Collaboration in Civic Spheres

Auditor estimates $73 million in WA childcare overpayments

by Matt Rosenberg October 5th, 2012

Almost one in four federal and state dollars spent on Working Connections program child care subsidies in Washington state during Fiscal Year 2011 were overpayments, according to a new report from the office of Washington State Auditor Brian Sonntag. State agencies in charge didn’t agree with the exact estimates but acknowledged that “the exiting system is not working as efficiently or effectively as we want it to or as it should.” They are to report to the legislature in December on contractor proposals for a new tracking system to improve accountability.

Following up on a critical September 2011 probe into the same problem, the auditor’s office did a follow-up report for the new audit, based on a statistical sampling to gauge the extent of overpayments that occurred as part of the $283 million paid for Working Connections childcare subsidies in the state during Fiscal 2011, from July 1, 2010 through June 30, 2011.

The audit found $73.9 million in estimated overpayments, which under state regulations occur when child care providers either don’t respond to requests for supporting documentation, or when they receive payment in excess of the amount for which they’re permitted to bill. Another $34.9 million was classified as “questioned” expenses for child care subsidies under Working Connections, meaning parent signatures on attendance records were either invalid or missing, or records were doctored or looked to have been all filled out at the same time.

The estimates were based on a sampling of 153 Washington state child care providers who were asked by the auditor’s office to convey copies of attendance records supporting all payments they received in Fiscal Year 2011. The results were extrapolated under a statistical model to the broader statewide pool of 18,300 providers of subsidized child care, leading to the estimates of overpayments and questioned payments.

Working Connections provides childcare subsidies to eligible lower-income families for parents who are working or enrolled in job training or education programs. Childcare providers in Washington are licensed by the Department of Early Learning. DEL and the Department of Social and Health Services together oversee the delivery of child care subsidies to providers on behalf of eligible families. The funds come from the U.S. government and the state of Washington.

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The earlier, 2011 audit by Sonntag’s office found the two agencies: didn’t do a good job of pinpointing providers who failed to follow billing rules; that the agencies reconciled attendance to payments less than one percent of the time; and that DSHS used random samples to decide what payments to scrutinize, instead of a more systematic “risk-based approach.”

In a written response appended to the current audit, DSHS Secretary Robin Arnold-Williams and DEL Director Elizabeth Hyde stressed that failure by some providers to respond to auditors’ requests for attendance records doesn’t necessarily equate with overpayments. They conceded though, that “the exiting system is not working as efficiently or effectively as we want it to or as it should.” The long-term solution is “an electronic subsidy system that will track attendance and improve internal controls,” and it was funded by the legislature in 2012, they wrote.

The audit notes that the agencies in December 2011 recommended to the legislature that they begin looking at shifting from DSHS to DEL the delivery of child care subsidies, and also evaluate and explore the feasibility of competitive, performance-based contracting.” DEL is to report to the legislature this December on its current evaluations of proposals from contractors for a new childcare subsidy tracking system.


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