A report on a troubled health services organization in Coastal Georgia says its operation has been riddled with financial irregularities and management problems.

Gateway Behavioral Health Services, which has an annual budget of more than $30 million, has a deficit of close to $4 million. It also had $1.4 million in accounts payable at the end of August, according to a report written by the organization’s newly appointed manager.

“Most alarming was the fact that the staffing company that employs almost all of Gateway’s direct service staff was owed $1.2 million, or three bi-weekly payrolls, placing them at risk for interruption in its ability to deliver services,’’ said the Sept. 17 report by David Crews

Next month, Gateway will close a St. Marys bottling plant that is losing money, said the report by Crews to the state Department of Behavioral Health and Developmental Disabilities (DBHDD). The plant employs people with behavioral health problems and developmental disabilities.

Crews, in an interview with GHN on Friday, said Gateway “has some real cash flow issues.’’

Crews was put in charge of Gateway in July, when DBHDD took control of the organization, firing its CEO and asking its chairman to resign.

Gateway had previously sued DBHDD, and the attorney who filed that lawsuit told Georgia Health News recently that the state seized control of Gateway and fired the CEO in retaliation for the suit. The lawsuit alleges the state owes Gateway more than $1 million in reduced payments.

David Will, the attorney, was originally hired by the Gateway board but no longer represents it except for the purposes of this ongoing litigation. He said in a recently amended complaint that the firing and request for resignation came the same day that a date was confirmed for mediation of the lawsuit.

Will and another attorney at his firm could not be reached for comment this week on Crews’ report.

The state is countersuing Gateway, saying that Georgia is owed $2.6 million from state loans made to the CSB in 2005.

Gateway is one of 26 community service boards (CSBs), which are quasi-governmental safety-net agencies that serve more than 175,000 Georgians who have developmental disabilities or have mental health or substance abuse problems. Gateway serves the counties of Glynn, Camden, McIntosh, Long, Liberty, Bryan, Chatham and Effingham.

The report notes that board members have done business with Gateway.

“It’s clear that a board member should not be doing business with a community service board,’’ Crews told GHN.

According to the report, board member Matt Cardella’s company was compensated for administering the contributions of Gateway employees who participated in the 401a or 457 Plan.

“Cardella stated that he offered to resign from the Gateway board in 2011, but was told that based on Gateway’s legal advice, he did not have to resign to avoid a conflict of interest,’’ the Crews report stated. “On August 31, 2013, upon being provided legal guidance from Gateway’s newly appointed attorney, Cardella immediately resigned from the Gateway board.”

Cardella referred a reporter to Crews for comment Friday.

Gateway board Chairman Howard Lynn’s company, Lynn Electric, was paid about $63,000 over three fiscal years for work at the GEM bottling plant, which provides employment to people with developmental disabilities.

Lynn said his company provided the labor and expertise for free, and he said the funds paid by the board went toward the purchase of needed materials, according to the Brunswick News.

The bottling plant required financial support of about $350,000 from Gateway Behavioral Health Services, the parent organization, in fiscal 2013. But the hourly labor cost or the payroll for consumers was only $65,000, according to the report.

GEM owes Gateway approximately $574,000 and does not have the ability to pay the loan, the report said.

Lynn was removed as board chairman by DBHDD Commissioner Frank Berry.

The report also stated that a note of about $953,000 is due for a Glynn County property that Gateway purchased and which now has a tax value of $646,000. The property was bought in May 2009 at a price of $1.4 million, apparently without an independent appraisal or market study, Crews said.

Gateway has administrative costs higher than other CSBs, the report said.

The CSB has been the subject of anonymous complaints from Gateway employees, alleging mismanagement. But some of them are not investigated.

Last year, the organization’s board last year passed a policy that the only anonymous complaints accepted would be those involving “emergency situations that threaten public health and safety,’’’ the report said.

“This policy appears to put a chilling effect on staff reporting corporate compliance issues,” the report said.

Crews told GHN that Gateway has “some good staff, committed people. Services are being delivered.’’

Berry, the DBHDD commissioner, said in his response to the Crews report that the agency will conduct a national search to identify a permanent CEO for Gateway.

The state agency, Berry said, will continue to oversee the operations of Gateway “until we have complete confidence that the local leadership can sustain adequate fiscal controls, demonstrate a pathway toward solvency and establish oversight and governance standards expressed in statute.”

See more at: http://www.georgiahealthnews.com/2013/09/report-blasts-gateway-financial-problems/#sthash.M52nHMWT.dpuf

Tags: health, Georgia Department of Behavioral Health and Developmental Disabilities, gpbwell, Georgia Health News, Andy Miller, gateway behavioral health services