Report 97024 Summary - April 1998
Department of Developmental Services:
Regional Center Budgets Are Not Based on Needs, and Departmental Oversight Could Be Improved
Results in Brief
The Department of Developmental Services (department) administers the Lanterman Developmental Disabilities Services Act (Lanterman Act). The Lanterman Act entitles developmentally disabled people to any service that allows them, as closely as possible, to integrate with their communities. In addition, the Lanterman Act states that, to the degree possible, developmentally disabled people (clients) should not be dislocated from their families or communities.
The department administers the Lanterman Act in part by contracting with a network of 21 independent, nonprofit regional centers that provide services, such as housing, transportation, health care, and skills training, to approximately 138,000 clients statewide. In fiscal year 1996-97, the 21 centers spent approximately $1 billion to administer the program and purchase services for clients' needs.
The 1997-98 Budget Act required the Bureau of State Audits (bureau) to examine how the department develops and allocates the regional centers' budget. In addition, the bureau was charged with analyzing costs for client case management and purchased services.
We reviewed the department's budget and allocation processes and found that the department's processes do not ensure that clients throughout the State have equal access to needed services. Specifically, we noted that the department budgets funds for services based on historical expenditures of each regional center, not on their separate needs. Moreover, the department's allocation process is designed to ensure that each regional center receives at least the same amount of funding as in the prior year, regardless of individual need.
In addition, the department is not ensuring that regional centers are properly staffed and that their clients have equal access to case managers, who determine clients' needs for services and assist them in obtaining services. We found that the department's estimate for regional center staffing is not representative of true needs or case management costs. The department recognizes this problem and has requested funding to hire 808 more case managers.
Also, the department has not developed a uniform definition for case management costs and does not track each center's costs to assess their staffing levels.
The department does not equitably allocate funds for the centers because it fails to analyze each center's expenditures for trends and cost variances and determine their causes. Our analysis of the regional centers' expenditure patterns over the past five fiscal years indicates that costs for services grew by 61 percent for all regional centers combined, and the rates of growth among regional centers varied widely. In addition, for fiscal year 1996-97, the regional centers exhibited wide swings in cost per client in several service categories; however, the department does not investigate why. We found a number of reasons for cost differences. For example, some centers have enlisted community support to reduce costs and make their purchase-of-services funds go further.
In addition, by failing to effectively administer performance contracts, the department is not ensuring the legislative intent of measuring the regional centers' efforts in attaining more independent, productive, and normal lives for their clients. Specifically, we found that:
- Many of the measures contained in the performance contracts are "process" measures, focusing on completing specific tasks rather than client progress, such as the ability to function more independently.
- The department's incentive awards for meeting performance measures may be inappropriately linked to cutting costs for operations and purchased services and may inadvertently encourage the centers to reduce services rather than improve them.
- The incentive award structure may actually discourage centers from meeting performance measures. Because
the centers can retain only 50 percent of any savings they generate, they are better off spending the surplus instead of meeting their performance measures. This is particularly true because the department does not take corrective action when centers do not meet their contract performance measures.
- The department fails to verify that the centers actually meet performance measures before awarding incentives, or that they spend the funds as intended.
To ensure equity in budgeting and allocating funds to the regional centers, the department needs to develop methods, such as piloting a master plan for the purchase of services that is based on each regional center's individual needs.
To ensure that regional centers are adequately staffed and that clients receive equal access to case management services, the department needs to take the following actions:
- Clearly identify appropriate case management costs for the centers.
- Require the regional centers to report case management costs quarterly, to regularly assess center staffing levels, and include this information in the annual financial audits.
- Use the centers' case management information to adequately budget for operations and ensure that all regional centers are properly staffed.
The department also needs to take the following steps to improve its budgetary oversight of the regional centers:
- Analyze causes of expenditure variances and trends to determine if variances are the result of disparate treatment in purchased services, and use the analyses to revise the budget and allocations accordingly.
- Identify management practices at regional centers successful in containing costs and encourage other centers to adopt them.
- Focus the centers' performance measures on determining how well services allow clients to attain more independent, productive, and normal lives. For example, using the client goals established in the Individual Program Plans, the regional centers should measure the progress that a set number of those clients are making as a result of receiving the services diagnosed to help them attain such goals.
- Encourage centers to meet performance measures without sacrificing client service and maintain a separate incentive fund to award centers appropriately. For instance, each regional center could award a portion of the incentive funds to staff and service providers, another part to improve the regional center facility, and a portion to reward those clients exhibiting measurable improvement.
- Take corrective action for centers not meeting the performance measures included in their contracts.
- Require more compelling evidence that the centers met their performance measures;
- Document approved contract changes;
- Compare original performance objectives to the centers' year-end reports;
- Obtain complete written plans from the centers for spending incentive funds;
- Monitor the centers' expenditure of the funds; and
- Submit all regional center year-end performance reports to the Legislature to comply with Sections 4753 and 4836 of the Lanterman Act.
The Department of Developmental Services (department) disagrees with many of our conclusions concerning its budget process and its failure to investigate variances in the regional centers' purchase-of-services costs. The department does agree that it needs to review its budget and allocation processes, establish guidelines for the regional centers to follow in reporting case management costs, and study purchase-of-services cost variations among the 21 regional centers. Although the department has concerns with several of our conclusions regarding its administration of the performance contract program, the department agrees with most of our recommendations.