Report Charges Improprieties in Head Start Unit : Investigation: County’s largest provider of services is accused of nepotism, conflict of interest and enrolling too many children.

The largest Head Start provider in Los Angeles County has violated federal regulations governing the program for low-income preschoolers by engaging in nepotism, renting office space and vans from its own employees and over-enrolling children, according to a county report obtained by The Times.

Prompted by complaints from parents and employees, an investigation conducted this summer by the county Office of Education turned up those and other alleged violations by the Latin American Civic Assn., the sole provider of Head Start services in the San Fernando and Santa Clarita valleys and the biggest of the county’s 27 providers.

The Office of Education is closely supervising the $5.3-million program, which serves 1,800 children, and will decide on any penalties after giving LACA’s board a chance to respond in detail to the allegations, said Andrew Kennedy, director of the Head Start project for the county.

“At this point, the evidence against them is very strong,” Kennedy said. “We are very, very concerned.”

Likely penalties include requiring the San Fernando-based nonprofit agency to correct the problems and pay back up to $300,000, including more than $16,000 paid to the executive director’s wife, Kennedy said. The county, which administers the program for the federal Department of Health and Human Services, also will continue to closely scrutinize the agency’s books for an undetermined period of time, he said.

But the agency will be allowed to continue to provide nutritious meals, medical services and instruction to poor children at more than two dozen centers from North Hollywood to Newhall, he said.

“They have a pretty good record of providing services to youth,” Kennedy said. “Usually, in cases like this, the board will choose new management and things will eventually get straightened out.”

Members of LACA’s board of directors could not be reached for comment. But Executive Director Ralph Arriola, head of the agency for the last 15 years, admitted in an interview Friday to many of the allegations contained in the county fact-finding report and audit dated Aug. 25.

Arriola admitted to overenrolling children, hiring his wife, Helen, as an office manager and owning a private company that leases 12 vans and offices in the 1200 block of Kewen Street to the agency. But Arriola, who is paid $51,000 annually to run the agency, denied that he profited from the violations.

“We did not get a fair hearing in this report and I’m going to fight to show that what we did was not to line the pockets of anybody,” Arriola said.

It was unclear Friday what effect the county’s investigation would have on LACA’s other programs. The veteran social service agency recently received a $500,000 federal grant to set up a network of drug and alcohol treatment programs for the San Fernando Valley. The agency is also a partner in a $7-million project to build affordable housing on Blythe Street in Panorama City.

Los Angeles officials and the private developer involved in the housing project said they are concerned about the allegations contained in the county’s report but will wait until a final report is completed next month before taking any action.

The city agreed in August to loan $3.5 million for the project, but has not yet signed a contract or released any funds, said Bob Moncrief, director of housing production for the city’s Housing Production and Preservation Department.

The county began investigating LACA earlier this summer after receiving complaints ranging from ripped carpeting to mismanagement from Sun Valley parent Maria Cabral, chairwoman of LACA’s Parent Policy Committee at the time.

As a result of Cabral’s complaints and information received from LACA employees, the county conducted an independent audit and sent four investigators to LACA headquarters and the Sun Valley site in July. The subsequent report found that many of Cabral’s complaints were valid and concluded that LACA:

* Leased vans and administrative offices from San Fernando Leasing and Rental Center Inc., a private company Arriola owns, in violation of federal conflict-of-interest regulations. The total rental payments for fiscal year 1991-92 were $25,560 for the vans and $66,512 for the administrative offices, according to the report.

Arriola said he set up the company because LACA’s credit rating was not good enough to lease the vans and office space independently, despite the millions of dollars the agency receives from the federal government. He said his company made about a 5% profit, which he said he spent on administrative costs.

* Hired Arriola’s wife, Helen, as an office manager six months ago, a position that pays $33,000 annually. The agency also paid a consulting fee of more than $19,000 last year for administrative services and reimbursement of expenses to Executive Edge, a private company owned by Helen Arriola. Both actions violated federal regulations against nepotism, according to officials.

Ralph Arriola defended hiring his wife, saying it was not nepotism because he does not directly supervise her. “She has a lot to contribute,” he said. “Her background in organizing . . . is extensive.”

* Overenrolled 10 children a day for an unspecified period of time in the Sun Valley center. After being cited for this by the state Department of Social Services during a routine visit, LACA briefly had some of them attend two or three days a week instead of the five days mandated by the county.

Arriola said overenrollment was necessary primarily because facilities for Head Start programs are difficult to find and he hates turning children away. “In no way would we enroll children in the program to make money,” he said. The county pays LACA about $3,000 per child, said Frank Lorah, assistant director of operations for the county Head Start program.

* Failed to spend proceeds of a fund-raiser for the purposes stated in letters to the Parent Policy Committee. Instead of spending the $14,490 that was raised on the child nutrition program and other services, LACA spent it in other ways, including $657 for turkey for its employees, according to the report.

Arriola said the fund-raiser did not raise enough money to use for the stated purposes.

* Failed to include parents in the decision-making process as required by federal law and failed to provide time for the public to address the Parent Policy Committee.

Under federal law, LACA’s 31-member Parent Policy Committee has final say over budget and personnel decisions, said Jerry Gomez, program specialist with the Administration for Children and Families, the federal agency that oversees Head Start programs.

Investigators found that LACA had hired personnel without getting approval from the parents committee and had no clearly defined system for involving parents.

* Failed to replace torn, rain-soaked carpeting and protect children against hazardous playground equipment at the Sun Valley center.

The carpeting has since been replaced, and the agency is working on providing more cushioning in the playground area, Arriola said.

The report also noted that the committee’s meetings were unproductive at times, including one on April 22 in which Ralph Arriola called the San Fernando Police Department when a member of the public refused to leave.

Arriola said the four police officers who arrived at the meeting did not eject the woman because he learned over the telephone from county education officials that she had a right to attend under state open-meeting laws. But he said parents adjourned the meeting because they did not want to hear the woman speak.