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: CDEC is required by Colorado Revised Statutes to institute and maintain systems of internal administrative and accounting controls to comply with the State and federal rules, regulations and contractual requirements. CDEC has developed an organizational structure with authority vested between program, contracts and procurement, and finance and accounting in such a way that ensures that duties are segregated and that responsibility is assigned to the Division with the required knowledge and guidance to carry out the duties. Program staff meet monthly with the Department’s finance, accounting, budget and procurement staff to review financial reports, discuss contract and procurement activities, and strategize for the successful implementation of the program. CDEC’s executive leadership team provides additional review and decision making to support program implementation and accountability. CDEC has established the CCCAP Program Integrity (PI) Team within the Division of Colorado Child Care Assistance Program. The priority of the PI Team is to provide counties with the guidance, support, training, and tools needed to administer the CCCAP at the county level. The team is responsible for statewide monitoring of the subsidy program to ensure compliance with applicable federal laws, state statutes, and CDEC regulations for the CCCAP. This is accomplished through county-level monitoring, quality assurance, and quality improvement activities, and by providing program direction, technical assistance, and training to Colorado county departments to improve the overall delivery of CCCAP benefits. The unit is also responsible for statewide coordination and compliance with state and federal audit activities for CCCAP. The data collected through these activities is used by CDEC and counties to analyze program performance, establish effective training plans, strengthen fraud detection and prevention efforts, and implement performance plans and corrective action measures as necessary. Additionally, to support the PI Team CDEC has set up a fraud email box where anonymous tips can be submitted to the Department’s Audit Unit. Any tips received through the fraud email box are reviewed and investigated by the Audit Unit, a separate unit within the Division of Finance, to determine if confirmed fraud has occurred. Once the investigation is completed the Audit Unit will then communicate any relevant findings to the PI Team and the Division of Finance to recoup any improper payments. Furthermore, the Audits and Compliance Unit support the Department’s duty in administering CCDF by providing an additional level of review and audit. The Audit Unit has the authority to review all aspects of CCDF within the Department. They can be directed at any time by senior management or at the discretion of the Audits and Compliance Director to perform an audit of the programs. Any findings or recommendations resulting from an audit will be communicated to the CCCAP division through a written audit report. The Compliance Unit will also perform periodic reviews of subrecipients of CCDF funds using a risk-based approach which is done in addition to any reviews performed by the PI Team. 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: CDEC follows State of Colorado procurement rules and guidelines in developing and monitoring contracts. These guidelines include requirements and stipulations for different types of procurement options such as Requests for Proposals, Documented Quotes, Sole Source, Inter Agency Agreements, or Purchase of Service Agreements. Oversight of a CCDF- funded contract begins during the contract development process. The development and content of the appropriate procurement mechanism is determined by the Colorado Procurement Code and is approved by the Department’s Contracts and Procurement Unit. State program staff work closely with the Contracts and Procurement Unit staff when developing all contracts or agreements. All subrecipients must certify that federal regulations and state guidelines will be followed. Contracts include statements of work exhibits that outline deliverables, key activities, performance indicators, performance metrics, and benchmarks that outline the frequency in which progress reports are submitted to the appropriate program staff at the Lead Agency. CDEC Contracts and Procurement Unit has a rigorous, multilevel budget review process for each procurement in which costs are reviewed for allowability before an agreement is executed - these budgets are also reviewed with the program staff and vendors prior to ensure clarity and understanding. Post award, CDEC Division of Finance requires vendors to submit monthly invoices that include line item budget details which are reviewed for allowability by both Program and Fiscal staff. Additionally, CDEC conducts routine subrecipient monitoring in accordance with Department’s established monitoring procedures, and each contract/agreement has a dedicated contract manager to work with the vendor to maintain performance. 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 State's financial system, Colorado Operations Resource Engine (CORE), contains functionality to prevent obligation or expenditures of Federal funds outside of the period of availability. Additionally, the system's Chart of Account codes are used to track spending on required categories, identify subrecipient awards and expenditures, and identify categories of unallowable expenditures. CDEC requires pre-approval of all expenditures through its workflow approval system, OnBase, which collects the necessary information from the requesting program staff to demonstrate that expenses are reasonable, allowable, and allocable to a funding source. Several layers of approval are required including program, finance and procurement staff. Additionally finance regularly reviews obligations and expenditure transactions to ensure compliance. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: CDEC uses coding specific to the grant award to capture the costs of all expenditures made on behalf of the federal award in the State’s financial system (CORE). CDEC reviews reports from CORE to ensure data accuracy. The data is summarized and entered into a workpaper to support entries into required reporting systems such as OLDC, FRS and PMS. The workpaper is reviewed by a peer or supervisor of the preparer, and then reviewed and approved by the Department Controller. d. Other. Describe: The Colorado Office of the State Controller has adopted the "Standards for Internal Control in the Federal Government'' (the "Green Book") as the standard for internal control for Federal Awards to State Agencies. State Agencies must follow the Green Book to maintain effective internal control related to administering federal grant funding. In addition, CDEC must adhere to the Statutory requirements in the Colorado State Department Financial Responsibility and Accountability Act. 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: In addition to the guidance, policies, and fiscal rules provided by the Office of the State Controller, CDEC uses an extensive workflow process that includes a pre-approval process prior to any approval of an expense. The review process of a request is completed and depending on the type of expense, multiple layers of review are required. CDEC requires training for all staff that manage contracts and financial information. CDEC has developed comprehensive budgets to cover all aspects of business operations and forecasting methods to assist in projections of costs over time. CDEC has developed extensive standard operating procedures and procedure manuals for financial management and reporting. Program managers throughout the Department are responsible for the day-to- day management of vendors and contracts. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: CDEC accesses fiscal systems to produce, correct, audit, approve, and input financial and transactions that pertain to the Federal and State Programs, this information is reviewed routinely to inform decisions on future expenditures, monitoring budget balances and determining adjustments necessary. c. How the results inform implementation. Describe: Results from financial management practices influence modifications to implementation. CDEC reviews and revises policies and procedures as necessary to refine and improve fiscal management practices. d. Other. Describe: 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: CDEC conducts risk assessments on all subrecipient contracts and conducts monitoring based on the assessed level of risk for each contract. Monitoring may include review of programmatic performance and financial reports, audit reviews, on-site monitoring and desk audits. CDEC partners with another state agency, the Department of Human Services, who conducts risk assessments on all counties responsible for administering the Colorado Child Care Assistance Program (CCCAP) and other Federal assistance programs. CDEC utilizes numerous tools to evaluate internal control activities as outlined in 2 CFR 200.331(d), CRS 26.5-1-715, CRS 26-2-717, 9 CCR 2501-1, and 9 CCR 2503-9 including but not limited to scheduled monitoring reviews of county operations, reviews of audits and risk based reports to evaluate performance, monitoring CHATS user access, and evaluating client records and provider payments for timeliness and accuracy. b. The frequency of each risk assessment. Describe: The Child Care Assistance Program (CCCAP) conducts county monitoring reviews with each county at a minimum of once every three years to evaluate the administration of CCCAP as outlined in the MOU. County monitoring reviews may be conducted more frequently based on concerns with county performance, significant changes to county leadership and/or staff. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The information obtained in the risk assessment is utilized by CCCAP to monitor county performance and determine if additional monitoring is required. Depending on the severity of the issue, counties may be expected to participate in a plan to resolve the issue and/or identify training or technical support needed to resolve the issue. The plans also identify the support that will be provided by the CCCAP team to assist the county in gaining compliance. Timeframes for responses are dependent on the severity of the issue, level of effort involved in resolving the task, and potential support and technical assistance required by the county and CCCAP staff to review and/or approve policies and activities. County monitoring plans are updated in coordination with internal control monitoring and/or as needed as defined by potential risk, agency changes that may impact the administration of CCCAP services, or program changes. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: CDEC CCCAP staff conduct county monitoring as part of the risk assessment process. This monitoring includes reviews of county policies and procedures, performance reports, system access, fraud prevention and detection efforts, and program integrity activities. CDEC staff conducts reviews of client case files and provider records to ensure accuracy and alignment with CCCAP procedures and identifies opportunities for training and technical assistance based on interviews with county leadership, eligibility and provider staff, and county providers and/or clients. CCCAP staff complete regular reviews of performance data and complete secondary reviews of county case file reviews to determine if counties are meeting the targeted measures or if interventions are necessary. CCCAP staff also conduct regular reviews of CHATS reports to monitor potential areas of risk, track performance, and measure progress. 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: CDEC provides ongoing training, coaching, and technical assistance to the 64 counties regarding local implementation and administration of the Colorado Child Care Assistance Program (CCCAP). Training offered may also be provided to CCDF contractors, child care providers, benefit recipients, and external entities as needed. Course content includes relevant federal law and regulations, state law and regulations, and Departmental Memos. Training on the use of the attendance tracking system (ATS) to monitor enrollment and attendance, training on CDEC Child Care Automated Tracking system (CHATS), PEAK Universal Application, generating reports, and all other technology systems used to administer CCCAP is also provided to promote and support the local implementation for this program. In addition, counties are trained in identifying their roles and responsibilities in relation to program integrity and fraud prevention and detection. Courses are offered as quick reference guides, videos, self-paced eLearning and online instructor-led training. All training content is regularly reviewed to ensure it reflects current information regarding policy and procedure and effective adult learning theories. CDEC staff identify needs, prioritize, write and/or revise materials to keep training materials current. CCCAP monitors participation in training that is required for counties to accurately administer the program and ensures at least one participant from each county attends and meets the expected learning objectives. An objective-based assessment is incorporated into all training sessions that are deemed mandatory for required participants to provide assurances to CCCAP that they have demonstrated they have the knowledge and skills required to accurately administer the program. CDEC uses CHATS, the electronic system for determining eligibility and making payments, to ensure checks and balances by establishing security roles and system edits. Security access to CHATS is limited to the user’s primary role and access is restricted to users who have not completed applicable training. ii. Describe how staff training is evaluated for effectiveness: CDEC staff assess and provide feedback regarding trainees' acquisition of knowledge and skill in the following ways: 1) During open office hours hosted during instructor-led cohorts; 2) Through knowledge checks placed throughout the training programs; 3) At the conclusion of instructor-led training through a final ￿capstone￿ project/assignment. In addition, CDEC staff also systematically observe trends (e.g., case review error trends, consistent errors, help desk tickets, frequent questions, unmet program goals) to identify training needs. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: CDEC utilizes the data from the risk assessment reports and state and county case reviews to monitor compliance as part of an ongoing system of monitoring counties in key eligibility, authorization and payment regulations, new regulations, and/or changes to policies. Information obtained from these sources are used to identify findings related to common errors. These findings, along with error trends identified from help desk tickets, frequent questions, unmet program goals, and/or findings from audits are used to inform training and technical assistance activities which help to inform improvement strategies pursued by CDEC and the counties. CDEC also monitors participation in training that is required to accurately administer the program. CDEC utilizes the performance measures, risk assessments, and findings from the statewide case reviews to monitor county performance, identify the cause of top error trends and/or improper payments, and to provide targeted training and technical assistance. 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 Child Care Licensing and Administration Unit conducts monthly training on CCDF requirements and implementation of policies with all licensing staff, including staff conducting CCDF services on the behalf of the Department as a contracted vendor. All contracted vendors are monitored as a sub-recipient. Contracted vendors are assigned a State CDHS Licensing Supervisor as a contract liaison. The contract liaison provides monthly training to the vendor on all licensing requirements as well as fiscal monitoring. Fiscal oversight for the contracts follow State of Colorado Department of Human Services procurement rules and guidelines in developing and monitoring contracts. Training is also offered to CCCAP child care providers, benefit recipients, and external entities as needed. Course content includes relevant federal law and regulations, state law and regulations, and Departmental Memos. Training on the use of the attendance tracking system (ATS) to monitor enrollment and attendance, training on CDEC Child Care Automated Tracking system (CHATS), generating reports, and other relevant technology systems used to administer CCCAP is also provided to promote and support the local implementation for this program. In addition, providers are trained in identifying their roles and responsibilities in relation to program integrity and fraud prevention and detection. ii. Describe how provider training is evaluated for effectiveness: CDEC staff assess and provide feedback regarding trainees' acquisition of knowledge and skill in the following ways: through knowledge checks placed throughout the training programs and at the conclusion of instructor-led training through a final ￿capstone￿ project/assignment. In addition, CDEC staff also systematically observe trends (e.g., case review error trends, consistent errors, help desk tickets, frequent questions, and unmet program goals) to identify training needs. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: CDEC conducts regular reviews of ATS and CHATS reports to monitor compliance as part of an ongoing system of monitoring for providers to ensure compliance with Fiscal Agreements, authorization and payment regulations, new regulations, and/or changes to policies. Information obtained from these sources are used to identify findings related to common errors. These findings, along with error trends identified from help desk tickets, frequent questions, unmet program goals, and/or findings from audits are used to inform provider training and technical assistance activities which help to inform improvement strategies pursued by CDEC. CDEC also monitors participation in training for providers as applicable. Counties and CDEC CCCAP team also conduct regular reviews of provider files to ensure compliance with CCCAP regulations, identify the cause of top error trends and/or improper payments, and to provide targeted training and technical assistance. 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: CDEC CCCAP reviews the results of the triennial error rate reviews to opine on error trends and findings, identify areas of non-compliance with CCCAP regulations and policies, and establish remediation plans to resolve the issues. The findings are also compared against the CCCAP review process and applicable Reviewer Guides to ensure accurate interpretation and application of federal regulations. CDEC CCCAP staff share the results of the report with counties during CCCAP County Users Group meetings to make them aware of the top error trends and evaluate the findings to determine if additional monitoring, technical assistance, or follow up is necessary. 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: CDEC shares the audit results with our 64 county partners. Additionally, results are shared with the Colorado Office of the State Auditor as part of their annual statewide single audit. CDEC CCCAP reviews the results of single audits to identify exceptions, opine on findings, and compare the results of the findings against CCCAP regulations and policies to determine if changes need to be made to CHATS functionality, CCCAP regulations, policies, guidance, or training. CDEC CCCAP staff also evaluate the findings to determine if additional monitoring, technical assistance, or follow up is necessary and to ensure follow up of prior year findings and/or concerns as outlined in 2 CFR 200.511 and 2 CFR 200.331(d)(2). 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: CDEC works closely with another state agency, the Department of Human Services (CDHS) to address compliance concerns with counties for other county administered programs to strategize and coordinate support efforts and develop a shared approach to resolving the concerns with the applicable county(ies). 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? In our Fiscal Year 2023 Statewide Single Audit the external auditors noted a Significant Deficiency in Internal Controls related to CCDF. They found in 2 out of 60 case files (3 percent) reviewed that the subsidy amount had been miscalculated by county caseworkers, resulting in an incorrect parent co-payment/parent fee. The external auditors made the recommendation we should strengthen internal controls to ensure that subsidy payments and associated parent fees are calculated appropriately going forward. The findings were based on case actions which occurred before July 2022, when CCCAP finalized the implementation of statewide internal controls to ensure compliance with federal and state eligibility requirements. These controls included strengthening policies and procedures to increase monitoring activities for counties, implementing a secondary review process to ensure counties conduct secondary reviews of case actions, establishing indicators and measures to assess performance for counties, and developing a formal method to accumulate and assess errors at each county that will allow the Department to analyze error rates and use the information to target training and improvement efforts.