LINCOLN — The cost of Nebraska's experiment in privatizing child welfare services has jumped by $3.2 million.
Federal officials notified the Nebraska Department of Health and Human Services on Friday that the state would be penalized for failing to follow regulations for use of foster care funds.
The penalty announced is for fiscal year 2010, said Thomas Pristow, HHS children and family services director. Additional penalties are likely for fiscal years 2011 and 2012.
“The bottom line is the department made errors,” Pristow said, noting that the decisions were made before he started.
The issue dates back to the contracts that HHS signed with five private child welfare agencies in November 2009.
Under the contracts, the state paid the agencies a fixed amount per month to provide all services for abused and neglected children and their families.
The rates were paid regardless of the actual cost of care, and the state did not have documentation to prove that the payments were allowable or reasonable.
Pristow said he has been working with federal officials from the Administration for Children and Families and the Children's Bureau to get the state into compliance.
The steps include seeking federal approval for the state's current contract with the Omaha-based Nebraska Families Collaborative, the last of the five original contractors.
Pristow said he expects to get approval for the contract soon. Starting in July, the state switched from paying fixed monthly rates to the Nebraska Families Collaborative to paying by the case.
The financial penalty is the latest blow to Nebraska's failed privatization effort.
Launched with promises of reform, the initiative wound up costing millions more than planned during its 2½-year life.
Four of the five private agencies lost or dropped their contracts, citing inadequate reimbursement from the state, and the goal of improving care for children went unrealized.
Nebraska lawmakers passed several major child welfare bills this year addressing problems uncovered by a legislative investigation into the privatization effort.
The $3.2 million penalty will come out of the $19.4 million worth of federal foster care funds that Nebraska receives annually.
The federal dollars are included in the $133 million that the state budgeted to provide services for children and families involved with the child welfare and juvenile justice systems this year.
Carolyn Rooker, executive director of Voices for Children of Nebraska, urged state officials to minimize the impact on children and families when deciding where to find the $3.2 million.
Pristow said he still has hopes of negotiating a smaller penalty with the federal government. If he cannot, however, he promised to take the money from places where it will not hurt the child welfare program.
Pristow also hopes to minimize the effect of the penalty on Nebraska's bid for a federal waiver allowing the state more flexibility in using federal foster care dollars.
Waiver funding is based on the previous four to five years' worth of funding provided to each state.
Nebraska did not seek approval for previous child welfare contracts, despite warnings from federal officials that the child welfare reform plan could jeopardize the state's federal foster care dollars.
Instead, HHS officials sent an email to the federal government on July 9, 2009, saying, “The state would prefer to avoid the submission of a formal request, the subsequent response and back and forth.”
Pristow offered little insight into why the state had not tried to work with the federal officials before. But he said the department is “doing what we are supposed to do” since he started in March.
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