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An Audit Report on On-site Financial Audits of Selected Residential Foster Care Contractors

November 2017

Summary Analysis

Four of the five residential child care contractors (providers) audited generally complied with cost reporting requirements. Those four providers—Benchmark Family Services, Inc., The Bair Foundation of Texas, Angel Wings Family Services, Inc., and The Settlement Club— accurately reported all or most of the expenditures tested on their cost reports for fiscal year 2016. However, two of those providers (Benchmark Family Services, Inc. and The Bair Foundation of Texas) did not disclose related party transactions as required. The fifth provider audited (Azleway, Inc.) accurately reported its payroll expenses, but it did not consistently ensure that its non-payroll expenditures were allowable and sufficiently supported.

One of the four child placing agencies audited (Benchmark Family Services, Inc.) had significant weaknesses in its processes for monitoring foster homes and did not conduct all quarterly monitoring visits as required. In addition, two child placing agencies audited (Azleway, Inc. and Angel Wings Family Services, Inc.) conducted all quarterly visits as required, but they should improve their documentation of those visits. The remaining child placing agency audited (The Bair Foundation of Texas) generally complied with monitoring requirements. One of the providers audited (The Settlement Club, Inc.) was a general residential operation and, therefore, did not have foster homes to monitor.

In addition, two of the providers audited (Benchmark Family Services, Inc. and Azleway Inc.) had significant weaknesses in their processes for obtaining required background checks of foster parents, employees, household members, caregivers, and/or frequent visitors. Overall, those providers did not have adequate processes to ensure that they (1) obtained Federal Bureau of Investigation fingerprint background checks as required; (2) consistently requested all background checks within the required time frames; and (3) tracked household members, caregivers, and frequent visitors to ensure that the providers conducted background checks in a timely manner.

 Jump to Overall Conclusion

The provider accurately reported all expenditures tested on its cost report for fiscal year 2016. The provider reported $9,562,237 in expenditures for providing 24-hour residential child care services on its fiscal year 2016 cost report.

However, the provider did not disclose related party transactions as required. In addition, the provider should strengthen its processes for foster parent payments and controls over its financial accounting system to comply with Department requirements.

Jump to Chapter 1-A 

The provider could not provide documentation to show that it consistently monitored foster homes in accordance with the Department’s requirements. The provider did not conduct all required quarterly monitoring visits for 18 (62 percent) of the 29 foster homes tested.

Jump to Chapter 1-B 

The provider did not consistently conduct all required background checks on foster parents, employees, household members, caregivers, and frequent visitors who were reported as active from July 1, 2015, through March 31, 2017. Of the 1,768 individuals tested, the provider did not conduct background checks for 220 (12 percent) individuals in compliance with requirements. That included 11 (7 percent) of 150 employees; 37 (4 percent) of 828 foster parents; and 172 (22 percent) of 790 household members, caregivers, and frequent visitors tested. In addition, auditors could not determine whether 100 (6 percent) of the 1,768 tested were cleared to be around children because the provider did not obtain required fingerprint background checks. Auditors also determined that the provider conducted some background checks up to 1,169 days late.

Jump to Chapter 1-C 

The provider generally complied with cost reporting requirements, including requirements for disclosing related party transactions, and it accurately reported on its cost report for fiscal year 2016 the majority of the payroll expenditures tested. The provider reported $7,048,500 in expenditures for providing 24-hour residential child care services on its fiscal year 2016 cost report.

Jump to Chapter 2-A 

The provider had documentation showing that it had conducted quarterly visits at its 30 applicable foster homes tested as required (see text box for additional information about monitoring visit requirements). However, for 3 (13 percent) of the 23 applicable foster homes tested, the provider did not conduct at least 2 unannounced visits during the year as required.

While the provider conducted quarterly monitoring visits for all 30 foster homes tested, it did not adequately document certain information the Department required.

Jump to Chapter 2-B 

The provider did not conduct all required background checks for a significant portion of the employees, foster parents, volunteers, household members, caregivers, and frequent visitors who were reported as active from September 1, 2015, through March 31, 2017. Of the 938 individuals tested, the provider did not conduct background checks for 204 (22 percent) individuals in compliance with requirements. This included 21 (24 percent) of 87 employees tested, 24 (9 percent) of 264 foster parents tested, and 159 (27 percent) of 587 household members tested. Auditors also determined that the provider conducted some background checks for those individuals up to 520 days late.

Jump to Chapter 2-C 

The provider accurately reported most of the expenditures tested on its cost report for fiscal year 2016. The provider reported $7,442,737 in expenditures for providing 24-hour residential child care services for fiscal year 2016.

However, the provider did not disclose related party transactions as required. In addition, it should strengthen controls over its financial accounting system and payroll system to comply with Department requirements.

Jump to Chapter 3-A 

The provider complied with most Department requirements for monitoring its foster homes. The provider had documentation showing that it conducted all quarterly monitoring visits as required. The provider generally complied with the Department’s quarterly monitoring requirements.

Jump to Chapter 3-B 

The provider complied with all background check requirements for 926 (97 percent) of the 954 employees, foster parents, household members, caregivers, and frequent visitors tested who were reported as active from July 1, 2015, through March 31, 2017.

However, the provider did not always obtain or follow up on fingerprint background checks as required and consistently conduct background checks within the required time frames. Auditors determined that the provider conducted some background checks up to 857 days late. In addition, the provider did not have adequate processes to track household members, caregivers, and frequent visitors to ensure that it conducted background checks in a timely manner.

Jump to Chapter 3-C 

The provider generally complied with cost reporting requirements, including requirements for disclosing related party transactions, and accurately reported on its cost report for fiscal year 2016 the majority of the expenditures tested. The provider reported $907,826 in expenditures for providing 24-hour residential child care services on its fiscal year 2016 cost report. However, 9 (30 percent) of 30 non-payroll expenditures tested were not adequately supported.

Jump to Chapter 4-A 

The provider did not consistently comply with Department requirements for documenting its quarterly monitoring visits for the 26 foster homes tested that the provider reported as active during the time period from January 1, 2016, to December 31, 2016.

The provider had documentation showing that it performed a visit every quarter as required for 25 (96 percent) of the 26 foster homes tested. For one foster home, the provider conducted one quarterly visit a month late. However, for 25 (96 percent) of 26 foster homes tested, the provider did not consistently document certain information the Department required. For example, for 20 foster homes, monitoring reports did not indicate who was present during the visit or whether all family members were present for two of the quarterly visits as required.

Jump to Chapter 4-B 

The provider did not always conduct background checks within the required time frames for employees, foster parents, household visits, caregivers, and frequent visitors who were reported active during the time period from January 1, 2016, to March 31, 2017. Of the 124 individuals tested, the provider did not conduct background checks for 12 (9.7 percent) individuals in compliance with requirements. Of those 12 individuals, two were foster parents. Auditors also determined that the provider conducted some background checks up to 300 days late.

Jump to Chapter 4-C 

The provider generally complied with cost reporting requirements, including requirements for disclosing related party transactions, and accurately reported on its cost report for fiscal year 2016 all of the expenditures that auditors tested. The provider reported $3,275,856 in expenditures for providing 24-hour residential child care services on its fiscal year 2016 cost report.

The provider did not have adequate information technology controls to help ensure that the data in its case management system, which it uses for tracking confidential data about the children in its care and other information about its general residential operations program, is secure.

Jump to Chapter 5-A 

The provider did not comply with background check requirements for 7 (4 percent) of 177 employees and volunteers tested who provided services for its general residential operations program from June 1, 2015, through March 31, 2017. For example, five employees and two volunteers, the provider did not conduct all required background check results prior to the individuals’ start dates.

Jump to Chapter 5-B 

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