Heartland Human Care Services, Inc., Generally Met Safety Standards, but Claimed Unallowable Rental Costs

Heartland Human Care Services, Inc. (Heartland), generally met applicable safety standards for the care and release of children in its custody. Heartland met State licensure requirements and requirements for inspections, performed adequate oversight, and followed guidance when reviewing background investigations for employees who care for the children. However, we observed one classroom where the staff-to-child supervision ratio was significantly less than required, and we observed one classroom and hallway that lacked required monitoring equipment. We also found that some Heartland case files were missing documentation assuring that required records were provided upon the child's release to a family member or other sponsor.

Heartland claimed allowable expenditures for 119 of 120 transactions reviewed in our stratified random sample. For one transaction, it did not comply with Federal regulations related to less-than-arm's-length lease agreements. We also identified rental costs on two additional less-than-arm's-length leases that exceeded the amount allowable for such leases. The three leases resulted in unallowable rental costs of $665,333 and associated indirect costs of $103,127.

We recommended that Heartland adhere to classroom staffing-to-child ratios in accordance with State regulations and maintain children's case file documentation in accordance with ORR policy. We also recommended that Heartland refund $768,460 to ORR for unallowable costs incurred under the less-than-arm's-length lease agreements and limit future rental costs under less-than-arm's-length lease agreements to the amount that would be allowed under 45 CFR section 75.465(c). In written comments on our draft report, Heartland agreed with our first two recommendations regarding staffing-to-child ratios and maintenance of case file documentation. Heartland did not agree with our third recommendation to refund $768,460 to ORR for unallowable rental costs. After reviewing Heartland's comments, we maintain that the recommendation to refund unallowable rental costs is valid, although the amount of questioned costs for one facility could be reduced. We defer to the Administration for Children and Families to determine any potential adjustments for the one facility.