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 is organized into various divisions to ensure accountability for CCDF expenditures: Policy & Communications, Operations, and Programs & Licensing. Each of these divisions is supervised by a director, with the Executive Learning Director as final authority. Additionally, the Lead Agency holds an Interagency Agreement (IAA) with the Oregon Department of Human Services (ODHS) to conduct eligibility determinations as well as some of the internal controls and program integrity activities for CCDF. The Policy & Communications Division is delegated the following duties: Child Care and Development Fund administration, research, government affairs, legal affairs, child care labor relations, subsidy suspensions, communications, and Early Learning Council administration. The Operations Division is delegated the following duties: budget and accounting, grants management, project management, internal audits, data & analytics, organizational change management, and Direct Pay Unit (DPU). DPU is delegated the responsibility for subsidy payment and provider approval. The Programs Division is delegated the following duties: child care licensing, professional learning, community systems coordination, Tribal Affairs, Social Equity, quality assurance, and Child Care Assistance Program (CCAP) policy. CCAP is delegated the responsibility for setting policy for the Lead Agency’s subsidy programs. The Lead Agency’s IAA with ODHS delegates the following duties: error rate reporting, overpayments and payment recovery, subsidy and provider hearings, fraud investigation, and eligibility determination. CCAP (and the CCDF team on occasion) coordinates with ODHS, on monthly error rate check-ins with the Quality Control Unit, coordination with other Self- Sufficiency Programs for rule-making and programmatic impacts (Eligibility Work Team ￿ twice monthly), a monthly Quality Oversight Board to identify error trends and training needs, Statewide Accuracy Meeting every other month to review programmatic accuracy, and a quarterly gathering between CCAP, the Office of Program Accuracy and Recovery (includes Quality Control, Overpayments, Fraud Investigations), and the Direct Pay Unit. Additionally, CCAP facilitates a monthly presentation for ODHS eligibility workers focused on training, communication of new policies, accuracy, and reducing errors in various program areas. The Grants Management team coordinates regularly other internal teams such as the Professional Learning and Program teams on deliverable submissions, including but not limited to regular progress reports and project plans to ensure that deliverables and activities have been met prior to payment being made as applicable in written agreements. When necessary, the Grants Management team also works closely with internal programmatic staff to review budgets and expenditure reports/invoices for accuracy and to identify and address any discrepancies prior to payment being made. On an as needed basis, internal programmatic staff coordinate with the Grants Management team to review new requests for expenditures or new activities being proposed for written agreements to ensure that costs are reasonable, necessary, and allowable under the written agreement, applicable rules, laws, and regulations. Agreement managers that manage CCDF funded agreements on the Grants Management team coordinate among each other for CCDF subrecipient fiscal monitoring that occurs each biennium. Coordination assists with streamlining monitoring practices. Finally, the Grants Management team coordinates with the Agency’s Procurement team to ensure that applicable federal terms and conditions are applied to each CCDF funded agreement, that subrecipient determinations are completed, and federal award exhibits are added with correct federal award information for subrecipients. The CCDF team meets with the Budget team on a monthly basis to review CCDF expenditures and projected costs. A budget report is provided to the Lead Agency’s ERDC Coordination meeting attendees (includes CCDF, CCAP, DPU, Communications, Research, Legal Affairs, and Child Care Labor Relations). The Grants Management team communicates on an as needed basis with the Budget team to ensure that funds are being charged to the correct index codes and federal fiscal year, that they are obligated and liquidated within federal award timeframes, and that funding is on track to be spent down based on agreement timelines or communicate underspending. In addition, the Grants Management team meets regularly with the CCDF and Budget teams to discuss and review infant/toddler target data collected on specific written agreements. The Grants Management team communicates with the accounting team on an as needed basis if there is an overpayment, payment issue such as a missing payment, or a grantee/contractor needs to return funds to the Agency due to a monitoring finding. Establishment of checks and balances to identify potential fraud risks. Describe: Responsibilities are delegated and separated to ensure that authorization of funds is reviewed by another unit. For subsidy purposes, reviews are conducted by the ODHS Quality Assurance Unit, Overpayment Writing Unit and the Data Match Unit that would help bring awareness to potential fraud issues. The Lead Agency’s Grants Management team completes subrecipient monitoring at least once a biennium for all contractors and grantees that are determined as subrecipients of CCDF. Subrecipient monitoring includes a section on fiscal oversight to ensure that funds are being managed and expended properly and that funds are being used according to CCDF. If the Lead Agency finds any non-compliance, the contractor or grantee is asked to complete a corrective action plan describing what will be done to ensure the non-compliance does not happen again in the future and communicate internal controls that are currently in place or will be put in place to mitigate future risk. The Lead Agency also reviews all invoices/expenditure reports and Awards Management System (AMS) claims of contractors and grantees for completeness, and any discrepancies that may be present. If there are discrepancies or questionable costs, the Lead Agency works with the contractor/grantee to make corrections and/or gain understanding of expenditures before payments are made. All expenditures are audited by fiscal staff to ensure they are recorded in the correct activity. CCDF staff, Budget team staff, and Grants staff meet monthly to ensure that activities are coded correctly for quality expenditures, administrative expenditures, and direct services. 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 maintains overall control of expenditures by monitoring performance-based Contracts and Agreements for compliance with federal regulations and negotiated performance targets for all written contracts and agreements that include CCDF. This includes, but is not limited to, contracts for CCR&Rs, for technical assistance to providers through Western Oregon University and Portland State University, and the Interagency Agreement with ODHS. Contracts and Interagency or Intergovernmental Agreements contain language that requires the contractor to certify that federal and state guidelines are followed. Certification language is included in all contracts executed through both the Lead Agency and contracted CCR&Rs for Baby Promise for contracted slots. Lead Agency Contractors and Grantees are required to submit quarterly or semi-annual performance reports on specific performance indicators. The Lead Agency completes subrecipient monitoring at least once a biennium for all contractors and grantees that are determined as subrecipients of federal funds. Subrecipient monitoring includes a section on fiscal oversight to ensure that funds are being managed and expended properly. This process is done through a fiscal audit where the Lead Agency reviews randomly selected months of fiscal documentation, including general ledgers, receipts, claim information, and any other backup documentation that shows the Lead Agency that an expenditure was allowable under the grant, contract, and federal requirements. If the Lead Agency finds any non-compliance, the contractor or grantee is asked to complete a corrective action plan describing what will be done to ensure the non-compliance does not happen again in the future. All Contracts that meet Single Audit Act compliance thresholds are required, through contract language, to submit an annual independent audit report. These reports are reviewed to ensure CCDF dollars are clearly identified by CFDA number and there are no major or significant deficiencies regarding the use of those dollars by the sub-recipient. All expenditures are audited by fiscal staff to ensure they are recorded in the correct activity. When there is a question about a particular expenditure, we will reach out to the assigned contract/grant manager for more information. This may also include reaching out to current CCDF Administrator to discuss best practices within CCDF activities. 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: State systems are utilized to track expenditures for all contracts and agreements using CCDF. These systems include Awards Management System (AMS), a grant management system, contract management system and SFMA, the State’s accounting system. Costs are monitored to the criteria for the goods/services purchased. Review of any expenditure, encumbrance or obligation by an approving officer includes asking appropriate questions, such as: is this a legal obligation for the state to incur? Is this obligation a responsible and appropriate use of these funds?; Did the agency receive the goods or services?. Documentation must show that an agency has received proper value, and this may consist of evidence that the goods/services have been received, items delivered were as specified, price, terms and extensions shown on the vendor’s invoices are corrected. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: The DELC Budget team runs ACF-696 reports in a statewide database, receives information from contractors, populates spreadsheets that crosswalk to the Online Data Collection website (Grant Solutions). One person enters and another approves for secondary review. Back-up versions of reports are saved for documentation purposes. The Budget team tracks the match and MOE requirements based upon ACF annual requirements posted online. When necessary, narratives accompany any data entry. 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: Fiscal management is defined as how the accounting structure is setup to track revenue and expenditures related to federal grants, and what internal controls in place to prevent fraudulent activity. The Grants Management team utilizes Agency approved policies and procedures to ensure effective fiscal management practices, including but not limited to policies and procedures for administrative cost limits, indirect cost management for federally funded awards, corrective action for non-compliance, and payment review/approvals. Policies and procedures are available and shared with the entire Agency. The Grants Management team refers to policies and procedures on a regular basis through the agreement administration process. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: Each federal grant has a separate set of accounting codes that are created when the grant is awarded. No federal awards use the same accounting codes. To prevent fraudulent activity, the accounting department uses several different internal controls. First, there is a person who keys revenue or expenditure entries in the financial system, and all of those entries must be released by a different person. These two people have different security levels within the finance system, which is controlled by two accountants, approved by the Department of Administrative Services, and reviewed on a quarterly basis. Another example is: there is one accountant who pulls expenditure data to inform the federal draw of revenue, the Accounting Director approves the draw, and another accountant completes the draw. The Lead Agency assesses and monitors the outcomes of our financial management practices through monthly meetings involving CCDF administration, accounting, budgeting, and grants teams, utilizing shared documents and Excel spreadsheets. Additionally, Oregon is subject to audits by the Secretary of State covering all aspects of CCDF spending to guarantee precise tracking and accountability. c. How the results inform implementation. Describe: The internal controls above describe above allow accounting staff to have a clear separation of duties so that there is more review on transactions. In addition, by having separate accounting codes, budget and accounting staff can frequently review and reconcile revenue and expenditures to ensure transactions are allowable under the federal grant and that the grant is spent down in time. 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: Approximately 160 vouchers are randomly selected each month for a desk audit by the Oregon Department of Human Services (ODHS). The Overpayment Writing (OWU) conducts a monthly audit of child care for School-Age children is conducted for months when school is in session. This audit reviews child care hours billed for School-Age children to identify improper payments resulting from providers billing for care during the school day. A review is not conducted on providers pulled for review who have had a prior review completed in the previous three months. Any provider who is pulled in the fourth month since their last review would have a review done. Data Match Unit also works a variety of federally mandated reports in conjunction with other states to achieve their goal of ensuring program integrity. DMU will notify workers if potential action is needed. For Baby Promise, monthly payment amounts along with all required ACF 801 data are captured in a database. Lead Agency compares monthly payment amounts by CCR&Rs to subcontracts with providers to ensure proper payment amounts. The Lead Agency and ODHS will partner to complete random audits from each of the CCR&Rs to verify payment and eligibility documentation. For all Lead Agency written contracts and agreements using CCDF, the CCDF Co-Administrators reviews the contract or agreement to ensure that the use of funds meets CCDF requirements and that other CCDF requirements are followed. The Lead Agency has written fiscal management policies and procedures that are followed and enforced and audited by the Secretary of State every year. The Lead Agency completes subrecipient monitoring at least once a biennium for all contractors and grantees that are determined as subrecipients of CCDF. Subrecipient monitoring includes a section on fiscal oversight to ensure that funds are being managed and expended properly and that funds are being used according to CCDF. If the Lead Agency finds any non-compliance, the contractor or grantee is asked to complete a corrective action plan describing what will be done to ensure the non-compliance does not happen again in the future. The Lead Agency reviews all invoices/expenditure reports and Awards Management System (AMS) claims of contractors and grantees. Local districts are able to pull case information from the ONE system to review for eligibility accuracy for ERDC. Local offices will implement reviews for various reasons including when new staff come on board, when staff change positions or experience a change in duties. They may also implement reviews if staff are experiencing errors or confusion in certain programs or areas. These reviews are up to the discretion of the local branch office and often vary with staff time. Typically, these are reviews conducted by a manager or lead worker. DELC Grants Management Office has a workgroup that is creating a risk assessment for all grantees and contractors. The risk assessment will be created and launched in two phases (phase 1: subrecipients of federal funds, and phase 2: all other grantees/contractors). We plan to start communicating this new requirement early June 2025 for the first phase to launch with grantees as an activity July 1, 2025 with a tentative due date of August 31, 2025. The goal is to have all grantees and contractors have a completed RA by the end of the 2025/2027 biennium. There is an entire project plan and timeline that is still being developed but this is a priority and we are working to finalize all subrecipients to start. b. The frequency of each risk assessment. Describe: Risk assessments are conducted on a regular basis. Specifically to the activities listed above, the school age report is worked during months that school is in session. Data Match is received quarterly and worked continuously. ODHS lead workers conduct reviews as necessary. Subrecipient monitoring occurs at least once a biennium. Quality Assurance works with local districts to review cases outside of the federal review cycle as needed to address accuracy in the ERDC program. The Secretary of State audits CCDF funding each year. DELC Grants Management Office has a workgroup that is creating a risk assessment for all grantees and contractors. The risk assessment will be created and launched in two phases (phase 1: subrecipients of federal funds, and phase 2: all other grantees/contractors). We plan to start communicating this new requirement early June 2025 for the first phase to launch with grantees as an activity July 1, 2025 with a tentative due date of August 31, 2025. The goal is to have all grantees and contractors have a completed RA by the end of the 2025/2027 biennium. There is an entire project plan and timeline that is still being developed but this is a priority and we are working to finalize all subrecipients to start. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The Lead Agency uses risk assessment results if a pattern is identified equaling incorrect eligibility decisions and addresses these issues through training or policy updates. The Child Care Assistance Program team, Budget team, and CCDF administration team meet on a monthly basis to review budgetary status and to address any concerns found. Any results found through audits or other risk assessment activities are analyzed and used to inform program improvement regarding all CCDF expenditures. This includes our grants and contracts to child care providers and other entities, use of quality dollars, etc. This occurs through partnership with CCDF administration and our budgets, accounting, and grants teams. DELC Grants Management Office has a workgroup that is creating a risk assessment for all grantees and contractors. The risk assessment will be created and launched in two phases (phase 1: subrecipients of federal funds, and phase 2: all other grantees/contractors). We plan to start communicating this new requirement early June 2025 for the first phase to launch with grantees as an activity July 1, 2025 with a tentative due date of August 31, 2025. The goal is to have all grantees and contractors have a completed RA by the end of the 2025/2027 biennium. There is an entire project plan and timeline that is still being developed but this is a priority and we are working to finalize all subrecipients to start. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The Lead Agency knows that our risk assessment processes utilized are effective as they continue to highlight instances of incorrect eligibility, delays in processing for our broader CCDF expenditures, and ways in which processes may be improved. Over time, however, these instances are reduced, which is further evidence that these risk assessment processes are effective. That said, the Lead Agency continues to seek ways in which we may hold ourselves accountable to accurate CCDF expenditures and periodically updates our risk assessment processes to increase communication across teams. DELC Grants Management Office has a workgroup that is creating a risk assessment for all grantees and contractors. The risk assessment will be created and launched in two phases (phase 1: subrecipients of federal funds, and phase 2: all other grantees/contractors). We plan to start communicating this new requirement early June 2025 for the first phase to launch with grantees as an activity July 1, 2025 with a tentative due date of August 31, 2025. The goal is to have all grantees and contractors have a completed RA by the end of the 2025/2027 biennium. There is an entire project plan and timeline that is still being developed but this is a priority and we are working to finalize all subrecipients to start. 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: ODHS staff attend eligibility and system training to determine ERDC eligibility and maintain ERDC cases appropriately. The Child Care Assistance Program (CCAP) has a policy email box that is available for staff to reach out to programs for clarification, policy guidance and with questions regarding how to treat difficult cases. CCAP provides a monthly statewide presentation to eligibility staff. Topics addressed to staff change periodically and based on error trends, program integrity is addressed as one of these topics. DELC Executive Leadership, CCDF Administration, Policy, Research, Governmental Affairs, Fiscal, Accounting, Budget, and Grants Management all receive training around CCDF program requirements and program integrity. Additionally, the CCDF Administration Team is planning to present to all DELC staff in the spring of 2025 around specifics of CCDF so that the federal requirements are made clearer as a piece of their existing work. ii. Describe how staff training is evaluated for effectiveness: ODHS conducts Quality Assurance (QA) reviews which address topics that have been trained on. The review results may be used to inform additional training needs or policy clarifications. DELC utilizes federal technical assistance trainings vetted through the Office of Child Care for its CCDF program requirements and program integrity trainings. These trainings will be updated as needed and are followed up by focused conversations around additional TA needs. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: Lead Agency staff may use results if a pattern is identified equaling incorrect eligibility decisions and address through training or policy updates. 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 Direct Pay Unit has a Provider Specialist who meets specifically with providers, in person, virtually and over the phone, to provide technical assistance and training on billing practices. Policy information is offered to providers in the ERDC Provider Guide (DELC 7492), which is sent to every provider once they are listed and approved. Full mailings of Provider Guides to all approved providers occur when the guide has been updated with new material. All CCDF-approved providers receive an orientation training which goes over CCDF provider requirements, and provides in-depth instruction regarding how to bill and how the CCDF subsidy program works. ii. Describe how provider training is evaluated for effectiveness: The materials are developed in collaboration with CCRR’s, CCAP, DPU and Oregon Center for Career Development (OCCD) to ensure effective content. The orientation training is evaluated for effectiveness via periodic reviews to ensure policy is up to date, collaboration with the Direct Pay Unit and the Child Care Assistance Program team, and through discussions with child care providers themselves in Child Care Provider Information Sessions and collective bargaining agreements. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: Materials are updated on a regular basis using feedback from partners to inform changes. 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 State Improper payment report is shared with federal partners and the data from the report is disseminated to ODHS staff determining eligibility. The internal control processes reduce instances that would create errors as they are addressed and corrected through the reported activities. 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 State Improper Payment Report which includes audit results is shared with federal partners and the data from the report is disseminated to ODHS staff determining eligibility. The internal control processes reduce instances that would create errors as they are addressed and corrected through the reported activities. Quality Assurance review results are used to inform staff for training purposes and any case correction determined is made prior to potentially being pulled in a federal audit. This allows the agency to ensure that families are receiving accurate benefits. 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? The Oregon Secretary of State office completed an audit of the Child Care Development Fund program for FY23 in April 2024. The Lead Agency received the following findings. Retain matching and level of effort support and improve controls over reporting Compliance Requirement: Reporting; Matching, Level of Effort Type of Finding: Material Weakness; Material Noncompliance DELC will work with the Department of Revenue to substantiate the matching and maintenance of effort numbers for FY 20 to FY 22 and ensure this information is retained appropriately outside beyond just email records. DELC will also update processes and procedures to correctly determine the amount of funding that is available for matching and maintenance of effort requirements, including substantiation from the Department of Revenue to support the matching and maintenance of effort amounts. In addition, DELC will update processes and procedures to ensure that tax credit amounts used in future reports are properly documented and substantiated by the Department of Revenue. Use restricted indirect cost rate when required Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency; Noncompliance DELC will create processes and procedures to ensure expenditures are allowable before a federal draw is completed and that the correct indirect rate is charged. Also, DELC will continue to work with the Oregon Department of Education to determine if any other indirect costs were incorrectly charged and will help make appropriate corrections to ensure federal grants were not overcharged. Improve controls over payroll Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency; Noncompliance DELC will take the following corrective action steps: Human Resources will audit all DELC employee records to ensure that positions descriptions are signed, and in the employee’s Workday personnel file. Human Resources will reiterate expectations to managers to ensure that timesheets are reviewed and approved by managers before the deadline each month. Budget will monitor payroll charges to identify when time has been incorrectly charged. DELC will reimburse the federal agency for the known unallowable costs Improve controls over family copay and child care hour calculations Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency; Noncompliance DELC will take the following corrective action steps. Child Care Assistance Program (CCAP) team will develop training partially focused on error trends found in this report to educate staff on findings and preventative measures. Child Care Assistance Program team will provide case finding information to OPAR for recoupment purposes. Child Care Assistance Program team conducts monthly analyst hours focused on policy changes, error trends and preventative measures for staff. Since the timeframe from the cited cases the CCAP team has presented audits and reviews, error trends, QRG/ETOP reminders, child care hours, ODHS audit and reviews and more. These monthly presentations will continue and include topics around accuracy. DELC will reimburse the federal agency for unallowable costs.