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Friends of the Fourth
District:
A few months ago, I had a chance to share with you details about the
serious problem in Los Angeles County and throughout the State of
California of criminals defrauding taxpayer subsidized programs
which provide low-income families with money to offset the costs of
child care. The State estimates this type of fraud exists in up to
seven percent of all of the child care cases statewide. We know this
type of fraud is costing California’s taxpayers millions of dollars
every year, but here in Los Angeles County, we also know how to
fight back against this type of fraud.
You may have recently read about a local case that perfectly
illustrates what is happening. In early October 2006, 11 local
residents were sent to prison for up to seven years for stealing
$1.25 million in taxpayer funds that should have been used for child
care. The scam occurs when these criminals bill State and local
agencies for child care reimbursement for employees that don’t
exist, care centers that don’t exist or even for children who don’t
exist. One of the 11 recently sentenced was pocketing nearly $20,000
every month even though she was not caring for a single child.
So how are these criminals able to get away with this fraud?
Depending on their level of income, Los Angeles County residents
eligible for child care funding get those funds from one of three
sources; Stage 1, Stage 2 or Stage 3. The Stage 1 program is for
families on welfare and is administered directly by the County.
Stage 2 is for families transitioning off of welfare but still rely
on a certain level of assistance. Stage 3 is designed for the
working poor. Fraud occurs in every stage because criminals
sometimes bill each one.
The County of Los Angeles has a very successful taskforce for
attacking fraud in Stage 1 – the only portion we can control. Last
year alone, this partnership saved taxpayers over $2 million in
Stage 1 child care fraud in Los Angeles County and actually
identified and helped prevent over $50 million in potential fraud
before it actually occurred.
We are making great strides to curb Stage 1 fraud, but Stages 2 and
3 are funded and administered directly by the State of California.
They have no clear policies in place that meaningfully address
program integrity or quality control, let alone a means of
preventing criminal activity in child care programs. As successful
as our local efforts have been, we can only address fraud in Stage
1. The result is that a majority of child care funding – nearly $235
million given out locally under Stage 2 and 3 last year – is left
wide open to fraud.
Need another example to know how bad the problem is? The recent
prison sentences for 11 Los Angeles County residents were a result
of the work of our Stage 1 fraud team. But only $68,000 of the $1.25
million they stole occurred in Stage 1. The other $1,182,000 in
fraud happened in Stage 2. The bottom line is that crooks know it’s
easier to cheat the State’s two programs because there is no
oversight and no fear of prosecution. According to a National
Women’s Law Center study, there are over 280,000 children waiting
for subsidizes child care in California. We have over 37,000
low-income children on waiting lists for subsidized child care slots
in Los Angeles County alone. The fact that some of these much needed
slots are being occupied by children that don’t exist is simply
outrageous.
Last year, I joined with Senator Bob Margett (R-Glendora) in
authoring Senate Bill 1421 which would have used the best practices
of our fraud prevention program in Los Angeles County as a test
model for a similar statewide program in Stage 2 and Stage 3 child
care. While I’m pleased to say that the bill received bipartisan
support and passed two policy committees, SB 1421 was parked in the
Senate Appropriations Committee until after the session ended,
essentially killing the bill. But the problem remains.
I will continue to advocate in Sacramento for a comprehensive
statewide solution to this problem. Senator Margett agrees with me
on this and intends to introduce another bill in the new legislative
session. The new bill will call for a study and pilot program in
several counties to test fraud prevention practices. The lessons we
learn from this effort will serve as a basis for implementing a
sensible, cohesive policy for ensuring integrity in these critically
needed programs.
It is my hope that legislators will join with us in support of this
reform in the months ahead. This reform will ensure that those who
truly need this child care funding – parents who are working to
transition off of welfare and into jobs – can continue to access the
funding they legitimately need. It will also ensure that we have
better quality control over the people applying for this funding and
what they are using it for. Most importantly, it will be a
tremendous step forward in curbing the millions of dollars in
taxpayer funds that are taken every year by the criminals who
defraud this important program.
DON KNABE
Supervisor, Fourth District
County of Los Angeles
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