A fiscal brief released this week by the city's Independent Budget Office analyzes a decade of direction and spending at the Administration for Children's Services, highlighting a philosophical evolution in the provision of care—and budgetary sinkholes that have unwittingly swallowed potential savings.

The IBO found that many fewer children are placed in foster care than were a decade ago—evidence of the agency's commitment to preventive services, which permit families to remain intact with varying levels of support, over foster care, which had been the norm before the mid-90s.

While more than 34,000 children were in foster care in 2000, fewer than 17,000 were "in the system" in 2010. Children and families receiving preventive services climbed from over 23,000 in 2000 to over 31,000 in 2008—a rise that followed a the steep climb in child-welfare complaints registered with the agency after the 2006 death of Nixmary Brown—but declined to just under 30,000 by 2010.

Advocates, academics and child-welfare experts say that preventive services work to preserve families and crucial relationships, too often placed at risk when a child is removed from the home. It's also true that preventive services cost far less per family (and even less per child, as families may have more than one child at home) than foster care—about $10,000 a year, compared with $49,000 on average for foster care, according to the IBO analysis.

That analysis also shows that bureaucratic issues, like the agency's likely compliance failure that cost the city hundreds of millions in federal funding and a bungled RFP that threw the agency's nonprofit service providers into more than a year of uncertainty, have whittled away at the potential savings accrued when caring for children becomes less expensive.

Prevention over foster care: Better outcomes, but where are savings?

The ACS was created in 1996 by the Giuliani administration, in a gut-level revamp of an inept old model, the Child Welfare Agency, after the murder of 6-year-old Eliza Izquierdo. At that time, ACS head Nicholas Scoppetta said that the agency would focus more on keeping children safe at home than placing kids in foster care. Also at that time, private nonprofit agencies were tapped as the actual providers of most preventive services, which can include everything from home-making support to drug counseling and family therapy, with the agency functioning more as a never-center or conduit than a provider of direct services.

In 2001, ACS reaffirmed this direction with its Renewed Plan of Action, and also committed itself to the practice of reinvesting savings accrued by keeping kids out of foster care back into the agency. While many advocates and the agency itself maintain that millions saved have been plowed back into ACS, IBO analysis shows a significantly different outcome. Essentially, the IBO reports, shortfalls in other budget areas, specifically in Title IV federal dollars, meant that the city had to shore up unplanned-for funding gaps with foster-care savings—and with new city dollars, in hard-fought budget battles.

Foster care spending decreased by 16 percent over the decade, according to the IBO, from $930 million to $782 million. Preventive services spending almost doubled over the same interval, from $117 million in 2000 to $230 million in 2010. (For context, recall that the city spends nearly $20 billion on education each year; that Broadway brings in nearly $10 billion a year—and that Goldman Sachs set aside more than $15 billion for pay and bonuses in 2010, the last year of the decade IBO studied.)

Saying "no" to federal money

In 2006, the city had to scramble to make up for evaporating federal dollars. The funding changes weren't due to spending changes at the federal level—far from it.

IBO reports that ACS, responding to warnings of a possible federal audit, elected to "transfer" most of the children whose care had been funded by federal Title IV-E funds—foster care's largest funding source—out of that program, to avoid scrutiny and a finding of noncompliance, which would inflict significant agency embarrassment and carry a hefty fine. In 2006, the city's share of foster-care funding increased by $100 million—and federal funding fell steeply, from $316 million in 2005 to $175 million.

The change was steep and sharp: In 2005, the city funded 29 percent of foster care, and the feds, 40 percent. By 2008, the ratio had more than flipped: the city paid for 48 percent of foster care, and Title IV dollars made up 17 percent. (By 2010, the balance shifted again, with the city, the state, and the feds paying 32 percent, 43 percent, and 25 percent, respectively.)

The city's standing policy of reinvesting savings from a shrinking foster-care caseload has been scuttled by cutbacks in other funding resources, IBO says: Of $45 million in savings made possible by shifting from foster care to preventive services, $31 million was plowed back into preventive services, according to ACS—yet of that $31 million, $24 million went to stopgap losses in federal Temporary Assistance for Needy Families (TANF) funds in 2003: The funds were essential to support the city's needy families—but spending them meant that only $7 million went to fund new preventive services, the designated target for foster-care savings.

City Limits asked ACS to respond to IBO's assertion that shortfalls in Title IV-E federal dollars resulted from ACS's transfer of questionable cases to avoid a formal audit and public scrutiny.  Spokesman Michael Fagan replied in an email: “As the report details, New York City's foster care census has dropped to record lows. In 2004, there were nearly 19,000 New York City children in foster care; today there are approximately 14,300. There is consensus among child welfare experts that children should remain safely with their families, whenever possible, through the use of quality protective and preventive services. To that end, the City has expanded its funding for preventive programs and these services were base lined in the last budget cycle by Mayor Bloomberg.  ACS has expansions planned for innovative, preventive programs to help families with adolescents in crisis.”

RFP process blamed for instability

Instability of direction and unpredictability in funding for preventive services plagues their provision as well, the IBO reports.

A 2009 Request for Proposals—the device ACS uses to engage and contract with nonprofit service providers—dictated cutbacks of 2,400 preventive "slots" (i.e., families), or about eight percent of the total. Agencies began to scramble to respond by closing out cases, laying off caseworkers, and transferring cases—families with vulnerable children—to other service providers, leading to enormous upheaval in continuity of care.

In January 2010, the Bloomberg Administration cut funding for an additional 600 "slots." Bungled metrics on providers and much controversy prompted ACS to rescind the awards based on its 2009 RFP, sowing additional confusion and doubt among providers. Pushback from the City Council restored most of the eliminated funds—but for 2011 only.

Families, caseworkers and agencies were caught in a costly shuffle of funds, resources, and services—a human confusion made bitterly plain with the death of Marchella Pierce, a medically fragile child released to her mother's care after years in hospitals and rehab, and despite the foster-care placement of her mother's youngest child, an infant, due to the mother's drug habits. While the private agency tasked with Marchella's care bears significant responsibility for the failure to keep her safe, a report by Public Advocate Bill deBlasio's office