EXECUTIVE SUMMARY:
This report presents the results of our audit of administrative costs related to training provided to current and prospective employees and claimed for Federal reimbursement by the California Department of Social Services (State) under title IV-E (Foster Care program) of the Social Security Act. Federal financial participation is available at a rate of 75 percent in certain costs of training staff employed or preparing for employment by the State or local agency administering Foster Care programs. This is an enhanced rate over the 50 percent rate for administrative costs necessary for the operation of States' Foster Care programs, including administrative costs related to training. The audit covered the period July 1, 1994 through December 31, 1995.
The primary objective of our audit was to determine whether the State claimed administrative costs related to foster care training at the appropriate rate of 50 percent instead of the 75 percent rate allowed for certain training costs specified by Federal regulations.
ADMINISTRATIVE COSTS CLAIMED AT 75 PERCENT RATE
Inappropriately Claimed Costs. The State inappropriately claimed administrative costs related to foster care training at the enhanced rate of 75 percent rather than the allowable rate of 50 percent. We identified $8.4 million inappropriately claimed at the 75 percent rate, resulting in an overclaim of Federal funds totaling $2.1 million. The costs related to county welfare departments, probation departments, and State and county contracts with universities and did not meet the definition of costs eligible for the enhanced rate under Federal regulations for the Foster Care programs.
Insufficiently Documented Costs. The State did not provide sufficient documentation to support some of the costs that were claimed as matching costs to meet the State's cost sharing requirement for certain costs claimed at the 75 percent enhanced rate. We identified $3.8 million (Federal share $2.8 million) of such inadequately supported costs claimed. In some instances, information provided by the State was not sufficient to determine the allowability of the costs under Federal regulations; in other instances, the information was not sufficient to distinguish between (i) costs related to training activities reimbursable at the 75 percent rate, and (ii) costs for administrative activities reimbursable at the 50 percent rate.
DUPLICATE COSTS CLAIMED
In its quarterly statements of expenditures, the State included adjustments to costs claimed for Federal reimbursement which resulted in two duplicate claims totaling $6.8 million (Federal share $4.5 million). One duplicate claim resulted from an apparent lack of understanding on how to claim child welfare information system costs that were allowable at the 75 percent rate. This resulted in the same costs being claimed under two different cost categories. The other duplicate claim resulted from an administrative error which duplicated an earlier adjustment for underclaimed costs.
We recommend that the State refund $6.6 million, which includes $2.1 million due to the inappropriate use of the 75 percent rate, and $4.5 million resulting from the duplication of costs. We also recommend that the State provide documentation for the unsupported costs claimed or make an appropriate refund of costs which cannot be supported. Our report also includes various procedural recommendations.
The State concurred with the recommended refund of $4.5 million resulting in duplicate claims. However, the State did not concur with the recommended refund of $2.1 million in administrative costs claimed at the enhanced rate of 75 percent or the finding and recommendation relating to the $3.8 million (Federal share $2.8 million) of inadequately supported costs set aside. The State did not agree that the regulations limited Federal reimbursement of training-related administrative costs to 50 percent, and commented that it considered the documentation provided in support of the costs claimed to meet its matching requirements to be sufficient.