The Day Care Crackdown: An Overreaction?

State and county had tools to combat fraud before the headlines hit

Shepherd Express

By Lisa Kaiser

The crackdown on state-subsidized day care providers in the Wisconsin Shares program has been called a “perfect storm”—a combination of a sensationalized, headline-grabbing series in the daily newspaper, an unpopular, down-in-the-polls governor and his new appointee, and conservatives’ contempt for taxpayer spending on central city residents.

But was the new legislation passed this year—in response to the hysteria surrounding Wisconsin Shares—really necessary?

It would be wise to remember that according to the nonpartisan Legislative Audit Bureau, the vast majority of Wisconsin Shares payments were made properly, and these parents and providers shouldn’t have their reputations tarnished.

And, despite the blazing headlines and political posturing, the evidence seems to show that there’s reason to believe that even the 100-plus providers who have had their payments suspended should be given the benefit of the doubt, too, until their cases have been heard. While those who have intentionally committed fraud should be held accountable, those familiar with the program say not all record-keeping errors should be labeled “fraud.”

Tools to Identify Fraud Existed

The Wisconsin Shares program is an element of the Tommy Thompson administration’s efforts to “end welfare as we know it” by creating the Wisconsin Works (W-2) program that mandated that unemployed people work for their benefits.

But parents of young children who work in low-wage jobs are not able to afford quality day care, so the state created the Wisconsin Shares program, which subsidized day care for low-income parents.

Now, Wisconsin Shares critics will say that the program was set up with such loose regulations and oversight that administrators could not go after providers who submitted fraudulent reports—for example, when a provider claimed to have cared for a child even though the child did not show up to the facility.

Yet the state—and Milwaukee County—had the resources to identify what the program terms “overpayments.”

In fact, instructions on how to recover overpayments appear in the 2008 version of the Wisconsin Shares Child Care Assistance Manual. “All overpayments made to providers must be collected, whether due to error or fraud,” the manual states. The overpayments—whether they were the error of the state or county, the day care provider or the parent—should have been deducted from the provider’s payments until all money was recouped.

If the agency documented that the overpayment constituted a “program violation,” it should have been referred to a fraud investigator, who had 90 days to review the entire case file and determine if the allegations were accurate and the fraud was intentional. If so, the provider could be suspended or referred to the local district attorney for possible prosecution. Providers were allowed to appeal the decision.

This process changed this summer, when new legislation was passed to allow the state Department of Children and Families (DCF) to immediately suspend payments if it had “reasonable suspicion” of fraud. Instead of allowing the provider to continue doing business while paying off the overpayment, the state now can effectively shut down these providers by immediately and indefinitely suspending payments.

Stephanie Hayden, spokeswoman for the DCF, said that prior to the change, the state paid the provider while his or her case was being reviewed and appealed.

“They would have been paid during that time,” Hayden said. “What if they weren’t serving any children? We would have paid them for not doing anything.”

The Appeals Process

Many of the suspended day care providers are attempting to appeal their cases before an administrative law judge. But the wait is long and frustrating; dates are being set as far away as March 2010 for those who have been suspended recently.

DCF’s Hayden said that the state is adding more legal personnel to work on the appeals, and the March cases will likely be bumped up. Three appeals have been completed, Hayden said—one in favor of DCF, while the two remaining cases are waiting for a decision.

The providers and their advocates have expressed frustration with the process, saying that the state’s representatives show up unprepared and then require hearings to be rescheduled.

What’s more, attorney N. Lynette McNeely, legal redress chair for the Waukesha County Branch of the NAACP and an advocate for the day care providers, questions the accuracy of the information being used as evidence against the providers.

The hearings therefore pit the county’s sometimes questionable records and the testimony of investigators against the providers’ records and testimony for events that could have occurred more than a year ago.

“If there’s a decision based on hearsay that someone committed fraud, that’s a problem,” McNeely said. “I don’t know if a judge can make a decision based on that.”

DCF’s Hayden said the county’s records are only “one of the things” being used as evidence against the suspended providers.

The State Takeover

The root of McNeely’s worries is the state’s impending takeover of Milwaukee County’s responsibilities for administering Wisconsin Shares and other public benefits programs. The county had employed caseworkers who were responsible for authorizing payments, ensuring parents’ eligibility and overseeing providers.

But a former caseworker who asked to remain anonymous told the Shepherd that county employees were overloaded with clients and often “there were too many cases to check.” Fraud-flagging protocols were not being followed, she said, and both the state and the county were responsible for the system falling apart after 2002.

Some day care providers have said that when they’d phoned the county to correct errors, their calls weren’t answered or returned. The former caseworker said that letters sent to the providers generated little response.

DCF’s Hayden said that the state had contracts with counties to administer the program—including suspending payments if fraud was detected.

“It was part of their contractual duty to make sure that the program was being run well and making sure that there wasn’t any fraud,” Hayden said. “We [state agencies] probably could have [suspended payments] but because of those contracts with the counties… now we realize that maybe that wasn’t working as well as it could have.”

But Milwaukee County, under County Executive Scott Walker’s leadership, failed to utilize $4 million since 2004 that could have been used to oversee the program.

The county’s failure to properly administer public benefits programs has led to the state DCF’s move to take over Wisconsin Shares in January 2010.

Yet the state is using attendance and payment records generated by the county—the same county it cannot trust to administer the program—to suspend payments to providers.