From reading more recent posts, I think you have decided to give notice to the nanny, with notice period as stated in her contract. So as such, the sitation has been resolved.
However, for benefit of anyone else in a similar position (now or in the future), I'll give as view on the the initial posting, in which I can see there being a few issues which I want to pick up on.
- Nannies own children are joining in on outings.
- when the nanny was hired, I presume you knew she had children. Was there any agreement regarding how her own children affected her work?
- DD1 (school aged?) was left at friend house to play, without your consent.
- DD2 (aged 22 months) was left with nannies daughter, without your consent.
Points 2 and 3 I feel are the most serious. I feel they are grounds in themself for instant dismissial.
I do not know what you have in the contract, but typically in a nanny contract, there will be a Gross Misconduct clause, which could be along the lines of;
Gross misconduct, which will result in instant dismissal includes the following:
Actions which could endanger or cause harm to the children.
Drunkenness or use of illegal drugs.
Theft or dishonesty.
If you have used a standard nanny contract, you may have the following popular clause:
Misconduct which may be deemed gross misconduct includes but is not limited to theft, drunkenness, illegal drug taking, child abuse and violent or threatening behaviour (be it verbal or physical).
The first one of these is better for our given situation, as leaving the children with someone without your consent, could endanger or cause harm to the children.
The second one does not specify directly that leaving the children with someone else would be grounds for gross misconduct, but does (by saying not limited to) leave it open for you to say that such behaviour did amount to gross misconduct, if you wanted the nanny to leave, or grounds for a written warning if you wanted the nanny to stay.
Given that I see a nannies role as being to care for the children, the nanny should NEVER leave the children with someone else, without your consent. There are of course common-sense exceptions - such as at toddler group when the nanny needs to go to the toilet, I feel they could then ask another person to keep an eye on the children, while they nipped to the loo. However, they should not leave the premises.
Having a clause in the Gross Misconduct setion of the contract, directly relating to leaving the children with someone else, is a good thing to add. It helps to clarify what is expected of the nanny, and with luck helps to protect the children.
For those of you who may want to read more about disciplinary procedures, including how to write them, then I suggest Code of Practice book 1 (PDF) from ACAS.