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: Using the authority outlined in Wisconsin Statutes ss. 49.141 through 49.161 and specifically s. 49.155, and Wisconsin Administrative Code DCF Chs. 101, 102, and 201, the Lead Agency established a program integrity unit to investigate improper payments and collect Wisconsin Shares funds that were improperly authorized. The Lead Agency has established accountability measures to address and reduce fraud, waste, and abuse, including program violations and administrative errors. The Lead Agency provides program integrity services directly for Milwaukee County child care subsidy payments and provides comprehensive guidance, technical assistance, and training to local agencies responsible for establishing overpayments for clients in the balance of the state. The Lead Agency hosts regular meetings with representatives from local agencies and external stakeholders to provide information on updated policies and procedures related to program integrity and internal controls efforts. The meetings are to receive feedback on the impact of new policies and procedures at the local level. The Lead Agency holds regular meetings with the Child Care Program Committee and Child Care Advisory Committee in which local agencies and external stakeholders have an opportunity to provide input on the impact of child care program integrity policies and procedures. Quarterly meetings are held internally within the Lead Agency to provide staff with current information that is to be passed on to local agencies related to program integrity policies, procedures, and system enhancements. Using the data provided by the local agency fraud plan to identify areas where additional training and technical assistance may be necessary. The Lead Agency has also established regular communication via a weekly e-mail listserv message to keep local agencies informed on all child care subsidy and CCDF related topics and updates. The Lead Agency established a program integrity unit to investigate improper payments and collect Wisconsin Shares funds that were improperly authorized. The Lead Agency provides program integrity services for Milwaukee County and provides guidance and technical assistance to local agencies responsible for establishing overpayments for clients in the balance of the state. The lead agency has a separate bureau for training development and quality assurance, and a section dedicated to overpayment collections. The Lead Agency requires local agencies to utilize a process called Front End Verification as a method of fraud prevention. Front End Verification is a process of additional scrutiny for cases that exhibit characteristics of potential program violations or errors. The Front End Verification is a process looks at questionable financial or household characteristics, for example, reported income does not coincide with wage match databases, suspicious/modified paystubs, frequent fluctuations in household members, absent parent is landlord etc. When a case is referred for Front End Verification, the local agency is expected to perform a more in-depth verification process. The local agency verifies the accuracy of information provided by the parent at application, review, or time of a change. Results are used in verifying eligibility for program services or for fraud investigation referrals when applicable in an effort to create strong controls for reducing fraud, waste, and abuse of CCDF funds. The Lead Agency develops red flag reports that collect and analyze data from clients and providers receiving CCDF funds. Each red flag is programmed with a threshold to measure results that may indicate further investigation is needed for a particular client or provider. Examples of client red flag reports are: Unusual Parent Schedule (parent schedule does not align with child care need); Current Weekly Authorized Hours Greater Than 50; Current Schedules for Approved Parent Activity; EBT Cards Replaced within 12 Months; Funds About to Expire; Inactive EBT Cards for More Than 30 Days with a Balance; Expungement; and Multiple Providers Including Child Care Need Schedule. Examples of provider red flag reports are: Unusual Payment Timing; Payment Grouping; Provider Over Capacity; Child Mobility; and Unusual Revenue Growth. The red flag referrals are reviewed to determine if further audit and investigation is warranted. The audit and investigation will determine if violations have occurred and/or if an overpayment should be established. The Lead Agency conducts quarterly targeted case reviews by selecting random samples of case files from each local agency to identify administrative errors and program areas that the local agency may need assistance with. The Lead Agency provides in-person and online training and/or technical assistance to local agencies as needed. The Lead Agency also conducts the FIP review every three years. These reviews focus on eligibility determination, authorization, and correct issuance of subsidy funds. 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 requires contracted local agencies to submit a Fraud Plan annually that outlines the agency's procedures for fraud detection and prevention. In addition, local agencies report statistics on their program integrity related activities through their Fraud Plan. The Lead Agency contracts with United Migrant Opportunity Services (UMOS) to provide care for children of migrant farmworkers. UMOS contract expenditures are monitored by the Lead Agency on a monthly basis. The Lead Agency follows Generally Accepted Accounting Principles (GAAP) and the Bureau of Finance (BOF) is responsible for the accounting and financial reporting of all funds administered by the Department of Children and Families. BOF provide financial services including accounts payable, accounts receivable, general accounting, federal reporting, and financial systems processing. BOF also provides contract and procurement services, financial consultation, and operating budget assistance to the program divisions in order to ensure sound financial policy and procedures in the spending of CCDF funds. 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: The Lead Agency and local agency contractors are both subject to annual single audit guidelines to ensure proper fiscal controls. The Lead Agency implements a series of performance measures annually with local agencies to measure contract compliance and specific contracted tasks. The Lead Agency performs annual quality assurance reviews in which targeted policies are reviewed and a sampling of cases processed by the local agency is audited to confirm compliance with policy. A review of Federal Improper Payments is completed by the Lead Agency every three years to ensure that funds are properly applied to eligible families. c. Processes and procedures to prepare and submit required state and federal fiscal reporting. Describe: The Lead Agency’s Bureau of Finance (BOF) CCDF grant accountant is responsible for working with the program areas and Lead Agency Budget Office to submit all financial reports as required by CCDF regulations. This includes quarterly expenditure reports, ACF-696, Pooling Factor form and other reports requested by ACF-OCC Grants Management. d. Other. Describe: The Lead Agency has procedures in place to remove or retract funds that have been loaded to a parent's EBT card if it is discovered that the parent’s payment amount had been incorrectly calculated, the parent no longer needed child care, or the parent was found ineligible for the level of subsidy received. This retraction process is done to avoid potential overpayments made by parents when completing payments to providers using subsidy funds for which the client was not eligible. 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 Lead Agency has an internal control plan that outlines specific elements to ensure the effective management. It was prepared in accordance with the requirements of the Cooperative Agreement on Accounting, Auditing, and Internal Control Activities between DOA and DCF. It reflects the instructions provided by the State Controller’s Office (SCO) regarding the development of an agency’s Internal Control Plan. Management is responsible for establishing and maintaining effective internal controls to provide reasonable assurances that state assets are safeguarded, and resources are properly used. The overriding purpose of the plan is to ensure that departmental activities are carried out according to management's intent to carry out its regulatory and guidance functions. Therefore, the manual includes descriptions of departmental processes, policies, and the means of communicating roles and responsibilities related to the internal control structure. The SCO views the development of an Internal Control Plan as an ongoing process and as a management tool to provide reasonable assurance that the following objectives are achieved: effective and efficiency of operations, reliability of financial information, and compliance with applicable law and regulations. The plan is written for management to communicate to staff its expectations and standards. The SCO also requires annual updates to ensure agencies monitor, evaluate, and improve their internal controls. The five components of an internal control structure (control environment, risk assessment, control activities, information and communication, and monitoring) as described in the SCO’s instructions for an Internal Control Plan are summarized below. Element 1 ￿ Control Environment: The control environment serves as the basis of the other components of internal control. It is established and maintained through continual communication. Element 2 ￿ Risk Assessment: This component is management’s process for identifying and analyzing relevant risks for systems currently in place. Element 3 ￿ Control Activities: These are the policies and procedures to address the obstacles and risks that would prevent management from achieving its objectives. Element 4 ￿ Information and Communication: Information and communication is the means for providing managers and staff the information they need to successfully carry out their responsibilities. Information should be accurate, timely, and current and should be accessible through a variety of communication mechanisms. Element 5 ￿ Monitoring: Monitoring assesses the quality of internal control activities over time. It should be an ongoing process by management to ensure properly functioning control activities and timely corrective actions to address potential problems. Additionally, the plan discusses general ledger, cost allocation, and clearing account activities. The plan also outlines accounts payable and accounts receivables. Lastly, the Internal Control Plan specifically defines the requirements of overseeing federal grants and details requirements of the CCDF program up to and including the issuance of child care subsidies and recovery of overpayments within the Wisconsin Child Care Shares subsidy program. b. How the Lead Agency measures and tracks results of their fiscal management practices. Describe: The Lead Agency's Internal Control Plan describes in detail to federal grant fiscal process to include grant setup/billing, draws, reporting, ongoing system reconciliation, final draw reconciliation, and grant closeout. For example, the Lead Agency DCF receives two types of federal grants ￿ mandatory and discretionary. Mandatory grants are required by law to be included in the federal budget and cannot be cut. Discretionary grants are set through the Congressional annual appropriations process; Congress uses discretion on selecting continued funding from year to year and can be cut. GRANT SETUP AND BILLING When DCF applies for a grant or when a grant award is received by the agency (in the case of an ongoing grant program), a grant proposal is created in STAR by a grant accountant. The proposal contains basic grant and budget information. The grant proposal is reviewed for accuracy by DCF’s system’s accountant and then routed to DOA for approval. Once the grant proposal goes through workflow approvals, the grant accountant completes three additional modules in STAR. A grant award profile which contains information about the grant, like start/end dates and CFDA number in the Grants module. A Project and associated Activities in the Project Costing (PC) module. Project costing collects and stores all the accounting transactions tied to a project and activity. And a customer contract in the Customer Contracts module. The customer contract picks up expense data from the project costing module and uses it to create draft billing information in the billing module. DRAWS DCF uses a centralized draw process which is performed by the State Controller’s Office (SCO). SCO uses the draft billing information from the customer contract module to create a bill in the billing module. Once the bill is finalized, it is used as a basis for SCO to draw the funds from the federal Payment Management System (PMS). Grant revenue is posted to the grant project when SCO completes the bill process, and the federal funds are deposited into DCF’s bank account when SCO completes the deposit of the drawn funds. REPORTING The grant accountant completes the SF-425 Federal Financial Report (FFR) for most grant awards. Some grants, like TANF, IV-E, and Child Support, require more extensive reporting and use custom forms provided by the awarding agency. This reporting is usually submitted in the federal On-Line Data Collection (OLDC) system. Federal reports show the actual funds that have been spent (expenditures) and any expenses that have been incurred but not yet drawn (unliquidated obligations) at the recipient/subrecipient level, both for the reporting period and cumulatively, for each award. The report is submitted to the appropriate federal system depending on federal awarding agency’s preference (Payment Management System, Grants Solutions, etc.) quarterly, semi-annually, or annually per the award notice. A final FFR is submitted at the completion of the award agreement. All grant reporting is archived electronically in DCF’s grants file along with all the backup documentation that supports the report. ONGOING SYSTEM RECONCILIATION On an at least annual basis, the grant accountant will compare modules in STAR to each other and to the federal payment system to make sure there are no errors that may contribute to inaccurate reporting or federal draws. Examples of reconciliations performed include: • Reconcile the GL: Expenses and Revenues to the PC: Expenses and Revenues by Project • Reconcile PC: Revenue (BIL, BLD, OLB) by Project to Life to Date Draw Report: Invoices (BLD/OLB) & Temp Bills (BIL/OLB) by Contract Line/LOC Doc ID and Subaccount ID • Reconcile the Federal Draw System (PMS) by Contract Line/LOC Doc ID and Subaccount ID to Open AR Report: Invoices (BLD) & OLB by Contract Line/LOC Doc ID and Subaccount ID + Fed AR Cash Management Deposits Report by Contract Line/LOC Doc ID and Subaccount FINAL DRAW RECONCILIATION A reconciliation between the final FFR and the grant balance in PMS is done at closeout to ensure DCF has not over or under drawn an award. If an over draw exists, the grant accountant will correct the error and return the excess funds to the awarding agency. If an under draw exists, the grant accountant will correct it, or, in the case where the expenses have exceeded the grant award amount, will move the excess expenditures to an alternate fund source. GRANT CLOSEOUT When a grant period is complete, final draws have been made, and the final reconciliation is clean, the grant accountant will close the grant project and the grant contract in STAR. This eliminates the possibility of future transactions hitting those modules and drawing (or returning) funds or creating variances between the accounting records in STAR and the expenses reported on the final FFR for that grant. c. How the results inform implementation. Describe: The Lead Agency reviews and utilizes feedback and findings from the monitoring or fiscal management practices across the CCDF programs. If any shortcomings or issues are discovered adjustments will be made moving forward to correct the course of the program operations. This is also relevant when successfully practices are identified to ensure those practices continue throughout the CCDF program areas. 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: The Lead Agency, local agencies, and other stakeholders conduct reviews to identify potential risk. An analysis is conducted of the potential impact new policies and procedures may have on families, providers, and local agency workers. After review and analysis is completed, the Lead Agency publishes and distributes to local agencies Operations Memos containing information on new program integrity policies and procedures. The Lead Agency requires local agencies to utilize a process called Front End Verification as a method of fraud prevention. Front End Verification is a process of additional scrutiny for cases that exhibit characteristics of potential program violations or errors. When a case is referred for Front End Verification, the local agency is expected to perform a more in-depth verification process. The local agency verifies the accuracy of information provided by the parent at application, review, or time of a change. Results are used in verifying eligibility for program services or for fraud investigation referrals when applicable. The Lead Agency hosts regular meetings with representatives from local agencies and external stakeholders to provide information on updated policies and procedures related to program integrity and to receive feedback on the impact of new policies and procedures at the local level. The Lead Agency holds regular meetings with the Child Care Program Committee and Child Care Advisory Committee in which local agencies and external stakeholders have an opportunity to provide input on the impact of child care program integrity policies and procedures. Quarterly meetings are held internally within the Lead Agency in order to provide staff with current information that is to be passed on to local agencies related to program integrity policies, procedures, and system enhancements. The Lead Agency conducts quarterly Targeted Case Reviews by selecting random samples of case files from each local agency to identify administrative errors and program areas. b. The frequency of each risk assessment. Describe: The Lead Agency hosts regular meetings with representatives from local agencies and external stakeholders to provide information on updated policies and procedures related to program integrity and to receive feedback on the impact of new policies and procedures at the local level. The Lead Agency holds regular meetings with the Child Care Program Committee and Child Care Advisory Committee in which local agencies and external stakeholders have an opportunity to provide input on the impact of child care program integrity policies and procedures. Quarterly meetings are held internally within the Lead Agency to provide staff with current information that is to be passed on to local agencies related to program integrity policies, procedures, and system enhancements. c. How the Lead Agency uses risk assessment results to inform program improvement. Describe: The Lead Agency, local agencies, and other stakeholders conduct reviews to identify potential risk. An analysis is conducted of the potential impact new policies and procedures may have on families, providers, and local agency workers. After review and analysis is completed, the Lead Agency publishes and distributes to local agencies Operations Memos containing information on new program integrity policies and procedures. d. How the Lead Agency knows that the risk assessment processes utilized are effective. Describe: The lead agency uses qualitative and quantitative data to evaluate the program’s operational effectiveness. This data comes from sources such as the annual local agency fraud plan and review, targeted case reviews, and contract monitoring. The lead agency management regularly meets to discuss emerging risks and develop mitigation strategies. The lead agency seeks continuous improvement on program operations and reducing the impacts of emerging risks and errors. e. Other. Describe: The Lead Agency provides in-person and online training and/or technical assistance to local agencies as needed. Several computer-based trainings are also available on demand for local agencies to access to further support on policy and procedure. Using the comprehensive data provided by the local agency fraud plan, the Lead Agency identifies areas where additional training and technical assistance may be necessary. The Lead Agency has also established regular communication via a weekly e- mail listserv message to keep local agencies informed on all child care subsidy related topics and updates. 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 staff who administer the CCDF program must complete the Lead Agency's "New Worker Training" course and complete a brief quiz to show comprehension and competency in the program within six months of starting work. The new worker training includes content about program integrity. In addition, there is a computer-based Wisconsin Shares program integrity specific training that is available to all staff who administer the CCDF program. The New Worker Training highlights the importance of compliance and overall integrity of the Wisconsin Shares Program through monitoring, investigating, and recovering misapplied funds. If identified through Lead Agency audits or any other monitoring action the local agency can be required to complete a corrective action plan to prevent future errors of the same type identified in an audit. The local agency will work with the Lead Agency to complete the corrective action plan. ii. Describe how staff training is evaluated for effectiveness: Targeted Case Reviews (TCRs) select random samples of case files from each local agency and are audited to ensure proper application of Wisconsin Shares Child Care Subsidy Program policy. Local agencies are rated on a three tier system based on the results of TCRs and local agency Child Care Fraud Plans. Local agencies are provided various levels of technical assistance based on their tier level. Local agencies that have been tier 1 (highest preforming tier) are able to request additional training and responsibilities offered by the Lead Agency. Local Agency Fraud Plans are required to be submitted each year to the Lead agency. The Lead Agency reviews the local agency’s operations, procedures, and ensures that program integrity is being upheld. Agency operations audits may be preformed by the Lead Agency and corrective actions plans created for the local agencies to assist with identifying errors, and other program integrity concerns, in the Wisconsin Shares program. 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 Local Agency Fraud Plans provides the Lead Agency with information on the local agency’s program integrity operations by providing various data points: ex. the total number of error types, intentional program violations, investigations completed etc. The Lead Agency utilizes the Fraud Plans to categorize local agencies into our tier system. The local agency’s tier level informs the Lead Agency’s monitoring, technical assistance, and additional training materials provided to the local agency. In addition, the Benefit Recovery Investigation Tracking System (BRITS) Data Warehouse tracks all administrative (i.e. local agency) errors which allows the Lead Agency to analyze the data and identify weak points for specific local agencies and emerging trends for all agencies. The BRITS Warehouse data allows the Lead Agency to alter and create training material to best assist identified weak points for local agencies. 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 issues Operations Memos to announce all new and updated policies and procedures to the Wisconsin Shares Program. These are distributed via listserv to local agencies and then to child care providers. The Lead Agency publishes periodic updates to the Wisconsin Shares Program Policy Manual that outlines program integrity policies and procedures which is available online to child care providers. The Lead Agency also provides community outreach sessions including, but not limited to, ￿Tuesday Talks￿ and ￿provider focus groups￿ to provide hands on technical assistance and space to answer child care provider questions and concerns about the Wisconsin Shares Program along with updates to the Wisconsin Shares program. DCF shares a QR code with any and all providers who have received technical assistance, investigations, or random site visits which includes an in-depth video training that providers are encouraged to view. In addition, the video is linked on the DCF website and accessible to anyone with internet access. Providers are also required to sign documents confirming they understand the program integrity policies, statutes, and administrative rules prior to becoming regulated for the WI Shares program-- providers are able to request additional information and technical assistance if there is any confusion prior to signing the document. The department also conducts provider outreach sessions once a month which provides a forum for child care providers to connect with Program Integrity staff, ask questions, and share thoughts on training tools. ii. Describe how provider training is evaluated for effectiveness: The Lead Agency conducts investigations and desk reviews to identify child care provider compliance with the Wisconsin Shares subsidy program. In these investigations and reviews trends and common misapplication of policy and procedures are identified for specific providers and/or all providers within a local agency. Specialized technical assistance or additional training may be provided to child care providers who have shown repeated errors resulting in multiple referrals to the Lead Agency’s investigation team. In addition, child care provider feedback is provided to the Local Agency through various outreach events and through the technical assistance email inbox. iii. Describe how the Lead Agency uses program integrity data (e.g., error rate results, risk assessment data) to inform ongoing provider training needs: The Lead Agency tracks all referrals for program integrity concerns in a Case Management System. In addition, returns for voluntary funds are tracked and organized by reason for return, the provider, and the local agency the provider is located. Each of these data warehouses provide the Lead Agency with data that informs child care provider training. Based on analysis from each data warehouses the Lead Agency provides individual technical assistance through written and verbal mediums to ensure repeated provider errors are minimized. Large trends identified based on reasons for returns or frequent violations to certain rules or procedures allow the Lead Agency to reform current training materials and highlight common error trends regarding program integrity. The Lead Agency evaluates the various trainings for effectiveness and make updated periodically, these training updates generally coincide with policy and/or program updates. 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 shares the information with internal stakeholders and decision makers. The error rates are evaluated to identify training needs and areas where quality assurance operations can be enhanced. 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 Lead Agency is reviewed regularly by the Wisconsin State Legislative Audit Bureau (LAB) to evaluate the effectiveness of operations. They provide technical assistance and guidance to improve operations and bolster the program integrity of programs that utilize CCDF funds. This information is shared with internal decision makers and stakeholders and with the general public as finding are public information in the State of Wisconsin. 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: N/A 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. The Lead Agency prepares an annual Internal Control Plan in accordance with the requirements of the Cooperative Agreement on Accounting, Auditing, and Internal Control Activities with Wisconsin Department of Administration. The report reflects instructions provided by the State Controller’s Office. b. [ ] Yes. If yes, what were the indicators? How did you use the information to strengthen your internal controls?