A Middleton foster-care company may have managed to overcharge taxpayers by an alleged $6.1 million by exploiting weaknesses in the financial oversight exercised by counties and the state, the State Journal has found.
County officials working with Community Care Resources said the financial information disclosed by CCR was not detailed enough to alert them to the alleged widespread misuse of taxpayer dollars between 2009 and 2011.
And until a year ago, the state Department of Children and Families had no oversight over the charges the company billed each county, agency spokeswoman Sara Buschman said.
Now the state sets the rates that can be charged per child for each agency based on the company's actual costs to train and license foster parents and provide services to them and foster children.
"We've never seen anything that would indicate to us anything improper going on," said Janet Wimmer, Adams County director of health and human services, which has three children in CCR-licensed homes. "(But) there would be no way for us to ferret out (overcharges) from looking at a general audit."
CCR has contracts in 24 Wisconsin counties serving about 120 children. County officials said they were shocked at the allegations against CCR, but they also uniformly praised the foster families and services provided by the company.
The state has revoked CCR's license, but the company continues to operate while it appeals.
Audit 'very concerning'
The state Department of Children and Families alleges that CCR made excessive profit, got reimbursed for undocumented expenses, double-billed for other expenses and charged for costs related to three homes, six vehicles and three boats belonging to owner Dan Simon and his wife, Mary. Mary Simon is the programs director at the agency.
Dan Simon has vigorously denied the allegations in formal responses to the state, saying he and his wife were underpaid, that some of the costs were legitimate business expenses and others were reported but not charged to the foster-care program.
The company continues to operate while its appeal is pending. Simon has declined to answer questions about the allegations.
"We have never had an issue with the quality of care that the kids are getting in the foster homes nor the support services provided by CCR," said Kerry Milkie, manager of the youth and family division for Racine County Human Services, which has contracted with CCR for 20 years.
"But from a fiscal standpoint, the (state) audit is very concerning to us."
Milkie said her agency is making contingency plans in case CCR loses its license and placements must be found for the 18 foster children currently under its care.
One option is to transfer the foster parents' licenses to the county to avoid moving the children, she said.
Marathon County, which has four children in CCR-licensed foster homes, is making similar plans, said Vicki Tylka, director of the Marathon County Department of Social Services.
State now sets rates
In the past, each county negotiated the administrative rates paid to child-placing agencies like CCR.
In mid-2011, the state was given the authority to set the rates, Buschman said. The rate that each agency can charge is now based on annual reports sent to DCF reflecting their actual costs for providing services.
After a lengthy process, officials settled on a maximum $63.50 per child per day, or about $1,900 a month, effective Jan. 1, 2012.
"The state did step in and look at the administrative charges for all of these agencies," said Greg Benesh, deputy director of the Oconto County Department of Health and Human Services. "I think maybe that's when everything hit the fan, when they did the uniform rate."
James Pekrul used to run a child-placing agency until DCF began examining his books in 2011 after receiving an anonymous tip.
Pekrul, who admits his bookeeping was "screwed up" but denied misappropriating any funds, said he surrendered his license because he couldn't afford to fight.
Pekrul, a former foster child and foster parent, continues to run Foster Care Youth Independence Center in Milwaukee, which provides independent-living and housing programs.
He's angry about the alleged misspending by CCR identified by the state.
"We're talking $6 million and you mean to tell me they flew under the radar? If it is true, it's disgusting," Pekrul said. "How many others are there?"
Even with the flat fee, child-placing agencies such as CCR now must submit financial statements showing how they used the money. If a company receives more money than it costs to provide the service, it's supposed to refund that to the county, he said.
"The audit needs to reflect that those were allowable costs," said Jesus Mireles, intake and shared-services division manager for the Waukesha County Deparment of Health and Human Services. "If they don't spend the money or use the money, they pay us back."
Waukesha County has between six and eight foster children in CCR-licensed home at any one time, he said.
State to pay families
In addition to the administrative fee paid to companies like CCR, parents receive separate payments based on the needs of the child as determined by the county.
Those fees range from $220 a month per child for a regular placement to $2,000 a month for a child with significant needs.
Child-placing agencies like CCR serve as a pass-through, doling out checks to foster parents licensed by their agencies. Last month, the state took over those duties from CCR, said Buschman "to ensure the integrity of payment to the foster parents."
Tylka said more will be known next week, when the CCR-licensed parents receive their first checks directly from the counties.
"The piece of it that really is unknown — how much were they paying the foster parents?" Tylka said.