Audit Report on the Compliance of Sheltering Arms Children’s Services with Foster and Child Care Payment Regulations

AUDIT REPORT IN BRIEF

Sheltering Arms Children’s Service (Sheltering Arms), is a not-for-profit organization that provides services to children in its Foster Boarding Home, Group Residence, and two Supervised Independent Living Programs under a contract with the Administration for Children’s Services (ACS). Foster care providers are reimbursed for expenses based on a per diem rate. From July 1, 1999, through June 30, 2000 (Fiscal Year 2000), ACS reimbursed Sheltering Arms $7.5 million for providing services to 726 individuals in its programs.

This audit assessed the adequacy of Sheltering Arms’ internal controls over expenses, revenues, and days-of-care; the appropriateness of its per diem rates; and compliance with State and City payment and reimbursement standards.

Sheltering Arms generally complied with promulgated announcements and regulations of the New York State Standards of Payment for Foster Care of Children and theCity Foster-Care Reimbursement Bulletin No. 92-5. Sheltering Arms had an adequate system of internal controls over the recording and reporting of its expenses, revenues, and days-of-care. In addition, Sheltering Arms was reimbursed by ACS for only those expenses appropriately incurred on behalf of its Independent Living Skills Program and Substance Abuse Program.

However, for Fiscal Year 2000, Sheltering Arms owes the City $348,312 resulting from differences between the funds it received from ACS and the expenses it incurred to operate the various programs that we audited. (These differences do not apply to the Independent Living Skills Program and Substance Abuse Program.) Specifically, ACS advanced Sheltering Arms $7,483,770 for providing 155,390 days-of-care in its Foster Boarding Home; 6,592 days-of-care in its Group Residence; and 1,283 days-of-care in its two Supervised Independent Living Programs. However, based on our final calculated per diem rates and audited days-of-care, Sheltering Arms was entitled to only $7,135,458 in ACS funding, a difference of $348,312. (See Appendices I through V for our recalculation of Sheltering Arms per diem rates.)

In addition, Sheltering Arms included $149,516 in expenses on its Report of Actual Expenditures DSS-2652 that should not have been charged to its foster care programs, and it improperly combined program expenses on its Report of Actual Expenditures DSS-2652, rather than segregating these costs by programs, as required by New York State Office of Children and Family Services (formerly the New York State Department of Social Services) regulations.

We recommend that Sheltering Arms remit $348,312 to ACS; report days-of-care accurately, and bill ACS for only those children in attendance at the foster care programs; include only allowable expenses in its reporting; and report each program’s expenses separately in its Report of Actual Expenditures DSS-2652.In addition, we recommend that ACS recoup $348,312 from Sheltering Arms and ensure that it complies with the report’s other recommendations.