Madison - The state Department of Justice now has a hand in the multimillion-dollar case of alleged fraud by a Dane County foster child agency - a sign of a possible criminal investigation.
Speaking to a Senate committee Thursday, state Children and Families Secretary Eloise Anderson would say only that her agency is in touch with Department of Justice officials.
"They're working with us and communicating with us," Anderson said.
A spokeswoman for the Department of Justice confirmed that but also declined to say whether there was a criminal investigation.
At the committee, Anderson took her first public questions on an audit by her agency that found that Community Care Resources of Middleton racked up $6.1 million in inappropriate charges and profits - mostly for the personal use of owners Daniel and Mary Simon - from 2009 to 2011.
In the hearing, Anderson and agency staff told members of the Senate Committee on Health and Human Services that the state's move to revoke Community Care's license came only after counties had complained about not getting answers from the firm and after some of those counties had stopped using Community Care. The state, which runs foster child programs in Milwaukee County, also stopped using the firm.
Anderson said the agency intended to audit more of Community Care's financials for evidence of impropriety, including some years before 2009 and its 2012 finances, which become available in July.
The completed state audit found that the Simons used the money from taxpayers meant to help vulnerable children to finance homes and renovations, luxury cars, boats and trips around the country.
The Simons are appealing the state's revocation of their license and findings by the state that their total salaries of more than $1 million over three years were inflated. In a letter given to the committee, the Simons' attorney, David Schwartz, said his clients were innocent.
Community Care "would like nothing more than the opportunity to attend the hearing and clear its name," Schwartz wrote in the letter. "Unfortunately, due to the ongoing revocation proceeding and litigation, based upon our advice, CCR cannot attend."
Schwartz did not return a phone call seeking comment.
Besides criminal cases, the Department of Justice does some other legal tasks for state agencies with similar problems to those facing the Department of Children and Families, including helping them collect money that is owed to the state.
As a result of new audits being conducted by the Department of Children and Families, Anderson and her staff told the senators that they have revoked the licenses of three other foster child agencies over the past year.
In the previous legislative session, the agency requested and received from lawmakers for the first time the ability to do in-depth audits of agencies for foster children that could detect fraud. In the current state budget, the agency received more audit staff.
"I look at this as a good news-bad news. The good news is that we as a Legislature gave you tools to uncover this. The bad news is how many other agencies are defrauding the government?" asked Sen. Leah Vukmir (R-Wauwatosa), the committee chair who called for the hearing.
State officials said they didn't expect any other problems as great as those with Community Care. But they acknowledged it will still take the Department of Children and Families three to five years to audit all 300 of the foster child agencies in the state.
Anderson said the fraud went undetected for so long because Community Care dealt almost exclusively directly with counties and in some rural counties was the only option officials had for placing high-need foster children.
Until recently, the state didn't collect information on rates counties were paying providers for that service. As a result, the rates varied widely and some counties had especially high costs, Anderson said.
Since agencies were being paid a set rate and were not being reimbursed for expenses, there also was not much information available on what the counties were spending money on, she said.
The state is now setting the rates, which have fallen sharply, and state officials also are looking into how private agencies are spending the money they receive, Anderson said. She told senators she would report back on further ways the state could prevent fraud in its programs.