Panel To Investigate Fraud Among Non-Profit Agencies Vendors With Government Contracts Not Held Accountable For Spending

A state House select committee has begun investigating reports of fraud among nonprofit agencies receiving government funds, starting with those in the Yakima Valley.

The seven-member committee has been given rare subpoena authority.

“We have the power to find the truth,” state Rep. Jim Clements, R-Selah, committee chairman, told the Yakima Herald-Republic in a story published Sunday.

The committee, first of its kind since lawmakers probed police corruption in the 1950s, was formed last month after numerous private meetings involving the FBI, the state auditor’s office, and both Republican and Democratic lawmakers.

The Yakima Valley is home to some of the state’s largest nonprofit agencies, including the Washington State Migrant Council, which employs 950 people and receives about $23 million a year in government funds.

The council will be among agencies probed, Clements and several others said. Executive director Carlos Diaz has said he welcomes state scrutiny.

“We don’t want to be heavy-handed with what we do, but at the same time we want to be serious about accountability,” said state Rep. Mary Lou Dickerson of Seattle, the select committee’s ranking Democrat.

”(Clements) was willing to step forward and focus on the Yakima area … because we can’t look at all the (legislative) districts in the state,” she said. The committee will broaden its inquiry, Dickerson said.

In addition to non-profit agencies, the committee will examine for-profit businesses receiving state money in contracts.

Lawmakers are also concerned about the social-service reimbursement system under which state agencies pay private organizations to provide services, the Herald-Republic said.

The state Department of Social and Health Services pays about $500 million yearly to agencies for everything from child and elder care to job training and counseling.

Those agencies are not required to provide detailed records of financial transactions. State auditors have only limited authority to examine how contract vendors spend taxpayer dollars.

“I think there has not been enough oversight of those funds,” said state Auditor Brian Sonntag, a Democrat who is providing the House select committee with technical assistance. “We’re looking for constructive outcomes … improving service to the public.”

State Deputy Auditor Linda Sheler said state law has never required that contract vendors be audited or undergo performance evaluations.

“The state has never seen fit to see accountability all the way out to service delivery,” Sheler said. “There’s a legitimate concern by Democrats and Republicans to ensure delivery of dollars is happening in the most efficient way.”

DSHS has 45,000 active vendor contracts, yet its internal auditors last year conducted only 55 audits, state documents show. Agency officials say program managers and case workers also are monitoring vendors.

“Our social service payment system is 20 years old,” said Philip Wozniak, director of the administrative services division at DSHS. “It’s archaic and needs to be updated.”

Dickerson believes that responsible agencies receiving state dollars stand to benefit from the investigation.

“We want to find the truth and if the truth involves a lack of accountability, then we want to ensure the holes in accountability are plugged,” she said.

The Migrant Council’s primary services include child care and educational programs for children of migrant workers statewide, and several other programs for needy people.

Last October, federal evaluators from the U.S. Department of Health and Human Services issued a report that cited several deficiencies, although they said the council was operating a “very strong program” overall with a 91 percent compliance rate.

The federal department, which provides $13 million of the agency’s budget, criticized the council for failing to enforce a policy against nepotism, the hiring of relatives which may give the appearance of favoritism.

After several dismissals and a long-term staff realignment plan, Health and Human Services says it’s satisfied the agency is in compliance.

Also expected to be examined by the select committee is a defunct Seattle-based nonprofit agency, Touchstones - More Alike than Different.

A state audit last year indicated Touchstones received more than $177,000 in excess payments from various governmental entities and some expenses were double- and triple-billed. Between June 1994 and February 1995, Touchstones received $107,696 from DSHS.