A Chicago nonprofit that provides adoption, foster care and related services for abused and neglected children is fighting allegations it misused taxpayer money after an extensive state audit revealed questionable charges for staff meals, traffic tickets and membership to a private social club, among other issues.
In a 64-page draft report obtained by the Tribune, auditors for the Illinois Department of Children and Family Services said they had “serious concerns” about spending by vendor Child Link as well as its internal controls. Issues highlighted in the confidential report included a lack of supporting documentation as well as disallowed expenses for food, entertainment and fundraising efforts.
The state’s child welfare agency has demanded that Child Link repay about $100,000 in “disallowed costs” that were incurred over a three-year period ending last summer. DCFS had pressed to be reimbursed nearly double that figure in January after completing the initial audit, but Child Link reduced the amount by providing more receipts and other supporting documentation.
This is the first time in about six years that DCFS has conducted such an extensive audit of one of its private partners at the urging of its inspector general.
It also is the first time DCFS has demanded reimbursement from Child Link in a partnership of nearly 15 years, officials at the nonprofit said. Child Link CEO Malia Arnett said her organization continues to challenge DCFS’ audit findings and has requested further review through the department’s closed-door administrative hearing process.
In an interview with the Tribune, Arnett and four of her board members defended their program. At times tearful, Arnett said she turned around a small, cash-strapped organization after taking the helm in 2004 and has made it her life’s work to ensure that children in the state’s foster care system have access to the resources and support they need to succeed.
Arnett said taxpayer money was properly spent to manage DCFS programs and related administrative costs. She conceded that some money, such as specific fundraising costs or a few staff traffic tickets flagged by auditors, “was not allocated as intended, but we have since corrected that situation.”
Arnett said none of the money was used for “personal gain.” As far as staff meals and entertainment, including a $1,000 outing to a White Sox game and a Christmas party costing nearly $6,000, nonprofit officials said DCFS has not questioned such expenses in past routine audits. They said such employee incentives are needed to stave off turnover in an industry with low wages and high stress, noting the long-stagnant rates the state pays private providers for services.
“I do not believe these expenditures were misspent,” Arnett said.
DCFS spokesman Jassen Strokosch agreed that Child Link has passed previous audits without issue. But he said the regular contract monitoring process is more of a random sampling of expenses than a comprehensive check of “every single specific transaction” for inspector general-driven reviews.
He said rules clearly dictate that state dollars cannot be spent to support vendors’ staff holiday parties, fundraising, traffic fines or other expenses Child Link described as staff development and training. As for the many other contested charges that nonprofit officials say went to their programming, Strokosch said a lack of supporting documentation was the problem.
“As long as it’s program-related, it’s often allowed,” he said, “but you have to follow basic accounting principles. We’re not going to just take their word for it.”
The audit battle comes as the beleaguered state agency again struggles with a clogged child abuse hotline, high investigator caseloads, troubling child deaths, long-persisting instability with its budget and leadership, and the dubious distinction of being the worst-ranked system in the country for the length of time children languish in foster care without a permanent home.
Though the money in dispute may not be a lot for an agency with an annual budget of $1.2 billion, Strokosch said administrators have zero tolerance for misuse of public funds meant for children.
“Every dollar used to keep kids safe matters,” he said. “We take every action available to us to ensure the department is reimbursed.”
Founded in 2004 and based in the city’s Pilsen neighborhood, Child Link has five DCFS contracts totaling more than $5 million this year. The organization provides myriad child welfare services to Chicago-area kids and teens, as well as operating two transitional living facilities that serve older female clients, up to age 21. Those facilities provide the young women with an apartment, life-skills training and other support services as they leave foster care and transition to adulthood.
Arnett has been with the nonprofit since its inception, building it from a small program formerly called Cabrini-Green Youth and Family Services to one that employs nearly 60 staffers and serves about 350 children each year. The agency’s achievements include a more than 90% high school graduation rate for its clients, with the majority of teens continuing on to college, she said.
Arnett said she was in substitute care as a child and is committed “to do better for foster kids.”
“We help our kids feel safe, secure and equitable to their peers despite their overwhelmingly traumatic situation,” said Arnett, whose annual salary was about $125,000 in 2018, records show. “We do everything in our power to help them feel less stigmatized by a lack of (family) support and resources.”
Nearly all of Child Link’s funding comes from DCFS. The nonprofit has received about $50 million from the child welfare agency since 2005, according to state comptroller officials. It also receives private donations and hosts annual fundraising events, such as a whiskey tasting, a wine festival, holiday toy and school supply drives, and a women’s luncheon.
The review of Child Link’s spending began last year with a complaint to the DCFS inspector general’s office. After a review of the organization’s financial records, Inspector General Meryl Paniak alerted DCFS auditors late last year to “numerous potentially disallowable transactions” and urged a three-year audit, sparking DCFS’ extensive review.
According to DCFS administrative rules, public funds may not be used for private agency expenses related to fundraising efforts, sales taxes, fines, penalties, entertainment, membership dues and several other nonprogram activities.
The majority of the ongoing audit dispute concerns more than $60,000 categorized as “meals and entertainment” billed to the state over three years, according to DCFS. They include several hotel events and dozens of restaurant meals, from coffee shops and cafes to upscale eateries, audit records showed.
Child Link used DCFS money for a staff Christmas party in December 2016 at a Pilsen craft brewery that cost nearly $6,000, auditors found. The report also showed a staff outing to a White Sox game in 2017 with a $1,044 price tag. Various purchases that agency officials attributed to staff development were made at venues such as Hotel Allegro in downtown’s theater district and the Cherry Circle Room in the historic Chicago Athletic Association Hotel near Millennium Park. Arnett described those expenses as necessary employment incentives for caseworkers paid an average of $33,000 to $40,000 annually.
Andrea Durbin heads Illinois Collaboration on Youth, which represents private providers of child welfare services, and has long advocated for rate increases. Durbin said she was unaware of the audit involving Child Link, which is not a member of her group. But she agreed with Arnett that staff turnover because of low wages and high stress is a problem for providers.
“I think we forget how challenging these jobs are,” Durbin said. “Providers are trying to do creative things to make sure they are able to recruit, train and keep a stable workforce.”
Other expenses flagged by auditors include $1,600 in sales tax, $300 in traffic tickets and several other payments to the city of Chicago that DCFS officials said were unexplained. The audit also cited several payments totaling about $5,000 to the Union League Club of Chicago in 2015.
Cook County Public Guardian Charles Golbert said, “That’s DCFS money intended for kids.”
“You cannot spend public dollars on private club memberships,” he said. “It’s our tax dollars and was intended for programs to take care of children.”
Arnett said Child Link had a four-month membership at a reduced rate for various events as part of the agency’s fundraising efforts. She said the membership was not for personal use and she was surprised to learn her agency had mistakenly billed the state for charges related to fundraising activities.
Child Link officials said some accounting mistakes were made, including charging taxpayers for traffic tickets and fundraising efforts, but they defended the bulk of the contested $100,000 in expenses as legitimate.
Arnett said DCFS erroneously flagged numerous expenditures for things like snacks for children during sibling visits, holiday parties for foster children and their families, back-to-school picnics, staff training and necessary staff travel to monitor DCFS children living in southern Illinois and out of state while at college or in foster care placements.
“We have requested that if a teenager has a piece of pizza, we have to have them sign for that,” Arnett said, lamenting a frustrating process. “(Every cent) has to be accounted for.”
Board chairman Dan Palmer said Child Link was “operating within the rules as we understood them” and that the nonprofit has spent millions of dollars from the state over the years without issue. He said Child Link has repeatedly spent more on programs for kids in recent years than DCFS provided, depleting the organization’s coffers.
“I just want to make sure there’s some perspective when you talk about that number,” Palmer said of the $100,000 in question. “That represents a tiny fraction of the total amount of money we spent on behalf of the kids in the organization.”
Board treasurer Anthony Spears said: “We’re operating as usual, which is to provide the best benefits we can to the kids and to utilize the funds as most expeditiously as we could.”
Child Link is seeking an administrative hearing, which is a closed-door proceeding, to contest the reimbursement demand. The administrative law judge’s finding is public. The hearing was set for May 24 but has been continued to July.
“We would like our day in court, so to speak,” Spears said.