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Executive Summary North Carolina has a long and proud tradition of providing services to citizens who have mental disabilities, including mental illness, developmental disabilities and addictive behavior. The State has built a statewide system of care valued at $1.2 billion annually. This study is part of an effort to restore that tradition. It is an effort to resume North Carolina's history of innovative services, and its ability to reach out to all parts of a very complex and diverse population and to support community services by generating significant resources within the State and the Counties, and from the Federal government. During the past decade, the tradition has been shaken. Issues of management, governance and finance have made it difficult to harness effectively all of the system's resources — those within the communities and the counties and those within the State hospitals and the regional centers — and to turn those resources toward common purposes. There have been a number of setbacks and warning signs: the loss of the Carolina Alternatives waiver for children's services; the financial crises that have closed several Area Programs; the required Medicaid paybacks for certain community -based services; the recent problems in staffing and record keeping at Dorothea Dix Hospital; the closing of several community residential and inpatient services; the turnover of leadership at the top of the agency; and several re- organizations of State agency staff. While these events are not foreign to a public mental health agency, their continuing occurrence has left staff discouraged, Area Programs and providers untrusting, and the Legislature and general public uneasy. Among the professionals and advocates for developmental disabilities services, there is a growing sense that the system has lost its ability to innovate. The national movement toward self - determination, in which individuals with developmental disabilities and their families play a leadership role in making decisions about their future, has not yet taken root in North Carolina the way it has in other states. Services in large intermediate care facilities and regional centers dominate North Carolina's State spending. The ability of the State to provide direction and leadership for developmental disabilities services has repeatedly come into question. This report, under the auspices of the State Legislature, and the leadership of the State Auditor, the Honorable Ralph Campbell, is an attempt to put forth a blueprint for transforming the system. It does not dwell on past problems, nor does it assess blame. It sets out a number of new directions, innovative ideas, changes in structure, and a process for bringing together the key elements of the system in an implementation process over the next five years. It does not attempt to paint the complete picture. Rather, it attempts to begin the work with a number of bold and perhaps controversial directions, creating a new public structure and process that will, eventually, transform the service system and restore the tradition. One caveat is in order. Although a lot of money is involved, money, by itself is not the answer. In fact, we believe that the current amount of State spending is not necessarily to blame for system problems, although North Carolina can do better. The problem is that the spending patterns are not aligned with the directions the system should be taking. Too much money is being spent on too few clients. Too much money is being spent on State hospitals, on small groups of clients who have been under court order, and on intermediate care facilities — both small and large. To realign spending with innovation and quality services for people who rely on the public service system, and to create a structure that supports effective governance and financing mechanisms — these are the important challenges that North Carolina now faces. Section L Summary Report Page 1 of 35