2012 HHS audit flagged $16M in improper child care payments to Minnesota

SAINT PAUL, MINNESOTA: A federal audit released over a decade ago found significant problems in how Minnesota administered federal child care funds, identifying millions of dollars in improper payments.

The findings predate the current political and criminal scrutiny facing the state over alleged large-scale fraud in social service programs.

Despite the warnings, Minnesota continued to receive increasing levels of federal funding in subsequent years. The earlier audit is now being cited as evidence that longstanding oversight issues went unaddressed.

Audit findings show questionable payments

The Department of Health and Human Services Office of Inspector General released an audit in July 2016 examining payments made through the Child Care Development Fund during fiscal year 2012.

The report found that 18.91% of all federal child care payments to Minnesota were deemed “improper,” amounting to roughly $16 million in questionable spending.

According to the audit, Minnesota state officials did not provide federal auditors with information on how many providers receiving improper payments had been flagged internally or referred to law enforcement.

The report also found that no providers suspected of wrongdoing were disqualified from receiving additional taxpayer funds.

Auditors noted that the state failed to conduct key safeguards, including checking for multiple providers billing for the same child at the same time and performing on-site visits to sub-recipients.

Nationwide, the audit identified approximately $311 million in improper payments from the Child Care Development Fund, the third-largest federal block grant program.

Minnesota was one of nine states that exceeded the 10% error threshold that triggers enhanced federal oversight, including mandatory on-site compliance reviews.

“The most common reason these States cited for not recovering improper payments was that the overpayments identified in the error rate reviews were due to caseworker or agency error, not to fraud,” the inspector general’s report stated.

It added that given the program’s vulnerability, stronger measures were needed to protect the integrity of child care funding.

Funding growth with declining enrollment

In fiscal year 2015, Minnesota received more than $85.5 million in child care reimbursements through the program.

Applying the same error rate identified in 2012 would place improper payments at more than $16.2 million for that year alone.

A decade later, Minnesota was slated to receive more than $185 million in child care funds, even as reported enrollment dropped by nearly half.

The discrepancy has placed Minnesota at the center of a growing controversy.

Republican state Rep Kristin Robbins said the warning signs were visible for years.

“The red flags are obvious,” Robbins told NewsNation. “It’s multiple services by one provider, and it’s an easier barrier to entry, not a lot of checks on the providers.”

Since Governor Tim Walz took office in 2019, Minnesota has received more than $2.1 billion in Child Care and Development Fund and Temporary Assistance for Needy Families funding alone.