Somali terror group cashing in on your tax dollars? Minnesota’s childcare fraud whistleblowers warned about a decade ago.
Photo by Matt Roth for The Washington Post via Getty Images
Stillman’s testimony prompted the Minnesota’s Office of the Legislative Auditor in 2019 to issue a report in which auditors stated they could not verify the alleged $100 million in annual fraud and concluded they could not provide a reliable estimate.
However, they believed the fraud was greater than the $5 million to $6 million prosecutors were able to prove in several criminal cases where defendants were charged with felonies and ordered to pay $4.6 million in restitution for their participation in a childcare fraud scheme.
Auditors also said they could not substantiate Stillman’s claims that any of the alleged funds were making their way into the pockets of terrorist groups.
“On the other hand, we found that federal regulatory and law enforcement agencies are concerned that terrorist organizations in certain countries, including Somalia, obtain and use money sent from the United States by immigrants and refugees to family and friends in those countries,” the auditors wrote. “In addition, federal prosecutions have convicted several individuals in Minnesota of providing material support to terrorist organizations in foreign [countries].”
Federal and state officials have been concerned about Child Care Assistance Program fraud since at least 2013, the report added.
The auditor’s report referenced an August 2018 email from Jay Swanson, the then-manager of the CCAP Investigations Unit, in which he substantiated Stillman’s allegations.
“Investigators, as well as the Supervisor and Manager of this unit believe that the overall fraud rate in this program is at least 50% of the $217M paid to child care centers in CY2017,” he wrote in an email to then-Inspector General Carolyn Ham.
Swanson claimed that much of the “pervasive” fraud could be attributed to “large scale overbilling” by “many child care centers,” eligible mothers recruited by providers to receive cash kickbacks, fraudulent centers opening in the same location as a previous center that was ineligible for the program, and shell care centers that exist only to scam the program, among numerous other schemes and oversight gaps.
“In my opinion anyone who claims that Mr. Stillman was making false statements on this topic either has no knowledge of this situation, or is attempting to shift the focus of the conversation away from a very serious issue,” Swanson concluded in his letter to the inspector general.
During a December 2018 hearing before the state lawmakers, IG Ham disputed Swanson’s claim.
“I do not trust the allegation that 50% of CCAP money is being paid fraudulently,” Ham remarked.
The CCAP Investigations Unit also warned about rampant fraud, according to the 2019 auditor report. The unit’s manager stated that investigators “do not believe, despite the number of cases investigated thus far, that any real progress has been made regarding CCAP fraud.”
“Investigators regularly see fraudulent child care centers open faster than they can close the existing ones down,” the manager explained.
While Minnesota DHS officials did not dispute the existence of a CCAP fraud problem, they argued that $100 million in fraud, as Stillman had claimed, was “not a credible number.”
“We’re concerned about fraud and are aggressively pursuing it, but it’s not at that level. Funding for the Child Care Assistance Program for 2017 was $248.2 million,” the MDHS said in a statement in May 2018, responding to Stillman’s allegations.
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Photographer: Simone Lueck/Bloomberg via Getty Images
Then-acting MDHS Commissioner Chuck Johnson reiterated that Stillman’s fraud estimate was not credible. However, he admitted he could not put a reliable number on the total fraud.
By the time the 2019 report was published, dozens of Minnesota residents and childcare centers had been charged with CCAP fraud.
Since these issues were initially brought to the MDHS’ attention, Minnesota has transitioned CCAP oversight and administration to the Department of Children, Youth, and Families. When reached for comment concerning childcare fraud, MDHS directed Blaze News to contact DCYF. That department did not respond.
Minnesota’s long-standing childcare fraud issues recently gained national attention, thanks to journalist Nick Shirley’s on-the-ground reporting in December. This explosive coverage has ignited fierce criticism of the state’s Democratic leadership while shining a harsh light on broader oversight failures that extend beyond the CCAP.
This week, the Minnesota Office of the Legislative Auditor released a performance audit highlighting grant issuance lapses in the Minnesota Department of Human Services’ Behavioral Health Administration, the department responsible for overseeing mental health programs and alcohol and drug abuse services.
Auditors aimed to assess whether the BHA had “adequate internal controls and complied with significant finance-related requirements related to oversight of grants.” Instead, they found that the administration had failed to comply with “most” of the tested requirements, concluding that it lacked sufficient internal controls over grant funds.
Some of the report’s shocking findings included nearly $300,000 in unsupported grant reimbursements, $915,000 in grant payments for work performed before fully executed agreements were established, $2.5 million in grants awarded without using a competitive bid process, and the improper use of single-source grants.
Additionally, auditors noted that, while MDHS and BHA staff were cooperative with the audit, they provided “a number of documents” that were “either backdated or created after our audit began.”
When reached for comment about the OLA report, Minnesota’s Department of Human Services provided an excerpt from temporary Commissioner Shireen Gandhi’s testimony at a Tuesday Legislative Audit Commission hearing.
During her opening remarks, Gandhi stated that she was “shocked” to learn that staff have provided auditors “anything other than an accurate representation of the work done.”
“With respect to the audit report, while it’s upsetting that DHS has findings in an area that we have placed concerted effort, the OLA’s report highlights the importance of the compliance work that is under way at the department. And the findings provide us with a road map for our focus going forward to continue strengthening oversight and integrity of behavioral health grants,” Gandhi said. “I take the report seriously, I accept responsibility for the findings, and I will ensure that DHS closes the findings.”
Eric Daugherty of Florida’s Voice reacted to the new “BOMBSHELL” report, stating that it confirms the MDHS “FABRICATED RECORDS and did not verify grant recipients, tried COVERING THEIR TRACKS, enabling massive fraud.”
He called on Gov. Tim Walz to immediately resign. Walz has already dropped out of his re-election campaign amid the state’s ongoing fraud controversy.
“Everyone who did this must be arrested,” Daugherty wrote.
It is not yet clear whether any of these reports will result in criminal investigations.
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