Nearly $23 million in federal health grant approvals have been thrust into uncertainty, with Orange County officials repeatedly delaying – and now deleting – the hiring of contractors that health director Clayton Chau recommended without competitive bidding.

One of the entities was not registered as a charity with the state when Chau recommended them for $600,000 of the federal dollars, while another of the vendors is listed as being in “forfeited” status by state tax authorities, according to online state records.

Chau, who serves both as the county health officer and director of the OC Health Care Agency, didn’t return a phone message for comment.

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The $23 million in health equity grants – funded by the U.S. Centers for Disease Control and Prevention (CDC) – are supposed to help combat COVID-19 and address health disparities among racial minorities.

In justifying the lack of competitive bidding for the contracts, Chau’s office wrote that there wasn’t time to ask for other bids.

“The County risks losing these funds if we are not able to execute a contract expeditiously,” Chau’s office wrote in an Aug. 11 explanation of why other firms weren’t given the chance to compete.

But the grant approvals have been postponed twice from supervisors’ meetings – before Chau deleted the item altogether just before this week’s meeting.

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At an online news conference Monday about the pandemic, Voice of OC asked Supervisor Katrina Foley if she has concerns about the county meeting the deadline for the CDC grants.

“Well of course,” said Foley, who has questioned why the contracts were not put out to bid.

“But that’s why the CEO’s office is working on the item and putting it on our Nov. 2 agenda,” she added, indicating the item had been taken over from Chau by county CEO Frank Kim.

“I have my opinions about how we contract. And I want to make sure we’re focused on our local businesses where we can, or making sure we can keep the work in-house where appropriate, not outsourcing so much,” Foley said.

“Some of the contracts I think are not going to go forward. Some may. We’re still just waiting to hear what the CEO ends up recommending.”

The other four supervisors didn’t return messages for comment.

Earlier this month, Kim said it’s just going to take time to get the grants approved.

“We don’t think that the grant is at risk,” Kim said in response to a question from Voice of OC at an Oct. 8 phone briefing with reporters.

“It’s just going to take a little bit longer.”

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One of the vendors proposed by Chau without competitive bidding is Advance OC, which was not registered as a charity with the state Attorney General’s Office when he asked supervisors to approve federal grant funding for them in September, according to state records.

Days later, following a Voice of OC article raising questions about the vendor, Advance OC was registered with the state on Oct. 6, according to the Attorney General’s website.

An Advance OC board member said the nonprofit had sent in its paperwork much earlier – sometime this summer – but that it wasn’t reflected in state records until later.

“We had actually previously sent the registration [to the Attorney General’s Office], and actually they had cashed the check way before the contract was introduced to the board. And I don’t know what the issue was,” said Niosha Shakoori, an employment law attorney who serves on Advance OC’s board.

“From what I understand…the agenda item is just being postponed until November just so they can do their due diligence, which we have kind of gone through already.”

Chau didn’t return a message asking if officials check the legal status of vendors before recommending they receive county contracts.

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Another vendor proposed by Chau has a “forfeited” status with the state Franchise Tax Board.

When contacted for comment, the Institute for Healthcare Improvement (IHI) attributed the issue to not paying an annual registration fee.

“IHI is a nonprofit organization. The CA Franchise Tax Board requires a $40.00 annual registration fee from nonprofits in order to operate in the state. In 2018, there was a discrepancy surrounding IHI’s annual payment,” said spokeswoman Joanna Clark in a statement Wednesday.

“IHI was just notified of the issue this month (October 2021). Upon notification, IHI submitted the payment and is now waiting for the state to process it and update IHI’s standing.”

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The CDC grant challenges come amid persistent reports that Chau – with backing from supervisors’ Chairman Andrew Do – is planning to quit his county job and move over to become CEO of CalOptima, the county’s health insurance for hundreds of thousands of low-income residents.

Chau and Do have declined to comment on such reports.

For part of the CDC grant funding, Chau was recommending the county hire a vendor that he advises on the side, Voice of OC revealed last month.

Chau didn’t disclose his advisory board position with Advance OC in his recommendation that the county hire the vendor for $600,000 in no-bid work.

A government ethics expert told Voice of OC that Chau should, at minimum, be transparent about his relationship with the contractor, if not recuse himself entirely from recommending them for county work.

“I would certainly recuse myself. That’s a clear conflict of interest,” said Tracy Westen, a government ethics expert who formerly headed the Center for Governmental Studies.

“It’s certainly something that should be disclosed,” he added.

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Chau declined to answer questions for Voice of OC’s article on the conflict concerns, telling a reporter last week that he was in a meeting and deferring comment to a Health Care Agency spokesperson.

A statement provided days later by the spokesperson said Chau and the other advisory board members don’t make decisions at Advance OC, but rather provide “technical assistance” to the vendor.

It’s not the first time Chau has faced conflicts of interest concerns.

He was fined by state authorities back in 2014 for failing to disclose lucrative drug company speaking fees when he worked as a top psychiatrist at the county Health Care Agency he now leads.

He received $84,250 in apparent violation of an agency policy against accepting such payments, according to a 2013 Voice of OC investigation that revealed the payments.

Nick Gerda covers county government for Voice of OC. You can contact him at ngerda@voiceofoc.org.

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