Representative Fessler and Members of the Welfare Oversight Council, Thank You for The

Testimony Prepared for the House Welfare Oversight Council Committee Representative Diane Fessler, Chair By Penny M. Wyman November 21, 2002

Representative Fessler and Members of the Welfare Oversight Council, thank you for the opportunity to provide testimony about the foster care audits to this committee. My name is Penny Wyman and I am the Executive Director of the Ohio Association of Child Caring Agencies.

I’d like to begin my testimony by highlighting those items on which OACCA agrees with the Ohio Department of Job and Family Services and the Auditor of State regarding the foster care audits.

While we disagree with some of the technicalities in the audit reports, we wholeheartedly agree that the audits raised some serious concerns and red flags about accountability on the part of a few agencies. The behaviors and issues uncovered in the audits of those few agencies are unconscionable and must not be tolerated. Period. However, these agencies were clearly exceptions and not the norm, as the Auditor has stated. We believe it is a disservice to the majority of our members and to the families and children they serve to paint all foster care providers with the same broad brush.

OACCA and its members agree completely that Ohio must improve and enforce current regulations regarding financial reporting, documentation and oversight for private providers of child and family services. The current system is confusing, inconsistently enforced and difficult to implement for both care providers and the regulatory bodies. This results in over- documentation of some items, insufficient documentation of other items, duplication of efforts and overall inefficient financial record keeping. In the end, the current system and the way it is used does not address many of the issues and concerns that were raised legitimately by the audits.

The OACCA and its members are 100 percent in favor of accountability for Ohio’s foster care system. We agree, too, that the current system needs improvement. We are working to make meaningful and effective improvements to the current system and to strengthen and clarify existing laws. Our partners in this effort include the Ohio Departments of Job and Family Services, Mental Health and Alcohol and Drug Addiction Services, the Auditor of State, the Ohio Society of CPAs, and the Public Children Services Association of Ohio. Together, we are developing a consolidated cost report to ensure that costs are accounted for accurately. We are creating a process for auditors to perform a unified audit that will provide auditors with an agency’s overall financial picture, improve accountability and reduce unnecessary administrative costs.

OACCA has taken the issues and concerns raised very seriously. We have provided training for our members on accountability and cost documentation to make sure our members understand them and can share the information with their Boards of Trustees. We plan additional training throughout 2003. Training, understanding and attention to detail will address the majority of the issues raised in the audits. Implementation of current regulations and application of penalties for abuse of not-for-profit status will complete the picture. The Internal Revenue Service and/or the Ohio Secretary of State – who has jurisdiction over 501 (c) (3) organizations – should apply these penalties.

Finally, OACCA and its members have always believed that third-party independent audits were a critical component of accountability. Our members will continue to submit the annual audits required by the OAC since 1991 and that we advocated for at that time.

Now, I’d like to take a few minutes to address a few key areas where we are not in agreement with the testimony you heard on November 14.

The Title IV-E reimbursement process is extremely complicated, and quite frankly, is the basis of a lawsuit OACCA has filed on behalf of its members. The lawsuit is the only avenue available to clarify the disparities in definitions of “private” vs. “public” funds and the nature of the financial relationship between private foster care providers and the public agencies that contract with them.

The fact is, private agencies do not, and by law are not allowed to receive Title IV-E reimbursements because the federal government has declared that private agencies do not have any public money. Public money is required to match IV-E dollars. County agencies contract with private agencies to provide care to children in the custody of the county. Private agencies provide this care at a cost that is negotiated between the county and the agency. The IV-E reimbursement that the county will eventually receive from the federal government does not -- and is not intended to – cover the whole cost of purchased service. In Ohio, counties receive a very high quality of care. The cost of that care is most often subsidized by privately donated funds.

Some private agencies receive funding from private donations, state or federal grants, private grants or foundations. Those funds are used for projects that begin after (and only if) the funding is received. Private agencies receive most of their financial resources from county agencies, but only as reimbursement after the private provider has served the child or family. Private agencies incur the costs first, then are reimbursed for a portion of the cost of that service. The private agency cares for the child and/or serves the family, providing services as agreed upon in the contract with the county agency. The private agency then bills the county for the services provided in fulfillment of their contract.

Out of concern for public resources and as good business practice, many private agencies voluntarily participate in Title IV-E that reimburses counties (via the state) for a portion of the cost of purchasing eligible services. The private agency completes a Title IV-E cost report and ODJFS uses that rate to determine how much reimbursement counties can receive from the state. The state, in turn, applies for reimbursement from the Federal Government. The Title IV- E reimbursement dollars are paid by the federal government to the state, then the state sends the money on to the county. All of this occurs long after the care is actually provided and after the county has reimbursed the private provider. As you can see, this process is complicated. The purpose of our lawsuit is to clarify this process for all parties involved and to clearly define the character of public money paid as reimbursement for services provided by a private entity. Our position is that that money becomes private once it is paid to the private sector as long as the contract has been fulfilled as agreed to by both parties and quality service has been provided. This is a position supported by Attorney General Montgomery in her Opinion 97-008. This is not in any way to imply, however, that we do not support ethical and responsible use of these private resources by charitable agencies, as I explained earlier.

Finally, I would like to stress that we seek a collaborative resolution to these issues that will be beneficial and agreeable to all involved parties including our member agencies and the many regulatory agencies. We look forward to continued dialogue about these issues and I thank you for giving me the opportunity to present my comments today.

Contact:

Penny M. Wyman, MA, MSW, LSW Executive Director The Ohio Association of Child Caring Agencies 614-461-0014 [email protected]