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Probe: Contractor unintentionally misspent $400K

May 19, 2011
By KELLI KENNEDY, Associated Press

FORT LAUDERDALE (AP) - A Miami foster-care provider contracting with the Department of Children and Families unintentionally misspent more than $400,000 in state funds, according to a state investigation released this week. But the contractor takes issue with the findings.

The inspector general's investigation found no intentional fraudulent misuse by Our Kids, a DCF contractor that receives about $74 million a year to care for 3,500 children.

But the investigation illustrates a broader problem of vague contracts between the department and its private contractors, including policies on awarding subcontracts and bonuses.

DCF began privatizing foster care statewide nearly a decade ago in the wake of several high- profile child deaths and has struggled to evolve in its role from running the program to overseeing its private contractors.

The DCF's inspector general launched its investigation last year after two disgruntled former employees of the contractor came forward with a host of allegations, including that Our Kids awarded contracts to friends of its CEO. After a 15-month investigation, the inspector general's office found most of the allegations were without merit.

However, investigators found evidence that two subcontractors were paid for expenses not allowed under its state contract.

In one case, Our Kids paid $32,000 to renovate a group home for a behavior analysis pilot program. In another, Our Kids paid $380,000 in lease-termination fees to for a subcontractor whose work was unexpectedly cut short.

DCF Secretary David Wilkins said he expects Our Kids to repay the funds.

But Our Kids CEO Fran Allegra said the agency's auditors were aware of and approved those transactions three years ago.

"Our accountants are telling us this wouldn't warrant payback because this was money spent on clients," Allegra said.

Our Kids drafted its own policy about how to award contracts to other businesses. DCF approved that policy, which gave Our Kids broad discretion in subcontracting decisions using state and federal funds.

"It is questionable whether the department should have approved such broad procurement policies," according to the report.

But Wilkins told The Associated Press that Our Kids made mistakes.

"Even though I think they were trying to make good business decisions on how to resolve those issues, there are rules that come with public money," Wilkins said. "They had a policy in place and they didn't follow it."

Investigators couldn't prove or disprove two allegations - involving bonuses to Our Kids employees and a $26,000 severance package - because DCF's contract with the providers does not address those issues.

"Although these dynamics may be in opposition to the ideas and philosophies of running a business in the private sector, they are the realities of life in an almost 100% government-funded and contract business environment," the report said.

Wilkins said the agency will set out guidelines for those issues this summer.

The report also highlights a push-pull between DCF and its private contractors, revealing "a distinct philosophical difference" that must be clarified going forward.

Provider contracts were written in the early phase of privatization and lack immediate consequences, including financial penalties or probationary periods for failure to comply. For example, providers still refuse to use the agency's multimillion-dollar computer system.

Yet DCF has little recourse other than the extreme step of terminating contracts.

"It's a learning process for both the (providers) and DCF," Allegra said. "You see it over and over again because not every law and rule has been rewritten to contemplate that what was once public is now being done by a private agency and so you run into a lot of gray area."

DCF and its providers still have not resolved a long-running disagreement over insurance premiums and who should be financially responsible when a child is harmed. Contractors pushed a bill (HB 1019) that stalled in the Legislature this year that would limit how much they would have to pay if a child is injured.

"Until it is resolved, it places unknown liability on the department," the report said.

 
 

 

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