City Audit Finds Maligned Service Provider for the Disabled Close to Reform

A Denver nonprofit that serves around 6,000 people with disabilities was in such disarray in 2015 that it spurred statewide legislation requiring other service providers that receive public funding to be more transparent.

But while Rocky Mountain Human Services has tackled its biggest problems, procedural changes could still make it more effective in its work for Denver Human Services, according to a new report from the Denver Auditor's Office.

According to the audit, released August 15, Denver Human Services' "lack of oversight" prevented it from properly overseeing the millions in taxpayer funds it gives RMHS every year. Specifically, DHS allowed the nonprofit to use "an unacceptable method for determining monthly expense reimbursements," "violated contract requirements when making budget amendments," did not monitor whether RMHS achieved certain outcomes for special projects, and lacked an annual risk assessment to identify what it should audit at RMHS.

In November and December of 2018, for example, Human Services declined to reimburse RMHS about $132,400 in expenses because paperwork the nonprofit submitted "was not the true source documentation Denver Human Services should have received to validate the costs." But DHS later reimbursed RMHS for the costs "without question," the audit noted.

At an August 15 audit committee hearing, DHS executive director Donald Mares rejected the audit's findings as they related to his department. "We are working to improve our process," he said. "But again, we feel pretty good about how we ensure this money that voters approved is getting to the people who need it as effectively as possible and still being true to fiscal accountability."

In 2003, Denver voters passed Initiative 100, which increased property taxes to bolster "community-centered boards," such as RMHS. The dedicated mill levy raised $7,555,000 in 2004; that amount had doubled to $14,551,414 by 2016.

Community-centered boards, or CCBs, have their roots in legislation pushed by President John F. Kennedy that set aside public funds to help people with intellectual and developmental disabilities. The legislation spurred the creation of CCBs like Rocky Mountain Human Services, which receive most of their funding from federal, state and local sources. Rocky Mountain Human Services was founded in 1992 (it was called Denver Options) and designated by the State of Colorado as the CCB for Denver.

In 2015, after RMHS's then-CEO Stephen Block was put on paid leave and eventually fired, auditor Tim O'Brien released a report detailing top-to-bottom financial negligence at the nonprofit. Denver Human Services hadn't been monitoring the city's contract with RMHS closely, the audit found, and as a result, "RMHS [had] been permitted to make questionable purchases using taxpayer funds." Among other things, RMHS had been buying Costco memberships for all its employees, totaling $18,900 annually; Block had been making nearly twice as much as his peers at other CCBs. And the nonprofit was using Denver taxpayer funds on individuals outside the city.

Overall, RMHS had been out of compliance in at least five instances, according to the 2015 audit: "First, RMHS has charged the City for expenses that are questionable in nature. Second, RMHS has overcharged the City for certain administrative expenses. Third, RMHS is not transparent about sources of funding for executive salaries and fundraising activities. Fourth, some RMHS payroll expenditures are outside of contract terms. Finally, RMHS has been providing services with mill levy funding to individuals who live outside of the City."

The audit called on DHS, then called the Department of Human Services, to work with Denver City Council and the Denver City Attorney's Office to strengthen its work under Initiative 100 and more closely monitor its contract with RMHS.

RMHS's current executive director, Shary Repinski, who stepped in after Block left, says that the nonprofit got to work immediately to address overhead costs and how it documents certain information. In the year after that initial audit, RMHS reduced overall expenses by 17 percent.

Unlike the 2015 findings, which O'Brien called "shameful" at the time, the new audit compliments the nonprofit on the positive feedback some participants gave regarding its services.

But surveys are also a problem for RMHS, according to the audit, because the nonprofit does not conduct its own. RMHS also lacks accountability over certain projects, has still served a few dozen non-Denver residents using mill levy funds, and did not follow procedures for some specific programs.

"It's been a journey," says Repinski. "We're learning as we're going. RMHS has done a lot of work over the last three years to really revision and create something completely new. I wish there had been some perspective on that [in the audit] because all of the services under this audit are brand-new." The audit focused mostly on programs implemented in the last 24 to 36 months.

In addition to cutting overhead costs, RMHS engaged with the community it serves to "find out what we're missing," Repinski says. "We had to completely pull apart the city resources and isolate it and think about it not as something completely different, but complimentary."

RMHS began offering more individualized care, she notes. For instance, its new Client Assistant Program, which is mentioned in the current audit, bridges certain gaps in services, like buying specialized therapy equipment not covered by Medicaid, or offering rental assistance.

"Audits are never fun, right?" Repinski says. "We look to audits to tell us how to improve. There are two core responsibilities we have that are sometimes in conflict. We believe we have a responsibility to the people we serve to be as flexible as we can to meet their needs. Then we have a core responsibility to fulfill our duty to the taxpayer. While I wish they could be the same thing, oftentimes they're not.

"The issue for us is, as you increase your level of internal controls and level of bureaucracy, you create hoops and extra steps for families that, quite honestly, don't have the energy or interest to move through," she concludes. "We have to keep it easy for them and also be accountable. That's a tough balance we try to find all the time."