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: Each of the areas below have their own specific roles. No one person's role allows them to work from the beginning of child care eligibility to the payment of child care. Finance and program staff meet quarterly, more often if needed, to ensure we coordinate activities and maintain clear communication between our areas. The organizational structure of the Lead Agency is divided into divisions that oversee its various administrative and programmatic responsibilities. In addition to the Lead Agency’s administrative leadership (State Director and Deputy Directors), divisions with responsibilities to implement and oversee internal controls that support program integrity and accountability include: 1. Financial Services which oversees contracts and procurement activities; 2. Internal Operations which oversees property and vehicle management, records retention, and postage; 3. Technology Services which oversees information technology, networking, telephones, copiers. Technology Services develop internal electronic processes and data systems to support separation of duties and responsibilities within a program area and their systems to ensure that the systems promote checks and balances as a way to ensure program integrity and accountability. 4. Information Security which oversees policies and strategies to secure agency information assets and protect against and respond to digital security threats. This area ensures that Personal Identifying Information (PII) is protected and that system that contain PII are secure; 5. Human Resources which oversees all personnel-related issues; 6. Staff Development and Training which oversees professional development for employees. This area is responsible to ensuring that all staff members are provided with the required training modules to support knowledge in areas such as Civil Rights, Ethics, and Security. These mandatory trainings for staff promote compliance with federal and state regulations. By having staff trained on these topic areas, they are equipped with the knowledge and tools to ensure program integrity and accountability. 7. Individual and Provider Rights which oversees civil rights issues, interpreter/translation services, and appeals processes. This area provides the oversight to ensure that the families we serve in South Carolina all have equal access to all services. Additionally, the area is responsible for ensuring that a client or provider that had had an adverse action taken has the right to a fair hearing. This provides for additional checks and balances to ensure program integrity. 8. Quality Assurance and Continuous Quality Improvement which promotes service and performance improvements; 9. Office of Inspector General which is responsible for conducting criminal investigations into allegations of fraud, waste, or abuse of programs administered by the Lead Agency, conducting FBI criminal background investigations to determine if applicants can work with children in child care, foster or adopt a child and employees and contractors who have access to federal tax information, overseeing the state child abuse and neglect registry and database, as well as overseeing emergency management and disaster services; 10. Internal Audits which conducts examinations of SCDSS fiscal operations, program management and program support activities and reports findings and recommendations to management and the State Director. Audits include a) financial and compliance; b) economy and efficiency; c) program results; and d) performance, along with independent audit reports submitted by providers of service in accordance with the Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Each of these divisions have policies and procedures specific to their area of responsibility that govern the activities of the entire Lead Agency, including program areas such as the Division of Early Care and Education (DECE) that administers the CCDF program. These policies and procedures address the delegation and segregation of duties and include checks and balances among the various divisions to avoid the potential for fraud, as well as to identify fraud risks. Among these are structured, formal processes for the coordination of activities and communication among divisions specifically including fiscal, procurement, and program staff. A description of these processes is in the development and execution of contracts and payment of contract invoices, described in 10.1.2 that follows. DECE program managers refer to CCDF regulations, program instructions, and CCDF grant terms and conditions to guide planning and administration, including revision of policies and procedures based on changes in law and regulations. Program policies and procedures are posted on the Lead Agency’s website under Manuals (Child Care Scholarship Program Policy Manual, Child Care Licensing System, Division of Early Care and Education Emergency Plan) and on www.scchildccare.org website under Library (ABC Quality documents including Indicators/Standards, Clarification Guides, Forms, Business Procedures). Assignment of authority and responsibilities related to program integrity and consistent with policies and procedures for effective stewardship of all program resources are documented in position descriptions that are discussed with employees at their hiring and annual evaluations. 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 uses the State of South Carolina’s accounting system, South Carolina Enterprise Information System (SCEIS) for the basis for record keeping and financial management systems for all CCDF related expenditures. SCEIS incorporates integrated processes with checks and balances for financial management, record keeping, and reporting by cost center, program cost accounts, and general ledger accounts. This applies to direct services, grants, contracts, etc. The Program Finance point of contact receives the ACF 696 to review prior to Finance submitting to ensure expenses are coded properly. If fraud is discovered, our Office of Inspector General will work with the agency to investigate the situation and take appropriate action as a result of the investigation. 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: Within South Carolina’s accounting system, SCEIS (described above in response to 10.1.2.a), used by the Lead Agency, are Program Cost Accounts (PCAs) that are established to track, trace and accumulate expenditures for a specific fund source, such as explicit types of CCDF activities. For example, allowable CCDF infant-toddler expenditures are coded and accumulated in PCA 1W12. Allowable CCDF quality expenditures that are carried out by the Lead Agency’s Child Care Licensing office and ABC Quality (Quality Rating and Improvement System) are coded to PCA 1W03. CCDF quality expenditures through executed contracts are coded to PCA 1W13. Also, South Carolina’s Comptroller General office maintains a chart of General Ledger account codes that are used to specify the type of expenditure (various kinds of direct services, non-direct services such as systems and eligibility determination, personnel expenditures, contractual expenditures depending on the type of contractor, operating supplies and services). Expenditures are accumulated in cost centers for the offices initiating the requests for expenditures. The Lead Agency program staff have been guided to identify and use the appropriate cost centers, PCAs, and General Ledger codes for specific allowable CCDF activities that are described in the CCDF Final Rule/regulations. If unsure, the Lead Agency staff will consult with the Lead Agency Finance Program Coordinator to determine the appropriate Cost Center, PCA, and General Ledger code to using each CCDF grant year when CCDF allocations are posted on the Office of Child Care’s website, the Lead Agency’s financial program coordinator compiles a spreadsheet for that grant year, identifying the CCDF allocations by type (Discretionary, Matching, Mandatory), along with the required Maintenance of Effort and State Matching requirements, calculating the percentages required to be spent by category (infant-toddler set-aside, quality set-aside, Discretionary direct services, TANF/transitioning/at-risk direct services) and the 5% limitation on administrative expenditures. Use of these funds by Cost Center, PCA, and General Ledger is tracked through SCEIS reports on at least a quarterly basis over the course of the open grant year. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: The Lead Agency’s Finance Office Grants Accounting and Reporting team monitors specific CCDF Federal grant activity through the SCEIS accounting system. CCDF Federal expenditure are reconciled quarterly in coordination with program staff to assure accuracy. The Lead Agency’s Finance Office Grants Accounting and Reporting prepares the ACF 696 reports. A draft of the ACF 696 fiscal reports are reviewed with program staff in the Division of Early Care and Education, adjustments are made if needed, a final review is completed by the Finance Grants Accounting and Reporting manager and/or Controller, then submitted as required to the appropriate state or federal office. 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 practices ensure that funds are used and reported in ways that are consistent with laws, regulations, policies and procedures with a low prevalence of errors in eligibility determinations and payments to providers, contractors and vendors. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: The Lead Agency continuously assesses its practices to identify and prevent errors in eligibility determinations and payments to providers, contractors, and vendors. Eligibility case review staff review a percentage of all new or recertification cases to ensure eligibility for Child Care Scholarships was determined properly and that services authorized according to policy. If errors are found, the case is returned to the eligibility staff to make a correction. Bi-weekly reports are reviewed by the Quality Review Team in supervisory reviews. Fiscal reports are reviewed for accuracy by both Finance office managers and the Lead Agency finance program coordinator. Contracts are routinely monitored by the Lead Agency program managers to assure performance according to the executed scope of services. Written reports from contractors about their progress with contracted activities are included in the scopes of services and reviewed by the Lead Agency contract managers. Invoices are reviewed by the Lead Agency contract managers to assure consistency with executed contract and budgets before approving for payment processing. The Lead Agency uses OCC-sponsored webinars on Program Integrity/Accountability/Internal Controls and review of OCC guidance materials, and program instructions, including instructions for ACF-696 financial reports to periodically conduct reviews of our policies, procedures and practices. Effectiveness is demonstrated by low prevalence of errors in eligibility determinations, payments to providers, contractors, and vendors. Since the Lead Agency is subject to the provisions of the Federal Single Audit Act, the agency is subject to annual audits by the external Office of the State Auditor. These audits include analyses of Lead Agency’s system of internal controls and program compliance with federal laws and regulations including fiscal management practices. The Lead Agency reviews and responds to State Auditors’ internal control questionnaire which addresses our policies, procedures and practices in every area of operation based on the annual OMB Compliance Supplement. c. How the results inform implementation. Describe: The results of the self-assessments and State audits provide an opportunity for the Lead Agency to conduct an in-depth review and update existing policies and procedures when applicable to ensure appropriate training to staff on proper procedures and to update fiscal management practices as needed to ensure compliance with the administration of the CCDF Program. The continuous quality improvement ensures proper application of the CCDF rules and regulations. 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: Eligibility case reviews are conducted on a percentage of all new and recertification cases to ensure that eligibility was determined properly and that the services authorized are in accordance with policy. If errors are found, case review staff return the case to the eligibility worker to make correction(s). Supervisory reviews are conducted using bi-weekly reports for the Quality Review team to identify errors and corrective actions. Written risk assessments are prepared for each contract prior to its execution, considering factors such as: How long has the potential contractor been operating? What is their organizational capacity to carry out the activities we’re seeking (expertise in the specific issue, personnel experience, financial stability, etc.)? Are there any adverse circumstances affecting the potential contractor? The risk assessment is conducted to determine the level and scope of the monitoring plan for each contract/grant which is attached to it. Depending on the extent of risk, on-site program reviews may be conducted by program staff. Program staff routinely monitor all deliverables to ensure that work is performed in accordance with the terms in the executed scope of services and that reports are received in a timely manner. Reporting requirements include project strategies, timelines, expected outcomes and method of evaluation. Program staff maintains regular contact with the contractor/grantee to provide technical assistance and to discuss barriers prohibiting completion of the tasks in the scope of work. Regular contact includes face-to-face meetings and telephone/electronic contacts as appropriate. b. The frequency of each risk assessment. Describe: The Quality Review Team receives a bi- weekly report of child care cases that have been approved and entered into the Child Care Scholarship database. A percentage of the cases are reviewed by the Quality Team to assess potential risks and for verification that the child care cases were processed in accordance with the established Child Care Scholarship Program policies and procedures to ensure compliance with the CCDF regulations. CCDF-funded contractors and grantees are required to submit annual and cumulative year end reports to the assigned contract manager describing their success in accomplishing deliverables/activities as describe in the scope of work. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: If risks are identified, resolutions are sought, including revision of policies procedures, and/or practices to minimize the risk. If errors are found, the manager and staff responsible for the error are notified and the errors are corrected if applicable. The identified errors result in the Program Manager reviewing policies and procedures to ensure clarity. If clarifications on policy is needed, the Program Manager will provide clarification on policy and send to all staff. Additionally, all policy manuals will be updated. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: Effectiveness is demonstrated by low prevalence of errors in eligibility determinations and in payments to providers, contractors, and vendors future errors should immediately decrease upon identifying the error and making policy clarifications to staff. 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: Eligibility workers and Control Center staff, at initial hire, are trained by supervisors and experienced staff on the policies and procedures of the Child Care Scholarship Program. New staff shadow existing staff to watch and learn how to properly apply policies to the daily work. Supervisors review the new staff's progress, along with the experienced staff that were training the new workers, and determine when the new staff person can work independently based on their ability to effectively carry out the policies and procedures correctly. The same process is followed if an existing staff assumes new duties on a function which they have not had training previously. Ongoing training is provided throughout the year to ensure staff are retaining the correct policy and procedures for administering the CCDF program requirements. Additionally, eligibility workers and control center staff are provided one-on-one training by the supervisors or the Program Manager as identified by Quality Team Program Coordinator on Child Care Scholarship mandatory program policies and procedures. They are also trained based on policies governing the findings from audit reviews and supervisory reviews. ii. Describe how staff training is evaluated for effectiveness: The effectiveness of the training provided is evaluated by experienced workers and supervisors visually monitoring the correct application of policies and procedures. The long term effectiveness is measured by the absence of errors when completing daily tasks around eligibility determination and program operations. Through the shadowing and observation, the supervisor determine if the new staff are on track. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing staff training needs: Desk reviews and errors found are used to inform training needs. The Lead Agency has a Desk Review Unit that is responsible for reviewing a percentage of cases worked by staff over a period of time to check for accuracy of data and proper eligibility determination. If errors are found, Eligibility workers and Control Center staff are provided one-on-one training by the supervisors, or the Program Manager as identified by Quality Team Program Coordinator on Child Care Scholarship program policies and procedures. They are also trained based on policies governing the findings from audit reviews and supervisory reviews. When errors are identified, the Program Manager reviews the current policy manual to ensure that the policy clearly explains the expectations. If it does, the Program Manager will send a policy reminder email to all staff reiterating how the policy and procedure should be interpreted and applied. If the policy is not clear, the Program Manager will send all staff a policy update with any corrections or clarifications and will update the policy manual to reflect the updates. The Improper Payment review and errors found are used to inform training needs. Upon completion of the cyclical Improper Payments review, predominate errors are identified from the error rate results. The Program Manager and supervisors are made aware of the areas requiring more in-depth training on policies and procedures. Trainings are then created to address the specific areas of concern. The trainings for staff are held in person and primarily conducted by the Program Manager. The trainings address the errors identified during the improper payment process, how to prevent future errors and also address additional policy and procedure 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: ABC Quality provides an online orientation training for programs through Pro-Solutions, which includes an overview of program manuals. The program manuals outline the requirements to participate, which includes the CCDF requirements as well as the definition of fraud, the investigation process, and consequences for committing fraud. Directors of programs who are serving children receiving CCDF funds must sign and acknowledge a provider agreement, which outlines the requirements to participate to include only serving children at the enrolled Quality location. Programs enrolled with ABC Quality are reviewed annually by ABC Quality assessors for compliance with policy. Any corrective action needed is communicated to the program by their assessor. Additionally, all staff who are employed within a program participating with ABC Quality are required to complete the Health and Safety Pre-Service training, which provides an overview of the health and safety requirements that meet CCDF program requirements. ABC Quality and the Child Care Scholarship Program began conducting webinars to provide continuous training opportunities to programs regarding the assessment framework. ABC Quality has developed a Town-Hall series to provide updates to programs on various topics. ABC Quality has partnered with several of the regional early childhood associations to provide ongoing training opportunities for programs at their annual conference. As policies or procedures change, programs enrolled with ABC Quality to serve children with CCDF-funded scholarships are sent notifications by letter, email, newsletter, and the website. Also, ABC assessors serve as communicators of policy changes through their annual on-site reviews of programs, phone calls, and email messages to providers. The Division of Early Care and Education has a monthly newsletter that is sent to all child care providers informing them of any updates, successes, and upcoming events related to the Child Care Scholarship Program, ABC Quality and Child Care Licensing. Additionally, the Child Care Scholarship Program sends a child care provider bulletin to all ABC Quality enrolled child care providers with policy updates and clarifications directly related to the Child Care Scholarship Program. The Child Care Scholarship Program will be conducting two child care provider trainings per year to provide the child care providers with opportunities to hear from the subject matter experts regarding policy changes, clarifications, any upcoming initiatives, and to allow them the chance to ask questions and have direct communication with program staff. The Child Care Scholarship Program will attend and present at child care conferences so that all child care provider attendees will be able to receive specific child care information and updates that will facilitate compliance with the CCDF regulations as well as increase program integrity while reducing errors in billing which results in less audit findings. ii. Describe how provider training is evaluated for effectiveness: Individuals who take the Pro-Solutions orientations and/or Health and Safety Pre-service are able to provide an evaluation of these courses, which enables ABC Quality to make adjustments as needed to meet the provider’s needs. After the ABC Quality webinars participants are given an opportunity to provide an evaluation to ensure the topic meets their needs. The ABC Quality Town-Hall series also serves as a platform for programs to get their questions answered. Participants are asked to provide their questions regarding the topic area prior to the meeting. At the end of the meeting participants are asked to complete an evaluation, to continue to provide better service and effectiveness in our training methods. The effectiveness of the trainings are evident when the Quality Assessors determine that the providers are in compliance with CCDF program requirements. The assessments will show there is an increase in the child care provider's compliance with policies and procedures which result in fewer areas of non-compliance and less audit findings. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: If internal audits identify audit findings on a child care provider, the Child Care Scholarship staff review policies and procedures with the child care provider to ensure targeted training around any issues identified. These findings are also used to inform topics discussed in Town Hall webinars with child care providers, state level conference training sessions as well as technical assistance sessions with the child care provider. 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 error rate review results are shared with Division Director of Early Care and Education and the Child Care Scholarship Program Manager. At the first monthly meeting after the error rate review report, the case reviewers meet with the eligibility Program Coordinator and eligibility Supervisors to discuss findings, errors, and improper payments from the error rate case reviews. The meeting also addresses any problems, answers questions, and provide clarification of child care program policies and procedures. The error rate report results are used as a guide for completing ongoing case reviews conducted by the Quality Review Team, including updating documents to ensure errors are identified which can be addressed quickly to assist in decreasing future errors. The error rate report results and the results from the ongoing case reviews are used to identify areas for staff trainings. The error rate report results aid in providing the information needed for the Quality Review Team in conjunction with the Division of Technology Services (DTS) staff to monitor the progress of eligibility staff and make recommendations regarding methods to improve agency data systems. b. Audit results. Describe who this information is shared with and how the Lead Agency uses the information to evaluate the effectiveness of its internal controls: Audit results are initially shared with the Chief Financial Officer, Finance Division Controller and Manager of Grants Accounting and Reporting in audit exit interviews. Afterward, the Finance Division staff share audit results that are specific to individual program areas, to include the Division Director and Program Fiscal Coordinator, typically in meetings with the program areas staff who are knowledgeable of the audit issues to determine if adjustments to internal controls, policies, procedures, or practices are needed and if so, to develop strategies to address them. 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. [x] No. If no, describe when and how it was most recently determined that there were no weaknesses in the Lead Agency’s internal controls. Statewide Single Audit for State Fiscal Year 2023 (7/1/2022-6/30/2023) identified no internal control weaknesses for the CCDF program. b. [ ] Yes. If yes, what were the indicators? How did you use the information to strengthen your internal controls?