State audit shows overall improvement, recommends increased oversight of child care payments

Mar 30, 2026

Today the Office of the Washington State Auditor released its massive annual audit of federal funds, which reviewed $23.7 billion in federal funds across 28 programs.

Auditors found a general pattern of improved compliance with federal requirements overall. SAO also determined that the state’s system to detect improper payments in child care subsidies has weaknesses that contributed to an estimated $37 million in questionable payments in 2025.

Earlier this year, SAO received inquiries from lawmakers, the media and the public about the potential for fraud in subsidized child care, inspired by concerns in other states.

“For months, we’ve told anyone who asked about child care subsidies that we were auditing the program and would publicly share what we found,” State Auditor Pat McCarthy said. “Today we can say that the state should take additional steps to detect and prevent improper payments. By doing so, the state can preserve more child care funding for the working families and providers who depend on that support."

The Office had not been able to audit the state’s use of the federal Child Care Development Fund since fiscal year 2021.

However, due to the Department of Children, Youth and Families making fewer accounting adjustments in fiscal year 2025 than it had in past years, auditors were able to trace individual payments to child care providers to their funding source.

Auditors reviewed records from a statistically valid sample of subsidized child care providers. Among the issues they found, some providers:

Did not respond to auditor requests for attendance records
Overbilled for services not supported by attendance records
Did not provide required signatures from parents or guardians

Based on the sample results, auditors estimated DCYF made a total of $27.2 million in questionable payments with federal Child Care Development Funds. The same issues resulted in a finding related to the Temporary Assistance for Needy Families program, and $9.9 million in questionable payments made to child care providers with those federal funds.

The audit found that the department’s program to detect overpayments needs improvement. The department does not review supporting documentation before paying child care providers. Instead, it relies on post-payment audits to determine whether providers had the required documentation to support the payments they received.

Reviewing a year of the department’s own audits, the State Auditor’s Office found:

Two thirds of the department’s audits (67%) identified overpayments.
Nearly a quarter (22%) of the payments audited were identified as overpayments, amounting to $2.2 million.
Those overpayments were submitted to a separate state office for collections, where providers can contest the department’s findings.

Based on the department’s own results and the results of the statistical sampling, the State Auditor’s Office recommended the department expand its own oversight efforts until it can implement robust pre-payment controls.

The full audit findings, including sampling methods and the department’s official responses, can be found online here for the Child Care Development Fund (PDF) and here for the Temporary Assistance for Needy Families program (PDF).

The audit also identified some issues with internal controls over health and safety requirements (PDF) for some providers.

Overall, however, the State of Washington Single Audit published today showed improvement. It included a total of 50 findings, significantly less than 82 findings in the previous year. The State Auditor’s Office produced a summary of the 2025 SWSA.

“I want to acknowledge the commitment to accountability the governor and his team have shown in improving operations,” McCarthy said. “Audits may surface challenging issues for agencies, but they are critical to maintaining public trust.”