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Oregon Secretary of State Tobias Read has referred the names of multiple preschool providers to the Oregon Department of Justice for investigation of possible fraud, he told WW this afternoon.
The SOS’s Audits Division released results of an investigation of Preschool Promise, or PSP, Wednesday morning. That program provides preschool to children ages 3 to 5 whose families are at or below 200% of the federal poverty level, with certain exceptions. The investigation found that between 2021 and 2024, largely under the oversight of the Oregon Department of Education, PSP issued about $1.4 million in wasteful awards to providers with chronically low enrollment—sometimes as few as one or two children.
Read’s office would not say how many providers it had referred to the DOJ. But in their investigation, auditors identified one fraud risk: 53 providers who received Paycheck Protection Program loans from the federal government, meant to cushion small businesses economically during the pandemic, while simultaneously receiving PSP funds. They referred those 53 names to the Office of the Inspector General at the U.S. Small Business Administration.
However, it is unclear how many were referred to Oregon’s DOJ. An SOS spokesperson could not disclose how many providers were turned over to the DOJ on grounds of confidentiality.
The SOS did not do a detailed review of providers to identify if they had requested more funding from PPP and PSP than their actual expenditures. “However, there is a risk that providers could have received duplicative payments that covered the same expenses during the same time period,” the investigation’s report reads.
State law requires that the Secretary of State’s Ofice notify law enforcement if it suspects fraud or other criminal activity.
In this case, Read referred the matter to the Department of Justice, overseen by Attorney General Dan Rayfield.
“For some providers, PSP covers all of their fixed costs and the risk of fraud related to payments from PPP is higher,” the investigation’s report reads. “For other grantees, PSP is a small portion of their total funding and the risk is lower.”
In a couple instances outlined in the report, the SOS did not have enough data to determine if there was fraud occurring. Read says it will be up to the DOJ to investigate further.
Read confirmed SOS alerted the DOJ a few weeks ago to its findings, though it officially filed its notification of potential fraud and criminal activity on July 18. He emphasized that the Audits Division’s responsibility is to flag concerns and make recommendations, but that implementation is up to other bodies, including the Department of Early Learning and Care, which currently oversees PSP.
Legislators and the governor, Read says, can use information unearthed from the SOS investigation to determine if there should be consequences for how ODE administered the program, he adds. This includes waste allegations that a few providers collected hundreds of thousands of dollars in exchange for serving just one or two children, significantly lower than their number of allocated seats.
“If there were efforts [to hold ODE accountable] that would not be us,” Read says. “Our goal is to do this analysis, to distribute this letter, to talk about the recommendations, and make clear what’s at stake. We very much want [DELC] to implement those recommendations. Other [accountability] efforts are for others to make.”
This story has been updated to clarify that the 53 providers referred to the feds may not match the number referred to the Oregon Department of Justice. It also clarifies that the few providers collecting hundreds of thousands of dollars in exchange for serving just one or two children is an example of waste, not fraud.
