SB 74 - News for Regional Center programs

From a position paper by ResCoalition: 

CONCERN

The Department of Developmental Services testified this new audit process was in response to the BSA audit, yet, the BSA audit was of Regional Centers, not vendors and there was no recommendation that vendors get audited. Yet, SB 74 is targeted at the providers/vendors. The way SB 74 was written requires that small entities providing direct service through multiple Regional Center contracts be required to obtain audits at their own expense, a daunting budgetary concern in this economy, especially as the majority of providers have received a 4.25% rate cut passed in the past couple of budget years. Under SB 74 requirements, entities providing residential services to as few as five individuals will fall under this requirement despite the fact that they hold five separate contracts for approximately $60,000/year, one contract per individual they serve. This has created an unfunded mandate with a cost range of six to twelve thousand dollars per year.

ResCoalition is concerned that this sweeping legislation negates the purpose of accountability and transparency both recommended by the BSA and directed by the Governor. Firstly, it is unlikely that the Regional Centers will have the ability to review audits from all the providers/vendors which will prove this requirement to be inadequate and an unnecessary financial burden. In this time of budget crisis it is important for funds to be focused on direct service to the population, this audit requirement as written, will only take money away from this effort.


Fiscal audits won’t address service issues related to improving quality of services to individuals with developmental disabilities. A fiscal audit only ensures there are adequate fiscal process to track dollars, it does not address if those dollars were spent on the correct services.

This audit requirement does, however, make sense for larger contracts/purchase of services as outlined in the BSA audit recommendations. Therefore, specifying the contract/purchase of service amounts of over $250,000 and $500,000 will be required to obtain an independent audit which will be submitted to and reviewed by the Regional Center allows for manageable loads for the Regional Center in addition to narrowing the most likely concerns for financial mismanagement of public funds as outlined in the BSA audit recommendations. This also meets the mandate for accountability and transparency of public funds which is the concern within this system.

INTENT
ResCoalition believes that the true intent of the BSA audit findings/recommendations and the Governor’s directive was to address the issues pertaining to RC contracts/purchase of service that exceed certain financial thresholds. Unfortunately, this bill currently dilutes the ability for the system to locate large pockets of misused or misappropriated public funds while creating an expensive unfunded mandate for the community.

RECOMMENDATIONS

ResCoalition recommends adding the clarification that these audits will be necessary for individual contracts or purchase of service that meet the fiscal threshold outlined in the legislation:

(A) When the contract/purchase of service amount received from the regional center or regional centers during the entity’s fiscal year is more than or equal to two hundred fifty thousand dollars ($250,000) but less than five hundred thousand dollars ($500,000), the entity shall obtain an independent audit or independent review report of its financial statements for the period. Consistent with Subchapter 21 (commencing with Section 58800) of Title 17 of the California Code of Regulations, this subdivision shall also apply to work activity program providers receiving less than two hundred fifty thousand dollars ($250,000).

(B) When the contract/purchase of service amount received from the regional center or regional centers during the entity’s fiscal year is equal to or more than five hundred thousand dollars ($500,000), the entity shall obtain an independent audit of its financial statements for the period.

QUESTIONS TO CONSIDER
As we consider the implications of this change, there are some issues that might arise. One concern that was presented was the manpower it would take to identify those contract/POS agreements over the identified thresholds. With the transition to electronic data systems including billing, it is anticipated this will actually be minimal. A second concern and legitimate question is to whether this provides adequate oversight. When one reviews the BSA audit, the problem contracts identified, would all still qualify under this modification.