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: EEC organizes units by core functions for clear delineation of authority and responsibilities; we have increased staffing to allow more delegation of duties and multiple sign-offs in decision making. We have clear segregation of duties within and between units to ensure that no one person is completing all steps in a single process. We have created a Project Management Office (PMO) to help with cross-unit communication and coordination of activities. The PMO ensures that all relevant staff are included in any large-scale project and that information is disseminated to all staff who may need to know of the activity. Fiscal and program staff also have regular check-in meetings to ensure alignment across funding and contracting. We now have functionality within Child Care Financial Assistance System (CCFA) that requires a second review and approval of eligibility determinations. This has increased control through a second review and approval for all authorizations and reauthorizations. We have also established a Family Access and Engagement unit which is tasked with monitoring providers and offering technical assistance if a provider is committing errors regularly. The Audit Resolution Unit and the Financial Assistance Unit preliminarily investigate providers and recipients of financial assistance, respectively. When a contracted provider, voucher provider or subsidy recipient is suspected of committing fraud, the case is referred to the Office of the State Auditor/Bureau of Special Investigations (BSI), who may initiate an in-depth investigation. 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: Contract scope of works are reviewed by Program, Budget, Procurement, and Legal units to ensure that they comply with federal and state regulations. All child care expenditures including contracts, voucher (grant), and quality spending are tracked using service codes which allocate spending to the appropriate accounts. Reports related to ineligible service codes and parent fees paid by the agency are pulled on a monthly basis to ensure CCDF funds are not used for those purposes. Expenditures are also billed and tracked in EEC’s Child Care Financial Assistance system, and the Budget unit uses reports from that system to disaggregate expenditures. Caseload reports are reviewed monthly by the Budget unit to track spending for certain types of care paid for with specific sources of funding. The Budget unit then meets with the Family Access and Engagement unit and the Commissioner to discuss next steps based on the budgetary impacts of current and projected caseload levels. The Budget unit also tracks all operating account expenditures through a monthly draw book to ensure that funds are being allocated accurately across all funding streams and federal benchmarks are being reached within each grant year. This draw book also ensures that EEC is meeting the obligation and liquidation deadlines for each funding stream. The Audit Resolution unit ensures that Child Care Resource and Referral agencies and contracted providers are in compliance with federal, state, and EEC policies and regulations. If non-compliance issues arise, it is the role of the head of the Audit Resolution unit and the Fiscal Monitors to assure audit resolution. This responsibility includes recouping federal financial assistance payments from Child Care Resource and Referral agency or contract providers due to a failure to comply with federal laws and regulations. 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: Contract scope of works are reviewed by Program, Budget, Procurement, and Legal units to ensure that they comply with federal and state regulations. All child care expenditures including contracts, voucher (grant), and quality spending are tracked using service codes which allocate spending to the appropriate accounts. Reports related to ineligible service codes and parent fees paid by the agency are pulled on a monthly basis to ensure CCDF funds are not used for those purposes. Expenditures are billed and tracked in EEC’s Child Care Financial Assistance system, and the Budget unit uses reports from that system to disaggregate expenditures. Reports related to ineligible service codes and parent fees paid by the agency are pulled monthly to ensure CCDF funds are not used for those purposes. Caseload reports are reviewed monthly by the Budget unit to track spending for certain types of care paid for with specific sources of funding. The budget unit then meets with the Family Access and Engagement unit and the Commissioner to discuss next steps based on the budgetary impacts of current and projected caseload levels. The Budget unit also tracks all operating account expenditures through a monthly draw book to ensure that funds are being allocated accurately across all funding streams and federal benchmarks are being reached within each grant year. This draw book also ensures that EEC is meeting the obligation and liquidation deadlines for each funding stream. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: The Budget unit has clear policy and procedures (outlined in Budget Unit Policy and Procedure document) to ensure multi-level sign-off for federal fiscal reporting with estimated dates for task completion. One individual prepares the report, another individual reviews the report, and a third individual submits the report. For state fiscal reporting, the Governor’s budget team (Administration and Finance ￿ ANF) sends deadlines for major milestones. The Budget unit drafts all fiscal reporting documents, which are approved to send to collaborating agencies (ANF, House and Senate Ways and Means). Any legislative fiscal reports are tracked by the Legislative Director. 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: EEC is required to implement a system of written fiscal management practices that include department-specific statutory, regulatory, and internal policies and procedures. The Massachusetts Comptroller (CTR) identified fifteen fiscal management policies that must be implemented into EEC’s oversight of the CCDF expenditures. The policies identified by CTR that EEC has implemented as a form of practice include: Protocols for Audits, Audit Follow-up, Auditor Independence, Department Initiated Audit Activity, Funding Allotments, Expenditure Corrections, Expenditure Refunds, Inter-subsidiary Transfers, Contract Amendments, Contract Suspensions, Contract Terminations, Management of Federal Grants and Sub-grants, Federal Grant Accounting and Reporting, Sub-Recipient Monitoring, State Finance Law Compliance Roles and Responsibilities, Records Management, Interdepartmental Service Agreements and Chargebacks, Bill Payments, Vendor Management, Payroll and Labor Cost Management, and Systems Security. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: A series of checks and balances are employed across the fiscal unit to ensure Budget, Procurement, Accounting, and Contract units are all operating in coordination. The Budget Unit creates spend updates regularly to review all encumbrances and spending. If encumbrances have not been created after budgetary approval, the Budget unit will follow up with the Procurement unit and/or Contracts unit to ensure contracts are executed. The Accounting unit distributes expenditure reports to all contract managers to ensure spend down of their contracts and grants. If a contractor or grantee is behind in submitting invoices for services rendered, the Accounting unit follows up with the Contract or Grant manager. The Procurement unit maintains a list of current contracts with end dates and follows up with Contract Managers and the Budget unit to ensure services are procured in a timely fashion to minimize disruption to services. c. How the results inform implementation. Describe: EEC’s fiscal management practices ensure strong financial stewardship of both state and federal funds used to administer child care services for families across the Commonwealth. The close review of budget and expenditures informs decisions to limit or expand access to each type of care funded through child care financial assistance. This review/monitoring also creates ample opportunity to identify errors in a timely manner. 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: EEC acknowledges that risks occur at every level of EEC and are a result of external and internal factors. In identifying risks, EEC must consider the likelihood and the impact of the risk. When risks are identified or determined, adequate controls are put in place to mitigate the risk. EEC’s Executive Team meets weekly to stay informed of current issues that may affect the integrity and/or ethics of the agency, as well as ongoing operational issues that may need to be addressed through policies and procedures. All administrators and staff generally meet monthly as a group. The major risks (identified as either low, moderate, or significant) and a mitigation analysis are identified within EEC's areas of risk. EEC believes that an assessment of risks from both internal and external sources is a crucial part of enhancing EEC performance. EEC has considered how it wants to manage risks by determining how to eliminate or reduce the risk to an acceptable level. EEC identifies risk externally through an assessment of its grants and contracts using a system to discuss, approve, and improve all activities, projects, and operations. EEC will also work with the external partner to determine how to avoid the risk, share the risk, or mitigate the risk through updated practices and policies. As required by the Comptroller for the Commonwealth of Massachusetts, EEC annually completes a risk assessment on the required fifteen fiscal management policies in conjunction with the annual Internal Control Certification to ensure effective fiscal management practices. The Provider Risk Assessment and Analysis Report (PRAAR) identifies where a contract provider and/or CCRR may have findings on independent audits and financial instability. The Child Care Financial Assistance (CCFA) System identifies risk through reports such as over-enrollment reports. Fiscal Monitoring identifies risk through the Subsidy Contract Spreadsheet and Subsidy Error Tracking Spreadsheets which are used to track audit results. The Comptroller has implemented a new Internal Control Certification (ICC) that all Executive Branch agencies (inclusive of the Department of Early Education and Care) must certify annually. This certification requires: a description of the system of written internal controls, training and monitoring in place as part of daily operations to achieve the department’s mission, compliance with the Comptroller’s published guidance, and prevention of fraud, waste, and abuse of Commonwealth resources. EEC completed the initial version of the Internal Controls Certification at the end of June 2024 and is working with the Comptroller’s office to come into full compliance with any new requirements where EEC is identified as not yet compliant. b. The frequency of each risk assessment. Describe: Internal Risk Assessments on Operations and Financial Management are done annually in accordance with the Massachusetts Comptroller’s Internal Control Certification schedule. The Provider Risk Assessment and Analysis Report (PRAAR) is done annually and when a new contract is issued. Child Care Financial Assistance (CCFA) System Risk Assessments are run monthly. The Subsidy error tracking report is updated after each completed fiscal monitoring visit. The error types and amounts of errors are reviewed on an ongoing basis. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: Financial Management policies and procedures are reviewed yearly to ensure efficient controls are in place to mitigate risks. EEC evaluates segregation of duties, changes in staffing structure, as well as mandates from the state legislature. The Provider Risk Assessment and Analysis Report (PRAAR) process utilizes corrective action plan findings to work with programs on evaluating and implementing the necessary controls to mitigate future findings. Child Care Financial Assistance (CCFA) System reports are used to make applicable updates to Financial Assistance Policy and Procedure manuals. In addition, the CCFA System may be updated to address functionality that may mitigate future errors. Fiscal Monitoring results are evaluated through the Subsidy Contract Spreadsheet which includes provider information, current and previous fiscal year risk assessment scores, Independent Audit Corrective Action Plan requirements (if applicable), the last monitoring visit, current monitoring visit type, current status of the monitoring visit, report release date, corrective action plan requirements (if applicable), and recoupment (if applicable). The Subsidy Error Tracking Spreadsheet includes the number of overall case files vs the number of case files reviewed; the type of program (income eligible, referral programs, Young Parent, and Homeless), the type of error i.e. non- payment error or improper payment error, and recoupment (if applicable). EEC uses these reports to determine an annual error rate, document areas where training is needed based on the error type, and make applicable updates to Financial Assistance Policy and Procedure manuals. In addition, the CCFA System may be updated to address functionality that could mitigate future errors. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: Staff from the EEC Audit and Financial Assistance units meet weekly to discuss current policy concerns. In a separate weekly meeting, members from those units also meet with the Child Care Financial Assistance (CCFA) System team to review system changes, bugs, and request reports. These meeting cadences can be used to discuss the risk assessment process and evaluate effectiveness. 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: EC Internal Staff involved in CCDF administration are required to take the CCDF Fundamentals courses when offered by the Office of Child Care (OCC). In addition, program integrity trainings and webinars held by the National Center on Subsidy Innovation and Accountability (NCSIA) are attended by the Audit Unit. Materials and resources received from those trainings are stored for current and new staff. EEC most recently provided a statewide training series in response to our Fall 2023 regulation changes, and related policy and procedural updates. These trainings were required for all external partners who administer child care financial assistance (CCFA). These trainings were recorded and are available to any new and existing staff as an easily accessible resource. Where necessary, EEC will use materials provided by OCC and NCSIA within the trainings as suggested tools for effective program integrity. EEC also maintains a written policy guide, which is available on the agency’s website, as well as any policy updates through policy advisories and virtual training sessions. As EEC refines their most recent policy guidance, a priority is building internal training capacity and creating opportunities for more regular feedback and training with all external partners. CCFA system webinars are held monthly and focus on topics related to attendance, billing, user management, intakes, authorizations, and adjustments. Lastly, newly developed policy advisories are distributed to all EEC staff and posted on EEC’s website. The Audit and Family Access units receive training as policy advisories are released and changes are made. These trainings take place during weekly unit meetings as necessary. EEC is developing specified trainings for the referral agencies who administer the CCDF program such as DCF, DTA, and HLC. Additionally, EEC has identified the positions of a Director of Learning, Development & Training and a Learning & Development Specialist as a hiring need FY25 to support training needs. ii. Describe how staff training is evaluated for effectiveness: Staff training is typically evaluated for effectiveness through the observation of issues that may arise during fiscal monitoring reviews. If a common issue is identified, the team will review training materials and procedures to identify areas that need to be updated. EEC also evaluates effectiveness of internal staff training through the MassPerform Expectations and Feedback Development program. This is a coaching/check-in model that allows managers and employees to discuss assigned job duties, performance measures, and professional development loops. This methodology serves as an opportunity to review how the CCDF program and program integrity is applied to the day-to-day work. Where necessary, supervisors will address areas where additional trainings are needed in order for EEC staff to administer the CCDF requirements effectively. EEC will continue to explore additional avenues on how to evaluate the trainings for internal staff. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: Staff training is typically evaluated for effectiveness through the observation and review of issues that may arise during fiscal monitoring reviews. If a common issue is identified, the team will review training materials and procedures to identify areas where updates are needed. 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: EEC most recently provided a statewide training series in response to our Fall 2023 regulation changes, and related policy and procedural updates. These trainings were required for all external partners who administer child care financial assistance (CCFA). These trainings were recorded and are available to new and existing staff as an easily accessible resource. Where necessary, EEC will use materials provided by OCC and NCSIA within the trainings as suggested tools for effective program integrity. EEC also maintains a written policy guide, which is available on the agency’s website, as well as any policy updates through policy advisories and virtual training sessions. As EEC refines their most recent policy guidance, the agency has prioritized building internal training capacity and creating opportunities for more regular feedback and training with all external partners. CCFA system webinars are held monthly and focus on topics related to attendance, billing, user management, intakes, authorizations, and adjustments. EEC is developing specific training for the referral agencies who administer the CCDF program such as DCF, DTA, and HLC. ii. Describe how provider training is evaluated for effectiveness: EEC evaluates the effectiveness of trainings for providers through knowledge checks and polls conducted during trainings, fiscal monitoring reviews and the tracking of agency errors, and review of the types of inquiries submitted to the EEC Subsidy Management email to monitor trends on the types of questions and technical assistance needed. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: EEC performs yearly risk assessments on all providers and CCCRRs. If providers are categorized as high risk, EEC may train providers on a topic or characteristic that the providers share to mitigate the risk. The contracts for CCRRs include Key Performance Indicators (KPIs) for various aspects of their duties. The KPI topics include Eligibility Services, Family Services, and Provider Services. KPIs are monitored on a quarterly basis and technical assistance is provided to a CCRR if they are not achieving their KPIs. Through the audit tracking reports, EEC tracks the type of errors that subrecipients are making. The Audit unit looks at the most frequent errors and tailors training to those topics. Training can either be individualized to a particular subrecipient, or, if the error is widespread, EEC would redo the training and offer to the entire field. EEC reviews error rate reports to determine the type of errors documented and the causes of the errors. Action steps detailed in the ￿Error Rate’ report include: additional financial assistance trainings to review common error types and steps on how to mitigate future errors; revisions of the ￿Financial Assistance Procedures’ manual; and technical assistance from Family Access Specialists. The specialists will provide technical assistance and coaching to the Child Care Resource and Referral Agencies (CCRR) and contracted providers participating in EEC Child Care Financial Assistance (CCFA). In addition, EEC is updating their Memorandum of Understanding agreements (MOU) with referral agencies. The MOUs will include specific instructions if immigration status cannot be confirmed during the eligibility determination process as well as the process for conducting annual eligibility determination case reviews of children authorized for financial assistance through the referral agency. 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: As a result of the Error rate review Triennial report results, EEC has adopted ongoing tracking and reporting of Fiscal Monitoring visit errors, non-payment errors, and improper payments. This tracking and reporting helps the Audit Compliance Resolution unit meet its overall objective to ensure transparency and accountability within the subsidy program while minimizing fraud, waste, and abuse. The two reports dedicated to tracking this information are the 'Subsidy Contract' spreadsheet and 'Subsidy Error Tracking' spreadsheet. Both reports are created each fiscal year to account for the current fiscal monitoring activities. This information is shared with EEC’s CFO annually. EEC notifies all participating contract providers and CCRRs of the sampled files included in the error rate review triennial report. Where there were findings, EEC indicates to providers the importance of conducting a review of the finding(s) and ensuring that their current subsidy file checklist and internal intake process adheres to EEC’s current policies and procedures for eligibility determination and the required documentation. EEC is in the process of revising the ￿Financial Assistance Policy Guide and Procedures’ Manual. The policy guide and procedures manual will provide clarity surrounding eligibility determinations by simplifying the application process, reducing the paperwork burden for families and programs, and clarifying the process for authorizations and placements. Family access specialists will provide technical assistance and coaching to the CCRRs and providers. The EEC Audit Unit will implement a fiscal monitoring schedule that will allow for an evaluation of the use of the subsidy file checklist and the implementation of the Financial Assistance Policy Guide. EEC currently meets with the Department of Transitional Assistance (DTA), Department of Children and Families (DCF), and Housing and Livable Communities (HLC) biweekly, to provide updates on financial assistance requirements. Ad hoc meetings for specific coordination are scheduled as needed. Based on the results of the ￿Error Rate’ report, the updated MOUs for these referral agencies will include the process to conduct annual eligibility determination case reviews of children authorized for financial assistance through the referral agency and specific instructions to the referral agency if during the eligibility determination process, immigration status cannot be confirmed. 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 Commonwealth of Massachusetts Comptroller’s office engages in an annual Single State Audit. When EEC is selected for the Single State Audit, the Child Care Development Cluster Compliance Supplement is used to conduct the audit. EEC uses the results of the Single State Audit to determine the effectiveness of internal and external controls. Once results are received by the EEC Chief Financial Officer (CFO), they review the findings and work with the Audit unit and any other units implicated to determine corrective actions, revisions to policies and procedures, technical assistance, and monitoring. If an external partner is identified, the results are shared with them as well. Updates to policies and procedures are then implemented and monitored to confirm that the findings are resolved. Internal audits are handled in the same manner. 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? One area of weakness that EEC intends to address within our internal controls is the time that has lapsed since the last version of our controls document was finalized, which was in 2016.