The Department of Children and Families (DCF) is responsible for overseeing child-placing agencies, which are child welfare agencies licensed by DCF to place and monitor children in foster homes. The primary responsibilities of child-placing agencies are to recruit foster parents to care for children who have been, or are at risk of becoming, abused or neglected and to ensure the health and safety of children placed in foster homes. In December 2012, there were 24 licensed child-placing agencies located throughout the state.

In recent years, DCF has sought to revoke the licenses of several child-placing agencies based on misuse of state and federal funds, such as payments for excess salaries, personal expenses, and undocumented expenditures. At the request of the Joint Legislative Audit Committee, we evaluated DCF’s oversight of child-placing agencies and conducted an independent assessment of the financial and administrative practices of several of the agencies. In conducting our evaluation, we reviewed:

In December 2012, 6,209 children were in out-of-home care. DCF’s administrative rules establish several levels of care to be provided by foster homes. Children with greater needs are placed in what have historically been called treatment foster homes. Other out-of-home care settings include a relative’s home, residential care center, and group home.

Counties and DCF’s Bureau of Milwaukee Child Welfare (BMCW) generally contract with child-placing agencies to place and monitor children in treatment foster homes. Services are funded from a combination of federal, state, and county sources.

For each child placed in a treatment foster home, the child-placing agency receives two types of payments: an administrative payment, which is a per-day amount paid to the child-placing agency to support its operations; and a maintenance payment, which is a per-month amount paid to the child-placing agency that is passed through to the foster parents to support costs of caring for the child.

2009 Wisconsin Act 28, the 2009-11 Biennial Budget Act, required DCF to begin establishing administrative payment rates for child-placing agencies in 2011. Prior to this time, counties negotiated with child-placing agencies in setting these rates.

As a result of the DCF rate-setting process, the per-child maximum daily administrative payment rate declined from $73.15 in July 2011 to $63.50 in July 2012, where it remains.

DCF seeks federal reimbursement for a portion of the treatment foster care costs incurred in serving eligible children. However, we found that DCF has not sought federal reimbursement for Wraparound Milwaukee, a program administered by Milwaukee County. Had DCF sought federal reimbursement for eligible expenditures in 2012, it could have received an estimated $470,000 in additional federal funds. DCF indicates that it has not claimed these funds in the past based on the additional work needed to fully document eligible treatment foster care costs.

Statutes require all prospective child-placing agencies to obtain a license, and DCF policies require it to visit each child-placing agency at least twice each year to assess compliance with licensure requirements. We found that in 2012, DCF had visited 23 of the 24 child-placing agencies at least twice, including one that was visited ten times. The remaining child-placing agency was visited only once in that year.

The number of monitoring visits conducted by DCF increased from 78 in 2010 to 100 in 2012, and the number of licensure violations DCF identified increased from 182 to 224 during this period. Violations were largely related to a failure to maintain adequate records.

In 2011, DCF increased its efforts to conduct financial reviews of child-placing agencies and other organizations. As of September 2013, DCF had completed reviews of five child-placing agencies and was in the process of conducting additional reviews of four agencies. Of the financial reviews DCF completed of five agencies, it found one agency to be in compliance and found varying levels of noncompliance with the others.

We reviewed the financial information submitted by all child-placing agencies from 2010 through 2012 and found that 13 agencies submitted financial information that did not include all required components. However, DCF did not identify noncompliance when incomplete information was submitted.

We independently reviewed a selection of 1,844 transactions totaling $838,739 made by five agencies from January 2010 through December 2012. We assessed whether the expenditures were made in compliance with state policies and federal rules. We questioned 558 transactions totaling $129,525.

Of the $129,525, 78.5 percent were expenditures incurred by Thrive Treatment Services, LLC, including:

The accounting practices of Benevolence First, Inc., and Thrive Treatment Services, LLC did not allow us to determine whether public funds were used to pay for costs that are not allowable under state policies and federal rules.

Other examples of costs we questioned for insufficient documentation among the agencies we reviewed include $10,946 by Benevolence First, Inc., and $8,171 by American Foundation of Counseling Services, Inc.

We also identified other issues related to the administrative policies and practices of child-placing agencies and made recommendations to address them.

Our report includes recommendations for the Department of Children and Families to: