Bad Foster Mama

I have been taking care of a 3 year old little boy for about 2 months now. The issue I have is with his "Foster Mother"( he is her great nephew) she will bring him in the same clothes day after day. She will keep him in them for about 3 to 4 days at a time. Clearly unwashed. The first week I didn't talk to her about it because I figured there had to be some personal reason why and I didn't want to start our relationship off with me jumping to conclusions. Well, this has been happening week after week. I talked to her about it and she told me that she didn't want to "SPOIL HIM" I almost fell over in shock. She is a dirty person herself and has strange views on parenting that I find odd.
I'm not sure if this behavior is enough to contact child services, but It scares me to think what will happen to him "in the system" if I do. I have been washing his clothes myself and have sent him home in clothes that my sons have grown out of. She gives them back and says Its spoiling him. He is the sweetest lil boy and he has stolen my heart in just this short time. He is with me 5 days a week from 4 am till 6 pm so with my help contrary to what I think I should do I'm hoping that I can make a difference in his life.
Am I doing the right thing I wonder?