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Office of the New York State Comptroller

Taxpayers' Guide to State and Local Audits

State University of New York: Downstate Medical Center
Allegations of Procurement Fraud, Waste and Abuse at
State University of New York


Issued: April 9, 2012
Link to full audit report 2010-S-45

Purpose
To determine if allegations of waste, abuse, and/or fraud at State University of New York (SUNY) Downstate Medical Center (Center) were accurate and, if so, what was the cost to taxpayers.

Background
Our office received three anonymous letters alleging waste, fraud, and abuse involving procurement practices at the Center. Our audit found some of these allegations were accurate. We found various weaknesses in the procurement processes at the Center resulting from a systemic breakdown in internal controls and a deficient control environment. The result was an environment which facilitated vendor manipulation of procurement processes, less than efficient implementation of a multimillion dollar software system, and possible conflicts of interest between at least one employee and a vendor.

Key Findings

  • One vendor, Eagle Two Construction (Eagle Two), was able to circumvent the Center's bidding processes. In six cases fake bids or bids from companies affiliated with Eagle Two were submitted against Eagle Two's bids in order to simulate competition for awarding work when there was none. In all six cases Eagle Two was awarded the work totaling $92,090. Also, an additional $49,890 was paid to Eagle Two or its affiliates for work that should have been covered under a
    contract Eagle Two already had with the Center.
  • A questionable relationship between a Center employee and a vendor, Technical Systems Integration Group Consulting (TSIG) may have impaired competition for five purchases totaling approximately $267,000.
  • The Center didn't adequately assess all the risks involved with implementation of the multimillion dollar Lawson software purchased to streamline the procurement process. After spending almost $2 million and over four years of staff time, the Center is not using the Lawson software in a majority of its units.

Key Recommendations

  • Establish and promote a control environment at SUNY Downstate Medical Center that supports internal controls and compliance with applicable law, including fair and competitive purchasing of goods and services, and compliance with the Public Officers Law.
  • Monitor purchases to assure they are justified, necessary, and being used to prevent waste of Center resources especially in emergency situations that limit purchase options and reduce chances of obtaining the best price and quality of services. Identify, assess and mitigate risks which may hinder the Center's procurement mission or objectives.


Other Related Audits/Reports of Interest
None


State Government Accountability Contact Information:
Audit Manager: Melissa Little
Phone:(518) 474-3271; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236