10.1 Effective Internal Controls

Lead Agencies must ensure the integrity of the use of CCDF funds through effective fiscal management and must ensure that financial practices are in place. Lead Agencies must have effective fiscal management practices in place for all CCDF expenditures. 10.1.1 Organizational structure to support integrity and internal controls Describe how the Lead Agency’s organizational structure ensures the oversight and implementation of effective internal controls that promote and support program integrity and accountability. Describe: The lead agency’s organizational structure for program integrity includes the following divisions of the lead agency, child care services, legal, finance, and program integrity divisions. The assignment of authority and responsibility related to program integrity are the discretion of the Commissioner, which is the lead agency’s official contact. The Commissioner also delegates the duties of each division. The Finance division provides fiscal management including disbursement and reporting of all CCDF funds. The Child Care Services division is responsible of the administration of CCDF funds including all direct and discretionary funds. The Legal division provides instruction on fiscal laws of the state. The Program Integrity division is responsible for investigations of suspected fraudulent activity of all state and federal funds that are disbursed by the lead agency. The lead agency coordinates all activities in the implementation of the internal controls of the program integrity of CCDF funds. The Lead Agency creates a contract and budget for each agency that administers eligibility and quality initiative services on behalf of the lead agency. Contractual agreements are reviewed by Legal and Financial Accounting staff. Communication between fiscal and program staff are determined on an as needed basis by program directors. Invoices for expenditures are submitted monthly and reviewed by a program specialist against budgets, verifying the number of children served and line-item detail accuracy as a means of checks and balances. Invoices are submitted to the lead agency’s Finance Division for additional review against budgets, contracts and financial reporting codes before payment is authorized. The Lead Agency has a dedicated Policy Specialist that constantly reviews Policy and Procedures for compliance with CCDF regulations as another means of checks and balances and another activity to support program integrity. The Policy Specialist updates policy and notifies all Child Care Management Agencies (CMA) of any changes and directives needed to fulfill the new policy. The lead agency also conducts yearly reviews conducted outside of the federal review cycle help the CMAs maintain error reduction, identify potential policy inconsistencies, and identify areas where targeted technical assistance is needed, as well as assist agencies to manage overall compliance with policy. Include the following elements in your description: 1. Assignment of authority and responsibilities related to program integrity. 2. Delegation of duties. 3. Coordination of activities. 4. Communication between fiscal and program staff. 5. Segregation of duties. 6. Establishment of checks and balances to identify potential fraud risks. 7. Other activities that support program integrity. 10.1.2 Fiscal management practices Describe how the Lead Agency ensures effective fiscal management practices for all CCDF expenditures, including: a. Fiscal oversight of CCDF funds, including grants and contracts. Describe: The Lead Agency creates a contract and budget for each agency that administers CCDF eligibility and quality initiative services on behalf of the lead agency. Contractual agreements are reviewed by Legal and Financial Accounting staff. Invoices for expenditures are submitted monthly and reviewed by a program specialist against budgets, verifying the number of children served and line-item detail accuracy. Invoices are submitted to the lead agency's Finance Division for additional review against budgets, contracts and financial reporting codes before payment is authorized. The lead agency also conducts yearly reviews conducted outside of the federal review cycle to help the Child Care Management Agencies maintain error reduction, identify potential policy inconsistencies, and identify areas where targeted technical assistance is needed, as well as assist agencies to manage overall compliance with policy. b. Tracking systems that ensure reasonable and allowable costs and allow for tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provision of this part. Describe: The Finance division creates funding codes to track CCDF expenditures for services such as CCDF eligibility and quality initiatives for professional development. These initiatives are implemented on the lead agency's behalf through contracts. Invoices are submitted, and expenditures are adjusted against running remaining balances of the yearly budgets. Before starting any contract, the lead agency's Funding Review Committee, which the finance division director leads, must review and approve funding for services exceeding $500. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: The Finance division prepares all fiscal reporting which are generated from the finance electronic systems. All reports must be reviewed and approved by either the finance assistant director or the lead agency's CFO prior to submission. d. Other. Describe: 10.1.3 Effectiveness of fiscal management practices Describe how the Lead Agency knows there are effective fiscal management practices in place for all CCDF expenditures, including: a. How the Lead Agency defines effective fiscal management practices. Describe: The Lead Agency implements mechanisms to provide oversight of Childcare Management Agencies' use of CCDF funds by conducting internal and external audits, reconciling invoices, analyzing contracts and expenditure reports. This includes ensuring compliance with federal regulations and guidelines as well as transparency and accountability in financial transactions. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: The Lead Agency measures and tracks results of their fiscal management practices through internal and external audits, invoices, contracts, and expenditure reports. The Lead Agency utilizes resources such as budget variance analyses, expenditure tracking systems, and internal controls to monitor spending patterns, identify potential areas of improvement, and assess the overall financial health of the program. c. How the results inform implementation. Describe: The results of the Lead Agency’s fiscal management practices inform implementation by providing valuable insights into the efficiency and effectiveness of CCDF expenditures. For example, if the outcome of audits reveal inaccurate eligibility determination, misallocation, overspending of funds, or fraud, the Lead Agency will take corrective action procedures to rectify the inconsistencies. Corrective actions can involve more corrective action procedures to rectify the inconsistencies. Corrective actions can involve more intense training, more stringent internal management of contract agencies, budget revisions or reallocation, and ultimately contract elimination when repeated programs violations are identified. d. Other. Describe: The Lead Agency engages in ongoing communication and collaboration with stakeholders, child care providers, advocacy groups, including other government entities to ensure the alignment of goals and priorities related to early childhood education and care. 10.1.4 Identifying risk Describe the processes the Lead Agency uses to identify risk in the CCDF program including: a. Each process used by the Lead Agency to identify risk (including entities responsible for implementing each process). Describe: The Lead Agency has a dedicated Policy Specialist that consistently reviews Policy and Procedures for compliance with CCDF regulations. The Policy Specialist updates policy and notifies all Child Care Management Agencies (CMA) of any changes and directives needed to fulfill the new policy. Yearly reviews conducted outside of the federal review cycle help the CMAs maintain error reduction, identify potential policy inconsistencies, and identify areas where targeted technical assistance is needed, as well as assist agencies to manage overall compliance with policy. Child Care Management Agencies also perform in-house supervisory case reviews for agreement with actions taken by the caseworker and were consistent with policy. The Lead Agency reviews attendance and billing records to identify potential risk of fraud. Swipe activity is checked against attendance/sign-in/sign-out sheets and provider authorizations. The Lead Agency has a complaint intake line for clients or providers to notify the agency of suspected fraud or improper use. The Lead Agency Child Care Management System and Time and Attendance System generates monthly and weekly administrative reports. These reports are used to verify the accuracy of daily tasks by system users and reports errors for correction. The Lead Agency’s Division of Information Systems performs daily and weekly system routines to find errors as well. Ad hoc reporting is available as needed in determining activity of any misuse of policy application. b. The frequency of each risk assessment. Describe: The program/policy specialist completes a monthly review of the policy and procedures manual. In addition to the required improper payment review reporting year, the lead agency conducts the improper payment yearly, reviewing a minimum of 20 cases per month. Child Care Management Agencies also perform in-house supervisory reviews on a monthly basis with a minimum of 10% of the entire caseload per worker without duplication of cases in a program year. The Lead Agency conducts daily reviews of its system red flag reports, which include attendance, billing records, and attendance activity. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The Lead Agency uses risk assessment results to inform program improvement by identifying contract agencies’ roles and responsibilities and eligibility of cases to determine if procedural processes are violated or need modification. The review of eligibility determination beginning with child care application information to enrollment of children, and provider payment will identify weakness and strengths to address. The results of these activities can led to payment recovery, fraud investigations, program violations and sanctions. Consistent errors within the same CMA may also lead to corrective action plans and additional monitoring of the CMA until risks are minimized. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The Lead Agency recognizes the effectiveness of its risk assessment processes when the actions performed in the assessment yields positive outcomes. The Child Care Management Agencies (CMA) maintains a reduction in errors as evident in the yearly Improper Payment Review and the rate is at or below 10%. The reduction of technical assistance by the CMA, either requested or identified through the risk assessment, is reduced to no more than 3 instances per year. The IP error rate includes both the number of improper payments and administrative errors. Additionally, the efficacy of other risk assessment processes is demonstrated when the Child Care Management Agency's performance avoids the need for corrective action as validated in the monthly reports and supervisory reviews. e. Other. Describe: 10.1.5 Processes to train about CCDF requirements and program integrity Describe the processes the Lead Agency uses to train staff of the Lead Agency and other agencies engaged in the administration of CCDF, and child care providers about program requirements and integrity. a. Describe how the Lead Agency ensures that all staff who administer the CCDF program (including through MOUs, grants, and contracts) are informed and trained regarding program requirements and integrity. i. Describe the training provided to staff members around CCDF program requirements and program integrity: The Lead Agency conducts annual subsidy policy training with state staff and contract agencies. The Lead Agency also provides training and technical assistance to contract agencies and to providers when changes occur in policy, CCDF eligibility requirements, and new data systems. The Lead Agency accommodates all entities by using a variety of options: technical platforms, correspondences, and in person meeting opportunities to ensure information is presented timely. Timeliness allows all entities to receive new information with the opportunity to participate in the QA session. ii. Describe how staff training is evaluated for effectiveness: The effectiveness of training is evaluated by encouraging participants to complete an evaluation form. Additionally, staff training effectiveness will be evaluated via practical exercises, observation of trainers, and feedback received from training events. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: Error rate review must score 10% or less to indicate successful program integrity. The Lead Agency uses program integrity data to inform ongoing staff training needs when evaluation scores are beneath standard or the error rate review exceeds 10%. b. Describe how the Lead Agency ensures all providers for children receiving CCDF funds are informed and trained regarding CCDF program requirements and program integrity: i. Describe the training for providers around CCDF program requirements and program integrity: The lead agency received a Preliminary Notice of Possible Non- Compliance on May 9, 2024, notifying the lead agency of a non-compliance related to the training of providers around CCDF requirements and program integrity. The Lead Agency certifies that additional time is needed to come into compliance with the requirement noted in the letter. The Lead Agency is currently implementing a new database system and restructuring its program integrity methods to align with the system's functionality for capturing program violations. The lead agency continues to use red flag reports, case reviews and other ad hoc reporting in its legacy system until the roll out of the new system. The lead agency staff will conduct provider training annually to inform providers of program requirements and integrity. The training will include the most recent policies and procedures of the child care subsidy program's requirements for participation, which includes guidance on payment rules, program disqualification, and due process. The training will be conducted by the lead agency's staff and will be conducted virtually. ii. Describe how provider training is evaluated for effectiveness: The effectiveness of training is evaluated by encouraging participants to complete an evaluation form. Additionally, provider training effectiveness will be evaluated via practical exercises, observation of trainers, and feedback received from training events. Low scoring categories, 3 points or less, will be modified for future training. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: The Lead Agency uses program integrity data to inform ongoing provider training needs when evaluation scores are beneath standard, or the error rate review exceeds 10%. The error rate reviews identify errors of delayed registrations for participation in the child care subsidy program and enrollments of children not authorized for care at the facility based on the license (capacity and age errors). 10.1.6 Evaluate internal control activities Describe how the Lead Agency uses the following to regularly evaluate the effectiveness of Lead Agency internal control activities for all CCDF expenditures. a. Error rate review triennial report results (if applicable). Describe who this information is shared with and how the Lead Agency uses the information to evaluate the effectiveness of its internal controls: The Lead Agency contracts the child care subsidy program eligibility processes to local agencies known as the Child Care Management Agencies (CMAs). The CMAs undergo the improper payment review yearly and complete in the same format as the triennial report. Each CMA is allowed to present evidence to change the findings of the draft report if such information was not visible to the reviewer. The evidence is reviewed and if accepted, the findings are changed in order to complete the final improper payment report. The final report is shared with the CMA and leadership within the Lead Agency. The lead agency uses this information to determine if additional training are needed for the CMAs, if there should be a reassignment of duties by the CMAs and if contract deliverables are being met. b. Audit results. Describe who this information is shared with and how the Lead Agency uses the information to evaluate the effectiveness of its internal controls: The Lead Agency undergoes an internal audit by the Alabama Examiners of Public Accounts biannually. The examiners review policy and procedures of the child care subsidy program, licensing regulations, and the lead agency’s Early Head Start-Child Care Partnerships program requirements to affirm the lead agency is operating within standards. The audit includes a review of the previous two fiscal years, case reviews, and database system demos. The results of these audits help determine if alternate approaches to program efforts should be reexamined to meet program goals. The results are shared with the lead agency's leadership and are available to the public upon request. The lead agency uses the audit results to determine if there should be changes in program policies and procedures regarding the delivery of eligibility services and internal controls, lead agency and Child Care Management Agency training and development, and contract deliverables of the Child Care Management Agencies. c. Other. Describe who this information is shared with and how the Lead Agency uses the information to evaluate the effectiveness of its internal controls: 10.1.7 Identified weaknesses in internal controls Has the Lead Agency or other entity identified any weaknesses in its internal controls? a. [ ] No. If no, describe when and how it was most recently determined that there were no weaknesses in the Lead Agency’s internal controls. b. [x] Yes. If yes, what were the indicators? How did you use the information to strengthen your internal controls? Weaknesses were identified in the previous state plan, which caused the lead agency to not meet the compliances in program integrity. The lead agency has purchased a new data management system to help establish better internal controls.