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
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.