10.2 Fraud Investigation, Payment Recovery, and Sanctions

Lead Agencies must have the necessary controls to identify fraud and other program violations to ensure program integrity. Program violations can include both intentional and unintentional client and/or provider violations, as defined by the Lead Agency. These violations and errors, identified through the error-rate review process and other review processes, may result in payment or nonpayment (administrative) errors and may or may not be the result of fraud, based on the Lead Agency definition. 10.2.1 Strategies used to identify and prevent program violations Check the activities the Lead Agency employs to ensure program integrity, and for each checked activity, identify what type of program violations the activity addresses, describe the activity and the results of these activities based on the most recent analysis. a. ☐ Share/match data from other programs (e.g., TANF program, Child and Adult Care Food Program, Food and Nutrition Service (FNS), Medicaid) or other databases (e.g., State Directory of New Hires, Social Security Administration, Public Assistance Reporting Information System (PARIS)). i. ☐ Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. ii. ☐ Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. iii. ☐ Agency errors. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. b. ☐ Run system reports that flag errors (include types). i. ☐ Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. ii. ☐ Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. iii. ☐ Agency errors. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. c. ☐ X Review enrollment documents and attendance or billing records. i. ☐ X Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: The Program Integrity and Improvement Section (PIIS), in the Child Care and Development Division, reviews contractor files as a supplementary function of the Contract Monitoring Review process that occurs for each contracting agency every three years or as resources permit. The Program Integrity Section staff review enrollment documents, attendance, and billing records. If an error is discovered, it is discussed with the contractor and their processes are reviewed. If technical assistance is needed, it is provided at that time. The PII section staff request that the error be corrected. The Contracting Agency will be required to submit a corrective action plan to correct any program violations. In addition to contract monitoring, programs are required to complete an independent financial and compliance audit annually that includes review of enrollment documents, attendance, and/or billing records. The requirement to conduct an independent audit and submit the results to The Department is reflected in California Code of Regulations, Title 5, Section 18071. The results of the past Payment Integrity Information Act are as follows: cases with an error 8.33%, cases with an improper payment 2.9%, total amount of payment for the sample that were improper payments 1.9%. ii. ☐ Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. iii. ☐ Agency errors. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. d. ☐ X Conduct supervisory staff reviews or quality assurance reviews. i. ☐ X Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Intentional program violations may be identified through Error Rate Review via the contract monitoring process, or the financial audit submitted by contracting agencies annually. Programs with significant intentional program violations are brought to Case Conference Committee to determine whether the contract status will be placed on “conditional status”, which requires corrective action within the fiscal year or “no offer of continued funding”. Significant violations may be referred to the local county district attorney’s office for prosecution consideration. ii. ☐ X Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: An Error Rate Review is conducted during the contract monitoring process by reviewing a random sampling of family data files containing enrollment documentation, attendance records, attendance and enrollment claims, and provider payments, if applicable. Unintentional program violations are addressed through technical assistance and an Error Rate Reduction Plan. If the programs error rate exceeds the allowable threshold, the contractor is placed on a corrective plan with the program analyst from the Program Integrity and Improvement Section to receive training and 1:1 technical assistance regarding the program violations identified. This is a successful practice because it provides targeted, specific guidance based on areas identified where requirements were not applied correctly and has supported the revision of internal control systems to avoid systemic errors. iii. ☐ X Agency errors. Describe the activities, the results of these activities, and how they inform better practice: An Error Rate Review is conducted during the contract monitoring process by reviewing a random sampling of family data files containing enrollment paperwork, attendance records, attendance and enrollment claims, and provider payments, if applicable. Agency errors are addressed through technical assistance and training. Contract agencies develop error rate reduction plans. Contractor staff receive 1:1 technical assistance to address systemic errors. Consultants and analysts provide training on topics related to the enrollment and attendance process via webinar, in cluster trainings, or 1:1. This is a successful practice because it allows for conversations to take place regarding the procedures a contractor utilizes and ensures there is an interactive process of learning correct application of requirements and enhancing the contractors current processes to ensure program integrity. e. ☐ X Audit provider records. i. ☐ Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. ii. ☐ Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. iii. ☐ X Agency errors. Describe the activities, the results of these activities, and how they inform better practice: The PIIS conducts review of provider records during a Contract Monitoring Review on a file- by-file basis to identify errors, estimate the error rates, and assist the contractor in developing a robust error rate reduction plan for provider reimbursements. The PIIS provides specific technical assistance based on the error rate reduction plan as well as a follow- up review to ensure the contractor's policy and procedures produce the required reduction of error rates for provider reimbursements. These processes results in a better understanding of statute and regulations and which has contributed to a reduction of overall error rates. f. ☐ X Train staff on policy and/or audits. i. ☐ Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. ii. ☐ X Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: The CDSS conducts a yearly comprehensive off-site training of three to five days for its staff members. The staff members also meet weekly through collaborative conversations to discuss issues regarding Child Care Development Fund (CCDF) program administration, requirements, and integrity. They provide on-going training and Technical Assistance to contractors in regional sessions, in 1:1 sessions, and/or in clusters with webinars or during face-to-face presentations. These sessions address CCDF program administration, requirements, and integrity. This is a successful practice because it is a layered approach. Lead agency staff are able to ask clarifying questions and reach a consensus on how requirements are applied. The staff then provide a targeted approach to ensure that areas of concern are addressed with the contractor and thus, ensure the requirements are adhered to. iii. ☐ X Agency errors. Describe the activities, the results of these activities, and how they inform better practice: On an annual basis CDSS provides training to child care and development contractors on the following areas, at a minimum: 1) Eligibility certification and recertification; 2) Income calculation; 3) Need and family fee assessment; 4) Collecting and earning family fees; 5); Attendance recording and reporting; 6) Earning your contract; and 7) Written information for Parents and Providers. Trainings are provided at statewide conferences, local regional area trainings, individual contractor level trainings, by webinar and video conferences. Trainings focus on how contractors can meet the regulatory requirements, implementation guidance, practical applications and simulated contractor examples are described to audience members with an emphasis placed on the categories of eligibility, need, family fees, provider payments, and attendance. These trainings result in contractors being better informed and having a clearer understanding of regulatory requirements. This is a successful practice because at the end of the fiscal year, the lead agency surveys contractors in attendance of the training opportunities and results are favorable. This is an indication that the contractor has been able to learn additional information and ask relevant questions that will assist their understanding of the programmatic requirements. g. ☐ X Other. Describe the activity(ies): The Program Integrity and Improvement Section is dedicated to supporting contractors in achieving program integrity through on-site visits. These on-site visits allow for staff to work with contractors in enhancing their understanding of the rules and regulations tied to their programs and evaluate any training needs. On-site visits are a successful practice because they allow staff to gain understanding of how the contractor organizes files, what the contractor’s system looks like, and gain a deeper understanding of where there may be issues in maintaining compliance. This allows for staff to provide training, technical assistance, and individualized support in understanding requirements. i. ☐ Intentional program violations. Describe the activities, the results of these activities, and how they inform better practice: Not Applicable. ii. ☐ X Unintentional program violations. Describe the activities, the results of these activities, and how they inform better practice: The CDSS has analysts working in teams, full-time, reviewing files, identifying administrative errors, and assisting contractors in crafting and implementing error rate reduction plans. Agency specific error rates have been successful in identifying issues and reducing the instance of errors. For all contractors, an annual independent audit is required and reviewed by CDSS. Actions Taken: on-site reviews of contractors to identify and reduce errors, follow-up reviews to assess effective implementation of error rate reduction plans, and review of annual agency audits and completion of on-site audits of high-risk contractors by CDSS’ auditors. Analysts are available to answer contractor’s questions about specific challenges or questions which arise throughout the year when applying regulatory and contractual obligations. These are successful practices because they allow the contractor to ensure they are aware of any areas for improvement and the Analysts are available to support them in ensuring they are responsive to assisting the contractor in achieving a higher level of compliance and lower instances of errors. iii. ☐ Agency errors. Describe the activities, the results of these activities, and how they inform better practice: Not applicable. 10.2.2 Identification and recovery of misspent funds Lead Agencies must identify and recover misspent funds that are a result of fraud, and they have the option to recover any misspent funds that are a result of unintentional program violations or agency errors. a. Identify which agency is responsible for pursuing fraud and overpayments (e.g., State Office of the Inspector General, State Attorney): Local County District Attorney, in conjunction with CDSS. b. Check and describe all activities, including the results of such activity, that the Lead Agency uses to investigate and recover improper payments due to fraud. Consider in your response potential fraud committed by providers, clients, staff, vendors, and contractors. Include in the description how each activity assists in the investigation and recovery of improper payment due to fraud or intentional program violations. Activities can include, but are not limited to, the following: i. ☐ X Require recovery after a minimum dollar amount of an improper payment and identify the minimum dollar amount. Describe the activities and the results of these activities based on the most recent analysis: California believes the cost of recovery, including staff time to investigate whether an improper payment occurred, construct a billing, and address any contractor appeals would cost more than the amount recovered. At this time, given the relatively low amount of funds identified as improper payments, California believes its resources will be more effectively expended on practices that will decrease future error rates. California, however, pursues issues of fraud. This is a successful practice due to the minimal amount of fraud discovered, and the use of resources spent on ensuring contractors gain a better understanding of requirements and self-evaluations to preserve program integrity. ii. ☐ X Coordinate with and refer to the other State/Territory agencies (e.g., State/Territory collection agency, law enforcement agency). Describe the activities and the results of these activities based on the most recent analysis: California Department of Social Services (CDSS) and the contracting agency would work in conjunction with the local county district attorneys to prosecute instances of fraud in the child care program. This activity sometimes results in funds owed being recovered. This is a successful practice because the local district attorney’s office has the resources and staff with background knowledge in order to investigate and potentially recover funds. iii. ☐ X Recover through repayment plans. Describe the activities and the results of these activities based on the most recent analysis: Within special circumstances or per the directive of legal settlements and decisions, the CDSS will generate a repayment plan with the contractor for one or multiple outstanding invoices. Repayment plans will stipulate a specific amount to be paid by a predetermined schedule until the remaining balance is paid-in-full. This activity sometimes results in funds owed being recovered. iv. ☐ X Reduce payments in subsequent months. Describe the activities and the results of these activities based on the most recent analysis: The CDSS may reduce monthly or quarterly advance apportionments to contractors in subsequent months of the fiscal year if and when the contractor has misrepresented/misreported actual contract earnings. The results of this activity have ensured that funds owed are recovered. v. ☐ X Recover through State/Territory tax intercepts. Describe the activities and the results of these activities based on the most recent analysis: The CDSS will follow the existing process, utilizing Franchise Tax Board to collect delinquent overpayments in the child care program, similar to the CalWORKs and Temporary Assistance for Needy Families programs. This is an existing practice and thus, is successful in recovering identified funds using a collaborating state department. vi. ☐ Recover through other means. Describe the activities and the results of these activities based on the most recent analysis: vii. ☐ X Establish a unit to investigate and collect improper payments and describe the composition of the unit. Describe the activities and the results of these activities based on the most recent analysis: The CDSS fraud investigative staff would investigate, establish, and pursue claims against child care providers. As applicable, county welfare fraud investigative staff would investigate, establish and pursue claims against recipients. This unit has not been established therefore there are no results. viii. ☐ Other. Describe the activities and the results of these activities: Not applicable. c. Does the Lead Agency investigate and recover improper payments due to unintentional program violations? ☐ X No. ☐ Yes. If yes, check and describe below any activities that the Lead Agency will use to investigate and recover improper payments due to unintentional program violations. Include in the description how each activity assists in the investigation and recovery of improper payments due to unintentional program violations. Include a description of the results of such activity. i. ☐ Require recovery after a minimum dollar amount of an improper payment and identify the minimum dollar amount. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. ii. ☐ Coordinate with and refer to the other State/Territory agencies (e.g., State/Territory collection agency, law enforcement agency). Describe the activities and the results of these activities based on the most recent analysis: Not applicable. iii. ☐ Recover through repayment plans. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. iv. ☐ Reduce payments in subsequent months. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. v. ☐ Recover through State/Territory tax intercepts. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. vi. ☐ Recover through other means. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. vii. ☐ Establish a unit to investigate and collect improper payments and describe the composition of the unit. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. viii. ☐ Other. Describe the activities and the results of these activities: Not applicable. d. Does the Lead Agency investigate and recover improper payments due to agency errors? ☐ X No. ☐ Yes. If yes, check and describe all activities that the Lead Agency will use to investigate and recover improper payments due to agency errors. Include in the description how each activity assists in the investigation and recovery of improper payments due to administrative errors. Include a description of the results of such activity. i. ☐ Require recovery after a minimum dollar amount of an improper payment and identify the minimum dollar amount. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. ii. ☐ Coordinate with and refer to the other State/Territory agencies (e.g., State/Territory collection agency, law enforcement agency). Describe the activities and the results of these activities based on the most recent analysis: Not applicable. iii. ☐ Recover through repayment plans. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. iv. ☐ Reduce payments in subsequent months. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. v. ☐ Recover through State/Territory tax intercepts. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. vi. ☐ Recover through other means. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. vii. ☐ Establish a unit to investigate and collect improper payments and describe the composition of the unit. Describe the activities and the results of these activities based on the most recent analysis: Not applicable. viii. ☐ Other. Describe the activities and the results of these activities: Not applicable. e. What type of sanction will the Lead Agency place on clients and providers to help reduce improper payments due to intentional program violations or fraud? Check and describe all that apply: i. ☐ X Disqualify the client. Describe this process, including a description of the appeal process for clients who are disqualified. Describe the activities and the results of these activities based on the most recent analysis: The contract agency provides the parent with a Notice of Action (NOA), termination of services. If the parent disagrees with the written decision, the parent has 14 days (19 days if the NOA was received by mail) to request a hearing. Within 10 calendar days of the receipt of the request for a hearing, the contractor must notify the parent of the date and time of the hearing. The parent or an authorized representative is required to attend the hearing and must have the opportunity to explain the reasons they believe the action was incorrect. Within 10 days of the hearing the hearing officer must mail or deliver to the parent a written decision. If the parent disagrees with the written decision, they may request an appeal, specifying the reason why they believe the decision is incorrect. Upon receipt of the appeal request, CDSS may investigate as necessary to resolve the appeal. The decision of CDSS shall be mailed or delivered to the parent and the contractor within 30 calendar days after the receipt of the appeal request. As a result, after the appeal process is complete, child care services could be continued or terminated. This practice results in many overturned appeals based on facts and circumstances provided by the parent. This is a transparent process included on every NOA issued to the parent. ii. ☐ X Disqualify the provider. Describe this process, including a description of the appeal process for providers who are disqualified. Describe the activities and the results of these activities based on the most recent analysis: Contractors must develop and implement written policies and procedures for provider participation, which includes grievance procedures for parents and providers in the program. (California Code of Regulations, Title 5, Section 18223). Any appeal by a provider must be handled by the contractor. After the appeal process is complete, the business relationship between a contractor and provider could be continued or terminated. Results are unknown to CDSS as these steps are independent of CDSS. iii. ☐ X Prosecute criminally. Describe the activities and the results of these activities based on the most recent analysis: The local prosecuting authorities will prosecute recipients and providers who, through investigation, are determined to have committed fraud. When the investigation and prosecution concludes they will notify the CDSS accordingly. In cases where this occurs the recipient or provider may be required to pay back monies received through fraudulent means. This is a successful practice because local authorities have the staff with subject matter expertise which will take a course of action when there are egregious circumstances. iv. ☐ Other. Describe the activities and the results of these activities based on the most recent analysis: Not applicable.