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A Report on On-site Audits of Residential Child Care Providers

August 2012

Report Number 12-050

Overall Conclusion

All five providers audited did not consistently maintain adequate supporting documentation to demonstrate that they accurately reported funds they expended for providing 24-hour residential child care services. The providers receive funds from the Department of Family and Protective Services (Department) for the delivery of goods and services--such as therapy, food, shelter, and clothing--that promote the mental and physical well-being of children placed in the providers' care. Providers deliver those services through contracts with the Department and report their revenue and expenditures on annual cost reports. (See Appendix 4 for cost report requirements.)

Those five providers were:

- Simply Love All People, Inc. (see Chapter 1).

- Antelope Valley Child, Youth, and Family Services (see Chapter 2).

- Unity Children's Home (see Chapter 3).

- Carter's Kids, Inc. (see Chapter 4).

- Agape Manor Home (see Chapter 5).

All five providers' external accountants performed the majority of their financial activities, which could include preparing the cost reports and financial statements, processing payroll, and making vendor and/or foster parent payments. Auditors identified internal control weaknesses at all five providers. Specifically:

- Four providers lacked detailed written policies and procedures for key financial processes.

- Three providers did not have adequate segregation of duties.

- All five providers did not conduct reviews of the financial information prepared by the external accountants.

- Four providers created their general ledgers from bank statements instead of financial transaction documents, such as revenue receipts, invoices, and purchase receipts.

Auditors also identified instances of noncompliance with cost report and background check requirements at all five providers audited. Two of the three providers audited that are child placing agencies (Agape Manor Home and Antelope Valley Child, Youth, and Family Services) generally paid their foster parents the required amounts according to the children's level of care and days of service; however, the remaining provider that was a child placing agency (Simply Love All People, Inc.) did not have supporting documentation for a majority of the foster parent payments tested. In addition, all three of those providers should improve their documentation of and compliance with foster parent monitoring requirements.

Auditors also communicated less significant issues separately in writing to each provider.

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