The nonprofit shut down the facility in September and its boys home a month later. An independent-living facility for teens in Lahaina already had been shut down in August. Interim MYFS Chief Executive Officer Tim Murphy said the homes were closed voluntarily after it became clear that management problems were beginning to compromise patient care.

Since the closures, Maui Youth and Family Services has been working to fix the problems, said board member Helen McCord. She noted the nonprofit had reorganized its administration, replaced longtime Chief Executive Officer Gail Gnazzo, filled staff vacancies and developed new care models for residential programs. The girls home was renovated and reopened in March, and MYFS next is looking to reopen its Lahaina facility.

"I think we've made giant steps in putting the organization back on two feet," said McCord.

While MYFS restores its residential services, it faces other challenges. The organization recently lost its county contract for outpatient youth substance abuse programs, due to an unexplained decline in enrollment, said County Housing and Human Concerns Director Vanessa Medeiros.

Only 10 youths participated in the program in the first half of the current fiscal year, down from 67 young people last year, according to county grants records.

County staff met with MYFS officials to discuss the issue, and ultimately decided to terminate grants to the program for the rest of the year, Medeiros said.

"The agency provides a critical service to the adolescents in our community," she said. "The decision to cancel the grant contract for the remaining term is a difficult one to make, but is necessary to ensure the standards of quality we have established for our grantees."

Murphy said the agency wasn't sure why the program had declined.

"We're serving less kids than we were expecting to serve," he said. "I'm not sure that means there's less kids that need service."

It became apparent to state health officials that there were problems at Maui Youth and Family Services residential programs late last summer, said Mary Brogan, acting division chief of the state Department of Health's Child and Adolescent Mental Health Division.

Officials picked up warning signs like an increase in the number of youths running away from the residential facilities, while officials became concerned that the program was "chaotic" and staff members weren't following procedures, she said.

"There was a need for additional training, a need for more procedures and internal oversight of procedures," Brogan said. "And to me, everything comes down to leadership, ultimately."

MYFS wasn't able to provide an acceptable improvement plan when confronted about the problems, she added.

"They decided themselves, which is a good thing, to take a break," she said. "I think that's absolutely what agencies need to do."

Murphy said the residential program faltered after losing several key staff members in late summer last year. The organization's director of residential care, chief financial officer and clinical supervisor all left for a variety of unrelated reasons, he said.

"With their departure went the day-to-day supervision and administration of those (residential) programs," he said. "It left our staff with more responsibility than they had training for."

Overwhelmed, staff members focused on managing behavioral issues more than providing the necessary substance abuse and mental health treatment to young patients, he said.

Over the long term, the program also had been struggling financially for several years, Murphy added.

The Department of Health reimburses MYFS for each patient it sends to the facility, but the program's high costs remain constant no matter how many beds are filled, often leading to deficits. The problem grew worse as the state began to refer fewer patients to the program last year, Murphy said.

"It's not unusual when programs are struggling for referring agencies to know that, and send their referrals elsewhere," he said.

The shake-up at MYFS continued when Gnazzo left the organization as its chief executive in October, not long after the last of the group homes was closed.

Board Chairman Peter Cahill declined to discuss Gnazzo's departure, citing privacy reasons.

"I'm not at liberty to discuss it," he said.

Gnazzo also declined to comment.

"I don't really want to comment about anything," she said. "I've worked really hard at letting it all go."

Murphy was hired as interim head of the nonprofit in November. A marriage and family therapist and former psychiatric hospital administrator in Oregon, Murphy previously had worked as a consultant for the state on youth and mental health issues, and also had advised the MYFS board before being hired full time.

He was hired initially for a six-month stint with the organization, but said he and the board currently are discussing an extension through the end of the year, although he does not plan to stay permanently.

"Not everything is quite accomplished," he said.

Since coming on board, Murphy said he's focused on overhauling the model of care for MYFS' residential programs. The new system is meant to downplay restraint and confinement in favor of a more holistic and "inclusive" treatment plan.

He said the changes should reduce behavioral problems and acting-out – a major cause of facility damage and drain on staff time that have driven up costs.

The agency also has hired a medical director to provide clinical guidance for residential treatment and other programs, and has rebuilt and renovated its group homes, Murphy said. The girls home reopened in March.

"I believe it's turned that corner, and we're going to see it re-emerge," Murphy said.

On the management side, the nonprofit has "flattened the hierarchy" to improve oversight, invested in training, and developed a new salary scale to boost staff morale and retention, Murphy said.

"We're getting our administrative house in order," he said.

But while MYFS reopens its group homes, there may be less demand for residential treatment for youths than there was in the past.

The overall population of young people in group homes has declined, as social service agencies shift focus toward improving outpatient services and keeping children in their own homes whenever possible, Brogan said.

"Referrals to all our facilities have been going down over time," she said. "We use less residential care than we have in the past."

While MYFS' financial challenges were most acute in its residential treatment programs, McCord acknowledged the board of directors last year expressed concern about larger fiscal issues at the agency.

Some of the organization's short-term investments weren't performing well, and costs like insurance, water and electricity were up, she said. The board was also concerned about the low number of youths enrolling in the residential programs, the high cost of the programs, and administrative and staffing issues, she said.

Murphy said he still was working on financial issues.

"The company is financially healthy, but it's running monthly deficits we hope to turn around in 2007," he said.

According to the agency's 2005 financial statements, the most recent available, MYFS operated on an annual budget of around $6.1 million, of which $5.7 million came from government contracts and grants.

The organization reported spending $1.5 million on residential services, making it one of the largest programs in its budget.

Murphy said he expected the organization would continue to receive government contracts. But he added that, as part of MYFS' reorganization, he wanted to re-evaluate contracts for current programs and determine if they are "in keeping with the mission and vision" of the nonprofit.

Brogan said that her office was monitoring closely the changes at MYFS, and that the organization seemed to have made "remarkable improvement." The state had asked for a number of changes to policies and procedures, she said, and the organization was taking action. Staff members monitoring the situation haven't reported any concerns.

"I think they're doing as well as can be expected right now, but we're watching," she said.