Child Care and Development Fund: Office of Child Care Should Strengthen Its Oversight and Monitoring of Program-Integrity Risks
Fast Facts
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
Highlights
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
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of Child Care | 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) |
Closed – Implemented
In September 2022, OCC provided us evidence that it established a written standard operating procedure that identifies roles, responsibilities, and timelines for conducting the State Plan review and approval process. OCC also provided evidence of training for staff on how to follow the Standard Operating Procedure. By taking these steps, OCC can better ensure that staff follow appropriate protocols for consistency when reviewing and approving State Plans. Establishing this Standard Operating Procedure will also help ensure OCC can retains organizational knowledge in the event of staff turnover, which OCC has noted as occurring during each review period.
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| Office of Child Care | The Director of OCC should define the informational needs related to the results of program-integrity activities. (Recommendation 2) |
Closed – Implemented
In July 2021, HHS's Office of Child Care (OCC) revised its CCDF Preprint to include information that defines its informational needs related to the results of program integrity activities. Specifically, OCC reformatted questions in section 8 of the Preprint to emphasize that state lead agencies should include the results of program activities in their responses. OCC also added a new question to section 8 of the Preprint to capture how state lead agencies evaluate internal controls on a regular basis. OCC also told us it would include this question in its next cycle of monitoring. By taking these steps, OCC will be better positioned to gather the information it needs to determine whether state lead agency's program integrity efforts are achieving results.
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| Office of Child Care | The Director of OCC should communicate externally to the states its informational needs related to the results of states' program-integrity activities. (Recommendation 3) |
Closed – Implemented
In July 2021, HHS's Office of Child Care (OCC) provided us evidence that it had taken several steps to communicate to the state lead agencies its informational needs related to the results of states' program integrity activities. For example, beginning in January 2021, OCC delivered a series of Preprint Trainings intended to support lead agencies in their CCDF Plan development. The training materials contain multiple examples of lead agency responses clearly outlining both the program activity process as well as the results of the process with a focus on specific and measurable results. OCC further told us that Technical assistance resources and webinars were also provided around program integrity, and these resources included references to these examples and what OCC would now need to see from program integrity efforts in lead agencies' CCDF Plans. By taking these steps, OCC will be better positioned to gather the information it needs to determine whether lead agencies' program integrity efforts are operating effectively.
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| Office of Child Care | The Director of OCC should communicate internally to staff its informational needs related to the results of states' program-integrity activities. (Recommendation 4) |
Closed – Implemented
In September 2022, OCC provided us evidence that it communicated its information needs related to the results of states' program-integrity activities as part of a series of trainings including regional and central office staff. For example, these training materials state that types of acceptable results include actual outcomes that have been observed, as opposed to what results would or could be. The training materials also provide examples of acceptable results, such as the amount of misspent funds recovered in a year, or the number of cases referred to a law enforcement agency for investigation. By helping its staff to understand what results of state program integrity activities they should expect to see states reporting, OCC staff will be better positioned to determine whether states are effectively ensuring the integrity of the CCDF program.
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| Office of Child Care | 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) |
Closed – Implemented
In July 2021, HHS's Office of Child Care (OCC) provided us evidence that it had revised its Corrective Action Plan (CAP) Review Tool to help guide the review of CAPs to ensure that state lead agencies' proposed corrective actions are aimed at root cause of improper payments and are effectively implemented. Documentation provided by OCC shows that revised tool instructs reviewers to evaluate the CAP in conjunction with the state's most recent ACF-404 State Improper Payments Report to ensure the CAP addresses the identified root causes of errors. Reviewers are guided through a series of questions about each of the state's proposed corrective action steps, including which error cause(s) the action aims to address, and whether the milestones and timeline demonstrate how the state will effectively implement the action. By taking these steps, OCC can help ensure states are taking steps to reduce improper payments in the CCDF program.
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| Office of Child Care | 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) |
Closed – Implemented
In October 2023, OCC provided us evidence that it completed the development of established written policies for the CAP follow-up process by providing the finalized OCC Error Rate CAP protocol. The purpose of the protocol is to outline OCC's processes for working with states with improper payment CAPs. The document describes steps for reviewing and approving CAPs, tracking CAP implementation progress, and determining when a state can be released from a CAP. By developing written policies for the CAP follow-up process, OCC staff will be better positioned to provide oversight to track CAP implementation progress and determine a state's compliance with CAP requirements that promote the integrity of the CCDF program.
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| Office of Child Care | The Director of OCC should develop and document criteria to assess the effectiveness of states' program-integrity control activities. (Recommendation 7) |
Open
In October 2023, OCC told us that it held a meeting to review existing criteria used to evaluate lead agencies'' compliance with CCDF requirements. OCC developed the ACF/OCC Oversight and Monitoring Activities Matrix to illustrate current tools used to assess program integrity activities. OCC plans to revise the CCDF State Plan to ensure better alignment and guidance around expectations. OCC told us it would share an update on its efforts in February 2024. We will continue to monitor OCC's efforts in this area and update the status of this recommendation accordingly.
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| Office of Child Care | 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) |
Closed – Implemented
In October 2023, OCC provided us evidence that it evaluated the feasibility of collecting information from the Self-Assessment Instrument by meeting with monitoring and program integrity teams to discuss lead agencies' current use of the Grantee Self-Assessment Tool and the Fraud Toolkits. Through these discussions, OCC developed the Monitoring Cycle 2: Program integrity and Accountability Framework and the OCC Monitoring internal Guidance on Cycle 2 Topics and Tools outlining OCC's approach for monitoring program integrity and accountability. Compliance with the regulation is determined by an in-depth review of the grantee's regulations, policies, and procedures and confirmed through onsite interviews with the lead agency and relevant partners. Monitoring results are communicated to lead agencies in an OCC monitoring report and an Implementation conference is held with lead agencies who receive findings of non-compliance through the monitoring process or the CCDF Plan. By establishing a shared understanding to monitor the effectiveness of states' program-integrity control activities, OCC staff will be better positioned to provide oversight to identify potential barriers and discuss ways OCC can support implementation efforts that promote the integrity of the CCDF program.
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| Administration for Children and Families | 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) |
Closed – Implemented
In September 2023, ACF provided us with a completed fraud risk assessment on the CCDF program that provides a basis for the development of an antifraud strategy and describes its approach to addressing the identified fraud risks.
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