The State Auditor’s Office (SAO) recently released its Financial Statements and Federal Single Audit, which reviewed federal funds used by state agencies, including the Department of Children, Youth, and Families (DCYF).
While it is common for audits to result in some findings, overall, we are heartened by the general trend of increased quality improvement and the decrease in findings from the previous year. We are actively working to strengthen our internal controls and continue to address issues that have been identified.
The following provides answers to questions individuals may have about the audit findings.
Q. What DCYF programs were audited by the SAO?
A. The SAO reviewed financial statements and expenditures of federal grants and awards to ensure compliance with federal regulations. Audits included:
The Child Care and Development Fund (CCDF) for the Working Connections Child Care (WCCC) program: $296.6 million
Temporary Assistance for Needy Families (TANF) for child care: $67.7 million
The Social Services Block Grant (SSBG) for child welfare-related services: $44.1 million
Foster Care Title IV-E for child welfare payments: $164 million
Q. Did the SAO find fraud in DCYF programs?
A. No. SAO auditors did not find evidence of fraud when they reviewed DCYF’s internal controls and compliance with federal requirements.
Q. If there was no fraud, why did the SAO note $37 million in “questionable payments” to child care providers?
A. The SAO sampled payments to 59 child care providers for the CCDF and TANF audit. Of those providers, 14 payments were questioned due to lack of provider records and overbilling. The amount of the 14 questioned payments totaled $6,123.
The auditor then used the $6,123 to extrapolate – or estimate – a total likely questioned cost of $37 million out of the $364 million in federal dollars we distributed to child care providers last year.
These are not confirmed findings and do not indicate actual fraud or improper payments. Overpayments do not equal fraud.
Q. What happens when a provider doesn’t submit records?
A. During an audit, the SAO will ask a random sample of child care providers for attendance records, receipts, and other documents. If a provider does not respond to the request for documentation, DCYF contacts the provider to request they submit the required records. If a provider does not submit records, the SAO writes a finding and DCYF seeks to recover the funds by writing an overpayment to the provider. Overpayments do not equal fraud.
Providers may provide records late, or during an appeal process, which may lead to the repayment amount being modified or eliminated. This does not change the published results of the audit. Regardless, DCYF emphasizes the importance of providers providing requested records to the SAO.
Q. What findings were made regarding child care provider eligibility?
The SAO made one finding related to eligibility of child care payments. The audit found an overpayment of $9,980 in federal funds that was due to a system coding error related to eligibility. Those funds were returned to the federal grant in February 2026.
Q. What does DCYF plan to do to address the latest audit findings?
A. DCYF will create a corrective action plan to address the SAO’s findings. The plan includes changes DCYF will make to reduce or resolve identified issues.
However, to fix this fully, DCYF will need additional resources to update its pre-payment verification systems and will need to hire more staff to review payments. To address many of these issues, DCYF needs a new electronic payment system. Such an investment would directly address a root cause of the errors found in the audit and significantly reduce improper payments and questioned costs.
With new WCCC billing requirements on the horizon following the passage of HB 2689 this year, DCYF will be updating its subsidy billing guides and provider trainings. DCYF will also provide change management support to providers as new provider attendance policies and billing practices are implemented.
Q. What is DCYF doing to address the overpayments identified in the audit?
A. When DCYF identifies an overpayment in its audit process, DCYF contacts the provider to inform them of the finding and provides technical assistance to prevent future improper payments. DCYF then refers the overpayment to the Department of Social and Health Services, Office of Financial Recovery for formal notice of the overpayment and recovery. This is standard practice with any overpayment found in DCYF’s audit process.
DCYF has written overpayments for the questioned payments and has submitted them to the Office of Financial Recovery to recoup the money.
