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: 1) The Department’s Child Care Subsidy and Child Care Regulation Administrators have oversight of the subsidy and regulation programs. Child Care Subsidy and Regulation Program Specialists are assigned to oversee and monitor the subsidy/regulation contracts and grants. 2) Child Care Subsidy and Regulation Program Specialists are assigned to oversee and monitor the subsidy/regulations contracts and grants. The program specialists will review and process payments to contractors upon receipt of monthly invoices verifying expenditures aligned with the approved contract/grant budget. Contractors submit quarterly and annual reports which program specialists review according to the performance outcomes of the contract/grant. The Child Care Subsidy and Regulation Administrators provide final approval on invoices and reports submitted by the contractors. 3) Contractors submit monthly invoices, quarterly, and annual reports which are reviewed by the Child Care Subsidy and Regulation Program Specialists. All invoices are reviewed by program specialists to verify expenditures are aligned with the approved contract/grant budget. If necessary, payment may be withheld until receipt of the quarterly report. Annual reports are submitted by the contractors and the final payment will not be processed without receipt of the annual report, even if an invoice is received. If there are any inconsistencies with invoices, quarterly, and annual reports the program specialist will follow-up with the contractors for clarification and/or correction. Program Specialists will also track payments issued to contractors to ensure that aggregate payments do not exceed the contract maximum amount at the end of the fiscal year. Contractors must submit copies of their annual audit reports to the program specialists; the Department’s Financial Evaluation office will conduct reviews if the contractors do not have an annual audit completed or for any contract services where an additional review is needed. 4) Child Care Subsidy and Regulation Program Administrators will communicate with the Department’s Financial Evaluation office on annual audit reports with contractors, budgetary concerns on contracts and budget reporting. 5) Child Care Subsidy and Regulation Program Specialists are assigned to oversee the subsidy and regulations contracts and grants. The program specialists will review and process payments to contractors upon receipt of monthly invoices verifying expenditures aligned with the approved contract/grant budget. The Child Care Subsidy and Regulation Program Administrators have final oversight after Program Specialists have reviewed invoices, reports and contracts. 6) Child care subsidy case managers and supervisors who have authority to authorize child care subsidy benefits are not able to issue Electronic Benefit Transfer (EBT) cards to subsidy families. Administrative support staff who do not have authority to authorize child care subsidy benefits are the persons allowed to verify and issue EBT cards for subsidy families. The Department runs system reports that flag potential errors or high risk actions and/or collects cumulative data for monthly review. Staff are identified with different system security profiles to limit their access within the Department’s system for case management. The Department’s Child Care Subsidy Program Office reviews various monthly system reports (EBT, overpayment, override, emergency disaster, etc.) that identifies possible overpayments which may then be referred to the investigative 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: The Department of Human Services Child Care Program Administrators and the Child Care Program Specialists assigned to oversee and monitor the contracts or grants conduct reviews and processes payments to contractors upon receipt of original invoices verifying costs and expenditures align with the approved budget. Quarterly activity reports are submitted by contractors. If necessary, payment may be withheld until receipt of the quarterly report. Annual reports are submitted by contractors and the final payment will not be processed without receipt of the annual report, even if an invoice has been received. Program Specialists review quarterly and annual reports and may cross-check the reports to ensure accuracy of data reporting. If inconsistencies are noted, Program Specialists follows up with contractors for clarification and/or correction. Program Specialists also track payments issued to contractors to ensure that aggregate payments do not exceed the contract maximum amount at the end of the fiscal year. Meetings may occur when there are any concerns or questions, as well as for status updates about the scope of services specifications for a contract. Contractors must submit copies of their annual audit reports to the Program Specialist; the Department’s Financial Evaluation office will conduct reviews if the contractors do not have an annual audit completed or for any contract services where an additional review is needed. 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: Budgets are received, reviewed, and approved by the Department of Human Services for each contract year with all budget line items having justification; monthly or quarterly invoice and expenditure reports are reviewed against the approved budget and requests for budget amendments are approved by the Department; monthly or quarterly activity reports and year end reports are reviewed. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: Budgets are received, reviewed, and approved by the Department of Human Services for each contract year with all budget line items having justification; monthly or quarterly invoice and expenditure reports are reviewed against the approved budget and requests for budget amendments are approved by the Department; monthly or quarterly activity reports and year end reports are reviewed. State and federal reports are prepared and submitted based on reporting timelines and with consultation from the fiscal office. 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 Department of Human Services aims to follow standard operating practices incorporating tracking invoices and budgets, ensuring compliance within CCDF rules and forecasting changes while ensuring parameters are within the policies and laws of the Department and State of Hawaii. Effective fiscal management practices also include a good internal control of department expenditures. The Department of Human Services has various levels of review of expenditures. Program expenditures are reviewed first by a program specialist and then reviewed by a supervisor to ensure it is a legitimate payment. The departmental pre-audit section is the third level of review before the final review with the Department of Accounting and General Services (DAGS), pre-audit section to ensure that the expenditures are within the state’s laws and practices. Budget and planning are essential factors in the Department of Human Services effective fiscal management practice. Department budgets are reviewed by the department’s budget analyst to ensure how funds will be spent. The department’s budget is then reviewed by the Department of Budget and Finance to ensure expenditures do not exceed what was appropriated. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: The Department of Human Services expenditures are compared against the actual program budget to ensure the program is meeting program expectations from a fiscal and program perspective. Actual program expenditures are compared to the budget to provide a measure of indicators. Hawaii’s CCDF-funded subsidies have a specific account code assigned to payments so that the program and fiscal offices are able to identify CCDF-funded payment expenditures from other sources of funding. Additionally, all CCDF administrative expenses, including contracted services, have specific account codes that are used to identify CCDF-funded expenditures from other sources of funding. c. How the results inform implementation. Describe: Results will provide an idea of program outcomes and expectations and where it is going forward as well as indicate trends on program needs and where increased funds may be needed in a future request from the Hawaii legislature. 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: The Department of Human Services ensures as part of the Request for Proposal (RFP) process when soliciting bids for contracts that each bidder must meet the requirement detailed within the RFP. The awarded contractor must meet the necessary skills in experience and capability; have a quality assurance and evaluation plan; meet the requirements detailed within the scope of service; have an organized and efficient project organization and staffing; and have an established accounting system. Submitted proposals for contracts are scored based on the criteria and requirements of the RFP. Contractors must also be compliant in Hawaii Compliance Express and the System for Award Management for the Child Care Subsidy and Regulation Program Offices to award contracts and make payments. The Child Care Subsidy and Regulation Program Specialists who oversee the various contracts within the program office will continuously monitor the contracts to ensure performance outcomes are being met, expenditures are aligned with the budget, and communicate with the contractor on issues and program improvements. Child care subsidy case managers and supervisors who have authority to authorize child care subsidy benefits are not able to issue Electronic Benefit Transfer (EBT) cards to subsidy families. Administrative support staff who do not have authority to authorize child care subsidy benefits are the persons allowed to verify and issue EBT cards for subsidy families. The Department of Human Services runs system reports that flag potential errors or high risk actions and collects cumulative data for monthly review. Staff are identified with different system security profiles to limit their access within the Department of Human Services Information and Technology systems for case management. b. The frequency of each risk assessment. Describe: The Child Care Subsidy and Regulation Program Office receives monthly system reports that flag potential errors or high risk actions and program staff review the cumulative data and follows up with line staff as necessary. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The Department of Human Services system reports can assist the Child Care Program Offices in verifying trends and issue policy clarifications and/or training to the staff to mitigate unnecessary risk. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: For contracts, all deliverables identified in the scope of services are met and performance benchmarks receive a percentage rating of 90% or higher. Families being serviced under the contracts are supported through the contracted services as evidenced under the final report. 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 Department’s Child Care Program Office in the Benefit, Employment and Support Services Division (BESSD) is responsible for policy development and administrative direction for the Department’s Child Care Subsidy program, Child Care Regulation Program, and quality initiatives, including contracted services to support quality care. The Child Care Subsidy and Regulation Programs notify child care subsidy and licensing staff respectively when any policy clarifications, updated procedures or updated forms are issued. When there are policy clarifications or updated procedures or forms issued by Child Care Subsidy and Regulation Program Offices, the Department’s Staff Development Office incorporates those updates into the standardized training on the Department’s child care licensing and subsidy policies, procedures, and the information and technology data system. The Child Care Subsidy and Regulation Program Offices post a headline and an electronic copy of the policy clarification on the BESSD SharePoint internal website that child care licensing and child care subsidy staff are instructed to check daily for new posted information. The Child Care Subsidy and Regulation Program Offices also issue email reminders to Unit Supervisors and conduct meetings as needed to review the policy clarifications. ii. Describe how staff training is evaluated for effectiveness: The Department of Human Services provides support to the Staff Development Office to ensure training material is vetted. At the end of training, the trainees complete an evaluation. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: The Department of Human Services refers to system reports which assist the department in verifying trends and issuing policy clarifications and/or training to the staff to mitigate unnecessary risk. The Department of Human Services will advise the Staff Development Office to update training materials to address the trends on the reports. Staff Development Office then provides refresher training to staff. 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 Department of Human Services (DHS) is not compliant by 10/01/24 for Program Integrity Training: Providers (section 98.68(a)(3). Preliminary Notice of Possible Non-compliance Rev date: 01/2023. DHS will need additional time to fully implement the requirement. Hawaii's relationship is with the parents primarily, and does not have a system in place to train providers on CCDF program requirements and program integrity. The Department of Human Services is coordinating with the Department’s contracted, Child Care Resource and Referral agency to develop training on CCDF program expectations around program integrity for providers. The Department of Human Services is in the process of developing an informational sheet on CCDF program expectations around program integrity for providers. For legally exempt providers who care for children whose families receive subsidy, the information is provided to the family to share with their provider. ii. Describe how provider training is evaluated for effectiveness: Not applicable, the Department of Human Services is in the process of working with the Child Care Resource and Referral agency on the 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 Department of Human Services refers to system reports which assist the Program Office in verifying trends and issue policy clarifications and/or training to the staff to mitigate unnecessary risk. The Child Care Subsidy and Regulation Program Offices will advise the vendor to update training materials to address the trends on the reports. The contractor will provide refresher training to staff. 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: Improper Payment Review is conducted by the Child Care Subsidy Program and information about the review or findings is shared with subsidy line staff. Errors within the Improper Payment Review are identified and evaluated by the Child Care Subsidy Program staff and corrections are made by subsidy line staff to recover overpayments or issue underpayments. Subsidy line staff are advised to submit corrections of identified errors within the Improper Payment Review. The 2021 Improper Payment Review error rate was at 1%, indicating no corrective action for the Department. 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 audit results are shared with the Child Care Subsidy and Regulation Program Offices and Division Administrators of the Benefits, Employment and Support Services Division. The Child Care Subsidy and Regulation Program Office references the recommendations from the subrecipient reviews conducted by the Audit, Quality Control and Research Office’s Financial Evaluation Auditor and adheres to their recommendations. If there is a finding, the information is provided to the contractors as a corrective action. 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? CCDF Single Audit conducted by a contractor would identify internal weaknesses. Auditors will identify deficiencies in internal controls pertaining to awarded contracts, eligibility payments to families, and grant payments to providers. Deficiencies that may be identified as part of the audit are addressed immediately by the Department of Human Services. A corrective action plan is developed to identify deficiencies and provide a timeframe to remedy the findings. Progress is evaluated at the identified timeframe to see if additional resources or technical assistance is needed.