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May 12, 2009


DiNapoli: Daycare Providers Were Improperly Paid $125,000 in Inappropriate Food Program Reimbursements

Eight daycare providers used various methods to potentially defraud the State Health Department (DOH) in seeking $125,400 in payments they were not entitled to through the federally funded Child and Adult Care Food Program, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“The food program is an important tool to ensure that New York’s children get proper nourishment at daycare centers,” DiNapoli said. “But DOH has to ensure that daycare centers are only reimbursed for meals actually served and at the correct reimbursement level. It’s appalling that daycare centers are trying to game the system and get funding for meals they never served. Every dime lost to fraud means less nourishment for kids in daycare programs.”

This audit is the third in a series of six audits looking at the use of grant monies for government-funded children’s programs. This audit, which covered July 2004 to April 2008, found that DOH did not effectively monitor the daycare centers and had even previously identified the same or similar problems at six of the eight centers but failed to take sufficient action to ensure the problems were corrected. DOH administers the food program for the U.S. Department of Agriculture.

Auditors determined that in order to receive more reimbursements from DOH, the daycare centers altered documentation, misclassified program participants’ income eligibility and inflated the number of meals actually served. The amount of money the centers were reimbursed by DOH was dependent on the number of meals served and the income eligibility of the children, which has three different income levels.

Specifically auditors found:

  • 78 percent of income eligibility applications at one center appeared fraudulent because information on the parent’s income was altered using white out or was completed in different handwriting or ink.
  • Another center requested reimbursement for 1,467 meals when meal counts and daily sign-in records verified only 776 meals were served.
  • One center incorrectly classified all 43 of its enrolled children in the income category that provided the center with the highest reimbursement rate when only 19 actually belonged in that category.

In addition, auditors found one center was not licensed for the number of children in its care and another center fed children out of a communal bowl and allowed the children to share utensils.

As a result of DiNapoli’s audit, DOH declared five of the centers to be seriously deficient in meeting regulation requirements and has since terminated three of the centers from the food program. Of the $125,400 that DiNapoli recommends recovering from the centers, DOH has collected $40,565.

Auditors selected the centers to review based on a previous audit (2006-S-33, released July 2, 2008) by the Comptroller’s office that found incidents of suspected fraud at 19 daycare centers that received grants from the New York State Office of Children and Family Services. This audit resulted in 19 referrals to law enforcement and recommended that OCFS recover $2.2 million in payments.

In addition, a third audit (2007-N-11, released May 29, 2008) by DiNapoli’s office found widespread noncompliance of health and safety requirements by legally exempt home daycare providers, including one convicted sex offender collecting state funds to care for three children.

DiNapoli’s office recommends that health department officials:

  • recover the remaining $84,835 in unsupported and inappropriate claims;
  • ensure centers correct problems cited in DOH’s program reviews;
  • document that centers have valid licenses to operate;
  • audit the remaining centers that received OCFS grant funds and food program funds but were not included in this audit.

DOH’s full response is included in the audit. Click here to view the audit.


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