Outrage Over Fraudulent Receipts, Municipalities Express Disbelief as Taxpayer Money Exceeding 200 Million Yen Spent

The municipal government is not the least bit responsible for the illegal expenditure of taxpayers’ money,” said a person involved with a child-care facility. The local government is not small responsible for the illegal expenditure of taxpayers’ money,” said a person involved with the childcare facility.

A series of incidents have occurred in which organizations that were commissioned to provide after-school care for children of dual-income families (school children’s clubs) illegally received large amounts of commission money by reporting fictitious working conditions.

The “Workers Co-op Center” (hereafter referred to as “Workers”) and the “Sophia Social Service” were the two organizations that became problematic. Both organizations reported a higher number of staff than they actually had at facilities commissioned by local governments, and both fraudulently received commission fees. Workers received approximately 195 million yen from Shinjuku City and 3.28 million yen from Arakawa City. The amount of money received by Sophia Social Welfare Organization from Arakawa Ward amounted to 21 million yen.

Workers is a major player in the childcare industry, having been commissioned to provide childcare support facilities at approximately 400 locations throughout Japan. On the other hand, Sophia Social Service Corporation was started by a professor of Sophia University to provide assistance to needy families, and is also focusing its efforts on public childcare facilities for school children.

38 cases of inappropriate reporting in other municipalities.

Workers has been entrusted with the operations of 10 school-age children’s clubs and 3 children’s halls operated by Shinjuku City. In June last year, an anonymous tip provided by a worker reported that Workers had falsely reported the staffing of these facilities, and upon investigation, it was discovered that the total number of hours that Workers had not fulfilled the staffing requirements in the contract between FY 2006 and FY 2011 amounted to 89,000 hours for all of the facilities. The ward announced at the end of February that the workers’ union had been established. At the end of February, the ward demanded that the workers return the approximately 198 million yen in personnel expenses that they had improperly received, plus the cost of the investigation.

Furthermore, it was found that 38 cases of improper reporting were also conducted at facilities commissioned by other local governments, and discussions are currently underway with the local governments involved, including the return of the improperly received outsourcing fees.

In the case of the Sophia Social Service, an investigation of six businesses outsourced by Arakawa Ward revealed that from FY’18 to FY’23, like the workers, the company improperly received about 22.96 million yen in outsourcing fees by making false reports with more staff than the actual number of employees. In February, the ward released an investigative report and demanded the Sophia Social Service Corporation return the 29 million yen or so it had received, plus penalties.

It is said that the false report was made in order to hide the fact that they were unable to assign the staff as decided due to a lack of manpower. It is known that the false reporting of a large number of staff was done by the entire organization, and in the workers’ case, not only the person in charge of the site, but also the area manager and the director were aware of the fraud.

The officials of Shinjuku and Arakawa wards, which were deceived by the outsourcing companies and ended up spending a large amount of taxpayers’ money illegally, said, “It is regrettable that there were irregularities in the projects and facilities related to the children.

It is unfortunate that there were irregularities in the projects and facilities involving children. We had been visiting the facilities once a month, but at that time, we could not detect the fraud because they were properly staffed. In order to prevent fraud, a method should have been introduced to check for proper staffing on days other than the day of the patrol.

The Shinjuku City Office said, “We had received reports on staffing at each facility through the daily logbooks, but we had no idea that the operators were lying. I feel that the city of Arakawa is responsible for not properly managing the actual situation.

The workers who received the illegal payments responded in this way.

“False reporting to the ward was due to insufficient staffing, lack of communication with the local government, low awareness of compliance, and inadequate management systems on site. Once again, we are acutely aware of our social responsibility. We have already returned the 190 million yen that we improperly received to Shinjuku City, and we will respond in good faith to the other municipalities that have asked us to return the money.”

We take this very seriously.”

On the other hand, Sophia Social Welfare Foundation issued a letter of apology in the name of its president, saying, “We take the situation very seriously.

We take the situation very seriously. The entire corporation will review its management and supervision system, ensure thorough compliance, and do its utmost to ensure that such a problem will never occur again.

There are approximately 25,000 childcare facilities for school-age children nationwide, and nearly half of them are “public-private” facilities, in which local governments take the initiative in managing the facilities and outsource the operations to the private sector. Kazuya Hagiwara, representative of the “Aiwa Schoolchildren’s Club Management Corporation,” which provides consulting services on the management of schoolchildren’s daycare facilities, says that the cases of misconduct uncovered this time are just the tip of the iceberg.

Many of the corporations that are commissioned to operate childcare facilities for schoolchildren are trying to secure a large profit by hiring elderly people at low wages. Such businesses have a low awareness of compliance, and it is believed that there are similar cases throughout Japan that have gone undetected. Proper management is necessary to avoid damaging the reputation of good businesses.

The local governments that are entrusted with the management of these services need to create a system that prevents the operators from cheating and put a stop to the misuse of taxpayers’ money.