Audit Shows Child Care Program Open to Fraud

March 4th, 2010 by investigates Categories: Featured, Reports One Response
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Denver Human Services has no supporting documentation for $2.8 million expense

Thursday, March 4th, 2010
by Todd Shepherd

A new audit shows a child care program subsidized with state and federal dollars is plainly open to fraud and abuse. The report from the office of the state auditor provides examples of how both the child care providers, and the families who access their services, are able to collect monies and services outside the rules of the program, perhaps even illegally.

The CCCAP program (Colorado Child Care Assistance Program) is designed to provide financial assistance to low-income families who need child care in order for the adults in the family to maintain employment. Under the program, families who qualify can take approved children to approved child-care providers, and a mix of federal, state, county and parent monies is used to reimburse the provider.

The audit randomly sampled 40 case files of families receiving assistance from CCCAP, and found three of those files lacked documentation supporting the families eligibility, noting:

  • The first case file lacked nearly all the required eligibility documents, including those necessary to verify the household income, the family’s county of residence, and the eligible activities engaged in by the parents. This family received $10,753 in child care subsidies during Fiscal Year 2009.
  • The second case file lacked evidence that the children receiving subsidized care were U.S. citizens. This family received $227 in child care subsidies during Fiscal Year 2009.
  • The third case file lacked documentation of the household income and the U.S. citizenship for the children receiving care. This family received $480 in child care subsidies during Fiscal Year 2009.
  • In all three cases, Department and county officials were unable to locate the documentation following our discussions with them.

    The audit also noted that a lack of administrative controls created possibilities for fraud, stating, “Over-authorizing care (i.e. authorizing more care than is justified by the parents’ schedules) increases the opportunity for fraud or abuse associated with the program.” A previous audit from 2008 found that in 38 percent of cases examined, “care was not authorized upon the clients’ needs, as reflected by their schedules.” Furthermore, rules designed in 2008 to prevent over-authorization of care had not been implemented by the time the most recent audit was performed.

    Another avenue of potential fraud resulted from the administering counties’ ability to “override” eligibility requirements. Much like the previous example, multiple problems were found with the “override” mechanism in a 2008 audit, and again, the proposed solutions were not implemented by the time the current audit (December 2009) was performed. “The lack of adequate controls over CCCAP eligibility overrides significantly increases the risk of fraud, errors, and irregularities that could result in ineligible families’ improperly receiving CCCAP subsidies…” the audit notes on pg. 16.

    The audit also criticized Denver County’s CCCAP administration, noting that in 2008 state auditors tested documentation on several “quality initiative [spending programs].” These quality initiatives are broadly designed to allow the county to execute a capital spending project to improve the quality and availability of child care in the state. The audit singled out a quality initiative project from Denver, noting, “Denver County could not provide supporting documentation for a transaction totaling about $2.8 million.” Based on this finding, the state auditor recommended that the Denver City and County auditor perform an audit on its own for the particular spending related to the “quality initiative.” No such audit has been undertaken.

    The state’s Department of Human Services (DHS) says counties have charged day care providers with fraud 11 times since 2000. More than 2,500 day care provider payment “adjustments” have been successfully undertaken by the counties since 2000, resulting in just over $200,000 being returned to the government from the providers. Also, more than 3,300 payment “recoveries” have been established against individuals/families for what DHS calls “household errors.”

    Liz McDonough, spokeswoman for DHS, said the department “is very cognizant of its responsibility to ensure that public funds are spent appropriately,” and added that “[n]one of the findings [of the state auditor] were a surprise, and in fact, State and county staff have been working hard over the last 6-7 years to improve controls in the system.” The Division of Child Care has also proposed a new rule set that would allow counties to disqualify clients and providers from the program for committing fraud, or for intentionally violating program rules. (Click here to read all the questions posed to DHS, and Ms. McDonough’s full responses).

    In early 2009, the Milwaukee Journal Sentinel completed a four-month investigation into an almost-identical child care program in Wisconsin. With only “limited access to [individual] cases, the Journal-Sentinel was able to identify almost $750,000 in suspicious child-care disbursements.” The investigation launched a public outcry, forcing state investigators to look deeper at the “Wisconsin Shares” program. Eventually, state regulators identified $13.7 million in overpayments, some of which were payments for child care services that were never provided. One hundred thirty day-care providers lost much of their public funding, and roughly a dozen providers were linked to drug operations. One provider is now defending herself on charges she defrauded the program to the tune of $3 million, allowing her to purchase a lavish lifestyle including a Jaguar, and a home with an indoor swimming pool.

    Update: Investigative reporter Kathy Hoekstra with the Mackinac Center for Public Policy forwarded this blistering audit of Michigan’s child care subsidy program in which auditors discovered roughly $200 million in improper or fraudulent payments.

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    1. [...] Investigates previously reported that a small audit into CCCAP showed that the program was open to fraud and [...]