NE audit of DHHS child care subsidy program exposes as much as $12.8M in improper payments • Nebraska Examiner

LINCOLN — A new probe of Nebraska’s child care assistance program has uncovered what the state auditor calls rampant abuses that led to as much as $12.8 million in improper payments to child care providers.

A 33-page audit released Tuesday looked at a sample of nearly $93 million in federal and state funds spent by the Nebraska Department of Health and Human Services on child care subsidies during a nine-month period starting in July 2023.

State Auditor Mike Foley said his team found that some providers took advantage of the state’s “lax oversight” of billings submitted through the Nebraska Family Online Client User System (NFOCUS). 

He said offending providers were “startlingly successful” in bilking DHHS out of payments in excess of those to which they were entitled. The public agency subsidizes child care centers and home care providers on a sliding scale basis for the care of children from low-income families.

“Some of the spurious billings were so wildly excessive that one wonders whether anyone at DHHS took even the most cursory glance at them before authorizing their payment,” Foley said. 

Millions in billings were at least “inordinately inflated” by various providers, he said, and may be “outright fraudulent.”

‘People tiptoe a little’

Overall, Foley said, it appeared that invoices to the NFOCUS system were routinely processed and paid with little, if any, meaningful oversight. Foley said the audit reflects a “classic problem” in cases of financial abuse.

“People tiptoe a little, fudge the number and nobody says anything. Then it gets bigger and bigger and bigger,” he said.

Among examples of improper billing cited by the audit team:

• DHHS at times paid double and triple billings for the same child during the same period of service. In one instance, a provider billed and was paid by the agency a “toddler” rate for a child and then again, for that same child, a preschool rate for the same two weeks during February. The audit team cited another child care provider for 13 instances of similar multiple billings.
• Billings were processed and paid for child care services supposedly provided to 210 children on Thanksgiving Day 2023, when the child care centers were not even open for business.
• Some child care providers billed for more days than were in the month covered. For instance, Foley said in a news release, one provider billed DHHS and was paid for 168 partial days of service during February, yet only 29 partial days would have been possible. Another provider billed DHHS and was paid for 120 partial days of service during January when only 31 billing days would have been possible. In another situation, the provider billed and was paid for 40 full days of service and 78 partial days in a single month.

The audit covers July 2023 through March 2024, and the sampling of cases reviewed found $328,997 in questionable costs due to various regulation violations, including claims not agreeing with attendance records and parents’ employment that did not appear to meet a requirement for economic self-sufficiency. 

With the dollar error rate for the random sample being 13.85%, the team estimated potential dollars at risk, or loss, for the audit period to be $12.87 million.

The auditing team provided DHHS managers opportunity to review and respond to its comments and recommendations, and an agency response is included in the report. 

DHHS also released a media statement, saying it agrees with the audit findings and has started processes to recoup funds questioned in the audit. 

‘Tireless efforts’ appreciated, CEO says

It also said that an investigation already is underway for one of the providers noted in the audit. 

DHHS said that its practices include “internal targeted high-risk reviews” of provider invoices. When a review identifies billed units that exceed authorization, the agency can refer the matter to its fraud unit and can recover full or partial payments. Child care providers also are trained, and refreshed, on billing procedures.

CEO Steve Corsi said that he appreciated Foley’s “tireless efforts to safeguard taxpayer dollars.”

Corsi said that since being appointed as DHHS’ top administrator less than a year ago, the agency’s primary focus has been to put in place effective guards to ensure taxpayer dollars are allocated properly.

“These efforts will be continued aggressively,” Corsi said. “We look forward to the ongoing collaboration with the State Auditor’s Office.”

Foley said that discussions with Corsi left him confident that problems would be fixed.

As noted in the audit, Nebraska’s child care subsidy program uses state and federal funds to assist qualified families with the cost of child care. Applicants must meet requirements, including income eligibility, outlined in federal Child Care and Development Block Grant regulations.

Financial help is available on a sliding fee scale to eligible families according to a child’s age and special needs. If a family requests a child care subsidy to facilitate a parent’s employment, the family is required to document that the subsidy helps them retain a job that leads to economic self-sufficiency.

Wrong rates, overlapping times, no attendance logs

The audit released Tuesday delved into payments made to providers who submitted billings through the NFOCUS system.

Providers are supposed to keep detailed attendance logs for children, and the government subsidy is generally granted on a partial- or full-day basis up to a maximum of 60 hours a week.

Among other examples of improper billings that Foley and the audit team said violated administrative requirements that are to be enforced by DHHS:

• Numerous provider billings exceeded the allowable rate for the child. Generally, child care rates for infants and toddlers are higher than those for older, preschool-aged kids. The audit team found 690 instances of DHHS paying rates that exceeded what was allowed based on age.
• Some providers failed to reduce billings by the amounts of the co-payments made by families served, resulting in overpayments by DHHS.
• Provider billings were found to overlap with times when the child already was being cared for by another provider.
• Billings were made for times with little or no attendance log information to document the presence of the child. 
• Providers billed for families whose low work pay, according to the audit team, could not have given the family the self-sufficiency required to receive subsidies for employment purposes.
• Billings were paid to providers that had exceeded their licensed capacity. 
• One owner operating two separate centers under two different licenses billed DHHS for a partial day of service for six children at each location, even though less than five hours of service in total was provided. Of the six kids, one received only a single hour of service at each location, but the owner billed and was paid for two partial days of service.

Foley said in an interview the crux of the problem is that DHHS “spot checks” cases after providers plug the billing information into the online system used for the child care subsidy program. 

He said the NFOCUS system is not set up to audit and relies on human oversight.

“That is where they’re dropping the ball,” Foley said of DHHS workers. “They go in after the fact and spot check — but not very thoroughly.”