Getting Away With Fraud?

Sometimes it seems that government officials have no ethics anymore.

In the case of Orange County, it is interesting how many instances of corruption or ethical lapses are prevalent in our government institutions. Whether it is Sheriff Mike Corona and his “Coronies,” the Capistrano Unified and Santa Ana Unified School District administrators, or senior managers in the Orange County Health Care Agency, it seems we cannot avoid the scandals and incompetence of these overly paid buffoons.

I received word the other day that the Health Care Agency was partially successful in their appeal of the $143,000 penalty they were issued for failing to properly manage a federal HIV/AIDS grant sub-contractor. The Orange County Register covered the story in a detailed investigative report “Misplaced Faith” released in March 2006.

Of course, if you were to read the release from the Health Care Agency on the subject you would be left with the impression that they were exonerated of any wrongdoing.

On March 16, 2007, the Department of Health and Human Services (DHHS) concluded its review of the Orange County (County) appeal regarding the Health Resources and Services Administration (HRSA) disallowance of $143,328 in charges claimed for the period of April 3, 2001 – February 28, 2003. The following is a synopsis of the DHHS decision:

1. The full disallowance of charges for the two-year period was not warranted as costs in the amount of $121,234 by New Millennium Community Coalition were consistent with actual costs reported.

2. The County did provide adequate documentation to show that services were provided to eligible individuals and that the provider engaged in other contract-related activities.

3. The County documentation of cost reports support costs claimed and was not unreasonable or unallowable.

Based on the HRSA final report and disallowance letter on March 2, 2006, the County paid the disallowed costs in the amount of $143,328 to avoid interest charges during the appeal process. The DHHS decision to reverse the disallowance for all but $22,094 will result in a repayment to the County in the amount of $121,234.

The last paragraph of their statement is really the only part of their release that isn’t deliberately misleading. The HHS Appeals Board determined in their decision that, due to a technicality, the County was justified in paying for reported costs because their contract did not require that the contracted services be delivered in order for the contractor to be paid.

The Health Care Agency has spent the last four years claiming nothing was wrong, now they want us to believe they had properly managed the contract in question and that the result of their appeal backs up their position. The fact that they had to return over $22,000 in unsubstantiated costs clearly indicates that they were wrong.

Further, the appeal did not address whether the contracted services were delivered, but simply whether there was documentation that superficially indicated that the contractor had expended funds in an effort, real or imagined, to deliver those services. Indeed there is evidence that some of the contracted services were delivered.  The problem that led to the HHS investigation was that the Health Care Agency had paid the contractor in full for services that administrators clearly knew had not been delivered.

On July 11, 2002, the program monitor for the New Millennium contract recommended in writing to her supervisor that the New Millennium contract be terminated because they were not performing up to expectations and were unwilling to change their behavior. The program monitor asked; “Why are we throwing away case management dollars on New Millennium?” Fifteen days later, on July 26, 2002 the same manager sent HRSA Project Officer Lorenzo Taylor a follow-up report regarding corrective action plans to address the deficiencies in New Millennium’s services cited in his March 2002 site visit report. Her follow-up indicated that progress was being made in improving New Millennium’s performance in direct contradiction to the recommendation from their program monitor that their contract be terminated.

The Board of Supervisors needs to pay attention to the underlying problem that has been revealed. Specifically, County managers were willing to commit fraud, lie to federal grant managers, cover-up misconduct, and permit retaliation against the employee who spoke out about management misconduct in order to conceal the truth. More than eleven years after the largest municipal bankruptcy in U.S. history, the culture of Here no evil; See no evil; and Speak no evil, is alive and well in the halls of Orange County administration.

These managers are David Riley, Assistant Director of the Health Care Agency; Jeffrey Nagel, Health Care Agency Chief Compliance Officer; and Peter Hughes, Director of the County Internal Audit Department.  These three individuals are responsible for the majority of this debacle, because they were aware of the problem and chose to cover it up rather than correct it. Anatomy of a Conspiracy

In addition to ensuring that these co-conspirators are removed from their respective positions of authority, the Board needs to reconsider and adopt the proposal that the Internal Audit Department be consolidated under the Auditor/Controller which failed on a two to two vote earlier this year.  They also need to go further and consolidate the operations and supervision of the Health Care Agency’s Office of Compliance within the Internal Audit Department and eliminate the duel reporting relationship with the Health Care Agency Director to provide real independence of this function‚ and prevent future management manipulation.

This leaves me with one question for the Board of Supervisors. Now that the final decision is in and these “managers” have cost the taxpayers more than $22,000, what are your going to do about it?

got ethics?