Reviewing Selected Issues Related To State Contracts For Foster Care and Family Preservation Services, KS, 2008

PERFORMANCE AUDIT REPORT
Foster Care: Reviewing Selected Issues Related to

State Contracts for Foster Care and Family
Preservation Services
A Report to the Legislative Post Audit Committee

By the Legislative Division of Post Audit
State of Kansas
April 2008
08PA04
Legislative Post Audit Committee
Legislative Division of Post Audit
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its audit agency, the Legislative Division of Post performance audits through the Chairman or any
Audit, are the audit arm of Kansas government. other member of the Committee. Copies of all
The programs and activities of State government completed performance audits are available from
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and administrators try increasingly to allocate tax
dollars effectively and make government work more
efficiently, they need information to evaluate the
work of governmental agencies. The audit work LEGISLATIVE POST AUDIT COMMITTEE
performed by Legislative Post Audit helps provide
that information. Senator Derek Schmidt, Chair
Senator Nick Jordan
We conduct our audit work in accordance Senator Les Donovan
with applicable government auditing standards Senator Anthony Hensley
set forth by the U.S. Government Accountability Senator Chris Steineger
Office. These standards pertain to the auditor’s
professional qualifications, the quality of the audit Representative Virgil Peck Jr., Vice-Chair
work, and the characteristics of professional and Representative Tom Burroughs
meaningful reports. The standards also have been Representative John Grange
endorsed by the American Institute of Certified Representative Peggy Mast
Public Accountants and adopted by the Legislative Representative Tom Sawyer
Post Audit Committee.
The Legislative Post Audit Committee is a LEGISLATIVE DIVISION OF POST AUDIT

bipartisan committee comprising five senators and
five representatives. Of the Senate members, three 800 SW Jackson
are appointed by the President of the Senate and Suite 1200
two are appointed by the Senate Minority Leader. Topeka, Kansas 66612-2212
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Website:
Audits are performed at the direction of http://kslegislature.org/postaudit
the Legislative Post Audit Committee. Legislators Barbara J. Hinton, Legislative Post Auditor
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LEGISLATURE OF KANSAS
LEGISLATIVE DIVISION OF POST AUDIT

800 SOUTHWEST JACKSON STREET, SUITE 1200
TOPEKA, KANSAS 66612-2212
TELEPHONE (785) 296-3792
FAX (785) 296-4482
E-MAIL: lpa@lpa.state.ks.us
March 28, 2008
To: Members, Legislative Post Audit Committee
Senator Derek Schmidt, Chair Representative Virgil Peck Jr., Vice-Chair

Senator Les Donovan Representative Tom Burroughs
Senator Anthony Hensley Representative John Grange
Senator Nick Jordan Representative Peggy Mast
Senator Chris Steineger Representative Tom Sawyer
This report contains the findings, conclusions, and recommendations from

our completed performance audit, Foster Care: Reviewing Selected Issues Related
to State Contracts for Foster Care and Family Preservation.
The report also contains several appendices showing the history of SRS
payments to family preservation and foster care contractors, the contractors’
family preservation and foster care outcomes for fiscal years 2006 and 2007, and
organizational charts for four child welfare contractors with affiliate companies.
The report includes several recommendations for The Farm, Inc., SRS, and
the Division of Purchases. We would be happy to discuss these recommendations
or any other items in the report with you any legislative committees, individual
legislators, or other State officials.
Barbara J. Hinton
Legislative Post Auditor
Get the Big Picture
Read these Sections and Features:
1. Executive Summary - an overview of the questions we

asked and the answers we found.
2. Conclusion and Recommendations - are referenced in

the Executive Summary and appear in a box after each
question in the report.
3. Agency Response - also referenced in the Executive

Summary and is the last Appendix.
READER’S GUIDE
Helpful Tools for Getting to the Detail

ƒ In most cases, an “At a Glance” description of the agency or
department appears within the first few pages of the main report.
ƒ Side Headings point out key issues and findings.
ƒ Charts/Tables may be found throughout the report, and help provide

a picture of what we found.
ƒ Narrative text boxes can highlight interesting information, or

provide detailed examples of problems we found.
ƒ Appendices may include additional supporting documentation, along

with the audit Scope Statement and Agency Response(s).

800 SW Jackson Street, Suite 1200, Topeka, KS 66612-2212
Phone: 785-296-3792 E-Mail: lpa@lpa.state.ks.us
Web: www.kslegislature.org/postaudit
EXECUTIVE SUMMARY
LEGISLATIVE DIVISION OF POST AUDIT
Overview of Family Preservation and Foster Care in Kansas

Several contractors provide family preservation and foster .................. page 3
care services in five regions of the State, at a total cost of over
$147 million in fiscal year 2007. Beginning in fiscal year 2006, family
preservation services were split into in-home and out-of-home services,
and foster care was also expanded to include case management for
adoption services. Payments for out-of home services within the foster
care and family preservation contracts have increased from about $94
million to almost $138 million over the past seven years, while in-home
services have decreased from $13 million to almost $10 million.
Question 1: Were Appropriate Procedures Followed in Awarding

Contracts to The Farm for Foster Care and
Family Preservation Services in 2005?
In May 2004, SRS began soliciting bids for family preservation .................. page 7
and foster care services for fiscal years 2006 through 2009. The
new contracts differed from the previous ones in that they created
two categories of family preservation services, and introduced a more
complex pricing structure for foster care services. SRS used a negotiated
procurement process designed to provide the State with the best value,
which may not result in the lowest cost.
During the process, an SRS employee appears to have .................. page 9

inadvertently disclosed information that The Farm subsequently
used to increase its bids. When conducting the financial phase of the
contracting process, SRS officials realized that four of five contractors’
bid proposals were significantly higher than SRS’ target, while The Farm
submitted bids that were lower than SRS had projected. In an attempt to
treat all contractors uniformly, SRS officials shared the basic framework
for a “risk mitigation” plan with all finalists to resolve issues that had stalled
discussions, but withheld certain details from The Farm.
While discussing its risk mitigation plan with Farm officials during
the third and final negotiations, an SRS employee disclosed financial
information that initially had been withheld, which led to The Farm
increasing its bids. Consequently, the State paid an additional $2.9 million
to The Farm during the first two contract years. To avoid this situation,
SRS officials could have finalized negotiations with The Farm before
working with the other contractors on the risk-mitigation plan. We also
found three minor instances where officials from SRS or the Division of
Purchases deviated from best practices and requirements, including the
absence of a procedure to check SRS staff involved in evaluating the bids
for potential conflicts of interest.
EXECUTIVE SUMMARY i
APRIL 2008 08PA04
Recently, SRS modified the contracts to resolve issues related ................ page 13
to Medicaid payments to contractors. Contractors were going to lose
an estimated $7 million in Medicaid payments during fiscal year 2008
due to reimbursements they couldn’t claim anymore. SRS agreed to
cover the majority of those losses with State General Fund moneys. The
balance was to be covered by other federal revenue sources. For fiscal
years 2008 and 2009, SRS also modified the existing contracts to return
to a flat monthly payment per child plus an administrative fee to alleviate
contractors’ concerns about uncertain payments.
Question 1 Conclusion ................ page 14
Question 1 Recommendations ................ page 15
Question 2: Have Moneys from the Contracts Awarded to The Farm

Been Used Only for Appropriate Purposes Related to the Contracts?
During fiscal year 2007, The Farm spent $21.3 million on its ................ page 17
family preservation and foster care contracts with SRS. The majority
of the money The Farm spent from its foster care and family preservation
contracts with SRS in 2007 was on foster care placements ($7.3 million)
and staff compensation ($5.8 million).
The contracts focus on outcomes rather than how the ................ page 18
money can be spent, and The Farm’s results were similar to other
contractors. None of the contractors have met all outcomes for family
preservation and foster care, but The Farm’s results generally are in-line
with the other contractors’ results. Family preservation contractors have
met 58% to 77% of the specified outcomes, while foster care contractors
have met about half of the specified outcomes during fiscal years 2006 and
2007.
We saw no spending by The Farm that was contrary to best ................ page 19
practices, but we identified independence issues related to one board
member. The Farm’s management compensation in 2006 was in-line with
other foster care and family preservation contractors, and board members
received no compensation. The Farm’s travel expenditures also didn’t
appear to be out-of-line. However, we noted two potential conflict-of-
interest situations that exist because one of The Farm’s board members is
married to its Chief Executive Officer.
The Farm hasn’t used affiliated businesses to increase ................ page 22

management compensation. The Farm has created a total of seven
affiliates, but only three of them are currently active. All three active
affiliates are non-profit organizations, while two of the inactive affiliates are
for-profit organizations. According to experts, creating for-profit or non-
profit affiliate companies is both common and acceptable. Three of the
ii EXECUTIVE SUMMARY
APRIL 2008 08PA04
four other foster care and family preservation contractors in Kansas also
have affiliates. We saw no evidence that The Farm has used affiliates to
increase fiscal year 2007 management salaries to unreasonable levels.
In fiscal year 2007, The Farm donated $500,000 to an affiliate, ................ page 24
but reported it to SRS as an expense. The donation to its Foundation
is an acceptable practice according to non-profit experts. However,
The Farm showed the $500,000 donation as an expense on reports it
submitted to SRS, which understated its net revenues and financial health.
Because both organizations share the same board of directors and many
of the key management staff, we think the transaction shouldn’t have been
categorized as an expense, but as a transfer of funds.
Since fiscal year 2005, The Farm has improved its financial ................ page 25
position significantly. The Farm has increased its net assets from $7.6
million to almost $12.1 million —an increase of about $4.5 million (or 59%)
since the new contract began. The Farm’s current assets for fiscal year
2007 totaled $13.4 million which was enough to cover about five months’
worth of expenditures that year.
Question 2 Conclusion ................ page 25
Question 2 Recommendations ................ page 26
APPENDIX A: Scope Statement ................ page 27
APPENDIX B: History of SRS Payments to Family Preservation, Foster ................ page 29

Care, and Adoption Contractors
APPENDIX C: SRS Family Preservation and Foster Care Outcomes for ................ page 31
Fiscal Years 2006 and 2007
APPENDIX D: Organizational Charts of Four Child Welfare Contractors ................ page 36

with Affiliate Companies
APPENDIX E: Agency Responses ................ page 38
This audit was conducted by Katrin Osterhaus, Nathan Ensz, Brad Hoff and Justin Stowe. Leo
Hafner was the audit manager. If you need any additional information about the audit’s findings,
please contact Katrin Osterhaus at the Division’s offices. Our address is: Legislative Division of
Post Audit, 800 SW Jackson Street, Suite 1200, Topeka, Kansas 66612. You also may call us at
(785) 296-3792, or contact us via the Internet at LPA@lpa.state.ks.us.
EXECUTIVE SUMMARY iii

APRIL 2008 08PA04
Foster Care: Reviewing Selected Issues Related to State
Contracts for Foster Care and Family Preservation Services
Foster care-related services have been provided by non-governmental,
non-profit entities since 1996, when the Department of Social and
Rehabilitation Services (SRS) privatized child welfare services. In
February 2005, the Department of Social and Rehabilitation Services
entered into new contracts to provide adoption, foster care, and family
preservation services in Kansas.
The four-year contracts, which began on July 1, 2005, had an option

for two one-year renewal periods. Contracts awarded in 2005
were with DCCCA, Inc., Kansas Children’s Service League, Inc.,
Kaw Valley Center (KVC) Behavioral HealthCare, Inc., St. Francis
Academy, Inc., The Farm, Inc., and United Methodist Youthville, Inc.
Recently, legislators have heard about alleged irregularities when the

foster care contracts were awarded in 2005. Among the concerns
were that information about other bids was disclosed to some bidders,
that some individuals making decisions about the awards may have
had a conflict of interest, and that SRS agreed to pay some contractors
far more than their bid amounts.
Legislators also have expressed concerns about the numerous related

non-profit and for-profit corporations The Farm has established, and
about whether those corporations could be used to divert moneys
intended to be used for foster care or family preservation services.
This performance audit answers the following questions:
1. Were appropriate procedures followed in awarding contracts

to The Farm for foster care and family preservation services
in 2005?
2. Have moneys from the contracts awarded to The Farm been
used only for appropriate purposes related to the contract?
To answer these questions, we reviewed the Division of Purchases’

bid documentation and interviewed officials to determine whether
various State requirements, policies, and best practices for awarding
the contracts were followed. We reviewed the contracts to determine
what restrictions exist in how moneys can be spent. We also
interviewed State officials to determine how and why rates changed
throughout the process, who was present at various negotiation
meetings, what information was shared, and who made final
decisions about the contracts. Finally, we interviewed SRS officials
and reviewed related documents to explain why SRS recently re-
negotiated the four-year foster care and family preservation contracts.
PERFORMANCE AUDIT REPORT 1

08PA04 APRIL 2008
We analyzed fiscal year 2007 expenditure data from The Farm to
determine whether the organization’s management oversight and
spending in the areas of compensation, transfers, and travel complied
with the best practices we identified. Related to The Farm’s creation
of affiliates, we interviewed experts as to what’s acceptable, and
interviewed other contractors in the State about their organizational
structure. Finally, we reviewed the CPA reports The Farm provided to
SRS to assess the organization’s financial position.
In conducting this audit, we followed all applicable government

auditing standards set forth by the U.S. Government Accountability
Office, except that we didn’t fully test the reliability of the following
three sources of data we used in this audit due to time constraints, as
described below.
We received fiscal year 2007 general ledger expenditure data from The
Farm. To test the data, we tied The Farm’s total contract expenditures
to its 2007 CPA audit report, and reconciled subtotals for contract-
related expenditures to the trial balance report we received from the
accounting firm. Lastly, we reviewed supporting documents for a risk-
based targeted sample of 20 travel- or transport-related transactions
provided by The Farm. We did not test a systematic sample across
all categories of transactions to test the reliability or validity of the
data. Officials from The Farm provided CPA reports for the last three
fiscal years, which we used to report on the financial position of the
organization. These data were audited by private accounting firms; we
didn’t review their work.
SRS officials provided us with information of payments to all contractors

for foster care and family preservation services for the past seven years.
Out of all these data, we reconciled SRS’ reported total payment to The
Farm for fiscal year 2006 to the amount in the State Accounting and
Reporting System (STARS) data.
We received outcome data for fiscal year 2006 and 2007 for foster care
and family preservation for all contractors from SRS. While SRS staff
check data reliability and validity of the data through computer edits,
review by staff for reasonableness, and file reviews, we didn’t review
their work nor did we do our own testing.
Based on our limited testwork and the testwork of others, we think it’s
unlikely that the data are so grossly or systematically inaccurate as to
affect our findings and conclusions.
2 PERFORMANCE AUDIT REPORT

08PA04 APRIL 2008
Overview of Family Preservation and Foster Care in Kansas
Several Contractors SRS privatized family preservation services in 1996 and foster care
Provide Family services in 1997. This was done to address longstanding concerns
Preservation and about the quality of services for children in the custody of SRS. SRS
Foster Care Services in divided the State into five service regions, and allowed non-profit
Five Regions of the State, organizations to submit bids for services.
At a Total Cost of About
Currently, family preservation and foster care services are
$147 Million in
administered both by SRS and by several non-profit contractors.
Fiscal Year 2007 Here’s a summary of these two child welfare programs:
• Family preservation services: Beginning with the fiscal year 2006
contracts, family preservation services were split into two components:
► Family In-Home: This is a short-term program that provides

families with the support necessary to maintain their children in the
home with the goal of avoiding SRS custody. Under privatization,
SRS refers children to contractors who provide a variety of services
to families, such as teaching parents appropriate expectations,
dealing with family conflict, and managing anger. Contractors
also provide services to families who have children with behavior
problems, mental illness, and developmental disabilities.
► Family Out-of-Home: Under the previous contract, a family

receiving services from the family preservation contractor would
have to change to the foster care contractor in that area if the child
came into SRS custody during that time. To avoid changes in case
workers and disruption of services, SRS created “out-of-home
services” within the family preservation contract. Out-of-home
services essentially are foster care services being provided by the
family preservation contractor.
• Foster care services: This program provides services for families

and children who’ve been removed from their homes and placed in the
custody of the State. Most children who require foster care have been
abused or neglected and have significant developmental, physical,
or emotional needs, which can require an array of services and care
options. Under privatization, children are referred to contractors who
are required to place each child in a foster home or a facility appropriate
for the child’s needs, and provide services that will help reunite children
with their families.
The most recent four-year contracts for these services began July 1,
2005 (fiscal year 2006), when SRS selected three agencies to provide
family preservation services across the State, and four agencies to
provide foster care services. Figure OV-1 shows which contractor
currently serves each region.

08PA04 APRIL 2008
OV-1
Family Preservation and Foster Care Service Providers
Effective July 1, 2005
Cheyenne Rawlins Republic Brown Doniphan
Decatur Norton Phillips Smith Jewell Washington Marshall Nemaha
Sherman Thomas Sheridan Mitchell

Cloud 3
Pottawatomie Jackson
Atchison
Graham Rooks Osborne Clay

Riley JeffersonLeavenworth
Ottawa Wyandotte
Lincoln Geary
Wallace Logan Gove Trego Wabaunsee Shawnee
Ellis Russell Douglas Johnson
Dickinson
4 Ellsworth
Saline
Morris Osage 2
Franklin Miami
Greeley Wichita Scott Lane Rush
Ness Barton Lyon
McPherson
Rice Marion Chase
Coffey Linn
Hamilton Kearny Finney Hodgeman

Pawnee
Stafford
Reno
Harvey
1 Anderson
Edwards Greenwood Woodson Allen Bourbon
Stanton Grant Haskell

Gray
Ford
Kiowa
Pratt
5
Sedgwick
Butler
Wilson Neosho Crawford

Kingman
Elk
Morton Stevens Seward Meade Clark Barber Sumner Cowley MontgomeryLabette Cherokee
Comanche Harper Chautauqua
Child Welfare Community Based Services Providers by Region

Region Family Preservation Foster Care
Region 1 DCCCA The Farm
Region 2 DCCCA KVC Behavioral Health
Region 3 The Farm KVC Behavioral Health
Region 4 St. Francis Academy St. Francis Academy
Region 5 DCCCA United Methodist Youthville
Source: Kansas Department of Social and Rehabilitation Services
SRS also privatized adoption services in 1996. For the most recent
contract period, SRS chose Kansas Children’s Service League to
provide adoption services Statewide. Adoption services aren’t
included in the scope of this audit.
Payments for out-of-home services within the foster care and
family preservation contracts have increased from about $94
million to almost $138 million over the past seven years. Figure
OV-2 shows caseload and cost information for these two out-of-home
services since 2001.

08PA04 APRIL 2008
OV-2
Average End-of Month Caseloads and Payment Amounts for Foster Care and Family
Preservation Out-of-Home (OOH) Services, Fiscal Year 2001-2007
Average Monthly Children Served (OOH Services) SRS Budget
Fiscal Actuals for OOH
Family % Change
Year Foster Care Total % Change Services
Preservation (in millions)
2001 3,662 0 3,662 N/A $94.0 N/A
2002 3,264 0 3,264 -11% $91.9 -2.2%
2003 3,046 0 3,046 -7% $88.4 -3.8%
2004 3,191 0 3,191 5% $90.9 2.8%
2005 3,323 0 3,323 4% $94.8 4.3%
2006 (a) 5,092 112 5,204 57% $121.7 28.4%
2007 4,926 572 5,498 6% $137.5 13.0%
(a) Fiscal year 2006 marks the start of the most recent contract period. Based on contract changes, caseloads were separated
between foster care and family preservation "out-of-home" placements, and now also include children that previously would
have been counted in the adoption contract. Similarly, case-management responsibility for children eligible for adoption was
moved to the foster care contractor, which significantly increased the contract payments starting that year.
Source: Unaudited SRS caseload and expenditure data for fiscal years 2001 through 2007.
As the figure shows, contract payments rose from about $95 million
in fiscal year 2005 to almost $122 million in fiscal year 2006, when
the new contract took effect, and to almost $138 million in fiscal year
2007. This amounts to a two-year cost increase of 45%. According
to SRS officials, the sharp rise in payments under the new contract
mostly can be attributed to two reasons:
• SRS moved case management for adoption services into the
foster care contracts. This change helps keep foster childrens’ case
managers the same when it’s determined that a child can’t be reunited
with the family. Under previous contracts, those children would have
transferred from the foster care provider to the adoption contractor.
Since fiscal year 2006, case management services for adoption are
provided by the foster care contractor, while the adoption contractor is
responsible for such services as recruitment and training of prospective
families. According to SRS officials, the increase in SRS contract
payments for out-of home services shown in Figure OV-2 in large
part is due to the additional adoption case management expenses
now provided under the foster care contract. (In turn, payments to the
contractor for adoption services decreased by about $30 million under
the new contract.)
• SRS made changes to the contracts’ payment structure. Under the

previous contracts, payments included a flat amount per child (to pay
for services while the child was in custody and during a reintegration
period), along with an administrative fee. This new structure eliminated
the administrative fee, but contained much larger monthly payments
for each child under the contractors’ care. In addition, these case rates
were “tiered” to be higher for children just entering the system than
those who had been in the system several months.
For example, if a contractor’s monthly foster care case rate was $4,000,
SRS would provide 100% of that amount per month for the first six
months after the child was referred. The rate then would drop to $2,640
(66% of the base amount) for months 7 through 12, and to $1,160 a
month (29% of the base amount) once a child had been in foster
08PA04 APRIL 2008
care for 12 months. These tiers were designed to encourage faster
reintegration of the children with their families. For the first year of the
contract, SRS also extended the amount of time children already in
the system were recognized within each tier-level, which contributed to
higher contractor payments.
The focus of the information presented in question one of this

report is on these out-of-home services.
Payments to contractors for family preservation in-home services
have decreased from about $13 million to $9.9 million over the
past seven years. Figure OV-3 shows family referrals and payment
information for this program since 2001.
OV-3
Total Referrals and Budget Actuals for
Family Preservation In-Home Services, Fiscal Years 2001-2007
SRS Budget
Fiscal Family
% Change Actuals % Change
Year referrals
(in millions)
2001 3,812 n/a $13.0 N/A
2002 2,731 -28% $10.6 -18.5%
2003 2,570 -6% $9.4 -11.3%
2004 2,660 4% $10.2 8.5%
2005 2,683 1% $10.7 4.9%
2006 2,836 6% $10.7 0.0%
2007 2,534 -11% $9.9 -7.5%
Source: Unaudited SRS referral and payment data for fiscal years 2001 through 2007
Appendix B shows foster care and family preservation SRS payments,

as well as SRS payments for adoption services, to individual
contractors over time.

08PA04 APRIL 2008
Question 1: Were Appropriate Procedures Followed in Awarding Contracts to
The Farm for Foster Care and Family Preservation Services in 2005?
ANSWER IN BRIEF: SRS and the Division of Purchases didn’t always follow appropriate
procedures in awarding the foster care and family preservation
services contracts in 2005. In May 2004, SRS began soliciting
proposals from contractors to provide family preservation and foster
care services in Kansas for fiscal years 2006 through 2009. Late
in the contract negotiations, an SRS employee appears to have
inadvertently disclosed information to The Farm that allowed it to
increase its foster care and family preservation bids. Sharing this
information with The Farm – and accepting its higher bid – resulted
in the State paying $2.9 million more than it otherwise would have
during the first two years of the contract.
With minor exceptions, SRS and the Division of Purchases officials
generally handled other aspects of this negotiated procurement
appropriately. SRS modified the existing foster care and family
preservation contracts because Medicaid has disallowed
reimbursement for some expenses the contractors were supposed to
be directly reimbursed for, and to smooth out payments to contractors.
This modified payment structure was similar to what SRS had in place
for fiscal years 2001 through 2005. These and related findings are
discussed in more detail in the sections that follow.
In May 2004, SRS used what’s called a negotiated procurement process. This
SRS Began Soliciting process commonly is used for large, complex contracts, and is
Bids For Family designed to provide the State with the best value, which may or
Preservation and may not be the lowest cost. That’s because the State can award
Foster Care Services the contract based on other characteristics, such as the contractor’s
For Fiscal Years 2006 expertise, previous performance, understanding of the project, or a
Through 2009 superior proposal.
Some of the main characteristics of a negotiated procurement process:
it typically includes one or more “pre-bid” conferences, technical and
cost proposals are reviewed separately, and the contracting parties can
work together to negotiate an agreed-upon price. State law requires
the negotiation team to be made up of the Director of the Division of
Purchases, the chief administrative officer of the State agency, and the
Secretary of Administration, or their designees.
For each of the two contracts, SRS received multiple bids for each
region. Figure 1-1 shows who bid on the contracts and who was
awarded the contracts for each region.

08PA04 APRIL 2008
Figure 1-1
Summary of Organizations that Bid on and Were Awarded
Family Preservation and Foster Care Contracts for
Fiscal Years 2006 Through 2009
Family Preservation (In-Home and Out-of-Home)
Organization Region 1 Region 2 Region 3 Region 4 Region 5
DCCCA 9 9 • • 9
The Farm • • 9 •
Kaw Valley • • •
St. Francis • 9
Youthville • •
Camelot Care • • •
KCSL • • • •
Foster Care
The Farm 9 • • •
Kaw Valley • 9 9
St. Francis • 9
Youthville • 9
KCSL • • • •
• = Organization Submitted Bid 9= Organization Awarded the Contract
Source: LPA summary of SRS family preservation and foster care contract awards.
As the figure shows, SRS awarded the family preservation contract

for region three (Northeast Kansas), and the foster care contract in
region one (Southeast Kansas) to The Farm, Inc. (hereafter referred to
as “The Farm”).
The new contracts differed from the previous ones in that they
created two categories of family preservation services, and
introduced a more complex pricing structure for foster care
services. As described in the Overview, family preservation services
generally are designed to prevent children from being removed from
their homes, while foster care services are provided when children
have been taken into the custody of the State. During the most recent
contract round, SRS instituted the following changes:
• SRS created “out-of-home services” within the family preservation
contract.
• SRS went to a tiered rate structure for children in foster care.
The financial information presented in this question focuses

specifically on out-of-home services for the family preservation and
foster care services contracts.

08PA04 APRIL 2008
During the Process, an During the final phases of the negotiation process in late 2004, an
SRS Employee Appears SRS employee disclosed certain case rate information to The Farm
To Have Inadvertently that shouldn’t have been shared. The following sections describe how
Disclosed Information this disclosure occurred, and the impact it had.
That The Farm
Subsequently Used To During the financial phase of the contracting process, SRS
Increase Its Bids officials realized that four of five contractors’ bid proposals were
significantly higher than SRS’ targets. Negotiated procurements
consist of three phases: The request for proposal process, proposal
evaluations, and financial negotiations.
The early months of the bid process were heavily focused on

clarifying the work and evaluating the contractors’ technical
proposals. During this time, two teams of a dozen SRS staff each
were involved in reviewing the technical proposals contractors
had submitted. A different fiscal review team evaluated the cost
proposals.
Based on these reviews, all bidders were considered eligible and

invited to the first round of negotiations, which occurred during the
second week of December 2004. At that time, SRS officials realized
that, except for The Farm, most bidders’ projected caseloads for
foster care were considerably lower than SRS’ projections. SRS
officials also noted that most bidders’ proposed monthly case rates
were significantly higher than SRS’ “target” case rate of $3,027, a rate
that was internally calculated to keep the agency within its budget
for these contracts. Figure 1-2 and Figure 1-3 show how SRS’
target case rates and caseload estimates compared to these finalists’
proposals.
Figure 1-2
Summary of Differences of Case Rates between Contractors and SRS
For the First Year of the Contract (Fiscal Year 2006)
Contractors' Bids SRS Target Rate Compared to SRS' Target
Region of
Contractor (Case Rate Per (Per Month Per Case Rate of $3,027,
the State
Child Per Month) Child) Contactors' Bids were…
Foster Care
1 The Farm $2,780 $3,027 …lower by $247
2 Kaw Valley $3,290 $3,027 …higher by $263
3 Kaw Valley $3,640 $3,027 …higher by $613
4 St. Francis $3,472 $3,027 …higher by $445
5 Youthville $3,630 $3,027 …higher By $603
Family Preservation (out-of-home)
1 DCCCA $3,875 $3,027 …higher by $848
2 DCCCA $3,875 $3,027 …higher by $848
3 The Farm $2,455 $3,027 …lower by $572
4 St. Francis $3,472 $3,027 …higher by $445
5 DCCCA $4,000 $3,027 …higher by $973
Source: LPA analysis of contractor and SRS case rate estimates.

08PA04 APRIL 2008
Figure 1-3
Summary of Differences of Monthly Caseloads between Contractors and SRS
For the First Year of the Contract (Fiscal Year 2006)
Compared to the SRS Estimated
Region of Contractors' Monthly SRS' Monthly
Contractor Monthly Caseloads, Contractors'
the State Caseload Estimate Caseload Estimate
caseloads were….
Foster Care
1 The Farm 509 505 …higher by 4
2 Kaw Valley 656 805 …lower by 149
3 Kaw Valley 454 522 …lower by 68
4 St. Francis 600 610 …lower by 10
5 Youthville 664 710 …lower by 46
Family Preservation (out-of-home)
1 DCCCA 28 28 …the same
3 The Farm 22 23 …lower by 1
4 St. Francis 16 21 …lower by 5
Source: LPA analysis of contractor and SRS caseload estimates.
SRS held a second round of negotiations in late December to

discuss the caseload differences. At that point, SRS officials had
narrowed the field to one finalist for each region and continued price
negotiations with those bidders. The situation reached an impasse
because both sides contended that their caseload projections were
accurate. If the contractors’ lower caseload estimates were right,
the contract costs for fiscal year 2006 would be about $124 million.
However, if SRS’ higher caseload estimates were right, the costs
would be almost $136 million that year. This is shown in the first two
bars of Figure 1-4.
For the third and final round of negotiations of family

preservation out-of-home and foster care contracts, SRS officials
came up with a “risk-mitigation” plan to resolve issues that had
stalled the discussions. This plan was designed to protect the State
from the significantly higher costs that would have resulted if SRS
had accepted the contractors’ proposed monthly case rates and if
caseloads ended up being higher than the contractors had projected.
Under the plan, SRS agreed to pay the monthly case rates each
contractor had proposed until the contractor hit an SRS payment limit
(which was based on SRS’ estimated caseloads and the SRS target
case rate). Once contractors reached that limit, they would be able
to receive additional State funding only if their monthly caseloads
exceeded SRS’ estimates. If that happened, funding would be based
on the lower “target” rate SRS had determined internally.

08PA04 APRIL 2008
Figure 1-4 also shows the Statewide payment limit of almost $120
million that SRS implemented as part of its risk-mitigation plan. SRS
ultimately paid an additional $6 million above the payment limit in
fiscal year 2006, because actual caseloads turned out to be higher than
even SRS had forecasted (shown in the third bar of the figure).
Figure 1-4
From
SRS’ 1 – Cost Mitigation.xlsx;
Risk-Mitigation Graph
Plan for Statewide Foster Care and
Family Preservation Out-of-Home Services Contracts Fiscal Year 2006 (a)
Projected Actual
$140 Million
$136 Million
SRS
$130 Million “Risk” $12 Million
$125.4 Million
$124 Million
SRS
“Risk” $5.8 Million SRS’
$120 Million Payment
Limit
$119.6 Million
$110 Million
$0
Contractor Caseloads x SRS Caseloads x
Contractor Case Rates Contractor Case Rates SRS Actual FY 2006 Payments
(a) The SRS risk-mitigation plan doesn’t apply to family preservation in-home services. That’s because SRS has control over in-home services
and receives a separate legislative appropriation for contractors to provide these services. In fiscal year 2006, family preservation in-home
services cost $10.7 million. Together with the $125.4 million for family preservation out-of home services and foster care services shown above,
total contract costs for fiscal year 2006 came to $136.1 million.
Source: LPA analysis of the contractors’ estimated costs and SRS’ estimated costs for foster care and family preservation out of home services.
We compared this to the actual cost for those services in fiscal year 2006.
While discussing its risk-mitigation plan with The Farm during

the third and final negotiation, an SRS employee disclosed too
much information about the proposal, which led to The Farm
increasing its bid. The reduced target rate SRS was proposing under
the risk-mitigation plan was $3,027 per child per month for fiscal
year 2006. While that amount was significantly lower than four
contractors’ proposed case rates, it was $247 more than The Farm’s
proposed rate of $2,780 per foster care child.
SRS officials could have finalized their negotiations with The Farm
before working with the other contractors on the risk-mitigation plan,
but didn’t. Apparently in an attempt to treat all contractors uniformly,
SRS officials shared the basic framework of the risk-mitigation plan
with all contractors, including The Farm.
During its final negotiation session with The Farm, SRS officials
purposefully withheld the “target rate” information from The Farm
08PA04 APRIL 2008
officials because the Farm had bid less than the target rate. However,
when The Farm officials questioned the risk-mitigation plan
during the negotiations as not being advantageous to them, an SRS
employee explained the plan in more detail. In justifying the plan,
the employee disclosed SRS’ target case rate of $3,027 for fiscal year
2006, and $3,367 for the next three years.
Realizing that their bid was significantly below what SRS was
willing to pay under that plan, The Farm officials raised the rate in
their “best-and-final” offer to match or surpass the target case rates
an SRS employee had revealed in the meeting. SRS accepted that
bid. In February 2005, SRS signed the contracts with all five family
preservation and foster care contractors.
Division of Purchases officials told us that the State doesn’t have

procedures in place to handle situations where one contractor’s bid
is vastly different from the other contractors being considered. Such
guidance may have prevented the problems that occurred in this case.
Sharing the target case rate with The Farm resulted in the State
paying an additional $2.9 million during the first two years of
the contract. The Farm received almost $1.5 million more during
fiscal year 2006 and almost $1.4 million more during fiscal year 2007
than it otherwise would have, based on actual caseloads during that
time. These additional payments
Figure 1-5 represented an increase of about
Impact of Rate Increases on The Farm's SRS Contract Revenues
Based on Actual Case Rates (Fiscal Years 2006 and 2007) 8.1% of The Farm’s total SRS
$25,000,000
contract-related revenues in 2006,
and 6.5% in the second year. This
$1,433,172
is shown graphically in Figure
$20,000,000
$1,477,272 1-5.
$15,000,000
SRS officials pointed out that
The Farm was still the lowest-
$21,912,112
cost contractor after this case rate
$10,000,000
$18,210,504 increase. They also said the rate
increase was justified because of
$5,000,000 concerns regarding The Farm’s
financial position. However, we
$0
didn’t see any evidence of that
Fiscal Year 2006 Fiscal Year 2007 concern during the bid evaluations
and negotiation sessions. We
Additional revenue The Farm received because it raised its
proposed bid rate based on information SRS disclosed
also noted that The Farm is an
Revenues The Farm would have received based on its original bid
organization experienced in
providing services to children and
Source: LPA analysis of The Farm's actual contract revenues and the portion of families, and it would have been in
revenues resulting from the rate increase during negotiations.
a position to submit an informed
bid.
08PA04 APRIL 2008
We also looked at the law, best practices, and policies to determine
how negotiated procurement contracts should be handled, and we
evaluated other aspects of what happened during the 2005 contract
negotiations, including such things as the independence of officials
involved in awarding the contracts, and adequate documentation of
the award process.
We found three minor instances where officials from SRS or
the Division of Purchases deviated from best practices and
requirements. These instances are described below:
• SRS didn’t have a mechanism to check its own employees for
conflicts of interest. Although the request for proposal required the
contractors to document any conflicts they may have as part of their bid,
the State didn’t require similar documentation from SRS and Division
of Purchases employees to ensure staff were unbiased in evaluating
the contract proposals. In contracts as large as these, best practices
suggest there should be procedures to check for and document conflicts
of interest. SRS officials told us they rely on State employees to self-
report any conflicts they may have. During this audit, we examined
information related to 12 State officials who were involved in the
contract process looking for any conflicts of interest, but we found none.
• SRS didn’t use an official scoring method for the technical

proposal. SRS officials provided general directions to contract
evaluators on which aspects of the request for proposal were most
important to review. However, those directions didn’t include a scoring
method or specific guidance that would have allowed them to objectively
measure contractors’ responses for those sections, which is something
best practices suggest is necessary.
• Division of Purchases’ officials didn’t provide reasons to the

appropriate legislative committees on why SRS didn’t select the
lowest-cost contractor for each region, as required by law. SRS
officials documented their explanations for not picking the lowest-cost
contractors, which included non-monetary reasons such as outcome
performance, strength of technical proposals, or strong working
relationships with other regions. Division of Purchases’ officials told
us they had since rectified this problem in their periodic reports to the
Senate Ways and Means and House Appropriations Committees.
Recently, SRS Modified During the audit, we learned that SRS officials had decided to modify
The Contracts to Resolve the current contracts, which were supposed to run from fiscal years
Issues Related to 2006 through 2009, and had essentially finalized the new terms as
Medicaid Payments to of December 2007. SRS officials and the contractors agreed that
Contractors the changes would be retroactive to the start of fiscal year 2008, and
would apply throughout all of fiscal year 2009.
SRS officials told us they took this action because, based on SRS
budget estimates, contractors were going to lose an estimated
$7 million in Medicaid payments during fiscal year 2008 due to
reimbursements they couldn’t claim anymore. (Medicaid had
disallowed payments for certain services, including mental health
services provided outside of authorized facilities.)

08PA04 APRIL 2008
As part of the contract modifications, SRS agreed to cover the
contractors’ losses in federal Medicaid revenues. According to SRS
officials, about 80% of the loss will be covered by State General Fund
moneys outside of the contracts, and the remaining moneys will come
from other federal revenue sources.
For fiscal years 2008 and 2009, SRS also modified the existing
contracts to return to a flat, monthly payment per child, plus
an administrative fee. SRS officials told us they had decided to
simplify the payment structure to alleviate contractors’ concerns
about uncertain payments. As mentioned earlier, the risk-mitigation
plan SRS had put in place could prevent contractors from receiving
monthly payments after reaching their payment limit. In addition,
payments could vary from month-to-month. If contractors
experienced a larger influx of children than projected, SRS would
have to pay more than expected because the case rate for these “new”
children was higher. On the other hand, if contractors couldn’t
reintegrate children in a timely manner, their payments would drop
because the “tiered” case rate for long-term children was lower.
SRS officials told us that, because of the problems associated with
this complex payment structure, they opted to go back to a basic
per-child payment, plus an administrative fee. This modified
payment structure was much like what SRS had in place in the
previous contract for fiscal years 2001 through 2005. SRS negotiated
separately with all contractors. As of November 2007, the newly
modified contracts, which were retroactive to the start of fiscal year
2008, had cost the State an additional $400,000. Because of the
complexities involved, we can’t estimate whether the renegotiations
will, in the end, save or cost the State additional money.
Although the original four-year contract had an option for two one-
year extensions, SRS officials told us they are going to rebid it for the
start of fiscal year 2010.
Conclusion: Before it rebids the foster care and family preservation contracts for
fiscal year 2010 and beyond, SRS needs to take a number of steps
to improve its bid evaluation and procurement negotiation process.
Some of those improvements relate to procedural issues, but others
are more substantive. It appeared to us that SRS and the Division of
Purchases erred in trying to treat all contractors the same during the
final price negotiations. The Farm had submitted a reasonable bid for
its region that was in-line with SRS’ projections, and that had much
lower costs than the bids submitted by the contractors for the four
other regions. It would have been in the State’s best interest to

08PA04 APRIL 2008
finalize price negotiations with The Farm before proceeding with a
“risk-mitigation” plan to limit payments to the four other contractors.
Involving The Farm in discussions about this plan—and inadvertently
disclosing financial details of that plan to The Farm—led The Farm
to raise its bid and ended up costing the State almost $3 million more
over two years than it would have had to pay. We saw no indication
in any of the documents we reviewed that there were concerns about
The Farm’s financial viability.
Recommendations: 1. To help ensure that it secures services under the foster care and
family preservation contracts at the best price for the State, while
still treating contract bidders fairly, the Department of Social and
Rehabilitation Services should do the following:
a. Continue to provide uniform information to all bidders

regarding the nature and scope of the services to be provided
under the contracts, the outcomes to be achieved, and the like.
b. Provide written guidance to employees who will review and

evaluate the bid proposals specifying how to evaluate and
score various elements of each bidder’s proposal for providing
the services and achieving the outcomes required under the
contract.
c. Document its rationale for choosing the contractors for each

region that SRS subsequently will negotiate prices with.
d. Ensure that it allows itself sufficient time to fully assess

whether the bidders’ proposals are reasonable, financially
feasible, and collectively in-line with SRS projections for such
factors as case rates and caseloads, before proceeding with
price negotiations with bidders.
e. Develop an agency strategy for dealing with each bidder

during the price negotiation process, and ensure that all
members of the negotiating team are well informed about
information that should not be disclosed to bidders.
f. Once bidders have been selected for price negotiations, SRS

should not try to apply the same price terms to all bidders
unless it is reasonable to do so. If some bidders have

08PA04 APRIL 2008
submitted knowledgeable and reasonable bids, SRS should
sign contracts with those bidders, and not share terms of its
price negotiations relating to other bidders.
2. To help ensure that SRS employees involved in reviewing and

awarding major contracts are free from bias with regard to those
contracts, SRS should develop procedures for the following:
a. identifying any employees who may have a potential conflict

of interest related to those contracts. One way to achieve
this is to require employees to complete and sign a disclosure
statement for each major contract they may be involved with
regarding the presence or absence of any potential conflicts of
interest they may have.
b. reviewing and considering the nature of any potential conflict

of interest, and documenting either that the potential conflict
of interest can be appropriately managed or that the employee
will not be allowed to participate in the process for awarding
or denying those contracts.
3. To help ensure that it complies with the provisions of K.S.A.

75-37,102, when it makes its annual report on negotiated
procurements to various legislative committees, the Division of
Purchases should include an explanation of the reasons why the
lowest bidders weren’t selected for any contract where that is
applicable.

08PA04 APRIL 2008
Question 2: Have Moneys from the Contracts Awarded to The Farm, Inc.,
Been Used Only for Appropriate Purposes Related to the Contracts?
ANSWER IN BRIEF: The Farm generally used contract moneys in accordance with best
practices for non-profit organizations. During fiscal year 2007, The
Farm received $23.5 million and spent $21.3 million on its family
preservation and foster care contracts with SRS. The contracts don’t
specify how moneys must be spent, but they require the contractors to
meet certain outcomes related to the children and families they serve.
Although none of the contractors fully achieved those outcomes, The
Farm’s results in 2006 and 2007 were in-line with other contractors.
In-line with best practices, The Farm didn’t directly compensate its
board members, its management compensation was in-line with other
contractors, and we didn’t see any extravagant travel expenses. We
did identify two issues related to a board member that represent a
potential conflict of interest.
Finally, concerns that The Farm has created affiliated businesses

to increase management’s compensation appear to be unfounded.
However, it donated $500,000 of its net revenues from fiscal year
2007 to one of its affiliates, and reported that donation to SRS as an
expense rather than as a transfer of net revenues, which would make
its financial position appear somewhat less positive than it was. The
Farm has improved its financial position significantly since 2005.
These and related findings are discussed in more detail in the sections
that follow.
During Fiscal Year The Farm is a non-profit organization that provides foster care, family
2007, The Farm Spent preservation, and other child welfare services. It provides those
$21.3 Million On Its services not only to SRS, but also to other foster care contractors.
Family Preservation For example, The Farm contracts with other foster care contractors to
And Foster Care place children with The Farm’s foster parent recruits. The Farm and
Contracts with SRS its affiliate companies currently employ almost 400 staff in 29 offices
across the State.
During fiscal year 2007, The Farm received about $23.5 million from
its foster care and family preservation contracts with SRS, which
accounted for about two-thirds of its total revenues that year. Some
other major revenue sources for The Farm that year included about
$5.7 million in payments for services provided to other foster care
and family preservation contractors, and $4.3 million in Medicaid
reimbursements for expenses received on behalf of eligible children.
The majority of the money The Farm received from its foster care
and family preservation contracts with SRS was spent on foster
08PA04 APRIL 2008
care placements and staff compensation. Figure 2-1 provides a
breakdown of how The Farm spent the money it received from both
contracts in fiscal year 2007.
Figure 2-1
Summary of The Farm’s Family Preservation and
Foster Care Contract Expenditures for Fiscal Year 2007 (in millions)
Total FY 2007 SRS Contract-Related

Expenditures = $21.3 Million
Overhead &
Administrative
Summary of Other Service Expenditures
Expenses
Expenditure Categories Amount % of Total
$4.3 (20%)
Foster Care Behavioral Health $748,932 27%
Placements Transportation for Children 629,152 23%
$7.3 (34%) Other
Services Clothing and Flex Expenses 512,635 18%
$2.8 (13%) Day Care 474,725 17%
Adoption 236,738 8%
Other Services 94,993 3%
Travel for Business 92,163 3%
Total Employee
Total $2,789,339 100%
Compensation
$5.8 (27%) Office-Related
Expenses
$1.1 (5%)
(a) Percentage totals don’t add to 100% due to rounding.
Source: LPA analysis of The Farm’s fiscal year 2007 expenditure data.
The Contracts Focus on We reviewed the family preservation and foster care contracts and
Outcomes Rather Than talked to SRS officials to determine how the contract moneys could
How the Money Can Be be used. Other than the broad requirement to provide foster care
Spent, and The Farm’s and family preservation services, the contracts didn’t place any
Results Were Similar to restrictions on how contract funds could be spent. SRS officials
Other Contractors told us they were more concerned about how well contractors met
specified outcomes, and they felt it was up to the contractors to decide
how to best spend the money to achieve those outcomes.
None of the contractors have met all outcomes for family

preservation and foster care, but The Farm’s results generally are
in-line with the other contractors’ results. At the start of the new
contract period, SRS established a total of 29 outcomes for family
preservation services, and 22 outcomes for foster care services. The
following are examples of expected outcomes:
• 90% of children will attend school regularly with no unexcused

absences (family preservation)
• 75% of children will be placed with a relative, sibling, or attend the same
school (foster care)

08PA04 APRIL 2008
Based on data SRS compiled for fiscal years 2006 and 2007 for all the
family preservation and foster care contractors, The Farm’s outcomes
were about average. Figure 2-2 provides some basic comparisons of
the proportion of outcomes each contractor met during those years.
Figure 2-2
Summary of Outcome Results for Family Preservation and Foster Care Contracts, by Region for Fiscal Years 2006 and 2007
FAMILY PRESERVATION FOSTER CARE
The Farm DCCCA DCCCA St. Francis DCCCA The Farm Kaw Valley Kaw Valley St. Francis Youthville
Region 3 Region 1 Region 2 Region 4 Region 5 Region 1 Region 2 Region 3 Region 4 Region 5
Fiscal Year 2007 Fiscal Year 2007

Number of
17 of 25 15 of 22 15 of 26 16 of 24 20 of 26 11 of 20 11 of 20 9 of 20 10 of 20 11 of 20
Goals Met (a)
Percentage of
68% 68% 58% 67% 77% 55% 55% 45% 50% 55%
Goals Met (a)
Fiscal Year 2006 Fiscal Year 2006
Number of
10 of 15 11 of 16 11 of 19 9 of 15 17 of 22 8 of 19 7 of 18 7 of 18 10 of 19 11 of 19
Goals Met (a)
Percentage of
67% 69% 58% 60% 77% 42% 39% 39% 53% 58%
Goals Met (a)
(a) Percentages are based on different numbers of outcomes for each contractor. That's because contractors don't always serve a sufficient population of children, and families didn't
return all SRS surveys.
Source: LPA analysis of unaudited SRS outcome data for fiscal years 2006 and 2007.
As the figure shows, family preservation contractors generally have

met 58% to 77% of the specified outcomes, and foster care contractors
have met about half of the specified outcomes. Appendix C provides
complete outcome information for all five contractors for fiscal years
2006 and 2007.
We Saw No Spending As part of this audit, we reviewed literature about non-profit

By The Farm organizations and talked to experts in the field for some general
That Was Contrary to guidance about assessing the appropriateness of expenditures. Two of
Best Practices, the organizations we contacted — Management Assistance Program
But We Identified for Nonprofits, and Independent Sector — have published reports
Independence Issues and guides and convened panels on non-profit best practices to help
Related to One Board strengthen non-profit governance, financial accountability, and ethical
Member standards. Staff members of these entities also provide consulting
services and training for boards of non-profit organizations.
Generally, the literature and the experts pointed to three things that we
should look for related to appropriate expenditures. They told us:
• Management compensation should not be excessive
• Board members should not receive compensation for their service on the
board
• Management and staff travel shouldn’t be lavish or extravagant
The Farm’s management compensation in 2006 was in-line with

other foster care and family preservation contractors, and board
members received no compensation. Best practices indicate that
non-profit organizations should pay management commensurate with
their job duties and responsibilities, and that CEO compensation
08PA04 APRIL 2008
should be comparable to similar organizations. Figure 2-3 provides
comparative compensation information for the five highest-paid
positions for each of the five foster care and family preservation
contractors.
Figure 2-3
Comparison of the Five Highest Paid Posittions at The Farm and Other Family Preservation
and Foster Care Contractors for Fiscal Years 2006 and 2007
Position 1 Position 2 Position 3 Position 4 Position 5 Average
Fiscal Year 2006

President/ Chief
Title Chief Operating Officer Chief Financial Officer Permanency President Nurse
Kaw Valley Executive Officer
$156,149
Center
Compensation $229,906 $142,425 $142,412 $137,243 $128,758
Child Welfare Contract
Title Executive Director Assistant Director Chief Financial Officer Program Director
Admins
DCCCA $141,727
Compensation $242,912 $138,449 $120,030 $116,398 $90,847
President of Admin. President of Vice President Admin.
Title Chief Executive Officer Director Public Policy
Services/CFO Operations/COO Services/CAO
The Farm $135,344
Compensation $185,548 $140,633 $139,950 $120,050 $90,539
President/ Chief Vice President Gift Executive Director Vice President
Title Vice President Finance
Executive Officer Planning Info Systems Mgmt Marketing
St. Francis $114,278
Compensation $178,565 $113,322 $103,244 $92,457 $83,804
President/ Chief Director of Facilities
Title Chief Financial Officer Chief Program Officer Chief Program Officer
Executive Officer Mgmt
Youthville $102,579
Compensation $155,806 $104,098 $95,149 $79,993 $77,849
Fiscal Year 2007
President of President of Admin. Vice President Admin.

Title Chief Executive Officer VP of Operations
The Farm Operations/COO Services/CFO Services/CAO $145,431
Compensation $189,794 $152,718 $151,500 $125,929 $107,213

Source: Fiscal year 2006 data from IRS Form 990 data for fiscal year 2006; fiscal year 2007 data from LPA analysis of The Farm's general ledger.
The fiscal year 2006 information shown on the top section of

Figure 2-3 is the most recent year that comparative information was
available from the Internal Revenue Service’s Form 990s, which non-
profit entities are required to fill out each year. As the figure shows,
The Farm’s average compensation amounts for its five highest paid
employees were in-line with other contractors.
The fiscal year 2007 information shown in Figure 2-3 for The Farm
showed that management compensation generally had increased
between 2% to 9% for the five highest paid employees across both
years. The $190,000 in compensation The Farm’s CEO received
during 2007 was still less than DCCCA and Kaw Valley Center paid
their CEOs in fiscal year 2006.
Best practices also say that board members of non-profits should

not receive compensation directly related to their services as board
members. We found that The Farm’s board members received no
direct compensation for their services on the board that year.
The Farm’s travel expenditures did not appear to be out-of-

line. For fiscal year 2007, we identified 4,685 travel- or transport-
related expenditures totaling about $540,000 for The Farm’s
08PA04 APRIL 2008
family preservation and foster care contracts. We scanned those
expenditures, especially those related to management travel, looking
for items that appeared to be extravagant. Overall, just over half the
transactions were related to transporting children, which accounted
for $390,000 of the expenditures. Only 35 expenditures were more
than $1,000, and typically went towards credit card expenditures staff
incurred while on the road.
We also looked through The Farm’s general ledger expenditures

to identify anyone who received $10,000 or more in travel-related
payments from the SRS contracts in fiscal year 2007. We identified
13 payees who received between $10,000 and $26,500. Twelve
payees were individuals hired to provide family preservation
transportation services; the remaining entity was a company providing
secure transportation services for children.
We also obtained detailed documentation for a targeted sample of

20 travel-related expenditures. The transactions we selected tended
to be larger amounts over $1,000 made to the credit card company,
transactions that didn’t show a payee, and several payments to board
members. These 20 items totaled almost $29,500, and represented
about 5.4% of The Farm’s travel and transportation expenditures paid
with SRS contract funds. Our review showed that:
• Of the $29,500 in sample expenditures we reviewed, 44% was for
transporting children, 29% for lodging, 25% for meals, and 2% was for
airfare.
• The 20 items accounted for almost 530 smaller transactions for costs
related to transporting children, lodging, and restaurant expenses for
staff on the road. Restaurant expenditures seemed reasonable and
ranged from a $2 charge at McDonalds to $247 for catering from Boston
Market. Hotel bills appeared to be reasonable, and were generally in the
range of about $65 (Chanute) to $170 (Overland Park) a night.
In addition to reviewing expenditures related to compensation and

travel, we reviewed oversight of expenditures by The Farm’s board of
directors.
We noted two potential conflict-of-interest situations that exist
because one of The Farm’s board members is married to its
Chief Executive Officer. Generally speaking, best practices say that
family relationships between board members and management should
be avoided. That’s because the relationship can impair the board
member’s independent judgment, thus making him or her less suitable
for service on a board. For example, the board sets the annual salary
of The Farm’s chief executive officer. It would be an inherent conflict
of interest for a family member to take part in that decision. Officials
from The Farm have taken the following steps to address the CEO’s
marriage to the board member:
08PA04 APRIL 2008
• The marriage relationship has been disclosed to, and discussed
by, the board as a whole. We saw evidence of this in the board
minutes.
• The Farm requires board members to sign a pledge that includes

a requirement to refrain from voting on matters affecting friends
or family members. We saw evidence in the board minutes of a board
member abstaining from votes that would affect the compensation of
the CEO, but those minutes didn’t specify who abstained from the vote.
The Farm officials told us that person was the board member married
to the CEO, and that they would specify which board member has
abstained from votes in future meeting minutes.
We also noted that the same board member works for a law firm The
Farm paid $46,000 to do legal work during the past two years. Best
practices say that board members shouldn’t be in a position to vote
on decisions to purchase services from companies that employ them.
That’s because the board member could be in a position to directly
or indirectly benefit financially from the decision to use his or her
company to provide services.
The Farm officials told us that, since 2003, their in-house legal
counsel, not the board of directors, has been responsible for deciding
which outside law firms to use. However, placing this decision with
the in-house legal counsel doesn’t really resolve the potential conflict-
of-interest situation because the legal counsel still reports to the CEO,
who is married to the board member.
The Farm Hasn’t Used Another concern that prompted this audit was that The Farm’s
Affiliated Businesses creation of affiliate companies was unusual and had been used to
To Increase increase management salaries beyond reasonable levels. Experts on
Management non-profit entities told us that creating for-profit or non-profit affiliate
Compensation companies is both common and acceptable. They said it allows non-
profits to pursue different markets and to achieve greater financial
stability.
The Farm has established seven affiliates, whose main purpose is

to provide specific services such as day care programs related to
The Farm’s primary mission. Officials told us The Farm created
these affiliates to diversify the types of services it can provide,
and to provide financial stability should The Farm lose the State’s
child welfare contracts. Figure 2-4 shows all The Farm’s affiliated
companies and their status as of January 2008.
As the figure shows, only three of The Farm’s seven affiliates

currently are active. The four inactive affiliates shown at the bottom
of Figure 2-4 were created near the start of fiscal year 2008. Two of
the newly created inactive affiliates are non-profit organizations, and
two are for-profit organizations.

08PA04 APRIL 2008
Figure 2-4
Summary Information on The Farm's Seven Affiliate Companies (as of January 2008)
Date of Type of
Affiliate Name Creation Affiliate Current Status Reason(s) Why Affiliate Was Created
Kansas Family & To maintain funds or property and to support specific projects and programs
Children's 8/28/1995 Non-profit Active for the care and education of children. This affiliate operates exclusively for
Foundation, Inc. the benefit of The Farm.
Pathway Family To provide supervision, structure, and guidance for children in need of care or
5/10/2004 Non-profit Active
Services, Inc. juvenile offenders.
TFI Community
3/12/2007 Non-profit Active To operate educational and day care programs for the general public.
Child Care, Inc.
TFI Community To provide management and administrative services, and to supply funds,
6/28/2007 Non-profit Inactive
Services, Inc. property, services, and other support activities to The Farm.
TFI Family
7/3/2007 Non-profit Inactive To provide child placement and guidance services for the general public.
Services, Inc.
Kyds, Inc. 7/3/2007 Profit Inactive These two for-profit affiliates are designed to provide or supplement children's
programs that might not qualify for non-profit tax exemptions. The Farm
officials told us that haven't fully decided the specific services these companies
TFI Financial will provide.
7/5/2007 Profit Inactive
Services, Inc.
Source: LPA summary of The Farm's reported organizational structure.
We also learned that The Farm’s 15 management staff and 7 board

members are essentially shared among all affiliate companies. For
example, The Farm’s oldest affiliate, Kansas Family and Children’s
Foundation, has five management staff who also are part of The
Farm’s management, and the Foundation has the same board
members. Another affiliate, Pathway, has two management staff
who are also part of The Farm, and two board members who are
also on The Farm’s board of directors. Experts told us that sharing
board members and staff among companies is both common and
acceptable.
Most of the other foster care and family preservation contractors

in Kansas also have affiliates. We found that three of the four other
family preservation and foster care contractors in Kansas also have
created non-profit and for-profit affiliates. Like The Farm, some of
those entities are active and others are inactive.
For example, both The Farm and DCCCA have non-profit foundations
that maintain funds and property for their organizations. In addition,
United Methodist Youthville created a for-profit affiliate to promote
sales of case-management software in conjunction with another for-
profit company. Appendix D contains more information about the
affiliates for The Farm and the three other contractors with affiliate
companies.

08PA04 APRIL 2008
We saw no evidence The Farm has used affiliates to increase
management salaries. The Farm’s affiliates don’t pay staff salaries
directly. Instead, all salaries are paid through the Farm’s central
accounting system, and portions of certain staff salaries are allocated
back to the affiliates for the work employees do for the affiliate.
Because The Farm and its affiliates use consolidated payroll

processes, we were able to calculate the total amount of compensation
management staff received in fiscal year 2007. Our analysis for
15 management staff showed that total compensation amounts—
including compensation allocated to its affiliates—appeared to be
reasonable. Figure 2-3, which was presented earlier, lists the five
highest-paid management staff for that year.
In Fiscal Year 2007, One of the concerns expressed about The Farm’s affiliates was that
The Farm Donated they could be used to divert money from the SRS contracts for
$500,000 to an Affiliate, purposes other than child welfare services. To address this concern,
But Reported It we examined The Farm’s financial records for payments or transfers
To SRS as an Expense of money between The Farm and its affiliates. Here’s what we found:
• The Farm donated $500,000 to its Foundation, which is an
acceptable practice according to non-profit experts we talked
to. At the end of fiscal year 2007, The Farm’s financial records
showed that its revenues exceeded expenditures by $2.5 million. It
donated $500,000 of that amount to The Kansas Family and Children’s
Foundation, one of its affiliate companies. Officials told us they donated
the money because, before the donation, the Foundation had an
endowment of less than $50,000, which made it more difficult to attract
large donations to the Foundation. When we contacted experts on non-
profit entities, they told us it’s okay to donate or transfer money as long
as that action is completely transparent.
• The Farm showed the $500,000 donation as an expense on reports

it submitted to SRS, which understated its financial health. The
Farm’s financial statements correctly categorized the donation as a
transfer. However, this transaction was classified as an expense on its
periodic reports to SRS. We don’t think it should have been categorized
as such for two reasons. First, the donation isn’t an operating expense;
it’s a transfer of funds. Second, even though the two organizations are
legally separate, The Farm and the Foundation share the same board of
directors and many of the key management staff. Essentially, The Farm
didn’t lose control of the funds. The Farm officials told us they decided
to classify it as a donation expense based on discussions they had with
their CPAs, and because the SRS report didn’t provide a better place for
this transaction.
By reporting the $500,000 donation as an expense on the SRS report,

The Farm lowered its reported net revenues from $2.5 million to $2
million for fiscal year 2007, which understated its financial picture for the
year. That could make a difference if SRS or The Farm used that figure
in subsequent negotiations regarding the amount of State funding The
Farm needed.

08PA04 APRIL 2008
Since Fiscal Year 2005, Figure 2-5 shows how The Farm’s assets and liabilities have
The Farm Has Improved increased from 2005 to 2007. As the figure shows, The Farm has
Its Financial Position increased its net assets by about $4.5 million (59%) since the new
Significantly contract period began.
Figure 2-5
Changes in The Farm's Total Assets and Liabilities Between Fiscal Years 2005 and 2007
Net Change % Change
Assets and Liabilities Fiscal Year 2005 Fiscal Year 2007
2005 - 2007 2005 - 2007
Current Assets (a) $8,504,546 $13,442,638 $4,938,092 58.1%
Buildings & Land $1,497,374 $3,871,282 $2,373,908 158.5%
Equipment $2,672,481 $1,867,818 -$804,663 -30.1%
Other Assets $81,052 $158,144 $77,092 95.1%
Depreciation ($2,252,128) ($1,677,648) $574,480 -25.5%
Total Assets $10,503,325 $17,662,234 $7,158,909 68.2%
Total Liabilities $2,916,603 $5,586,072 $2,669,469 91.5%

Net Assets (Total Assets
$7,586,722 $12,076,162 $4,489,440 59.17%
Less Total Liabilities)
(a) Current assets are cash and cash equivalents, certificates of deposit, U.S. Treasury Bills, accounts receivable, less
allowance for doubtful accounts of $50,000, and prepaid expenses.
Source: LPA analysis of The Farm's CPA audit report and financial statements for fiscal years 2005 and 2007.
We calculated that The Farm’s 2007 current assets of $13.4 million

could cover about five months’ worth of its total expenditures that
year. In its 2007 biannual audit report, SRS also concluded that The
Farm had a strong financial position.
Conclusion: When the State contracts for services from an outside vendor, it
typically doesn’t specify how that vendor can spend the money.
Instead, the contractor agrees to provide a certain level of service for
the price paid. The foster care and family preservation contracts are
no different. The contractors are free to spend the money as they see
fit, as long as they provide a level of service that is acceptable to SRS.
The foster care and family preservation money The Farm spent during
fiscal year 2007 generally went toward the types of expenditures we
would expect to see under the contracts, and The Farm’s performance
was in line with the other contractors. There was no evidence
that The Farm officials had used affiliated companies to boost
management salaries or divert moneys from the contracts. However,
because the marriage of one of its board members to The Farm’s chief
executive officer creates a potential for conflicts of interest, officials
08PA04 APRIL 2008
need to take some additional steps to avoid those potential conflicts.
Although it was allowable for The Farm officials to donate $500,000
of its net revenues to its affiliated foundation, they need to do a better
job of ensuring that net revenues transferred to affiliated organizations
are clearly spelled out in the reports The Farm provides to SRS, and
are not included as operating expenses for the organization.
Recommendations: 1. To ensure financial reports to SRS accurately show how it

calculates net revenues, The Farm officials should not include
transfers to its affiliate as a donation expense as long as the
two organizations share the same board members. Instead,
those transactions should be listed as a new line item in the
“reconciliation” section of the SRS report, and clearly be labeled
as funds transferred to its affiliate organization.
2. To help ensure that SRS has accurate financial information on file
for fiscal year 2007, the Farm should revise the second 6-month
report for that year as described above. This will allow for more
transparency, and enable State officials to calculate net revenues
before and after the $500,000 transfer of funds to the foundation,
which matches what’s shown on the CPA report.
3. To avoid any potential conflicts of interest that result from family
relationships, the board of directors should reconsider whether it
should keep the spouse of The Farm’s chief executive officer on
the board.
4. To avoid the possibility that The Farm’s in-house legal counsel
could be influenced by the chief executive officer to contract with
her spouse’s law firm for outside legal work, The Farm’s board
of directors should make decisions about awarding outside legal
work, while requiring the affected board member to abstain from
the vote.
5. To ensure that it can clearly document compliance with its
conflict-of-interest policies, The Farm should record the names
of board member who abstain from votes in its minutes of board
meetings.

08PA04 APRIL 2008
APPENDIX A
Scope Statement
This appendix contains the scope statement approved by the Legislative Post Audit
Committee for this audit on September 24, 2007. The audit was requested by Representative
Peggy Mast.
Foster Care: Reviewing Selected Issues Related to State Contracts

for Foster Care and Family Preservation Services
Foster care-related services have been provided by non-governmental not-for-profit

entities since 1996, when the Department of Social and Rehabilitation Services privatized child
welfare services. In January 2005, the Department of Social and Rehabilitation Services entered
into new contracts to provide adoption, reintegration/foster care, and family preservation services
in Kansas. The four-year contracts, which began on July 1, 2005, have an option for one two-
year renewal period. Contracts awarded in 2005 were with DCCCA, Kansas Childrens Service
League, KVC Behavioral Health, St. Francis, The Farm, and United Methodist Youthville.
Recently, legislators have heard that there were potential irregularities when the foster
care contracts were awarded in 2005. Among the concerns are that information about other bids
was disclosed to some bidders, that some individuals making decisions about the awards may
have had a conflict of interest, and that SRS agreed to pay some contractors more than their bid
amounts. Legislators also have expressed concerns about the numerous related non-profit and
for-profit corporations TFI Inc. has established, and about whether those corporations could be
used to divert moneys intended to be used for foster care or family preservation services.
A performance audit of this topic would address the following questions.
1. Were appropriate procedures followed in awarding contracts to The Farm for

foster care and family preservation services in 2005? To answer this question, we
would review State requirements for awarding these types of contracts. We would
determine who was involved in reviewing the bids, and assess whether they may have
had any potential conflicts of interest at the time. To the extent possible, we would
determine what meetings were held to discuss or review bids, and who was present at
those meetings. As needed, we would interview officials in attendance at those meetings
to learn what information was discussed, and with whom. We would compare those
processes to best practices. We would review the actual bid documents and compare them
to the final contracts, and find out the reasons for major differences between the amounts
bid and the amounts of the final contract awards. We would conduct additional work in
this area as needed.
2. Have moneys from the contracts awarded to The Farm been used only for
appropriate purposes related to the contract? To answer this question, we would
determine what contracts SRS has entered into with The Farm or any of its related

08PA04 APRIL 2008
corporations and what those contracts call for. We would review expenditures or
transfers of money The Farm has made to determine whether they appear to be for the
purposes intended in the contracts. We would also look at any payments or transfers from
The Farm to related corporations to determine the reasons for those payments or transfers
and what contract-related services those corporations provided. Finally, we would look
at the amounts SRS paid to The Farm, the amounts spent on services, and the amounts
carried forward in reserves. As needed, we would interview officials from SRS or The
Farm to determine whether certain expenditures are allowable under the contracts. We
would conduct additional work in this area as needed.
Estimated Time to Complete: 8-12 weeks

08PA04 APRIL 2008
APPENDIX B
History of SRS Payments to Family Preservation, Foster Care, and Adoption

Contractors
This appendix contains a summary of SRS payments to family preservation, foster care,
and adoption contractors for fiscal years 2001 through 2007. The following table shows which
contractors served which regions for the two contract periods shown in this appendix. SRS
chose Kansas Children’s Service League to provide adoption services Statewide across all years.
Summary of Contractors by Region by Contract Period

Family
Foster Care
Preservation
Region 2 DCCCA Kaw Valley
Region 3 DCCCA KCSL
Region 4 St. Francis St. Francis
Region 5 DCCCA Youthville
Family
Foster Care
Preservation
Region 2 DCCCA Kaw Valley
Region 3 The Farm Kaw Valley
Region 4 St. Francis St. Francis
Region 5 DCCCA Youthville

08PA04 APRIL 2008
30
Appendix B
Summary of SRS Payments to Family Preservation, Foster Care, and Adoption Contractors for Fiscal Years 2001 Through 2007
Payments &
Fiscal Statewide Total Budget
Service Type DCCCA KCSL Kaw Valley St Francis The FARM Youthville Adjustments
Year Payments Expenditures
(b)
Family Preservation $ 9,458,990 $ - $ - $ 2,328,894 $ - $ - $ 11,787,884 $ 1,197,415 $ 12,985,299
Foster Care $ - $ 15,175,896 $ 13,955,287 $ 20,336,526 $ 18,824,799 $ 30,121,145 $ 98,413,653 $ (4,374,199) $ 94,039,454
2001
Adoption $ - $ 33,131,755 $ - $ - $ - $ - $ 33,131,755 $ 7,173,182 $ 40,304,937
Total $ 9,458,990 $ 48,307,651 $ 13,955,287 $ 22,665,420 $ 18,824,799 $ 30,121,145 $ 143,333,292 $ 3,996,398 $ 147,329,690
Family Preservation $ 8,405,813 $ - $ - $ 2,148,462 $ - $ - $ 10,554,275 $ - $ 10,554,275
Foster Care $ - $ 14,498,522 $ 14,572,485 $ 22,326,863 $ 19,802,727 $ 23,829,353 $ 95,029,950 $ (3,089,691) $ 91,940,259
2002
Adoption $ - $ 31,647,327 $ - $ - $ - $ - $ 31,647,327 $ (3,490,929) $ 28,156,398
Total $ 8,405,813 $ 46,145,849 $ 14,572,485 $ 24,475,325 $ 19,802,727 $ 23,829,353 $ 137,231,552 $ (6,580,620) $ 130,650,932
Foster Care $ - $ 13,998,388 $ 14,135,407 $ 19,968,286 $ 19,843,980 $ 22,279,971 $ 90,226,032 $ (1,819,845) $ 88,406,187
2003
Adoption $ - $ 33,279,712 $ - $ - $ - $ - $ 33,279,712 $ (945,055) $ 32,334,657
Total $ 7,383,501 $ 47,278,100 $ 14,135,407 $ 21,957,738 $ 19,843,980 $ 22,279,971 $ 132,878,697 $ (2,764,900) $ 130,113,797
Foster Care $ - $ 14,586,239 $ 14,585,391 $ 19,638,827 $ 20,841,913 $ 22,442,442 $ 92,094,812 $ (1,206,532) $ 90,888,280
2004
Adoption $ - $ 33,631,025 $ - $ - $ - $ - $ 33,631,025 $ (1,066,158) $ 32,564,867
Total $ 8,145,640 $ 48,217,264 $ 14,585,391 $ 21,717,402 $ 20,841,913 $ 22,442,442 $ 135,950,052 $ (2,272,690) $ 133,677,362
Foster Care $ - $ 16,513,942 $ 15,923,884 $ 20,282,513 $ 22,552,879 $ 21,142,229 $ 96,415,447 $ (1,616,945) $ 94,798,502
2005
Adoption $ - $ 35,445,570 $ - $ - $ - $ - $ 35,445,570 $ (1,103,730) $ 34,341,840
Total $ 8,451,088 $ 51,959,512 $ 15,923,884 $ 22,576,701 $ 22,552,879 $ 21,142,229 $ 142,606,293 $ (2,720,675) $ 139,885,618
Family Preservation $ 6,205,597 $ - $ - $ 2,504,625 $ 1,971,254 $ - $ 10,681,476 $ - $ 10,681,476
Foster Care $ 3,166,482 $ - $ 51,849,930 $ 26,903,509 $ 17,716,522 $ 25,610,800 $ 125,247,243 $ (3,572,042) $ 121,675,201
2006 (a)
Adoption $ - $ 3,549,996 $ - $ - $ - $ - $ 3,549,996 $ - $ 3,549,996
Total $ 9,372,079 $ 3,549,996 $ 51,849,930 $ 29,408,134 $ 19,687,776 $ 25,610,800 $ 139,478,715 $ (3,572,042) $ 135,906,673
Family Preservation $ 5,627,996 $ - $ - $ 2,611,167 $ 1,620,372 $ - $ 9,859,535 $ - $ 9,859,535
Foster Care $ 10,264,733 $ - $ 52,453,768 $ 28,492,516 $ 21,724,912 $ 27,910,109 $ 140,846,038 $ (3,376,969) $ 137,469,069
2007
Adoption $ - $ 3,727,500 $ - $ - $ - $ - $ 3,727,500 $ 8,962 $ 3,736,462
Total $ 15,892,729 $ 3,727,500 $ 52,453,768 $ 31,103,683 $ 23,345,284 $ 27,910,109 $ 154,433,073 $ (3,368,007) $ 151,065,066
(a) Fiscal year 2006 marks the start of the most recent contract period. Based on contract changes, caseloads were separated between foster care and family preservation "out-of-home" placements and
now also include children that previously would have been counted in the adoption contract. Similarly, case management responsibility for children eligible for adoption was moved to the foster care and
family preservation contractors for OOH services, which significantly increase the contract payments starting that year.
(b) Payments & Adjustments" include a combination of transactions such as payments for prior period contracts, year-end encumbrances, utilization of prior year encumbrances, expenditure reductions for
SSA/SSI payments, and other miscellaneous adjustments.
Source: Unaudited SRS expenditure data for fiscal years 2001 through 2007.
08PA04 APRIL 2008

PERFORMANCE AUDIT REPORT
APPENDIX C
SRS Family Preservation and Foster Care Outcomes for Fiscal Years 2006 and 2007
This appendix contains a summary of the contractors’ performance in meeting SRS’

family preservation and foster care outcomes for fiscal years 2006 and 2007. We didn’t audit
the data, but SRS takes various measures to ensure that the data received from the contractors is
accurate.
The appendix shows family preservation outcomes for the three contractors for fiscal year
2006, followed by family preservation outcomes for fiscal year 2007. Foster care outcomes for
the four contractors are presented next for both years

08PA04 APRIL 2008
Appendix C
Family Preservation and Foster Care Outcomes for Fiscal Years 2006 and 2007 (a)
Family Preservation Outcomes - Fiscal Year 2006
Region 1 Region 2 Region 3 Region 4 Region 5
Outcome Outcome Outcome Outcome St. Outcome Outcome
DCCCA DCCCA The Farm DCCCA
Met? Met? Met? Francis Met? Met?
In-Home: Children Thrive
96% of children will not experience
98.4% Yes 99.0% Yes 99.8% Yes 99.3% Yes 99.9% Yes
maltreatment during FPS
95% of families engaged in FPS
97.3% Yes 93.6% No 94.2% No 91.6% No 95.5% Yes
services
In-Home: Customers Are Satisfied with Services
60% of families report at 90 days an
enhanced capacity to meet needs
60% of families report at closure an

100.0% Yes 100.0% Yes N/A (a) N/A (a) 75.0% Yes 93.3% Yes
85% of adults indicate family centered

100.0% Yes 100.0% Yes N/A (a) N/A (a) 87.5% Yes 93.3% Yes
principles were utilized in services
85% of youth indicate family centered

100.0% Yes 100.0% Yes 71.4% No 0.0% No 100.0% Yes
Out-of-Home: Children Thrive
93.9% of children will not experience
recurrent maltreatment
99.43% of children safe from
maltreatment by a placement provider
75% of child placed with relative,
68.1% No 54.4% No 41.4% No 47.6% No 63.8% No
sibling, or attends same school
50% of children maintain academic
N/A (a) N/A (a) 37.5% No N/A (a) N/A (a) N/A (a) N/A (a) 0.0% No
performance
90% of children have regular school
N/A (a) N/A (a) 38.4% No N/A (a) N/A (a) N/A (a) N/A (a) 0.0% No
attendance
Out-of-Home: Families Live in Stable and Supportive Environments
76.2 % of children reintegrated timely
(< 12 mo.)
86.7% of children in OOH less than 12
74.0% No 83.0% No 80.0% No 43.0% No 77.0% No
mos. have 2 or less plcmts
90% of children placed in family like
88.0% No 79.0% No 96.0% Yes 87.0% No 95.0% Yes
setting
95% of children have a goal that
N/A (a) N/A (a) 100.0% Yes N/A (a) N/A (a) N/A (a) N/A (a) 100.0% Yes
meets their needs
90% of children are without negative
law enforcement contact
95% of children have their initial case
80.0% No 76.0% No 82.0% No 67.0% No 79.0% No
plan engaged timely
Out-of-Home: Customers Are Satisfied with Services
50.0% No 0.0% No 88.2% Yes N/A (a) N/A (a) 92.0% Yes

N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) 96.2% Yes

N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) N/A (a) 96.2% Yes

N/A (a) N/A (a) N/A (a) N/A (a) 100.0% Yes N/A (a) N/A (a) 100.0% Yes
In-Home and Out-of-Home: Stakeholder Response
50% of stakeholders report families
have enhanced capacity to meet 72.7% Yes 72.7% Yes 73.9% Yes 71.7% Yes 72.7% Yes
needs

08PA04 APRIL 2008
Family Preservation Outcomes - Fiscal Year 2007
Outcome
Outcome Outcome Outcome St. Outcome Outcome
DCCCA DCCCA The Farm DCCCA
Met? Met? Met? Francis Met? Met?
In-Home: Children Thrive
maltreatment during FPS
maltreatment after FPS
95% of families engaged in FPS
89.4% No 86.9% No 87.7% No 91.0% No 93.0% No
services
In-Home: Customers Are Satisfied with Services


50.0% No 97.9% Yes 76.5% No 100.0% Yes 86.7% Yes

No data N/A (a) 50.0% No 0.0% No 100.0% Yes 92.9% Yes
Out-of-Home: Children Thrive
99.43% of children remain safe in out
of home placement
95% of children are safe following
reintegration, adoption finalization, or 100.0% Yes 100.0% Yes 100.0% Yes 100.0% Yes 100.0% Yes
guardianship
75% of children are placed in a
location that promotes continuity of
66.0% No 53.8% No 59.9% No 59.2% No 66.6% No
family relationships and community
connections
90% of youth leave custody with at
100.0% Yes 0.0% No No data N/A (a) No data N/A (a) 0.0% No
least one positive role model
performance equal to or greater than
performance at the time of entry into
care
90% of children attend school
33.0% No 65.0% No 100.0% Yes 80.0% No 45.0% No
regularly with no unexcused absences
Out-of-Home: Families Live in Stable and Supportive Environments
76.2 % of children reintegrated timely
93.2% Yes 92.3% Yes 91.5% Yes 85.2% Yes 71.4% No
(< 12 mo.)
32% of children adopted timely (< 24
No data N/A (a) No data N/A (a) No data N/A (a) No data N/A (a) 100.0% Yes
mo).
86.7% of children will experience no
more than 2 placements in the first 12 73.0% No 72.6% No 76.8% No 64.3% No 80.5% No
mos of out of home placement
91.4% of children released from
custody will not re enter custody within 100.0% Yes 64.3% No 100.0% Yes 100.0% Yes 100.0% Yes
12 months of release date
90% of children are placed in a family
93.2% Yes 82.1% No 94.8% Yes 88.5% No 92.1% Yes
like setting
95% of children have a case plan
permanency goal that meets their 76.0% No 96.0% Yes 87.0% No 100.0% Yes 100.0% Yes
needs
95% of children have timely
93.7% No 93.9% No 94.3% No 91.1% No 99.5% Yes
permanency hearings
Out-of-Home: Customers Are Satisfied with Services
60% of families report enhanced
60.0% Yes 100.0% Yes 100.0% Yes No data N/A (a) No data N/A (a)
capacity to meet their needs (90 days)

No data N/A (a) 80.0% Yes 100.0% Yes 100.0% Yes 100.0% Yes
capacity to meet their needs (closure)

No data N/A (a) 80.0% No 100.0% Yes 66.7% No 100.0% Yes

No data N/A (a) 50.0% No 0.0% No 100.0% Yes 92.9% Yes
In-Home and Out-of-Home: Stakeholder Response
have enhanced capacity to meet 60.0% Yes 60.0% Yes 54.8% Yes 0.0% No 60.0% Yes
needs

08PA04 APRIL 2008
Foster Care Outcomes - Fiscal Year 2006
Outcome Outcome Kaw Outcome Kaw Outcome St. Outcome Outcome
The FARM Youthville
Met? Valley Met? Valley Met? Francis Met? Met?
Children Thrive
99.43% of children safe from
maltreatment by a placement 99.8% Yes 99.7% Yes 99.9% Yes 99.9% Yes 99.7% Yes
provider
75% of child placed with relative,
62.9% No 56.1% No 59.6% No 48.1% No 58.9% No
sibling, or attends same school
90% of youth leave custody with one
69.4% No 54.9% No 44.3% No 77.6% No 88.5% No
positive role model
57.2% Yes 86.2% Yes 42.3% No 56.5% Yes 52.4% Yes
performance
90% of children have regular school
53.8% No 81.8% No 29.0% No 43.2% No 48.0% No
attendance
Families Live in Stable and Supportive Environments
76.2 % of children reintegrated
55.5% No 62.9% No 53.4% No 57.0% No 26.2% No
timely (< 12 mo.)
25.0% No 24.8% No 15.9% No 22.8% No 40.6% Yes
mo).
86.7% of children in OOH less than
78.0% No 69.0% No 72.0% No 70.0% No 67.0% No
12 mos. have 2 or less plcmts
90% of children placed in family like
88.0% No 86.0% No 87.0% No 84.0% No 88.0% No
setting
95% of children have a goal that
meets their needs
permanency hearings (% is a
80.2% No 72.3% No 89.9% No 83.6% No 88.6% No
combination of FPS OOH and R/FC
contract data)
95% of children have their initial
81.0% No 72.0% No 74.0% No 72.0% No 69.0% No
case plan engaged timely
Customers Are Satisfied with Services

85% of adults indicate family
centered principles were utilized in 60.0% No 33.0% No 50.0% No 90.9% Yes 96.0% Yes
services
85% of youth indicate family
centered principles were utilized in 81.8% No 83.3% No 100.0% Yes 85.7% Yes 90.0% Yes
services
Stakeholder Response
have enhanced capacity to meet 73.9% Yes N/A (a) N/A (a) N/A (a) N/A (a) 71.7% Yes 100.0% Yes
needs

08PA04 APRIL 2008
Foster Care Outcomes - Fiscal Year 2007
Outcome
Outcome Kaw Outcome Kaw Outcome St. Outcome Outcome
The FARM Youthville
Met? Valley Met? Valley Met? Francis Met? Met?
Children Thrive
99.43% of children remain safe in
out of home placement
95% of children are safe following
reintegration, adoption finalization, 98.7% Yes 96.7% Yes 98.6% Yes 99.4% Yes 99.0% Yes
or guardianship
location that promotes continuity of
63.9% No 55.3% No 57.9% No 54.0% No 63.0% No
family relationships and community
connections
90% of youth leave custody with at
least one positive role model
performance equal to or greater than
performance at the time of entry into
care
90% of children attend school
regularly with no unexcused 70.0% No 54.0% No 56.0% No 55.0% No 49.0% No
absences
Families Live in Stable and Supportive Environments
76.2 % of children reintegrated
59.0% No 52.5% No 54.3% No 47.4% No 34.3% No
timely (< 12 mo.)
16.4% No 28.8% No 14.9% No 26.2% No 41.8% Yes
mo).
86.7% of children will experience no
more than 2 placements in the first 77.7% No 74.2% No 73.4% No 74.2% No 73.5% No
12 mos of out of home placement
91.4% of children released from
custody will not re enter custody 94.2% Yes 93.0% Yes 94.7% Yes 94.5% Yes 98.0% Yes
within 12 months of release date
96.6% Yes 91.7% Yes 91.6% Yes 88.0% No 91.5% Yes
family like setting
95% of children have a case plan
permanency goal that meets their 96.0% Yes 98.0% Yes 96.0% Yes 99.0% Yes 97.0% Yes
needs
84.1% No 79.5% No 89.5% No 80.0% No 85.2% No
permanency hearings
Customers Are Satisfied with Services
capacity to meet their needs (90 45.5% No 71.1% Yes 47.6% No 74.1% Yes 89.2% Yes
days)
capacity to meet their needs 73.9% Yes 71.8% Yes 55.2% No 84.0% Yes 88.2% Yes
(closure)
85% of adults indicate family
centered principles were utilized in 56.5% No 74.4% No 36.8% No 84.0% No 91.2% Yes
services
85% of youth indicate family
centered principles were utilized in 55.0% No 76.2% No 44.4% No 63.6% No 100.0% Yes
services
Stakeholder Response
have enhanced capacity to meet 54.8% Yes 0.0% No 0.0% No 0.0% No 0.0% No
needs
(a) Some outcome goals aren't applicable because contractors don't always serve a sufficient population of children, and familes didn't return all SRS surveys.
(b) In fiscal year 2006, seven family preservation care outcomes weren't applicable to any of the family preservation contractors, and three foster care outcomes weren't applicable to
any of the foster care contractors. As a result, these outcomes aren't included in this appendix.
Source: LPA summary of unaudited SRS reported outcome data.

08PA04 APRIL 2008
APPENDIX D
Organizational Charts of Four Child Welfare Contractors with Affiliate Companies
This appendix contains organizational charts for the four SRS family preservation and
foster care contractors that have created affiliate and subsidiary companies. The status of these
affiliate and subsidiary companies is current as of January, 2008.

08PA04 APRIL 2008
Appendix D
Affiliate (Subsidiary) Companies of SRS Family Preservation and Foster Care Contractors
(as of January 2008)
The Farm, Inc.
ACTIVE INACTIVE
Kansas Family & Children’s

The FARM, Inc. TFI Family Services, Inc.
Foundation
Est. 1965 Est. 2007
Est. 1995
Peggy Martin - CEO No Management
Peggy Martin - CEO
TFI Community Services, Inc.
TFI Community Child Care, Inc.
Est. 2007
Est. 2007
Peggy Martin - CEO
Kathryn Efinger – Executive
Director
Kyds, Inc.
Est. 2007
Pathway Family Services, Inc. No Management
Est. 2004
John Bozich - President
TFI Financial Services, Inc.
Est. 2007
No Management
United Methodist Youthville, Inc.
United Methodist Youthville United Methodist Child Welfare Resource

Foundation, Inc. Youthville, Inc. Center
Est. 1995 Est. 1927 Est. 1999
Ray Tenner - President Shelly Duncan - CEO No Management
St. Francis Academy, Inc.
The St. Francis Academy,

Bridgeway Apartments, Inc.
Inc. - Atchison
Est. 1997
The St. Francis Est. 1991
Edward Fellhauer – Dean and
Academy, Inc. No Management
President/CEO
Est. 1945
Edward Fellhauer – Dean
The St. Francis Academy, Inc - and President/CEO The St. Francis Academy,
California. Inc. – Lake Placid
Est. 2001 Est. 1965
Edward Fellhauer – Dean and No Management
President/CEO
The St. Francis Academy, Inc. -

Picayune
Est. 1992
Edward Fellhauer – Dean and Legend
President/CEO
Active
St Francis at Ellsworth, Inc.
Est. 1986 Inactive
President/CEO Nonprofit
St Francis at Salina, Inc. Profit

Est. 1986
President/CEO
DCCCA, Inc.
DCCCA, Inc.
Elm Acres Foundation, Inc.
Est. 1974
Est. 2001
Bruce Beale – Executive
John Mazurek - President
Director
Oaks Center Condominium

Association
Est. 2007
Dean Bevan - President
Source: LPA summary of information provided by family preservation and foster care contractors

08PA04 APRIL 2008
APPENDIX E
Agency Responses
On March 7, 2008, we provided copies of the draft audit report to the Department of Social and
Rehabilitation Services, the Division of Purchases, and The Farm, Inc. All Agency responses are included as this
Appendix.

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Reviewing Selected Issues Related To State Contracts For Foster Care and Family Preservation Services, KS, 2008

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Reviewing Selected Issues Related To State Contracts For Foster Care and Family Preservation Services, KS, 2008

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PERFORMANCE AUDIT REPORT

Foster Care: Reviewing Selected Issues Related to

A Report to the Legislative Post Audit Committee

The Legislative Post Audit Committee is a LEGISLATIVE DIVISION OF POST AUDIT

DO YOU HAVE AN IDEA FOR

LEGISLATIVE DIVISION OF POST AUDIT

March 28, 2008

To: Members, Legislative Post Audit Committee

Senator Derek Schmidt, Chair Representative Virgil Peck Jr., Vice-Chair

This report contains the findings, conclusions, and recommendations from

1. Executive Summary - an overview of the questions we

2. Conclusion and Recommendations - are referenced in

3. Agency Response - also referenced in the Executive

Helpful Tools for Getting to the Detail

ƒ Side Headings point out key issues and findings.

ƒ Charts/Tables may be found throughout the report, and help provide

ƒ Narrative text boxes can highlight interesting information, or

ƒ Appendices may include additional supporting documentation, along

Legislative Division of Post Audit

Overview of Family Preservation and Foster Care in Kansas

Question 1: Were Appropriate Procedures Followed in Awarding

During the process, an SRS employee appears to have .................. page 9

Question 1 Conclusion ................ page 14

Question 1 Recommendations ................ page 15

Question 2: Have Moneys from the Contracts Awarded to The Farm

The Farm hasn’t used affiliated businesses to increase ................ page 22

Question 2 Conclusion ................ page 25

Question 2 Recommendations ................ page 26

APPENDIX A: Scope Statement ................ page 27

APPENDIX B: History of SRS Payments to Family Preservation, Foster ................ page 29

APPENDIX D: Organizational Charts of Four Child Welfare Contractors ................ page 36

APPENDIX E: Agency Responses ................ page 38

EXECUTIVE SUMMARY iii

The four-year contracts, which began on July 1, 2005, had an option

Recently, legislators have heard about alleged irregularities when the

Legislators also have expressed concerns about the numerous related

1. Were appropriate procedures followed in awarding contracts

To answer these questions, we reviewed the Division of Purchases’

PERFORMANCE AUDIT REPORT 1

In conducting this audit, we followed all applicable government

SRS officials provided us with information of payments to all contractors

2 PERFORMANCE AUDIT REPORT

► Family In-Home: This is a short-term program that provides

► Family Out-of-Home: Under the previous contract, a family

• Foster care services: This program provides services for families

PERFORMANCE AUDIT REPORT 3

Sherman Thomas Sheridan Mitchell

Graham Rooks Osborne Clay

Hamilton Kearny Finney Hodgeman

Edwards Greenwood Woodson Allen Bourbon

Stanton Grant Haskell

Wilson Neosho Crawford

Child Welfare Community Based Services Providers by Region

Source: Kansas Department of Social and Rehabilitation Services

4 PERFORMANCE AUDIT REPORT

• SRS made changes to the contracts’ payment structure. Under the

The focus of the information presented in question one of this

Appendix B shows foster care and family preservation SRS payments,

6 PERFORMANCE AUDIT REPORT

PERFORMANCE AUDIT REPORT 7

As the figure shows, SRS awarded the family preservation contract

• SRS went to a tiered rate structure for children in foster care.

The financial information presented in this question focuses