Topeka ? Auditors on Wednesday reported there was an “inherent conflict of interest” in the way the state dispensed $254 million in aid for people with developmental disabilities.

But the auditors’ report drew quick rebuke from community developmental disability organizations, or CDDOs, including Cottonwood Inc. in Lawrence.

“In our view, the report is fact-poor and full of seemingly forgone conclusions,” Sharon Spratt, executive director of Cottonwood, said in a written response. “The report also appears to have sought out allegations and implications of intentional wrong-doing by CDDOs.”

The audit marked the opening salvo in what is expected to be a fierce political fight when the 2004 Legislature convenes in January.

The audit was accepted by the Legislative Post Audit Committee and forwarded to various legislative budget and social service committees for consideration.

At stake is a system that dispenses $254 million for community services for 8,500 people with developmental disabilities.

The aid is delivered through a network of 28 community organizations, which were set up so that people with disabilities could get services within the community rather than a state hospital or institution.

Twenty-two of the 28 organizations, including Cottonwood Inc., which serves Douglas and Jefferson counties, not only serve as “gatekeepers” for services, but also administer the services, according to the audit.

The audit said the setup was a conflict of interest, giving community organizations an unfair advantage in competing for dollars to provide services, and positioning them to extract the highest amount of state dollars for the least-disabled clients.

But representatives of some of the organizations said the audit was flawed and simply diverted attention from the issue that more money was needed to help people with disabilities.

Spratt said auditors missed the point.

She said the audit showed that 94 percent of parents and guardians who responded to a survey said the organizations “did not try to steer them to or away from a particular service provider.”

“This statement should be the definitive point of the report,” Spratt said, adding that the intended outcome of de-institutionalizing people with developmental disabilities was “to provide a stable choice-driven system of support to families and clients, the primary stakeholders.”

The remarks by Spratt were echoed by community officials across the state.

Tom Laing, executive director of InterHab, said community organizations, service providers and the Kansas Department of Social and Rehabilitation Services had taken steps to address and limit conflicts of interest in the system. He sees no need for further reforms. InterHab represents such community organizations.

“In the evidence that was presented, there’s not justification for making radical changes in the system,” Laing said.

But Senate President Dave Kerr, R-Hutchinson, said of the audit, “There are some really important issues that have been raised here.”

Other legislators were less convinced of the audit’s findings, saying they were satisfied with how their local organizations operated.

“I’m not so sure we have a real problem,” said state Rep. Bill McCreary, a Wellington Republican.

The Associated Press contributed to this report.