Free Lunch For Crooks

The federal program that feeds low-income children in day care was an invitation to steal for crooks.

CBS News Correspondent Wyatt Andrews reports after 3,200 unannounced inspections, federal auditors found taxpayers were feeding thousands of children who did not exist.

In one case, taxpayer funds were covering $6 per day per child to a site that is actually a vacant lot. Agriculture Department Inspector General Roger Viadero says program operators simply over-reported the number of meals served, and the government paid. "We found $73 million being billed to the taxpayer that should not have billed, much less paid," he explains.

One California operator skimmed $2.3 million and bought a $1 million home. According to Viadero, "She bought four pieces of property, went on several vacations. This is our poster child."

It wasn't the day care centers themselves that were scamming the government. Under this program, large non-profit agencies called sponsors were set up to dispense and monitor the funds for several different centers under their umbrella. These sponsors -- the very groups put in place to watchdog the money --were the ones stealing it.

Auditors also found honest programs. Deborah Ellis of YWCA day care in Washington feels the program is needed to feed the children of the working poor. "It's very vital that we have this program because it provides children with the nutrition they need," she explains.

So far, there have been 44 prosecutions, but scammers may still be at it. The report bitterly complains that three years into this audit, the agriculture department has yet to fix what's broken.