Inspectors Find Fraud at Centers for Children

Inspectors Find Fraud at Centers for Children
By SAM DILLON
Published: May 18, 2010


Federal undercover investigators found workers at federally financed child care centers frequently misrepresenting information about applicants’ job status and earnings to fraudulently register ineligible children, the Government Accountability Office said in a report issued Tuesday.

The investigators posed as parents or guardians of fictitious children and used bogus pay stubs and other documents to seek to register for day care services at Head Start centers, the report said. In 8 of 15 undercover tests, employees lied on federal forms about the applicants’ family income and other information to gain approval for the ineligible children, the report said.

An employee at one New Jersey Head Start center disregarded $23,000 worth of income to qualify a too-affluent, fictitious family the undercover agents were seeking to register.

“Now you see it, now you don’t,” the New Jersey employee told the investigators, referring to the $23,000 in income, the G.A.O. report said.

Head Start, an agency of the Health and Human Services Department with a budget of about $9 billion this year, provides child care and other services to nearly one million children nationwide. To be eligible, children must be from families whose incomes do not exceed 130 percent of the poverty level, or about $28,600 a year for a family of four.

Examining records at one nonprofit Head Start center in Texas, federal investigators found that the center had enrolled two families with incomes higher than $110,000, the report said.

“The system is vulnerable to fraud,” Gregory Kutz, the G.A.O.’s managing director for special investigations, told the House education committee in a hearing on Tuesday.

Investigators carried out their undercover inquiries at 13 Head Start centers in California, Maryland, New Jersey, Pennsylvania, Texas, Wisconsin and Washington, D.C. In an initial inquiry after two calls to a G.A.O. fraud hot line, investigators found fraud and abuses at two additional centers, one in the Midwest and one in Texas. Mr. Kutz said in an interview that he could not identify the Midwestern state or the names of any of the centers because the investigation was continuing.

The G.A.O. will soon refer the Head Start findings to the inspector general’s office at the Health and Human Services Department for its consideration for a criminal inquiry, Mr. Kutz said.

The report and the hearing left unclear just how widespread the fraudulent practices may be. The investigation found fraud in more than half of all the centers it examined. But those were only a tiny fraction of the 1,600 or so nonprofit operators that receive Head Start money to run more than 3,000 programs.

Republicans on the House committee called for a broader investigation.

“The G.A.O. has brought to light a disturbing pattern of abuse,” said Representative Judy Biggert, Republican of Illinois.

In a letter to the committee, Kathleen Sebelius, the secretary of health and human services, said that President Obama had been briefed on the investigation and that her agency had begun its own internal investigation and would make unannounced visits to Head Start centers.

One in five preschool children live in poverty, but less than half of the children eligible for Head Start are able to receive federally funded child care because of the agency’s long waiting lists.

“That’s why it’s vital that Head Start enrollment procedures are followed and that taxpayer dollars are used as intended,” Representative George Miller, a California Democrat and chairman of the committee, said in opening the hearing.

Minutes later, Mr. Kutz played videotapes in which various employees at Head Start centers, unaware that they were being taped, were seen conversing casually with the undercover investigators about how they would lie on the federal applications.

After viewing the video, Mr. Miller sought to confirm with Mr. Kutz that it had shown “people in different programs appearing to doctor the income requirements.”

“I wouldn’t say appearing to,” Mr. Kutz replied. “I’d say they did. They committed fraud.”

Mr. Kutz said the motivation for the employees’ behavior was not entirely clear. In some cases, it appeared that the management of the nonprofit agencies receiving Head Start money were pressuring employees to lie on the applications to make sure the agencies met enrollment targets.

A version of this article appeared in print on May 19, 2010, on page A18 of the New York edition.

http://www.nytimes.com/2010/05/19/education/19headstart.html