Milwaukee County Child Welfare System Contractor Reimbursements Found to be Inappropriate

An audit of the Milwaukee County Child Welfare system was completed by state auditors at the direction of the Joint Legislative Audit Committee. The audit found almost $700,000 of questionable and unallowable costs.

The Child Welfare system had 153 full-time employees in June 2005, while outside contractors had about 500 staff members to provide the bulk of the services. From January 2001 through June 2005, the program spent a total of $493.7 million. In 2004 alone, program expenditures totaled $103 million.

The costs charged to the program by nine contractors in 2004 were tested by auditors. The auditors found $677,694 in unallowable and questionable costs charged by six of the contractors.

1,409 transactions totaling $2.8 million were tested, with selection for testing based upon the size of the transaction and the vendor involved. The unallowable and questionable costs total $136,090, plus a duplicate payment to a contractor in the amount of $541,604.

The questionable costs include the following:

  • items not supported with receipts ($1,025)
  • a penalty charged by a telecommunications company for early termination of a contract ($3,085)
  • bank fees ($5,789)
  • an excessive severance package for an executive ($46,214)
  • legal fees unrelated to child welfare programs ($32,971)
  • promotional items distributed to employees, such as pens, mugs, jackets, etc. ($6,253)
  • gift cards given to employees or with no receipts ($12,670)
  • ….and more

In case you didn’t do the math, $136,090 in inappropriate charges (excluding the larger amount as we’ll assume it was a mistake) represents 4.9% of the $2.8 million in transactions that were tested. Apply that to just the $103 million spent by the Child Welfare system in 2004, and you’ve got an estimated $5 million of (fraud?) problems per year.

Read the full text of the audit.

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