Wisconsin Foster Care Agency Made $6.1 Million in Fraudulent or Improper Charges UPDATED

“The owners of a Dane County firm for foster children charged taxpayers millions of dollars in fraudulent or improper charges – or one in every three dollars they billed, according to the allegations made in a state audit.

Community Care Resources of Middleton racked up $6.1 million in inappropriate charges and profits – mostly for its owners’ personal use – from 2009 to 2011, according to the audit by the state Department of Children and Families. That amounts to 34% of the $18.1 million paid to the foster-child placement agency over that three-year period.

In addition, the state released new details Tuesday on two Milwaukee foster children agencies that lost their licenses for what auditors identified in one case as fraud and in the other as “poor or nonexisting” accounting practices and questionable financial dealings.

Also, two Republican senators Tuesday called on state Attorney General J.B. Van Hollen to open a criminal case against Community Care Resources.

“In the light of the allegations, we ask that the Department of Justice and our attorney general take action,” Sens. Rob Cowles of Allouez and Leah Vukmir of Wauwatosa wrote in a letter to Van Hollen.

The revelations about Community Care Resources and its owners, Daniel and Mary Simon, have focused attention on programs for foster children in Wisconsin, which the state has been auditing over the past two years.

A spokeswoman for the state Department of Children and Families had no comment Tuesday on how Community Care Resources could avoid detection by government officials, win government contracts, or ensure adequate care for foster children when the agency was diverting so much money from its proper uses.

Part of the issue may be that Community Care Resources was paid by counties, not the state, and some rural counties may not have had the option of another private-sector agency. The state department started auditing agencies such as Community Care Resources in 2011 after seeking and receiving that authority for the first time from the Legislature.

The state audit found that the Simons used the money to finance homes and renovations, luxury cars, boats and trips around the country.

The Simons are appealing the state’s revocation of their license and such findings by the state that their total salaries of more than $1 million over three years were inflated.

In the state report, Community Care Resources responded that the Simons’ salaries were if anything too low.

The state “grossly undervalues the responsibilities of the many and varied functions and associated responsibilities, liabilities and risk of a business entity on a 24-hour a day, seven days a week . . . basis,” their response reads.

The Department of Children and Families also released audit reports on two Milwaukee foster child agencies that lost their licenses in 2011.

James Pekrul, the owner of Foster Care Youth Independence Center of Wisconsin, took thousands of dollars from the agency’s checking account in 2011 for his personal use, the audit alleges. In addition, Pekrul used the agency debit card to make car payments and buy clothing, cable service, music downloads and health club dues for himself and a family member, it says.

Pekrul also failed to file and pay taxes on time and document his center’s spending, the report found.

Pekrul could not be reached for comment and no one could be reached at the number listed for the center.

A Purpose for Life Inc. lost the license for First Step Living Center after the state determined in November 2011 that the center had financial management problems, inadequate accounting practices and difficulty meeting its payroll. Among the problems cited was a commingling of the center’s funds with those of another facility and a personal loan made to an employee.

In an interview, A Purpose for Life owner Greg Owens disputed the findings.

“We had better fiscal controls than most multimillion-dollar organizations,” he said.”

Audit: Foster care firm made $6.1 million in fraudulent or improper charges

[Milwaukee Journal-Sentinel 2/6/13 by Jason Stein]

REFORM Puzzle Piece

Update: “State Department of Children and Families officials told the Senate health committee on Thursday [February 14, 2013] that the company’s unusual expenses reports caught their attention in November 2011, when several counties reported missing the company’s expenses reports.

The state says foster care companies used to set their own service rates and submit expenses to counties, but now the department can determine their rates and audit their expenses after legislators passed regulations in 2010.

The department says Community Care Resources Inc. has to pay back more than $6 million it allegedly overcharged by next Friday.

Community Care’s attorney is disputing the allegations in a letter to the committee.”

Wis official says regulatory loophole in the foster care system causes fraud

[TMJ4 2/14/13 by Associated Press]

Children and Families Secretary Eloise Anderson “said the agency intended to audit more of Community Care’s financials for evidence of impropriety, including some years before 2009 and its 2012 finances, which become available in July.

The completed state audit found that the Simons used the money from taxpayers meant to help vulnerable children to finance homes and renovations, luxury cars, boats and trips around the country.

The Simons are appealing the state’s revocation of their license and findings by the state that their total salaries of more than $1 million over three years were inflated. In a letter given to the committee, the Simons’ attorney, David Schwartz, said his clients were innocent.

Community Care “would like nothing more than the opportunity to attend the hearing and clear its name,” Schwartz wrote in the letter. “Unfortunately, due to the ongoing revocation proceeding and litigation, based upon our advice, CCR cannot attend.”

Schwartz did not return a phone call seeking comment.

Besides criminal cases, the Department of Justice does some other legal tasks for state agencies with similar problems to those facing the Department of Children and Families, including helping them collect money that is owed to the state.

As a result of new audits being conducted by the Department of Children and Families, Anderson and her staff told the senators that they have revoked the licenses of three other foster child agencies over the past year.

In the previous legislative session, the agency requested and received from lawmakers for the first time the ability to do in-depth audits of agencies for foster children that could detect fraud. In the current state budget, the agency received more audit staff.

“I look at this as a good news-bad news. The good news is that we as a Legislature gave you tools to uncover this. The bad news is how many other agencies are defrauding the government?” asked Sen. Leah Vukmir (R-Wauwatosa), the committee chair who called for the hearing.

State officials said they didn’t expect any other problems as great as those with Community Care. But they acknowledged it will still take the Department of Children and Families three to five years to audit all 300 of the foster child agencies in the state.

Anderson said the fraud went undetected for so long because Community Care dealt almost exclusively directly with counties and in some rural counties was the only option officials had for placing high-need foster children.

Until recently, the state didn’t collect information on rates counties were paying providers for that service. As a result, the rates varied widely and some counties had especially high costs, Anderson said.

Since agencies were being paid a set rate and were not being reimbursed for expenses, there also was not much information available on what the counties were spending money on, she said.

The state is now setting the rates, which have fallen sharply, and state officials also are looking into how private agencies are spending the money they receive, Anderson said. She told senators she would report back on further ways the state could prevent fraud in its programs.”

$6.1 million foster care fraud case now involves Justice Department

[Journal-Sentinel 2/14/13 by Jason Stein]