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

August 2011

Report Number 11-049

Overall Conclusion

Four of the five residential child care providers (providers) audited appropriately spent federal and state funds to pay the costs they incurred for providing 24-hour residential child care services. Those four providers were:

- Helping Hand Home for Children, Inc. (see Chapter 1).

- Arrow Child and Family Ministries (see Chapter 2).

- Boysville, Inc. (see Chapter 3).

- Grace Manor (see Chapter 4).

The remaining provider audited--Connecting Lifes--had serious weaknesses in its financial processes (see Chapter 5). As a result of those weaknesses, auditors determined that data necessary to perform the audit objectives was unreliable and could not determine whether Connecting Lifes appropriately spent the federal and state funds it reported on its 2010 cost report. This provider (1) did not maintain sufficient documentation for expenditures; (2) did not consistently, accurately, or appropriately record all expenditures in its general ledger; and (3) did not consistently comply with cost report requirements. The Department did not exercise the renewal option of the provider's current contract for child placing services; therefore, the contract will expire on August 31, 2011. The provider may reapply for a contract with the Department during a residential child care contract procurement.

The direct care and administrative costs that providers incur are intended to provide 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 these services through contracts with the Department of Family and Protective Services (Department) and report their revenue and expenditures on annual cost reports. (See Appendix 4 for cost reporting requirements.)

All five providers audited should improve their compliance with cost reporting requirements and background check requirements. In addition, the three child placing agencies audited should improve their documentation of and compliance with foster parent monitoring requirements.

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