LINCOLN — Nebraska's child welfare costs have increased by about 27 percent after the state undertook a controversial privatization initiative, according to a state audit released Wednesday.
State Auditor Mike Foley unveiled the audit at a hearing before the Legislature's Health and Human Services Committee, which is investigating the privatization effort.
"This audit points to a critical lack of accountability," Foley said. "The consequence to the Nebraska taxpayers has been dramatic, including tens of millions of dollars in increased costs for child welfare services and a conspicuous lack of financia accountability that effectively frustrates any hope of transparency with regard to the expenditure of related public funds ."
Among his findings:
• The Department of Health and Human Services failed to bid publicly multimillion-dollar contracts with private service providers, resulting in many amendments and increased costs with no effective oversight.
• One service provider, Visinet, was overpaid by millions of dollars. The provider went bankrupt within six months of signing its contract with the state.
• HHS spent thousands of dollars on both duplicate claims and payments to the wrong contractors.
• HHS failed to secure possession of important, as well as potentially confidential, documents relating to client services after terminating its contract with Visinet.
• HHS failed to reconcile provider billings in N-FOCUS, the agency's main computer system, which prevented effective agency oversight of both service expenditures and the welfare of children in state custody.
• Service providers failed to meet client service coordination and delivery benchmarks required by the service contracts with HHS.
• HHS failed to prevent former employees of service providers from gaining access to confidential client information in N-FOCUS, and at least one continued to access those records.
• HHS failed to approve subcontractors used by service providers, as well as to ensure that such subcontractors were appropriately compensated for their services. Subcontractors in three services areas have not been paid for services provided last year.
• HHS failed to cooperate with the audit examination.
State Health and Human Services officials disputed the findings in the audit. They said that Visinet was not overpaid and that the department has legal authority to award contracts without competitive bidding.
"There are a number of recommendations with which we strongly and fundamentally disagree,” said Kerry Winterer, CEO of the department.
Winterer said he also questions the auditor's authority to examine issues that are not issues of fiscal accountability.
He said the management decisions in question were made to protect the overall integrity of the child welfare/juvenile services system.
Todd Reckling, director of the department's Division of Children and Family Services, said changes have already been made to strengthen oversight of contractors and of financial issues.
He cited a personnel change in June, in which Vicki Maca was appointed as an administrator to provide full-time oversight of the initiative. Over the past several months, additional financial oversight has been implemented, according to Reckling.
Foley's audit is part of the legislative investigation, which is looking at issues including escalating costs of the contracts and growing instability within the system.
Nebraska undertook the privatization effort in November 2009, turning over to contractors the bulk of the duties for ensuring the safety and well-being of abused and neglected children.
Initially the contracts covered the entire state, but three of the five original contractors have since lost or dropped their contracts.
The remaining two are the Omaha-based Nebraska Families Collaborative, which handles one-third of the cases in the eastern area, and the Kansas-based KVC, which handles another third of the cases in the eastern area, which consists of Douglas and Sarpy Counties.
State workers resumed responsibility for cases in the central, western and northern areas of the state, as well as one-third of the cases in the eastern area. HHS recently announced that the Nebraska Families Collaborative will take over the state's one-third of eastern cases in October.
An analysis by the Omaha World-Herald in July found that the state paid contractors 50 percent more than planned and overspent its budget by $30.5 million for the fiscal year that ended June 30.
HHS made three unplanned infusions of money and repeatedly front-loaded payments to contractors, a practice that optimistically anticipates costs going down as the months go by, the analysis found.
State Sen. Amanda McGill said: "That report was scathing. The tough part is figuring out what to do about it. "
Contact the writer:
402-473-9583, martha.stoddard@owh.com
Copyright ©2012 Omaha World-Herald®. All rights reserved. This material may not be published, broadcast, rewritten, displayed or redistributed for any purpose without permission from the Omaha World-Herald.
