November 13, 2013;Contra Costa Times

Public decision-makers sometimes face difficult choices when it comes to whether to continue funding a troubled nonprofit. Lisa Vorderbrueggen reports that the Board of Supervisors of Contra Costa County terminated a 35-year funding relationship with the nonprofit Mental Health Consumer Concerns of Concord, California, due to having misspent $363,000 in public funds. The question in this case, however, is what kind of misspending, and toward what end?

The County apparently has four contracts with the nonprofit, amounting to about $1.85 million for a variety of services, including the operation of three mental health wellness centers in Richmond, Concord, and Antioch. Terminating the contract, according to executive director Mary Hogden, means forcing the organization to declare bankruptcy and dismiss its 40 employees.

Did Hogden and her colleagues rip off the money? Vorderbrueggen doesn’t say that in her article. Rather, the misspending was that since 2007, the nonprofit has been setting aside 15 percent of its contract payments into a reserve account. The result was not that the funds were never spent, but they were not spent in the same year that they were awarded. This was a violation of the terms of the nonprofit’s contracts, though eventually much of the money was spent on “legitimate” services in the end. The remaining funds were allocated to what Vorderbrueggen called “restructuring,” without further explanation.

Two concerns emerge. First, it appears, based on the sharp tongue-lashing delivered by the county supervisors to their own staff, that the staff had engaged in “lax contract oversight.” County staff seemed to have been aware of this practice of the organization since 2007 and had not stepped in to stop it in all that time. In fact, the group has acknowledged the error and pledged to repay to the county whatever funds were misspent by raising money from grants and donations. Second, despite the misspending, there don’t seem to have been complaints about the quality of the services the group provided. Rather, the president of the board of supervisors, Federal Glover, voted against terminating the contracts, saying that the county should take more responsibility for its role in allowing the group to veer off course from its contract terms and that the group “has provided, by all accounts, great services” in its three-decade relationship with Contra Costa. By terminating its relationship with Mental Health Consumer Concerns, the county, according to Vorderbrueggen, has to do some “fast-tracking in its search for new mental health service providers.”

It appears that the nonprofit agrees that it violated the terms of its contracts over several years. That could be enough in itself to warrant the board’s action putting the group out of business, no further questions needed. It also appears that county staff provided poor oversight and may have known all along about the group’s use of funds for a reserve account and “restructuring.” That could have been taken by the nonprofit’s staff over the years as something like tacit approval from county overseers. If the supervisors saw this as a nonprofit problem that the county aided and abetted in a way, it would perhaps give them good reason to reconsider the contract termination. The group appears willing to generate donations to repay the county for what it misspent and would want to continue providing mental health services in the region. That could have been evaluated on a cost-benefit basis—whether the county gets more by taking a tough stance on contract compliance or loses more by having to replace a competent service provider that, per Vorderbrueggen’s article, doesn’t seem to have diverted funds for fraudulent purposes. What would you have done in this case?—Rick Cohen