City left ‘Caring for Denver’ dollars unspent

Published on September 15, 2022

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DENVER – The Denver Police Department and Department of Public Safety are not managing the money they receive from the Caring for Denver Foundation for a co-responder program sufficiently, according to a new grant audit from Denver Auditor Timothy M. O’Brien, CPA.

This audit was part of a series of grant audits that check for compliance with grant terms and was not an audit of the effectiveness, benefits, or outcomes of the innovative Co-Responder Program, which were not part of the scope of this report.

“We were reviewing the administration of the program, not its objectives,” Auditor O’Brien said. “We found the city is leaving money on the table that could be used for the co-responder program or other programs to support mental health as voters required.”

The city owes $438,000 to the Caring for Denver Foundation because it did not use all the money in time — which sat unused earning interest — instead of being used to help people experiencing mental health crises.

The city also isn’t paying its service provider on time for co-responder services and is charging unallowable costs to the grant. We break down all of these key areas of weakness below.

In 2018, voters approved a 0.25% sales and use tax increase to fund behavioral health services for city residents. These funds are disbursed through grants by a nonprofit organization, the Caring for Denver Foundation. In 2020, the Police Department received a grant from the Caring for Denver Foundation, to fund the Co-Responder Program.  The program is meant to pair licensed mental health clinicians - also called co-responders – with police officers to respond to calls for service involving individuals with suspected or known mental health needs.

The city contracted with a nonprofit called WellPower, formerly known as Mental Health Center of Denver, to provide these services.

Unused funds:

We found the Police Department left $383,000 of grant funds unused, which gained extra interest and now totals about $438,000. And as April 2022, Public Safety had not work with the city’s Finance Department to return the unspent money to the Caring for Denver Foundation after the grant end date of July 31, 2021.

This money could have been used to help people in Denver and should be returned to the Caring for Denver Foundation.

Managers said they were unsure of the closeout process and assumed unspent funds would be carried over to a future Co-Responder Program grant award. They also said they did not close the award because they wanted to wait until there was assurance the city had paid WellPower for all provided services.

“Unfortunately, grants can’t be treated like regular city budgets that roll over from year to year,” Auditor O’Brien said. “It’s use it or lose it — and in this case the people of Denver lost the opportunity in that funding year receive even more services from this innovative new co-responder program.”

The Police Department could have used the grant dollars for the Co-Responder Expansion Program or returned it to the foundation to help people in Denver through other initiatives laid out in ordinance. For example, Denver ordinance says the money could have helped fund alternative-to-jail facilities or training for first responders on how to properly assess and help meet the needs of people with mental health conditions and substance use disorders.

Late payments:

The city also paid its service provider late and did not pay penalties for the delays, possibly causing hardship for Wellpower. Some of the city’s late payments were as much as seven and a half months overdue. According to city rules, invoices paid more than 35 days late should mean departments incur “prompt-pay” penalties.

Specifically, the city’s Controller’s Office calculated the city might have owed WellPower an additional $32,000 in late penalties. However, the department says those fees were waived.

WellPower told us they initially did not agree to waiving those penalties and later agreed only after the request of finance managers from Public Safety. WellPower’s managers said late payment of invoices creates “operational difficulties” and cash flow issues.

Unfortunately, the Police Department and Public Safety chose to disagree with our recommendation to work with WellPower to determine how much is owed and document any agreement to waive interest. Agency managers says they believe they were transparent and honest in communication with WellPower.

“This isn’t the only contractor I’ve heard complain about late payments from the city,” Auditor O’Brien said. “When it comes to nonprofits or small businesses, cash flow problems can be devastating to their operations. It’s the city’s responsibility to set these organizations up for success when doing business with taxpayer dollars.”

While the Police Department did provide documentation showing WellPower eventually agreed to waive the prompt payment penalties, WellPower told our team the nonprofit could not continue to operate that way. They said even after following up with the city on multiple late payments, they were not getting paid.

Unallowable costs:

The Police Department also used grant dollars to pay for costs that weren’t allowed, such as excessive indirect costs, travel expenses, and expenses from the wrong grant year. Indirect costs are general business expenses necessary for operational functions, such as rent and utility bills. For comparison, direct costs that would have been allowed include co-responders’ wages, uniforms, and benefits.

The Police Department agreed to reimburse WellPower’s indirect costs at a rate of 30% of the overall expenses. The grant only allows for a 10% indirect cost rate. According to Caring for Denver Foundation, the city must pay for the extra indirect costs using a different funding source, but the city used grant funds when it should not have. As a result, the full 90% of grant funds were not available for use to help the public directly as voters intended.

By the Police Department not understanding all the terms of its grant agreement related to which costs can and cannot be reimbursed, the city risks over- or underpaying for expenses and indirect costs.

This lowers the amount of money available to meet the program’s goal of paying for facilities and staffing as alternatives to jail, fully funding a co-responder program, and training first responders to help people with mental health conditions and substance use disorder needs.

We made 25 recommendations to the Police Department and Department of Public Safety to improve how they manage the Co-Responder Program grant dollars. Additional recommendations included documenting justification for using Wellpower a sole-source contractor for the co-responder program and gaining more complete access to WellPower’s data system.

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