FLORIDA PRIOR TO RECENT COMPUTER THEFT WARNING SIGNS AT CHILDNET WENT IGNORED Warning signs at ChildNet ignored - 04/28/2007 - MiamiHerald.com:

BROWARD
Warning signs at ChildNet ignored

Documents show that ChildNet managers had been warned about security lapses months before a computer theft brought in the FBI

As problems mounted this month in Broward's private foster care agency, its board of directors took quick action. They axed three top executives, improved computer security and fired two workers with felony records.

But state records show there were signs ChildNet was in trouble long before this month's scandal involving theft and fraud.

And the board, including some of Broward's most prominent and experienced philanthropists and child advocates, apparently ignored red flags.

Audits, monitoring reports and corrective action plans over the past four years show:

• The agency was running a $500,000 deficit that threatened to cancel small raises for its 450 employees.

• It had been warned about potential computer security lapses and lax inventory control.

• For nearly three years, the state Department of Children & Families and independent monitors repeatedly complained that some ChildNet employees hadn't undergone proper background checks.

An elite board with oversight of $65 million annually and the welfare of more than 1,000 children should have been paying closer attention, said DCF Chief Bob Butterworth, who scolded board members and criticized ChildNet's now-fired CEO Peter Balitsaris in front of the Senate Children and Families Committee this week.

As some members said to me, `We were honored to be on the board -- we still are -- but maybe we didn't take it as seriously as we did before,' '' Butterworth said. ``I think it's a wake-up call for all of us in nonprofits.''

The FBI and Fort Lauderdale police are investigating accusations of theft and financial mismanagement.

On Monday, DCF gave ChildNet 30 days to address problems, including improving computer security and verifying employee background checks.

Board members say they're ready for a new era of cooperation with DCF. Board Chairman Howard Bakalar said they've begun interviewing candidates for the crucial job of chief financial officer after firing Peter Greenhough.

''I think things are getting better and easier, and we're seeing a path here,'' Bakalar said.

Boards have an obligation to ask probing questions of the managers they hire to run day-to-duty operations, said Broward County Commissioner Lois Wexler.

ChildNet especially needs skilled and well-connected fundraisers, she said, but may have lacked people with the courage to question management.

''You have a lot of people who serve on boards who are political people, connected people, people who are able to generate money, as well as focus on the agency. That's important,'' Wexler said. ``However, balancing the board is important, too. There's a mix necessary for success.''

ChildNet's board met once a month. Their duties included reviewing ChildNet's financial statements. The board's finance committee also held a monthly teleconference to review spending. Members included Bakalar, John Hart and Emilio Benitez, who resigned to take a seat on the Children's Services Council.

An April 20 state assessment showed ChildNet is facing a $500,000 deficit, mostly due to more medically needy children in costlier residential group care. Such placement may be less effective than placing children with families. But ChildNet didn't have enough foster families.

ChildNet also didn't get state money to cover employees' promised 3 percent raises.

''I think the board relied on information from the administration, and was not as engaged as they probably should have been in terms of questioning and making sure that everything was done in a proper manner,'' said state Sen. Nan Rich, a member of the Senate committee that oversees funding for agencies such as ChildNet.

Meanwhile, board members were warned about computer problems, which exploded April 11 when ChildNet fired two employees suspected of stealing a laptop containing private data on as many as 12,000 potential foster parents.

The agency's fiscal monitors, Abel and Associates, suggested in November 2006 that ChildNet ''review common drive files and restrict access as appropriate.'' ChildNet elected not to do it, according to the Abel report.

One theft suspect had a criminal background, part of his file but overlooked. Another suspect in the theft of $6000 in Wal-Mart gift cards also had a criminal background.

The agency was repeatedly told to improve background checks on workers.

''This is the third year that reference checks have been called to your attention . . . reference checks have not been completed or done timely for those who are in critical positions,'' DCF's contract managers warned in June 16 letter.

The board's biggest failing may have been its reluctance to replace Balitsaris, its combative CEO.

''Peter respected his own opinions more so than the opinions of others,'' said board member John Hart, a former Broward County commissioner.

Balitsaris' belligerence hurt ChildNet, said Jack Moss, Broward's chief DCF official. ''Management was arrogant and alienating people who could have supported the agency,'' Moss said, referring to Butterworth and Rich, among others.

Balitsaris and Moss were in a bitter dispute over how to monitor performance. Balitsaris argued that DCF's standards weren't an accurate reflection of the group's work.

Treasurer Joey Epstein said ChildNet's scope and size require a CEO with the strength to run things without a micromanaging board.

''Do you entrust your chief executive officer to run the day-to-day to business? Yes,'' said Epstein, an accountant who also serves on the Legal Aid and the Greater Fort Lauderdale Chamber of Commerce boards. ``Does the board want to know every day-to-day thing? No, that's not our job.''

As ChildNet has scrambled to reform, interim chief executive Larry Rein offered emotional apologies for the problems and assurances that kids were not neglected.

''The next crucial step starting right now is regaining the support and trust of this community,'' said Rein, who had worked as a ChildNet manager.

ChildNet is seeking more families to care for kids with medical problems.

Moss said last week he believes ChildNet has the strength and will to move beyond its problems.

''With the changes in leadership, there's been a significant change in the culture of the organization, and they're much more open to working collaboratively,'' Moss said.