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July 2, 2008

DiNapoli Refers 19 NYC Daycare Providers to Law Enforcement

Audits Find Extensive Fraud; OCFS Agrees to Make Oversight Improvements

New York State Comptroller Thomas P. DiNapoli today announced his auditors found extensive incidents of suspected fraud in state-funded daycare in New York City and his office has referred 19 cases to local law enforcement. The New York State Office of Children and Family Services (OCFS) has embraced DiNapoli’s recommendations to improve oversight of the programs and ensure the child daycare system is working as intended.

“These daycare dollars are supposed to expand services in the City and help working families by providing a safe, caring environment for children,” DiNapoli said. “Instead, we’ve seen 47-cents on every dollar in this expansion effort simply disappear. It’s deplorable that individuals would seek to exploit these programs.

“New York’s children and families deserve better, and so do taxpayers. OCFS Commissioner Carrión has been a valuable and effective partner in using our audit to improve oversight and guard against this kind of fraud and abuse.”

OCFS Commissioner Gladys Carrión, Esq. said: “These findings by the State Comptroller have provided me and my staff with guidance as we work toward the goal of assuring that the tax dollars allocated to support children and families in New York State are spent as effectively and efficiently – and honestly – as possible. These recommendations will go a long way toward assuring that past abuses are not repeated under my watch.”

The law enforcement referrals stem from a pair of Comptroller audits that examined State-funded daycare in New York City. Auditors reviewed health, safety and fiscal issues relating to home-based child care in New York City in an audit released in late May.

A second audit released today examining the use of funds to create and preserve child care slots in New York City uncovered 18 cases of suspected fraud, and DiNapoli’s office referred those cases to District Attorneys for the counties of the Bronx, Kings, New York, and Queens. The audit released today found that OCFS contracts are not achieving the goal of creating and preserving child care slots in New York City, and generally are not serving areas of the City that have the greatest need for child care. Additionally, tax dollars are being misspent for fraudulent purposes.

The audit reviewed OCFS contracts between May 15, 1999 and August 31, 2006, during which time OCFS awarded 205 contracts totaling $10.7 million for child care slots in New York City.

The DiNapoli audit found:

  • As of May 24, 2007, contract grantees had created only 821, or 53 percent, of the 1,545 child care slots they had been paid to create. Auditors estimate this resulted in contract overpayments totaling $861,995.
  • Contract grantees failed to preserve 330 of the 1,888 slots that should have been preserved so that instead of attaining 2,612 New York City daycare slots, there was a shortfall of 1,054 slots (which represents the 330 slots that were not preserved and the 724 slots that had not been created.)
  • Fifty-five contractors were paid a total of $2.9 million between December 10, 1999 and January 17, 2007, of which 39 misspent almost $1.6 million on expenses that were not in accordance with contract terms and appear to be fraudulent.
  • Although an OCFS-funded needs assessment study in 2004 identified the top 10 New York City communities with the highest need for child care, only 5 of 18 contracts awarded between January 1, 2004 and May 1, 2006 were within these 10 high-need communities.
  • The misuse of contract funds and the underachievement of contract objectives may have been substantially reduced if OCFS had provided effective program outreach, contract proposal evaluation and contract oversight.
  • OCFS lacked adequate procedures for employees to follow when reviewing contract requests for reimbursements, did not ensure that employees had sufficient knowledge and skills to properly monitor contract compliance, and did not require staff to conduct necessary follow-up and corrective actions in light of indications that grantees were not adhering to contract terms.

DiNapoli’s audit team made recommendations that OCFS should:

  • Seek to recover almost $2.2 million ($861,995 paid to grantees that did not create the required slots and $1,576,228 from grantees that did not adhere to contract terms, less $241,434 of overlapping expenses).
  • Verify funds are being used to create and preserve daycare slots, as required.
  • Audit all New York City daycare contracts to create and preserve slots not included in this audit.
  • Audit future contracts to ensure compliance with contract terms and proper spending.
  • Work with high need communities to create child care slots.
  • Develop a written evaluation process that results in funding viable daycare proposals.
  • Train employees to more effectively monitor and review contracts.
  • Reimburse contract grantees only after reviewing and verifying documentation supporting reimbursement requests.
  • Develop written procedures to consistently review and evaluate the need for contract extensions and budget modifications.

OCFS has agreed with and started to implement OSC recommendations. Carrión said since taking office in January 2007 OCFS she has:

  • Created a separate Child Care Services Division. Recruited top managers from other divisions to execute a transparent RFP process.
  • Convened a senior level task force to build new controls and implement business process improvements.
  • Decreased workloads from 200 to 40 per manager to improve monitoring.
  • Started the process of recovering monies from grantees as warranted.
  • Contracted with than independent audit firm to begin additional audits in New York City.
  • Directed OCFS Audit and Quality Control (ACQ) staff to assist independent auditor in completing audit on a continuing basis. A total of 21 new audits have already been initiated.
  • Conducting through its ACQ unit 13 audits of day care grantees outside NYC.
  • Tasked its Bureau of Training to design training for program, contract, budget and audit staff on effective monitoring of day care contracts.
  • Teamed with OSC and trained 100 OCFS employees to detect fraud.
  • Had its Division of Child Care Services staff are currently conducting information sessions to reach out to communities with the highest need to increase the quality of applications and to address the need for accountability in recordkeeping and documentation.
  • Communicated with state legislators, local child care councils, and the NYC Department of Health and Mental Hygiene to initiate Bidders Conferences following issuance of new RFPs for improved transparency and accountability.

Click here for a copy of the report and the OCFS response.


19 Daycare Criminal Referrals Made By Comptroller DiNapoli’s Office

Brooklyn (12):
1. Footsteps Childcare, Inc.
2. Mulberry Bush Center for Child Development, Inc.
3. Donna’s Quality Day Care, Inc.
4. Marie Carmen Daycare Center, Inc.
5. Little Red Riding Hood, Inc.
6. Building Blocks Child Care Center, Inc.
7. Flatbush Haitian Center, Inc.
8. Zion Day Care Center
9. Sanctified Church of God, Inc.
10. Educators for Children, Youth and Families, Inc.
11. Thema Sleepover, Inc.
12. One individual home daycare provider

The Bronx (1):
13. Baychester Early Learning Center, Inc.

Manhattan (1):
14. Dr. Georgina Falu Foundation, Inc.

Queens (5):
15. Women of Faith, Inc.
16. Nu Image Family Center, Inc.
17. Kids Choice Day Care, Inc.
18. Queens Child Guidance Center, Inc.
19. Little Rascals Infants and Toddlers Day Care Services


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