Day care owner caught overbilling state by $178K

Target 8

GRAND RAPIDS, Mich. (WOOD) — Over the course of 10 years, a Grand Rapids day care owner billed the state $177,695 for care she didn’t provide, according to documents obtained by Target 8.

A Kent County judge will sentence Janice Rhodes, 67, Thursday afternoon on two counts of misdemeanor welfare fraud. She has already pleaded guilty in the case and agreed to pay restitution of $32,746, the amount she overcharged the state between November 2015 and October 2016.

But Target 8 obtained a state report showing this was the fourth time Rhodes has been caught overbilling since 2005.

Still, the state allowed Rhodes to maintain a license to run Alphabet Soup Daycare Center on Leonard Street NE near Ball Avenue. Rhodes has owned the center, which is licensed to care for up to 89 children, since it opened in 1997.

Target 8 was referred to Rhodes’ lawyer when we tried to reach her for an interview. The lawyer said, “No comment.”


“Ms. Rhodes has been involved in three prior DHHS (Michigan Department of Health and Human Services) investigations,” a state licensing consultant wrote in a Special Investigation Report for Licensing and Regulatory Affairs.

The report went on to specify the overages:

  • “From 08/17/2005-03/14/2009 an over issuance in the amount of $91,592.58 based on excessive billing of absent hours.”
  • “From 04/01/2009-12/31/2012 an over issuance in the amount of $45,160.24 based on the overbilling of hours.”
  • “From 01/13/2013-11/14/2015 an over issuance occurred in the amount of $8,196.00 based on improperly rounding hours, inappropriate absent billing and incomplete attendance records.”

“Now is the time that it needs to stop,” said a mom who recently pulled her son out of Alphabet Soup Daycare Center.

A phone call from that mom prompted Target 8 to investigate Rhodes’ serial overbilling. The mom had noticed what she thought were discrepancies in the way Rhodes had been charging the state.

“They’re overbilling the state for services that they did not do,” said the mom, who didn’t want her name used.

It wasn’t until Target 8 told her that she learned the state was already well aware of Rhodes’ overcharging practices.


The Child Development and Care program within the Michigan Department of Education reimburses providers to help cover day care costs for low-income families so parents can work.

“Every time we review a provider’s time and attendance records, we look to see what is the cause of the error, and whether or not there’s a pattern that (suggests) intentionality,” the head of that program, Lisa Brewer-Walraven, told Target 8 when asked why Rhodes was still allowed to participate despite her history.

Brewer-Walraven said the program uses an established process to determine if errors were made on purpose or by honest mistake. In Rhodes’ case, up until the last incident, the review process never established that the errors were intentional.

“We made referrals to the Office of Inspector General when we thought we started to see patterns of intentionality,” Brewer-Walraven said.

But Brewer-Walraven acknowledged she could not find evidence that the Office of Inspector General ever notified her program of the result of its first investigation in 2010, the one that found Rhodes had received $91,592 more than she was due from 2005 to 2009.

“At that time, there were not always clear lines of communication, but like I said, we’ve been working on that in order to ensure that we’re communicating about interactions with providers,” Brewer-Walraven said.


Complicating the process further is the fact that three different state agencies play roles in policing day care providers who might be fleecing taxpayers.

The Child Development and Care program, which pays providers, is located within the Michigan Department of Education, but it’s MDHHS that determines parental eligibility. Also, it’s MDHHS’s Office of Inspector General that investigates providers for potential fraud and misuse of subsidies.

A third state agency, Licensing and Regulatory Affairs, actually licenses Michigan’s 9,000 child care providers.

“My job is to make sure (children) are in a healthy and safe environment,” Mark Jansen, a former state legislator who now runs LARA’s Childcare Licensing Division, said. “The things we spend our time on is the actual facility itself, the ratio of workers to the number of children, safe sleep.”

When asked why a provider who was caught overcharging so many times was able to maintain her license, Jansen said he’s prohibited from talking about Rhodes’ case specifically. He did note that his agency ultimately revoked her license in July of this year — eight years after she was caught overbilling the first time.

The 2018 Special Investigation Report from LARA that led to the revocation determined that Rhodes had violated rules requiring that caregivers be of “good moral character,” be “suitable” to care for children, have the “administrative capacity” to operate and have the ability to “maintain an accurate record of daily attendance.”

A new operator has obtained a license to run Alphabet Soup, so it’s still open under new management.


Brewer-Walraven of the Child Development and Care program noted that Rhodes signed agreements over the years to pay back the overages.

She also said Rhodes has already reimbursed the state 88 percent of the overages she has agreed to pay back, which amounts to $129,628.

Brewer-Walraven went on to note that the Child Development and Care program has implemented multiple fraud detection tools since a 2008 state audit found its controls lacking. The audit estimated the lack of oversight led to $147 million in improper and potentially fraudulent payments.

“We did implement several corrective actions to help bring more integrity and control into the program,” Brewer-Walraven said.

Last year, the Office of Inspector General completed 269 investigations involving the Child Development and Care program, finding $1.3 million in fraud.

In March, a new state law went into effect, mandating that providers convicted of fraud have their licensed revoked. If a provider is convicted of misdemeanor fraud, they are banned from holding a day care license for five years. If it’s a felony, the ban is 10 years.  

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