Health and Human Services

An Audit Report on Contract Management at the Commission on Alcohol and Drug Abuse

December 2000

Report Number 01-012

Overall Conclusion

The Commission on Alcohol and Drug Abuse (Agency) faces the task of correcting a decade of serious management problems. The problems have hampered the Agency's ability to ensure that contract funding was expended as intended. The Agency has begun to correct contract management problems by establishing a culture of accountability and revising its contract procedures for fiscal year 2001 contracts. The Agency has also undergone significant changes in upper management, including the hiring of a new executive director in February 2000 and a new chief fiscal officer in November 1999.

A culture that did not rely on good management information to make decisions has hindered the Agency's effective monitoring and managing of state and federal funds. In addition, former management did not always follow business processes meant to award contracts to the best-qualified service providers and ensure providers spend funds appropriately. Eighty-three percent of the Agency's $180 million revised fiscal year 2000 budget went to substance abuse service providers.

Key Facts and Findings

Mismanagement by former executives led to a budget shortfall reported in October 1999 that caused the Agency to reduce its fiscal year 2000 contracts by $23 million (13 percent).
Agency-reported data indicates that although the Agency was able to spend 29 percent more than its original fiscal year 1999 appropriation, it did not meet several key performance targets primarily related to the number of clients served and the average cost of providing services during that year.
The Agency's oversight of providers did not always identify those that spent Agency funds inappropriately. Visits to eight providers identified $791,000 in questionable costs. For example, the Agency reimbursed one provider for $82,000 worth of remodeling although the Agency approved a maximum of $25,000 in minor remodeling.
In addition to problems with provider oversight, the Agency had problems that made it difficult to (1) select the best providers available, (2) protect its interests with strong contract provisions, and (3) pay providers reasonable amounts for services.

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