Southeastern Arizona Behavioral Health Services needs to make some changes or it risks losing a $35 million contract with the Community Partnership of Southern Arizona.

Neal Cash, president of CPSA, had concerns in December about an investigation by the Arizona Attorney General into embezzlement allegations; former agency CEO Dana Johnson’s borrowing and never repaying $150,000; the level of services being provided to patients; and spending on vehicles and auditing fees.

Cash said a letter was subsequently sent because CPSA feels SEABHS has not followed requirements in the contract between the two agencies.

Since 2006, tax documents show CPSA has given SEABHS between $29 million and $35 million a year.

Without the funding, SEABHS’ future would be uncertain. It relies heavily on the public funding. The agency provides mental-health services in Cochise, Greenlee, Graham and Santa Cruz counties, and has 400 employees.

The Dec. 17, 2009, letter to Jim Rubio, acting CEO of SEABHS, outlines five areas to be corrected by May 3. A plan of action had to be drafted by Jan. 19.

SEABHS is required to correct finances and staffing levels, a lack of networking and sufficiency, financial instability outlined in recent audits and an inability to meet community expectations.

The SEABHS Board of Directors has been at odds over how to rebuild the image of the company.

Marcelino Varona Jr. of Nogales has pushed for more board oversight while other members argue that “micro-managing” is not best for the company.

Issues pointed out by Varona in the monthly board meetings were stressed in the Letter of Cure, along with other issues Cash said SEABHS must address to get a contract renewal.

Cash said the first concern centers around the money, with CPSA questioning if SEABHS is providing services commensurate with the dollars it receives annually.

Cash said SEABHS has shown an “inability” to provide services consistent with funding for at least two years.

This leads to another problem outlined by Cash regarding SEABHS staffing.

Cash said SEABHS has had significant vacancies, and they have not been filled in a timely manner.

Because SEABHS did not meet required staffing levels, Cash said the agency received a $13,000 sanction from the state in October. The fine was levied because SEABHS did not hire the high-needs case managers required in a state iniatie. Staffing levels must meet requirements set by the Arizona Department of Health Services (ADHS), Division of Behavioral Health Services (DBHS).

SEABHS must have a minimum of 18 full-time high-needs case managers on staff by Jan. 31, hire or subcontract for seven support and rehabilitation staff members by Feb. 28, and hire or subcontract for case managers, 3 full-time and one part-time, who will give 50 percent of their time to case management and 50 percent to rehabilitation support services.

Cash said that to assure these guidelines are met, CPSA will monitor the situation monthly.

Also, there was a “significant turnover of supervisors” in SEABHS clinical sites in Benson, Bisbee, Douglas, Clifton, Nogales, Safford, Sierra Vista and Willcox.

A plan is required for SEABHS to increase medical professionals on staff to care for children and adolescents. Staffing levels for childcare have improved in recent months, but Cash said SEABHS must prove this level can be maintained.

SEABHS was below standards in hiring medical professionals to care for adult patients in the fourth quarter of 2009, and the first quarter of 2010. Cash said no correction plan is required, but sufficient staffing levels must be maintained.

Cash was concerned about SEABHS not having a human resource director on staff. He said the agency must provide assurance that the position will be filled, and must submit a plan to CPSA specifying how human resource functions will be administered.

Also, SEABHS must address network efficiency. Cash said the company has not utilized community-based providers to deliver support services.

Therefore, SEABHS is not in compliance with designating a contractually required network development liaison and not in compliance with the requirements of a Substance Abuse Prevention and Treatment Block Grant.

The grant funding was to go toward residential facility services for substance-using women with dependent children. SEABHS must submit a plan outlining how the grant requirements will be met.

A fourth issue is SEABHS’ financial instability.

“Recent audits have pointed out inadequate internal controls,” Cash said. “SEABHS must submit a plan to review, revise and implement internal controls, policies and procedures to ensure processes are in place requiring segregation of duties and restricted access to blank checks, petty cash and check deposits.”

In December, the Attorney General indicted Sylvia Nerey, a former SEABHS employee in Nogales, for allegedly embezzling more than $30,655 between October 2006 and October 2008.

The charges are the result of a joint investigation by the Nogales Police Department, Benson Police Department and the Attorney General’s Office Special Investigations Section and Medicaid Fraud Control Unit.

Nerey is accused of forging 18 SEABHS checks, which were either deposited into her personal accounts or cashed. The checks ranged from $605.95 to $2,103.73.

Another former employee is being investigated for using SEABHS services to maintain a personal vehicle.

The Attorney General has also named former CEO Johnson as a suspect for misuse of funds after borrowing and never repaying $150,000 in 2004.

Johnson was terminated in November.

Company policy at the time Johnson’s loan was approved by an executive board did allow employees to borrow company funds. The board eliminated the policy in December.

Starting this month, SEABHS is required to submit a monthly financial report to CPSA’s chief financial officer.

For the company’s vehicle fleet, Cash said SEABHS will be required to submit a plan to review current expenses and reduce unnecessary expenses. Last year, SEABHS spent $500,000 on auditing fees and $650,000 to maintain and manage a 119-car vehicle fleet.

Before being fired, Johnson drove a 2007 agency-owned Cadillac. Other administrators are driving Jeep Liberties and a Dodge Ram.

Board meetings in November and December offered few reports of costs, and who is driving company cars, but no board action has been taken.

The CPSA order means the issue will no longer be ignored.

“SEABHS must update its policies and procedures to ensure appropriate use of company vehicles for SEABHS business and personal use by staff driving vehicles home and back to their assigned work sites,” Cash said. “SEABHS must appropriately report the monetary value for staff’s personal use of a company vehicle on the employee’s W-2 in accordance with IRS regulations.”

The final area SEABHS must address is community expectations.

“CPSA has received community feedback demonstrating a community perception of SEABHS as a closed and retaliatory system lacking transparency and unwilling to work collaboratively with other community stakeholders,” Cash said in the four-page letter. “To counter this negative community perception, SEABHS must … develop and implement a comprehensive communications plan to address community concerns and improve community communication.”

To date, SEABHS remains unresponsive to allegations against it. Rubio has not returned calls for comment from Wick Communications since early December.

In November, after agreeing to an interview to discuss how SEABHS would be moving forward to fix its image and overcome adversity, Rubio canceled. His secretary promised to call and reschedule. The call never came, and Rubio and some SEABHS board members remain unresponsive to media inquiries.

Cash confirmed that SEABHS did comply with the CPSA order to submit a corrective plan of action by the Jan. 19 deadline.

Cash said CPSA is reviewing the letter, has requested more information on some issues, and will issue an official statement to SEABHS by Feb. 2.

“They have responded appropriately,” Cash said. “We’ll see where we go from here. Ideally, the goal here is to make sure things get better down the road.”