$1.1-Million Snafu Adds to Criticism of Mental Agency

Times Staff Writer

As officials at St. John’s Hospital and Health Center were reviewing some of their Los Angeles County contracts last year, they made a startling discovery: The Department of Mental Health had overpaid the Santa Monica hospital by $1.1 million to run county mental health programs.

And when hospital officials contacted the department to repay the money, they got another surprise--county mental health officials were unaware that they had paid too much. “It clearly was a clerical error. No mincing words, it was an error,” Dennis Denby, the department’s chief accountant, said.

Delay of a Year

Another department mistake occurred when local officials took nearly a year to submit required budget plans to state mental health officials. Those documents were needed to release about $7 million of a $9.3-million federal block grant for local mental health programs. But the department never sent the necessary papers until after state officials said they had sent a barrage of letters, made phone calls to the county department and finally, in desperation, flew from Sacramento to Los Angeles “to show them what we needed,” said Dean Owen, a spokesman for the state Department of Mental Health. “Then we released the money.”


Those examples of administrative lapses have fueled controversy surrounding the county’s most financially troubled department.

The department is faced with treating increasing numbers of mentally ill people, some of whom are homeless. At the same time, it has a budget deficit of $18 million because of reduced state appropriations, said Roberto Quiroz, mental health director.

Rapidly Growing Deficit

Quiroz, backed by the Los Angeles County Board of Supervisors, moved to close several neighborhood mental health treatment centers, most of them in poor areas. But a Superior Court judge blocked the county. Now, Quiroz said, the department’s deficit is growing at $1.5 million a month.


Although Quiroz has denied that he is guilty of administrative lapses, he has retained as a consultant Ted Von Minden, a management expert who retired recently as Los Angles County undersheriff.

Quiroz has been subjected to criticism from those who contend that his inept administration, rather than reduced state funding, is chiefly responsible for the deteriorating department.

“What we have under Roberto is management in chaos,” said Roger Rice, a retired division chief in the department’s program review and evaluation section, a strong critic of his one-time boss.

“I think the money is going down into a black hole. There is simply no accountability in the department,” said another longtime department employee who asked not to be identified.

Internal memoranda obtained by The Times have outlined similar concerns.

In one memorandum, dated September, 1987, members of the department’s contracts and grants staff expressed concerns about “the lack of leadership” in the agency and complained of “the absence of long-term scheduling and planning” in mental health programs.

Management Problems

In another criticism, a report issued last spring by the county auditor-controller found that the department lacked adequate “fiscal monitoring” of mental health contracts. Other audit reports have pointed to similar management shortcomings.


Quiroz conceded that some of the criticism is justified. But he said management failures cited in the audits were being corrected.

He dismissed his critics as disgruntled or misguided. He said that memos were leaked to The Times to embarrass the department and, along with a drumbeat of criticism from detractors, are part of a concerted effort to undermine him.

“What I think this is, is a smoke screen, and the only thing that will satisfy them is if Roberto Quiroz goes. It’s as simple as that,” he said, adding that he has no intention of stepping down from his $87,000-a-year post.

Quiroz and other county officials defended the department’s handling of the overpayment to St. John’s and the failure to apply for federal funds.

Word From Hospital

Officials said they first learned of the overpayment when hospital officials called them in February, 1987, after $1.1 million had already been paid to the hospital.

“We were the ones who discovered the error. Somebody had doubled the (payment) formula and given us an over-imbursement,” said Armen Markarian, a hospital spokesman, who added that the hospital repaid the money last year.

Department officials said that despite the oversight they are confident the overpayment would have been caught in the county’s review process, and Quiroz said no county funds were lost.


Quiroz also defended his department despite its yearlong delay in submitting the proper documents to state officials and releasing the $7 million in federal money being held in Sacramento.

The money was part of federal money sent to the state in 1986 for distribution in Los Angeles County by the state mental health department. However, in May 1987, state officials warned the county that they were holding the money until they received budget forms that told them how the money would be spent.

Two more letters followed in April and another in June, reminding the county that it had missed the November, 1986, deadline and that all claims submitted in the preceding 10 months had been suspended.

Quiroz said, “We initially submitted something that the state did not feel was adequate . . . and then we never heard from them for months.”

Quiroz said he knew of no mental health programs that were threatened by the delay in receiving the federal money.

“We tapped into the county general fund for more funds than we generally would have,” said Gurubunda Singh Khalsa, the department’s chief financial officer, “but we did pay the county back for that.” He added that the department has also tightened controls on the way federal block grants are handled.

Quiroz is supported by the Los Angeles County Board of Supervisors, which appointed him.

“I have confidence in Roberto,” Board Chairman Deane Dana said. “He is doing the best he can given the limitations of state funding.”

And Quiroz got an ovation from the Mental Health Advisory Board when he appeared before the citizens group, which is appointed by the supervisors and by community organizations interested in improving the mental health system.