Summary of Report 08-046

August 2008

Report Number 08-046

Three of five 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 three providers were:

- Alliance Adolescent and Children's Services, Inc.

- Covenant Kids, Inc.

- Hope For Tomorrow.

These three providers also spent federal and state funds to pay for administrative costs that were reasonable and appropriate.

The fourth provider audited--the Panhandle Assessment Center Child Placing Agency--spent federal and state funds to pay for administrative costs that were reasonable and appropriate. However, auditors identified weaknesses in this provider's supporting documentation for direct costs.

Because of financial weaknesses at the fifth provider audited--the Willie C. McDuffie Residential Treatment Center--auditors were unable to verify that this provider's direct and administrative costs were reasonable and appropriate. This provider did not always maintain supporting documentation for its expenditures, and it did not always record financial transactions accurately in its accounting system.

This report discusses the significant issues identified at each provider audited. Auditors also identified less significant issues that were communicated separately in writing to each provider.

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 2007, the Department paid the five providers audited approximately $16.2 million to provide services to 2,178 children.


Contact the SAO about this report.

Download the Acrobat version of this report. (.pdf)

If you prefer an HTML version, follow this link to an Adobe site which converts PDF files to HTML.