San Francisco Chronicle

August 4, 1997

Agencies for disabled in disarray

State slow to respond to mismanagement, fiscal woes

By Edward W. Lempinen and Reynolds Holding

Chronicle Staff Writers

The sprawling bureaucracy that controls more than $1 billion a year for developmentally disabled Californians is plagued by mismanagement and financial abuses so severe that the health and safety of the disabled have been jeopardized, a Chronicle investigation has found.

State officials have known for two decades of serious problems in the network of 21 private, state-funded regional centers.  But in a two-month investigation, The Chronicle found that problems at some centers have persisted through the 1990s, and that reaction from Governor Pete Wilson's administration has often been slow and ineffective.

More than 100 interviews and thousands of pages of audits, state reports and court documents revealed that some of the centers have been linked to embezzlement, fraud and unethical financial deals.  The Oakland-based Regional Center of the East Bay -- one of the most troubled agencies in the system -- has in recent years lost hundreds of thousands of dollars from theft, missing checks and undocumented loans.

Meanwhile, hundreds of children and adults with varying degrees of mental retardation, autism and cerebral palsy have received inadequate services -- or no services at all -- though the state and federal governments have increased regional center budgets by millions of dollars a year. Problems have grown so severe at several regional centers that parents, center social workers and providers of housing and training to the disabled have rebelled against executives who run the agencies.

"We have fought this system for more than 20 years," says Patsy Crawford, a group home owner and outspoken critic of the Modesto-area regional center.  "It's like an octopus, and it gets bigger and bigger and bigger.  And if taxpayers knew some of the things going on, they'd be appalled."

The regional center system has been under intense scrutiny this year because of its role in a controversial state policy that has transferred more than 2,000 state hospital residents, most of them severely disabled, into community homes.  The policy has been linked with dozens of deaths and medical emergencies.

But Wilson's Department of Developmental Services insists that most regional centers are working well under difficult conditions.  In the past two years, the department has formally disciplined six of the centers -- and that, officials say, proves that they are closely policing the system that oversees care and services for more than 140,000 people.

Critics, however, contend the department's actions have amounted to little more than demands for longer reports and tighter operations. "Some monitoring by DDS does go on," says a veteran therapist who works with regional centers.  "But when push comes to shove, the impression I have is that DDS does nothing.

The first regional centers were founded in 1966, in the early years of California's effort to move the developmentally disabled out of institutions and into the more normal life of communities. Families and lawmakers who pioneered the system believed that the non-profit community-based agencies would be more flexible than the state -- and more effective -- in developing housing, health care, education and jobs for the mentally retarded and others.

Within a decade, though, state legislators were hearing that the system had lost sight of its mission.  In reports and audits submitted to the Legislature in 1976 and in 1988, investigators cited a pattern of problems: abuses of power, high turnover among social workers, poor accounting practices and chronic budget deficits.

The problems persisted into the 1990s, with many regional centers blaming their failures on a lack of funds.  New clients were more severely disabled and needed increasingly sophisticated and expensive services, the centers said.

But since 1990, the system's budget has grown twice as fast as the disabled population in the community. And thousands of pages of documents obtained from the department under the California Public Records Act suggest that mismanagement -- not tight money -- accounts for financial breakdowns at several regional centers.  At the same time, critics say, the state's oversight has been so weak that neither the Department of Developmental Services nor the centers can track how the money was spent, or whether it was spent wisely.

At the Regional Center of the East Bay, years of administrative chaos culminated in 1987 with the replacement of top managers.  But the center has made little progress since in correcting management troubles that have ranged from the absurd to the criminal.

In 1988, the state auditor reported thousands of dollars in missing deposits, undocumented loans and unrecorded expenses.  From 1990 through 1994, the center failed to perform required audits.  Accountants hired in 1995 to do the work found bookkeeping so careless that they refused to certify the financial statements for fiscal years 1990 through 1993.

In 1994, the center's controller was fired for failing to have the audits done, says Kathryn Munn, the executive director of the center since 1989.  According to internal department documents, management later discovered he had also taken at least $7,000 in center funds.  He avoided prosecution for embezzlement after agreeing to repay the money.

But the problems apparently extended beyond the controller.  A photocopy of a center check was cashed illegally for more than $36,000 in 1994.  Police reports say that almost $1,000 was stolen from an office drawer in 1993. 

"I know of people who stole thousands and thousands of dollars," said one source familiar with center operations.  "You could easily write a check to yourself, and there were people who did it all the time." 

The state forced the center to accept closer monitoring in 1995 and then put it on probation last year, one of the final steps before repeal of the center's contract. 

According to a report issued in January, auditors discovered hundreds of thousands of dollars in unpaid and undocumented loans to service providers.  Many of the providers denied receiving loans, claiming they had been paid for services.  The center has written off much of the money as unrecoverable.

The auditors also found that the center's accounting staff was unable even to keep a checkbook: Two identically numbered checks were issued for different amounts to different people; checks marked "void" by the center cleared the bank; other checks cleared in amounts different from those noted in center records.  Last August, Munn blamed the problems on "inadequate staffing ... and poor training," and said "significant improvements have taken place.”  But finances have continued to deteriorate, with the center amassing a deficit of at least $900,000 for the fiscal year that ended in June.  Many critics blame Munn.

"When problems happen over and over and over, when does it become time to change leadership?" says Ron Rhone, a union official representing staff at the center.  "When is it time for the state to come in and say: ‘Enough is enough'?"

Unlike the East Bay center, the South Central Los Angeles Regional Center has improved a decades-old record of financial waste and lax management.  But critics say change has come through questionable deals, intimidation of service providers and violation of government regulations.

Last year, the state investigated a series of suspicious financial transactions between the center and a developer of homes for disabled people with serious medical needs.

In 1993, the center agreed to lend the developer $50,000.  It then forgave the loan -- just before the developer contributed $50,000 to a fund for "staff and client programs" at the center.

To department officials, the transaction looked like a scheme to convert $50,000 of state money to the personal use of management.

The developer and center Executive Director Dexter Henderson deny that was their intent.  But the department's investigation turned up dozens of other questionable transactions -- including almost $200,000 in contributions by the center to the developer and 10 other providers.  Ultimately, the department found no wrongdoing, though it ordered the center to submit to closer monitoring and to recover the $50,000.

Henderson blames any mistakes on his haste to develop the homes.  He defends the center's financial practices.  "The facilities are up, they are brand new, we have clients in them and we are receiving services," he says proudly.  "It's well worth the criticism we went through.''

State officials learned of problems at the Stockton-based Valley Mountain Regional Center as early as 1991.  But they failed to act before 1995, when the center's attempts to save money by cutting services provoked outrage from Dennis G. Amundson, the Wilson-appointed director of the Department of Developmental Services.

In an Oct. 19, 1995, letter, Amundson blasted the center for planning deep cuts in transportation and day programs for the disabled.  He called the plans "woefully inadequate" and accused the center of "glaring insensitivity" in making "very poor decisions" -- such as holding a board of directors’ retreat at Lake Tahoe.

Amundson again criticized the center almost 10 months later for cutting services while preserving staff jobs and salaries.

Last year, a department review revealed dozens of violations of rules for spending federal money.  In one case, the center received federal funds for a disabled person who was actually in jail, one of several mistakes an inspector attributed to "a pervasive ennui surrounding the regional center."

Meanwhile, the Regional Center of Orange County has drawn legislative scrutiny this summer for an end-of-the-fiscal-year rush to give $2.8 million in surplus funds to service providers.

The Joint Legislative Audit Committee has demanded a detailed accounting of how the money was allocated and spent.

When regional centers tried to make ends meet by asking staff social workers to take on more clients and to take unpaid furloughs, labor conflicts flared.  In early 1996, more than 100 social workers at Valley Mountain called for the removal of center executives.  And in a letter to Amundson, they charged that the department's intervention in Valley Mountain's problems had come too late and was too weak.

In June 1996, staff at the Regional Center of the East Bay followed suit.  In a blunt letter delivered to the center's board of directors, about 70 social workers declared that they had lost confidence in Director Munn:

"Whether we are looking at gross fiscal mismanagement of individual consumer and agency funds, deteriorating conditions for the ... staff of the agency, or the massive disruption

Caused by the reorganization (of the agency), the result is the same: Consumers will not receive the quality of service that they deserve."

At North Bay Regional Center in Napa and at the Tri-Counties Regional Center in Carpinteria, near Santa Barbara, staffers have threatened to strike.

At the Orange County regional center, tensions escalated this spring when a union organizer was fired from her case-manager job.  When workers called a strike for mid-July, parents groups and disabled-service operators promised to join them on the picket lines.  Just days before the walkout, a contract agreement was reached.

The conflicts have a common theme: Huge caseloads and forced furloughs leave many social workers feeling that they don't have enough time to take care of their clients and to closely monitor their homes and programs.  Frustration, low pay and long hours lead to turnover, which leads to a diminished quality of care.

At Orange County, about 60 experienced social workers have left the agency in the past two years -- and many of the replacements have been entry-level workers who are sometimes paid less than $25,000 a year.

"When you burn out, you're just going through the motions, or you quit," says Rhone, the East Bay union official.  "It's a sad statement to make, but it's what happens when people become disillusioned."

And when they quit, Rhone says, 70 or 80 families may go unattended for more than a month before a new case manager takes over.  An inexperienced case manager may be overwhelmed.

"It's nuts," Rhone says.  "The whole system is nuts."

Ultimately, critics say, the price for such disarray is paid by the disabled.  Many regional centers have tried to ease financial pressures by delaying crucial services to the disabled, or by denying them altogether.

As early as 1991, Amundson's department heard such complaints from families at San Andreas Regional Center, which provides services to 6,500 clients in Monterey, San Benito, Santa Cruz and Santa Clara counties.

The department warned the center that year that it was not providing adequate care to clients.  Still, the problems continued.

In 1995, a local oversight panel detailed dozens of cases in which San Andreas had delayed services, arbitrarily denied them and obstructed families' efforts to appeal.  Only then did Amundson intervene forcefully.  First he threatened to end the state's contract with the agency.  When San Andreas' executive director resigned under pressure, Amundson dispatched a state team to run the center until it stabilized.

Today, the San Andreas center's performance is much improved.  But those who deal with the center say that some families still run into arbitrary delays and denials.  Similar problems are reported statewide by parents, therapists and educators.

When South Central Los Angeles Regional Center racked up deficits of several hundred thousand dollars from 1992 to 1995, it shut down for weeks at a time and slashed payments to providers.

A state investigation found the center had violated federal regulations by cutting care to infants without notice and without providing alternatives.  And, investigators found, the center chronically missed federal deadlines for evaluating and treating infants and toddlers.

At South Central, San Andreas and other centers, critics cite a common pattern: Parents who know how to work the system often get what their children need, while families who don't know the system -- many of them low-income and minority families -- might not.

"We're talking large numbers of families, huge numbers -- hundreds, easily," said one therapist, who asked to remain anonymous.

Regional centers also have been implicated in problems related to the Wilson administration's transfer of severely disabled patients from the state hospitals to community residences.

The centers have played a central role helping the state to meet yearly transfer quotas, dispensing hundreds of millions of dollars a year to pay for housing, medical care and other programs for the patients.

But some families say the centers have pressured them to accept the transfers.  Sometimes, they say, medical care and other services promised by the regional centers were never delivered -- and as a result, their children suffered serious health problems.

Group home owners say that regional centers have sent them former state hospital residents without informing them of the patient's history of sexual assault, fire-starting or other violent behavior disorders.

Watchdog groups say the regional centers have failed to properly check on clients after they're transferred, or to monitor the clients' homes and programs.

Sonoma County education officials say that San Francisco-based Golden Gate Regional Center failed to assure that promised medical care and other essential services were provided to a

19-year-old man who was transferred in June 1996 from the Sonoma Developmental Center in Eldridge to a community home in South San Francisco.

The man, severely disabled by cerebral palsy, was hospitalized several times after the transfer.  In November, state inspectors cited the home for failure to provide proper medical care and oversight.  Later the man was sent to a nursing home for the elderly.  He died in May.


While the death may have been inevitable because of his condition, the Sonoma officials say that failed oversight by the regional center made his last year chaotic, painful and lonely.

"The impact of poor planning, limited monitoring, insufficient training, inadequate coordination of services ... and the lack of adequate medical supervision had a disastrous impact," says Sonoma school nurse Ellie Held.  "How does the regional center allow this?"

In an interview last week, Golden Gate Director Julius Gaillard said he had never heard of the deficiencies discovered by state inspectors.  And he insisted that the man got the services he needed.

"We worked very hard to protect this boy and look after his welfare," Gaillard said.  "In our opinion, this is not a case that should be used to demonstrate that our system has been negligent."

Both the Association of Regional Center Administrators and the state Department of Developmental Services deny that mismanagement has caused breakdowns in care anywhere in the system.

Said Deputy Director Douglas G. Arnold: "The department believes that negative impacts on consumer services have been avoided."

Golden Gate Regional Center generally has a good reputation, and Gaillard joins others who insist that the system should not be judged by its weakest links.  But complaints about the agencies have flowed into state legislative offices this year, and a growing number of lawmakers believe the system needs reform.

"If the 21 regional centers represent the backbone of the developmental disabilities system in California, that unfortunately constitutes a chiropractic nightmare," says Robert Cross, vice president of a state group called California Association of State Hospital Parent Councils for the Retarded.  Senator Mike Thompson, a St. Helena Democrat who chairs the powerful budget committee, offered a plan this spring that would, among other things, require the Department of Developmental Services to monitor the regional centers more closely.

Many regional centers have balked at such reforms, and some have orchestrated letter-writing campaigns and other protests.  In a scathing letter last May, Thompson warned the centers that they faced extinction if they didn't accept change.  "I have spent an enormous amount of time convincing my colleagues that improving the existing system is a better route than ... replacing regional centers," Thompson wrote.  "I am concerned that your actions will further sway my colleagues toward believing that regional centers are incapable of self-improvement and not committed to meaningful reform."

Negotiations on the reform package are continuing, but sources close to the talks say that regional centers are continuing to resist.  And Cross, among others, doubts that the reforms are strong enough to make the department and the centers more accountable.


"The regional centers have remarkable clout," he says.  "They and DDS are in league and they can design exits faster than the Legislature can devise traffic controls."

East Bay center's long history of trouble

1987 -- After years of mismanagement and financial problems, the Regional Center of the East Bay replaces its executive director and chief financial officer.

1988 -- State auditor general finds misuse of state money, uncontrolled spending and other financial abuses at the center.  Department of Developmental Services promises to work on problems but stresses "independence" of regional centers.  1990-94 -- The East Bay center fails to have financial operations audited despite state requirement of annual audits.  The center's accounting records are so poor that independent auditors cannot certify accuracy of financial statements for 1990-93.

1994 -- The Center's controller is fired.  He repays more than $7,000 in center funds to avoid embezzlement charges.

1995 -- The center incurs deficit of $700,000.  DDS orders the center to comply with stricter accounting procedures and reporting requirements.  The center's executive director, Kathryn Munn, reprimands staffers who complained to board of directors about low morale, increasing caseloads and problems with management.  DDS closes nine group homes owned by FMA Inc. and used by the East Bay center to house the developmentally disabled.  Department documents filthy conditions and serious physical and verbal abuse at the facilities since 1991.

1996 -- DDS puts the center on probation, warning that contract with state will be rescinded if problems do not improve.  The center's social workers revolt against Munn, saying they have no confidence in her leadership.

1997 -- The center projects a deficit of $900,000.  Munn issues order barring employees from speaking to the press about the center.

What is a regional center?

Regional centers are private, nonprofit agencies, financed almost entirely with money from the state and federal governments.  Each one works under contract with the state and is responsible for a specific geographic area.

At their founding in the mid-1960s, they were expected to coordinate close-to-home care and services for people with mental retardation, autism, cerebral palsy and other developmental disabilities.  Today, 21 independent regional centers control a combined annual budget of nearly $1.1 billion.

The centers evaluate children and adults for possible developmental disabilities and determine which of them are eligible for services.  For those who are eligible, the regional center pays other businesses and agencies to provide an array of services from housing and education to transportation and baby-sitting for parents with disabled children.

How the California regional center system works


California has a cradle-to-grave system of care and services for the developmentally disabled that is unique in the nation.  The system is administered by 21 regional centers -- private, nonprofit agencies funded by state and federal tax dollars.  To understand how the system works, consider the case of Rosie B., a fictional character: 

Rosie is born with Down syndrome.  Hospital officials refer her mother and father to their local regional center.  After an evaluation, the center confirms that she is eligible for services.  Under the direction of agency experts, Rosie is enrolled in an infant development program.  Perhaps her parents are referred to special counselors who know the stresses of raising a developmentally disabled child. 

As Rosie grows a bit older, she might be enrolled in physical therapy and speech therapy.  And the family's case manager can arrange for "respite" services -- baby sitters who specialize in kids like Rosie.  Many of the services are paid for by insurance, and for those that aren’t; the regional center may be able to help.

When Rosie turns 14, the regional center staff begins to prepare a plan that will guide her transition to adulthood.  She will be eligible to remain in California's school system until she turns 22, but she may want job training, therapy or other services arranged by the regional center.

As Rosie finishes her education, her regional center case manager might help her find a work program designed for the developmentally disabled.  If she wants to live on her own, her case manager may find a group home for her, or an apartment that she would share with a roommate.  The case manager also may have a hand in arranging and paying for recreational activities.

If Rosie is on Supplemental Security Income, a federal aid program, most of her monthly check would be paid to the group home owner for room and board.  The regional center would supplement that payment with state and federal funds.  If Rosie gets sick, the bill would be paid by Medi-Cal, but the regional center might help her find specialized medical care.  Every year, the regional center staff would work with Rosie to develop a program and goals.  Through the year, the case manager would be responsible for periodically checking in on Rosie and helping her to resolve any problems.  The case manager also is responsible for making sure the home itself is safe and healthy.