INVESTIGATION: Severe Financial Problems Plague State Agency
Thursday, September 24, 2015
The Rhode Island Department of Children, Youth, and Families is riddled with severe financial problems and shoddy record keeping, leading to running deficits, a potential misuse of funds, and violation of state purchasing regulations, according to a state audit.
GoLocalProv obtained the audit after it was reported last week that two senior officials at the financially distressed agency had been put on paid leave. One of them was Brian Peterson, the associate director of financial management. A DCYF source tells GoLocalProv that the action against Peterson was related to the audit findings. An agency spokesman would not comment.
But the spokesman, Michael Raia, did confirm that the audit has now led to a State Police investigation into “potential financial issues.”
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe audit, issued later in the summer, uncovered systemic problems in the financial operations of the state agency. Among its findings: 10 out of 22 contracts had been awarded without going out to bid and more than half of them were signed after the contractors had already started the work. In some instances contractors may have been twice for the same work. Other payments were issued in error.
DCYF was even missing some of its contracts and had “limited fiscal monitoring” information for just 3 out of the 22 contracts reviewed.
“Without adequate efforts dedicated to the monitoring process, DCYF may not detect provider noncompliance with contract terms or State and Federal regulations; there is potential for misuse of funds. More importantly, there is a risk that children may not receive the appropriate quality of care,” states the audit, dated July 30.
A detailed breakdown of the audit findings are in the below slides.
‘Administrative blunders’
A top state lawmaker expressed dismay and surprise at the audit.
“Granted the kids come always come first, but when you can’t get the administration and finances right they will suffer,” state Rep. Joseph McNamara, a Warwick Democrat who chairs the House Committee on Health, Education, and Welfare.
He said lawmakers once had been under the impression that DCYF’s long-running deficits were the result of a rising case load. The audit has instead revealed that they are the result of what McNamara described as “administrative blunders,” such as not being able to accurately predict when federal reimbursements for services would be received.
In the summer, Governor Gina Raimondo announced a total overhaul of DCFY, aimed not just at rectifying its many financial troubles, but also improving the quality of services it provides to children and families, according to Raia, who is officially the spokesman for the Executive Office of Health and Human Services, which oversees DCYF.
“A strong, well-functioning DCYF is essential to strengthen Rhode Island families and ensure all Rhode Island children have the opportunity to make it in Rhode Island. Immediately upon taking office, the Governor ordered an overhaul of DCYF to address inherited managerial and operational challenges. No one in the administration will be satisfied until the challenges we inherited are resolved. We have the right team in place to lead a turnaround and we will continue to measure progress on the goals set in the DCYF turnaround plan,” said Marie Aberger, a spokeswoman for Raimondo.
Tens of millions of funding at issue
The audit does not provide a full accounting of how much money may have been wasted or misspent.
But two of the most troublesome contracts are among the agency's largest: the $35.6 million a year it pays to each of two agencies that help DCYF manage a statewide network of nonprofit and private service providers.
Spending on the contracts, which were set to run from mid-2012 to this summer, had consistently gone over budget. The agency attempted to terminate the contracts but was unable to because it did not have the authority. The audit does not explain why the state Division of Purchases did not support the termination.
Raia confirmed that the two agencies—Family Service of Rhode Island and Child and Family Service—received a contract extension until December 31, 2015 while a turnaround team of state officials oversees the overhaul of the state agency. The contractors' duties have been narrowed but information on how much of a reduction in payment comes with that was not available in time for publication.
Poor record keeping and lack of financial oversight resulted in a $15.7 million budget deficit for DCYF by the time Raimondo took office. Raimondo was able to eliminate $4 million of that. The rest had to be covered by a one-time allocation of funds from the state legislation to “stabilize” the agency, according to Raia.
“The audit of DCYF ordered by the Raimondo administration has uncovered the most widespread, egregious fiscal mismanagement of a government department that can be imagined short of someone outright embezzling the entire budget,” said Monique Chartier, spokeswoman for the RI Taxpayers group. “This is scandalous and fulfills a taxpayer’s worst nightmare: that all government does is collect hard-earned tax dollars and carelessly squanders them—in this case, on a wholesale scale.”
Beyond financial issues, the audit gave a glimpse of an agency in a state of near-complete dysfunction: payments were issued to service providers without verifying whether the work had actually been done, social workers and others who deal directly with children were not communicating were not able to review contracts to see which best met their needs, and the agency was unable to verify which service providers were caring for which children.
“We appear to reaching some sort of critical mass of evidence of that government simply isn't working in Rhode Island—from 38 Studios to the Department of Transportation to collapsing cities and fire districts to the DCYF. The underlying reason seems likely to be that the people responsible for the day-to-day operation of government agencies fully understand that elected officials, one, are in office above all to support their interests and, two, have an electoral lock on all of the key positions,” said Justin Katz, the research director at the Rhode Island Center for Freedom and Prosperity.
Overhauling a state agency
The problems uncovered this summer were not unforeseen. In May 2014, a top DCYF official has recommended “control improvements to the contracting and financial oversight processes” which would have resolved some of the findings in the audit. Ironically, that official was Peterson, one of the top staffers placed on paid leave last week.
DCYF is now in the midst of a major restructuring of its operations, with Jamia McDonald, the Chief Strategy Officer at the Executive Office of Health and Human Services, heading up the effort and handling the day-to-day operations of the agency. Presently, DCYF does not have an official director. Former director Janice DeFrances was not reappointed by Raimondo and announced her retirement earlier this year.
The overhaul process is being done with input from a number of national experts, including the Harvard Kennedy School Government Performance Lab and the Annie E. Casey Foundation and Casey Family Programs, according to Raia.
In the wake of the audit, DCYF officials set a number of deadlines for when the issues identified within it would be addressed. Some were due to be completed by the end of the summer. Others will not be fixed until the end of this month or next. Raia said state authorities are confident that the overhaul is keeping to schedule.
McNamara says the agency also needs new kind of leadership. Presently state law requires that the director have a graduate degree in social work. He filed legislation in the last session that he said would allow the director to be someone with an advanced degree in business or administration.
In an interview, he stressed that he did not mean to criticize social workers. “Social workers do a great job,” McNamara said. “They do a tremendous job for the citizens of Rhode Island.”
However, a different skill set is needed to actually run DCYF, he said. “We need to have individuals that have the administrative skills, the financial background ... to be leading this multimillion-dollar agency,” McNamara said.
But the bill faced a storm of opposition from the social worker community in a hearing in the last session and ended up not even passing the committee that McNamara chairs.
Tips on potential corruption at the local or state level, misspending, abuse of power, and other issues of public interest can be sent to [email protected]. Follow Stephen Beale on Twitter @bealenews
Related Slideshow: State Audit of The Department of Children, Youth & Families
Below is a synopsis of the major findings of a state audit of the Rhode Island Department of Children, Youth, and Families (DCYF). The audit was conducted by the state Bureau of Audits and released on July 30, 2015. The findings are now coming under renewed scrutiny after two top DCYF officials were put on paid leave last week. Note that some of the issues identified in the audit were expected to be corrected by this month. Many others are still in the process of being resolved. Many of the issues revolve around the many outside nonprofit agencies and private groups DCYF hires to provide certain services.
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