The objective of our examination was to determine whether the travel expenses claimed for reimbursement by Pitts Management Associates, Inc. (PMA) were incurred for business purposes and were reasonable in price.
Under its contracts with SUNY Downstate Medical Center (Downstate), PMA provided organizational restructuring and consulting services to Downstate. On a monthly basis, PMA was reimbursed for professional fees and the consultants’ travel-related expenses. The initial contract, which was approved by the Office of the State Comptroller, required PMA to use reasonable efforts to minimize expenses. It also limited the expenses to the guidelines outlined in the PMA Staff and Subcontract Associate Employees Handbook 2012 (PMA Handbook).
When the contract was extended, the language limiting expenses as outlined in the PMA Handbook were eliminated. Instead, expenses were reimbursable on the basis of PMA’s actual cost. However, the contract extension, which was not approved by the Office of the State Comptroller, still required PMA to use reasonable efforts to minimize expenses.
We found not all the travel expenses claimed for reimbursement by PMA and approved for payment by Downstate were incurred for business purposes or were reasonable in price. We also found that PMA did not make a reasonable effort to minimize expenses. We questioned $83,156 in expenses for which Downstate staff could not adequately demonstrate the business purpose and/or price reasonableness.
We also have serious concerns about the internal controls with regard to monitoring this contract and whether the actions of Downstate’s President exacerbated a poor control environment that appeared to exist within the Finance Department. Moreover, on several occasions, Downstate staff deferred to PMA when asked to justify the business purpose and price reasonableness of questionable PMA expenses. By accepting PMA’s justifications as to what was appropriate without making an independent judgement, Downstate relinquished its responsibility to properly monitor payments to PMA.
We also found that Downstate’s President attended a six-day birthday celebration in Bermuda for PMA’s Chairman/Chief Executive Officer. In addition, the Executive Vice President/Chief Operating Officer and the Assistant Vice President/Chief Nursing Officer accepted one and two meals, respectively, from PMA. In each instance PMA executives submitted, and Downstate approved, reimbursement for those meals. We are referring these issues to the NYS Joint Commission on Public Ethics for its review.
- Review the actions of the President of Downstate Medical Center and take action, as appropriate, to ensure time cards are submitted timely and appropriately certified and all expenses claimed for reimbursement are business related.
- Ensure the President of Downstate Medical Center provides appropriate oversight of all operations and sets an ethical standard that fosters a positive control environment.
- Ensure Downstate develops a policy for consulting contracts that includes reimbursement for meals, transportation, lodging and miscellaneous expenses that conforms to the U.S. General Services Administration Reimbursement Rates and/or the New York State Travel Manual.
- Ensure Downstate establishes and promotes a control environment that supports internal controls, including appropriate separation of duties and compliance with the Public Officers Law.
- SUNY System Administration’s Internal Auditor should perform an independent examination of all travel-related expenses PMA charged and Downstate approved. As part of this examination, auditors should review the reasonableness of the charges and recover as appropriate.
- Recover $41,512 in miscellaneous expenses including $32,500 for software license fees and $9,012 for legal fees
Division of Contracts and Expenditures
Holly Reilly, Director of State Expenditures
Phone: (518) 474-4868; Email: [email protected]
Address: Office of the State Comptroller; Division of Contracts and Expenditures; 110 State Street, 10th Floor; Albany, NY 12236