- Associated Press - Monday, May 19, 2014

LINCOLN, Neb. (AP) - State officials have reduced the amount that Nebraska owes the federal government for child welfare services that weren’t properly documented, but could still end up paying $15 million.

A Department of Health and Human Services spokesman said Monday that the agency has successfully documented $7 million of the $22 million in federal aid that was distributed to private groups for foster care and other child welfare services.

Federal officials called for reimbursement in January after noting that Nebraska failed to properly track payments made as part of its troubled effort to privatize child welfare services.

Nebraska didn’t require its child-welfare contractors to give a breakdown of how much money was going to foster parents versus other services for neglected and abused children, federal officials said in a January letter to Nebraska DHHS officials. A review of 40 foster-care payments in fiscal years 2011 and 2012 found that the state didn’t comply with federal rules in at least half of the cases, according to the U.S. Department of Health and Human Services.

The letter said Nebraska officials improperly included non-allowable expenses, such as their contractors’ administrative costs, in their payment claims.

DHHS spokesman Russ Reno said the agency has proposed a payment schedule to the federal government, but likely won’t begin reimbursing until later this summer. Reno said department officials were able to document about $7 million in allowable expenses from the child service providers. But he said it’s unlikely the state will be able to document any more expenses.

“At this point, I don’t think we have any expectation of doing that,” he said.

State Auditor Mike Foley said his office hasn’t followed up with the department since he announced in January that state officials had received the letter. Foley, who is leaving office in January, said the office’s staff will review the child welfare payments again during the department’s annual audit. Foley has said the department could face annual interest fees of more than 10 percent if it fails to repay the money right away.

“It’s up to them now to work it out with the feds,” Foley said.

The privatization experiment faced problems shortly after it began in 2009, when the state hired five lead agencies to provide services for abused, neglected and troubled children who were in state care. Four of the five providers ended or lost their contracts with the state, citing a lack of funding and an unsustainable number of children in the system. The state has since restored its public child-welfare services everywhere except in the Omaha area.

Kerry Winterer, the department’s CEO, has said the payment-tracking problems were due to inadequate documentation from the private agencies, and the problems have since been fixed.

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