County considers disbanding child welfare donation unit after audit finds toys, funds unused and mismanaged

Los Angeles County is reviewing how best to handle child welfare donations after an audit found that thousands of toys weren’t given out, inappropriate payments were made and fundraising efforts were largely ineffective.

The Board of Supervisors will consider a motion Tuesday to explore alternatives to the Children’s Trust Fund Unit, an arm of the Department of Children and Family Services that is charged with raising money for foster kids’ needs that aren’t covered by other sources. The trust fund has helped provide foster children with holiday gifts, quinceañera dresses and trips to summer camp, among other things.

The county conducted an audit of the trust fund unit at the request of department management, who had concerns about whether it generated enough revenue to justify its staffing costs. The audit’s findings, released last week, show that the unit lacked oversight and disregarded internal controls, leading to unaccounted-for and misspent donations.

In 2015, for example, the unit paid out $336,000 for kids to attend summer camp, but most camps weren’t accredited or licensed, and every camp received the same rate per child, regardless of the camp’s duration or the services it offered, the report said. The unit also made multiple payments for the same children, for children who did not attend and for children who were ineligible.

The year prior, during the “Spark of Love” toy drive, the unit received at least 44,000 toys worth a total of $440,000, but some 7,000 of those toys languished in a warehouse a year later, the audit found. Another 2,500 toys couldn’t be accounted for and 12,000 went to organizations without the required tax-exempt status, whereas eligible nonprofits and a county park were denied the items. Similarly, about a quarter of $140,000 in event tickets — to ballgames and theme parks, for example — went missing or were issued to outside entities instead of to foster kids.

“The Children’s Trust Fund is needed to enhance the lives of L.A.’s children in foster care,” said Jennifer Rexroad, a foster parent and executive director of the California Alliance of Caregivers, an advocacy group. “It would be a tragedy if children suffered the loss of donations and special opportunities meant for them.”

Last week’s report is the latest in a series of audits that have documented poor financial management at Children and Family Services. Last year a review of the department’s purchasing and payment procedures found that problems with record-keeping, inappropriate purchases and poor gift card controls had persisted since 2007, when they were found to have cost the department more than $1 million. A 2015 review found the department had spent hundreds of thousands of dollars on overly expensive office supplies.

Brandon Nichols, the acting director of Children and Family Services, said in an interview that he was “horribly disappointed” by what the report on the trust fund unit revealed. Of the apparent pattern in recent years, Nichols acknowledged that the department’s attention had drifted away from internal controls.

“Child safety is such an overarching concern,” he said. “That’s what had gotten most of the attention.”

Nichols said the department, which was informed of some of the findings while the audit was underway, has already taken steps to correct them. The unit’s manager resigned, and another staff member was moved to a role that doesn’t involve fiscal duties.

In addition, Nichols said, the department has been working with the county’s Internal Services Department to improve how it buys and pays for goods and services, and training staff on the importance of record-keeping and public accountability.

Aside from documenting poor management of donations, the audit questioned whether the trust fund unit requires dedicated full-time staff, noting that it “only generates minimal income relative to [its] size.”

Records showed the unit raised approximately $17,000, $22,000 and $7,000 in fiscal years 2012-13, 2013-14 and 2014-15, respectively. But it spent more than $400,000 on personnel costs in each of those years. (The audit noted “substantial deficiencies” in record-keeping; additional money may have been raised but not recorded.)

In a letter to the board, Auditor-Controller John Naimo recommended that the department consider disbanding the unit.

Nichols said Children and Family Services is exploring that idea and looking for another place to house the unit’s functions. Options could include a standalone nonprofit organization or another body within the county, such as the Office of Child Protection’s center for public-private partnerships, he said.

But Tuesday’s motion, introduced by Supervisor Sheila Kuehl, directs the county’s chief executive office to study other county departments and come up with options to fix the unit, rather than immediately dissolve it.

“Many county departments operate similar funds with strong fiscal controls,” Kuehl said in a statement. “This motion will allow the board to consider other existing structures that may provide the accountability we need to continue to operate the Children’s Trust Fund Unit.”

Rexroad, of the caregiver alliance, said counties across the state have various ways of raising money for foster kids, but donors prize organizations where their dollars will count the most.

“Many people want to help foster children but can’t foster, and instead they give money,” she said. “It’s important...to have a place where people can make monetary and other donations that eventually make it to benefit the child.”

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nina.agrawal@latimes.com

Twitter: @AgrawalNina