"We feel this is a temporary condition," said Bob Hartman, president and CEO at Kansas Children's Service League. "We are financially healthy. This is not a repeat of the Youthville situation."
United Methodist Youthville filed Chapter 11 bankruptcy June 22, owing more than $1 million to subcontractors.
Fearing the Kansas Children's Service League also was headed into a financial hole, several subcontractors alerted the Journal-World to the agency's payment problems.
Sylvia Crawford, executive director at The Villages, a Topeka-based residential program that operates three group homes in Lawrence, said payments once received in 30 days now take about 45 days.
The Lawrence homes care for 34 teen-age boys and girls in foster care who are awaiting adoption. Most are from northeast Kansas. Without The Villages group homes, Crawford said the children would probably be moved to homes farther away from friends and relatives.
"Those 15 days may not sound like much, but for us it's a substantial amount," Crawford said. "We are constantly having to dip into our reserves to address the cash-flow problems caused by the late payments."
Others also have noticed the lapses.
"Our contract with KCSL says we are to be paid within 30 days of the date of billing," said Karen Schectman, executive director of Florence Crittenton Services, a Topeka residential program for girls. "But our payment for services billed on May 1 didn't arrive until July 9th -- that's 39 days late."
State lawmakers were surprised to hear of Kansas Children's Service League's problems.
"Oh, my gosh!" Sen. Sandy Praeger, R-Lawrence, said. "The last thing any of us want to hear is that another contractor is getting into difficulty for trying to do the right thing by Kansas kids."
Praeger said she would support Rep. Brenda Landwehr's demand that all six of the state's child-welfare contractors undergo independent audits.
Landwehr, a Wichita Republican, called for the audits shortly after Youthville filed for bankruptcy. She could not be reached for comment.
Earlier this year, Landwehr and Rep. Rocky Nichols, D-Topeka, introduced a bill that would have required contractors to pay their subcontractors within 30 days. The bill did not pass.
"When I look at this," Nichols said, "I see another glaring example of how the decision to privatize took on doing way too much, way too fast. And when you do that, there are bound to be growing pains.
"But here we are, five years later, and it's still in pain."
Hartman said the problems were temporary and all bills have since been paid.
"All of our bills have been paid," he said. "Some payments were delayed toward the end of the first fiscal year (June 30), but now that we're in the second year of the (adoption) contract, things are much more positive."
Since lawmakers privatized most of the state's child welfare service in 1997, Kansas Children's Service League has had the foster-care contract for an 18-county region that includes Topeka, Manhattan and Salina. It won the statewide adoption contract last year, replacing Lutheran Social services, which later avoided bankruptcy by convincing subcontractors to accept 74 cents on the dollar for outstanding debts.
Hartman pinned the agency's troubles on missed projections within the adoption contract.
"We have experienced higher mental-health costs than were expected, and the numbers of children being referred for adoption are down significantly," he said. "That left us with higher costs and less income."
Both issues, Hartman said, are the subject of annual negotiations with the state Department of Social and Rehabilitation Services.
It's unclear whether the proposed changes will increase the contract's costs.
Hartman declined to comment on the negotiations.
"They're confidential," he said, noting that an agreement is expected by Aug. 1.
SRS spokeswoman Stacey Herman also declined comment.
When Kansas Children's Service League bid on the adoption contract last year, Hartman said he assumed the agency would care for 1,800 or 1,900 children a month.
"We're at 1,540 now," Hartman said. "Referrals have consistently been about 300 fewer than expected."
Fewer referrals, Hartman said, means less income, because SRS payments are tied to the number of children in the system each month.
Under the current contract, SRS pays Kansas Children's Service League $1,426 per month for each child in the adoption system; $2,174 for each child in foster care.
Hartman and Herman attributed the decline in adoption referrals to a change in the contracts that blocks referrals until both parents' rights have been terminated.
In the past, a child often was put up for adoption after their custodial parents' rights were terminated, only to see the process delayed until the non-custodial parent's rights also were terminated.
Though the change was meant to move children through the adoption process quicker, it's also caused fewer children to enter the system.
Hartman said he underestimated the contract's mental health costs because the necessary data "was not readily available."
-- Staff writer Dave Ranney can be reached at 832-7222.