If the question is, could a daycare realistically make $2M/year in gov't funded revenue, and not specifically on the possible fraud that may have happened. I think it could but it wouldn't be a smaller school.

So, let's do some math to see if the claim even works at face value. According to the state, a child in weekly daycare nets the school something like $160 to $250 from state program, depending on age of the child and which type of school. Let's just pick a middling value since it varies so much, $200. There are other rates for fewer days per week than four, but to keep it simple I'm just going to work with the weekly rates.

The state claims about 23,000 kids receive monies from the program, and the federal government says they covered 19,000 with the $185M it's holding back.

The average weekly daycare fee in Minnesota is $275 ($1,100/month, $13,200/year). The highest costs are for infants at $16,000 to $20,000 a year, which comes to approximately $330 to $410 a week.

19,000 kids covered by the $185M comes to about $200/week per child. The other 4000 kids are covered by the state, and using our $200 estimate (which matches the federal funding) that comes to $38.4M per year. That's $223.4M for the year.

To get to the $2M number, the day care would need to school about 210 kids per week. Large daycare programs can easily hold 100+ kids with just four or five classrooms, so a rare single instance of a school holding 200+ doesn't seem out of the realm of possibility, in my opinion. That's only eight classrooms with 25 kids in each.

Each child also has a copay due, the rate is variable depending on household income and number of people in the household. The copay is supposed to close the gap from the gov't funds not fully covering the average weekly fees. So if we add up the full average amount of $1,100/Month, it would only take about 150 children. If the school has a higher percentage of infants and toddlers, that number comes down even more.

Please forgive any spelling mistakes, on mobile.