Seven months after a state audit flagged an estimated $37 million in questioned child care subsidy costs, Washington’s Department of Children, Youth and Familie
Seven months after a state audit flagged an estimated $37 million in questioned child care subsidy costs, Washington’s Department of Children, Youth and Families is preparing to roll out new billing guidelines aimed at better matching taxpayer payments to the care children actually receive.
The change is not a formal recommendation from auditors, but it targets a key problem identified in the audit: payments that did not align with attendance records.
The audit, released in March, found missing attendance records and some overbilling, exposing broader weaknesses in DCYF’s system for verifying child care subsidy payments.
State Auditor Pat McCarthy described the issue in a March interview: “Well, I think it’s oversight and its internal controls in particular. So when they are providing the funding, they have a control in place to make sure that they can verify that those controls are accurate.”
Under the new rules, beginning this fall, child care center providers will be paid more closely based on attendance rather than enrollment. The change will apply to licensed family homes as well, but not until 2027.
The new guideline limits what providers can claim when attendance is low. It is triggered by Substitute House Bill 2689, which passed in April and is intended to better protect taxpayer dollars. However, it is not the electronic real-time verification system auditors discussed.
State auditors are now reviewing DCYF’s progress on recommended fixes as part of the annual statewide audit. After the findings, DCYF vowed to create a corrective action plan, but the agency has not yet responded to a request for an update on that plan.
Since the audit, DCYF has said it will need additional resources to update its prepayment verification systems and hire more staff to review payments in order to “reduce and resolve identified issues fully.”
The agency is also working to recoup overpayments. The state audit sampled payments for 59 child care providers, and 14 payments totaling $6,123 were questioned. Auditors extrapolated that number to estimate $37 million in questioned costs statewide.
PREVIOUSLY | DCYF says no reportable fraud linked to state audit
When asked about reimbursements for questioned payments, a DCYF spokesperson said, “DCYF has written overpayments for the questioned payments and has submitted them to the Office of Financial Recovery to recoup the money.”
Auditors emphasized the issue was poor oversight, not fraud. “I can tell you that our audit did not conclude that fraud occurred,” McCarthy said during the March interview.
The changes come amid heightened awareness about potential day care fraud nationwide. Last week, federal authorities alleged $10 million in child care payment fraud in California during a news conference. “Today the Department of Justice and our partners are announcing 12 arrests and charges in 'Operation Cradle to Grift,’ a fraud investigation that has so far uncovered 12 ghost daycares in the San Diego area,” said Colin McDonald, assistant attorney general in the Justice Department’s National Fraud Enforcement Division.
In Washington, the new billing rules take effect Oct. 1 for the October month of services. DCYF said last week it held three webinars for providers regarding the billing changes for child care centers and is updating its training for providers.
In an email, a DCYF spokesperson wrote, “DCYF must implement the laws passed by the Legislature, and this includes Substitute House Bill 2689.
Child care providers will now be paid based on the number of days a child attends, allowable holidays, and professional development days. This also limits the number of absent days a provider may claim.
This will impact providers that participate in subsidy when children attend fewer than 16 days within the month. Providers will need to update their billing practices.”
