Audit of State Paym en t s to C h i l d Care Providers

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Executive summary3
Audit results..3 Why we did this audit ...6 Whats next?..6

Introduction7
Audit authority, objectives and scope.7 About the Working Connections Child Care program8

Audit results.....13
Objective 1..13 Objective 2..21
Are providers being overpaid for child care services?...13

Do state laws and regulations provide agencies with timely access to child care attendance records?..21

Objective 3.26

What reporting options are available to those wishing to report suspected fraud or improper payments or improper payments made to child care providers? Do the Departments of Social and Health Services and Early Learning effectively evaluate and resolve reported issues?...26

Objective 4.28

Are the Departments of Social and Health Services and Early Learning effectively identifying child care providers who do not comply with billing rules?...28

Appendix A: State agencies responses....31 Appendix B: Audit criteria..35 State Auditors Office contacts...41

E x e c u t i v e
Audit Results

S u m m a r y

We audited the Working Connections Child Care program administered by the Department of Early Learning (DEL) and the Department of Social and Health Services (DSHS). The program helps low-income families pay for child care while they work, look for work, or attend job training as required by WorkFirst, one of the states public assistance programs. The audit had four objectives, which were: 1. 2. 3. Are providers being overpaid for child care services? Do state laws and regulations provide the agencies with timely access to child care attendance records? What reporting options are available for those wishing to report suspected improper payments or fraud related to child care providers? Do the agencies effectively evaluate and resolve reported issues? Are the agencies effectively identifying child care providers that do not comply with program billing rules?

4.

We reconciled daily child care attendance records to paid invoices for 146 providers, as discussed in Objective 1 of this report, and found the program made more than $2.6 million in overpayments to providers. In addition, we questioned the legitimacy of over $241,000 in payments related to conditions also described in Objective 1 of this report. As defined by Washington Administrative Code1 , overpayments for child care occur when a provider: Bills and receives payment for services not provided. Bills and receives payment without attendance records to support the billing. Bills and receives payment for more than they are eligible to bill for. Cares for a child outside their licensed, allowable age range without a waiver.

Washington Administrative Code 170-290-0268

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Overpayments
Non-responses to records request Providers have never kept records Records reported stolen Too many days claimed by providers Too few days claimed by providers

S u m m a r y
Amount
$194,605 $346,899 (2) $2,021,749 (3) $79,571 ($26,149)

This table shows the types of overpayments we identified during the audit and:

Totals

$2,616,675

In some cases we questioned the legitimacy of payments to providers. The following table summarizes those cases: Questionable payments Amount
All records missing parent signatures Records contained invalid parent signatures Parent/provider overlap Records altered by whiteout or a photocopier $98,208 $99,256 $38,301 $ 5,464

Total

$241,229

We also found: An internal control weakness that puts over $3.4 million paid to providers for child care registration fees at risk of being overpaid. Eight providers had more children in their homes than licensed for by the Department of Early Learning. Forty-one providers responded with records showing children were signed in and out at the same time every day, rather than the actual arrival and departure times. Sixty-four providers responded with records missing required criteria. Neither DSHS nor DEL has timely access to child care attendance records. Most providers have 14 days to produce these records, rather than being required to produce them on demand. This presents an opportunity for records to be altered or fabricated. Current laws and regulations do not specify that the agencies have the authority to remove original child attendance records from a child care center or home for the purpose of reviewing or making copies to ensure providers are following billing rules. Legal obstacles prevent the DSHS Office of Fraud and Accountability from investigating suspected overpayments or fraud. These obstacles include limited authority for the agencies to access original child care attendance records and perform on-site visits of licensed child care centers, licensed family homes and license-exempt providers.
We expanded our audit scope to include all payments for subsidized child care made to all six providers we found in this category. We expanded our audit scope for one provider to include seven years of payments.

In Objective 2 of this audit we discuss how:

(2) (3)

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S u m m a r y

Regarding Objective 3, we found the process for those wishing to report suspected billing fraud is spread across many state agencies. Neither DEL nor DSHS promotes how people wishing to notify them of potential fraud may do so. As described in Objective 4 of this audit, we found the agencies do not adequately monitor payments to child care providers. The agencies do not routinely reconcile an adequate sample size that compares provider invoices paid through the Social Service Payment System to actual attendance records. These reconciliations are the only method that can provide the agencies with assurance that providers are not being overpaid. The issues we identified during the audit are not exclusive to Washington State: In 2009, a Pulitzer Prize-winning investigative report led to the overhaul of the $340 million Wisconsin Shares child care program. Providers were found to be working with parents to collect child care subsidies using fake attendance records. The state projected a $100 million savings from cracking down on fraud in the program. In August 2010, federal prosecutors charged 11 people, including four day-care center operators and seven New York City employees, with taking part in a fraud involving more than 30 day-care centers that netted approximately $18 million. A report published in October 2010 by the California Senate Office of Oversight and Outcomes made several recommendations to prevent child care fraud, which included unannounced visits to child care providers to assure children are present at the times claimed. In 2011, seven people were charged with misappropriating more than $500,000 from the CalWORKS child care program.

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S u m m a r y

Why we did this audit

The State Auditors Offices new approach to accountability audits of state agencies has shifted its focus to auditing and reporting on significant statewide issues, rather than individual agencies. We selected this program for audit based on its previous history of audit findings and issues noted by our Office and other agencies and on the more than $300 million it pays to nearly 19,000 providers annually: In June 2010 the state Joint Legislative Audit and Review Committee (JLARC) reported on its performance audit of DEL. JLARC concluded DEL did not routinely notify DSHS when it found providers did not comply with attendance record requirements. In September 2010, the U.S. Government Accountability Office (GAO) reported that Washington State lacked adequate controls over child care assistance applications and billing processes. Posing as fictitious parents and providers, some GAO staff successfully billed for $4,717 in child care assistance for fictitious children and parents. The report stated DSHS approved individuals for services after completing brief phone interviews and failed to detect that an applicant used the Social Security number of a deceased individual and provided incorrect Social Security numbers for the children. In December 2010, a former DSHS financial technician was sentenced in U.S. District Court for misappropriating funds from the Working Connections Child Care program and ordered to pay $156,729 in restitution. The worker was able to enter false information into a computer system that allowed payments to be made to that individual and another individual who were not providing child care. Also, DEL reported to the U.S. Department of Health and Human Services that an estimated $53.8 million in improper authorizations for child care were made in federal fiscal year 2007. This report was submitted in response to the Federal Improper Payment Elimination and Recovery Act. The Act requires the agency to conduct an annual risk assessment and, if a program is found to be susceptible to significant improper payments, estimate the amount of improper payments.

Whats next?
As long as the amount of grant funding from the Child Care Development Fund remains significant, we will continue to conduct our annual single audit of the program. That audit is designed to examine compliance with federal grant requirements. In fiscal year 2012, we plan to perform a targeted audit of license exempt child care providers and the seasonal child care program. 6

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Audit authority, scope and objectives
We performed this audit under the authority of state law (RCW 43.09.310), which requires the State Auditor to perform post-audits of state agencies. These audits are designed to assess whether agencies have systems in place to ensure accountability over state funds and comply with state laws and regulations. The scope of this audit included payments to child care providers for services between July 1, 2009 and June 30, 2010. For some issues noted, we expanded our review to present a more complete picture of their financial effect on the state. Our audit objectives were: 1. 2. 3. Are providers being overpaid for child care services? Do state laws and regulations provide the agencies with timely access to child care attendance records? What reporting options are available for those wishing to report suspected improper payments or fraud related to child care providers? Do the agencies effectively evaluate and resolve reported issues? Are the agencies effectively identifying child care providers that do not comply with program billing rules?

4.

We also audited the program as part of our fiscal year 2010 Single Audit of Washington State, which examined the agencies compliance with federal grant requirements and systems they have in place to protect public resources. Since 2005, we have issued audit findings and made recommendations regarding inadequate monitoring by the agencies over payments to child care providers. This audit goes beyond single audit work in that we performed our own reconciliations of payments to attendance records to determine if overpayments are occurring. Our audit authority under the Single Audit Act limits our ability to audit beyond objective 1. However, under the authority of state law (RCW 43.09.310), we expanded coverage to include objectives 2 through 4.

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About the Working Connections Child Care program
The Working Connections Child Care program helps eligible families pay for child care while they work, attend job training or educational programs. Federal and state money is used to pay for child care subsidies and the programs administrative costs. Federal money comes from the Child Care Development Fund, the Temporary Assistance for Needy Families (TANF) program and the American Recovery and Reinvestment Act. DEL writes administrative rules, interprets and clarifies program policies, provides program oversight and reports directly to the federal government on Washingtons child care subsidy programs. DEL also is responsible for child care licensing and monitoring, child care quality and early learning initiatives. Through an interagency agreement with DEL, DSHS child care subsidy staff helps families apply for the program, determine eligibility and co-payments, authorize child care and pay providers. In 2010, approximately 33,500 households and 60,000 children were enrolled in the program.

Eligibility and authorization

Eligibility is determined by a households income and number of family members. Families must make a monthly co-payment to providers, which is calculated by using a formula (see Appendix B). Children of eligible families are authorized for full-day or half-day care. The provider will receive a notice in the mail confirming eligibility and authorizing the provider to bill DSHS for services. When a familys eligibility or need for care changes, the parent or provider are responsible for contacting DSHS to update their case. This audit focused on the agencies payments to providers. It did not examine whether the agencies are properly determining client eligibility and ensuring monthly co-payments are being made.

Child care providers

Families choose the type of child care that works best for them and must notify DSHS of the provider they plan to use. Provider types are:

I n t r o d u c t i o n
Licensed or certified child care centers. Licensed or certified family home providers. Non-licensed (exempt) in-home or relative care providers.

In 2010, the Program paid nearly 19,000 providers for providing care. Approximately 7,400 of those providers are licensed or certified by DEL. The other 11,600 are exempt from licensing requirements.

Licensed or certified child care providers

To receive payment under the Working Connections program, a provider must be: Currently licensed as required by Washington state law. If caring for children in a border state, meet that states licensing requirements.

Some providers are not licensed, but are certified by DEL. They are: Tribal child care facilities that meet the requirements of tribal law; Child care facilities on military installations. Child care facilities public school districts operate on school property.

Non-licensed (exempt) in-home or relative care

In 2006, legislation was passed allowing collective bargaining between the state of Washington and the union representing licensed family home child care providers and in-home/relative child care providers exempt from licensing requirements. To receive payment under the Working Connections program, non-licensed in-home or relative providers must meet state requirements, such as passing a background check, being informed about basic health, prevention and control of infectious disease and keeping daily child attendance.

Billing rules and attendance records

Licensed or certified providers are allowed to bill for time a child is in attendance plus up to five additional days each month for time a child may be absent, if the child is enrolled full time. Full-time enrollment is considered to be 22 full- or half-time days each month. During the audit period DEL changed the billing rules. Effective April 1, 2010, providers began billing for the total number of days the child attended, plus the five absent days. If the number of allowable days is less than the maximum allowed amount on their monthly invoice, providers are responsible for reducing the invoiced amount, prior to requesting payment.

I n t r o d u c t i o n
The rate paid by DSHS to providers for child care is the lesser of the providers private rate or the maximum subsidy daily rate for the region in which the child resides. All Working Connections child care providers are required to keep daily attendance records to support invoices. Licensed and certified providers are responsible for ensuring parents or guardians sign children in and out daily. Regulations require the following for child attendance records: Date. Time in and time out. Parent or guardians full, legal signature when they sign their child in and out.

Non-licensed in-home/relative providers also must keep daily attendance, but parents are required to sign the records only weekly. DEL requires all to keep their records for five years. It provides a standardized form on its website for providers to use to track attendance. Providers can create their own attendance record forms, as long as they contain all required information.

Payments to providers
DSHS Social Services Payment System authorizes and processes payments to providers. The system generates monthly invoices that are sent to providers listing each subsidized child care service they were authorized for. The amount listed is always the maximum allowed amount. Payments to providers through SSPS are processed solely on information from the provider. In other words, DSHS relies on providers to adjust the days of service on these invoices to the amount supported by attendance records. Providers can sign and return their invoices by mail, or use the Departments Invoice Express phone line to submit the days of care that was provided. The Departments only procedures to verify whether this information is accurate are its reconciliations with child attendance records. In fiscal year 2010, the Department paid $306 million through the Working Connections program to more than 19,000 child care providers. This chart shows that total payments to child care providers increased every year from 2007 to 2010.

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I n t r o d u c t i o n
Payments to Providers in Working Connections Child Care Program
Fiscal Year

2007

$250,380,852

2008

$274,461,956

2009

$287,513,118

2010

$306,141,579

50

100

150

200

250

300

350

Dollars in millions
Source: DSHS Social Service Payment System

Authorized child care slots

The Department of Early Learnings policies define the number of children that can be in a licensed child care center, licensed family home or nonlicensed providers home at any given time. It also has staff-to-child ratios and training requirements. The table below shows the required staff to child ratios for licensed child care centers. Licensed Child Care Centers Age of Children Staff/Child Ratios
1 to 11 months 12 to 29 months 30 months to 5 years (preschool) 5 years and older (school-age) 1 to 4 1 to 7 1 to 10 1 to 15

Group Size*
8 14 20 30

*Maximum number of that age in one room at any time.

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The table below shows staff to child ratios child care providers of licensed family homes are required to maintain. Licensed Family Child Care Homes Age Range 0 to 11 years 2 to 11 years 5 to 11 years 0 to 11 years 3 to 11 years 0 to 11 years Requirement Provider Provider w/1 yr experience Provider w/1 yr experience Provider w/1 yr experience & assistant Provider w/2 yrs experience and 1 ECE class Provider w/2 yrs experience and 1 ECE class & assistant Total Under Age 2 2 N/A N/A 4 N/A 4 Group Size* 8 8 10 9 10 12

*Maximum number of children in the family child care home at any one time including the providers own children 12 years of age and under.

For non-licensed in-home or relative providers, providers may have no more than six children in the home at any given time. DEL has not defined staffto-child ratios for these providers.

Child Care Registration Fees

If licensed child care centers and family homes have a written policy to charge registration fees for private paying families, they can bill the Working Connections Child Care program up to $50 per child when they meet the following criteria: When a child first enrolls with the provider. Once every calendar year per child. When a child leaves the providers care and returns more than 60 days later. If parents enroll their child with a different provider in the same year, both providers can bill for the registration fee.

Recent legislation
The 2011 Legislature passed a bill4 requiring DSHS and DEL, in consultation with interested individuals and organizations, to identify options to track subsidized child care attendance, including methods using a landline or cellular phone, a computer, a pointof-sale system or some combination of these methods. The agencies must report their recommendations to the Legislature by December 31, 2011. The method(s) chosen must interface smoothly with current and future payment systems for subsidized child care payments.
4 ESSB 5921

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R e s u l t s

Objective 1
Are providers being overpaid for child care services? Summary
We reconciled daily child care attendance records to paid invoices for 146 providers and found the program overpaid these providers more than $2.6 million. In addition, we questioned the legitimacy of an additional $241,000 in payments. In April 2011, the number of families on the waiting list for the Working Connections Child Care program was 3,295. Overpayments decrease the amount of resources available for eligible recipients. Since the Working Connections Program is partially funded by federal dollars, the U.S. Department of Health and Human Services could recoup overpayments from the state.

Audit Methodology
To independently analyze whether state agencies are overpaying child care providers, we reconciled invoices paid by the Working Connections program to child attendance records. Rather than use a random sample of providers, we identified four high-risk populations: 1. Multiple providers billing from the same address. 2. Parents enrolled in the Working Connections program, who also have provider billing numbers. 3. Providers billing for children of parents with invalid Social Security numbers. 4. Providers billing for children of parents with Social Security numbers belonging to a deceased person. Through our experience in auditing this program, we know it takes significant time and resources to reconcile the attendance records to invoices. This is especially true for centers with large numbers of children. Therefore, we chose providers to test with fewer than 150 child slots.

Providers billing from the same address

We identified 531 addresses from which at least two providers were billing for child care. These addresses may not be where the child care was provided. For example, some child care providers may operate at multi13

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ple locations, but bill from a central office. We also found multiple providers billing from the same home or apartment. From this population we judgmentally selected 48 providers.

Parents who have provider billing numbers

We found 4,823 parents enrolled in the Working Connections Program who also have provider billing numbers. This means that the parent could be an active child care provider being paid through the program. It could also mean that the parent is receiving benefits for other social services paid through the Social Service Payment System. From this population we judgmentally selected 40 providers.

Providers billing when a primary recipients Social Security number is invalid

A valid Social Security number is not required to be eligible for program benefits. Federal law restricts states from using the validity of Social Security numbers as a criterion for eligibility for this program. We compared the parents Social Security number on file with DSHS to data obtained from the Social Security Administration. Social Security numbers were determined to be invalid for reasons such as being inaccurate or un-issued. We found 2,113 providers were paid for child care subsidies when at least one parents Social Security number was invalid. From this population we judgmentally selected 28 providers.

Providers billing when a parents Social Security number belongs to a deceased person
We cross-matched the parents Social Security numbers to the Social Security Administrations Death Index. We found 53 providers were paid for child care when a parents Social Security number belonged to a deceased person. From this population we judgmentally selected 30 providers. In total we requested records from 146 (0.74 percent) of the 19,684 providers that were paid for child care subsidies by the Working Connections program in fiscal year 2010.

Attendance records and payment data

Neither DSHS nor the State Auditors Office has the authority to compel providers to produce attendance records. Only DEL has this authority. With assistance from DEL, we requested that providers send photo copies of child care attendance records for February, March and April of 2010 to our office. As defined in Title 170 of Washington Administrative Code, providers were asked to respond within 14 days. 14

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R e s u l t s

We obtained child care subsidy payment data from the DSHS Social Service Payment System. Using each providers billing number, we created a list of all payments for child care subsidies the program made between February and April 2010. We chose these months because only one legal holiday occurs during the time period, which makes the reconciliation process more efficient.

Audit Results
We found providers in the Working Connections Child Care program are being overpaid and are not following licensing regulations and billing rules. Of the 146 providers that we requested attendance records from, 131 (90 percent) responded. Our audit results are supported by records that contain confidential information. For that reason, specific case details are not disclosed in our report. We grouped our exceptions into these categories:

Overpayments
We identified the following types of overpayments: Non-responses to records request. Providers have never kept records. Records were reported as stolen. Too many and too few days claimed by providers.

Questionable payments
In some cases we could not determine if overpayments occurred, but found reasons some payments were questionable: All records were missing parent signatures. Invalid parent signatures. Parent/provider overlap. Records altered by white out or a photocopier. Child care registration fees.

Other issues
We identified other instances in which we could not determine if an overpayment occurred or if payments were questionable, but that were significant enough to include in our report. These issues are: More children in homes than licensed for by DEL.

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Sign in-out times always the same and signatures on dates not on the calendar. Records missing required criteria.

Overpayments
As defined by Washington Administrative Code 5, overpayments for child care occur when a provider: Bills and receives payment for services not provided. Bills without attendance records that support their billing. Bills and receives payment for more than they are eligible to bill for. Care for a child outside their licensed, allowable age range without a waiver.

Non-responses to records request

All child care providers paid through the Working Connections program are required to keep daily attendance records. We identified $194,605 in payments not supported by such records. Fifteen providers (10 percent) did not respond to the request for attendance records we made through DEL. By not responding these providers violated Title 170 of the Washington Administrative Code and the agency has the authority to assess an overpayment. The total paid to these providers between February and April 2010 was $113,599. Records for some children were missing in responses from 43 providers (33 percent). The amount paid for these services between February and April 2010 was $81,006.

Providers have never kept records

Six providers (5 percent) responded to our request by stating they have never kept attendance records because they were not aware of the requirement. To become licensed, prospective child care providers must attend a DEL-sponsored orientation. According to DEL, billing rules and policies are addressed during the orientation. Billing training is also required for exempt providers. For these providers, we expanded our scope to all payments for subsidized child care made by DSHS. The total paid between these dates to the six providers was $346,899, which we consider to be overpayments.

Washington Administrative Code 170-290-0268

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Records reported stolen

R e s u l t s

One provider sent us a report regarding an alleged theft at her child care center. In the report she stated to law enforcement that attendance records supporting child care, paid for by the program from December 2003 to October 16, 2010, were stolen. She also claimed other items were stolen, including $4,500 in cash; three televisions and small electronics. We contacted the detective in charge of the case and obtained a copy of the official police report. The report stated that when they arrived on scene, responding officers found that a small window of the facility had been broken. The officers documented in their report that no entry to the building was made. The detective stated that there was only a seven-minute window between the time the buildings alarm sounded and when officers arrived on scene. We reviewed the providers billing records and licensing status. This provider has been licensed since November 26, 2003 for 78 child care slots. The number of children billed for annually by this provider ranged from 78 to 160. Between January 1, 2004 and December 31, 2010 the provider was paid $2,021,749 through the Working Connections program for child care subsidies.

Too many and too few days claimed by providers

DSHS relies on providers to adjust the maximum allowed number of days on invoices to the actual number of days. After reconciling child attendance records to these invoices we found 75 providers (57 percent) billed for more days than what was supported by their attendance records. The total overpaid for these days was $79,571. We also found 55 providers (42 percent) were underpaid $26,149 as a result of submitting invoices for fewer days than they were entitled to.

Questionable payments
In some cases we found questionable payments to providers, but could not determine if overpayments occurred.

All records missing parent signatures

We received records from eight providers (6 percent) that contained no parent signatures on the child care attendance records, and therefore no evidence the children were in attendance. We questioned $98,208 that was paid to these providers.

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Records contained invalid parent signatures

Washington Administrative Code and program rules require parents to use their full, legal signatures when signing their children in and out. Some child attendance records contained printed or illegible names. In these cases we reviewed scanned images of documents provided by DSHS to identify the parents full, legal signature. When we compared these official signatures to the child attendance records, we observed some that were significantly different. In these cases we considered the parents signature to be invalid. By not requiring parents to use their full, legal signatures when signing children in and out of their facility or home, providers are committing licensing violations and are not complying with program billing rules. We found 22 providers (17 percent) whose records contained at least one parents signature we considered to be invalid. We questioned $99,256 that was paid in these cases. We shared examples of the signatures we concluded were invalid with DEL and the DSHS Office of Fraud and Accountability. The reviewers agreed with our conclusion that the signatures may not have been valid.

Parent/provider overlap
Recent investigations in other states of similar child care subsidy programs have identified providers who operate out of their homes and receive child care subsidies. The programs are abused by parent/providers who bill for subsidized child care for one anothers children, when in reality the children remain at home with their parents. Attendance records are fabricated to make it appear legitimate child care is being provided. No laws or regulations prohibit parents enrolled in the Working Connections program from being child care providers, or from being employed by another child care provider. DEL and DSHS do not maintain a database that would allow them to identify subsidy recipients who also are child care providers. We found five instances in which parents signed their own children in and out at a child care providers residence at the same time they were paid as a child care provider at their residence. The total paid by the Program to providers when these overlaps occurred was $38,301. While the Program helps ensure low-income working families have adequate access to child care so they can obtain and retain employment, it allows subsidy payments to be the primary source of self-employment income used to determine eligibility for program benefits. By choosing to operate as a child care provider, parents can simultaneously send their own children to other providers for subsidized care. Not only does this practice unnecessarily sub-

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sidize the care of children whose parents are child care providers, it increases the opportunity for fraud or abuse to occur between two or more providers who report caring for one anothers children, but in fact do not.

Records altered by white out or a photocopier

Of the 131 providers that responded to our request, 38 (29 percent) sent records that were altered by white-out or that had been photocopied from one month to the next with no changes. A marker was used to write over the name of month. We questioned $5,464 paid to this provider between February and April 2010.

Other Issues
We identified other issues when we could not determine if an overpayment occurred or questionable payments were made. However, these issues were significant enough to include in our report.

Registration fees for child care

The program is at risk of overpaying providers for registration fees. DSHS does not verify that child care providers charge registration fees to all of their clients prior to authorizing payment for these fees. It relies on verbal statements it obtains when it annually contacts providers by phone to confirm whether the fees are allowable. Without verifying these verbal statements from providers, the Department cannot ensure it is not paying providers for registration fees they do not charge to private-pay clients. Between July 1, 2009 and June 30, 2010, the Program paid $3,453,364 in registration fees to providers.

More children in providers homes than licensed for

DEL can license family home providers for a maximum of 12 children and also determines the number that a provider can serve using these factors: Physical environment in the home. The number of approved staff available for providing care. The providers education and licensed child care experience and skills of staff and volunteers. Ages, characteristics and needs of the children served. The number and ages of the providers own children residing in the home who are 11 years of age or under. The supply of developmentally appropriate toys and equipment for the ages and abilities of children the provider cares for. 19

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Of the 56 licensed family home providers that responded to our records request, eight (14 percent) had more children in their home than they were licensed for. Four licensed family home providers did not respond to our request, so we could not determine whether the number of children in their home exceeded their maximum licensed amount at any given time. Some providers also had children under the age of 12 living in their household, but we could not find information to determine if they were present in the home at the same time as the other children.

Sign in-out times always the same and signatures on days that do not exist
Of the 131 providers that responded to our request, 41 (31 percent) responded with records when children were signed in and out at the same time every day the child was in care, rather than actual daily arrival and departure times as required under administrative rules. We also observed records that contained parent signatures on days that did not exist. For example, in the month of February which has 28 days, we observed signatures on the records made through the 31st of the month. Since all of the required elements were documented on the attendance records, we did not question the payments. However, these conditions indicate that records are being completed all at one time, rather than daily or weekly as required by program rules.

Records missing required criteria

At times, attendance records submitted by providers were missing some required criteria. This included times in/out, dates and/or parent signatures. We found 64 providers records (49 percent) were missing some of the required criteria. For these days we did not question the paid amounts because we found enough evidence to support the payment. However, when required elements are missing from attendance records, the providers are in violation of program licensing requirements and billing rules.

Recommendations
We recommend DSHS and DEL: Pursue collection of overpayments made to child care providers identified in this audit. Follow up on provider licensing violations that were identified in this audit. Establish and follow internal controls to ensure documentation 20

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regarding registration fees is obtained and reviewed before payment is authorized. Ensure that it follows a new state law regarding tracking child care attendance by designing effective internal controls to prevent overpayments.

Objective 2
Do state laws and regulations provide agencies with timely access to child care attendance records? Summary
We found Washington Administrative Code requirements are inconsistent and do not provide state agencies with timely access to child care attendance records. Program subsidy rules grant most providers 14 days to produce attendance records, rather than requiring them to produce them on demand. This presents an opportunity for records to be altered or fabricated. During our reconciliation of attendance records to invoices discussed in Objective 1 of this report, we found that 38 (29 percent) of the providers sent records that were altered by white-out or photocopied. Also, 41 providers (31 percent) submitted records showing children were signed in/out at the same time every day the child was in care, rather than actual daily arrival and departure times as required under administrative rules. This evidence demonstrates a risk that some providers may be altering or fabricating attendance records. Current laws and regulations do not specify that state agencies have the authority to remove child attendance records from a providers child care center or home for the purpose of reviewing or making copies to ensure providers are following billing rules. Legal obstacles prevent the DSHS Office of Fraud and Accountability from conducting investigations of suspected overpayments or fraud. These obstacles include limited authority to access original child care attendance records and perform on-site visits of licensed child care centers, licensed family homes and license exempt providers.

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Methodology

R e s u l t s

To assess whether state laws and regulations provide state agencies with timely access to child care attendance records we interviewed DEL and DSHS employees. We also contacted other states with similar child care programs and compared their accessibility to child care records.

Background and audit results

In fiscal year 2010, DSHS paid more than 19,000 providers for child care subsidies: 7,400 (39 percent) are licensed child care centers or family home child care providers. 11,600 (61 percent) are exempt, relative/in-home providers.

DEL performs on-site visits of licensed homes every 18 months and of licensed child care centers annually. Washington Administrative Code lists the requirements for maintaining attendance records and how they are to be made available. DEL does not perform on-site visits of exempt, relative/in-home providers. The minimum requirements for tracking child attendance and how they are to be made available to state agencies are described in the Code and DEL billing rules.

Licensed child care centers

Washington Administrative Code does not require licensed child care centers to produce attendance records during licensing visits. If during an onsite visit a licensor finds records are not being kept, he or she is to document a licensing violation and send the information to DSHS for consideration of a post-payment review. The Code does state that if access to the records is refused, DEL may deny, suspend or revoke a providers license. If DSHS or DEL suspects an overpayment, Washington Administrative Code states that providers have 14 calendar days to respond with the requested documentation.

Licensed family home providers

The Code requires licensed family home providers to produce attendance records upon request during licensing visits by DEL. Chapter 170-296-0520(8) of Washington Administrative Code states: The records and reports are subject to inspection and you must allow us [DEL] access to them during all hours in which licensed activities are conducted. 22

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As with licensed centers, if DSHS or DEL suspects an overpayment was made, the Code states providers have 14 calendar days to supply the requested documentation.

Unlicensed in-home/family providers

Since these providers are not licensed, neither agency performs scheduled on-site visits. However, the Code states child care providers must produce attendance records that are requested by DSHS and DEL within 14 consecutive calendar days of the request. Washington Administrative Code does not grant state agencies the authority to require all child care providers to produce records immediately upon request. It also does not specify that state agencies are allowed to remove attendance records from a providers business or home for the purposes of review or making copies to ensure providers are paid appropriately.

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What about other states?

R e s u l t s

The following table compares the access to records of other states with similar child care programs to Washington. This shows that, compared to many of these states, Washington has limited access to records. The state of Wisconsin recently overhauled its child care regulations, including a change in law that allows the state to suspend subsidy payments if it has a reasonable suspicion that a provider has violated billing rules. Access to Child Care Attendance Records in Other States
State
Washington

Program
Working Connections

Number of providers
19,800

Access to records
Licensed centers and non-licensed relative/in-home providers have 14 days to respond to requests for child care attendance records. Records and reports of licensed family home providers are subject to inspection during all hours in which licensed activities are conducted.

Oregon Idaho

Oregon Child Care Division Idaho Child Care Program

5,350 2,370

Records from all provider types are to be available at all times to the Child Care Division. Providers must grant to the Department and its agents, immediate access to records for review and copying during normal business hours. The Department may also request copies be sent by the provider, who has 20 days to respond. The Department has the authority to inspect, audit, and copy child or child care center records upon demand during normal business hours. Records may be removed if necessary for copying. All records of any child care facility, except financial records, shall be available for review by the Secretary or duly authorized representative of the Department or cooperating agency. The Wisconsin Department of Children and Families (DCF), the Milwaukee Early Care Administration (MECA), counties and tribes have the right to visit the child care facilities to monitor compliance with program requirements, including keeping accurate records. Monitoring may review records on-site, copy records on-site, or arrange to temporarily remove original records for review and copying (while leaving a proper receipt). Providers must provide this access immediately upon request.

California

CalWORKS and Alternative Payment Program North Carolina Division of Child Development

49,000

North Carolina

8,500

Wisconsin

Wisconsin Shares Child Care Subsidy Program

7,810

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DSHS Office of Fraud and Accountability

If child care providers are suspected of overbilling or defrauding the Working Connections program, the DSHS Office of Fraud and Accountability (OFA) (formally the Division of Fraud and Investigations) is responsible for building a case. We met with representatives from OFA, DSHS and DEL to discuss limitations that deter investigations of child care providers. Neither agency has uninhibited access to original child care attendance records. To maintain the chain of evidence when developing a criminal case, the OFA needs this level of access to original documents. Currently, DSHS and DEL rely on copies of records when determining if overpayments to child care providers occurred. A significant limitation of the OFA to investigate providers is a settlement reached between DSHS, DEL and licensed family home child care providers in 2008. The settlement was the result of a lawsuit that stemmed from a 2001 DSHS investigation of child care providers in Mattawa, Washington. The terms of the agreement are: DSHS investigators may not enter a family home child care providers home absent consent, a court order or a warrant. Absent a court order or warrant, DSHS investigators must mail a letter to family home providers at least five days in advance that notifies the provider the agency will be seeking consent to enter the providers home. Investigators may only obtain copies of original records by consent, warrant or a court order. The original records must be returned within 60 days unless the agency is authorized for a longer term pursuant to the warrant or court order. Until passage of ESSB 5921 in 2011 legislative session, DSHS did not have statutory authority to issue administrative subpoenas to family home child care providers.

Recommendations
We recommend that DEL and DSHS: Strengthen administrative rules to compel all licensed, certified and exempt providers to make records available immediately upon request. This would include allowing DSHS and DEL access to original child care attendance records and on-site visits of licensed child care centers, licensed family homes and license exempt providers for the purpose of investigating suspected overpayments and fraud. In addition, incentives should be built into the rules to compel providers to provide immediate access, such as immediate suspension of the providers subsidy payments. 25

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Objective 3
What reporting options are available for those wishing to report suspected fraud or improper payments made to child care providers? Do DSHS and DEL effectively evaluate and resolve reported issues? Summary
The process for those wishing to report suspected fraud or improper payments is decentralized. Employees from both agencies are unclear about where to send complaints. DSHS and DEL stated they received only one report of improper payments or potential fraud by a child care provider from July 1, 2009 through Dec. 31, 2010. This indicates that the agencies are not effectively advertising where people should report concerns.

Methodology
We interviewed DEL and DSHS employees on options available for those wishing to report suspected improper payments and searched state agency websites. To examine the effectiveness of how the departments evaluate and resolve reported issues, we requested a list of all referrals they received from July 1, 2009 through December 31, 2010.

Background
DSHS has many options people can use to report suspected fraud or improper payments to child care providers. These include: An online complaint form. A call center for providers. A dedicated facsimile line. A mailing address. An internal referral system to be used by DSHS financial workers and community service office staff.

The Departments Welfare Fraud Hotline Coordinator processes these referrals. DEL licensors perform annual on-site visits of licensed child care centers and homes. These visits include a verification of whether providers maintain required child attendance records, but licensors do not reconcile them to 26

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Audit results

R e s u l t s

invoices. Licensors are instructed to report suspected improper payments or fraud to the DSHS Call Center.

DSHS reported only one referral related to suspected improper payment of benefits or fraud by child care providers was received during the period under audit. This referral was sent by DEL in August 2010 when a licensor determined a child care provider had continued to bill for services after its center had flooded and closed. DSHS officials stated the case is still under investigation. Since DSHS and DEL assert that no other referrals were received, we could not assess the effectiveness of how they evaluate and resolve reported issues. We found that the intake process for referrals is decentralized across multiple agencies. Employees are uncertain of where to report known or suspected fraud or improper payments to child care providers. In states that are making significant child care subsidy reforms, such as Wisconsin, information about how to report known or suspected child care fraud is easily identified on the programs websites. This is not the case for DSHS and DEL. It does not advertise how to report known or suspected fraud related to child care providers.

Recommendations
We recommend the agencies: Centralize the reporting process for those reporting suspected fraud or improper payments made to child care providers. More effectively advertise their fraud program and clearly indicate where referrals should be sent. Aggressively pursue reports of known or suspected fraud.

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Objective 4
Are DSHS and DEL effectively identifying child care providers that do not comply with program billing rules? Summary
DEL and DSHS are not effectively identifying providers that do not comply with billing rules. During state fiscal year 2010, the agencies reconciled less than 1 percent of total payments made to providers to child attendance records. This amount is inadequate based on the known internal control weaknesses within the program. When selecting invoices to review, DSHS is instructed through an agreement with DEL to use random samples rather than a risk-based approach. By selecting samples of invoices randomly, rather than through a risk-based process, it is less likely the Department will identify providers who are being significantly overpaid. Using a risk-based selection method in this audit, we found that 131 providers (90 percent) of 146 providers did not comply with billing and/or licensing rules.

Methodology
We interviewed staff from both departments and reviewed documentation gathered during our federal Single Audit of the Program to assess the effectiveness of how the program determines if providers are complying with billing rules.

Background
The Program relies on two primary controls to determine if providers comply with billing rules: 1. 2. DSHS payment review program. DSHS quality assurance reviews.

Payment review program

Through this program, DSHS contracts with a private firm to create a system to identify suspected overpayments to clients and providers. These are: Duplicate payments. Half-day payments exceeding maximum amounts.

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Excessive days paid.

R e s u l t s

School holiday hours paid for children under age five.

The reviews are done annually. If it finds overpayments, DSHS sends a notice to the provider. The Agencys Office of Financial Recovery pursues collection of these overpayments. Between July 1, 2009 and June 30, 2010, this review program identified $196,287 in overpayments.

Quality assurance reviews

As part of their agreement, DSHS performs monthly reconciliations of invoices to child attendance records to determine if providers are being overpaid by the program and are not in compliance with billing rules. The agreement states DSHS is to select providers at random. The agreement does not specify the number of cases to be reviewed. According to DEL, random samples are used to select invoices in an effort to get a representative look at how providers bill across the state. However, these results are not used by management to target and follow up when it finds non-compliance. Through these random samples, DSHS reviewed $402,195 in payments made to 483 providers between July 1, 2009 and June 30, 2010. This represents approximately one-tenth of one percent of the $306 million paid to providers during that time.

Audit Results
Based on the results of Objective 1 in this audit and given the known internal control weaknesses within the program, we conclude that DSHS does not perform reconciliations of adequate sample size that compare provider invoices paid through the Social Service Payment System to actual attendance records. These reconciliations are the only method that can provide the agencies with assurance that providers are not being overpaid. By selecting samples of invoices randomly, rather than through a risk based selection process, it is less likely that the Department will identify providers who are being significantly overpaid by the Program. The use of random samples would be reasonable, if the agencies used the results of the reviews to target providers with the highest rates of non-compliance with billing rules. Neither agency commits resources to identify improper payments or potential fraud through the use of data mining. The agencies rely only on the 29

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contract with the private firm to examine overpayments and the agencies inadequate random samples. DSHS has decreased the number of investigators in its Division of Fraud and Investigations from 55 investigators in July 2008 to 36 in May 2011. No investigators are specifically assigned to vendor or provider fraud cases.

Recent legislation
In 2011, the Washington State Legislature passed a law revising certain social service programs and establishing the Office of Fraud and Accountability (OFA) within DSHS. The OFA must detect, investigate and prosecute acts that constitute fraud or abuse in public assistance programs administered by DSHS. The OFA Director reports directly to the DSHS Secretary. As stated in Objective 2 of this audit report, legal obstacles prevent OFA from investigating fraud or abuse of child care subsidies.

Recommendations
We recommend the agencies: Focus resources to identify and pursue providers that are being overpaid. This should include the identification and prosecution of providers that willfully defraud the system. Use a risk-based selection, rather than random samples when selecting which child care providers records to reconcile with attendance records. If the agencies want to continue with random sampling of invoices, the results of those reviews should be used to target providers with the highest rate of non-compliance.

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SAO Objective 1:

Are providers being overpaid for child care services?

The Department of Early Learning (DEL) and the Department of Social and Health Services (DSHS) agree that lack of unfettered access to attendance records could result in overpayments and questionable payments to providers in the Working Connections Child Care Program. DEL partially agrees that some of the questionable record-keeping practices used by providers could indicate a licensing violation. Unclear or inconsistent signatures, attendance records with the exact same sign-in and sign-out times for multiple children, the use of white-out on records and non-responses to records requests could raise suspicions of inaccurate record keeping, but it is very difficult to substantiate to the degree necessary to establish an actual policy violation however, these are signals that warrant further investigations by staff. As your audit acknowledged, it takes significant time and resources to reconcile the attendance records to invoices and that must be balanced with DELs primary licensing focus of ensuring the safety of children while in care. However, licensors will be alerted of potential record-keeping issues. A new law enacted this year requires DEL and DSHS to identify different options to track subsidized child care attendance, including methods using a land line or cell phones, computers, point-of-sale systems or a combination of these, by December 31, 2011. Because of a conflict between this law and the budget bill, funds have not been released to begin implementation of a new attendance tracking system. DEL will design the system with internal controls to assure program integrity. This solution when implemented holds the greatest promise for preventing fraud and abuse. Meanwhile, the DSHS Office of Fraud and Accountability and Economic Services Administration, with assistance from DEL, initiated action to recover more than $426,000 in overpayments from 19 providers identified in the audit. Another 10 providers and the possibility of more are under review for possible criminal action. More recoveries could be made based on the outcome of those ongoing investigations. The one childcare provider case mentioned in the audit has been thoroughly investigated and closed by DSHS. The case involved a dispute over how many professional development days can be billed and did not involve any fraudulent billing for direct child care.

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SAO Objective 2:

Do state laws and regulations provide agencies with timely access to child care attendance records?
Timely access to records is critical to proper fraud investigations and DSHS/ DEL are committed to gaining legal access to child care attendance records to support investigations. DEL is currently authorized to access original attendance records and to conduct on-site visits, but does not have authority to investigate suspected overpayments and fraud. With limitations, DSHS can investigate suspected overpayments and fraud, but has no authority to obtain attendance records or make on-site visits to investigate. DSHS is pursuing authority from recent legislation to determine if it supersedes limitations on access to child care records contained in a consent order.

SAO Objective 3:

What reporting options are available for those wishing to report suspected fraud or improper payments made to child care providers? Do DSHS and DEL effectively evaluate and resolve reported issues?
DSHS and DEL agree that improvement is needed for reporting fraud in child care provider cases. The New Office of Fraud and Accountability has prioritized the pursuit of cases involving child care provider fraud reported directly to OFA by DEL, and OFA and DEL communicate regularly on child care provider cases. The DSHS website home page now prominently displays a vehicle for the public and employees to report allegations of fraud. A column of How do I? questions includes Report fraud. When fraud is confirmed, DSHS announces it to the news media, the public and employees. Links to reporting fraud and the fraud hot line are included in these communications. Plans are under way to develop public and employee outreach in reporting all fraud and abuse of public benefits as part of the improvements to fraud and accountability. DSHS will lead a workgroup, with representatives from DEL, to review existing policies and procedures for reporting, evaluating and resolving suspected fraud and improper payments to child care providers to strengthen the reporting process.

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DEL also will review and improve existing policy and procedures for reporting suspected fraud to the DSHS Fraud and Accountability Office.

SAO Objective 4:

Are DSHS and DEL effectively identifying child care providers that do not comply with program billing rules?
DSHS currently takes action to recover overpayments when inaccurate payments are discovered. DSHS has established the Office of Fraud and Accountability (OFA) located within the DSHS Secretarys Office and works very closely with DEL under a signed MOU executed by both agency leaders. DSHS/OFA is hiring new criminal investigators and is seeking legal opinions on its ability to access on-site child care attendance records. The use of a high-risk billing practice model is very useful to identify areas of potential fraud and overpayments, but, it does not provide an overall assessment of the common patterns of billing that statistically valid random sample can provide. Both strategies could be utilized depending on the goal and purpose of the monitoring conducted and within resources the departments will be analyzing the high risk billing practices.

Concluding Statement:
The Departments would like to thank SAO staff who worked many hours on this audit and for the resulting audit report. The final report provides valuable information that the Departments will use to reduce improper payments in the child care program and the processes used to report, evaluate, and resolve suspected fraud. The Departments would like to offer the following feedback regarding the final report: The majority of overpayments reflect the 3-month review of records conducted by the auditors (February April 2010). The vast majority of the calculated overpayments ($2.0 million of the $2.6 million total overpayments) result is from a seven-year extrapolation based on one providers failure to produce records for that period. This case is being thoroughly investigated by the departments.

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Revised Code of Washington (RCW)

RCW 43.215.240

Access to agencies Records inspection. All agencies subject to this chapter shall accord the department, the chief of the Washington state patrol, and the director of fire protection, or their designees, the right of entrance and the privilege of access to and inspection of records for the purpose of determining whether or not there is compliance with the provisions of this chapter and the requirements adopted under it.

RCW 43.215.300, states in part

Licenses Denial, suspension, revocation, modification, nonrenewal Proceedings Penalties. (1) An agency may be denied a license, or any license issued pursuant to this chapter may be suspended, revoked, modified, or not renewed by the director upon proof (a) that the agency has failed or refused to comply with the provisions of this chapter or the requirements adopted pursuant to this chapter; or (b) that the conditions required for the issuance of a license under this chapter have ceased to exist with respect to such licenses. RCW 43.215.305 governs notice of a license denial, revocation, suspension, or modification and provides the right to an adjudicative proceeding.

Washington Administrative Code (WAC) WAC 170-151-460, states in part

What program records must I maintain? You must maintain the following documentation on the premises: (1) The daily attendance record: (a) The parent, or other person authorized by the parent to take the child to or from the center, must sign in the child on arrival and must sign out the child at departure, using a full, legal signature; (b) When the child leaves the center to attend school or other offsite activity as authorized by the parent, your staff person must sign out the child and sign in the child on return to the center; and (c) Signed agreements between a program director and a parent where school-age child is allowed to leave the center on his own, must be verified by signature and dated by the director and parent. Staff may sign a child in/out whose parent has agreed in writing to let the child leave the center.

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WAC 170-290-0075
Determining income eligibility and copayment amounts. (1) DSHS takes the following steps to determine a consumers eligibility and copayment: (a) Determine the consumers family size (under WAC 170-290-0015); and (b) Determine the consumers countable income (under WAC 170-2900065). (2) If the consumers familys countable monthly income falls within the range below, then his or her copayment is: IF A CONSUMERS INCOME IS: THEN THE CONSUMERS COPAYMENT IS: $15

At or below 82% of the federal poverty guidelines (FPG) Above 82% of the FPG up to 137.5% $50 of the FPG Above 137.5% of the FPG through The dollar amount equal to subtract200% of the FPG ing 137.5% of FPG from countable income, multiplying by 44%, then adding $50 Above 200% of the FPG, a consumer is not eligible for WCCC benefits. (3) DSHS does not prorate the copayment when a consumer uses care for part of a month. (4) The FPG is updated every year on April 1. The WCCC eligibility level is updated at the same time every year to remain current with the FPG.

WAC 170-290-0138, states in part

In-home/relative providers Responsibilities. An in-home/relative provider must: (5) Bill only for actual hours of care provided. Those hours must be authorized by DSHS, and used by the consumer for his or her DSHS approved activities; (6) Bill for no more than six children at one time during the same hours of care; (7) Keep attendance records for five years documenting the days and hours of care provided; (8) Have the consumer sign and date the records at least weekly, verify36

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ing the accuracy of the dates and times; (9) Repay any overpayments under WAC 170-290-0268; and (10) Provide any of the records in subsections (7) and (8) of this section that are requested by DSHS or DEL, within fourteen consecutive calendar days of the request.

WAC 170-290-0245
Registration fees. (1) DSHS may pay licensed or certified child care providers and DEL contracted seasonal day camps a registration fee when: (a) A child is first enrolled by the consumer for child care with a provider; (b) A consumer enrolls their child with a new child care provider during their eligibility period; or (c) A child has more than a sixty-day break in child care services with the same provider, and it is the providers policy to charge all parents this fee when there is a break in service. (2) A registration fee will be paid only once per calendar year for children who are cared for by the same provider, even if the provider receives subsidy payments under different subsidy programs during this time period for the enrolled children, unless there is a break of sixty days or more as provided in subsection (1)(c) of this section.

WAC 170-290-0266
Payment discrepancies generally. (1) Payment discrepancies include both underpayments and overpayments. (2) For providers or consumers not covered under WAC 170-290-0267 through 170-290-0275, payment discrepancies are subject to chapter 388-410 WAC (benefit errors). (3) For providers covered under the collective bargaining agreement, all other payment discrepancy issues are covered under WAC 170-290-0275.

WAC 170-290-0267
Payment discrepancies Provider underpayments. (1) Underpayments to a provider occur if DSHS pays less than the amount the provider is eligible to receive. (2) Underpayment requests will only be considered by DSHS if the provider submitted his or her original invoice for payment to DSHS no later than twelve months after the date of service. 37

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WAC 170-290-0268
Payment discrepancies Provider overpayments. (1) An overpayment occurs when a provider receives payment that is more than the provider is eligible to receive. Provider overpayments are established when that provider: (a) Bills and receives payment for services not provided; (b) Bills without attendance records that support their billing; (c) Bills and receives payment for more than they are eligible to bill; or (d) With respect to licensed or certified providers only, is caring for a WCCC child outside their licensed allowable age range without a waiver. (2) DELs or DSHSs WCCC program staff may request documentation from a provider when preparing to establish an overpayment. The provider has fourteen consecutive calendar days to supply any requested documentation. (3) Providers are required to repay any payments that they were not eligible to receive. (4) If an overpayment was made through departmental error, the provider is still required to repay that amount.

WAC 170-290-0275
Payment discrepancies Providers covered under collective bargaining. (1) This section applies to any provider covered under the collective bargaining agreement. (2) For in-home/relative and licensed family home child care providers, disputes regarding underpayments shall be grievable. (3) Beginning July 1, 2007, there are different time frames for how far back a payment discrepancy may be corrected. The time frames, as provided in this subsection are based on: (a) When services were provided; (b) When the request for the underpayment was made; and (c) The type of provider: Family home or in-home/relative provider. (4) Family home and in-home/relative providers must submit a claim for payment no later than twelve months after the date of service. Submitting a claim for payment means turning the original invoice in to DSHS for services no later than twelve months after the date of service. If the claim for payment is made within the twelve-month period, the time limits for correcting payment errors are: (a) Two years back if the error is on rates paid by age and/or region, un38

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less discovered by a federal audit. This means the provider has up to two years after the date of service to ask for a corrected payment; or (b) Three years back if the error was for any other reason, including those discovered by a federal audit. This means the provider has up to three years after the date of service to ask for a corrected payment.

WAC 170-295-0100, states in part

When can my license application be denied and when can my license be suspended or revoked? (1) If you do not meet the requirements in chapter 170-295 WAC we deny your license application or suspend or revoke your license. (3) We must deny, suspend, or revoke your license if you: (h) Refuse to permit an authorized representative of the department, state fire marshal, or state auditors office with official identification to: (ii) Access your records related to the centers operation; or

WAC 170-295-7030
What type of attendance records do I have to keep? You must keep daily attendance records. (1) The parent or other person authorized by the parent to take the child to or from the center must sign in the child on arrival and sign out the child at departure, using their full legal signature and writing the time of arrival and departure; (2) When the child leaves the center to attend school or participate in offsite activities as authorized by the parent, you or your staff must sign out the child, and sign in the child on return to the center; and (3) Attendance records and invoices for state paid children must be kept on the premises for at least five years after the child leaves your care.

WAC 170-296-0120
When does the department establish an overpayment for payment I receive through the child care subsidy program? We establish child care subsidy overpayments for payments you received when: (1) You receive payment for services you did not provide; (2) You do not have attendance records that support the billing. Only attendance records meeting WAC requirements will be accepted for attendance verification; (3) We pay you more than you are eligible to bill; 39

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(4) You receive payment from us and you are not eligible based on WAC 388-290-0125; or (5) You receive payment for caring for children outside your licensed allowable age range and you do not have a waiver for that purpose.

WAC 170-296-0520, states in part

How long must I keep child records and what am I required to document while operating my business? (8) You must maintain all records and reports required by these regulations in an up-to-date manner in the licensed space of the facility. The records and reports are subject to inspection and you must allow us access to them during all hours in which licensed activities are conducted.

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C o n t a c t s
State Auditor Brian Sonntag, CGFM
(360) 902-0361 Brian.Sonntag@sao.wa.gov

Director of State and Local Audit (360) 902-0366 Chuck.Pfeil@sao.wa.gov

Chuck Pfeil

Deputy Director of State and Local Audit (360) 725-5359 Kelly.Collins@sao.wa.gov To request public records:

Kelly Collins

Director of Communications (360) 902-0091 Mindy.Chambers@sao.wa.gov

Mindy Chambers

Public Records Officer (360) 725-5617 Publicrecords@sao.wa.gov

Mary Leider

G e n e r a l
Headquarters (360) 902-0370

i n f o r m a t i o n
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www.sao.wa.gov

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The State Auditors Office Mission

The State Auditors Office independently serves the citizens of Washington by promoting accountability, fiscal integrity and openness in state and local government. Working with these governments and with citizens, we strive to ensure the efficient and effective use of public resources.

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