PA Child Care disputes state audit process

WILKES-BARRE – A state audit of the PA Child Care juvenile detention center was based on incomplete information that led to a “multitude of inaccuracies” and faulty conclusions regarding the profit the center’s owners earned, according to a written response to the audit.

Saying the audit process was “fraught with dispute and controversy from the outset,” the 22-page response offers a stinging rebuke to the audit methods employed by the state Department of Public Welfare. It also questions the impartiality of department employees involved with the probe.

“Much of this conflict has resulted from mistaken stances at the outset of the process and the refusal to adjust those stances through negotiations,” the response says. “As the parties have grown rooted in steadfast and adverse positions, the ability to listen, the ability to communicate and to objectively reflect has been lost.”

The document was released to the media on Thursday by Daniel Fee, the owner of a public relations firm hired by PA Child Care owners Robert J. Powell and Gregory Zappala to respond to what they contend is inaccurate information regarding the center’s lease with Luzerne County.

Luzerne County’s majority commissioners in 2004 signed a 20-year, $58 million contract to lease the facility.

The county on Wednesday said it may terminate the lease because DPW has threatened to withhold $2 million in funding based on its belief the center’s owners are making an excessive profit.

“You are only hearing one side. We want to provide what we believe are the true facts,” Fee said.

The facts, according to the center’s response, are that DPW based its analysis on incomplete data that led auditors to wrongly conclude the owners reaped a profit of $1.2 million from sales of $4 million in services in 2003.

The response says the profit was less – although it doesn’t specify how much less. The problem, the response says, is DPW did not take into account all expenses, including debt service and administrative, insurance, maintenance and construction management costs incurred by the center.

The report acknowledges PA Child Care did not provide all that information to DPW, but says that was because the department refused to provide adequate assurances that propriety information would not be publicly disseminated.

The report faults DPW for allowing its staff to release preliminary audit information to former county Controller Stephen Flood and then failing to prohibit Flood from releasing that information to The Times Leader, which printed a story in December 2004 detailing the findings.

“PACC expressed its desire to have the information maintained by the department confidentially in light of the repeated public disclosures of PACC’s internal information ... (but) no agreement could be reached,” the response says.

The response also takes issue with DPW’s claims that the daily rate PA Child Care charged prior to turning the facility over to the county was too high.

Luzerne County first began to utilize the center in 2003. At the time, it was staffed and operated by PA Child Care, which charged the county a daily rate for each juvenile housed there.

The report notes the daily rate ranged from $268 to $315 in 2003 based on the type treatment a youth received. That was less than what was charged at some state-run facilities, the report says.