1st Issue: County Overbilling & Government Indifference (Part 1)

1st Issue:  County Overbilling & Government Indifference (Part 1)

Whistleblowing can arise out of seemingly innocent events.  In July 2013 as I began to prepare for the year-end audit, I discovered that I had overbilled Santa Clara County by more than $130,000 during the prior two years because of the misunderstanding that we – I, the CEO Jenny, and the Program Officer Hilary – shared about how to bill two contracts.  One section of the contracts seemed to permit billing based on the number of nights clients stayed in the facility rather than on the more usual standard of reimbursable costs, which was implied in a different section.

I called my contact at the County to clarify which method was correct: the less profitable reimbursable cost method.  When I informed Jenny, she became upset, not because the mistake had occurred but because I had talked to the County about it.  She was sure she could have fixed it by calling the County Mental Health Department director herself.  She and Hilary would get with the director.  Leave the amount in revenue, she said.

At a joint meeting of the Finance and Executive Committees in August, members discussed the overbilling violation and my handling of the problem.  The Board Chair said that the coming year would be challenging and she didn’t want to see any “red flags” – possible compliance problems raised to the attention of authorities.  The others accepted her advice silently, but I pressed for clarification.  Did she mean that I should not go to a funder if I identified a compliance problem as I had done with the County billing?  She danced around an answer; I pressed, “Answer the question.”  Her eyes opened wide, rustling sounds came from other Board members, and she replied that any matters like that should be handled by Jenny, not me.  Jenny chimed in, “That’s what I told him!”  The incident would make its way into HomeFirst's brief against me.

Jenny and Hilary may have had meetings with the County; plans might have been considered to remedy the overbilling; new billings proceeded on the correct basis as though no problem had occurred; and the overbilling remained outstanding.  By February 2014, I had reported other issues to external authorities, and I decided to complain about the County’s failure to demand the return of its money.  Unlike most government agencies, the County reports actions taken on whistleblowing reports to its website.  From January 2011 through March 2014, 4% of the 237 complaints were sustained and 80% were described as pending.  My complaint stuck in the pending category. 

Because State funds were used for the grants, in April I complained to the State Attorney General’s office that the County failed to protect State funds that it employed in the contracts.  The office replied that it had no interest in the case because the funds involved were primarily local and the County could handle it well enough.

After receiving only an automated response from the County to my complaint, in May I filed a second complaint, this time pointing to HomeFirst’s financial vulnerability which could endanger the County’s claim.  I noted that three of the key County staff who oversaw agreements with HomeFirst were former HomeFirst employees.  That complaint received no reply, either.  In response to my Freedom of Information Act (FOIA) request for records relating to the violation, the County attorney said that all documents were protected.  My complaint to the County Executive, who managed the operations of County, received no response. 

The State money involved came from California’s Mental Health Services Act (MHSA), which provided for a 1% tax on incomes over $1 million to fund county mental health programs with spending subject to annual review by a new Mental Health Services Oversight and Accountability Commission.  The 2013 California State Auditor audit report, however, concluded that the California Department of Mental Health and the Accountability Commission provided little oversight of County implementation of MHSA programs and their effectiveness.  They found no evidence that any on-site reviews tested whether County assertions about their compliance with MHSA requirements and use of funds were accurate and proper.  Two years later, an independent State oversight group concurred, writing that effective control of the funds, which amounted to $13 billion by January 2015, was delegated to the Counties and State monitoring agencies had no significant ability to force changes even in the event of abuse.

In early August 2014, acting on my complaint letter, the Accountability Commission learned from the County that HomeFirst had solvency issues but was working on a plan to repay the money.  In September, County Board of Supervisors, Supervisor Joe Simitian assured me that the overbilling problem was known and the money would be collected by June 2015.

Although several governmental offices were charged with ensuring that nonprofit companies used taxpayer money appropriately, they all moved at a leisurely pace getting HomeFirst to return the improperly obtained funds.