Federal authorities have charged 12 individuals in San Diego with operating fraudulent home daycare centers that allegedly defrauded approximately $14 million in government childcare subsidies intended to support low-income families. The Department of Justice (DOJ) announced the indictments on Tuesday, describing a scheme in which defendants obtained California licenses for home childcare operations and registered with local nonprofits authorized to distribute federally subsidized daycare funds. According to the complaint, they submitted false attendance records to claim payments, with some defendants reportedly absent from the country during periods when they claimed to be providing childcare.

Each defendant is accused of receiving between $538,000 and $1.2 million through the alleged scheme. The DOJ noted that while the cases are unrelated, the methods used were largely similar.

The following day, authorities unveiled separate charges against four individuals in the Los Angeles area accused of misappropriating millions of dollars allocated for homeless services. These defendants ran questionable nonprofits that secured contracts with the Los Angeles Homeless Services Authority and other organizations managing billions in homeless assistance funds. One defendant reportedly received $118 million in government grants, much of which prosecutors allege was diverted for personal expenses, including luxury vacations, vintage car restorations, real estate purchases, and recreational spending such as PlayStation charges. Fraudulent invoices and sham vendors with no real employees or valid operations were reportedly used to funnel the money back to the accused.

These cases highlight concerns over the scale of welfare fraud in California, a state that has seen a significant expansion in social assistance organizations. Between early 2020 and 2026, California added over 205,000 such establishments, many with only one or two employees. Adjusted for population, the state has more than 16 times as many social assistance entities as Florida, alongside five times the number of unsheltered homeless individuals.

Despite increasing government expenditures on homelessness, the problem persists. Democratic lawmakers in Sacramento are currently seeking voter approval for $11.25 billion in state borrowing to fund additional affordable housing projects. However, earlier audits found that California lacks sufficient oversight and tracking of homeless program expenditures and outcomes. A 2024 state auditor’s report revealed that $24 billion had been spent over five years across roughly 30 homelessness programs, yet comprehensive data on costs and effectiveness remain unavailable.

Debates continue over the root causes of California’s growing homelessness crisis. A study by the Public Policy Institute of California identified the state’s 2014 Proposition 47—a ballot measure that reduced penalties for certain drug and theft offenses—as a significant factor correlated with rising homelessness. Since the measure’s enactment, the homeless population increased 60 percent from 2014 onward, with a 10 percent rise in unsheltered individuals. The study also documented an 8 percent increase in serious drug use indicators, such as overdose deaths and hospital visits, alongside a 20 percent decline in drug treatment admissions, partially attributed to reduced legal incentives for rehabilitation.

Financial backers of some of these policy changes include prominent California business figures who supported higher taxes to fund social programs. Critics argue that increased taxation and government spending have fueled wasteful practices and created incentives for fraudulent entities, potentially undermining efforts to address homelessness effectively.

Opponents of a proposed 5 percent wealth tax on billionaires scheduled for a November ballot contend that such measures could drive entrepreneurs away and lead to an increase in sham businesses. Proponents maintain that additional revenue is necessary to combat homelessness and provide affordable housing, despite concerns over program oversight and fraud. The ongoing controversy underscores the complexity of balancing social welfare funding with accountability and effective policy in California.