Report finds homeless service provider DEMA unable to account for about 40% of its billing to Sonoma County Health Services Department

The accounting firm Sonoma County hired to examine invoicing by homeless services provider DEMA Management and Consulting was unable to account for $2.3 million out of $5.5 million in billing across five months by the for-profit company.

Santa Rosa-based Pisenti and Brinker found DEMA did not have timekeeping records to validate the work of the company’s salaried employees — which includes the director of nursing position at the center of a Press Democrat investigation into the company’s billing that kicked off the county’s financial investigation in July.

The company was hired initially to run one emergency housing site to shelter at-risk individuals in the first year of the COVID-19 pandemic. They took on up to seven more sites through 2023 in a series of emergency contracts without competitive bidding.

The Pisenti and Brinker accountants selected five months of invoices to test across 2020, 2021, 2022 and 2023. Over those five months, DEMA billed 37,000 hours for salaried employees but did not document, in the ways county officials say was called for in the contract, that the time was actually worked.

The $2.3 million in costs associated with those hours represents about 40% of the company’s billing tested under the county-ordered review.

Extrapolating that percentage across the company’s contract history with the county, as much as $11 million in billing could fall under the same category, Sonoma County Auditor Erick Roeser said.

Pisenti and Brinker’s findings are “significant” and pose additional unanswered questions about DEMA’s book keeping and billing to the county, Roeser said in a Tuesday meeting with The Press Democrat’s Editorial Board that was requested by county officials ahead of the report’s release.

DEMA’s CEO Michelle Patino, and an accountant she has hired to review the county’s inquiry, contended, however, that Pisenti and Brinker rejected records they say could prove that hours billed were worked.

“Every hour is accounted for,” Patino said in a Wednesday afternoon interview.

She and her hired accountant, Jeffrey Mallan, told The Press Democrat the county’s investigation was designed to come up short of a true examination of DEMA’s billing.

“If they’re going to audit something, do your job. Don’t limit yourself,” Jeffrey Mallan, a forensic accountant hired by DEMA said. “If you’re going to open the can of worms, finish it.”

The report raises the additional question of whether the Federal Emergency Management Agency, which is supposed to reimburse the county for the cost of DEMA’s services during the pandemic response, will find DEMA’s bookkeeping sufficient.

After more than seven months of requests, first from county officials and then Pisenti and Brinker, DEMA was unable to produce various records county officials say the company was required to keep under its contracts with the Department of Health Services.

But Patino, the DEMA CEO, said Wednesday she had followed instructions given to her by county officials about what records to keep. She said she was not required to track her salaried employees’ time. County officials, however, said that requirement was in the contract.

“What I was told to do, that’s what I followed,” Patino said. She questioned why the county health department paid her invoices over years if the bills weren’t accompanied by proper documentation.

“If they wanted something different when they were paying on my invoices, why didn't they tell me?” she said. “For I would have been happy to comply and happy to change it. Why three and a half years later are you trying to say I didn't follow things, but you had every opportunity to tell me?”

County of Sonoma - Pisenti & Brinker report.pdf

Patino, a former emergency room nurse, launched DEMA during the early days of the pandemic in 2020, as county health officials rushed to shelter local homeless people and others deemed vulnerable amid widespread community transmission of the coronavirus. She impressed health department leaders with her ability to quickly hire health workers, and her company grew to employ more than 100 people as the Department of Health Services awarded her more emergency contracts to run a growing number of housing sites. None of those contracts were put out for a bid.

On Tuesday, Health Services Director Tina Rivera said there weren’t other providers the county could turn to at the pandemic’s outset.

“We recognize that DEMA did quickly stand up a very critical and much needed, very valuable service as we all recognize for our county,” Rivera said Tuesday. “We truly are grateful for their partnership.”

Rivera said DEMA was correcting some of its billing practices and was now tracking salaried staff time.

DEMA is now in its fourth year of county contracts secured without a bidding process. In 2023, it earned a new emergency contract to staff the county’s managed homeless encampment on its administrative campus in Santa Rosa.

But the Pisenti and Brinker report now puts greater pressure on the Board of Supervisors to decide whether DEMA’s operations with the county will continue. Its current contract expires March 31, Patino said.

Patino has not heard from county officials about its future and voiced worry about the jobs of some 70 DEMA employees.

“I’d like to continue to serve the county and community,” she said. But she also doubled down in Wednesday interview on her stated intention to sue the county, alleging it has discriminated against her through the probe of her business.

DEMA billed the county more than $26 million over its first 26 months, a period examined by The Press Democrat in a pair of July 2023 stories. Roeser, the county’s elected auditor and financial chief, opened the investigation into DEMA’s billing following those first stories, one of which raised questions about $800,000 in billing for the DEMA’s director of nursing position.

Billing for DEMA employees paid by the hour largely checked out, according to Pisenti and Brinker.

In her written response to the report, Patino said Pisenti and Brinker would not accept forms of documentation she argues can prove her salaried employees were doing the work she billed the county for.

DEMA Consulting and Management Response to Pisenti & Brinker Report.pdf

Among those records were forms required by FEMA, which is supposed to reimburse the county for most of DEMA’s billing, and daily lists where employees wrote down their body temperatures — proving, she says, they were at the sites where they were supposed be working.

All of the FEMA forms DEMA provided county officials were filled out by Patino herself, which led auditors to question their validity. The county has been contacted by a FEMA fraud investigator, and has heard from local law enforcement as well, Roeser said.

Sonoma County District Attorney Carla Rodriguez declined to comment on Roeser’s remarks.

Patino said Wednesday she had not be contacted by FEMA investigators nor informed by the county about FEMA’s outreach.

She spoke of what she described as the constant pressures of responding to a disaster in the early months of the company’s work for the county. That environment, and at the same time the fact that she started a new company, did not allow for exhaustive bookkeeping.

But her contracts allowed DEMA to charge the county for accountants, and she did, billing more than $1 million — in invoices that lumped together, payroll, human resources and FEMA compliance work.

It’s unclear how many salaried employees DEMA had across the five months Pisenti and Brinker tested.

In the Tuesday interview with The Press Democrat’s Editorial Board, Roeser, the county auditor, said the accountants estimated it was around 16 to 18 employees but would have fluctuated as the company grew and contracted. On the high end of that estimate, each employee would have worked around 103 hours a week to account for the 37,000 hours examined in the review.

But Patino said at her peak she had more than 18 salaried employees, but could not immediately provide the number on Wednesday. She estimated it to be in the mid twenties, she said.

On Tuesday, in its third closed-door meeting on DEMA in recent weeks, the Board of Supervisors voted to finally release Pisenti and Brinker’s report, which they have had since late February.

Supervisor David Rabbitt, the board chair, said the Pisenti and Brinker report raised concerns about the contractor but said it was too soon to know what the supervisors will do. "I'm frustrated. I'm concerned,“ he said late Tuesday to The Press Democrat’s Editorial Board,

The supervisors also directed county staff to start seeking alternatives for the interim housing sites still under DEMA’s management, according to County Counsel Robert Pittman’s report out of Tuesday’s closed session.

But Rabbitt and Rivera also signaled Tuesday that neither the report nor the series of closed-door meetings had led county officials to a decision on whether to continue contracting with DEMA.

The board is set to reconvene on the matter at its April 16 meeting.

“We are analyzing what our next steps will be,” Rabbitt said.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. Follow him on X (Twitter) @AndrewGraham88