It's not up to you to decide whether or not there is illegal activity going on, it's simply up to you to report SUSPECTED illegal activity and let the government do the rest. I don't see it as you getting "involved" per se because your part will be minimal (however critical) in the grand scheme.

If they are indeed found to be running a daycare illegally then you will have done them a huge favor by reporting them now, before the Bill takes effect, instead of later on when the fines for operating illegally will be astronomical.