A nonprofit executive awarded state funds to her sister even though the service was available at a lower cost. A chief executive breached a confidential police tipline. And workers spent $900,000 on transportation - purposely spiking the budget to ensure more money the next year.
Those were some of the findings in a Bureau of State Audits report about state oversight of regional centers, nonprofit organizations that spend about $3.4 billion annually to serve 240,000 Californians with developmental disabilities.
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The state’s Department of Developmental Services oversees the 21 regional centers throughout the state, which contract with other nonprofits that render direct services to clients such as in-home care and transportation.
The audit [PDF] found widespread fear of retaliation among workers for reporting suspected wrongdoing at some regional centers. It reported that millions of contracts are issued without advertising for bids or going through a competitive process.
And the audit found that the regional centers did little to justify or create an objective base for setting rates for services, a responsibility that state DDS overseers say is not in their purview.
The Assembly Committee on Accountability and Administrative Review called for the probe of the Department of Developmental Services. Committee chairman Hector De La Torre, D-South Gate, said the audit backed up what he heard in a prior hearing about "favoritism in contracting, a lack of information about how regional centers spend billions of public dollars per year, and the pervasive fear of retaliation among regional center staff and service providers."
"Every dollar we can save through being more efficient is another dollar available for those consumers," he said in an interview.
De La Torre said his committee introduced a bill that would give the same whistle-blower protection to regional center employees that covers state workers, and he hopes it will be passed this session.
Department of Developmental Services deputy director Rita Walker said in an interview that the agency has sent directives to the regional centers reminding them to shore up policies and procedures related to contracting, service purchasing and conflict of interest.
However, DDS took exception with an audit recommendation that it do more to oversee vendor selection and cost-benefit analyses among competing vendors. The state said such a role is best filled by the regional centers.
The audit delved into examples of conduct at regional centers that, in some cases, caused high rates of employee discontent.
At Valley Mountain Regional Center, based in Stockton, one assistant director awarded a $16-an-hour rate to a respite care provider who was also her sister.
From the audit:
Her involvement was indicated by her signature on the rate‑agreement form in the vendor file. Although the rate for this vendor is higher than the rate for a comparable vendor, the assistant director asserted that the additional value brought by this vendor (such as having local offices and speaking Spanish) justified the increased rate. However, she admitted that no formal comparison between the two rates was done at the time the rate was set. She also indicated that the vendor’s cost breakdown was provided to her at the time the rate was established, but this breakdown cannot now be located.
Dick Jacobs, executive director of that regional center, said he did not know how much money was passed to the top staffer’s sister, but said that the “state and BSA looked at it and didn’t find there was any unearned payment.”
He said the regional center, which had annual expenses of $139 million in 2008, tightened up its conflict-of-interest oversight. The assistant director is still in place but does not deal with that contract, he said.
“There was a conflict there and we had to fix it and make sure we don’t have repeats in any way with 2,000 vendors that we deal with,” Jacobs said.
Walker, of the state agency, said it is launching an audit of that regional center next week.
At Inland Regional Center in San Bernardino County, staff awarded a $900,000 contract to a transportation company, apparently to bring about a budget boost in the future. From the audit:
Inland’s administrative services chief indicated that … it may have been trying to increase its fiscal year 2007–08 fourth‑quarter expenditures in the hope of obtaining an increase to the following year’s budget.
Inland’s auditor, who prepared the calculations supporting the need for a 40 percent increase, agreed that increasing expenditures to obtain a higher budget level in the next year was discussed in meetings he attended in spring 2008 related to the broker services.
And a final and alarming incident was detailed at the same regional center, where nearly 60 percent of employees reported that they did not feel safe reporting suspected improprieties.
A former chief financial officer told auditors that after some laptop computers were stolen, police set up a “confidential hotline” for employees call and share anything they knew about the theft.
However, the former executive reported:
In a meeting with the chiefs, the former director laid an envelope on the table and stated that the envelope contained records of all the Inland employees that used the Inland phone system to call the confidential hotline. I felt at the time that this was an inappropriate display of intimidation and should not have been said. Further, if such a phone call review was performed, I believe it undermined the police’s efforts to establish a communication channel that was confidential.
Walker, the Department of Developmental Services deputy director, said the account in the audit was the first she’d heard of the incident.
She said the state has updated and posted its whistle-blower policy to its website and encourages staff to report anything it deems unfit.
“This department is strongly committed to accountability,” Walker said.
A DDS spokeswoman said the state agency conducts its own audits of regional centers, which it has started and will be posted on the Internet by Aug. 30.
However, the California Disability Services Association, which represents 100 nonprofits that contract with regional centers, issued a statement calling on lawmakers to institute change.
"CDSA strongly urges the state legislature to strengthen whistle-blower protections and take immediate steps to reduce bureaucratic waste by implementing more transparency and stricter oversight within the Department [of Developmental Services]," read the statement from executive director Christopher Rice.
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