Over $1.3 BILLION in Washington childcare spending ‘unauditable’ as oversight failures mount

Washington state’s childcare subsidy system is facing explosive new scrutiny after state auditors confirmed that more than $1.3 billion in spending over four years was effectively unauditable. This raises serious questions about how taxpayer dollars are being tracked and whether fraud could be going undetected.

According to data from the Washington State Auditor’s Office (SAO), the Department of Children, Youth and Families (DCYF) failed to maintain the records necessary to audit federal childcare funds from 2021 through 2024, meaning auditors could not verify how the money was spent at the provider level.

The totals are staggering. In 2024 alone, auditors could not verify $416 million in spending. In 2023, that number was $356 million, followed by $268.5 million in 2022 and $293 million in 2021. Combined, that amounts to over $1.3 billion in spending that auditors could not verify due to missing documentation and inadequate tracking systems.

In unusually blunt language, the State Auditor’s Office acknowledged the severity of the issue, stating it had to effectively “disclaim” the entire program because it could not be audited. “Being unable to audit these federal funds is a serious and troubling matter,” the auditor’s office stated, emphasizing that determining fraud is the job of law enforcement, not auditors. While the audit raises serious concerns, it stops short of declaring fraud, because without records, there is no way to know how much fraud may exist.

A separate 2025 audit found $37 million in questionable childcare payments in a single year, tied to missing attendance records, overbilling, and a lack of proper documentation. DCYF previously acknowledged $2 million in overpayments to providers, while auditors said it was “impossible” to trace payments for four consecutive years. Internal reviews have also shown that 67 percent of audits identified overpayments, reinforcing concerns that the system is not catching problems before money goes out the door.

Critics argue the system effectively operates on a “pay first, verify later” model. Without attendance records or provider-level data, there is no reliable way to confirm whether services were actually delivered. That concern has fueled investigations by independent journalists into alleged “ghost daycares,” providers listed as active but appearing empty or nonexistent when visited.

Despite the mounting evidence of oversight failures, state officials have downplayed fraud concerns. Attorney General Nick Brown has called most allegations “baseless.” The auditor made clear that fixing the problem is not within her office’s authority. “We are a reporting agency, not an enforcement agency,” the office stated, placing responsibility on DCYF leadership and federal agencies overseeing the funds.

That leaves a critical gap: the same agencies responsible for the failures are also responsible for fixing them. Rep. Michael Baumgartner (R-WA) has called for a federal review of Washington’s programs, warning that systems with weak upfront controls are especially vulnerable to large-scale fraud, like what has already been uncovered in Minnesota.

Though the audits are not proof that $1.3 billion was stolen, the state cannot prove how that money was spent. Washington taxpayers are left on the hook for billions that went out the door, and no one can say for sure where it went.