ST. LOUIS • St. Louis building inspectors condemned the Kidz In Action day care more than a year ago when they discovered a highly hazardous hot water heater.
The original gas burner had been junked. In its place was a stove-top electric heating element, its extension cord “hot to the touch” and “rubbery” and plugged into two adapters in a light fixture on the wall.
The electrical hazard, along with other serious building code violations, prompted the city in June 2013 to shut down the north St. Louis day care, which reported to be caring for at least 78 children that month.
In the days that followed, the state also moved to revoke the facility’s license.
But neither action stopped the Missouri Department of Social Services from continuing to pay more than $50,000 in tuition subsidies for the months of June, July and August 2013 — much of that when the facility had been closed by the city amid front-page news coverage.
Whether that money will ever be recouped remains unknown.
What is known through a Post-Dispatch review of state records is that two state agencies had been actively auditing Kidz In Action even before the city’s condemnation and closure.
For months, the center had been suspected of misreporting its enrollment records to improperly collect extra subsidies. One department had already required the provider to pay back more than $12,000 in food subsidies.
Despite those red flags, records show the state continued to pay child care and food subsidies to Kidz In Action even after the facility was allowed to reopen in August 2013. That was true in January, when the facility lacked a required food permit and was banned from serving food. And it was true in April, when electricity was shut off for nearly two weeks.
In some months, records show, the state was paying the provider and at the same time garnisheeing those payments to pay off unemployment taxes she owed to the state department of labor. Those payments were also made at a time when multiple tax liens were placed on the owner for unpaid income and sales taxes.
Missouri has struggled to ensure that more than $110 million in annual federal and state supported child care subsidies are properly spent. Two separate state agencies administer the funding and handle inspections — but they don’t always share information.
In August, the Post-Dispatch reported that the Department of Social Services continued subsidy payments to day cares that had been cited by the Department of Health and Senior Services for operating illegally with too many children.
The Kidz In Action case, however, shows how a center was able to take in $50,000 in a period when it was not authorized to watch any children. And it points to a deeper lack of communication between state and city officials.
A lawyer representing Kidz In Action’s owner, Tanya Shields, did not return calls seeking comment. Shields could also not be reached.
A spokesman with the Department of Social Services said Kidz In Action is currently under investigation and did not comment further. The department did not respond to the newspaper’s question about whether the state is pursuing the repayment of $50,000 paid to the facility during the condemnation.
According to public records obtained by the Post-Dispatch, the questionable payments are not formally referenced by state regulators until May — nearly a year after the facility had been condemned and closed.
The faulty water heater was just one factor that led city inspectors to condemn and shut down the day care on Palm Street on June 7, 2013.
The facility, licensed to care for 60 children at once, had other major violations: a broken front window, a leaky roof, a front door that did not properly latch and another water heater unsafely sealed behind a wall.
After the day care was condemned by the city in June 2013, the Post-Dispatch ran a front page story on the center’s health and safety issues. But even before then, records show, the facility was on the radar of two state agencies.
Inspections by the Department of Health and Senior Services had turned up a long list of problems, including a kitchen with no hot water, a broken refrigerator, incomplete immunization records and missing parent contact information.
Meanwhile, the Department of Social Services had written letters to Shields in April and June 2013 informing her the facility’s attendance records were being audited. Indeed, the state would ultimately seek to collect $4,211 in child care subsidy overpayments found by that audit in both May and October 2013 — the months before and after the facility was shut down.
Records further show that two months prior to the city’s building condemnation, the Department of Health and Senior Services notified Shields that she owed $12,400 to the state for misreporting meals served under the Child and Adult Care Food Program.
In state reports, the food subsidy auditors said the center reported buying 10 gallons of milk in one month. But auditors said the center would have had to buy 117 gallons to serve the number of children it reported feeding that month. The center spent just 42 cents a day on food per child, when the average child care center spends more than $1.50 per day on each child to meet state nutrition standards, the report said.
Records show the Department of Social Services paid the provider $56,458 in child care subsidies for about 72 children in June, July and August even though the facility was officially shuttered for more than 10 weeks in those months. In the month of July alone, when the center was shuttered every day by a St. Louis city order, Shields reported caring for some 70 children and was paid $22,077 by the state.
In a letter dated June 20, 2013, about two weeks after the facility was condemned, state child care regulators informed Shields that the state was moving to revoke her license.
But they did not follow through on that letter.
City building code officials said Shields corrected the safety issues and was granted a new occupancy permit. Records show she was able to reopen to children on Aug. 20, 2013, with the child care license.
Shields immediately began collecting tuition subsidies. Such payments totaled $211,899 from Oct. 1 through May of this year, an average of $26,487 a month.
Shields also once again collected money from the food subsidy program. From December last year through the end of August this year, records show the state agency paid the day care provider $32,322.
The money flowed even as Shields was settling debts with the state and facing court orders to pay unpaid taxes and unemployment contributions. Those include:
• The $12,400 in food subsidies she improperly collected in the spring of 2013. Records indicate the funds were docked from her new payments and state officials say they are now paid.
• The $4,200 in child care tuition subsidies improperly collected in May and September 2013.
• More than $44,000 in liens ordered by the court to repay income taxes from 2007, 2009 and 2010, as well as sales taxes from 2013-14.
• More than $21,000 of court-ordered garnishments to repay the Missouri Department of Labor for overdue unemployment taxes.
The court later granted the Department of Social Services the authority to garnishee Shields’ child care subsidy payments to collect on the unemployment tax debts.
In paying the debts this way, the court essentially allowed newer taxpayer supported subsidy money to repay tax debts stemming from prior subsidy payments.
Problems at Kidz In Action continued after the center was allowed to reopen.
Records show the St. Louis Health Department informed child care regulators that Shields had bounced a check she’d written in November 2013 to renew the facility’s food preparation permit. An official with the St. Louis Health Department said the city issued a cessation order on Jan. 3 prohibiting the facility from preparing or serving food without the permit.
On Jan. 7, the city health department posted the cessation order on the front door of Kidz In Action. Records show state regulators made an unannounced inspection two weeks later and confirmed employees had cooked a lunch that day. Shields told investigators that day she was unaware of the city order to cease preparing food.
The city official said the cessation order was in effect until Feb. 7, when Shields paid the money she owed on the permit. That meant the child care was banned from serving food for all but three days in January. Yet, records show, the state health department paid $1,957 in food subsidies that month. An official with that agency said Shields claimed the food subsidy for 14 days in January.
The Department of Social Services also paid child care subsidies that month — about $23,819, nearly the same amount of subsidy it paid the center the month prior to the cessation order.
The facility also struggled to keep up with its electric bill. Records indicate the power was disconnected from April 12 through April 21. On an unannounced inspection April 14, state regulators found no children at the facility.
And yet, an official with the Department of Social Services confirmed the agency paid $9,421 in child care subsidies for 64 children during the 10 days the power was shut off. The state paid a total of $28,718 in child care subsidies for the month of April.
By early June, state child care regulators and the Department of Social Services apparently had had enough.
On June 3 — nearly a year after the day care was first condemned by the city — Kathy Quick, the now retired state director of child care regulation, wrote Shields a new letter notifying her the state again intended to revoke Kidz In Action’s child care license.
A week later, the Department of Social Services stopped Shield’s ability to file tuition subsidy claims online or receive payment through direct deposit. On July 3, the agency terminated her child care subsidy contract.
The license revocation letter cited nearly a full year of substantiated complaints against the provider: unpaid debts and unmet licensing obligations, unsafe premises for children, an inability to conform to building and sanitation codes and a failure to keep accurate attendance records.
The letter also chastised Shields for collecting child care subsidy payments when the facility was closed last summer.
“This does not demonstrate you are of good character,” the letter said.
From the month when her day care was condemned last year through this past August, the state paid Shields more than $324,000 in child care and food subsidies.
A state spokesman for child care regulation said Shields is appealing the license revocation. Because the day care was not deemed an imminent danger to children, under state law it can remain open pending the appeal. The appeal hearing is scheduled for next March. In the meantime, Shields has an October court date to deal with a city claim she owes $1,406 in local earnings and payroll taxes.
On Thursday, an employee answered the door at the child care center and allowed a reporter inside. There were three employees present, but not Shields. The employee said the state has unfairly claimed Shields is in business just for the money. But the employee said she is in it to help the parents — and the children.
The lunch table was set with paper plates. There were six children in the infant and early toddler room listening to classical music. Twelve children were lining up for lunch in the room for 2- to 3-year-olds.
The state, meanwhile, is preparing another direct deposit to Kidz In Action to cover the meals. The center’s August food subsidy payment will be $6,035.45.