Washington made an estimated $37 million in questionable child care payments over the course of a year using federal dollars, according to the state auditor’s office.
A report the auditor released this week found weaknesses within the Department of Children, Youth and Families that contributed to frequent overpayments in the previous fiscal year.
The audit comes after months of concerns, largely from conservatives, about abuse of federal child care funding in the state.
The Trump administration and the state of Minnesota have been in a standoff over allegations of widespread fraud there. The federal government has tried to freeze billions of dollars in funding for Minnesota and other Democrat-led states.
“For months, we’ve told anyone who asked about child care subsidies that we were auditing the program and would publicly share what we found,” state Auditor Pat McCarthy said in a statement. “Today we can say that the state should take additional steps to detect and prevent improper payments. By doing so, the state can preserve more child care funding for the working families and providers who depend on that support.”
The $37 million the audit identified is made up of $27.2 million in federal Child Care and Development Fund grants and $9.9 million from the Temporary Assistance for Needy Families, or TANF, program.
The state Department of Children, Youth and Families administers federal grants to help working families pay for child care and fund improvements.
In fiscal year 2025, the department spent about $369 million in federal dollars from the Child Care and Development Fund. Most went to monthly child care subsidy payments to providers. Another $68 million was spent under Temporary Assistance for Needy Families.
The audit examined a random sample of 59 of nearly 400,000 monthly child care payments the department made from July 2024 through June 2025. Over a dozen of them had issues, with total improper payments of more than $6,000 between the two funding pots, according to the audit.
Auditors used this sample to extrapolate the total questioned costs. The total of questionable payments does not necessarily indicate fraud, but accounts for cases when an agency doesn’t have adequate documentation to back up its spending or it hasn’t complied with federal requirements.
Not all of the potentially problematic cases were overpayments. The reasons for the concerns varied. Some providers overbilled for services that their attendance records didn’t back up, for example. Others didn’t even respond to requests for these records.
A key issue the audit flagged is that the Department of Children, Youth and Families doesn’t review supporting documentation from providers to verify their requests for funding are allowable before paying them. The department said it doesn’t have the resources to do so, with just a half-dozen auditors reviewing hundreds of thousands of payments.
The report’s conclusion isn’t new. For nearly 20 years, auditors have reported the state hasn’t had adequate internal controls to ensure payments to providers were above board.
In a statement, the department said it “is committed to strengthening internal controls and resolving the outstanding findings identified.”
“To be clear, DCYF has consistently met federal grant management requirements, and the federal audits of our programs have not identified any misuse of funds,” the statement adds.
The department said it is working with providers to address issues, like providing needed documentation.
‘This whole story’s not over’
A leading Republican critic of the Department of Children, Youth and Families said this misused funding is “taking away from those who could actually benefit from it.”
“It’s kind of like they give money and maybe ask questions later, maybe audit later,” said Rep. Travis Couture, R-Allyn.
Couture helped lead the charge this year to pass legislation aiming to add more accountability to the agency’s child care work. The bill passed the House nearly unanimously, but stalled in the Senate.
“This whole story’s not over and I just think we need to be really vigilant and be good fiduciaries of taxpayer money,” Couture said Tuesday.
The Democratic chair of the state Senate Human Services Committee, which handles child care issues, said Washington has long had “robust standards for becoming a licensed child care and early learning provider,” but she plans to work with the Department of Children, Youth and Families to address the continued weaknesses.
“This includes updating the system so errors are identified before payments are made to providers,” Sen. Claire Wilson, D-Federal Way, said in a statement. “It’s on the state to tighten these controls so we can improve our child care system and better serve Washington families.”
The auditor’s office hasn’t been able to investigate the Child Care and Development Fund spending since fiscal year 2021, as major accounting adjustments made by the Department of Children, Youth and Families had made the payments untraceable for years.
The report also found the agency’s internal audits were not timely, often coming six months to a year later, while the goal is four to six months. And in some months, officials completed far fewer of these audits than they were supposed to.
In over 2,200 of its own audits, the department identified $2.2 million in overpayments to providers.
The department took steps to recover the money. It has done the same for the overpayments the external state audit found. The auditor recommended the Department of Children, Youth and Families expand its own internal oversight efforts until it can implement better pre-payment protections.
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The U.S. Department of Health and Human Services, which provides the federal funding, said in a statement Wednesday that “when audits identify deficiencies in a state’s internal controls or compliance with federal requirements, we expect swift corrective action.”
The statement added that the agency “remains committed to safeguarding federal resources, combating fraud and improper payments, and ensuring that childcare funding reaches the families who need it most.”
Facing a budget deficit, lawmakers this year looked to reduce payments to child care providers who serve low-income families that get state subsidies from the Working Connections Child Care program.
The audit released Monday was part of a broader review of nearly $24 billion in federal funds that showed an overall improvement in the state following federal requirements.
This story has been updated with comment from the U.S. Department of Health and Human Services.
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