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 one CCDF Administrator. CCDF program activities are housed in the Early Childhood Services Bureau (ECSB) and Child Care Bureau (CCB) within the Early Childhood and Family Support Division (ECFSD) of the Department of Public Health and Human Services. There is a separate fiscal team in the Fiscal Operations Bureau (FOB) within ECFSD. The ECFSD Administrator oversees the entire program, in collaboration with the Director’s Office and Legislative Audit Division (LAD). LAD completes independent audits of CCDF. The Lead Agency contracts eligibility determination processes to contractors across the state. These staff are charged with processing Best Beginnings Scholarship applications, including gathering the required documentation from families, making eligibility determinations, and reviewing and approving invoices for payment. For eligibility determination, they follow a two-step internal review process wherein a determination is evaluated by a second staff before being approved or denied. These staff are trained and supported by CCB's Policy Unit. In addition to offering regular training and technical assistance, the Policy Unit maintains a manual that aids contract staff in navigating the eligibility and payment processes. The Policy Unit conducts monthly case file reviews with the Best Beginnings Scholarship contractors. This process mirrors the Federal Improper Payment Initiative. The results of these reviews are used to identify any errors and trends and inform manual updates, training, or technical assistance. The Policy Unit also leads any investigation into all instances of alleged or suspected fraud, either by family or provider. The subsidy contractors assist in collecting documentation to support investigative efforts. The Lead Agency’s grants and contracts are reimbursement-based. Invoices are submitted to the designated contract liaison; this is the program manager of the relevant program being supported by the contract. The contract liaison reviews the invoice for contract alignment and either certifies the program’s approval or returns to the contractor for clarification or correction. Once approved, the invoice is submitted to FOB and the dedicated Budget Analyst provides a second level review. Only after the second level approval is granted is payment authorized and released to the contractor. Contractors are required to submit monthly invoices, unless otherwise specified, to reduce instances of unallowable and un-reimbursable activities. Management from both the Early Childhood Services Bureau and the Child Care Bureau and the FOB Bureau Chief meet with the dedicated CCDF Budget Analyst twice a month to review the budget, expenditures, trends, obligations, grant targets, and reporting. 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 Lead Agency’s computer database automatically releases invoices for payment. The monthly authorized amount is paid when a child is authorized for care for the entire month and attends for at least one day in the service month allowing for the quick approval of invoices and subsequent payments. When the Lead Agency is unable to obtain program critical services within the ECFSD, it may seek to procure those services through an outside agency by means of a formalized agreement. Such procurements may take the form of a Request for Proposal, Sole Source, Inter-Agency Agreements, Memoranda of Understanding, or Contractor Engagement Proposal. The Montana Office of Administration establishes state procurement rules and offers guidelines in developing, securing, and monitoring contracts. ECFSD’s Fiscal and Operations Bureau (FOB) supports the Lead Agency team in securing contracts, reviewing agreements with program managers for allowable costs and activities, adherence to procurement rules and guidelines during the procurement process, and subsequent contract monitoring. Prior to pursuing a procurement, the Lead Agency must demonstrate the need for the procurement. This is a formal request process in which the Lead Agency establishes the need, provides supporting documentation, and fiscal impact, if appropriate. FOB informs the Lead Agency during this process and determines the appropriate procurement method. Once approved, FOB conducts the contracting. Contracts include a statement of work with identifiable deliverables, performance metrics, and reporting and monitoring criteria. In addition, contractors must attest to their ability to adhere to relevant federal and state regulations. Following an award, contractors must follow ECFSD policy and submit monthly budget invoices to program and fiscal staff for review and approval prior to payment. FOB, program managers, and the CCDF Administrator meet regularly to review contract budgets and expenditures, program budgets and expenditures, and review contract budget requests for allowable costs. Both fiscal and program input is needed to determine allowability. Following ECFSD policy, all contractors submit monthly invoices to the Lead Agency. The monthly invoice includes budget line-item details. The manager reviews the invoices for appropriate and allowable cost, contract deliverable alignment, and correct allocation of funds against budget line-item expenditures. If approved, the invoice is sent to FOB for review and upon approval, the invoice is processed for payment. All costs and contracts are tracked in the Lead Agency database. 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: Following Lead Agency policy, all contractors submit monthly invoices to the program contract manager. The monthly invoice includes budget line-item details. The program contact manager reviews the invoices for appropriate and allowable cost, contract deliverable alignment, and correct allocation of funds against budget line-item expenditures. If approved, the invoice is sent to FOB for review and upon approval, the invoice is processed for payment. All costs and contracts are tracked in the Lead Agency’s database. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: All state and federal fiscal reporting involves both the program management and FOB fiscal team which meet twice monthly to address budget oversight. The FOB’s CCDF Budget Analyst presents the budget to the CCDF Administrator, Fiscal Bureau Chief, Early Child Services Bureau Chief, and program managers within the Lead Agency at each meeting. The first meeting covers the CCDF expenditures for the multiple grant years, the internal ACF-696 Federal Financial Report targets, and addresses any concerns for the open grant years. The second meeting covers the quality programming of CCDF. For example, the FOB fiscal team prepares the ACF-696 in collaboration with the Business and Financial Services Division (BFSD). The final step is a review by the CCDF Administrator. 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: Effective fiscal management means CCDF has met its required financial obligations and been used efficiently. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: CCDF program management and FOB fiscal team which meet twice monthly to address budget oversight. The Budget Analyst presents the budget to the CCDF Administrator, Fiscal Bureau Chief, Early Child Services Bureau Chief, and program managers within the Lead Agency at each meeting. The first meeting covers the CCDF expenditures for the multiple grant years, the internal ACF-696 Federal Financial Report targets, and addresses any concerns for the open grant years. The second meeting covers the quality programming of CCDF. c. How the results inform implementation. Describe: Financial forecasting meets financial targets. The budget tools that the Fiscal Bureau team uses to inform the CCDF teams of expenditures are evolving documents. It is regularly updated as program needs dictate. Monitoring CCDF expenditures through this tool and accompanying analysis provided by the Fiscal Bureau informs the implementation of CCDF. The Lead Agency monitors the CCDF direct service target, quality and infant/toddler earmarks, and operating within the 5% administrative cap. Any expenditure trends that would result in the Lead Agency missing targets drives policy decisions, such as decreasing copayments, to meet those targets. The regular budget analysis also allows the Lead Agency to forecast and then subsequently monitor policy implementations. 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: 1) The Lead Agency conducts an annual review of policy and procedure. The Policy Unit reviews policy and procedure for accuracy and alignment with current rule. Policies and procedures are assessed on an ongoing basis to determine risk the level of exposure or risk. This process is informed using error trends identified during monthly error rate reviews Error trend mitigation strategies include training, manual updating, and targeted technical assistance. 2) The Lead Agency ￿s database requires dual approval for all contracts and agreements before such action is authorized. The database automatically holds payment for all subsidy invoices that exceed 10% of the authorized amount. Cases are reviewed by an eligibility supervisor and approved before payment is executed. 3) The Lead Agency works with scholarship contractor agencies to assign and conduct reviews on scholarship cases, monthly. Upon completion of the reviews, the file reviews report is submitted to the Lead Agency. b. The frequency of each risk assessment. Describe: 1) The Lead Agency conducts an annual review of policy and procedure. 2) Subsidy invoices that exceed 10% of the authorized amount are reviewed on an as needed basis. Only when an invoice meets the requirement is a review required. 3) File reviews are completed monthly. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: 1) Through the annual review of policy and procedure, the Lead Agency can identify outdated, ineffective, or changing text. This review ensures policy and procedure are continuously improved. 2) Through subsidy invoices that exceed 10% of the authorized amount requiring a secondary approval, the Lead Agency can identify subsidy payments that may not follow policy. When policy is not followed, investigation into a child care provider or family’s subsidy case is triggered. 3) Through file reviews, the Lead Agency is able to ensure policy is followed in determining a family’s subsidy case, how a payment was made, and if a child care provider’s attendance records followed. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The Lead Agency will know the risk assessment processes are effective when the error rate remains under the federal threshold, invoices are processed in a timely manner, and financial obligations are met. 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: Lead Agency leadership holds monthly meetings with Lead Agency CCDF contractors to review CCDF requirements and policy implementation. The Lead Agency’s Child Care Licensing and the CCDF Policy Unit meet regularly to review policy and clarify process around implementation and monitoring. The Lead agency program managers and FOB’s CCDF fiscal analyst monitor contractors to ensure compliance with CCDF rules. ii. Describe how staff training is evaluated for effectiveness: The Lead Agency works with scholarship contractor agencies to assign and conduct reviews on scholarship cases, monthly. Upon completion of the reviews, the file reviews report is submitted to the Lead Agency. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: If the Lead Agency finds errors in the file reviews, then training can be targeted to the identified risk. In some cases, a corrective action plan for a contractor may be necessary. 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 Lead Agency requires an annual review of the Provider Rights and Responsibilities document for any provider that participates in the Best Beginnings Scholarship. ii. Describe how provider training is evaluated for effectiveness: Lead Agency scholarship contractor agencies report informal and formal technical assistance provided to child care providers within their service area. Trends are evaluated in quarterly data reports. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: Through case reviews, the Lead Agency tracks and evaluates trends. The Lead Agency develops training and consumer education can to meet the needs identified through the case reviews. 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: The Lead Agency underwent a federal reporting year in FFY2021 for error rate case reviews and had the following findings: improper payments (2.28%); cases with an error (8.33%); and cases with an improper payment (5.43%). These findings demonstrate the effectiveness of internal controls. The Lead Agency policy staff conduct regular reviews of policy, process, and procedures to ensure they are accurate and aligned. Lead Agency staff conduct testing in the database as new programming warrants and conduct a security review every six months. Database monitoring ensures user information is accurate and up-to-date, permission levels are correctly assigned, and inactive users are removed. Designated staff from the Lead Agency meet monthly with the database contractor to receive status reports on new programming and resolution of issues, monitor contract deliverables, and review requested modifications. The database contractor’s work is also monitored and tracked using the JIRA platform. This tool allows for issue tracking and product management. The Lead Agency’s multilevel procurement process provides strict oversight of contracts for allowable costs, and adherence to federal, state and program rules before a contract is executed. Executed contracts are the subjected to ongoing monitoring by both fiscal and program managers to ensure continuing compliance. 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: Montana’s Legislative Audit Division conducts biennial audits of Montana state programs including CCDF. Audits are either fiscal or performance in nature during which state auditors review the Lead Agency’s policies, procedures, fiscal records, systems and databases, and relevant documents to determine compliance with state and federal rule. Audits provide the Lead Agency with regular outside analysis of program operations and potential weaknesses in the system. Audit reports are publicly available on the State of Montana website. 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? In the September 2022 audit by the Legislative Audit Division, titled ￿Ensuring Montana’s Child Care is Affordable, Accessible, and Safe: Distribution of the Child Care and Development Fund,￿ the following findings were noted: 1) CCDF funding is not based on need; 2) Goals and measurement tools needed to demonstrate effectiveness and efficiency; and 3) Licensing needs additional steps in background check and relevant trainings. The Department of Public Health and Human Services responded and has implemented the following resolutions to the findings: 1) Using county level data to analyze policy decisions (ex: 2023 Market Rate Survey); 2) Utilizing the CCDF State Plan to demonstrate measurable goals; 3) Implementing address checks in the Sexual and Violent Offender Registry (SVOR); (4) and ongoing training for child care licensing staff.