Texas Reviews Child Care Spending and Finds More Than $4 Million in Fraud

AUSTIN, TX — More than $4 million in federal money spent on child care scholarships in Texas was considered “improper,” a new report ordered by Gov. Greg Abbott found.

Abbott’s directive followed reports of a $110 million child care fraud scheme in Minnesota uncovered by independent journalist Nick Shirley.

The Texas Workforce Commission and Texas Health and Human Services Commission are two of four agencies that oversee Texas’ child care system — and were tagged by the governor with investigating payments. 

The report released in February by the two Texas agencies details the state’s ongoing safeguards to prevent, stop and prosecute fraud and what is being done to clamp down on it further. It also highlighted part of the last improper payment report submitted to federal regulators, which states Texas’ improper payment rate is 0.44% — equivalent to about $4.3 million of the more than $990 million budget.

“This report confirms that Texas maintains strong anti-fraud measures that have kept improper payments extraordinarily low compared to other states,” said Andrew Mahaleris, Abbott’s press secretary. “Governor Abbott will continue working to further enhance oversight, fraud reporting tools, and enforcement to ensure every taxpayer dollar serves its intended purpose.”

Abbott issued six directives to the state workforce and human services commissions to identify if Texas had a problem with improper payments, specifically with fraud.

He wanted the two agencies to: review current data collection efforts to make sure they’re sufficient; identify high-risk providers and bring them into compliance; ensure all providers data on children receiving scholarships is accurate; make sure the state’s oversight process is upheld uniformly across the state; improve the online fraud reporting portal; and submit fraud investigations to state or federal prosecutors if necessary.

Of the approximately 7,500 child care providers who accept child care scholarships, 125 were flagged as high risk by the state agencies during this investigation.

Other fraud prevention measures include: regular, in-person assessments of child care providers; an attendance tracking system; a hotline and online portal for allegations of fraud, and a quick response to those allegations by state boards.

Sherry Durham, the senior director of Child Care for Workforce Solutions of Deep East Texas, said the regulations Texas has in place make sense and are easy enough to maintain. The state’s safeguards could be a model for other states, she said.

“First and foremost is child safety,” Durham said. “But then, also, if there’s money coming from the federal government, you want to be good stewards of it.”

These measures, many of which have been built upon since 2011, cut improper payments from 8.28% in 2007 to less than 0.5% in 2022, according to the latest report, which cited the federal improper payment report submitted to the Administration for Children and Families, the largest federal human services administration, every three years.

This national average for improper payments is 3.96%.

The last report submitted by Texas was in 2022. The next report is due later this year.

The Texas Senate Health and Human Services Committee is asking for public recommendations and ideas on fraud prevention in the child care and Medicaid system. The meeting is at 9 a.m., April 8, in the Capitol Extension Office. The notice does not indicate whether online participation will be permitted.

Advocates have been walking a fine line since these allegations because of the heightened response by the federal government and state governments, including Texas.