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: 1. DCYF financial responsibilities are under the authority of the Deputy Secretary of Operations and the Chief Financial Officer (CFO). These offices are separated from the responsibilities of Licensing and CCDF program administration. Under the CFO the responsibilities of Budget, Cost Allocation and Grants Management, Fiscal Integrity and Contracts are assigned to different units to assist with internal controls and segregation of duties. Within these units' different levels of approval authority, both approval and payment, are established for grants management, reporting, budget, and contracts. 2. DCYF complies with the Department of Enterprise Services (DES) RCWs for agency delegated authority. Levels of authority are defined by position and job duties. Within the Finance Division all contracts, payments, federal reporting and draws, fiscal reviews, and financial coding are all reviewed by supervisors to verify accuracy before finalization of the activities. 3. Finance is fundamental to the agency achieving its strategy, so our work starts with the work that supports the people we serve. We have all relevant stakeholders involved in the conversations early and often so that we stay focused and aligned, reducing the need to revisit or change plans. The Cost Allocation and Grants Management unit meets monthly with program staff to review expenditures reports, grant requirements, and any changes in rules and regulations. All contracts are coordinated between finance and program staff to verify compliance with state and federal requirements prior to approval by finance and program leadership members. In addition, the Fiscal Integrity unit coordinates with program staff for vendor and subrecipient monitoring. 4. The Cost Allocation and Grants Management unit meets monthly with program staff to review expenditures reports, grant requirements, and any changes in rules and regulations. Changes in state or federal regulations are coordinated between the divisions to ensure effective internal controls and implementation. Divisions also coordinate at the Leadership level, often and early, to ensure program integrity. Great partnership starts with having the right people at the table, having all relevant stakeholders involved in the conversations early and often so that we stay focused and aligned, reducing the need to revisit or change plans. Great partnerships are sustained by ongoing communication, aligned priorities and a basic understanding and orientation to each other’s work and perspectives. 5. Finance policies and procedures require separation of duties for all processes to ensure that information is reviewed by multiple employees prior to approval and submission. Our financial and grants systems are set up with different levels of access to ensure these levels of delegation are automated for all information technology systems. 6. DCYF conducts internal audits of its Subsidy program to identify potential benefits and payment fraud. DCYF refers cases to DSHS Office of Fraud and Accountability for investigation and recoupment. 7. NA 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: DCYF has internal control policies in place to ensure separation of duties to safeguard its assets and check the accuracy and reliability of its accounting data. Washington State's Agency Financial Reporting System (AFRS) is the accounting system of record and has Information Technology security built in to ensure separation of duties. Segregation of duties include, but are not limited to, a unit supervisor reviews and approves invoices prior to payment, separate staff input and release payments, and the tasks related to federal draw down of funds and financial reporting are separated between staff members in the Cost Allocation and Grants Management Unit and the Accounting Unit. DCYF has multiple approvals built into the contracts, budgeting, and expenditure systems to ensure proper levels of approval. DCYF uses the Contracts and Procurement System (CAPS) to track all contracts paid for with CCDF funds. The agency Contracts and Procurement Unit meets with agency contract managers quarterly to provide training on state and federal requirements or when new contract managers are hired and provides technical assistance when contracts are being developed. Staff that manage contracts are required to complete state mandated contract trainings, conduct a risk assessment for each contract, set deliverables for contracts, and monitor the contract according to the risk rating. All contracts that contain federal funds have Federal Certifications and Assurance attached to the contract that contain grant requirements in accordance with the Code of Federal Regulations and the grant application. The Cost Allocation and Grants Management Unit assists contract managers with determining if contracts are sub-recipient contracts and indicates this in the Contract and Procurement System. DCYF has sub-recipient monitoring plan examples provided by the Contracts and Procurement Unit based on the designated risk level. The sub-recipient monitoring worksheet contains standard administrative and fiscal requirements, while the programmatic section is tailored to capture specific monitoring elements based on the federal program grant requirements. All sub-recipient contracts contain language on roles and responsibilities and assurances of compliance with grant requirements. In addition, DCYF complies with federal sub-recipient requirements by submitting the Federal Funding Accountability and Transparency Act (FFATA) reports on a monthly basis. The Fiscal Integrity Unit reviews sub-recipient contracts annually for compliance with federal and state requirements. All CCDF contracts and agreements go through a chain of reviews by the Program Manager, Contracts and Procurement Unit, Chief Financial Officer, Budget Director, and Assistant Director for approval prior to execution. Once the contract is fully executed, the services are monitored by the assigned contract manager and the Fiscal Integrity Unit and may include the following control items determined by the contract risk assessment: periodic reporting, on-site reviews and observations, invoice and audit report reviews, customer surveys, and other periodic contact. DCYF Accounting Unit compares all approved invoices to the contract budgets to verify funds are available and payments are not duplicated prior to payment. After payments have been processed through AFRS the expenditure reports are reviewed by Budget, the Grants Manager and Program staff on a monthly basis. DCYF has a service level agreement with DSHS that sets out the requirements that are followed regarding CCDF grant funds and their interaction with TANF funds. In addition, the State Auditor's Office annually audits the CCDF grant in detail to ensure accuracy and accountability. Errors and (intentional and unintentional) program violations result in overpayments to clients or providers. DSHS Office of Financial Recovery collects these amounts and reports to DCYF. DCYF works with DSHS to verify that funds are returned to DCYF and recorded to the proper grant award. For closed award periods DCYF transmits the funds back to the granting agency. 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: DCYF partnered with the Department of Social and Health Services (DSHS) to create a Payment Allocation Model (PAM) cost allocation system within DSHS’ Barcode system that reviews the client level data and identifies the correct funding source for each client based on the activities allowable prior to DCYF issuing the payment. The cost allocations determined through PAM export into DCYFs Social Service Payment System (SSPS) tied to the client level data. The dollar amounts and funding source allocations tie into the Agency Financial Reporting System (AFRS). DCYF also assigned unique fiscal data elements to all payments. The DCYF Quality Assurance team tracks fiscal data and conducts monthly provider audits to identify patterns of inappropriate payments. Improper payments are identified and documented using the department’s eligibility system. Program violations and fraud identification are also tracked in department’s eligibility system. Grant Management: DCYF uses grant-level management of all federal funds, including the CCDF grants. The Department allocates the CCDF grants to eligible clients and allowable activities in compliance with 45 CFR 98.67. The clients are assigned an eligibility type upon eligibility determination that connects with an allowable source of funds for payments. Grant level adjustments are made within the source of funds. If the source of funds contains multiple grants, transfers occur between grant sources to properly spend grant dollars within the allowable period of performance and ensure level of effort and matching requirements. Additionally, DSHS reviews the provider payments to verify client’s eligibility for TANF funds. Beginning in state fiscal year 2025, thanks to an investment in the state budget for the purpose of enhancing our accounting system, adjustments will be made at the expenditure or child-level to assist with tracking for activities allowed to meet the level of assurance as identified by the State Auditor’s Office for the annual statewide single audit. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: Proper grant expenditures: The Cost Allocation and Grants Management Unit and Budget Unit prepare monthly reports based off the financial data in the Agency Financial Reporting System to ensure that all charges to the CCDF grant are properly accounted for in Mandatory, Matching, and Discretionary. In addition, the Cost Allocation and Grants Management Unit reviews expenditures to verify that the proper period of performance is charged for the funding source and the services are allowable. DCYF's Grants Manager also processes reports to verify that expenditures are properly reported to the grant and uploads all federal data to the designated systems by the deadlines outlined in the grant to ensure transparency and accountability to our grants reporting. In addition, DCYF monitors all contracted services through its Contracts and Procurement System (CAPS) to ensure reasonable and allowable costs. With the CAPS system, all payments, including those made for quality, are automated. Payment files are reviewed to make sure payment is reasonable and allowable prior to issuance. 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: The DCYF Quality Assurance team audits providers for program integrity compliance. DCYF typically audits 2% of the caseload on average and combines random audits with targeted audits. Both of these audits are designed to increase program integrity by informing providers and workers of billing issues and correct billing procedures and by recouping funds. These audits are random, and any targeted approaches DCYF takes are first carefully analyzed for disparate impact as to protected classes outlined in state and federal anti- discrimination law. The DCYF Fiscal Review Team reviews contracts based on the identified risk rating to include periodic reporting, on-site reviews and observations, invoice and audit report reviews, customer surveys, and other periodic contact with contractors. a. The Cost Allocation and Grants Management Unit and Budget Unit prepare monthly reports based off the financial data in the Agency Financial Reporting System to ensure that all charges to the CCDF grant are properly accounted for in Mandatory, Matching, and Discretionary. In addition, the Cost Allocation and Grants Management Unit reviews expenditures to verify that the proper period of performance is charged for the funding source and the services are allowable. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: The Quality Assurance team evaluates internal controls using our program integrity procedures, utilizing a combination of centralized and local case reviews to identify error trends, identify root causes, and develop solutions to the root causes. DCFY updates policies and procedures based on these evaluations and provides outreach to providers to assist with compliance. The DCYF Fiscal Review Team provides outreach and assistance to contractors to assist with any compliance issues identified during the fiscal review process. c. How the results inform implementation. Describe: DCYF makes changes to the professional development and training process to improve staff skills and accuracy. Staff training is in a continuous improvement cycle and evolves with staff needs, changes in rule, or areas of improvement identified in monthly audits. The Department continues to improve processes and internal controls and create and deliver staff training based on current data trends and patterns. 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: DCYF assesses risk through internal audits of eligibility cases and providers, external audits (Improper Payments Information Act (IPIA) Federal audit conducted every 3 years, Statewide single audit is a state audit conducted annually by the State Auditor's Office), calibrations among auditors and among lead workers, and a non-concur process where eligibility workers can dispute an audit finding, which is then reviewed by a panel. b. The frequency of each risk assessment. Describe: Four eligibility cases per worker are audited monthly by the QA eligibility auditors. The provider auditors conduct 200+ audits per month. IPIA audits are conducted every three years, and SAO audits are annual. Overpayments are analyzed and calibrated monthly. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The CCSP Quality Assurance team gathers audit data that is analyzed for trends over time. If the QA team determines that the data are showing consistent issues with performance, they communicate this information to the Training Team to determine what kind of learning solution may be necessary. This partnership allows for the development of targeted data-driven professional learning and job aids. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The Department of Children, Youth, and Families (DCYF) ensures the efficacy of the risk assessment process by auditing the work of the auditors for accuracy, continued improvement of external audits, and overpayment data. Audit data is monitored after interventions (training, coaching) to assess intervention effectiveness and determine additional efforts if needed. External audits (Improper payments information act/State Auditor's Office) affirm DCYF’s efforts have improved the audit findings each year for the past 7 years. The QA auditors and lead workers are audited monthly through a calibration process where they all audit the same case, and the results are reviewed for variances and then discussed in a monthly meeting to ensure the correct application of rules. 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: All new hires complete a comprehensive onboarding that includes an overview of the program and its expectations, the Washington Administrative Code, as well as the associated policies and procedures. Staff must pass an assessment of learning after each training course to demonstrate that they have understood the content and are able to apply the concepts to practice. In addition, as all new staff begin to work on cases, all their actions are audited by a team lead, thus providing another layer of quality assurance and highlighting areas of growth in a supported environment. Since the program undergoes periodic policy changes that impact procedures, all staff are required to participate in an informational webinar and additional training, if necessary, to understand the program expectations. DCYF QA facilitates a monthly calibration meeting in which the auditors, lead workers and trainers audit the same case, which is then reviewed against the applicable rules to ensure consistency and correctness. The verification process DCYF established has the program integrity measures built into them. ii. Describe how staff training is evaluated for effectiveness: Staff are required to complete an assessment of learning after each training course that asks them to demonstrate their understanding of knowledge and practices. The Training Program also utilizes call center staff feedback during design processes to ensure that the content addresses difficult to understand procedures. In addition, the agency employs a comprehensive quality assurance process that is comprised of random case audits as well as monitoring of live calls. These strategies provide sources of evidence of staff comprehension of the program’s policies and procedures and provide data for further quality improvement that is necessary in order to ensure effective workforce preparation 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 CCSP Quality Assurance team gathers audit data that is analyzed for trends over time. If the QA team determines that the data are showing consistent issues with performance, they communicate this information to the Training Team to determine what kind of learning solution may be necessary. This partnership allows for the development of targeted data-driven professional learning and job aids. 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: DCYF provides mandatory training to licensed family homes and FFN providers as agreed upon in collective bargaining agreement. ii. Describe how provider training is evaluated for effectiveness: DCYF audits provider payments to inform changes in policy, billing guides and training. 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 CCSP Quality Assurance team gathers audit data that is analyzed for trends over time. If the QA team determines that the data are showing consistent issues with performance, they communicate this information to the Training Team to determine what kind of learning solution may be necessary. This partnership allows for the development of targeted data-driven professional learning and job aids. 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 is shared with Child Care Subsidy executive management, the steering committee attendees, supervisors, and lead workers. DCYF uses the error rate review to evaluate the effectiveness of its internal control activities and opportunities to improve them. Findings shape needed changes to rule, policy, procedures, system updates or staff training, depending on the specific type of errors identified, their financial impact (error amount), and prevalence (error rate). DCYF uses the report to develop a corrective action plan, which becomes the guiding document for Subsidy program efforts to improve internal controls around eligibility. 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 shared with Child Care Subsidy executive management, Subsidy steering committee attendees, supervisors, and lead workers, and discussed weekly in the Policy, Procedure & Training (PPT) meeting. Further, the quality assurance (QA) team, QA administrator and QA policy analyst review audit results for areas of improvement during the monthly QA unit meeting. DCYF uses the audit results to evaluate the effectiveness of its internal control activities and opportunities to improve them. Findings shape needed changes to rule, policy, procedures, system updates or staff training, depending on the specific type of errors identified, their financial impact (error amount), and prevalence (error rate). 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: DCYF uses results from administrative hearings, and the Office of Fraud and Accountability investigations to identify potential areas of vulnerability. Data from overturned hearings or criminal convictions can help justify the need for rule changes. 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 State Auditor’s Office has issued statewide single audit federal findings for the CCDF program related to internal controls of provider payments. The SAO maintained that the CCDF program is not auditable without child-level data. In response to the auditor’s recommendations, the Department submitted a budget request for the 2024 supplemental budget. Funding was provided to develop and maintain the business process that would allow adjustments to include child-level data beginning July 2024.