Dozens of fraud investigations ongoing in state daycare program

The Ohio Department of Job and Family Services has opened dozens of fraud investigations of taxpayer-funded daycare centers following an overhaul launched earlier this year meant to detect abuse in the state program.

There are 64 open investigations in 21 counties of state-funded daycare centers, according to information from ODJFS obtained through a public records request. That includes seven investigations in Montgomery County, nine in Hamilton County and one in Butler County.

Those daycare centers, operated both out of homes and small businesses, are run by private providers that are reimbursed by the state for watching children of low-income, working parents. In January, the state spent $6 million to switch to a new billing method meant to try to weed out dishonest daycare centers billing for nonexistent childcare. In March, ODJFS announced the creation of an anti-fraud unit.

Ben Johnson, spokesman for ODJFS, declined to provide additional information about the 64 open investigations, other than to say they are ongoing.

“Some of them will most likely result in more serious action,” Johnson said. “In at least a couple cases, local law enforcement is involved.”

The number of fraud investigations is in stark contrast to 2011. When the Dayton Daily News contacted the state last year for a story about the program, state officials said they weren’t aware of any documented instances of child care fraud.

“It’s like night and day,” Joel Potts, executive director of the Ohio Job and Family Services county directors association, said of the state’s attitude toward preventing fraud in the program. He said publicity about vulnerabilities in the program and fraud charges for child care providers in Lima and Columbus may have jolted the state into taking the issue more seriously.

“They’re (the state) finally starting to see what we’ve been saying all along: Yhere are certainly opportunities for abuse in the system, and the few are making it bad for the many,” Potts said.

Federal funding has been available since the welfare-to-work initiatives of the 1990s to subsidize day care costs for low-income working parents. The program in 2010 paid $600 million for Ohio families to day care providers.

In January, the state brought online an electronic billing system that replaced an old paper-billing method.

Here’s how the new billing system works: Each child is assigned a unique identification card, which their parent or guardian uses to swipe them in and out at state-licensed child care centers. That information — showing when the child was in day care down to the minute — is sent to the state, which in turn sends money to the providers for the number of hours of care provided.

Data analysts also pore over the billing activity for suspicious patterns — for instance, children who check in and out at the exact same time every day.

Before January, parents filled out paper time sheets that documented when their children were at a center. Those time sheets were largely based on the honor system, and critics said they were easy for dishonest providers and parents to fake.

Since making the billing changeover, the state has launched at least 80 investigations of possible fraud, either in response to allegations from the public or as a result of data analysis.

Of those, 16 were closed, including one in Montgomery County, after state officials determined fraud wasn’t taking place. The most common allegations that led to the investigations were reports of daycare providers who were improperly keeping parents’ swipe cards and suspicious swipe card activity.

The investigations for all of the closed cases were ended a few days after they were opened. On the other hand, the open cases provided to this newspaper have been open for weeks or months, with one in Montgomery County dating back to April.

Potts didn’t have direct knowledge of the open cases, but said: “I would assume … if it’s not dismissed quickly, that means they’ve looked at it and said there’s something more here.”

There have been two fraud-related prosecutions of taxpayer-funded daycare centers in Ohio this year.

Last February, the owner of a home-based daycare center in Columbus was charged with stealing more than $18,000 from the program for delivering non-existent child care. A trial is scheduled for Dec. 10, according to Franklin County court records.

And in July, the owner of two child care centers in Lima was convicted of racketeering and theft among other charges for billing the government for providing $27,000 worth of non-existent care for 17 children. Another 14 people, including parents and child care center workers, have since pleaded guilty to various crimes for their roles in the scheme.

Besides cracking down on fraud and abuse, the new swipe card system is supposed to save money by shifting billing responsibilities from counties to the state and streamlining the process. That hasn’t happened yet, at least according to Erin Thomas-Brodine, budget office supervisor for the Clark County Department of Job and Family Services.

“We’re all saying it should (save money), but it hasn’t happened yet,” Thomas-Brodine said. “We’re almost 11 months into this …we don’t see our workload decreasing at all.”

In fact, Clark County’s administrative workload has increased, possibly doubling or tripling, she said. This is in part because many parents or guardians fail to bring their swipe cards when they drop off their children, or when they pick them up.

When that happens, the provider basically takes down an IOU, which the county is required to spend time verifying and processing. The bureaucratic process from start to finish to handle these manual claims can take two months, resulting in delayed payments for providers, Thomas-Brodine said.

“It’s putting a lot of burden on the counties and the daycare centers,” she said.

Potts with the state county JFS directors association said he thinks parents will start remembering their cards if daycare providers and counties toughen up.

“We don’t let people go into the grocery store and say, oh, I forgot my EBT (electronic benefits transfer, more commonly known as food stamp) card. Let me just write on a piece of paper that I owe $100 worth of groceries. Just send it to county JFS,” Potts said. “No, that would be insane.”

Johnson with the Ohio Department of Job and Family Services said the state has cut off some daycare providers that refused to switch to the new electronic billing system. Otherwise, the state is working with counties to try to improve the paperwork process, he said.

“We’re pleased with the system, and we like everything we’ve seen so far. But we’re only nine or 10 months in, and there are certainly changes we can make that will make it work even better,” Johnson said.

Staff Writer Josh Sweigart contributed to this story

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