Child Care and Development Fund:

Office of Child Care Should Strengthen Its Oversight and Monitoring of Program-Integrity Risks

GAO-20-227: Published: Mar 2, 2020. Publicly Released: Apr 13, 2020.

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Seto J. Bagdoyan
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bagdoyans@gao.gov

 

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States receive federal money from the Child Care and Development Fund to help low-income families pay for child care while parents work or attend school.

HHS’s Office of Child Care oversees and approves state programs, including their plans for identifying fraud and payment errors. For example, how are states ensuring funds are appropriately allocated—such as not reimbursing for child care that was never provided?

While HHS has taken steps to monitor state programs for fraud and payment errors, it needs to fully assess fraud risks to the fund. We made 9 recommendations to better protect the integrity of the fund.

Child playing

Child playing

Additional Materials:

Contact:

Seto J. Bagdoyan
(202) 512-6722
bagdoyans@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The Child Care and Development Fund (CCDF) provided states more than $8 billion in federal funds in fiscal year 2019. The Office of Child Care (OCC) oversees the integrity of the CCDF, which subsidizes child care for low-income families. A key part of OCC's oversight includes reviewing and approving State Plans. OCC requested but did not require states to describe in their State Plans the results of their program-integrity activities, which describe the processes that states use to identify fraud risk. Further, OCC has not defined or communicated what information it considers to be the “results” of program-integrity activities to the states and its own staff. Without defining and communicating its informational needs, OCC may continue to lack quality information that could help ensure states' accountability over their program-integrity activities.

Comparison of Program-Integrity Activity Results Reported in State Plans

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OCC oversees states' improper payment risks through a process that includes a requirement for states to submit corrective action plans (CAP) when they estimate their annual payment error rates are at or above 10 percent. Since 2013, seven states have submitted 14 CAPs. These CAPs describe states' proposed actions for reducing improper payments. However, OCC does not have documented criteria to guide its review and approval of the CAPs to ensure the proposed corrective actions are aimed at root causes of improper payments and are effectively implemented. Without developing this guidance, OCC does not have assurance that proposed corrective actions are specifically aimed at root causes of improper payments, leaving the CCDF program at continued risk of improper payments.

Why GAO Did This Study

The CCDF is administered as a block grant to the states by OCC, an agency within the Department of Health and Human Services (HHS). Recent reports by the HHS Office of the Inspector General show that OCC's monitoring of CCDF state program-integrity efforts remains a challenge. CCDF has also been designated as a program susceptible to significant improper payments, as defined by the Office of Management and Budget.

GAO was asked to review CCDF program-integrity efforts. This report discusses, among other things, the extent to which OCC provides oversight of (1) states' CCDF program-integrity activities, including encouraging that all requested information is included within State Plans; and (2) improper-payment risks and relevant corrective actions in states' CCDF programs. GAO analyzed 51 approved CCDF State Plans, including from the District of Columbia, for the fiscal years 2019–2021 grant period. GAO also reviewed OCC policies and procedures and compared them to relevant laws, regulations, and Standards for Internal Control in the Federal Government , and interviewed relevant federal officials.

What GAO Recommends

GAO is making nine recommendations, including that OCC define and communicate its informational needs on the results of states' program-integrity activities, and that OCC develop criteria to guide the review of CAPs to ensure that proposed corrective actions are aimed at root causes of improper payments and are effectively implemented. HHS concurred with our recommendations and provided technical comments, which GAO incorporated as appropriate.

For more information, contact Seto J. Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: In September 2020, OCC told us it has been working on establishing written policies (e.g., internal guidance documents and checklists) to implement and document the State Plan review and approval process. OCC expects to complete this work for the FY2022-2024 Plan period. We will continue to monitor OCC's efforts to implement this recommendation.

    Recommendation: The Director of OCC should establish internal written policies to effectively implement and document the State Plan review and approval process for future review and approval periods. (Recommendation 1)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  2. Status: Open

    Comments: In September 2020, OCC told us that it is developing the next CCDF State/Territory Plan Preprint due for submission by states and territories July 1, 2021. According to OCC, it plans to incorporate its information needs regarding the results of program integrity into the Preprint document as it develops the document. We will continue to monitor OCC's progress in implementing this recommendation.

    Recommendation: The Director of OCC should define the informational needs related to the results of program-integrity activities. (Recommendation 2)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  3. Status: Open

    Comments: In September 2020, OCC told us that it is developing the next CCDF State/Territory Plan Preprint due for submission by states and territories July 1, 2021. According to OCC, it plans to communicate its information needs regarding the results of program integrity activities to states and territories as part of the Preprint Training activities - including webinars and peer-to-peer virtual meetings - so Lead Agencies understand what is expected for them to address in the CCDF Plan. We will continue to monitor OCC's progress in implementing this recommendation.

    Recommendation: The Director of OCC should communicate externally to the states its informational needs related to the results of states' program-integrity activities. (Recommendation 3)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  4. Status: Open

    Comments: In September 2020, OCC told us that it is developing the next CCDF State/Territory Plan Preprint due for submission by states and territories July 1, 2021. According to OCC, it plans to communicate its information needs regarding the results of program integrity activities to staff in both regional and central offices as part of the Preprint Training activities so staff understand what is expected for Lead Agencies to address in the CCDF Plan. We will continue to monitor OCC's progress in implementing this recommendation.

    Recommendation: The Director of OCC should communicate internally to staff its informational needs related to the results of states' program-integrity activities. (Recommendation 4)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  5. Status: Open

    Comments: In September 2020, OCC told us it revised the CAP Review Tool to in response to our recommendation. OCC also told us that it plans to implement the revised CAP Review Tool beginning September 2020 to document the review of CAPs submitted for the most recent ACF-404 reporting cycle (June 2020). We asked OCC to provide documentation showing the revised CAP Review Tool is responsive to our recommendation. We will update this recommendation status after reviewing the documentation OCC provides.

    Recommendation: The Director of OCC should develop documented criteria to guide the review of CAPs submitted by states to ensure that proposed corrective actions are aimed at root causes of improper payments and are effectively implemented. (Recommendation 5)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  6. Status: Open

    Comments: In September 2020, OCC told us it developed draft written policies for the CAP follow-up process to ensure that OCC's oversight and monitoring of CAPs is carried out consistently. However, due to the impact of the COVID-19 on staffing capacity, OCC has not presented the draft policies to regional offices for feedback. OCC told us it plans to finalize the written policies for the CAP follow-up process by December 2020. We will continue to monitor OCC's progress in implementing this recommendation.

    Recommendation: The Director of OCC should timely complete its effort to develop established written policies for the CAP follow-up process to ensure that OCC's oversight and monitoring of CAPs is carried out consistently. (Recommendation 6)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  7. Status: Open

    Comments: In September 2020, OCC told us it analyzed information gathered from federal and state resources to develop and document criteria to be used to assess the effectiveness of states' program integrity control activities. We asked OCC to provide us the document showing all criteria to be used to assess the effectiveness of states' program integrity control activities. We will update this recommendation status after reviewing the documentation OCC provides.

    Recommendation: The Director of OCC should develop and document criteria to assess the effectiveness of states' program-integrity control activities. (Recommendation 7)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  8. Status: Open

    Comments: In September 2020, OCC told us it is working to make the Self-Assessment Instrument and Fraud Toolkit more user-friendly to encourage increased use within the state CCDF program. With increased usage, OCC believes it will be in a better position to assess how the collection of data from these two instruments can be incorporated into the Onsite Monitoring System or other oversight activity. OCC told us it anticipates completing work to implement this recommendation by December 2020. We will continue to monitor OCC's progress in implementing this recommendation.

    Recommendation: The Director of OCC should evaluate the feasibility of collecting information from the Grantee Internal Controls Self-Assessment Instrument (Self-Assessment Instrument) and Fraud Toolkit, such as during its Monitoring System process, to monitor the effectiveness of states' program-integrity control activities. (Recommendation 8)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families: Office of the Child Care Bureau

  9. Status: Open

    Comments: In September 2020, HHS told us it anticipates completing the initial fraud risk assessment for the CCDF program by December 2020. We will continue to monitor HHS's efforts to implement this recommendation.

    Recommendation: The Assistant Secretary for ACF should ensure that ACF conducts a fraud risk assessment to provide a basis for the documentation and development of an antifraud strategy that describes the CCDF program's approach to address prioritizing fraud risks identified. (Recommendation 9)

    Agency Affected: Department of Health and Human Services: Administration for Children and Families

 

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