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May 6, 2010

DiNapoli: Audits Identify Overpayments
to OASAS Contractors

Better Monitoring of Payments Will Save Millions

A chemical dependency contractor doing work on behalf of the Office of Alcoholism and Substance Abuse Services (OASAS) overcharged the agency by $11.5 million while two other contractors failed to prove they were entitled to $8.4 million in OASAS state contract payments, according to audits released today by State Comptroller Thomas DiNapoli.

“The state is facing multi-billion dollar deficits,” DiNapoli said. “OASAS needs to do a better job of monitoring its contractors and ensuring taxpayer money isn’t being wasted.”

OASAS has a six-year contract with Daytop Village Inc., ending June 30, 2010, to fund chemical dependency services for adolescents and adults. Under the contract, OASAS pays Daytop’s program-related expenses that exceed funds it gets from Medicaid, third party insurance companies and self-paying clients.

Through the end of 2009, OASAS paid Daytop, based in New York City, about $97 million under this contract.

DiNapoli’s auditors found that during the audit period of July 1, 2004 through June 30, 2008, OASAS paid Daytop at least $11.5 million more than it should have.

Daytop failed to collect $8.3 million in revenues it could have collected from third-parties and charged $2.7 million to OASAS it could have gotten from third-parties had it gotten prior approvals from insurance carriers or submitted claims in a timely manner. Daytop collected about $430,000 of program revenue, but failed to offset charges to OASAS and inappropriately billed another $76,000 for business lunches, consultants and vehicle leases.

A separate audit of Palladia Inc. and Queens Child Guidance Center found both contractors did not adequately document the funding they received from the state went toward state programs. Neither of the groups fully complied with their OASAS contract requirements, and Palladia also failed to comply with federal regulations.

For the year ending June 30, 2006, OASAS paid Palladia $8.03 million and the Guidance Center $346,223.

DiNapoli’s auditors found the contractors could not adequately support that the $8.4 million they were paid went to state contract-funded programs. For example, five of 14 Palladia employees indicated they worked on several programs, including non-state programs, even though their salaries were charged in full to a state contract.

DiNapoli’s office is asking OASAS to recover all state funds paid to these contractors unless the contractors can come up with documentation supporting the expenditures as being for state contracts.

OASAS officials generally agreed with the audits’ recommendations.

For a complete copy of the Daytop audit, go to:

For a complete copy of the Palladia and Queens Child Guidance Center audit, go to:


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