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: Assignment of authority and responsibilities: All positions within the Child Development and Care (CDC) Program are provided with a Position Description (PD) that details the major responsibilities of their position, as well as their title. The PD is discussed with the employees upon hire (with their supervisor or manager) and, periodically, as part of their one­ on-one meetings with their manager in regards to performance management. In addition, all processes and procedures within the office have written instructions that include the specific title of those who are responsible for performing steps within the process and the duties they are responsible for. The process documents also outline what the managers/ leadership are responsible for. Delegation of duties: Any other delegation of duties outside of the staff position descriptions or written internal processes is provided in writing to the staff by their manager/supervisor. Coordination of activities: Regular monthly meetings are held with the CDC Leadership team (this includes all managers and supervisors and the Director of the program) to discuss the coordination of activities across units within the office, priority projects and any audit findings that need attention. In addition, the Director meets bi-weekly with each manager who directly reports to her to get updates on the specific activities of each program area within the office. Additionally, managers have individual and monthly team meetings with their staff to discuss coordination of activities. Communication between fiscal and program staff: Regular monthly meetings are held with internal and external fiscal and program staff to resolve any issues that may arise for resolution. Written meeting notes are written and forwarded to all participants so that there is a written record of what was discussed and/ or resolved. The program Director is updated monthly on the status of the budget and any concerns. Segregation of duties: Segregation of duties is an integral part of the Internal Control process within the office. Specific duties are performed/assigned to staff (backup staff are assigned as needed). Managers work to ensure that the positions under their area of responsibility are segregated and that internal processes for review and approval are followed as written. Establishment of checks and balances to identify potential fraud risks: The Department, under the leadership of the Department of Technology, Management and Budget completes an internal controls evaluation as requested. 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 reviews the monthly statement of expenses. Those receiving funds are to keep records of expenses and be able to submit to the state of Michigan when requested for auditing purposes. 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: Each agreement in place requires an approved budget before the reimbursement process begins. The Department reviews the statement of expenses monthly. Those receiving funds areito keep records of expenses and be able to submit to the state of Michigan when requested for auditing purposes. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: Each quarter, the Office of Financial Management pulls the data from two systems and reviews before sending on to the Financial Specialist in the CDC office. The Financial Specialist reviews the data for proper time period and allowability. The Financial Specialist enters into a spreadsheet that was created by the office to calculate the different award amounts. The Financial specialist fills out the ACF-696 and sends back to the Office of Financial Management. They review again and submit via Grant solutions. For the ACF-800 the data is received from multiple parts of the office and compiled by the Financial Specialist, who also enters it into the CARS system. d. Other. Describe: Michigan conducts time and attendance reviews throughout the fiscal year. Child Development and Care (CDC) Providers are selected for review by: (1) random pull (2) Billing discrepancies, (3) Self-Reporters, and (4) referrals. Michigan conducts ongoing CDC Case Reviews of both open and closed CDC Cases to ensure the Michigan Department of Health and Human Services (MDHHS)local offices, who are responsible for determining CDC eligibility, are opening, and closing CDC cases in accordance with the CDC policies. 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 involve ensuring expenditures are necessary, reasonable, allocable, allowable and adequately documented. It ensures that fiscal requirements are met and that the program is in compliance with federal guidelines. Multiple staff review prior to approval. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: Each agreement in place requires an approved budget before we begin reimbursement. The Department reviews the statement of expenses monthly. Those receiving funds are to keep records of expenses and be able to submit to the state of Michigan when requested for auditing purposes. Multiple staff review prior to approval. c. How the results inform implementation. Describe: Expenditures are reviewed and if necessary, request back up for certain expenditures. The statement of expenditure submitted monthly gives MiLEAP an idea of the rate of spending and whether or not the entity is on track for spending and spending correctly. d. Other. Describe: Michigan conducts time and attendance reviews for child care provider billing throughout the fiscal year. Child Development and Care (CDC) Providers are selected for review by: (1) random pull (2) Billing discrepancies, (3) Self-Reporters, and (4) referrals. Michigan conducts ongoing CDC Case Reviews of both open and closed CDC Cases to ensure the Michigan Department of Health and Human Services (MDHHS)local offices, who are responsible for determining CDC eligibility, are opening, and closing CDC cases in accordance with the CDC policies. 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 Lead Agency participates in the State's risk assessment process bi-annually to identify program risks and their mitigation strategy. The Office of Auditor General conducts an annual audit, State of Michigan Comprehensive Annual Financial Report (SOMCAFR), that reviews our internal control activities. The Lead Agency conducts ongoing case reviews to identify risks associated with eligibility determinations. The lead agency conducts provider billing reviews monitor appropriate billing and identify areas of risk in the billing rules and billing system. The Lead Agency conducts case reviews and provider time and attendance billing reviews. MDHHS local offices also conduct case reviews. b. The frequency of each risk assessment. Describe: The Lead Agency participates in the State's risk assessment process bi-annually to identify program risks and their mitigation strategy. Case reviews and provider time and attendance billing reviews are conducted monthly ongoing. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The Lead Agency participates in the State of Michigan’s risk assessment process bi-annually to identify program risks and any mitigation strategies that are needed. As needed new policies and procedures are developed to address inefficiencies. In addition, we update or revise the CDC Handbook to ensure common misunderstandings and errors are clear to reduce errors. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The risk assessment process is overseen by a Department of Technology, Management and Budget team member. The plan is approved for accuracy and then monitored for compliance. The State Administrative Manager overseeing the time and attendance reviews, and case reviews is responsible for ensuring the team is identifying errors and staff are following through on any identified errors. 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: Training is available to MDHHS local office staff through online modules and includes training to help with both policy understanding and application, as well as technology use. In-person training is conducted for new hires at MDHHS. Policy change notices are issued to MDHHS staff and partners when there is a change in policy and manuals are updated. In addition, Tips related to the CDC program are provided to MDHHS staff. CDC program office staff are routinely updated on the new rules and policies. CDC program office meets regularly with partners under agreement with the program to ensure proper utilization of funds. ii. Describe how staff training is evaluated for effectiveness: Michigan conducts ongoing case reviews to ensure MDHHS local offices are utilizing current policy to open cases and determine authorizations. CDC managers routinely evaluate staff work within their area to ensure consistency. CDC program office meets regularly with those who have an agreement to review scope of work and spending. 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 Lead Agency participates in the State's risk assessment process bi- annually to determine program risks and modifies processes as necessary. Staff receives training as needed to address identified issues. In addition, information from annual State of Michigan audits provides guidance for program improvements and 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: A CDC Handbook is published quarterly for all providers. In addition, tools and resources are available at the CDC website. During the License Exempt Provider Preservice Training (LEPPT), license exempt providers receive a copy of the CDC Handbook and are instructed to review all program rules, including the billing and record keeping rules. Orientation for licensed providers includes two documents. The first explains payments for Child Care and Development Fund (CCDF) billing and the other explains how to register to receive payments. Provider instructional videos are available at the CDC website for training on how to keep accurate time and attendance records and how to use the online billing system correctly. A link to the policy manuals is available to providers on our website at current MDHHS Policy Manuals https://www.mfia.state.mi.us/olmweb/ex/html/ ii. Describe how provider training is evaluated for effectiveness: Providers are selected for a time and attendance review using the following methods: random selection, parent referrals, call center referrals, and partner referrals. Time and attendance records are requested and reviewed. Records are reviewed to ensure they comply with CDC program guidelines. The results of these reviews inform our understanding of the effectiveness of our provider training and allow for us to adjust as necessary. 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 Lead Agency participates in the State's risk assessment process bi-annually to not only determine program risks and identify program integrity. The Office of Auditor General conducts an annual audit, State of Michigan Comprehensive Annual Financial Report (SOMCAFR), that reviews our internal control activities. Revisions are made to the CDC Handbook based on common provider errors and misunderstandings that are discovered during billing reviews. These revisions are made to educated providers and clarify program rules. Provider billing reviews are used for: Educating providers about the CDC program rules and regulations so that they may correct their billing practices. ·Establishing claims for overpayments and collect on the overpayments. ·Allows us to regularly review our processes to determine if program rules are understood. 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: This information is shared with the Office of Child Care and MDHHS. The Lead Agency uses the information to evaluate the effectiveness of its internal control by reviewing the improper payment error rate as well as the overall error rate through the randomly selected 276 case reads done during the Federal review cycle. The case reads are to identify if the eligibility and or benefit amounts were determined correctly. The ACF-404 is completed with detailed errors found, action steps used on how to correct them, timeline, as well as our target goal for the next cycle on reducing the error rate. This process is done every three years. 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: When audit findings about the CDC program are received, they are shared both within MILEAP and, when appropriate, with MDHHS leadership depending on the source of the audit and its findings. For example, we are currently involved in an audit for administrative errors from DHHS Form 198 not printing correctly. Audit findings were shared with the CDC Integrity team, as well as members of the Eligibility Services Administration unit within MDHHS. As a group, we reviewed and responded to the findings and brainstormed potential solutions until a final technology fix can be implemented. Another example is audit findings for the Stabilization Grants. Those were shared with the grants project manager and the finance manager so that we could address additional training needs for staff monitoring the grant reports and documentation, as well as determine if different procedures needed to be created for managing financial returns to the department for these grants compared to how recoupments are normally processed. Regardless of the specific audit, our process remains the same: sharing findings with those who oversee the area in question, determining responses to the findings, and then implementing procedural changes if needed to address it moving forward. 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: A detailed Error Rate Report is sent to each local office or county. A monthly closed case report is sent to MDHHS Field Operations. 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 are identified either through the annual single audit or the bi-annual risk assessment process conducted by the State of Michigan. For the annual single audit corrective actions must be identified and reported. In the FY23 single audit four findings were identified: • Lack of documentation for child care stabilization grants to ensure authorized spending. The Department followed up with the providers to collect appropriate documentation or create a recoupment of funds. • Missing documentation in child care scholarship eligibility determinations conducted by the Department of Health and Human Services (DHHS). As part of our Improper Payment Error Corrective Action Plan (CAP) MiLEAP and DHHS identify the most common errors to create tools and resources for the field to use when conducting eligibility determinations, cases are read monthly and CAP activities are reported on monthly. • Child care licensing did not perform timely annual inspections to ensure health and safety requirements were met by child care providers (visits completed 15-20 months). Visits were delayed due to lack of insufficient resources. In FY25 child care licensing will be adding 30 additional licensing consultants to assist with monitoring of health and safety requirements and ensure licensing compliance. • Missing unique entity identified on a federal project award. MiLEAP will ensure its ongoing process for grant approvals includes a step to ensure inclusion.