Responses to the Audit
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California Department of Education
Elaine M. Howle, State Auditor
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Subject: The Community Child Care Council of Santa Clara County: Because It
Disadvantaged Some Families and Misused State Funds, It Could Benefit
From Increased Monitoring by the California Department of Education
The California Department of Education (Education) appreciates the opportunity to comment and provide proposed corrective actions for the recommendations outlined in the California State Auditor's (CSA) Audit Report No. 2017-116 titled: The Community Child Care Council of Santa Clara County: Because It Disadvantaged Some Families and Misused State Funds, It Could Benefit From Increased Monitoring by the California Department of Education.
Recommendation 1
To make its appeal process more accessible to families who may not receive a satisfactory resolution from its contractors, Education should require by October 2018 its contractors to share key information in their communications with families about the process for appealing notices. The required information should include valid grounds for a family to file an appeal as well as information or documentation Education would need in order to review the family's appeal of adverse decisions regarding their child-care services. Education should also require contractors to incorporate this information in contractually mandated staff training and in publicly available policies and procedures.
Education's Comments and Corrective Actions
Education does not concur with the recommendation. Contractors are required to communicate the appeal process information to families to ensure they receive a satisfactory resolution to their appeal. Further, Education's Notice of Action (NOA) form, available for contractors and used by 4Cs, includes the following:
Step 5: If you disagree with the written decision of the agency, you have 14 calendar days in which to appeal to Early Education and Support Division (EESD). Your appeal to EESD must include the following documents and information: (1) a written statement specifying the reasons you believe the agency's decision was incorrect, (2) a copy of the agency's decision letter, and (3) a copy of both sides of this notice. You may either fax your appeal to 916-323-6853, or mail your appeal to the following address: California Department of Education, Early Education and Support Division, 1430 N Street, Suite 3410, Sacramento, CA 95814, Attn: Appeals Coordinator, Phone 916-322-6233.
Education believes this level of detail is appropriate as it allows families to appeal any adverse decision. Further, the documents needed to initiate the appeal are specified on the NOA. In addition, without listing the numerous valid grounds for filing appeals, Education has the opportunity to evaluate all appeals without a parent inaccurately determining a decision is not appealable.
Regarding the CSA's direction that Education should require contractors to incorporate this information in contractually mandated staff training and in publicly available policies and procedures, Education already provides training to contractors regarding the appeals process and includes appeal information on its Website at https://www.cde.ca.gov/sp/cd/ci/parentappealinformation.asp. In turn, contractors are required to provide training to their staff based on staff needs to perform their job duties, which can include specific topics such as the appeal process, as appropriate. At this time, Education does not concur with the CSA's determination that parents do not receive enough information to assert their appeal rights. Overall, Education believes the appeal process information is sufficiently available.
Recommendation 2
In order to rectify 4Cs' inappropriate use of state funding, Education should by October 2018, recalculate the amount of 4Cs' reimbursable costs based on the unallowable costs we identified and recover any funds that should be repaid.
Education's Comments and Corrective Actions
Education concurs with the recommendation. Upon issuance of the final audit report, Education will process adjustments resulting from the CSA and Education's audits, recalculate the amount of 4Cs' reimbursable costs, and take appropriate action based on those results. However, the CSA will need to provide the questionable and/or unallowable costs identified by contract and fiscal year in order for Education to recalculate the amount of 4Cs' reimbursable costs.
Recommendation 3
After completing its performance audit in September 2018, Education should determine whether to conduct any follow-up reviews of 4Cs' administrative costs and whether it needs to expand its procedures for identifying questionable costs. In addition, Education should determine whether the results of its audit identify any systemic issues pertaining to administrative costs for which it should consider expanding its audit procedures over administrative costs pertaining to its other child-care contractors.
Education's Comments and Corrective Actions
Education partially concurs with the recommendation. Education is currently conducting a performance audit of the 4Cs to determine whether it properly administered its child care and development program in accordance with program requirements and the contract Funding Terms and Conditions for the period July 1, 2015 through September 30, 2016. The audit scope includes audit procedures related to internal controls, eligibility, general expenditures, payroll expenditures, cost allocation, and related party transactions. The administrative costs are being audited within the various expenditure categories included in the audit. At the conclusion of the audit, Education will require 4Cs to implement corrective actions for findings and/or questioned costs identified. The contract earnings will be recalculated incorporating audit adjustments resulting from the CSA and Education's audits.
Education routinely considers prior audit results and various other risk factors such as systemic issues or contractor-specific risks, including but not limited to administrative costs, when planning and performing audits of child care contractors. Additionally, after the performance audit is complete, Education will determine whether any follow-up reviews of 4Cs administrative costs should be conducted.
Recommendation 4
To ensure its contractors can effectively make program improvements and maintain successes in ways that are meaningful to their stakeholders, Education should adopt measures to ensure its contractors follow the terms of their contracts by demonstrating their board members conduct a critical appraisal of each education program.
Education's Comments and Corrective Actions
Education does not concur with the recommendation. The CSA discounted Education's intent of the assessment of the program within the Annual Program Self Evaluation process and defined their own expectations. Education utilizes a Program Self Evaluation (PSE) process requirement and has a directive in place, which provides instructions to all contractors for completing and submitting the PSE each fiscal year. Education requires each contractor to develop and implement an annual plan for its PSE process. The annual plan must include a self-evaluation based on the use of the Program Instrument, Desired Results Parent Survey, and for center-based programs (including Family Child Care Home Education Networks), Desired Results Developmental Profiles, and Environment Rating Scales. In addition, the terms of the contracts state that the annual plan shall include an assessment of the program by staff and board members as evidenced by written documentation. Education's expectations for contractors performance of the assessments is that contractors analyze their findings from the self-evaluation and develop both a written list of tasks to modify the program for all areas needing improvement and procedures for ongoing monitoring to ensure that satisfactory areas continue to meet standards. The Board is not expected to do a separate critical appraisal as referenced in the recommendation and can rely on staff's assessments to govern the organization. Contractors are required to submit a summary of findings of the PSE to Education annually in June. Additionally, Education provides on-going training, technical assistance, and support to new and existing contractors on how to conduct an annual PSE.
Recommendation 5
To strengthen the quality of its monitoring efforts, Education should create and implement procedures by October 2018 for staff to document the evidence used to support their contract monitoring reviews. Further, Education should use the results and evidence of compliance identified in these reviews to enhance its comparative performance measures and formulate effective training for its contractors.
Education's Comments and Corrective Actions
Education concurs with the recommendation. In order to further strengthen Education's monitoring review documentation as described on page 37 of the draft audit report, Education will include on the monitoring review instrument: (1) a description of documents reviewed; (2) observations made; and (3) information obtained through interviews. Education already documents this information during the review of eligibility records and will expand this to the other areas of the monitoring review instrument. Additionally, documentation of this evidence is used to measure performance and formulate effective training for Education's contractors.
The CSA's cite to Education's position not to implement a recommendation in the July 2017 audit report, California Department of Education: It Has Not Ensured That School Food Authorities Comply with the Federal Buy American Requirement (Report 2017-139) is problematic and implies an ongoing concern across programs. The recommendation in the prior report is different and requires significantly different documentation and retention of evidence. Specifically, report 2017-139 recommended that Education require reviewers to collect and retain evidence for all items they evaluate for compliance with the Buy American requirement. The current audit recommends that Education document the evidence used to support their contract monitoring reviews as described above, which is reasonable and realistic to implement, instead of retaining copies of all evidence reviewed. It is not feasible nor required that Education collect and maintain all evidence reviewed during monitoring reviews. Rather, sufficiently documenting the evidence reviewed will support the overall monitoring review results.
Recommendation 6
To ensure the appropriate use of state grant funds, Education should determine, to the extent possible, the amount of supplemental plan funds that did not comply with federal requirements, and it should require 4Cs to reimburse the State for improper payments of state funds it made to the supplemental plan.
Education's Comments and Corrective Actions
Education concurs with the recommendation. Education will require 4Cs to take appropriate action based on the outcome of the pending class action lawsuit regarding 4Cs administration of its retirement plans.
If you have any questions regarding Education's comments or corrective actions, please contact Kimberly Tarvin, Director, Audits and Investigations Division, by e-mail at ktarvin@cde.ca.gov.
Sincerely,
Michelle Zumot
Chief Deputy Superintendent of Public Instruction
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM
THE CALIFORNIA DEPARTMENT OF EDUCATION
To provide clarity and perspective, we are commenting on Education's response to the audit. The numbers below correspond to the numbers we have placed in the margin of Education's response.
We stand by our recommendation to make Education's appeal process more accessible to families. 4Cs' use of Education's notice of action form is neither consistent nor required. We found that 4Cs did not include a telephone number for Education on many of the notices we reviewed. We have modified our text in the report to clarify what we found. It is unclear why 4Cs would omit Education's telephone number from some notices, but as we state in the report, Education has not established any procedural requirements for its child development contractors to share specific information with their clients. Education only requires its contractors to follow state regulation, which does not specify that contractors are required to include Education's telephone number on their notices.
We disagree with Education's claim that information on its appeal process is sufficiently available, based on the issues we discuss in the report and the fact that families did not use Education's appeal process in any instance pertaining to 4Cs' backdated notices. As we state in the report, 4Cs uses its parent and provider handbook and the notices to provide information to families about the appeal process. However, neither the handbook nor the notice describe valid grounds for a family to file an appeal. Further, despite Education's statement that the documentation required to initiate an appeal is identified in the notices, we stand by our conclusion that this information is not adequate. Although Education asserts that not listing valid grounds for filing appeals encourages more parents to appeal, we note that families at 4Cs did not make any appeals about receiving backdated notices. Finally, we note that Education does not require its contractors to complete the training it offers or include information about the appeals process in the training contractors are required to provide to their staff.
It is unclear to us why Education only partially concurs with this recommendation. Education states that it will determine whether to conduct any follow‑up reviews of 4Cs administrative costs and that it routinely considers prior audit results, systemic issues, and contractor‑specific risks when planning and performing audits of child‑care contractors. Those actions appear consistent with our recommendation. We look forward to Education's 60‑day response to determine the extent to which it plans to implement the recommendation.
Education's disagreement with our recommendation underlies the concern we describe in the report, in which Education interprets a program self-evaluation contractual requirement differently from how its contracts describe it. As Education notes in its response, and as we note in the report, Education's contracts require 4Cs' board to include an assessment of its programs, yet 4Cs could not provide documentation that its board members assessed any of these programs. Further, Education's position that its contractors' board members are not expected to conduct a separate critical appraisal of each education program contradicts the requirements specified in its contracts. Education states in its response that board members can rely on staff assessments to govern the organization. However, it also acknowledges that its contracts state that the annual plan shall include an assessment of the program by staff and board members as evidenced by written documentation.
During the publication process for the audit report, page numbers shifted. The page number cited by Education in its response refers to page 32 in this final published audit report.
We believe the reference to our July 2017 audit report is appropriate because our related finding in that audit matches the underlying issue in this report's finding—that Education retains documentation to support its analysis of compliance only in instances of noncompliance. As we state in this report, without documentation of compliance, Education's staff were unable to demonstrate how their monitoring practices did not detect the noncompliance we found. Similarly, in our July 2017 audit report, we concluded that because of limited supporting documentation, it is unclear how Education would identify instances of noncompliance that its reviewers may have overlooked or misjudged. Our recommendations in both the July 2017 audit report and this report direct Education to strengthen its monitoring efforts by documenting the evidence it uses to make its determinations of both compliance and noncompliance. Finally, the report number that Education references in its response should be Report 2016‑139. Our draft report presented an incorrect report number, which we subsequently corrected.
Community Child Care Council of Santa Clara County
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, California 95814
Miss Elaine M. Howle
State Auditor
Attention: Mr. Linus Li
March 22, 2018
Subject: Joint Legislative Audit Committee Audit
Community Child Care Council of Santa Clara County, Inc.
Audit Number 2017-116
Dear Miss Howle:
This letter serves as our initial response to the "Draft Audit Report" as referenced above.
The Community Child Care Council of Santa Clara "4C" has reviewed the draft report. 4C takes seriously the issues identified there in and will present a plan to the California State Auditor addressing the issues identified in the report within 60 days of the report's publication.
Sincerely yours,
Joseph Manarang
Interim Executive Director
Community Child Care Council of Santa Clara County, Inc.
Josephm@4c.org
(408) 487-0747, extension 606
Cc: Mr. Joshua Hooper (California State Auditor's Office)
Sent via email with hard copy via USPS.