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 has aligned public health, human services, and other state agencies to develop Iowa’s Health and Human Services department. As part of this alignment, HHS has intentionally developed a Compliance Division with a focus on internal auditing procedures. This helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes. Quality/internal controls are the policies, procedures and daily activities put in place to ensure that operations are efficient and activities are compliant with applicable laws, regulations, standards, and department policies. HHS continues to review manuals, standard operations procedures, administrative reporting structures, etc. Foundations of effective Governance have been developed including delegation, direction, resources and oversight as well as accountability and reporting to include providing specialist for oversight, risk assessment and risk management. Through the use of internal audit, we can provide independent assurance by checking actions after they occur. Internal audits may include financial reporting, compliance, information security, operations, risk management, and investigative. Additionally, the Compliance division houses the Contracting bureau and multi-agency alignment has required the lead agency to evaluates procurement and contracting policies and practices. New processes require a strategic and risk based contract assessment process to aid program staff in anticipating and preemptively mitigating potential procurement issues. The use of distinct guidelines and federal definitions for procurement solicitations is established. New trainings have been developed for those involved in the contract management process, including cost allocation training and a renewed focus on 2 CFR 200 standards. 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 State Administrator and the Child Care Director meet with a budget analyst from the Lead Agency's Division of Fiscal management on an ongoing basis to obligate and liquidate CCDF funds. Monthly tracking spreadsheets are sent by the budget analyst to ensure timely tracking of fund use. Additionally there are be-monthly projection meetings in which the Lead Agency's leadership, the Department of Management and the Legislative Services Agency review and track all CCDF funds and make adjustments as needed. Development of contracts with CCDF funds is supported by the Lead Agency's Bureau of Contracting Support which ensure federal regulations are followed in procurement and contracting processes. Once a contract is in force, contract managers from the Lead Agency's Child Care Policy Bureau handle daily functioning of the contractors and submitting invoices for billing. Contract managers also conduct monitoring visits to ensure contractors are delivering the contracted scope of work and that data is being reported accurately. The budget analyst reviews and tracks all CCDF funds that are expended and sends monthly updates to leadership of the lead agency. 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 Lead Agency’s fiscal staff are able to track all expenditures through use of the State of Iowa accounting procedures and policies. All expenses have accounting codes that allow fiscal staff to track detailed information about each expense including, what entity was paid, general expense category (i.e. professional services or education opportunities), specific type of expense (i.e. IT development or provider training). Fiscal staff regularly track these expenses and provide reports to the policy staff. Additionally the Lead Agency has a contracting department that assists contract managers in development of contracts as well as providing training regarding how to develop contracts that comply with federal regulations and expenditure requirements. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: The information for fiscal reports is first compiled by the budget analyst. A preliminary report is then sent to the Accounting staff to reconcile for any potential accounting errors. The report is checked by the accounting staff at the grant level (i.e., CCDD, CCDF, CCDM, etc.) for compliance with specific grant obligation, liquidation, match, and maintenance of effort requirements. Specific spending targets associated with a grant award are also checked, such as direct services, and quality and infant spending requirements. After accounting has successfully reviewed the report, the report is returned to the budget analyst along with documents certifying reconciliation with the accounting ledger. The budget analyst then forwards the certified report, along with the reconciliation documents to the budget manager for review. After the budget manager has reviewed, and signed off on the report, the budget analyst then inputs the report into the federal grant reporting system online. The budget analyst has a federal contact at ACFS to assist with any issues which may arise to entering the report information into the online federal system. After the report is successfully entered by the budget analyst, the budget manager certifies the report in the online system. d. Other. Describe: N/A 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: Effective fiscal management practices begin with alignment to 2 CFR Part 200 ensuring that expenditures are necessary, reasonable, allowable, and allocable. In addition, there are appropriate segregation of duties and other checks and balances in place to ensure proper management. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: Iowa HHS budget analysts track and review expenditures and there is a reconciliation process with the accountants which is part of the federal reporting process. c. How the results inform implementation. Describe: Budget analysts work closely with programs staff tracking both revenues and expenditures, creating program projections on a regular basis to give program staff and policy makers timely information to make informed decisions. d. Other. Describe: N/A 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 Internal Controls and Accountability Unit conducts a department-wide risk assessment of all department programs and functions each year, including a risk assessment of the child care program. This assessment evaluates the program based on a core set of risk factors defined by internal audit best practices and applied consistently across all programs. The program risk score is used to identify potential areas for further evaluation by the department’s internal audit function within that year. Findings from any internal audits conducted on the program, including any areas of noncompliance or operational inefficiency, are shared back with program leadership to inform quality improvements and strengthen internal controls. It is the goal of the internal audit function to review all department programs on a rotational basis. The Lead Agency segregates staff duties so that staff that are responsible for family or provider eligibility do not also have the ability to process payments to providers. Additionally Supervisors of the family eligibility unit and the provider eligibility unit conduct ongoing case readings of staff to ensure accuracy and compliance with child care policy. These supervisors also hold regular ongoing meetings with staff to discuss quality control findings. The Lead Agency's Quality Control Bureau conducts ongoing quality control reviews of family eligibility cases. When errors are found information is sent to the individual worker and their supervisor for review and to create learning opportunities to prevent future errors. The CCA program manager regularly receives reports from the eligibility IT system of child care providers that are billing large amounts so that these can be reviewed for accuracy and potential fraud. b. The frequency of each risk assessment. Describe: Annually c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: Findings from any internal audits conducted on the program, including any areas of noncompliance or operational inefficiency, are shared back with program leadership to inform quality improvements and strengthen internal controls. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The Internal Controls and Accountability Unit is a new unit within the Lead Agency’s merged structure with public health. The agency intends to monitor this process and if the processes are effective we would expect future negative internal and external audit findings to be reduced. e. Other. Describe: N/A 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: Training is based on the staff members role. Family eligibility staff, registration staff and payment staff are trained through the Lead Agency’s Income Maintenance Training Academy (IMTA). IMTA conducts policy/procedure training on child care assistance as well as child care IT system training for all new staff. Regulatory staff that conduct inspections are trained by their supervisors through an onboarding process. ii. Describe how staff training is evaluated for effectiveness: Supervisors for the family eligibility, registration and payment staff regularly conduct case readings of all staff. Supervisors evaluate if inaccuracies are individual or if they are seeing trends across workers. If trends are identified the Supervisors work with IMTA staff to update training curricula. Supervisors of the regulatory staff review and sign off on all regulatory reports. Individual deficiencies are address but if trends are noticed that would be discussed with the Regulatory Program Manager to see if updates to the onboarding process are needed. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: Supervisors from the Lead Agency regularly review error rate results and if trends are noticed additional trainings or internal controls are developed. Additionally results of internal audit findings are shared regularly with program leadership to inform staff training needs. 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: In Iowa's Preliminary letter of non-compliance issued on 1/22/24 this requirement was identified as non-compliant. The Lead Agency will need time to develop and implement a training process. Iowa currently has written instructions and a telephone hotline that providers can call with questions about our CCDF program but there is not a formal training on CCDF program requirements and program integrity. ii. Describe how provider training is evaluated for effectiveness: Iowa is still in the development phases of building training materials for child care providers but methods to determine effectiveness will be part of the development process. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: Iowa is still in the development phases of building training materials for child care providers but methods to determine effectiveness will be part of the development process so that the Lead Agency can use that data to inform ongoing training needs in this area. 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: Error rate reports are shared with program management, the Chief Audit Executive, and the Chief of Compliance. The Internal Controls and Accountability Unit tracks and monitors all management action items arising from quality control and audit findings to ensure compliance. Error rate findings are incorporated into the department’s annual risk assessment and are used by the department’s internal auditors when evaluating the effectiveness of the program’s internal controls. 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: Audit results are shared with program management, the Chief Audit Executive, and the Chief of Compliance. The Internal Controls and Accountability Unit tracks and monitors all management action items arising from quality control and audit findings to ensure compliance. Audit findings are incorporated into the department’s annual risk assessment and are used by the department’s internal auditors when evaluating the effectiveness of the program’s internal controls. 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: N/A 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? Internal control weaknesses have been identified in sub-recipient monitoring. Identification of this weakness occurred through a review of sub-recipient activity by a financial auditing firm hired by the department. Internal controls have since been strengthened by ensuring more robust terms and conditions are included in the sub- recipient contracting process and by better standardizing and documenting monitoring activities. The department’s internal audit function will begin its first full year of conducting internal audits in July 2024 and anticipates an ability to answer this question more robustly in the future.