Too Many Snacks?


Most working parents depend on third-party child care. Finding the right daycare, babysitter, nanny or after school program can be tricky. Parents are looking for a safe environment for their kids to learn and grow. They may wonder about the child to instructor ratio or agonize over the cost. But, how often do parents wonder whether their daycare provider is ripping off the federal government? That’s just one of the questions raised by today’s Fraud of the Day from about an Indianapolis couple accused of child care fraud.

The article reports that the couple is ”accused of faking documents to collect possibly millions of tax dollars for meals they didn’t serve to children who weren’t there.’? The investigation, a cooperative effort including the Indiana Family and Social Services Administration, U.S. Department of Agriculture and Internal Revenue Service, is ongoing but investigators say that the child care fraud ”totaled several million dollars.’? (Who knew child care could be so lucrative?)

So, what happened? According to the indictment the couple used a systematic approach to inflate the hours that children spent at the center and the amount of meals they ate while there. Specifically, the indictment asserts the couple ”hired several employees, identified only by initials, to keep track of how many hours children were actually at the centers and then bump those up to the maximum allowed to increase state reimbursement.’? The couple also allegedly ”told the employees to falsely claim that children had as many meals and snacks as possible, even if they weren’t there.’? And, what if employees didn’t want to go along with it? The indictment says they were ”threatened with termination.”

Employees were also allegedly trained how to alter records to hide the real data from state officials. Authorities allege that employees illegally obtained ”’pin’ numbers from parents, who were issued swipe-cards and pin numbers by the state for documenting how much time the children actually spent at the centers.’? Regardless, of how much time the children were actually at the center, investigators say the employees and their supervisors documented the maximum amount of time. (If these allegations are true, can you image that employee training? ”Today we will learn how to commit fraud…”?

The daycare facilities were shut down for all practical purposes in January when their federal funding was stopped pending results of the fraud investigation. As a result, approximately 164 families and 320 children were forced to find alternative daycare options.

It is important to note that this couple has only been accused – not convicted of any wrongdoing. They are presumed innocent until proven guilty and are entitled to their day in court.

That said the case is instructive. How easy would it be to fake a few records about the number of snacks a kid ate at daycare? It sounds pretty easy to me. The more important issue and today’s question of the day is? how can we prevent this type of fraud from happening?

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Couple Accused of Swindling Millions in Day-Care Dollars,” written by Diana Penner and published by the on September 26, 2012.

A husband and wife who operated day-care centers for Indianapolis’ neediest children are accused of faking documents to collect possibly millions of tax dollars for meals they didn’t serve to children who weren’t there.

The couple faces decades in federal prison and losing dozens of properties if convicted.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.