2 Head Start Providers Lose $7 Million in Funding

County officials have stripped two of the largest Head Start providers in Los Angeles County of $7 million in future federal funding, saying the agencies were riddled with financial and other problems, The Times has learned.

The San Fernando-based Latin American Civic Assn., the sole provider of the program for low-income preschoolers in the San Fernando and Santa Clarita valleys, will lose $5 million and Azteca Head Start of Alhambra will lose $2 million, a county spokesman said.

Nutritious meals, medical services and instruction to 2,000 poor children will continue without disruption despite the lost funding in both valleys and in East Los Angeles, Alhambra, Cudahy, Maywood and Montebello, the spokesman said. The county or other nonprofit agencies will run the programs.

“There may be a changing of the guard, but there will be no reduction in services,” Mike Bower said. “And every effort will be made to absorb the employees, particularly the instructional people.”

The agencies have until March 5 to appeal the decision, which affects the 1993-94 fiscal year. But even if they do appeal, they must relinquish control of the Head Start program on July 1 to the county until the appeals are decided, Bower said.

Neither agency returned calls from The Times, but county officials said LACA has indicated it will appeal the denial of funds.

The county would be likely to rescind the order and provide the funding if the agencies agreed to replace key administrators or their boards of directors, officials said. The county’s investigation is continuing, and it is unclear whether any of the violations involved criminal misconduct.

A Latin American American Civic Assn. employee who asked not to be identified said Tuesday that morale at the agency has plummeted since its 300 employees learned of the county’s action late last week.

“People are very upset, but we’re not writing letters of support for the agency because it’s time to stop this mismanagement,” the employee said. “It’s been going on for years, but we didn’t say anything because we were intimidated by the director.”

Prompted by complaints from parents and employees, county investigators last summer found that LACA had violated federal regulations by renting office space and vans from its own employees, overpaying staff members and engaging in nepotism, including hiring the executive director’s wife.

In December, the agency was ordered to repay $104,700 in federal funds to the county Office of Education, which administers Head Start locally for the federal Department of Health and Human Services. The county also classified LACA as a high-risk agency and continued to scrutinize its books.

Since then, the county has discovered that the agency appears to have misspent hundreds of thousands of dollars intended for expansion of the program to new sites, bringing the total of misspent funds to more than $800,000, Bower said.

Ralph Arriola, head of the agency for 15 years, has acknowledged committing some of the violations, including hiring his wife. But Arriola, who is paid $51,000 annually to run the agency, denied that he profited from doing so.

“I’m going to fight to show that what we did was not to line the pockets of anybody,” Arriola said last fall.

Last month the county suggested that LACA rectify some of the funding discrepancies by cutting some top-level agency jobs. Instead, “their plan of recovery was cutting the heck out of the program staff by eliminating teachers, aides and nurses,” Bower said.

It was then that the county moved to deny LACA’s future funding.

“We decided not to throw good money after bad--to stop the bleeding,” Bower said. “It appears to be in the best interest of the community to put an agency in place that is more fiscally responsible.”

It was unclear Tuesday what effect the county’s decision 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 the appeal process is exhausted before taking action.

The city agreed last August to lend $3.5 million for the project and has released about $1.2 million so far, said Bob Moncrief, director of housing production for the city’s Housing Production and Preservation Department.

The Azteca program, which serves 700 children in east and southeast Los Angeles and the San Gabriel Valley, has a history of fiscal and other problems, Bower said. In the last three years, the agency violated federal regulations by refusing to accept children who are physically disabled or not toilet-trained, Bower said. In 1990, Azteca was ordered to return $76,000 in mismanaged funds, including money used for unauthorized air fares and checks made out to cash, he said.