Internal audits from the Maryland State Department of Education found that more than $66 million in overpayments went to childcare providers statewide between 2023 and 2025. The money should have been returned to the state, but Project Baltimore reported that MSDE mismanaged the process and failed to recover the taxpayer funds.

MSDE addressed provider concerns during a virtual town hall on September 10, 2025. State Superintendent of Schools Dr. Carey Wright and Assistant State Superintendent Sarah Neville-Morgan led the discussion about the program's rapid growth and the state's failure to properly monitor the added money.

Maryland's Child Care Scholarship Program was expanding rapidly as Annapolis poured hundreds of millions of new taxpayer dollars into it. During the meeting, Neville-Morgan acknowledged a major breakdown in oversight, saying, “We didn't have all the proper systems to track or correct overpayments.”

A licensed Maryland childcare provider who attended the call spoke with Project Baltimore but requested anonymity because of fears about retaliation from state officials. “It was an uproar,” the provider said about the meeting.

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The provider offered a blunt assessment of what happened after the state sent out money improperly. “The state made a mistake and paid us. But we got to keep it.”

The scholarship program, administered through MSDE, provides cash assistance to families with income-eligible children younger than 13. It also serves children ages 13 through 19 who have a qualifying disability.

Funding soared more than 300% over five years, climbing from $132M in 2022 to $560M in 2026. That represented an increase of about $430 million annually, even as internal audits were finding that millions in taxpayer dollars had been misspent.

An internal email sent to MSDE officials on September 9, 2025, showed state audits had identified $66.5 million in total overpayments. The confidential provider described duplicate payments and cases in which providers were paid despite never submitting invoices.

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“Some providers were being paid for the same kid twice,” the provider explained. “They found that other providers just never turned in their invoices, but they were paid for it.”

MSDE began recouping some of the money in 2023 as its internal audits exposed millions in overpayments. An agency spreadsheet obtained by FOX45 News showed that $4.1 million was paid back to MSDE between January 2023 and September 2025.

An email obtained by FOX45 News documented another $433,429 received through physical checks for overpayments. By September 2025, however, some providers were pushing back against the state's reimbursement demands.

Project Baltimore's source said the money had already been spent and providers did not have it available to return. The source also said people fought for providers to be allowed to keep the funds.

Then came the state's decision to abandon broad recovery of the money. During the September town hall, Neville-Morgan told providers, “MSDE has decided not to move forward with the broad recoupments of past payments that you received.”

Documents obtained by FOX45 News also indicated that millions already paid back would be returned to providers. When asked what came to mind upon learning that taxpayers would not get their money back, the confidential source answered without hesitation.

“Free money. We are getting free money,” the childcare provider remarked. The provider added, “We do not have to pay it back. We did not earn it.”

Maryland code appears to point in a different direction. Under the section titled “Payments for Child Care Services,” the law says “overpayments are collected” when providers “fail to correctly report information.”

Much of the audited $66.5 million involved child care providers who could not or did not correctly report information. Despite that language, MSDE did not dispute Project Baltimore's findings in its statement to FOX45 News.

“Our goal is to protect public funds while ensuring child care providers are not asked to repay money solely because of system limitations or processes that did not align with program requirements.” The state said it is working to “improve payment reviews, clarify program requirements, and strengthen oversight to ensure responsible funds management.”

MSDE also told Project Baltimore that it was working to verify the figures contained in its own audits. The agency said it had recouped overpayments determined to be fraud, but it could not provide Project Baltimore with the amount recovered.

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