A Report on On-site Audits of Residential Child Care Providers
August 2007
Report Number 07-044
Overall Conclusion
The six residential child care providers (24-hour providers) audited appropriately spent federal and state funds to pay direct costs incurred for providing 24-hour residential child care services. These payments are intended to ensure the delivery of goods and services--such as direct care, therapy, food, shelter, and clothing--that promote the mental and physical well-being of children placed in the providers' care. Providers deliver these services through contracts with the Department of Family and Protective Services (Department).
The providers also spent federal and state funds to pay for administrative costs. Auditors determined that administrative costs were reasonable and appropriate at five providers:
- Circles of Care (see Chapter 2).
- The Children's Shelter (see Chapter 3).
- Canyon Lakes Residential Treatment Center (see Chapter 4).
- Lifeline Fellowship Family Church (doing business as Lifeline Children and Family Services, see Chapter 5).
- DePelchin Children's Center's Isabel Elkins Residential Treatment Center (see Chapter 6).
Because of serious financial weaknesses at the sixth provider audited-Youth in View-auditors were unable to verify that this provider's administrative costs were reasonable and appropriate (see Chapter 1). Youth in View did not always (1) maintain supporting documentation for its expenditures, (2) accurately record financial transactions in its accounting system, and (3) ensure segregation of duties within its financial processes.
Under their unit rate contracts with the Department, providers are paid an amount per child per day for delivering services. The Department does not control how providers spend the payments, so long as the providers (1) spend these funds legally and (2) account for their expenditures accurately in cost reports they submit to the Health and Human Services Commission for rate setting purposes. Expenditures reported as unallowable costs are not included in the cost data used to set unit rates. During calendar year 2006, the Department paid the six providers audited approximately $21 million to provide services to 1,823 children.
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