its a fine line... "licensing" is a State requirement. BUT, LOTS of "babysitters" do not have a license.... it is a complicated and costly thing to complete in some States.
Like many things in life, being a "licensed" person does not mean they are better... or worse. My friend for example, casually babysat... but could NOT afford all the "requirements" to make her home into a "licensed" home facility. But she still babysat. It was just 1-2 other kids. And she is a great babysitter and great with children, and has a Masters Degree in child development, and CPR.
So, its up to you. Even "licensed" Daycare facilities have had troubles with the law too. Or child endangerment/crimes too. Unlicensed child care as well. So, it is the caregiver... that is responsible for any said actions or not.
But if the babysitter is "unlicensed"... then you CANNOT claim a child-care deduction on your taxes. AND, your friend cannot write off or claim any costs/income... because she is probably operating under the table and getting paid that way or in cash.
I would also see if she has liability insurance, if she has a "Contract" that you and she sign off on, if she have "rules" and gives you this information etc. AND, "back ground" check her too.
At least, you already know her, and has been a long time neighbor.
For some, its an ethical issue, and for others there is no difference between a "licensed" or un-licensed Home-Daycare.
I cannot make the decision for you, but just some ideas.
All the best,
Susan