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.

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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

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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.

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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 the Child Care Bureau 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)
Open
In July 2021, OCC told us it developed a Standard Operating Procedure that identifies roles, responsibilities, and timelines for conducting the Plan review and approval process. We requested that OCC provide us documentation of this Standard Operating Procedure. We will update the status of this recommendation after we have reviewed the Standard Operating Procedure to identify the extent to which it establishes internal written policies to effectively implement and document the State Plan review and approval process for future review and approval periods, as we recommended.
Office of the Child Care Bureau 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.
Office of the Child Care Bureau 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.
Office of the Child Care Bureau The Director of OCC should communicate internally to staff its informational needs related to the results of states' program-integrity activities. (Recommendation 4)
Open
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 asked OCC to provide documentation that it completed these actions, as planned, in August 2021. We will update the status of this recommendation after we confirm that OCC has completed its actions as planned.
Office of the Child Care Bureau 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.
Office of the Child Care Bureau 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)
Open
In July 2021, OCC told us it had developed draft written policies for the CAP follow-up process to ensure that OCC's oversight and monitoring of CAPs is carried out consistently. According to OCC, due to the impact of the COVID-19 pandemic and competing priorities on staffing capacity, OCC has not shared the draft policies with regional offices for feedback. OCC told us it will request feedback from regional staff in the fall of 2021 and finalize the written CAP follow-up policies by October 31, 2021. We will continue to monitor OCC's efforts to implement this recommendation and update the status of the recommendation accordingly.
Office of the Child Care Bureau The Director of OCC should develop and document criteria to assess the effectiveness of states' program-integrity control activities. (Recommendation 7)
Open
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. In response, OCC told us in July 2021 that OCC's triennial ACF-404 State Improper Payments Report contains criteria for assessing states' program integrity control activities. Further, OCC stated that it considers states' error rates to be the criteria for determining effectiveness of the states' program integrity control activities. In September 2021, we communicated to OCC that its response did not meet the intent of our recommendation, particularly because using payment error rates as criteria does not encompass program integrity risks that are not related to payment errors (such as non-financial fraud risks). As noted in our report, and in ACF's own training materials developed in response to our other recommendations from this report, program integrity includes risks that do not pose a direct financial costs. We will assess OCC's response to our communication and update the status of this recommendation accordingly.
Office of the Child Care Bureau 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)
Open
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. Due to the impact of the COVID-19 pandemic and competing priorities on staffing capacity, OCC is told us it anticipates completing this work no earlier than October 31, 2021. We will continue to monitor OCC's progress in implementing this recommendation.
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)
Open
In September 2020, HHS told us it plans to refine its Fraud Risk Assessment template and complete an initial fraud risk assessment for the CCDF program. In September 2021, HHS told us it plans to complete its work by October 31, 2021. We will continue to monitor HHS's efforts to implement this recommendation.

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