Report 2002-031 Summary - September 2002

Department of Rehabilitation: Its Delay in Correcting Known Weaknesses Has Limited the Success of the Business Enterprise Program for the Blind

HIGHLIGHTS

Our review of the Department of Rehabilitation's (department) administration of the Business Enterprise Program for the Blind (program) reveals that:

RESULTS IN BRIEF

The Department of Rehabilitation (department) administers the Business Enterprise Program for the Blind (program) in accordance with the federal Randolph-Sheppard Act and the California Welfare and Institutions Code. The goals of the program are to provide blind persons with remunerative employment, enlarge the economic opportunities of the blind, and to stimulate the blind to greater efforts in striving to make themselves self-supporting. To accomplish these goals, the program provides food-service facilities and training to qualified blind persons throughout the State, enabling them to operate their own food-service businesses, including cafeterias, snack bars, wet and dry vending stands, and vending machines. However, we found that the department's delay in correcting known program weaknesses has hampered its ability to provide blind persons with meaningful business opportunities that allow them to be independent.

In recent years, the department has achieved only a limited level of success in terms of program participation and income for blind operators of food-service facilities (operators). Specifically, the number of new participants has declined recently, falling from 16 in federal fiscal year 1997-98 to 7 in federal fiscal year 2000-01. Of the 7 participants who completed training in federal fiscal year 2000-01, only 3 obtained food-service facilities. Further, in fiscal year 2000-01, more than 50 percent of operators earned less than $2,500 per month, the program's minimum for opening a new location, and nearly 30 percent earned less than $1,050, about what a person could earn working full time at California's 2001 minimum wage. Nonetheless, because a small number of operators have been quite successful, the average net income earned in federal fiscal year 1999-2000 by California's operators was slightly higher than the national average, totaling about $34,300 a year.

The problems the program has faced may in part arise from the department's delays in correcting weaknesses that previous audits identified. These weaknesses included the need for a strategic plan and the need to update the regulatory guidelines that govern the program. The department has only recently developed its first strategic plan, which represents a significant step forward. However, the plan lacks defined outcomes and important performance measures that would enable the department to track whether it achieves its objectives. In addition, after more than seven years of work, the department has yet to update its regulations. Consequently, the program lacks clear guidelines for basic and critical tasks such as purchasing equipment, which may lead to a disparate delivery of its services. The department has no clear time frames or deadlines for completing the regulations, and the reasons it offers for not having done so lack substance.

One of the key areas in which the department requires immediate guidance concerns partnerships between program participants and private food-service businesses. To make its cafeterias more profitable, the department has pursued these private partnerships, which ideally would serve as transitional situations during which the operator would receive training from the private partner. However, in practice the partnerships have resulted in operators essentially contracting out some of their program benefits to private businesses for set monthly fees in what appears to be an action inconsistent with the content of the federal law. Moreover, the department has effectively relinquished the ability to monitor the financial information for these facilities. As a result, it cannot ensure it collects the full fees that it would normally collect from the facilities, which in effect means that other operators are paying an inequitable share of program costs.

Other weaknesses in the department's administration of the program have impeded its success and that of its participants. Since August 1998 the department has not actively pursued the collection of past-due commissions owed to the program by private vending machine businesses. Because of the department's delay, some of these funds may now be uncollectible, which effectively reduces the money available to fund the operators' retirement plan. Further, the department has not ensured that the program provides required consulting services and upward mobility training to its operators, nor has it adequately monitored the operators so it might intervene and assist in resolving financial or operational problems.

RECOMMENDATIONS

To improve the effectiveness of the program, the department should ensure that it dedicates the proper level of attention and resources to correcting the program's known weaknesses. Specifically, the department should take the following actions:

AGENCY COMMENTS

The department generally agrees with our recommendations and states that it will continue its efforts to improve the program. However, it strongly disagrees with some of the statements and conclusions contained in the report concerning management and the operation of the program. Our comments on the department's response immediately follow it.