits, auditors found that the Central NY DDSO had hired dozens of relatives of employees to provide repair and other respite care services totaling $253,000. The other audit found problems with overtime hours worked by staff.
In January 2008, auditors began examining the purchasing practices at the physical plant from July 2003 through June 2008. Staff are responsible for hiring vendors to maintain and repair 197 group homes. Before any bids were sought for work, staff would predetermine which vendor would win the state’s work and at what price. Staff colluded with the vendor to submit fake bids to rig the bidding process. One employee even admitted creating fake losing bids on his home computer. In some cases, false bids were fraudulently submitted on the letterhead of other vendors.
Auditors found documentation showing the scheme went back as far as 2003. One vendor admitted that he had been participating in the scheme since the late 1990s.
State law requires that agencies provide evidence that all vendors are given a fair opportunity to provide the needed service and that a reasonable price is paid for the service. The law also requires agencies to maintain a detailed record with supporting documentation of all decisions made during the procurement process.
Among other findings in the audit:
Auditors made a dozen recommendations to improve operations and purchasing practices at the Central NY DDSO. Auditors and investigators from the Comptroller’s office are cooperating with the Oneida District Attorney’s ongoing investigation.
DiNapoli urges state employees, businesses and members of the community who suspect fraud at any level of government to call his toll-free fraud hotline at 1-888-OSC-4555 (1-888-672-4555). Anonymous e-mails can be sent to email@example.com and complaints can be filed online at www.osc.state.ny.us/investigations.
The Office of Mental Retardation and Developmental Disabilities, which oversees the Central NY DDSO, has taken steps to address the issues identified in the audit and tighten internal controls. It also has ceased doing business with all but two of the vendors. See the audit for the agency’s full response.
The Central NY DDSO oversees 197 community-based group homes, 306 family care homes and 23 other program sites that provide care for about 4,000 individuals in Cayuga, Cortland, Herkimer, Lewis, Madison, Oneida, Onondaga and Oswego counties.
Click here for a copy of the audit.