State-Funded Child Care Agency 4C Council Placed Under Audit

As a single mom with a full-time job, the last thing Valentina Renales has time for is a bureaucratic paper chase. But for the past year, the 38-year-old mother of three has gone through dozens of emails, countless phone calls, three caseworkers and two managers in a battle to keep her child care subsidy—her path out of poverty.

“I’m scared I’ll lose this,” Renales says, visibly exhausted at the end of a recent weekday. “It allows me to work, to put aside money for college, to expose my children to early education, to purchase a car, to better myself as a person. Without child care, none of this would be possible.”

Unsubsidized day care, however, would cost, by her estimate, something on the order of $3,000-plus a month for her 5-year-old, Savanna, and toddler, Ava.

“That’s way more than I bring home each month,” says Renales, who makes $16 an hour as a classroom aid at Rocketship Education, a chain of government funded, privately run charter schools.

Her concerns have been falling on deaf ears. The Community Child Care Council of Santa Clara County—known as 4Cs, or 4C Council—lost Renales’ case file and fell behind on paperwork. She found out that the publicly funded nonprofit overstated her income by $5,800 a year, understated her family size and miscalculated her subsidy. The agency, which relies on roughly $45 million a year in government funding, has also fallen several thousands of dollars behind on payments to her child care provider, Action Day Primary.

“We’re going on a year without this being resolved,” Renales says. “That’s why people are refusing to work with 4Cs—they aren’t getting paid. Thousands of families depend on this agency, and it’s failing them.”

Employees at 4Cs say that at least 100 cases went missing at one point, prompting a manager to order staff to stop what they’re doing and go on a “scavenger hunt” until they found them. Another source say 4Cs is so backlogged that in addition to missing files, there are more than 1,000 unassigned cases.

Several more employees say they hope the heightened attention from regulators will force the nonprofit to correct course. Last week, a handful of attachés from the California Department of Education (CDE)—the nonprofit’s primary funder—walked into the 4Cs north San Jose headquarters to begin an in-depth audit.

“They better get to the bottom of this,” Renales says. “These are people’s lives we’re talking about.”

The 4C Council is responsible for subsidizing child care for more than 5,500 children in Silicon Valley. Since last fall, San Jose Inside has reported about the rampant dysfunction, crippling staff turnover, shuttered day cares and missing retirement payments at the 45-year-old agency. New details now indicate that the future of 4Cs—the South Bay’s single largest taxpayer funded nonprofit—grows increasingly uncertain.

An internal memo stamped Feb. 3, 2016, and mistakenly disclosed to San Jose Inside by the CDE, noted that the South Bay nonprofit had incurred operating losses in four of the prior six years. Net assets dropped from $910,106 in 2009 to $170,109 in 2015, according to the document. While audits of the 4C Council meet submission standards every year, the memo states, its weakening financial condition has prompted alarm in Sacramento.

“If the contractor continues this overall trend, there is a greater possibility that the contractor will soon be unable to continue as a going concern,” the document signed by CDE Audit Manager J.R. Waltz stated. The term “going concern” is accounting lingo for that an entity could continue to operate for at least a year.

San Jose Inside asked to see similar memos going back to 2010, but CDE spokesman Robert Oakes denied the request. The document—available here—was “inadvertently produced” to San Jose Inside, he said. “The memoranda are authored in anticipation that there may be administrative [or] judicial action taken in the future,” Oakes wrote in an email last month. “[They] reflect the deliberative process of the CDE audit staff.”

Source: California Department of Education

Source: California Department of Education

According to state education code, CDE has three options for dealing with a contractor in such dismal financial straits: continue the contracts with 4Cs as is, impose stricter conditions or not renew them at all. The state has until early April to decide, which may explain the timing of the audit—although it’s unclear what prompted the probe. Oakes went incommunicado, as did 4Cs Executive Director Alfredo Villaseñor. But in a notice sent to employees, Villaseñor denied that the organization is in poor financial health.

“Today, I was contacted by a local reporter who alleges that she has in her possession a copy of an internal audit memo form (sic) the California Department of Education that alleges that our organization ‘is headed toward insolvency,’” he wrote Friday. “Recognizing the political environment our organization is currently in, I am writing to directly address these issues with you. I want to be clear in stating that our organization has been in existence for 45 years, and has always been financially responsible.”

Villaseñor said he’d tell the CDE about “the unauthorized usage” of the agency’s name “in an attempt to smear our organization.” He ended the missive by urging staffers to stay focused on the important work of helping the county’s most vulnerable residents.

“On that mission, we will never quiver,” he wrote. Presumably he meant “quaver.”

But Yaxin Gonzalez, one of Villaseñor’s case managers, says the organization has strayed from its mission to help struggling families, prompting an exodus of institutional knowledge. The number of case managers fell from more than 30 to about a dozen and the per-person caseload jumped dramatically to upward of 100. Though many of the problems are out of her control, Gonzalez says she and her fellow case managers have to smoothing things over for parents who break down in tears because of 4Cs’ mistakes.

“One of the things that gets to me is that management has lost the vision of the mission of the agency,” Gonzalez says. “They’re no longer there for the community.”

Under Villaseñor’s leadership, day care centers have closed and families that depend on subsidies fear losing them because 4Cs misses deadlines. Day cares that depend on 4Cs to reimburse them have gone months without getting paid. A growing number of those facilities refuse to work with 4Cs clients because of the agency’s track record.

Contractors have operated with little oversight, leading to a lawsuit filed earlier this year against 4Cs for allegedly failing to prevent two girls from being sexually assaulted by an employee at one home day care. Despite tens of thousands of children in need of child care, according to a Santa Clara Child Care Needs Assessment, 4Cs struggles to meet enrollment targets and routinely fails to hire enough teachers to meet the one-per-eight student ratio. It’s not for a lack of funding either, as the nonprofit has returned millions of dollars in federal grant money in years past.

Confidence in the organization was also shaken by changes in leadership. Sofia Mendoza, a revered community leader, was deeply involved with 4Cs, serving for years on its board of directors before her death in 2015. Ben Menor, her successor as chair of the board, has earned less respect because of his 2008 no contest plea to charges that were later dismissed in an embezzlement scandal at another nonprofit. More than a decade ago, the city of San Jose conducted an audit that uncovered misuse of hundreds of thousands of dollars in public money under his purview as head of the Northside Community Center. Though a judge exonerated Menor of criminal charges, that didn’t change the audit findings. A lawsuit also claims that Menor borrowed $50,000 from a family friend to indemnify court-ordered restitution but never repaid the personal loan.

Other problems have only come to light because of a protracted battle between employees who voted to unionize. In February, San Jose Inside reported on a retiree’s pension payments being withheld. Two weeks after that story was published and seven months after her last day on the job, the retiree, Gloria Pena, got her first check in the mail.

Meanwhile, four sources familiar with the situation say the nonprofit’s attorneys have admitted at the negotiating table that both pension accounts run afoul of federal law. According to union reps, Villaseñor also excluded an entire category of staffers from receiving pensions, misclassifying teachers and their aides as temps even if they worked at 4Cs for several years.

Employees and union reps have begged state lawmakers and education officials to investigate, and say they welcome the CDE’s audit. Gonzalez says auditors originally planned to stay a week but decided to extend the review to potentially an entire month.

“Maybe they’re finally listening to us,” says Kristy Sermersheim, who was interim chief elected officer of the SEIU Local 521 and lead negotiator for the 4Cs workers until last month. “We’re all frustrated that there’s been no accountability for an organization that has a shaky relationship with the truth.”

This article has been updated. 

Jennifer Wadsworth is the former news editor for San Jose Inside and Metro Silicon Valley. Follow her on Twitter at @jennwadsworth.


  1. > “One of the things that gets to me is that management has lost the vision of the mission of the agency,” Gonzalez says. “They’re no longer there for the community.”

    This is the classic death spiral of government funded bureaucracies that spend other people’s money to “do good”.

    At some point, the FIRST PRIORITY becomes saving bureaucrat jobs.

  2. $3000-$4000 a month for private daycare, that’s between $8-12 per hour per kid or roughly $20 average. How much is your 4C charging and collecting per kid, and how much is daddy contributing and how much are we the taxpayer shelling out for not our children? Inquiring minds just have to know!

  3. Alfredo Villaseñor is a scam. He has robbed thousands of dollars from the providers that he is meant to serve and has coerced them into joining programs that bring the organization more cash, such as EHS. He ordered multiple vehicles for his employees using the funding the State gives it to “improve” the image of the property. He had no right to order these new vehicles for each employee with tax payer funds. Please end this organization, it’s trash.

    • There’s no accountability, especially when employees are serving their own interests and management doesn’t implement a system with checks and balances. This organization has had fraud cases where recipients collected benefits by falsifying or understating their income to meet the program’s income qualifications. The trained case managers at Community Child Care Counsel didn’t even bother verifying if recipients are collecting child support or alimony in addition to their employment check, which may ultimately disqualify them for any subsidized childcare benefits. So thousands of dollars are lost every year to overpayments that will never be recovered…..

      Even when these complaints were submitted to Community Child Care Counsel – they fell on “deaf ears” the same way as the mother’s concerns in this article. The complaints were probably ignored so they can hide the corruption within the organization to avoid losing their government funding.

      The irony of the story is that one of the past recipients that was committing benefit fraud is now working as a daycare provider under the supervision of Community Child Care Counsel. She is probably helping other parents commit benefit fraud by cheating the system as she has figured out how to steal and get away with it. So I guess they don’t have the resources to run background checks or cross reference names on the system in case they are related to someone in this article.

      So, insolvency is only a matter of time, but hopefully with this audit they can discover the many reasons this organization has incurred operating losses in four of the past six years.

  4. Having worked in a government funded non-profit, I can tell you this kind of stuff goes on all the time. There are good people doing good things there, but the level of incompetency and scamming outweighs it many times. One problem is that many in management have no business training or business experience. They got promoted because they were good at implementing and managing programs. They operate more on ‘feelings’ (their own or others) than on cold hard numbers or facts. There were chronic alcoholics caring for children, obviously padded expense reports, ignoring glaring problem employees or issues (seriously, one manager said he hoped if he ignored the problem it would go away – it didn’t and almost folded the agency) and it took YEARS to fire employees who were skimming off the agency. Image was everything – one colleague told me early on that what you say is more important than what you do. And with the low wages, you’re kind of scraping the bottom of the employee barrel. Many of these people would never survive in the corporate world – I longed to go back to that environment, but at my age it wasn’t going to happen. I was grateful to have a job, but it was very demoralizing to be giving 150% to the job with no recognition whatsoever. I finally gave up and just did the minimum required.

  5. “Having worked in a government funded non-profit…” The government doesn’t fund anything. Taxpayers do.

  6. This doesnt shock me because this happen before were the agency do you guys remember ” ESO”?
    Yes ESO also owed chidcare providers thousands of dollars and They were closed down .

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