Privatization in Practice: Case Studies of Contracting for TANF Case Management. Financial Integrity

03/01/2003

Public agencies monitor contractors finances to determine whether they bill for appropriate services and properly administer funding for subcontractors or client supportive service payments. Scrutiny is necessary not only to confirm that contractors are spending public funds on allowable expenses, but also to alert public agencies about possible weaknesses in the management of provider operations.

At least two sites  Wisconsin and Lower Rio Grande Valley  have had to address problems related to contractor finances. The Wisconsin Legislative Audit Bureau exposed charges for disallowable costs made by two contractors. These included staff time spent on developing proposals for work in other states, entertainment expenses, and donations to nonprofit organizations (Wisconsin Legislative Audit Bureau 2001). In Lower Rio Grande Valley, workforce board employees discovered fiscal negligence on the part of a former contractor when they learned it was delaying supportive service payments to clients due to cash shortfalls.

Financial audits are the main way public agencies verify contractors fiscal integrity. Some welfare agencies provide specific guidelines for financial management procedures and standards and use monitoring visits to confirm that required procedures are in place. Ongoing financial control also occurs as public agencies review invoices submitted by contractors. Information from study sites points to the importance of providing clear and comprehensive guidelines on financial management, and using multiple approaches for monitoring, as doing so increases the likelihood of identifying problems early.

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