Our follow-up audit of the California Department of Developmental Services’ (Developmental Services) progress in addressing issues we raised in our 2010 audit, highlighted the following:
- Some of the Legislature’s previous cost‑containment measures appear to have been implemented effectively.
- It remains unclear whether regional centers and consumers’ planning teams are consistently reviewing vendor cost when state law requires them to do so.
- The five regional centers we visited lacked practices that would demonstrate they were selecting the least costly provider when applicable or justify if the least costly provider was not selected.
- Developmental Services cannot ensure that planning teams are selecting the least costly provider of comparable services that meet the consumer’s needs.
Results in Brief
The California Department of Developmental Services (Developmental Services) continues to miss an opportunity for ensuring that regional centers comply with one of the Legislature’s cost‑containment directives under the Lanterman Developmental Disabilities Services Act (Lanterman Act). According to our August 2010 report titled Department of Developmental Services: A More Uniform and Transparent Procurement and Rate‑Setting Process Would Improve the Cost‑Effectiveness of Regional Centers, Report 2009‑118 (2010 audit), Californians with developmental disabilities (consumers) may obtain community‑based services via California’s network of 21 regional centers—private, nonprofit organizations receiving primary funding and oversight from Developmental Services. Determining what services are needed and which vendors are used for these services is primarily a joint decision, one that the consumer, the consumer’s family or representatives if needed, and the regional center staff make. This group, collectively referred to under statute as a planning team, is ultimately responsible for identifying the consumer’s needs and establishing his or her Individual Program Plan (IPP).
During the State’s fiscal crisis, the Legislature enacted cost‑containment measures in several state programs to help balance the State’s annual budgets. Among the numerous cost‑containing measures adopted, the Legislature and the governor focused on reducing costs under the Lanterman Act by enacting an indefinite rate freeze and adjustable rate ceilings, which became effective in February 2008, on what regional centers could pay vendors. They also subsequently required in July 2009 that regional centers procure services from the least costly vendor of comparable service that can meet the needs of the consumer.1 However, neither the July 2009 Lanterman Act amendment nor other state law or regulation defines comparable service for use in the vendor selection process. When the State implemented the 2009 measure, it was facing a multibillion dollar budget deficit and the Legislature expected this cost‑cutting measure would save the State’s General Fund in excess of $23 million. Among the findings contained in the 2010 audit, the California State Auditor (state auditor) found that neither state law nor Developmental Services required planning teams to document their cost analyses when selecting among multiple vendors. As a result, the 2010 audit noted there is no way to determine whether planning teams are selecting the lowest cost vendor when state law requires that they do so. The state auditor recommended that Developmental Services require regional centers and their planning teams to document how they chose the least costly vendor, when required under state law, and then review a sample of this documentation as a part of the department’s biennial audits of the State’s regional centers. Developmental Services declined to implement these recommendations, stating it believes that it does not have the authority to do so, a contention with which we continue to disagree.
This follow‑up audit shows that some of the Legislature’s previous cost‑containment measures are being successfully implemented based on our review of 200 expenditures that five regional centers collectively incurred. However, it remains unclear whether regional centers and their planning teams are consistently reviewing vendor cost when state law requires them to do so. Our review of a sample of IPPs and case notes found that all five regional centers we visited lacked practices that would allow Developmental Services or other independent observers to verify that they were selecting the least costly provider offering comparable services meeting the needs of the consumer, and if the least costly provider was not selected, why not. As we originally noted in our 2010 audit, without such documentation, Developmental Services cannot ensure that planning teams are selecting the least costly vendor when appropriate. Consequently, we believe it would be prudent for the Legislature to amend state law and to direct regional centers to document the vendor cost analyses that the planning team performs to choose among multiple vendors of a service when creating a consumer’s IPP. Further, the Legislature should require that Developmental Services verify that such steps are actually performed in practice.
If the Legislature wishes to better guard against future cost increases under the Lanterman Act, it should amend existing law to require that planning teams document vendor cost considerations when they offer comparable services meeting the consumer’s needs and that regional centers retain that documentation. Specifically, for consumer needs that the planning team decides will be addressed by a vendor, the Legislature should require the planning team to document the following:
- Whether multiple vendors offer comparable services needed by the particular consumer.
- Whether any particular vendor offering comparable services was deemed unacceptable by the planning team and why.
- Whether the least costly vendor offering comparable services was ultimately selected, and if not, why.
To further ensure that the planning team consistently chooses the least costly vendor when state law requires, the Legislature should direct Developmental Services to audit compliance with the documentation requirements.
To ensure that regional centers and their planning teams are using consistent criteria when determining whether multiple vendors exist, the Legislature should define the phrase comparable service for the purpose of the 2009 amendment to the Lanterman Act. One away the Legislature could do this would be to define comparable service as a service of the type required in the consumer’s treatment plan and that the planning team has reviewed and found to meet the needs of the consumer.
Because we did not make specific recommendations to Developmental Services, it did not need to respond in writing to the follow-up report. Nevertheless, we offered the department the opportunity to respond and it elected not to do so.
1 California Welfare and Institutions Code, sections 4681.6, 4689.8, and 4691.9 established the indefinite rate freeze and the rate ceiling, and Section 4648 established the requirement for regional centers to select the least costly provider among vendors offering comparable services. Go back to text