Oversight of Contract Expenditures of Phoenix House New York

Issued Date
January 09, 2019
Alcoholism and Substance Abuse Services, Office of


Our audit determined whether the Office of Alcoholism and Substance Abuse Services (OASAS) is effectively monitoring its contracts with Phoenix House New York (PHNY) to ensure reimbursed claims are allowable, supported, and program related. The audit covered the period July 1, 2013 through June 30, 2016.


OASAS oversees one of the nation’s largest and most diverse programs for the prevention and treatment of alcohol and substance abuse. Its mission is to provide quality, accessible, and costeffective services that strengthen communities, schools, and families through alcohol and drug prevention treatment.

In 2009, OASAS entered into a five-year, $47.6 million net deficit funding contract with PHNY, under which PHNY would provide drug and alcohol addiction treatment services. The contract was renewed in 2014 for another five-year term (July 1, 2014 through June 30, 2019) at a total cost of $51.4 million. During our audit scope, PHNY was one of six affiliates operated by the Phoenix House Foundation (Foundation), a nationally recognized and accredited behavioral health care provider that specializes in the treatment and prevention of mental health and substance use and co-occurring substance use disorders. PHNY provides outpatient, inpatient, and residential services at several facilities throughout the New York metropolitan area. According to the contracts, OASAS reimburses PHNY for its net operating expenses, up to the maximum budgeted amount, for providing the contracted services. The expenses are reported by PHNY on its annual Consolidated Fiscal Reports (CFRs) and are subject to the requirements in the Consolidated Fiscal Reporting and Claiming Manual (CFR Manual), OASAS’ Administrative and Fiscal Guidelines for OASAS-Funded Providers (Guidelines), Phoenix House Personnel Policies and Procedures (Policies), and the contracts.

Key Findings

  • OASAS does not adequately monitor the expenses PHNY reports on its CFRs. Consequently, PHNY was able to claim reimbursement for the higher budgeted expenses, rather than actual expenses.
  • For the three years ended June 30, 2016, PHNY claimed and received reimbursement for approximately $2.9 million in unallowable and unsupported parent agency administrative expenses. This occurred because OASAS did not request, nor did PHNY disclose and document, the composition of parent agency administrative expenses.
  • PHNY also claimed and received reimbursement for an additional $851,428 in personal service expenses and $169,856 in other than personal service expenses. These expenses did not meet the requirements of the CFR Manual, Guidelines, Policies, and/or contracts.

Key Recommendations

  • Establish additional monitoring controls and improve oversight to ensure that PHNY only claims actual expenses and that those expenses are allowable, reasonable, supported, and consistent with the CFR Manual, Guidelines, Policies, and contracts.
  • Ensure that PHNY discloses all expenses during its budget process; specifically, the details of those expenses included in parent agency administrative costs.
  • Recover $3.9 million in unallowable and/or unsupported costs from PHNY, including $2.9 million in parent agency administrative costs, $851,428 in personal service costs, and $169,856 in other than personal service costs. Take steps to ensure that PHNY only claims costs that are allowable and supported.

Other Related Audits/Reports of Interest

Office of Alcoholism and Substance Abuse Services: Contracted Programs With Puerto Rican Organization to Motivate, Enlighten and Serve Addicts, Inc. (2015-S-24)
Office of Alcoholism and Substance Abuse Services - Drug and Alcohol Treatment Program: Provider Claiming of Depreciation Expenses (2015-S-84)

Kenrick Sifontes

State Government Accountability Contact Information:
Audit Director:Kenrick Sifontes
Phone: (212) 417-5200; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236