Sonoma County extends contract with controversial homeless provider that is under financial investigation

Sonoma County agreed to pay DEMA Management & Consulting an additional $1.1 million to extend its contract for two months as an investigation into the for-profit company’s billing practices nears its conclusion.

DEMA, which was the subject of a Press Democrat investigation that found $800,000 in questionable billing to taxpayers, continues to run two housing sites for the county, one at the county’s emergency shelter site, which has been open for 10 months, and the other at the Mickey Zane Place, a former hotel in downtown Santa Rosa.

The company, founded by former emergency room nurse Michelle Patino during the pandemic, operated seven homeless housing sites at the height of its business. It received more than $26 million in no-bid county contracts in three years to provide nurses, paramedics and other trained medical staff at those locations.

Sonoma County’s independently elected auditor Erick Roeser launched a financial investigation into DEMA’s billing practices after The Press Democrat raised questions about billing for positions current and former company employees did not remember existing.

Roeser intends to report on a completed investigation to the board by the end of February, he said this week.

The investigation was initially delayed, according to Roeser, because DEMA struggled to comply with requests for documentation of its accounting, payroll and billing process. DEMA CEO Michelle Patino has argued she provided the auditors everything they asked for. She denied any wrongdoing, and said that if she made mistakes, she would reimburse the county.

DEMA’s no-bid contracts with the county were executed under emergency government orders that suspend normal contracting rules — first because of the pandemic and then when the county declared a crisis to deal with homeless camps on the Joe Rodota Trail.

Homeless people have continued camping on the trail, including at some encampments that grew to considerable size, throughout 2023 and into the new year.

Running concurrent to the financial investigation has been a competitive bidding process for a provider to manage the county’s homeless housing sites into the future — principally a new facility being prepared in a former juvenile detention facility near Los Guilicos Village.

The Sonoma County Department of Health plans to submit its choice of contractor to the Board of Supervisors around the same time the board and public get the results of the audit. That competitive bidding process has been winnowed down to two possible providers, DEMA and HomeFirst, a Bay Area homeless service provider.

That bidding process generated its own questions after St. Vincent de Paul, the current operator of the 60-bed housing site at Los Guilicos Village, accused county health officials of misleading the organization into missing its opportunity to bid.

St. Vincent executive director Jack Tibbetts, a former Santa Rosa City Council member, said Tuesday that the nonprofit has retained legal counsel ahead of the decision.

There was no indication Tuesday that the county intended to reverse course in light of St. Vincent’s concerns.

“What's triggering us to do an extension is to give sufficient time to complete the outside audit,” County Administrator Christina Rivera told the board at Tuesday’s meeting, “learn about what that report content would be and the opportunities that we may have to cure some processes.”

While Roeser, the county auditor, has kept other county officials apprised of the audit’s progress, he has not discussed the accounting firm’s findings with them, he told The Press Democrat in a phone interview Tuesday.

“I’m really reserving any dissemination of information until we have an actual report,“ he said.

Roeser cautioned that the investigation his office started and then handed to an outside accounting firm is focused on the county’s contracts with DEMA and how the company has billed in accordance with that contract. The accountants do not have the authority to conduct a complete audit of the company, Roeser said, and he has sought to use the term financial investigation instead of audit as a result.

Last November, Roeser announced he was hiring Santa Rosa-based accounting firm Pisenti & Brinker to take over the investigation because it was outpacing his staff and resources. He said at the time that they hoped to conclude the work by mid-January. But that date shifted to mid-February, he said.

Roeser intends to provide Pisenti & Brinker’s report to the supervisors at their Feb. 27 meeting. He anticipated the report should become available to the public beforehand, he said, when the board publishes its meeting agenda online.

Roeser also emphasized that his office is not a part of awarding the new contract for homeless services. He would present the accounting firm’s report to the board and then leave the five elected officials to make their choice on how to proceed.

The board made a last minute adjustment to its agenda this week that underscored that separation. When initially published last week, two county agencies — the health department and the auditor’s office — were originally listed for the board’s action item on extending DEMA’s contract.

On Friday, the board published an “addendum” removing the auditor’s office. Roeser requested the change. "The action item was to extend the contract to DEMA and my office is not party to the contracting process,“ he said.

In its investigation, The Press Democrat reviewed 26 months of company invoices. The newspaper reported on $800,000 in questionable billing focused on a single position, the director of nursing, for which DEMA billed between $76 and $95 an hour.

From August 2020 to October 2022, DEMA billed more than $1.5 million for more than 18,930 director of nursing hours across the seven sites it managed. There are approximately 18,980 hours in 26 months, meaning the company billed for directors of nursing working all but 50 of those hours, according to a Press Democrat calculation.

But 11 medical employees of the company, including one who held the director of nursing position, told The Press Democrat they only ever recalled one person holding the position at a time. At the most, employees said, there were two, since Patino categorized herself as a director of nursing.

After the newspaper’s initial investigation ran, Patino said she categorized an assistant director of nursing, a clinical director of nursing, herself, along with the actual director of nursing, all under the position when it came to billing the county and FEMA. Over the 26 months the newspaper examined, six different people held those positions and did that work, she said.

Employees, Patino said, would have only understood there to be one director of nursing because she directed them to report to just one person.

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