Review of Foster Care Claims Reclassified by the State of Alabama

EXECUTIVE SUMMARY:

The objective of our audit was to determine the appropriateness of the reclassifications designed to upgrade payments for Aid to Children in Foster Care (State subsidized foster care) to Title IV-E Foster Care (federally subsidized foster care).

In the statewide audit covering Fiscal Years (FY) 1993 and 1994, the State auditors reported that Alabama inappropriately upgraded State foster care clients to Federal foster care status. Alabama had reclassified 1,981 State subsidized foster care claims to federally subsidized foster care. Retroactive payments related to the reclassified claims totaled $4.4 million for the two FYs ended September 30, 1994. The claims were upgraded by the State based on work conducted by a consulting firm.

Based on the State auditors' report, Alabama instructed the consulting firm to recalculate the number of clients eligible for federally funded foster care using a revised methodology. During the FY 1995 audit, the State auditors concluded that the State had corrected the prior years' audit finding related to upgraded claims.

However, we reviewed 30 case files for clients with reclassified claims and determined that in 11 instances, the reclassifications were not appropriate based on documentation contained in the case files. As a result of the retroactive adjustments, the State was not reimbursed the correct amount of Federal Financial Participation.

We recommended that the State review the work performed by the consultants to ensure that expenditures for retroactive upgrades charged to the IV-E Foster Care program were made to eligible clients. In written comments to the draft report, the Department of Human Resources (DHR) officials disagreed with our recommendation. According to DHR officials, it would not be a prudent use of scarce State resources to perform a 100 percent review of the retroactive upgrades.