Department of Mental Hygiene

Provider Property Leases with Related Parties (Follow-Up Review)

The programs administered by the Office of Mental Health, the Office of Mental Retardation and Developmental Disabilities, and the Office of Alcoholism and Substance Abuse Services are often provided in community settings by not-for-profit organizations, whose costs are reimbursed by the three mental hygiene agencies. The facilities used in providing these programs are often leased to the not-for-profit organizations by companies that are closely related to the organizations. To prevent excessive payments for these less-than-arm's-length leases, State reimbursement for such a lease should generally be limited to the costs incurred by the related party in acquiring and maintaining the facility.

In our prior audit report 94-S-31, we examined the efforts of the three mental hygiene agencies to prevent excessive reimbursements for leases with related parties and found that a number of improvements were needed, particularly in leases overseen by the Office of Mental Retardation and Developmental Disabilities. In our follow-up review, we found that the three agencies have worked together to make some improvements, but have not acted together to address other problems, such as inconsistent regulations, and as a result, the Office of Mental Retardation and Developmental Disabilities' regulations continue to need improvement.

For a complete copy of Report 95-F-60 here.
For a copy of the 90-day response click here.