Report 2017-116 Recommendation 10 Responses

Report 2017-116: 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 (Release Date: April 2018)

Recommendation #10 To: Education, Department of

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 claimed by its other child-care contractors.

1-Year Agency Response

Education routinely considers prior audit results and other factors including, but not limited to, risks related to administrative costs when planning and performing audits of child care contractors in accordance with generally accepted government auditing standards. The performance audit of the 4C's compliance with applicable child care and development program laws, regulations, and contract/grant requirements during the period July 1, 2015 through June 30, 2016, included extensive procedures related to internal controls, eligibility, general expenditures, payroll expenditures, cost allocation, and related party transactions. The administrative costs were included within the various expenditure categories audited.

Since issuance of the CSA's audit report, Education changed the 4Cs contract status from clear to conditional, which requires the agency to meet additional contract requirements pursuant to California Code of Regulations, Title 5, Section 18310. Additionally, on November 29, 2019, the 4Cs appealed the amounts billed by Education for fiscal year 2015-16 to the Office of Administrative Hearings. Education will continue to monitor the corrective actions implemented by the agency and follow-up as necessary.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Education's response indicates that it believes it has sufficient procedures for identifying questionable costs and that its current risk-based approach for conducting these audits allows it the flexibility to identify inappropriate administrative costs based on the risk associated with those costs.

6-Month Agency Response

Education issued the draft audit report. 4Cs submitted a response, which included a voluminous amount of new documentation. Education is performing a detailed, objective review of the new documentation, and anticipates issuing a final report at the end of October 2018. Once the final report is issued, Education will conduct follow-up reviews as necessary. Education routinely considers prior audit results and various other risk factors, including but not limited to administrative costs, when planning and performing audits of child care contractors.

California State Auditor's Assessment of 6-Month Status: Pending

Education issued its final audit report on October 31, 2018.

60-Day Agency Response

Education continues to partially concur with this recommendation. Education's audit of 4Cs is still in progress. Upon issuance of the final audit report, Education will determine whether to conduct any follow-up reviews for 4Cs' administrative costs. Education routinely considers prior audit results and various other risk factors, including but not limited to administrative costs, when planning and performing audits of child care contractors.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2017-116

Agency responses received are posted verbatim.