StarVista closes after number of financial issues

But during a meeting last week, the program’s leaders told them that Tuesday would be the residents’ last full day there.

“Everybody was really stressed about not having anywhere to go,” one resident said in Spanish. “We cried all weekend. It was very high emotions.”

Less than a week after the Daybreak announcement, StarVista’s leadership told employees that, apart from the crisis hotline and the San Mateo County Pride Center, all of its programs would close down by the end of July, ending a long, turbulent chapter for one of the county’s top behavioral health contractors, which has received about $17 million from the county since 2024, according to the county ledger.

Over the last several months, the organization has faced payroll delays, laid off and furloughed over 60 employees and shuttered numerous programs — sometimes with less than two weeks’ notice — including the early childhood department, the First Chance sobering station, a counseling center and DUI program.

According to audio obtained by the Daily Journal, StarVista had been taking out lines of credit to cover payroll for years, highlighting the organization’s fiscal predicament. CEO Sara Mitchell had taken a leave of absence in March — when payroll delays, layoffs and other program closures were announced — and former Chief Financial Officer Mike Bilby recently resigned after less than a year in the role. The issue also comes less than two years after StarVista’s former clinical director Clarise Blanchard was charged with embezzlement, accused of funneling about $700,000 worth of donations intended for StarVista to a personal account from around 2009 to 2022.

Possible merger

In light of the financial challenges, StarVista had been pursuing a merger with another nonprofit, but according to July 16 audio obtained by the Daily Journal, acting CEO Shareen Leland said the county decided not to transfer its current contracts under the proposed merger, without which the organization wouldn’t be able to move forward.

A county spokesperson did not respond to requests for comment in time for publication.

While most employees were aware of StarVista’s financial challenges, many managers and directors were surprised to learn their programs would be cut, given their department’s healthy revenue and stable expenses. Just nine months prior, the Daybreak program announced it had received a $1.25 million grant from The Runaway and Homeless Youth program, a “prestigious,” “five-year” grant, a company email stated.

While there are some revenue streams that are unrestricted, Debbie Diaz, who previously held clinical and director-level roles at StarVista, said that by and large, the funds for contracts with public agencies, including the county, state and school districts, are earmarked for very specific services. Grants, whether from a public or private entity, also usually come with explicit conditions and are not intended to be used however the organization sees fit.

But multiple current and former directors were told something different from leadership.

“They’d say the money is basically in one big pot, but that’s not really how things should work,” Diaz said. “Contracts are for specific programs and for specific things.”

Another former employee from the early childhood department was also surprised to learn of her program’s abrupt closure, since it had maintained a generally strong financial position for years.

Multiple director-level sources who have worked for StarVista said they also noticed dubious line items that were budgeted into their programs’ contracts. They included a child and family program budget showing about $23,000 in expenses for rent and phones, despite staff working from schools and not receiving cellphones or having an office from which to work, a source familiar with the program said. A similar instance happened with a foster youth program, another school-based program, that included similar types of line items for a program with only a few full-time staff, one source said.

Another former director never got a clear answer as to why their program contracts continued to include the same amount of rent – $50,000 — as a line item, even after it downsized its office and began to share it with several other programs. Other allocations, such as $30,000 for internet and phones, also raised red flags, given the relatively small department, a relative lack of reimbursement for any supplies and sharing basic resources, including laptops, she said.

StarVista’s relationship with the county

StarVista’s near-sudden collapse raises questions over how the county keeps an eye on the organizations it contracts out to for critical services. Typically, the county reviews a potential contractor’s financial documents at the beginning of the request-for-proposal process, and every year it is provided with contractors’ audit reports and financial statements, Jei Africa, director of the county’s Department of Behavioral Health and Recovery Services, previously stated.

But despite the increasing red flags over the past year, StarVista’s 2023 financial report — the most recent one available on its website — did not raise alarm bells, though it mentioned that the audit does “not express an opinion on the effectiveness of StarVista’s internal control” and that “material weaknesses or significant deficiencies may exist that were not identified.”

While StarVista had some of the most closures over the past year, other contractors, such as Caminar, have also shut down a handful of programs, including its crisis residential home Redwood House.

Africa and County Executive Mike Callagy have previously mentioned, including during Board of Supervisors meetings, that while the program closures can have short-term impacts on clients, the county has largely been successful in finding similar, alternative services for clients. They’ve also mentioned that some of the operational issues providers face could be remedied with more consolidation, given there are often duplicate services.

But many of the programs that have closed over the past year are not offered anywhere else in the county. StarVista’s First Chance was the county’s only sobering station that was a jail alternative for those arrested for driving under the influence, and the last program in the county for multiple-DUI offenders has closed as well.

Mitri Hanania, managing attorney at the San Mateo County Private Defender Program, said private defenders and their clients are increasingly having difficulty finding programs for their clients.

“They have so many people applying that they can’t take in everybody, so you get on a waitlist, and that’s where the problems start to occur,” Hanania said previously. “Because if you’re not enrolled, you’re not in compliance with the court and you are unable to reinstate your license to be able to drive.”

Caminar’s Redwood House was the only crisis residential facility of its kind in the county, and Daybreak was the only such shelter serving that demographic and suite of services.

David Canepa, president of the San Mateo County Board of Supervisors, said he would like the county to do a deep dive on the impacts of the closure and explore ways to prevent something like this from happening again.

“I’m interested in calling a study session to understand what services and gaps are within our county relative to StarVista,” Canepa said. “We have to figure out how to plug these gaps, and how do we get out in front of this?”

He added he would be interested in conducting a “financial stress test” for some nonprofits that provide such critical services.

Impact on clients and staff

Daybreak residents said they didn’t find out until Monday, July 21, one day before they had to move out, that they could be transferred to another shelter that offered comparable services — however, the length of stay is still temporary, up to about four months, with some options to extend.

But for the four days prior, some wondered if they would be homeless.

“To hear the news on Thursday was the most horrible thing that could’ve happened,” one resident said. “After going through everything and fighting to get resources, it felt like they were taking them away from me so quickly. I’m barely 20 years old.”

Another resident met with someone on Friday, July 11, to discuss her options and said residents were encouraged to find a garage or living room to rent. They would also receive about one to two months’ worth of rent, but she, along with most of her peers, wouldn’t have been able to afford it after a couple months without having much income and given their ages and sometimes immigration status — not to mention they only had five days’ notice.

“I would’ve been homeless after the month or two that they paid for rent, because I have nowhere else to go,” one resident said in Spanish.

One Daybreak employee said that transferring to other shelters, like the Navigation Center, were also discussed, but most of the residents are young adults, sometimes teens, with sexual trauma, and thrusting them into an adult shelter without adequate planning is daunting and irresponsible.

Diaz said she wishes there was more thought given to the abrupt transitions clients are facing.

“StarVista doesn’t seem to be advocating very hard,” she said. “To give [residents] less than a week’s notice to vacate is unethical.”

StarVista did not respond for comment before publication.