LINCOLN — State auditors are calling into question more than $26 million worth of Nebraska child welfare spending from last year.

A 98-page audit report, released Friday, listed the findings: payments made in error, overpayments, unauthorized payments, unreasonable costs and numerous other payments.

The audit found problems with both the Department of Health and Human Services and PromiseShip, formerly the Nebraska Families Collaborative. PromiseShip is an Omaha-based nonprofit that contracts with the state to manage child welfare cases in Douglas and Sarpy Counties.

The audit concluded that the magnitude of concerns “give rise to questions regarding the need for, not to mention the propriety of” the state putting more money into child welfare.

Among examples of the problems raised:

» An adoption subsidy was paid incorrectly, resulting in overpayments of $226,379. The adoption agreement set the subsidy at $27.40 per day. It was paid instead at $767.20 per day.

» A ward was moved from a residential facility that cost $370.01 per day to a lower level of care that cost more than twice as much — $902.59 per day. The audit report also asked why a service provider was paid $75 per day for three months to develop a plan of care for the youth.

» A service provider charged one hour of time for supervising parental visits that lasted 26 minutes. The worker also claimed travel time during the visits for taking the family to stores, restaurants and other places.

» PromiseShip charged the state $42,678 for costs related to bidding on a state case management contract. The bidding process ultimately was terminated, and HHS negotiated an extension of its previous contract with PromiseShip.

» The state paid $91,552.48 to modify a foster family’s home to accommodate a disabled child whose case was managed by PromiseShip. The final cost of the work exceeded the original bid by $23,327.50.

» A state ward was placed in the home of a foster parent whose son was the ward’s boyfriend, even though the boyfriend had been convicted of sexual assault in 2011.

HHS and PromiseShip officials said they agree with the auditors that some matters need correcting, but both disputed key findings in the audit.

Matt Litt, an HHS spokesman, said the department and its Children and Family Services Division were “committed to serving families and doing so in a fiscally responsible way.”

“While we strongly disagree with some of its findings, this collaborative report will ultimately help us improve services and provide more children with permanent homes,” said Dave Newell, president and chief executive officer of PromiseShip.

One point of contention was the $26 million figure, which is an estimate based on a sample of payments examined by the auditors. Litt emphasized that the figure is not an actual tally of misspent funds.

Matt Wallen, the Children and Family Services director, disputed some of the specific payments questioned by the auditors. For example, he said HHS paid for the home modifications to avoid a contempt of court charge. Newell said PromiseShip did not pay because it had the case for only a couple of weeks before the court order was issued.

Wallen and Newell said the auditor was premature in calling some of the PromiseShip expenses unreasonable. HHS is in the process of reviewing all of the costs reported by PromiseShip to identify which should be reimbursed by the state. The review for last year has not been completed. But the auditor pointed out that the state had paid PromiseShip $4.3 million before starting the review of expenses.

In addition, the HHS officials faulted the auditors for comparing the growth in the number of state wards with the growth in the child welfare budget. State support for child welfare increased by 34 percent between the fiscal year that ended June 30, 2016, and the one that ended June 30 of this year, while the number of children in state care increased 5.8 percent.

Wallen said HHS sought more money because the cost and number of services needed for children and families has increased, along with the number of state wards.

Two advocacy organizations expressed concern about the audit’s findings, saying they highlighted a “troubling lack of oversight and accountability” within the child welfare system.

“This audit reveals two of the largest agencies we have tasked with the essential role of ensuring the safety and stability of children and families are not performing up to the level needed,” said Sarah Helvey, child welfare director of Nebraska Appleseed. “We must strengthen oversight to make sure the agencies responsible for child welfare are proving worthy of that trust.”

Juliet Summers of Voices for Children in Nebraska said, “It is fair to demand transparency and accountability for how those funds are used to serve kids.”

Along with questioning child welfare spending, the audit raised concerns about the state’s contract with PromiseShip.

The audit noted that the current contract had not been competitively bid and that about half of all spending on child welfare services went to PromiseShip, while the organization manages only 44 percent of cases.

It also cited a study commissioned by the Legislature that concluded that privatization had not produced “any measurable benefit” for the state.

The state originally contracted with PromiseShip in 2009, when the state attempted to privatize child welfare statewide. PromiseShip, formed by Boys Town and other private Omaha-area child welfare agencies, is the only surviving contractor from that experiment. HHS employees manage child welfare cases in all other parts of the state.

The contract with PromiseShip has been expanded and extended multiple times since then. The most recent extension was approved in May 2017, after state officials rejected both bids for a new long-term contract.

Martha Stoddard keeps legislators honest from The World-Herald's Lincoln bureau, where she covers news from the State Capitol. Follow her on Twitter @StoddardOWH. Phone: 402-473-9583.

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