Order to Repay 67 Million Yen for Fraudulent Billing: Lessons Learned from the Revocation of a Disability Employment Support Facility's Designation

In July 2024, Kyoto City announced the revocation of the designation of "Emi Craft" (a Type B Continuous Employment Support facility).

The operating corporation, ZERO Co., Ltd., was ordered to repay approximately 67 million yen after fraudulently billing for benefits without properly staffing a manager and a service management supervisor.

In this article, I would like to examine the background of this case and the "pitfalls of system operation" that disability welfare service providers often overlook, from the perspective of an administrative scrivener.

It Started with a "False Designation Application"

The root of the problem dates back to the facility's designation in August 2023.

ZERO Co., Ltd. applied for designation by listing an external individual who had no actual plans to work there as the "manager and service management supervisor."

This constitutes a clear case of "false application."

By definition, a designation application is predicated on the fact that "an appropriate staffing structure is in place at the time the business begins."

Using names for appearances only or staffing based on mere projections is a legally high-risk act.

The Fraud Began at the "Application Stage"

Many cases of fraudulent billing typically stem from operational deficiencies, such as "misunderstandings of additional payment rules" or "staffing standards falling apart mid-operation."

However, cases like this one, where the operation was "inappropriate from the time of designation," are easily viewed as highly malicious and lead directly to more severe penalties (revocation of designation).

Why "I Had No Intent to Defraud" Is Not a Valid Defense

ZERO claims, "We acknowledge our management responsibility, but we had no intent to commit fraud."

However, benefit payments in the disability welfare system are only made when "laws and standards are met."

If benefits are received while operating in a structure that violates the system, it is considered "fraudulent billing" regardless of intent, making the provider subject to repayment, additional penalty charges, and revocation of designation.

In other words, "I didn't know" or "I had no malicious intent" are not valid excuses.

It Is Not Only the Business Operator That Is Affected

Emi Craft had 36 users enrolled.

While the operator is reportedly facilitating transfers to other facilities following the revocation, a sudden change in their living and working environment is a significant burden for users with disabilities.

Furthermore, it also leads to employment instability and a loss of social credibility for the staff.

Three Preventive Measures an Administrative Scrivener Wants to Convey

1. Do not rely on 'projections' for the organizational structure at the time of designation application
   Apply based on personnel who can actually work, rather than 'prospective hires' or 'collaborators'.

2. Conduct regular 'personnel placement checks'
   Review whether you have fallen below the standards due to resignations, transfers, maternity leave, etc.

3. Ensure the operations manager correctly understands the system
   It is essential that the management themselves, rather than leaving it to outsiders, grasp the rules and responsibilities of the system.

Operations that do not leave 'loopholes' in the system are the first step toward trust

Disability welfare services are built on the two wheels of the 'system' and the 'field'.

Sustainable operations cannot be achieved if there is an imbalance toward either one.

I hope you will take this case as a lesson, and now is the time to proceed with developing a structure that returns to the principles of the system.

If you have any concerns about management or designation requirements, please consult with a professional as soon as possible.