In cooperation with the Federal Bureau of Investigation, Nebraska State Auditor Mike Foley found evidence of hundreds of thousands of dollars of overpayments to two child care centers based in Omaha.

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Foley said his staff examined billings from the "Kids Ark Learning Center" and "Wise Kids," -- operations serving more than 240 children.

In a 98-page management letter issued Friday to the Nebraska Department of Health and Human Services and the Nebraska Department of Education, Foley noted that the two centers, operated by the same owners, systematically over-billed and received overpayments for child care services they never provided.

The child care centers used a variety of techniques to receive overpayments, Foley said.

On several occasions, the attendance calendar provided to DHHS showed more days of attendance than were actually recorded.

In some instances, the child care centers inflated the days, hours, and hourly rates; in other instances, they billed for services supposedly rendered on days when the facilities were not open for business. And, they billed for days of care when specific children were known to have been ill and not there, Foley said.

Both child care providers billed the state, claiming to have cared for the same child on the same days, Foley said.

The child care providers billed DHHS for 43 days of service for one child during December when the facilities were only open 22 days.

Another tactic was to bill DHHS for care for children in excess of the licensed capacity of the centers, Foley said

Kids Ark has a licensed capacity of 78 children, while Wise Kids has a licensed capacity of 90. Yet, based on the records obtained from DHHS, Wise Kids was well over its licensed capacity limits every day in December.

The auditors visited the Wise Kids center Friday and observed 112 children present.

Foley said state auditors meticulously examined DHHS billing invoices and child attendance records. The audit team then compared those to the corresponding attendance records and meal count sheets submitted to NDE as part of the federal subsidized meals program and noted discrepancies between the two.

The two child care centers have received more than $11.7 million in federal and state funds since 2003 and are no stranger to techniques that can create overpayments, Foley said.

DHHS records document that every year since 2004, the child care centers have overbilled. Prior total overbillings exceed $80,000.

One of the two centers, Wise Kids, was placed on disciplinary probation by DHHS in 2005-2006 and assessed a civil penalty then of $5,715.

Foley noted, “DHHS has had a long and troubled history with these particular child care centers dating back to 2004, and DHHS needs to be more vigilant in monitoring the current invoices from the care centers.”

“Virtually every invoice we reviewed contained billing discrepancies, all of which resulted in overpayments,” Foley said.

The FBI has an interest in the case due to the large amounts of federal funds at risk, he said.

The management letter also reports that Kids Ark filed its articles of incorporation with the Nebraska Secretary of State as a limited liability corporation (LLC) in 2003 and continues to hold itself out as an LLC. However, the entity has not made its required corporate filings or paid its appropriate fees with the Secretary of State from 2007-12.

A copy of the management letter is on the State Auditors web site: http://www.auditors.nebraska.gov