If I got it right it sound like the kids' mom was arrested ... kids' mom turns the kids over to HER mom (grandma) ... officer tells grandma to return the kids or face arrest herself ... officer's wife works for DHS (CPS, HRA ... whatever the sicial service agency is) ... officer and wife get temporary custody - and the payments that come with it.
If so, that's not unusual. In many cases, CPS (or the appropriate service agency) is the only body that can legally place the children if the primary caretaker is arrested. In that case, the person COULD be directed to turn the children over to CPS.
Now, in my county there are very, very few foster homes ... so few, in fact, that we often have to leave children in potentially dangerous environments OR ship them out of county. My wife and I are also foster parents ... why? Because we feel that just arresting mom and dad is not enough, we need to be a part of the overall solution when we can. My guess is that this officer and his wife are in the same boat. So unless there is a specific protocl against it, there would be nothing wrong with it. Heck, I don't have to seize kids to fill my empty beds up ... I have a full house all the time anyway.
Ultimately, there will be court hearings to determine the status of the children ... out here that usually happens about 2 weeks after they are seized if not sooner. Then attorneys are appointed for the children AND the parents, and the arguments are made. In the most recent case, I was the on scene supervisor of a drug raid and I told the officers to take any child present into protective custody if the parent(s) were arrested. Mom was, and I ultimately received the child as a foster child. Was that improper? Nope. Do I receive some remuneration from the county for having the child? Yep.
But, when there are enough foster homes available then I won't feel I have to do it.
In the meantime, Poison, your sister and your mother should wait for the court hearing and make their case then.
Good luck to all. And hopefully whatever happened will NEVER be allowed to happen again ... for the kids' sake.
Carl