Legislative auditors want the attorney general’s office to investigate a statewide child care grant program, for possible civil or criminal violations.

In a scathing report issued late Monday afternoon, Legislative Services Office auditors said they found several serious problems with the federally funded program. The LSO says the state Department of Health and Welfare overspent the federal grants, probably approved some improper taxpayer-funded purchases, and failed to make sure the program served 5- to 13-year-olds, as state law mandated.

“We identified a lack of internal controls throughout the program,” auditors wrote. “These findings are serious enough to report to the Idaho Attorney General.”

In a statement late Monday, Health and Welfare Director Dave Jeppesen said his department “respectfully disagrees with all of the report’s findings.”

The 55-page report marks the latest development in an ongoing dispute over the Community Partners Grants program. Using federal COVID-19 aid dollars, the 2021 Legislature created the grant program, hoping to reverse learning loss and other aftereffects from the pandemic.

A series of problems have plagued the rollout, LSO auditors wrote:

• The state appropriated $36 million in federal grants for the first year of the program. Health and Welfare handed out more than $36.4 million.
• Grant applicants sought to use money to cover a bevy of improper expenses, such as rental assistance, computers, playgrounds and other equipment — totaling roughly $3.8 million over two years. As a result, some grant dollars were “likely used” to cover purchases that fell outside state law, auditors wrote.
• Some grant recipients received too much money — because they applied for multiple awards, and Health and Welfare approved their applications. As a result, much of the grant money went to parties with statewide reach, including the University of Idaho, the United Way and the Idaho Association for the Education of Young Children, an early education nonprofit.
• Reviewing 145 grant applications, auditors found that nearly 30% of the programs served children under the age of 5, or over the age of 13. Health and Welfare failed to set up “procedures or internal controls” to make sure the grants met the Legislature’s intent, supporting 5- to 13-year-olds.

Throughout the audit, Health and Welfare disputed all of the LSO’s findings. Minutes after the release of the audit Monday, Jeppesen doubled down in a statement to the media. He praised Health and Welfare staff for setting up “a successful, appropriate, accountable program” serving thousands of Idahoans.

“The grants are helping children across Idaho learn and stay safe, and we’re proud to be a part of it.”

The LSO audit could amplify a rift over the grants — pitting Jeppesen and his department against Attorney General Raúl Labrador and his staff.

In March, Health and Welfare sued Labrador, seeking to halt his office’s probe into the program. Earlier this month, a judge said Labrador would need to appoint a special prosecutor to investigate the program.

Health and Welfare has maintained that it followed advice from the attorney general’s office in launching the grant program.