Table 1

In Michigan, children are removed from their natural homes and brought under the care of the State only after a series of legal steps have been taken to ascertain what is best for a child. If DSS and court officers determine that the needs of the child cam best be met by removing the child from his or her natural home, the child will be assigned to a setting where protection, oversight and counseling cam be best provided.[5]

When a decision has been made to remove a child from his or her home, DSS has the authority to exercise several options: 1) regular foster care; 2) specialized foster care; or 3) institutional care. Regular foster care covers placement in a family foster care home of a child who, in the judgment of DSS, does mot require intensive services by either the foster family or the supervising agency. Specialized foster care is for children with more serious adjustment problems who are judged to need intensive intervention short of what would be provided in the more costly and restrictive institutional care setting.

...the private child and family services agencies were responsible for 73% of the children in specialized foster care. In all, private agencies supervised 65.6% of the 11,252 state neglect/abuse wards in Fiscal Year 1990-91.

In both types of foster care, the child and the foster family are serviced by a professional caseworker. This caseworker may be am employee of DSS or a private foster care agency. DSS has administratively defined "specialized foster care" so that it applies only to specialized care that is provided by private child-placing agencies. Amy care provided through direct DSS casework service is classified by DSS as "regular foster care," even if the child is receiving specialized services and the foster family is being compensated at the specialized care rate.[6]

When the needs of the child indicate that placement in a foster home rather than am institutional setting is appropriate, DSS cam either assign the child to a local DSS case-worker or to a private child-placing agency. Except in the Family Assignment System in Wayne County, where foster care cases are assigned on a rotating, random basis to participating private agencies and DSS, the local DSS office has complete power to exercise its own discretion regarding assignment.

Private child-placing agencies which administer regular and specialized foster care receive daily reimbursement rates for each child in their care as specified by DSS under terms of a contract. The rate pays for the casework services of the private agency and is separate from the compensation paid to the foster care family.[7] These rates are determined by DSS based, in large part, on the agency's cost of providing the service.

In setting the rates, DSS monitors and processes private agency fiscal reports and communicates standards and guidelines for rates through its Cost Schedule Instruction Manual Bulletin. Reimbursement rates are established and paid only after cost figures have been audited and verified, maximum number of days' care have been established, and adjustment of costs to reflect price level changes have been determined. (Michigan standards and guidelines closely mirror federal standards, promulgated by Office of Management and Budget for U.S. government contracts with private agencies through OMB Circular A-122.[8] The federal standards are a primary addendum to the state bulletin.)

To avoid excessive rate increases, DSS may limit growth of daily payment rates. DSS also reserves the right to monitor the accumulation of large amounts of cash and other liquid assets by providers to assure that rate increase requests from private agencies are not the result of "having used their cash reserves to increase program expenditures substantially through the use of large reserves of cash or other liquid assets without prior contractual agreement with DSS."[9] This mechanism assures that requests for rate increases represent only necessary reimbursement for legitimate services.

Private agencies have been an active part of Michigan's child care system for many years. Through contracts, DSS has taken advantage of the skills which these agencies have to offer. In fact, state law obligates DSS to purchase foster care services from private agencies to meet children's needs unless "licensed and caring institutions or placement agencies are not available" or there is a religious conflict.[10]

Table 1 indicates that in Fiscal Year (FY) 1990-91, 63% of children in regular foster care were managed be caseworkers in the private agency sector, and 37% by DSS public sector caseworkers. In addition, the private child and family services agencies were responsible for 73% of the children in specialized foster care. In all, private agencies supervised 65.6% of the 11,252 state neglect/abuse wards in Fiscal Year 1990-91.

The share of state wards placed in foster care arrangements supervised by private agency caseworkers grew dramatically during the decade from 1981 to 1991. In 1981, 44% of these children were served by private caseworkers. The decade also saw a 200% increase in the number of children removed from their natural homes due to abuse and neglect. The number of children supervised by DSS employees remained static, while the number of children supervised by private sector caseworkers increased by more than 62%.[11]

After reaching its highest point at 11,310 in April, 1992, the number of children in foster care for neglect and abuse subsequently declined slightly every month for the next nine months. In January, 1993, 10,459 children were in out-of-home placements for reasons of neglect and abuse.[12] This downward trend continues, partially as the result of the family preservation initiatives discussed in Section V below.