Auditors found the state often pays providers before verifying documentation, relying instead on audits after the fact, a system critics describe as “pay and chase.”
Washington’s troubled childcare subsidy system is facing renewed scrutiny after a sweeping new state audit found tens of millions of dollars in questionable payments, adding to a growing list of red flags involving oversight failures, missing records, and weak financial controls at the Department of Children, Youth and Families (DCYF).
The Washington State Auditor’s Office (SAO) released its annual review of $23.7 billion in federal funds across 28 programs, identifying serious weaknesses in how the state detects improper payments in child care subsidies. Auditors estimate that those failures contributed to $37 million in questionable payments in 2025 alone, according to KOMO news.
According to the audit, problems with documentation and verification continue to plague the system, including $27.2 million in questionable payments tied to the federal Child Care Development Fund, and $9.9 million in questionable payments tied to Temporary Assistance for Needy Families (TANF).
Providers also failed to produce attendance records, overbilled for services, or lacked required parent signatures. Auditors found the state often pays providers before verifying documentation, relying instead on audits after the fact, a system critics describe as “pay and chase.”
Even DCYF’s own internal reviews paint a troubling picture. 67 percent of audits identified overpayments, while 22% of payments reviewed were overpayments, totaling $2.2 million.
The findings add to a mounting pattern. Auditors said it was “impossible” to trace payments to individual providers for four years due to missing data. Additionally, more than $416 million in spending was previously “questioned” due to inadequate documentation. DCYF also acknowledged 1,372 overpayments totaling $2 million in 1 year.
State Auditor Pat McCarthy said the state must take additional steps to prevent improper payments, emphasizing the need to preserve funding for families who depend on the program.
Rep. Michael Baumgartner (R-WA) previously called for a federal program-integrity review of Washington’s welfare and child care funding systems. Speaking on The Ari Hoffman Show, Baumgartner said the push was driven by both the alarming audit findings and fraud scandals in other states like Minnesota. “Any time billions of dollars are being spent, taxpayers deserve a regular review,” Baumgartner said, emphasizing that oversight “shouldn’t be a Republican or Democrat issue.”
In a letter to HHS and USDA, Baumgartner requested independent verification that Washington’s safeguards are working or identification of gaps before they escalate into a larger scandal. He warned that systems relying on weak upfront verification and heavy post-payment audits are especially vulnerable to fraud.
The audit comes after months of public concern about potential fraud, fueled in part by large-scale cases uncovered in Minnesota and investigations by independent journalists in Washington alleging “ghost daycares” and billing irregularities.
Faced with the mounting evidence, Attorney General Nick Brown called the fraud allegations “baseless,” even as audits continue to document systemic weaknesses.
While the audit stops short of declaring widespread fraud, it confirms what critics have warned for months: Washington’s child care subsidy system has serious vulnerabilities, and millions of taxpayer dollars are at risk. With $37 million now flagged in a single year, and hundreds of millions more previously questioned, pressure is building on state leaders to move beyond audits and implement real accountability before the problem grows even larger.
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