Audit Bombshell: Washington State Auditor’s Office Finds $500 Million Handed Out With Virtually No Oversight—Not a Single Provider Record on File

Renewed scrutiny is mounting over Washington State Department of Children, Youth, and Families (DCYF) as auditors and lawmakers raise serious concerns about oversight, transparency, and missing records tied to provider payments. The Washington State Auditor’s Office confirmed to KOMO News that it encountered four years of missing provider records while reviewing the system—fueling demands for answers amid heightened sensitivity following documented fraud cases in Minnesota. The dispute has now moved into court, with State Rep. Jim Walsh filing for an injunction accusing DCYF of scrubbing provider data and removing information from state websites. State officials pushed back, with Bob Ferguson’s office calling the lawsuit baseless and political, arguing it fails to identify a clear violation of state law. DCYF, meanwhile, says it audited nearly 2,000 providers in 2025, referred 14 cases to its Office of Fraud and Accountability—and secured zero prosecutions, a statistic that has only intensified calls for tougher oversight and accountability.

Serious, long-running oversight failures at the Washington Department of Children, Youth and Families (DCYF) involving hundreds of millions of dollars in child-care payments. Washington State Auditor Pat McCarthy confirmed that for four consecutive statewide audits, her office lacked access to basic provider-level records, making it impossible to track where money went or to verify compliance. The findings center on the Child Care and Development Fund, a $770 million program paying roughly 7,400 providers annually. Because DCYF failed to maintain documentation required under federal law, auditors questioned more than $415 million in federal costs in FY24 alone and labeled DCYF one of the highest-risk agencies in state government.

INSANE: Audit confirms Washington State handed out $500 MILLION with virtually no oversight, doing so without a single provider record on file.

In just a 4 YEAR PERIOD.

Horrifying.
pic.twitter.com/sSs9Yn9Up7

— Jack (@jackunheard) January 22, 2026

Auditor highlights gaps in past Washington child care fund audits

By: Michelle Esteban, KOMO News, January 14, 2026:

Updated Thu, January 15, 2026 at 12:51 PM

By: KOMO, January 22, 2026:

WASHINGTON STATE — KOMO News has learned of alleged serious oversight and accountability gaps at the Washington Department of Children, Youth and Families (DCYF) over the last four years when it comes to payments to child care providers.

Washington State Auditor Pat McCarthy told KOMO News the agency (DCYF) lacked access to ‘provider-level data’ in the last four statewide audits. She said the data is needed to fully track where money is going.

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This comes as concerns about child care funding make headlines in Washington state, and the rest of the country.

The State Auditor’s Office is currently auditing the Child Care and Development Fund, a $770 million program managed by the Department of Children, Youth and Families that made payments to 7,400 child care providers in Washington in the most recent fiscal year.

The audit was launched prior to the day care funding allegations that first surfaced in viral videos out of Minneapolis last month and is expected to be completed sometime in March.

There are no audit conclusions yet, but at this stage of the audit, McCarthy said the auditors have not seen any evidence of fraud. That said, McCarthy said the agency remains high risk and points to oversight gaps in the prior four fiscal years’ audits. She noted the FY24 audit questioned more than $400 million in federal program costs incurred.

“They are probably the most risky of all of the departments in state government,” said McCarthy during a sit down interview in her Olympia office on Wednesday.

She added it’s one of the highest-risk agencies in state government due to the size, scope, and vulnerable population it serves. Part of the audit’s ‘Schedule of Federal Award Findings and Question Costs’ reads:

“By not complying with federal law requirements to maintain adequate supporting documentation for expenditures, the department made it impossible for our office to audit the federal dollars it used for payments to child care providers.”

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“Because we could not test transactional-level detail, we also could not determine whether the issues we identified in prior audits had improved or worsened, including the Department’s lack of adequate internal controls and significant rate of noncompliance for payments to child care providers.”

“Because the department did not comply with HHS requirements to allow for the tracing of grant expenditures to a payment level, we are questioning all $415,579,473 in federal program costs it incurred during the audit period.”

“We will look at individual providers when we do those audits, but we have to get that information from the agency to be able to do that body of work. And we haven’t been able to get that information for the last four years,” McCarthy said.

When asked directly whether the state knows if child care dollars are flowing properly, McCarthy deferred to DCYF.

“I believe the DCYF can speak to that.”

When asked about the auditor’s findings, DCFY responded in an email to KOMO News:

“That is correct. While we have been consistently in compliance with federal requirements for this program, DCYF took feedback from prior audits to change how we track payments to comply with the state auditor’s recommendations. We’ve been working closely with SAO for the past year, and we changed our process in FY25, which is the audit they are working on right now.”

But McCarthy said in the most recent audit (FY25), her staff noted a change. She said recent leadership changes could improve accountability, calling it “a new day” — but cautions that audits are ongoing.

“With the new administration, and I’m talking about the new Secretary at DSHS, DCYF Secretary Tana Senn, and the Governor of the state of Washington and his efforts on accountability for his state agencies were seeing a change.”

McCarthy said the public scrutiny is a good thing and added that her office provides extensive audit information online. She said because audits can be technical and wonky, staff have worked to provide infographics and make their site and audit information ‘user-friendly.’

“It’s incumbent upon parents and families to be able to ensure that they are getting the services that they are paying for or they’re getting subsidized for.”

Despite the past audit highlighting a lack of adequate documentation from DCYF to support its expenditures linked to payments to child care providers through the Child Care Development Fund (CCDF) and the questions swirling nationwide about such funding, McCarthy emphasized concerns in other states should not be assumed here.