Sonoma County supervisors vote to sever ties with DEMA after financial investigation, legal threats from CEO
The Sonoma County Board of Supervisors on Tuesday voted to begin severing ties with contractor DEMA Management and Consulting, rejecting a request by the Department of Health Services to extend the for-profit company’s expired contract until July 31.
Instead, the five elected officials ordered county staff to replace DEMA as manager of two key county housing sites — a managed tent site a block away from the supervisors’ office, and the converted hotel Mickey Zane Place. The decision comes after a financial investigation that raised questions about the company’s billing, first raised in a Press Democrat investigation, and after DEMA’s CEO threatened to sue the county over an alleged bias against her.
Supervisors did not specify an exact timeline Tuesday. County officials said they must confer with their labor unions to determine if current staff can take on the medical and service work DEMA provides at the two sites. Another option is to seek out a new vendor on an emergency basis while a formal competitive bidding process plays out.
In the meantime, it appeared DEMA would continue managing the two sites on a week-to-week contract.
Some of the supervisors expressed frustration with the health department’s request to maintain the company until July 31, telling Director Tina Rivera they had hoped by this point, following months of internal debate, the agency would have more immediate options for moving away from DEMA.
“I’ve asked for options multiple times over multiple months,” Supervisor Chris Coursey said.
Supervisor Susan Gorin echoed that, saying she was not comfortable extending a contract with DEMA for any considerable length of time and is “frustrated” the board did not have more to choose from.
The health department had provided supervisors two options.
One was to award DEMA a new, multiyear contract through 2027 to continue managing Sonoma County’s homeless housing sites. Competitive bidding for that contract began late last summer even as the county’s financial investigation into the company was underway. During that process, a review panel recommended DEMA win that new contract over HomeFirst, a Bay Area service provider that has worked with the city of Rohnert Park. The panel made that decision in December, though it only became public last week.
The financial investigation concluded in March with a report stating that DEMA did not have the supporting documentation necessary to back up as much as 40% of the billing investigators examined.
After that report, the health department asked supervisors to once again offer DEMA a short-term extension of its contract, this time until July 31, while the department opened a new competitive bidding process for a long-term housing site operator.
The supervisors Tuesday indicated they did not have an appetite for maintaining ties with DEMA, a provider that was born during the early days of the pandemic and went on to run as many as seven sites for the county. Their decision came despite public comment from the company’s CEO Michelle Patino and three DEMA employees, who asked supervisors to keep on with the company and touted the front-line team’s connections to their vulnerable clients.
In her comments before the board, Patino again accused the county of discriminating against her as an LGBTQ+ business owner, and accused The Press Democrat of publishing “unsubstantiated” information that kicked off the financial inquiry.
“We have shown merit and expertise and the ability to fulfill this county’s goals at every turn,” Patino said. She emphasized that the county’s investigation had not turned up any evidence of fraud. She has denied any wrongdoing in her billing and said the county ignored documentation she believed supported her invoices.
A Press Democrat report published in July 2023 outlined $26 million in no-bid emergency contracts the company had secured in a little more than two years, and raised questions about billing for the company’s position of director of nursing. A review of invoices for that position showed $800,000 in billing that doesn’t align with what nine health care workers formerly or currently employed at the company say they saw on the ground.
In the wake of the newspaper’s investigation, Sonoma County’s independently elected auditor opened a financial inquiry that resulted in a report officials made public March 26.
That report, written by Santa Rosa-based accounting firm Pisenti & Brinker, did not conclude whether DEMA had overbilled in its invoices. Instead, the accountants found they couldn’t properly assess DEMA’s billing because the company had not tracked the work of its salaried employees.
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