COUNTY OF LOS ANGELES DEPARTMENT OF AUDITOR-CONTROLLER

KENNETH HAHN HALL OF ADMINISTRATION 500 WEST TEMPLE STREET, ROOM 525 LOS ANGELES, CALIFORNIA 90012-3873 PHONE: (213)974-8301 FAX: (213)626-5427
WENDY L. WATANABE
AUDITOR-CONTROLLER ASST. AUDITOR-CONTROLLERS

ROBERT A. DAVIS JOHN NAlMO JAMES L. SCHNEIDERMAN JUDl E. THOMAS

July I, 1 201

TO:

Supervisor Michael D. Antonovich, Mayor Supervisor Gloria Molina Supervisor Mark Ridley-Thomas Supervisor Zev Yaroslavsky Supervisor Don Knabe / Wendy L watana&j,,$$ Auditor-Controller
LUVLEE'S RESIDENTIAL CARE, INCORPORATED, A GROUP HOME FOSTER CARE CONTRACT PROVIDER FISCAL REVIEW

FROM: SUBJECT:

At the request of the Department of children and Family Services (DCFS), we reviewed the fiscal operations of Luvlee's Residential Care, Incorporated, (LRC or Agency), from January 1 to December 31, 2009. LRC is licensed to operate two group homes (GH), each with a resident capacity of six children. LRC homes are located in the Fifth . , Supervisorial District and San Bernardino County. DCFS and the Probation Department (Probation) contract with LRC to care for foster children placed in the Agency's homes. DCFS paid LRC $4,941 per child per month, based on a rate determined by the California Department of Social Services. The rate increased to $5,490 per child per month, effective December I , 2009, and increased again to $7,274 per child per month, effective December 14, 2009. During calendar year 2009, DCFS paid the Agency a total of $737,063 in GH foster care funds. The issuance of our report to your Board was delayed in part by changes in federal and State regulations regarding possible repayment of questioned costs from fiscal audits. To enable LRC to begin taking corrective action as soon as possible, we discussed the findings and recommendations from our review with Agency management at the end of our review.

Help Conserve Paper - Print Double-Sided "To Enrich Lives Through Effective and Caring Service"

Board of Supervisors July 1, 201 1 Page 2

Summary of Findings

We identified inadequately

in $204 unallowable supported

expenditures expenditures.

and

$1,928

LRC also needs to its internal strengthen controls over and its accou disbursements, bank deposits and reconciliations, personnel and payrollrecords, reporting independent contractor income, and to fixed revise the Semi-Annual Expenditure yearReportsand ensure the calendar 2009, for year-to-date match the expenses amounts on the Agency's 2009 statements. our findings Details of are indiscussed Attachment I. We recommend DCFS resolve the questioned that and collect costs amounts. DCFS should also ensure that LRC address the recommendations in this report, and monitor permanent changes.
Review of Report

any disallowed management to to ensure in the

We discussed our LRC management and DCFS report with on 11, 201 1. The January Agency's response, which is incorporated Plan into DCFS (Attachment II), indicates the Agency's general agreement and recommendations.

This audit is not be, and intendeddoes constitute, the discovery not to or identification of an overpaymentpurposes of the for federal lmproper Payments California laws, including but not State necessarily to Welfare and Institutions limited Code sections 1 1466.23, 11466.235, 1466.24, etc., nor State 1 regulations to intende implement either lmproper Payments Act or the federal related provisions State law. in This audit is intended DCFSsolely managing assist its in to contractual Consequently, this forwarded to DCFS in order be report will it might take that further action, as it deems appropriate, based may, on its or may not, include or the identification discovery overpayment for purposes of an of federal or State law.

Board of Supervisors July I, 201 1 Page 3 We thank LRC management review. Please if you have me call Campbell at (21 3) 253-01 WLW: JLS:RGC:MWM Attachments and staff for their any questions, your staff may or 01.

cooperation contact Ro

c: William T Fujioka, Chief Executive Officer Ph.D., Director, DCFS Jackie Contreras, Acting Donald H. Blevins, Chief Probation Officer Sean Hardge, Executive Director, Luvlee's Care, lncorporated Residential Board of Directors, Luvlee's Residential Care, lncorporated Cora Dixon, Bureau Chief,Care Audit Foster Bureau, Dept. of Social CA Services Commission for Children and Families Public Information Office Audit Committee

Attachment
Luvlee's Residential Care, Incorporated Group Contract Provider Home Fiscal Review REVIEW OF EXPENDITURES

We identified in $204unallowable expenditures in unsupported/inadequately supported expenditures. Details discussed below.

Applicable Regulations and Guidelines

and of the

LRC is required to following federal, GH Contract, Administration including

operate home (GH) group its program in accordance State and guidelines: County regulations the Auditor-Controller Handbook (A-C Contract and Handbook) A-122, and

with

Acc

Federal Office Management and Budget Circular of Profit Organizations A-I 22) (Circular California MPP)
0

Cost for Non- Principles (CDSSProcedures

Department of Social

Services of Policies Manual 22)

California Code of Regulations, Title 22 (Title

Unallowable Expenditures

We identified in unallowable $204 expenditures for credit card late fees charges, and a non-sufficient (NSF) fee from Agency's bank. Circular A-122 the fund that and interest penalties expense are Sections 16 and 23 indicate expenditures.
Unsupportedllnadequately Supported Expenditures

and

unal

A-C Handbook Section A.3.2 vouchers, invoices, other supporting receipts, expenditures be disallowed upon audit. will

states that or documents,

all

expenditures and tha

We identified $1,928 in inadequately for credit supported card charges, expend clothing purchases to an employee. The and payments Agency provided c checks and credit statements, card no receipts, or the receipts but provided were inadequate to substantiate the expenditures that were program related.

AUDITOR-CONTROLLER COUNTY OF LOS ANGELES

Luvlee's Residential Care, Incorporated Recommendations

1.

Page 2

DCFS management resolve the $2,132 ($204 + $1,928) in questioned costs and collect any disallowed amounts.

LRC management:
2.

Ensure that foster care funds are used for allowable expenditures to carry out the purpose and activities of the Agency. Consistently maintain adequate supporting documentation for all Agency expenditures, including original itemized receipts and invoices. CONTRACT COMPLIANCE AND INTERNAL CONTROLS

3.

We also noted some contract and internal compliance control issues weaknesse DCFS should ensure LRC management that takes actionof the to addres contract compliance and internal in this control report. should recommendations DCFS also monitor to ensure the actions in permanentresult changes. Accounting and Disbursement Procedures

Proper disbursement procedures signature from someone a second require independent of the transaction, at a higher and level than the first check the appropriatenessthe expense. We noted of the payee on 23 that checks, totaling $48,181, also signed the checks. Recommendation
4.

LRC management require a second signature on all checks where the payee and check signer are the same employee.

Payroll 1 Personnel Controls

CDSS-MPP Section 11-402 requires be maintained supporting for that Handbook.Section all program expenditures, including salary rates. I B.3.1 states that timecards be prepared forreportspay period, and or time each must all timecards or must be signed time reports by the employee to and the certify the accuracy of the reported time. We reviewedemployee 12 files and personnel payroll records, following: the and noted

None theofpersonnel files the contained employees' current rates. However, we determined the employees' salaries were the Child Welfare of America League (CWLA) Study. Salary
AUDITOR-CONTROLLER COUNTY OF LOS ANGELES

authorized reasonab

Luvlee's Residential Care, Incorporated One employee's timecard was not Recommendations LRC management:
5.

Paqe 3

signedthe supervisor. by

Ensure personnel files contain current salary rates approved by management. Ensure all timecards are signed by a supervisor to certify the accuracy of the reported time.

6.

Independent Contractors A-C Handbook requirements for filing We reviewed payments contractor 1099. LRC a contractors are reported Recommendation 7. LRC management ensure all payments to independent contractors are reported to the federal and State taxing authorities. A.2.6 requires Section contractors to comply with federal State and 1099 (Miscellaneous Income) Forms two contractors, and noted that LRC did not to issue one management should all payments to independent that ensure to the taxing authorities.

Bank Reconciliations A-C Handbook of the bank statement accuracy. The and the reviewer. We reviewed the Agency's payroll), and noted reviewer. Recommendation
8.

Section date, bank

B.1.4 requires be prepared bank within reconciliation 30 days by management for appropriateness and and reviewed reconciliations dated by both the be signed and should preparer

monthly bank two accounts for reconciliations and (general of the bank reconciliations were signed that none the preparer by or

LRC management ensure monthly bank reconciliations are signed by the preparer and reviewer.

A UDITOR-CONTROLLER COUNTY OF LOS ANGELES

Luvlee's Residential Care, Incorporated Untimely Deposits A-C Handbook deposited weekly, or when

Page 4

Section B.1.2 states $500 or that more cash be shall receipts withinof receipt. one dayCollections than $500 may be deposited less of the total reaches occurs$500, whichever first.

warrants, $17,313, totaling that We noted LRC received 17 Los Angeles County that were deposited ten days or after more the issue date. Six were deposited with days of the issue fourdate, deposited 15 days were after issue the date, another warrant was 17deposited the issue date, days after and a sixth deposited was warrant 85 days afterissue the date. management LRC should consider ha payments electronically into the Agency's deposited account. directly bank Recommendation
9.

LRC management ensure that Los Angeles County warrants are deposited timely, and consider having its County payments electronically deposited directly into the Agency's bank account.

Fixed Assets A-C Handbook B.4.2 requires Section agencies assets, including item description, the detailed acquisition cost, and source(s) of funds. In addition, inventory of all at least annually to ensure fixed assets accounted and maintained for, working order. in proper LRC did not maintain inventory of its fixed assets Recommendations LRC management
10.

to maintainfixed of a curre serial number, date agencies an should that all are fixed asse an not

fixed In addition, the Agency listing. does assets at least annually.

conduc

Prepare a fixed assets listing that includes the detailed item description, serial number, date of purchase, acquisition cost, and source(s) of funds. Conduct an inventory of fixed assets t o ensure that all fixed assets are accounted for at least annually.

11.

Semi-Annual Expenditure Reports GH Contract Expenditure reporting 16.4 requires Section Reports period. agencies to prepare submit Semi-Annual and 60 to days DCFS the end after within of each semi-annual

AUDITOR-CONTROLLER COUNTY OF LOS ANGELES

Luvlee's Residential

Incorporated Care,

Page 5

LRC provided of the Semi-Annual copies Expenditure for calendar year Reports 2009 that were submitted DCFS. to We noted some minor variances SAER and the Agency's audited financial for the period statementsended 31, 2009. LRC should revise the July I , 2009 through agree with Agency's audited the financial
Recommendation 12. LRC management revise the year-to-date amounts on the July 1, 2009 through December 31, 2009 Semi-Annual Expenditure Report and resubmit the Report to DCFS.

(SAE

Decem

December SAER 31,2009 YTD and resubmit the Report statements

to amounts to DCFS.

AUDITOR-CONTROLLER COUNTY OF LOS ANGELES

Attachment I1

Attachment II County sf Lss Angeles BEPARWENT OF CHILDREN AND FAMILY SERVICES

425 Shatto Place, L s Angeles, California 90020 o

(213) 361-6802

Board of Stipsrvlsors GLORIA MOLINA Flmt Olstrtct MARK RIDLEY-THOMAS Second Dlatrtct LEV YAROSLAVSKY Third Olstrlct DON KNABE

Sean Hardge, Executive Director Luvlee's Residenttal Care, Incorporated 91 10 tndependence Ave Chauswodh, CA 94311

Fourth Dlstrlct
MICHAEL D. ANTONOVICH Flfth Olstrlct

AUg$lb'F"QR-C6NfR6)LLER'SFiSCAt AblOff REPORT OM LIJVLEE'S RESIDENTIAL CARE, GNGORPBWTED -. A GROUP HOME FOSTER CARE CONTWCTOR

We [have ~-evtewed your fiscal corrective actron plan (FCAP) rn response ta the Auditor r3;or~troller's ftscal audit report period for the of 1, through December 31, 2009 The January FCAP fully addresses the aud~t report 11 reeornmendations (see Attachment) In i h e one recornrr-bendation dlrected to DCFS was fully addressed

addition,

DCF5 requrres that Luvlee's Wesidentlal Care, Incorporated, as agreed, subrn~ta cheek drawn on non-foster cafe funds rn the total amount of $2,432.00 Please make your check
payable to BCFS Cashier and mail to
Latisha Thompson, ASM Ill Family Services 425 Shatto Place Rm. 304 Los Angeles, Ca. 90020 from payment will which

Depadment af Children and

Khe G)epdrttnr>nt requires that you identify the source of the funds be -rrade

If you have any questrcrns, please contact All Gomaa-Mersai of rny staff at (213)351 -3209

/ ~ a b s h ailiompi;on, ASM l l i FISL'BI Mdf~!lrtor~r~g Special Payments and

. ! ( ; j / W/t ( - / < LJd / ;- r i j ~ ~ - ~ j / , ~ l L - > S '-'

Mlke klicWslters. Chief AudlP DIV~GIOII (via electronic only) Sandra Gomer, Prlncipal Accauntant-Auditor (via electronic

mail mail

only)

"TI Et~nch Lives Througf) ERecbve and Caring Serv~ce"

LUVLEE'S g2ESIDENTlAL CARE, INCORPORATED - A GROUP HOME FOSTER CARE CBNTRACWR Note: Department of Children and Family Services (DCFS) wit1 only review docurnentat~a~n previoi~sly not provided the Aud~t~r-Controller, to

FlSCAL REVIEW OF

Based on the FCAP dated February 23, 2011, submitted by Luvlee's Residential Care, Incarpt,raled, status of each recommendation is summarized as follows:
s

Rcccrnmendaticlns ( 9
--

- 1I ) were fully addressed

) were partially addressed.

Recomrnendatirans (

-7-_ Reccmrnendatian (1) directed to the Department was addressed.

1,

DCFS management reserves $2,"13 ($264 + $1,928) in questioned costs and C O ! % ~ any disalllowed amounts. G~
Agenev Proposed FCAP: kuwiee's Management wili repay the $204 ir7 unalbt.,cabie costs and h e $7,924 in Auditclr-Controller identified tbns~ppo~ed/inadequateIy supported costs for a total of' $2,132.00. Paymerlt wflf 68 .3 me-time payment paid in full by March I, 2QI I.

D@FS 8esponstz. DCFS accepts the agency's response. DCFS requires that
Luviee 3 Residential Care, as agreed, submit a check drawn on Incarporated, non-foster care funds in the amount of $2,132.00. The Department requires that you ident~fy the source of the funds from which payments will be made. Please make your cheeks payable to DCFS Cashier and mail to:

Latisha Thompson, ASM Ill Depadment sf Children and Family Services 425 Shatto Place Rm. 304 Lss Angeles, Ca. 90020

2,

buv$ee's management ensures that fester care3 funds are used far a1$0wab!e expenditures to carry atrt the purpose and activities of the
Agenc f.

Agency Proposed FCAP: Luvlee's management will ensure that foster care f~lrjds are used for allowable expenditures by imptementing the attached accounting policies and procedures cany out the purpose manual to and aca"lvific;lsof tuviee's Residential Cam, Inc.

DCFS Response DCFS accepts

3.

the

agency's

response,

Luvles's management adequate supporting documentation for maintains a I Agency expenditures, including original itemized invoices and rsceiph. B

Agency Proposed FCA?: Luvlee's managemenf will ensure a// agency cxpendifures Ete suppoded by opiginal invoices r and store receipts.
DCFS 9ersponsa DCFS accepts the agency's Baara-approved policiesiprocedures that ensure,

response. subm~t complrance with the

Please

ret:omrr~endatian.

4.

Luaclee's management requires a second signature on ail checks where the payee and the check signer is the same employee.
Agency Proposed FGAP. Effective ~mmediateiyLuvfee's menagement will reqta1re3 Wu signaturns on all checks rvhen the payee and check signer is the s;;,t-ne e,~;nployee.

DGFS aesponse DCFS accepts the agency's response. Please So:%-d approved policteslprocedures that ensure compliance with the !ec,rzmrr.rer~dat~on

submit

kuwletr's managemant ensures pemcsmnel files eontai~r current salary rates approvad by management,
Agency Proposed FCAP: E#ective immediately, Luvlee's management will ensure ail personnel files contain ctlrrent sa/ary rates approved hy management ni accos-dancewith the Auditor-Cor~troIIerGrnup Home Contract Accounting and AcSm1nrs4ri-$fion Handbook.
DCFS Rezspanse: DCFS accepts the ageney's response. 13c3ard-approved pol~cieslprocedures that ensure compliance recontn~er~dation

subrn~l Please with the

6.

buvlse's managemant ensures all timecards are signed by a supervisor to cadi@ the accuracy of:$Rsrepor6ed time.
Agency Praposed FCAP: A 1 timecards or time repods b v i l l be signed by the 1 e,??pin and supenljscrr to certify fhe accuracy af the reporfed &me. lrhe ofice yee $managerwiII ensure proper authonza fion prior 10 processmg payroll.

Page 2 of 4

DCFS Response: DCFS accepts the agency's response. Please ensure complian~e with Board-approved paliaes/procedures that reeommendation.
7.

submit the independent

Luvlee*s managamant ensures are repoded to the federal and

all payments State authorities. taxing

to

Agency Proposed FCAP: 1411 independent must submit contractors IRSan Farm !At'-9 Request for 'Tax Payer ldenfifjcation and Certification or equivalent to the Accounting Depadment, prior to payment. F o m f099's will be mailed a// to cur-r~nl if~depend~nt contractors and reported to fhe federal and state taxing a ufhuriiies.

OCFS Response: DCFS accepts the

Board -approved recoinmendation.

agency's response. polisieslprocedures bank reconciliations monthly

Please submrl with the that

ensure signed

8,

tuvlbae" management ensures tha praparetr and reviewer.

by are

Agency Proposed FCAP. Alf bank statements will be received recnnci/ed and by someone with no cash handling or check wri'fing functions. bank Monthly reconc/liafions wiiI b~ prepared within 30 days of the bank statement date and i-evie~fed by management for appropriafeness and accuracy. Bank reconctliations wiII be signed by both the preparer and the reviewer.

BCFS Response: DCFS accepts the agency's response Please subrnrt Board-approved polic=ies/precedures that ensure compliance with the rscomn.rendation.

9.

Luvlee's managemant ensures Losthat Angeles County warranb are deposited timely, and consider having its County payments electronically deposited directiy info the Agency's bank account.
Agency Proposed FCAP: All checks wiII be endorsed upon receipt County wanan!s "staling $500 or more will be deposited within hours 24 of receipt. Wamrrts of $508 or less wi/l be secured and deposited weekly or when total reaches $500, kvhiche~fer occua first.

DCFS Rssponse: DCFS accepts the agency's response. Boarel-approved polisieslprocedures that ensure recommendation.

Please compliance with the

submit

Page 3 of 4

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