Fiscal Oversight and Monitoring of AIDS Institute Service Provider Contracts

Issued Date
May 22, 2017
Health, Department of


To determine if the Department of Health’s AIDS Institute (Institute) has provided effective oversight of its service provider contracts to ensure claimed expenses are program appropriate and consistent with contract requirements. Our audit covered the period April 1, 2014 through February 6, 2017.


The Institute’s stated mission is to protect and promote the health of New York State’s diverse population through disease surveillance and the provision of quality prevention, health care, and support services for those impacted by HIV/AIDS, sexually transmitted diseases, viral hepatitis, and related health concerns. In addition, the Institute promotes the health of LGBT populations and substance users and the sexual health of all New Yorkers. The Institute executes approximately 700 State and federal contracts annually and processes voucher payments to those contractors. The Institute has developed guidelines, materials, and strategies for not-for-profit agencies to strengthen financial management and internal control structures, and oversees a management review program that assists grantees to ensure solvency and effective operations.

In September 2014, the Comptroller’s Bureau of State Expenditures issued a report detailing problems found with payment claims submitted by one Institute contractor (the Long Island Association for AIDS Care, or LIAAC). Of about $2.3 million that the Institute paid to LIAAC during the year ended June 30, 2012, the examination identified over $178,000 of inappropriate and questionable expenses. In response to the report, officials acknowledged that the Institute’s risk assessment process had focused on identifying agencies in poor fiscal health, and that a broader look at other characteristics and areas of risk was needed. The Institute agreed to recover the inappropriate payments and develop new control activities.

From April 1, 2014 through May 9, 2016, the Institute managed 872 contracts totaling more than $225 million. These contracts provide a range of services including syringe exchange, intervention, counseling and testing, and housing.

Key Findings

  • The Institute has taken several steps to update its procedures to address problems with contractor cost claims that were identified prior to this audit. However, the Institute needs to further improve its internal controls to provide effective oversight and monitoring, and thereby ensure that claimed contractor expenses are program appropriate and consistent with contract requirements.
  • The Institute continues to place significant reliance on its budget approval and monitoring process, whereby controls ensure budgeted cost categories are allowable and actual costs do not exceed budget line item amounts. However, the Institute does not require detailed listings of costs or other supporting documentation to accompany voucher submissions. As such, the Institute has insufficient assurance that all claims for reimbursement are appropriate.
  • Although Institute personnel conduct periodic fiscal monitoring reviews, the Institute did not meet its formal goal to examine each contractor at least once every two years in at least one-third of the cases we reviewed. For 152 contractors, we compared the time that elapsed between the last two reviews and found that, for 58 (38 percent), the time frame exceeded the two-year requirement by at least 30 days. Of these 58 contract reviews, 27 were more than 60 days late. Most importantly, its practice of reviewing only one monthly voucher claim for every two-year period provided very limited assurance that contractors: routinely claimed only allowable expenses; maintained appropriate documentation to substantiate voucher claims; and properly allocated expenses across multiple funding sources.
  • The Institute’s practice of providing contractors with advance notice of the month to be reviewed, along with details of the specific costs to be examined, gave contractors considerable opportunity to fabricate supporting documentation for such costs. In addition, the Institute’s practices provided contractors with opportunity to manipulate expenses claimed on vouchers for other months throughout the two-year cycle, which most likely would not be selected for detailed Institute review.
  • When a review uncovered claimed expenses that are not allowable, the Institute generally did not expand the review beyond the selected month to determine if similar problems existed with other months’ claims. Also, in some cases, the Institute did not take action to recover amounts corresponding to ineligible cost claims. For example, although a contractor could not provide appropriate documentation to support $12,275 of miscellaneous costs, supplies, and travel expenses that it claimed, the Institute did not recover the unsupported costs.

Key Recommendation

  • Further strengthen controls to provide additional assurance that contractors’ claimed expenses are program appropriate and consistent with contract requirements. Such controls should include, but not be limited to:
    • Requiring contractors to submit detailed listings of expenses along with their vouchers;
    • Incorporating an analysis of the detailed expenses in the risk assessment process to determine what costs to review during the on-site fiscal review;
    • Incorporating an examination, based on the risk assessment, of an unannounced sample of expenses during on-site fiscal reviews;
    • Performing an expanded analysis of claimed expenses to determine the full extent to which certain non-allowable expenses, identified during a standard one-month review, were also claimed in prior months;
    • and Implementing controls over fiscal monitoring reviews to ensure that recoveries are consistently made and that each contractor is reviewed timely.

Other Related Audit/Report of Interest

Department of Health AIDS Institute: Long Island Association for AIDS Care, Inc. (2012-0063)

John Buyce

State Government Accountability Contact Information:
Audit Director: John Buyce
Phone: (518) 474-3271; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236