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County audit says public, board were misled: Questionable management to blame for 2017 budget request, not state

PMG FILE PHOTO - Multnomah County Chair Deborah KafouryIt was an ugly situation that almost never became public.

Cold winter winds were approaching, and decisions made by Multnomah County mental health managers were about to cause 45 to 50 severely mentally ill people to be kicked out onto the streets of Portland.

How did this happen?

Documents show county managers belatedly realized they had been spending more money than they were taking in from the state, leading them to cancel a contract with a nonprofit that had been providing 31 units of housing and services for the region's most vulnerable population. The result was a potentially life-threatening situation.

But when the mental health managers asked the elected county Board of Commissioners for more money at an October 2017 public meeting to avert the crisis, they divulged none of the potentially embarrassing background.

Instead, the managers submitted documents to the board blaming their need for funds on new budget cuts by the state — cuts that in reality did not exist.

This two-year-old incident of apparent public misinformation was unearthed recently by staff of Multnomah County's independent elected Auditor Jennifer McGuirk, and briefly mentioned in a Nov. 20 public report. It has sparked concerns among some officials at the county about whether they can rely on what they and the public are being told at public board meetings.

"The matter is under review" by Chief Operating Officer Marissa Madrigal, said county Communications Director Julie Sullivan-Springhetti.

"It sounds like it was misrepresented," said Commissioner Sharon Meieran, calling the lack of transparency revealed in the audit "extremely disturbing and concerning."

The matter highlights the unusual structure of Multnomah County government, in which one elected official — Chair Deborah Kafoury— oversees the bureaucracy. The rest of the five-member board serves as a de facto Legislature that sets policy and is supposed to provide oversight of a roughly $2 billion budget.

Kafoury said the county's former top mental health director, David Hidalgo, is no longer at the county. He was fired earlier this year amidst questons about management and misinformation about whether his staff was properly investigating abuse.

"We've been reeling from the management isues in this division for a couple of years at least," Kafoury said, adding that she is "hopeful that we won't have this kind of a situation again."

She said she's confirmed that the people kicked out of their housing due to the county budget crunch were all placed in new housing, thanks to the money approved by the board in 2017.

"The money was spent to keep people off the streets and out of the hospital," Kafoury said.

Matter seemed routine

In a memo posted on the county's website for public review before the Oct. 5, 2017, board meeting, the mental health division's then-director, Hidalgo, asked the board to approve spending $280,000 from the county's "general fund" — the discretionary portion of the budget funded by property taxes. The memo said the division needed the money because the division's previous budget was based on a draft state budget proposed by Gov. Kate Brown, and now the actual final budget had been approved by the Legislature.

The rationale made sense as two previous budget issues before the board had cited state budget cuts, and were approved unanimously by the board.

When it came to agenda item R-9, mental health division manager Neal Rotman told the board that the requested funding "replaces a reduction from the state. ... This funding will support approximately 45 to 50 individuals needing support to avoid homelessness."

Kafoury added more context for the board and viewing public: "So these are the specific items that we voted on as a package earlier, that we've had conversations about, just as a heads-up for everyone out there."

The budget change was approved unanimously by the four commissioners in attendance: Kafoury, Meieran, Loretta Smith and Jessica Vega Pederson.

Those votes, however, were based on false information provided publicly, according to McGuirk's audit.

"The budget modification process lacked transparency," according to the Nov. 20 report, which called the claim of a new budget cut "inaccurate ... There had been a reduction two years prior, as described in the section above, but that was already reflected in the division's FY 2018 budget. The modification paperwork and the presentation did not accurately describe the circumstances leading to the request."

The audit said that the earlier 2015 budget cut by the state happened because the division had been intentionally building reserves by failing to spend all the state funds that were supposed to go to help the severely mentally ill. That led the state to cut funds for the county in its 2015 budget.

"It's very problematic if we receive incorrect or incomplete information, particularly around an issue as important as funding for our mental health services," said Vega Pederson. "Government doesn't function well if it's not transparent, and I'm thankful the audit brought this issue to our attention."

Internally, documents were accurate

Internal Multnomah County emails show that the mental health division's budget crunch came as a surprise to them. They realized the problem, however, in 2016 —more than a year before managers went to the board.

In a September 2016 email, Rotman informed his fellow managers that the department was "over budget" for its budget on severely mentally ill people in September 2016 due to overspending. The overspending was in part due to a state budget cut in 2015, adopted by the state in response to the division's accumulation of surplus funds.

In May 2017, Rotman cancelled a contract for 31 units of housing and services for the severely mentally ill that the county had previously entered into with the nonprofit Columbia Care. In an email to the nonprofit, Rotman wrote: "I realize that this is a drastic reduction in programming and will have a significant impact on the clients and your employees," but said he was hoping to get money from the state to provide a "glide path" to transition the people affected.

In an email exchange with division director Hidalgo in July 2017, Rotman again noted the budget crunch stemmed from the state's 2015 reaction to the division's underspending in previous years. Rotman said more funding would be needed to "avoid immediate homelessness" for the affected residents. Hidalgo responded that Rotman needed to submit a budget request for adding to the division's "reduction sheet."

The auditors interviewed deputy health director Wendy Lear about the matter on Sept. 13, 2019. Notes from the meeting paraphrase her description of the 2017 budget situation: "Ms. Lear said that conversations with the Chair were transparent but that did not translate to the budget modification."

What Lear meant by this is unclear, McGuirk told the Tribune.

Kafoury, for her part, said it's hard to say what she and the other commissioners knew and didn't know, as all had received closed-door budget briefings from top managers. She can't recall the briefings and what she knew at the time.

"I don't know that anyone purposely misled me," she said "I definitely would never intentionally mislead anyone, my commissioners, the public. So if I had overlooked any inconsistencies between any of the health department conversations that I've had and the board presentation, then I'll take ownership of that."


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