Acting on a tip, investigators had found that Smith's nonprofit foster care agency, KARE Inc., had been reimbursed $6,700 from the state for foster parent training sessions, but had not paid the foster parents.
In a letter to KARE's board president, state officials also said the Dayton agency had furnished false reports for 1990 and '91 to get recertified. They said the financial reports were not done by a licensed, certified public accountant, as claimed, nor had the reports been reviewed by the agency's board, as required.
But in August 1995, three years after the investigation started, officials with the Ohio Department of Human Services and attorney general's office signed an agreement allowing Smith to continue to operate. The agreement was reached despite Smith's history of problems and despite an offer by her attorney that Smith step down as KARE director.
Smith declined to talk about the case, but officials say it illustrates some of the deep flaws in Ohio's private foster care network, a multi-million dollar industry that operates with little oversight.
`Where is the accountability in the system?' asked Dan Schneider, head of the Public Children Services Association of Ohio. `A major hearing needs to be held on this issue. Performance ought to count for something.'
State Sen. Rhine McLin, D-Dayton, and Rep. Jack Ford, D-Toledo, agree. They are working on legislation that would set tougher standards for private agencies, saying a February Dayton Daily News series on foster care focused their attention on the situation.
The series found that public agencies, overwhelmed by caseloads that have tripled in the past decade, are paying private groups premium rates to find homes for the most troubled kids in the system. Private agencies now make nearly one-third of Ohio's foster care placements, yet officials disagree over who should monitor them. County officials say the state should do it; some state officials say it's up to the counties.
Meanwhile, Ford said, the job isn't getting done.
`Right now, there is no oversight,' he said.
Looking at spending
1995 wasn't the first year Smith eluded problems with the state. In 1989, she gave up a license to run a group home for delinquents after a 14-year-old boy hanged himself and inspectors found freezing cold rooms, locked food cupboards and other serious problems at the home.
Within months, working through a different state department, Smith opened her foster care placement agency, KARE (Kids Are Really Essential).
The business seems to be thriving. Tax records show that in 1996, KARE received nearly $2.7 million for placing 68 children in foster homes and handling 12 adoptions.
Smith's salary that year, $124,992, rivaled the governor's. In fact, tax documents show in 1996, Smith, her husband and her daughter, also KARE employees, were paid almost $300,000 in salaries set with no oversight from state or local governments.
McLin and Ford say that needs to change. McLin said a system that rewards people so well for finding homes for foster children should also monitor them well.
County and state officials need to determine who is overpaid, and who is delivering the best service for the money, McLin said. She is exploring legislation that would limit the number of times a child can be moved in foster care. And she and Ford are looking at ways to monitor how much money agencies spend on administration.
`I don't have problems with people getting paid for services, the problem is when they aren't delivering the kinds of services they are getting paid for,' McLin said. `We've got checks and balances for nursing homes, why not expand that for foster care? There is not a check and balance system for foster care children that's working.'
Ford agreed. Citing the $200,000 salary of one nonprofit agency president in Toledo, Ford said state regulators should look at whether foster agencies are spending tax dollars on themselves instead of providing counseling, tutoring and other needed services to children.
`The beauty of this system is that it's so cheap to incorporate and start doing business,' Ford said. `But if these agencies are under pressure to generate profits for themselves, what do you think that does to the services they deliver to kids?
Bennett Weiner, a vice president for the Council of Better Business Bureaus, said nonprofit agencies operating on tax dollars, not fund-raising, is an area that's rarely examined. He said the Toledo executive's $200,000 salary is far higher than the $118,000 average paid in salary and benefits to CEOs of national charities in 1994.
Ron Browder, policy coordinator in the Ohio Department of Human Services, said the state has no authority to review how much money private agencies spend on administrative costs. That should be up to the county contracting with the agency, he said.
`It's not for us to say that KARE shouldn't be making a million a year, or however much it can make,' Browder said.
Jacqui Sensky, deputy chief of staff for Gov. George Voinovich, agreed, saying, `A lot of people in for-profits and nonprofits draw down healthy salaries off mostly government contracts, but that's not necessarily wrong.'
It may not be wrong, but Arnold Tompkins, director of the Ohio Department of Human Services, questions whether it's wise to pay private agencies so much tax money without checking to see how its spent.
`I would think local taxpayers would have a problem with that,' Tompkins said.
"We need them"
One major deterrent to cracking down on foster care agencies is the dire need for their services. Without them, state and local officials say, already overburdened social workers would have nowhere to place abused, unruly and delinquent youth.
`I don't know what we'd do without these agencies,' said Ann Stevens, spokeswoman for Montgomery County Childrens Services. `We need them.'
Tompkins said his office would be inundated with complaints if it started shutting down agencies.
`If I had tried to yank KARE's license, then bloody murder would have happened in the field,' he said. `We would have heard from public agencies who contract with them and need them to place kids, and from parents who are getting paid by KARE who are asking, `What am I going to do now?''
Still, Tompkins acknowledged his department should tighten standards for agencies. He said, for example, that lower-level department employees reached the 1995 settlement agreement with KARE. The department initially threatened to revoke Smith's license, but changed course after KARE paid foster parents what they were owed for the training, and provided the state with audits for 1991, '92 and '93. Before seeking future training reimbursements, Smith was required to submit proof that parents had been paid.
Tompkins said the agreement should not have been signed without his or a deputy director's OK. Securing a top official's approval is routine, said Tompkins, who `was surprised we didn't do that on this one.' By law, Smith must also submit copies of all federal tax forms to the attorney general's office. But in December, when the Dayton Daily News asked for KARE-related tax documents, the attorney general's office could find just one on file, from 1996.
Smith's accountant then provided filings for other years, but a spokesman for the attorney general's office said KARE still owes $1,000 in fees for turning in the documents late.
Tompkins said the state should keep closer track of financial documents and require agencies to submit other data as well, such as how often social workers visit children, how often foster children are moved and other key information.
Tompkins also said the next time the state is considering revoking a private agency's license, all the counties that do business with the agency will be notified so they can make a decision about whether to continue their contracts.
`If we're to do this right, we'll start alerting (counties). That should be done, there is no question about it,' he said.
In retrospect, other human services officials said, the KARE case should have been handled differently. But they note Smith did come into compliance by paying the parents shortly after the nonpayment was discovered. They also said the department has just two employees in charge of enforcing foster care regulations. One was on a six-week maternity leave at the time and the other was too busy with three other cases to pursue Smith.
`We determined the (KARE) fiscal problems posed no danger to the children,' Browder said. `While the state wants fiscal responsibility, we had other cases where the focus was on whether the children were safe.'
County vs. state
While officials agree that private agencies should be monitored better, they disagree on who should be in charge of the oversight.
Greg DePorter, spokesman for the Department of Human Services, believes counties must ultimately take responsibility for the quality of foster care, especially the care provided by agencies they hire.
After all, DePorter said, counties pay private foster agencies to find homes for children who are in the county's custody. It should be up to those counties to monitor how the money is spent. Beyond performing basic licensing checks, the human services department hasn't been given authority by the legislature to monitor how agencies spend their money or otherwise do business.
`For a county to say that (monitoring agencies) is the state's responsibility, that's so completely out of the realm of reality, it's not funny,' DePorter said.
But, he added, `If the only one looking at an agency is the state, through licensing, and if counties are absolving themselves of responsibility - which scares the daylights out of me - then certainly there is room for dialogue on this.'
Stevens, however, the spokeswoman for Montgomery County Childrens Services, said simply, `How a private agency runs itself is the state's responsibility.'
She said Montgomery County Childrens Services doesn't investigate complaints against private agencies; it turns them over to the state. It also doesn't insure agencies are solvent or check to see if agencies are following proper procedures or `best practices.'
`If we have to continually monitor private agencies, what's the point of contracting with them?' Stevens said. If counties were responsible for making sure private agencies were up to par, they would stop contracting with private foster agencies and `do that work ourselves.'
Montgomery County Commissioner Vicki Pegg said Ohio's 88 counties can't be expected to conduct internal audits of the 102 private agencies across Ohio. `Practically speaking it won't work,' Pegg said.
She said the county and state need to coordinate a plan to make sure foster children and taxpayers aren't the losers in this system.
`We have to end this tug of war over who should be responsible, and work as partners on this issue in order to get something done,' Pegg said.
`If I thought we were paying more to get more (services) for damaged children, that would be one thing. But the strong potential is there for us to be paying more and getting less, and that's unconscionable.''
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Dayton Daily News