The other answers address how this affects the children (which are obviously most important) but I would like to address how this affects you directly.
While I'm not a lawyer, I see a potential for liability here. In most areas of our lives, failure to report a health problem isn't that big a deal. Bugs in the restaurant where you work, nobody is going to do anything to you if you don't report it. But all of this changes when children are involved. What might otherwise be dismissed suddenly comes under much greater scrutiny.
You haven't said what your role is at this daycare either. From what I know about daycare centers, I'll assume you're a caregiver. As such, you bear a higher responsibility than some passer-by for the welfare of the children in your care.
Think about this for a minute. Depending on what's doing the biting, some of these children could get really sick. And if a child has an allergy or auto-immune condition that nobody knows about, the child could actually die. I'm not exaggerating. Suppose that happens and suppose that child is directly under your care. How are you going to answer, "since you knew about these bites and knew your employer wasn't doing anything about them, why did you not report it?"
You need to do a few things:
- You need to contact the local health department. Since there is vermin involved, this is clearly a public health issue.
- You need to call Child Protective Services (depending on your state this could be Family Services, Social Services or something similar). You might think I'm overreacting and as a parent I truly loathe the idea of calling CPS but I'm not. This is a separate issue from a health issue. The health issue is about everyone getting bitten and the infestation. The issue I'm talking about here is that the children are being neglected and harmed through the negligence of your employers. And unless you do what you can to stop it, you are a party to it. As a practical matter, reporting also demonstrates that you're actively trying to protect the children.
- You need to start looking for a new job immediately after you do 1 and 2. First of all, you don't want to work for someone who doesn't care about their employees and especially about the children under their care. Second, they are probably going to go out of business due to mounting debt and you don't want to find yourself suddenly out of work. Third, if you do 1 and 2, hopefully they'll go out of business because of negligence.
- When you find work, if nothing's been done from 1 and 2, you should tell the parents. You no longer would have a responsibility to your employer and parents need to know.
You need to protect the children but you need to protect yourself too. You don't want to be caught up in any firestorm that results from this place's negligence and you also don't want to resist being accused of negligence yourself.
I too am very sorry. But this is more than just what's good for you or your workplace, even though that's what this site is about. From where I sit it's about right and wrong. You can choose to stay or go, the children must go where they're told and they shouldn't be made to suffer by your employer's inaction or possibly their parents own negligence (if they know about the bites and keep placing their child there).