Minnesota Republicans said Tuesday they want to crack down on subsidized child-care providers who commit fraud, following a television news report that suggested illegally obtained funds may be going overseas to finance terrorist groups.
State and federal officials said Tuesday that they've seen no evidence of a link between Minnesota day-care operators and overseas terrorist groups, but that they welcome any additional resources to investigate fraud against the state's child-care subsidy program.
The legislation introduced Tuesday would enable the Minnesota Department of Human Services (DHS) to close child-care businesses that participate in the program but fail to fully cooperate with investigators. It would also create new criminal and civil penalties for anyone who transferred fraudulently obtained money to countries on the U.S. State Department's travel ban list.
The legislation, announced abruptly at a news conference, would also direct the state Legislative Auditor to investigate the Child Care Assistance Program, which subsidizes the child-care expenses of about 29,000 low-income children per month.
It's in response to a Fox 9 news report that said Minnesota refugee families are taking suitcases full of cash on flights from the Minneapolis-St. Paul International Airport to Somalia and the Middle East where terrorist groups are active.
"The scale of this accusation is extremely troubling," said Rep. Matt Dean, R-Dellwood, chief author of the bill and chairman of the Health and Human Services Finance Committee. "This [legislation] will put some teeth into fraud prevention."
Acting Human Services Commissioner Chuck Johnson said his agency is looking into the concerns raised in the report, but he cast doubt on the scope of the fraud described. The TV report said that child-care fraud could be costing Minnesota taxpayers up to $100 million a year. Johnson noted that total funding for the Child Care Assistance Program in 2017 was just $248 million, and the largest provider in the program has billings of $12 million.
"That [$100 million estimate] does not seem credible based on the size of the program and what we know about these providers," Johnson said.
At a Senate committee hearing Tuesday called to explore possible fraud in the state child-care assistance program, DHS Inspector General Carolyn Ham cautioned against a "rush to judgment" against child-care centers, while highlighting several measures that would improve oversight and hold fraudulent providers accountable.
She suggested that the state be given the power to permanently disqualify providers once they are convicted of a single case of fraud. She also suggested that the standard for disqualifying providers from the program be changed from "clear and convincing" to "preponderance of evidence," which is a lower burden.
Ham said she was aware that cash "regularly leaves the airport," in part because some people leaving Minnesota are going to countries where they do not have bank accounts.
"In none of our [criminal] cases have we had specific evidence of terrorism," she said in testimony. "And if we did, we would immediately share it with the Department of Homeland Security."
A number of legislators also sounded doubtful of the TV news report at Tuesday's packed Senate committee hearing. Sen. Matt Klein, DFL-Mendota Heights, said the report lacked adequate evidence to support its core assertions, including that money stolen from the program is going overseas to fund terrorist groups in the Middle East. "This is extremely inflammatory and polarizing," he said at the hearing.
The last time federal prosecutors indicted a Minnesota child-care provider for defrauding the government was in January 2017, and the charges made no mention of transferring funds abroad.
Gregory Brooker, the U.S. attorney in Minnesota, would not comment on the allegations but said in a statement: "Fraud in government-funded programs has been and will continue to be aggressively prosecuted by the U.S. Attorney's Office. As with every criminal case, we focus on the specific evidence to prove the elements of the offense."
Fraud unit doubled
Minnesota has ramped up its investigation of child-care fraud reports in recent years. It has closed 13 child-care centers following fraud investigations since 2014, with a focus on operators who inflate the number of families they serve to collect extra state subsidies, and collected $4.6 million in court-ordered restitution for fraudulent overpayments, state officials said.
Johnson added, however, that there was no evidence of fraudulent money being funneled overseas to fund terrorist groups in any of the criminal cases pursued by the DHS Inspector General's Office since 2014. "We are continuing to aggressively pursue fraud wherever we see it with these programs," he said. "And wherever possible, we will shut down the [child care] centers that are responsible."
Timing will be a challenge for the proposals, which came forward very late in the session. They would significantly expand the state's enforcement powers to investigate fraud in the child-care assistance program. It follows years of efforts by investigators at DHS to root out billing abuses by child-care providers and parents who collude in billing state programs for services never rendered.
Over the past six years, DHS has intensified its investigations of fraud, based on reports that providers were exploiting parents and their children to divert money from the assistance program. The state was also responding to frustrations from county administrators, who complained that they lacked the staff and expertise to pursue complicated fraud cases.
In response, a specialized child-care fraud unit was created within the DHS Office of the Inspector General, which gained broad new powers including the ability to terminate payments to child-care providers for fraudulent billing. Last year, lawmakers approved funding that enabled the fraud unit to double in size through the addition of eight new investigators.
In 2015, a Minneapolis day care center, Salama Child Care, was shut down after authorities determined that it billed the state for hundreds of hours of care that were never provided, even for days when it was closed.
Gov. Mark Dayton said he hasn't looked at the bill yet and would need to review it.
"I share the concern that the money not, first of all, be stolen from the state child-care program, and then sent to elsewhere and used for terrorist activities," he said.