Foster Care Candidate Revenue Maximization Schemes Line County Coffers

Some years ago, in a published article, I explained that: “Significantly, a child who has been identified as a potential ‘candidate’ for placement into foster care may trigger reimbursements to the agency for these administrative costs regardless of whether or not the child had actually entered foster care, and these reimbursements to the agency may continue so long as the child remains a potential candidate for entry. Once the determination is made that a child is no longer a ‘candidate’ for entry into care these reimbursements stop. Hence, there exists a clear financial incentive to agencies to maintain a case as open.”

Today, I examine this specific revenue maximization gimmick in greater detail, and, my own home state of Virginia provides a shining illustration.

In 2002, the Virginia Department of Social Services established the Revenue Maximization Unit, which it renamed the Claims Integrity Unit, to administer its revenue maximization efforts. In December of 2002, the agency issued “Guidelines for State or Local Revenue Maximization Plans for Local Public Assistance Cost Allocation Plans (LPACAPS) or Certified Pass Through Plans (CPT).”

According to an audit report issued by the Office of Inspector General of the Department of Health and Human Services, the State agency issued guidelines that encouraged counties to submit plans for revenue maximization projects, which it defined as: “[T]hose projects with identified opportunities for additional federal reimbursement for allowable social service costs that are otherwise not reimbursed through an existing state reimbursement process.”

The guidelines stated that counties could partner with outside groups that provided social services and specifically suggested projects that focused on administrative costs, including “Title IV-E foster care pre-placement prevention. This project requires case file documentation and review of client qualification to confirm the client as a ‘reasonable candidate’ for removal from the home . . . .”

“Counties submitted claims for partners to the Claims Integrity Unit for processing. The Claims Integrity Unit charged the counties a 2.5-percent fee to cover operating costs. The State agency consolidated claims submitted through the Claims Integrity Unit with other Title IV-E claims from the counties,” the report explains.

We turn now to Fairfax County, the subject of a federal audit. As the Inspector General explains:

    As part of its revenue maximization efforts, in April 2002, Fairfax County began claiming administrative costs for candidacy determinations made by entities known as “partners.” The
    Fairfax County partners included the Fairfax County Juvenile and Domestic Relations District
    Court; Fairfax County Public Schools; the Fairfax-Falls Church Community Services Board; and
    five units within DFS, not including the Division of Children and Youth. The county and its
    partners defined their relationship through a memorandum of agreement, which provided the
    methodology for reporting to the county costs associated with “pre-placement preventative
    services.”

Truth be told, these unholy alliances had always existed in Fairfax – just as they do elsewhere – however their informal partnership had now crystallized into a more formal one with the specific aim of maximizing federal revenue in mind.

When all was said and done, the federal government disallowed $5,577,929 in “administrative expenses” that Fairfax County had claimed for its foster care “candidates” under this revenue maximization scheme. How the money was disbursed between the partners is where the story gets interesting.

The Inspector General explains that the Fairfax County Juvenile and Domestic Relations District Court “accounted for almost half of the total administrative costs claimed by Fairfax County partners during our review period,” and that the Court had “submitted 9,494 quarterly claims” for administrative expenses related to alleged candidacy determinations over the course of the period being audited.

The audit spanned the period of April 2002 through March 2004. During the course of this period, the amount that was disallowed came to a cool $2,368,902 – translating into approximately $1 million that the Fairfax County Juvenile and Domestic Relations District Court had managed to rake in by virtue of its role in identifying nearly 10,000 potential candidates for entry into foster care.

To apply some perspective, consider that according to a fact sheet by the National Resource Center for Permanency and Family Connections, there were 7,861 children in the foster care system in the entire State of Virginia as of October 31, 2005. To apply some more perspective, consider also that according to the Casey Foundation’s Kids Count Data Center, while Fairfax County was second only to Richmond in the raw number of children in its foster care system, there were only 424 children actually in its foster care system as of 2005.

Just how the remaining half of the administrative expenses were divvied up between the remaining “partners” in the revenue generating venture was not specified by the Inspector General.

In my recently revised article on reunification plans, I explain that: “The process of collecting and documenting the information required for the termination procedure often takes place during the critical reunification stage. Experts testifying against families in courtrooms are frequently the same ones that the parents were compelled to attend services with as a part of their mandated plan. And, without their testimony the state would often have no case against them.”

I note also that this point was not entirely lost on Nebraska’s Foster Care Review Board, which candidly admitted that “no plan can mean children remain in out-of-home care without permanency because the professionals cannot build a case for termination of parental rights.”

When a memorandum of agreement to maximize revenue is hammered out between a local Department of Social Services, its Juvenile Court, and the local Community Services Board, can there be any doubt but that serious conflicts of interest exist?

But Fairfax wasn’t the only County to hop on board the gravy train with the State’s encouragement. As another audit issued by the Inspector General explains:

    As part of its revenue maximization efforts, in April 2002, Arlington County began claiming
    administrative costs for candidacy determinations made by entities known as “partners.” The
    Arlington County partners included the School Board; the Office of Comprehensive Services for
    At-Risk Youth; the County Juvenile and Domestic Relations District Court; the Office of
    Northern Virginia Family Services; and the Department of Human Services, Health Services
    Division. The county and its partners defined their relationship through a memorandum of
    agreement, which provided the methodology for reporting to the county costs associated with
    “pre-placement preventative services.”

Who would you suppose the major beneficiary of Arlington’s scheme was? As the OIG explains, the Arlington County Juvenile and Domestic Relations District Court “accounted for more than half of the total administrative costs claimed by Arlington County partners during our review period,” and the Court “did not provide adequate documentation to support its candidacy determinations.”

Over the two year period covered by this audit, the County had raked in $1,744,137, of which the Arlington County Juvenile and Domestic Relations District Court was the prime beneficiary.

During the audit period, the court submitted 1,875 quarterly claims. To put this into perspective, consider that according to the Kids Count Data Center, the County only had 166 children actually in foster care in 2005.

Caught with their hands in the federal cookie jar, and faced with huge disallowances, the Virginia Department of Social Services eventually abandoned this particular revenue maximization scheme in favor of some others.

According to the minutes of the State Board of Social Services covering the period of August 18 and 19, 2004, the federal challenges being made to the States’ revenue maximization efforts greatly concerned officials in the Department.

As the minutes explain: “There have been some revenue maximization challenges that were previously mentioned before the Board over the past months. The federal government, in a series of audits has said the department has not been doing things in a way they approve and as a result we will be penalized around seven million dollars and upward. In response, the department halted payment pursuant to this program while we were engaging in a negotiation that still continues. I believe we can continue to negotiate and put new policies and procedures in place and begin to continue with making payments in September. Specifics on these changes will be provided at the October meeting.”

The two reports cited herein were issued in November of 2007, and they resulted in disallowances that came in addition to those already settled by the State from prior audits.

I won’t get into the specific revenue generating mechanisms that the State currently employs, other than by way of saying that there would appear to be no limits to the ingenuity of social service providers and their revenue maximization providers when it comes to raking in federal dollars.

And, quite clearly the Juvenile Courts – at least in some jurisdictions – are getting a thick slice of that fine, green, revenue-maximized pie.