Audit of Berkshire County Arc finds improper use of state funds

Berkshire County

BOSTON (WWLP) — An audit of a Pittsfield non-profit has found more than $777,000 in unallowable expenses.

Berkshire County Arc, Inc. (BCArc) is a nonprofit human service agency founded in 1959 that serves children and adults with intellectual and developmental disabilities, and individuals who need assistance with daily living. 

The Massachusetts Office of the State Auditor examiners investigated the period of July 1, 2017, through June 30, 2019, and found $777,844 that was spent improperly including expenses made on 48 credit cards that were unallowable under state regulations, and that some of the inappropriate spending came at the direction of those in management positions.

The audit found BCArc charged $651,540 in unallowable expenses against its state contracts for maintenance expenses, bookkeeping, and capital improvements made to buildings owned by an affiliated organization called Berkshire Omega. Berkshire Omega operates exclusively for the benefit of BCArc, and its board of directors has five members who were appointed by BCArc’s board. Under state regulations, this type of spending is unallowable because the costs are non-program-related and do not directly benefit the nonprofit’s clients.

Additionally, BCArc employees used organization credit cards to pay for $124,247 in expenses that were non-reimbursable under its state contracts because they were either not related to the nonprofit’s programs, were specifically prohibited by state regulations, or were inadequately documented. The audit found BCArc’s president and CEO used credit card reward travel miles earned by BCArc for his personal use which is inconsistent with state regulations and the organization’s own policy. Auditors discovered the president and CEO’s spouse, who was working as a consultant to BCArc, used or benefited from the organization’s credit cards for $2,057 in trips, meals, and gifts for a BCArc conference. BCArc also charged its client funds accounts $43,192 in credit card purchases for which it did not have the required documentation.

As a result, several recommendations have been made for corrections. BCArc’s board and those in management should establish monitoring procedures to hold employees accountable for spending and a system of oversight for credit card use to ensure spending is appropriate and documented. In its response, BCArc stated that its board of directors has made some revisions to the credit card use policy. The audit also recommends the organization end the practice of using state funds to pay for Berkshire Omega’s capital improvements and to work with the state on all unallowable costs that should be repaid.

The chairman of the Berkshire County Arc Board of Directors released this statement to NEWS10’s sister station in Springfield:

The Berkshire County Arc Board remains confident in the leadership of Berkshire County Arc and its dedicated and passionate staff, led by CEO Ken Singer. The Board and the agency refute findings in the audit report and maintain that the OSA grossly mischaracterizes the agency.

BCArc is dedicated to improving the quality of life for the more than 1,000 of our family, friends, and neighbors through 43 residential sites and five-day programs. Under the 41-year leadership of Ken Singer, BCArc has a long and impactful track record of growth, building it from a $7M budget in 1994 to a $40M budget today.

Over the course of two years, BCArc complied swiftly and fully with the state auditors’ requests, producing hundreds of pages of documentation, all while delivering award-winning service to program participants, and helping them navigate and overcome unprecedented challenges due to the Covid-19 epidemic. Services for the individuals whom BCArc serves have not been impacted.

BCArc has spent, received, and used public funds in accordance with its state contracts: to the benefit of the more than 1,000 individuals that it serves.  

BCArc has consistently complied with recommendations from regulatory and/or oversight agencies or internal/external auditors regarding policies, procedures, and practices.

The Board maintains that, in its audit report, the OSA grossly mischaracterizes the agency. This is surprising, as during the last exit meeting, BCArc was assured that the issues are related primarily to documentation.

As the audit team acknowledged during the exit interview, BCArc’s finances are more than sufficient to pay for any non-reimbursable expenses. BCArc has since modified its procedures to require more rigor and detail on expense documentation as recommended by the OSA.

Finally, the Board recognizes that there are always improvements to be made to bookkeeping systems, policies, and procedures. We welcome the guidance of the OSA. The OSA does acknowledge that BCArc implemented new or revised accounting practices as they recommended, and BCArc and its Board of Directors will continue to optimize our practices going forward.

Michael Ferry
Chair, Berkshire County Arc Board of Directors

In the fiscal year 2019, BCArc received over $25 million in funding from state agencies including the Department of Developmental Services, the Rehabilitation Commission, and the Commission for the Blind.

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