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County leaders quietly settled a dispute with two of their largest nonprofit meal providers last year – one that ended up costing taxpayers over $9 million and never got publicly discussed.
It’s the second time in two months that Orange County leaders have faced questions over how well they oversee contracts amidst a lawsuit with a different nonprofit that county attorneys say embezzled over $10 million meant to go toward feeding seniors.
The controversy is fueling ongoing concerns about the lack of local oversight of federal COVID funds handed out by the County of Orange, with some county supervisors now calling for an audit of over $200 million in spending.
In addition, issues like this are also triggering questions about the lack of any public discussion or transparency about contract challenges within the $9.5 billion county bureaucracy.
It’s also driving a new emphasis by county supervisors to have all ongoing contract disputes publicly disclosed in real time.
[Read: Santana: Are Reforms and Transparency Coming to Orange County?]
Meals on Wheels OC and AgeWell Senior Services both got hired by the County of Orange in 2020 to provide meals to seniors during the COVID-19 pandemic through a statewide program dubbed Great Plates that was ultimately reimbursed with federal funds.
“When Great Plates Delivered was announced by the State, it was a framework, not a program,” said Holly Hagler, Meals on Wheels OC’s CEO, in a May 2020 press release. “We have now turned a concept into a viable program that helps older adults in our community.”
The two nonprofits received at least $61 million for Great Plates during the COVID-19 pandemic in contracts approved without a public bid or discussion, and county executives planned to pay for them by getting grants from the Federal Emergency Management Agency (FEMA).
But when county leaders asked FEMA for reimbursement, the agency shot down over $23 million in listed fees, saying the nonprofits hadn’t spent the money.
“That alerted us and we looked into it,” said County Supervisor Katrina Foley in a Wednesday interview. “It was determined that the allocation was more than they needed and they had money leftover.”
When county leaders asked for the money back, AgeWell and Meals on Wheels denied the request, arguing the contract let them keep the leftover funds, according to Foley.
“They were interpreting it as the nonprofit would get to keep the money – we interpreted it as a reimbursement contract,” said Foley. “It was a contract that was put together during the pandemic. The language wasn’t as tight as many of us would’ve liked.”
Ultimately, the county got back $14 million from the two nonprofits in a May 2023 settlement, leaving the nonprofits with about $9.4 million, with both sides signing a legal agreement agreeing not to talk about the issue.
“The existence of this agreement, and all terms and information contained herein, shall be kept confidential by the Parties,” reads the agreement, noting several exemptions including the California Public Records Act and a court order.
Voice of OC obtained the agreement via the California Public Records Act.
To review a copy of the settlement, click here.
The county also agreed if they managed to recoup costs in an appeal to FEMA, anything above $9.4 million would go to the nonprofits.
Supervisor Vicente Sarmiento praised the settlement in a short statement Wednesday evening.
“As part of anticipated litigation, the County negotiated with the vendors involved and agreed to a settlement offer that returned 14 million dollars to the County. I was pleased that the vendor and the County were able to resolve this contract,” Sarmiento said.
Darla Olsen, Meals on Wheels OC’s Vice President of Advancement, said they told county leaders as early as July 2020 that they were “deriving substantial net proceeds,” from their contracts, claiming county leaders told them to keep using the money to provide meals.
“In December 2022, the County requested that instead of using the additional funds for senior meals and services, Meals on Wheels OC should instead return the excess revenue…so that the money could be used to meet other county needs,” Olsen wrote in a Wednesday statement.
“This resulted in a dispute that was settled without need for litigation,” she continued. “Meals on Wheels OC was able to retain certain funds that are still being used to provide meals.”
In a statement to Voice of OC, AgeWell CEO Steve Moyer highlighted serving over a million meals to seniors through the Great Plates program, but did not answer questions about the county’s demand for the return of $23 million.
“Age Well remains deeply committed to its decades-long partnership with the County of Orange,” Moyer wrote. “We are proud of our past, present, and ongoing efforts.”
Foley said the county permanently changed its contracting policies after the lawsuit.
“The language of all of our contracts has been changed to make sure that when it’s a reimbursement contract that it’s clear to the vendor they’re only getting paid what they can prove they spent,” Foley said. “Then there’s a percentage in our contracts now that clearly itemizes the amount you can use for administrative costs.”
“I believe that language was not clear or missing,” she continued. “Their position was this was all administrative costs.”
In the settlement, all sides agreed to not let the issue impact future contracts.
“The County agrees to not hold the GPD dispute against the Charities as a negative factor in county procurement decisions,” the settlement states. “The GPD dispute will not be used by the County to support a finding of a lack of present responsibility or integrity by either Age Well or Meals on Wheels.”
However, when the next AgeWell contract came up just a few months later, Supervisor Don Wagner did raise complaints.
“This is not our first rodeo with Age Well. Why would you bring us an Age Well contract?” Wagner asked county staff publicly from the dais at the time. “You’re going to put us in a position that we have to say yes to this particular vendor with whom we have experience at the risk of our public. That is a horrible position for you to put us in.”
[Read: OC Officials Reluctantly Contract With Elderly Services Provider Behind on Old Goals]
The contract dispute isn’t the only high profile contract dispute kept secret at the County of Orange – a longtime tendency.
To date, most of the public focus has been on the Viet America Society, a nonprofit county leaders allege embezzled over $10 million meant for meals for seniors that was instead spent on things like buying houses for its leadership, which included County Supervisor Andrew Do’s daughter.
After county leaders announced that suit, the FBI and IRS raided Do’s house and his daughter Rhiannon’s home. No criminal charges have been filed and both have declined to comment about the issue.
[Read: FBI Executes Searches on OC Supervisor, His Daughter & Others in Missing COVID Money Case]
Most recently, county leaders also abruptly took over another contracting effort – a multi-million dollar contract with the Be Well nonprofit for mental health services that say has not achieved its mark after years of questions over what the organization was doing.
[Read: Orange County Drops Contract with Flagship Mental Health Nonprofit After Failed Audit]
Foley stressed the two senior meal contracts were very different situations from Viet America Society, highlighting how Meals on Wheels and Age Well had both been able to prove they aided seniors.
“The bottom line is this was a contract dispute,” Foley said, “They didn’t do anything wrong in terms of not providing the services.”
Noah Biesiada is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.
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