Report 2017-116 All Recommendation 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 #1 To: Community Child Care Council of Santa Clara County

To ensure that families have sufficient time to respond to notices regarding eligibility, 4Cs should establish specific controls in its child-care data system by July 2018 to prevent staff from backdating the notification dates of the notices, and it should begin conducting periodic reviews of notification dates in the data system by October 2018 to ensure that the controls are effective.

1-Year Agency Response

In addition to the previous tracking and monitoring tools implemented to ensure families have sufficient time to respond to notices regarding eligibility, and reported in the October 4, 2018 Response date, the following practices have been established:

1. Development of NOA tracking spreadsheet. Case managers are responsible to notate all NOAs issued for the month and acknowledge that NOAs are mailed on the same date as stated in the case notes. Case Manager submits NOA tracking spreadsheet to supervisor for review. (Implemented September 2018)

2. Conduct periodic reviews by random sampling of files from each case manager's caseload to assure that all NOAs issued are reported accurately on the submitted spreadsheet. (Implemented December 2018)

3. Revised staff training materials on NOA process

Attachments:

1) Staff Training Materials: Proper Letter & NOA Usage

2) Case Manager Tracking NOAs (February 2019)

3) NOA Tracking Audit Log Randomized Samples (December 2018, January 2019 & February 2019)

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

4Cs provided documentation of a policy for conducting periodic reviews on an ongoing basis along with the documentation referenced in its response addressing past periodic reviews it conducted.

6-Month Agency Response

Agency has developed Tracking and Monitoring NOA tool to record Date NOA issued, Family ID, Family Name, How NOA was distributed, Reason for NOA, Recording of NOA activity in software case notes. Each staff who issues NOA is responsible for recording on spreadsheet which is reviewed and verified by Supervisor and Manager. Staff have received multiple trainings on proper issuance and tracking of NOAs. Supporting Documentation: Bi-Weekly Case Manager Discussion Sign-In Sheet_9_10_2018_11am; Bi-Weekly Cse Manager Discussion Sign In Sheet_September 10_430pm; NOA Steps to Complete Before Sending NOA; Tracking NOAs Month; NOA Tracking_Documenting Case Notes_Staff Training; Tracking NOAs Case Manager Spreadsheet_October 2018.

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

4Cs provided documentation of the controls it has implemented and subsequently informed us that it plans to begin periodic reviews in December 2018 to ensure those controls are effective.

60-Day Agency Response

On December 9, 2017, 4Cs Director of Compliance contacted the NoHo software vendor to inquire about "locking" the NoHo date generated field. Doing this would prevent a user from changing the date a Notice of Action (NOA) is created. NoHo software vendor informed the 4Cs that the NOA lock feature was "broken" and their programmers would fix it. As of February 13, 2018, the lock feature was fixed and the NOA date generated field was "locked" to prevent a user from changing the date when a NOA is created. The date the NOA is created is the default date. It cannot be changed. (Supporting documentation submitted of NoHo Screen Shot "Field is Locked - Date Integrity".)

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

4Cs provided evidence that it implemented controls to prevent the backdating of notification dates for notices of action. However, its response did not address whether it plans to conduct periodic reviews of these dates in the data system to ensure that the controls are effective.

Recommendation #2 To: Community Child Care Council of Santa Clara County

To ensure that families understand how to elevate appeals to Education, 4Cs should amend its notice forms and its handbook by October 2018 to consistently describe additional means for contacting Education beyond a mailing address and fax number, such as a telephone number, an email address, and a link to Education's website for online information about reporting appeals.

1-Year Agency Response

At the request of the Joint Legislative Audit Committee, the agency made the following additions to its notification to families of the parent appeal process:

1. Added an email address to its Parent Handbook for parents to submit an appeal via email to the California Department of Education / Early Learning and Care Division (CDE/ELCD) Parent Appeals office. (This email was supplied to the 4C Council by the CDE/ELCD Parent Appeals office on April 4, 2019.)

2. Added the CDE/ELCD Parent Appeals office email address to the Appeal Policy handout that was completed by the agency February 26, 2018 and previously reported in the 60-day response.

3. CDE/ELCD updated the Notice of Action forms to include their contact phone number to the CDE/ELCD Appeals Coordinator. The phone number is now included on all parent notice of actions that are issued by the agency.

4. Updated agency website to include a link to the CDE/ELCD webpage on parent appeals and to the CDE/ELCD Parent Appeals office phone number.

Attachments:

1) Copy of Parent Handbook, pages 37-39 "Notice of Action Parent Appeal Process"

2) Copy of Appeal Policy Handout

3) Copy of CDE/ELCD Notice of Action (Form CD-7617)

4) Copy of page from agency website: https://www.4c.org/parent/appealing-a-notice-of-action.html

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

6-Month Agency Response

The agency has been provided technical assistance from CDE Consultants, Dr. Joe Martinez and Deborah Rawson on its handbook revisions. Dr. Joe Martinez has provided feedback and recommendations and also noted in an email dated August 23, 2018, that "the elements of the Santa Clara pilot are still in process, so finalizing the parent handbook may take a little more time." The pilot began January 12, 2018 so we have revised our Fully Implemented due date to January 2019. In the interim, parents are being provided with the revised notices and appeal policy that was submitted in the previous report. Supporting documentation, "Parent Provider Handbook with edits_8_23_2018"

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

60-Day Agency Response

The 4C Council provides written information to families of their appeal rights on the Notice of Action that is given to families and is written in the agency's Subsidized Child Care Programs Parent & Provider Handbook. 4C Council found ways to enhance its communication to families regarding the appeal process.

1. Enhancement of the Notice of Action by highlighting in yellow on the Notice of Action important dates, steps families would take to file an appeal and request a hearing, and agency contact person name and phone number. (Supporting documentation submitted of sample Notice of Action with fields highlighted in yellow).

In addition, on February 5, 2018, 4C staff were informed of steps to complete prior to sending a Notice of Action to families. A staff training handout was created of the steps to complete before sending a notice of action. (Supporting documentation submitted of "Notice of Action NOA Steps to Complete Before Sending NOA".

2. An "Appeal Policy" handout was created, February 26, 2018, that agency staff provides to parents. (Supporting documentation submitted "Appeal Policy FY 17-18".

3. Parents will receive the "Parent Appeal Information Pamphlet" developed by the California Department of Education March 2014. (Supporting documentation submitted "Parent Appeal Information Pamphlet" in both English and Spanish)

4. 4C Council developed the "Authorized Representative for Local Appeal Hearing" to give families who elect to have someone, other than themselves, represent them at the hearing. (Supporting documentation form, "Authorized Representative for Local Appeal Hearing")

5. 4C Council enhanced its website to provide on-line information and link to CDE Parent Appeal Information Pamphlet. In addition, parent can submit their request to appeal on-line. See agency's website page: http://www.4c.org/parent/appealing-a-notice-of-action.html

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

4Cs subsequently informed us that it has not yet updated the parent and provider handbook but plans to do so in July 2018. In the meantime, 4Cs developed an appeal policy for distribution that includes a phone number for Education, and it has updated its Notice of Action form with additional information on the process for appealing, including Education's phone number.

Recommendation #3 To: Community Child Care Council of Santa Clara County

To ensure that it is processing all provider payments promptly, 4Cs should formalize policies by October 2018 that address communication between its subsidy department and fiscal department regarding provider payments. These policies should be clearly communicated to both departments and provide a way for staff to be held accountable for late communications resulting in delayed payments to providers.

6-Month Agency Response

The agency developed a troubleshooting team to address issues of late payments. The troubleshooting team is an extension of the process established by the Fiscal and Subsidy Department to minimize late payment. The troubleshoot team reviews and analyzes the monthly Outstanding Attendance Record to identify the causes of late payments. It has been found that late payments are caused by non-receipt/submission of attendance records from providers; incomplete or improperly completed attendance records submitted by providers. The agency is enforcing its attendance policy as stated in the Parent Provider handbook and the Agency Provider agreement. Supporting documentation: "Trouble Shoot Team Procedure_Staff Meeting"; "Fiscal and Subsidy Department Policies & Procedures_Minimize Late Payment"; "Provider Agency Agreement & Parent Provider Handbook"

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

4Cs provided its procedures to improve communication between its subsidy department and its fiscal department to minimize late payments. These procedures include oversight of that communication by department supervisors.

60-Day Agency Response

The 4C Fiscal team has identified the common causes of the delay in payment to the providers, and has established policies and procedures including the necessary monitoring tool to address each type of delay. A "Trouble shoot" team is being developed by restructuring the 4C Fiscal and Subsidy departments in the joined effort to minimize any holdups and hold individual staff accountable for the deficient responsiveness to communication and inquiries leading to delay in payment to the providers. Refer to the following documents.

Policies and procedures to minimize late payment: May 2018 - Communication between Fiscal and Subsidy department is strengthened and enforced by guidelines and monitoring tools aiming to resolve any holdups internally and those of external factors (provider and parent) including attendance records that are still outstanding. Restructuring effort to create a "Trouble shoot" is in the work and will be fully implemented by October 2018. (Supporting documentation submitted "Fiscal Policies and Procedure to Minimize Late Payments")

Attendance record Checklist (English and Spanish): May 2018 - A document served as a visual aid was uploaded on the agency's website ( http://www.4c.org/provider/provider_faqs.html) and included in the provider training package. Document will also be mailed with the provider payment checks issued in June 2018 and is included in the provider package during enrollment. (Supporting documentation submitted "Attendance Record Checklist", "Licensed Provider Enrollment Orientation PPT" and "Licensed Provider Enrollment Packet", "Exempt Non-Relative Provider Enrollment Packet")

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

4Cs provided documentation of procedures it developed to minimize delays in payments to providers, which it indicated would be fully implemented by October 2018. Those procedures focus primarily on delays resulting from the actions of parents and providers but also make reference to coordination within 4Cs. We look forward to reviewing 4Cs' six-month response to assess whether the implemented procedures sufficiently address communication between the fiscal department and the subsidy department and provide a way for staff to be held accountable for late communications resulting in delayed payments to providers.

Recommendation #4 To: Education, Department of

To make its appeal process more accessible to families who may not receive a satisfactory resolution from its contractors, Education should, by October 2018, require that its contractors 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 into contractually mandated staff training and into publicly available policies and procedures.

1-Year Agency Response

Education's status on this recommendation is unchanged; no additional comments will be forthcoming.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

Although Education continues not to concur, we stand by our recommendation that Education require its contractors to share key information in their communications with families about the process for appealing notices. Education previously indicated that it will not implement this recommendation even though it requires contractors to communicate the appeal process information to families. Implementing our recommendation could make Education's appeal process more accessible to families who do not receive satisfactory resolution from their contractors pertaining to adverse decisions.

6-Month Agency Response

Education's status on this recommendation is unchanged; no additional comments will be forthcoming.

California State Auditor's Assessment of 6-Month Status: Will Not Implement

Although Education continues not to concur, we stand by our recommendation that Education require its contractors to share key information in their communications with families about the process for appealing notices. Education previously indicated that it will not implement this recommendation even though it requires contractors to communicate the appeal process information to families. Implementing our recommendation could make Education's appeal process more accessible to families who do not receive satisfactory resolution from their contractors pertaining to adverse decisions.

60-Day Agency Response

Education continues to not concur with the recommendation. Education maintains that contractors are required to communicate the appeal process information to families and provides a sample Notice of Action (NOA) to all contractors for their use. However, if contractors elect not to use the sample provided by Education, they must provide their own NOA, which must include sufficient information. During monitoring visits, Education reviews NOAs to verify contractors provide sufficient detail regarding the appeal process including contact information.

California State Auditor's Assessment of 60-Day Status: Will Not Implement

We continue to stand by our recommendation that Education require its contractors to share key information in their communications with families about the process for appealing notices. Education indicates that it will not implement this recommendation even though it requires contractors to communicate the appeal process information to families. Implementing our recommendation could make Education's appeal process more accessible to families who do not receive satisfactory resolution from their contractors pertaining to adverse decisions.

Recommendation #5 To: Community Child Care Council of Santa Clara County

To ensure that it can justify the costs for which it seeks reimbursement, 4Cs should, by October 2018, strengthen its controls over its approval of the expenditures it charges to the State's share of its funding. These controls should include retention of all documentation to justify appropriate approval of these expenditures.

6-Month Agency Response

The document retention policy was prepared on March 13, 2018 and implemented. Document retention process was revised May 18, 2018. Both Procurement and Expense policy and Documentation Retention policy are in full use agency-wide. An Internal Control Plan was developed and a Fiscal Department Training Plan created. Supporting Documentation: "Internal Control Plan"; "Documentation Retention Policy"; "Procurement and Expenses Policy"

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

4Cs provided documentation of its internal control plan and its new policies and procedures for procurement and document retention.

60-Day Agency Response

4C has worked towards strengthening its controls to ensure that the agency's costs are justified when seeking reimbursement. The fiscal department is utilizing a 4 step process to ensure that improvement is met (Development, Approval, Training and Implementation). The following outlines our continued process for strengthening controls:

Development of Policies - Jan 2018, our staff developed new policies and a monitoring checklist to enhance internal controls on procurement and expenses (ref 9-19). Our goal is to ensure that expenses are reasonable, allowable and allocable. Supporting documentation must be included prior to approvals.

Approval of Policies - On Feb 22, 2018, we presented to the Board an amendment to our procurement process along with the monitoring checklist.

Training to Management and Staff - Feb 22 and Mar 8, 2018 - CFO trained Board on Fiscal Processes (Ref: "Board of Directors - Fiscal Training - Approved Policies and Procedures.PDF"). Mar 13, 2018 - CFO trained GL Staff on updated Processes (Ref: "03.13.18 - GL Fiscal Staff Training (Approved Policies and Procedures).pdf"). May 11, 2018 -trained on procurement/expense at Manager's Meeting (Ref, "05.11.18 - Manager Meeting on Procurement. Pdf"). Fiscal will provide ongoing training to management.

Implementation - Mar 13, 2018 - Agency wide procurement and expense monitoring began. May 23, 2018 - Standard Operating Procedures (SOPs) are written to ensure that staff and agency retain all documents related to all purchases. SOPs are not required to be approved by Board. SOPs are currently in process (Ref: "4Cs - Fiscal - Corrective and Implantation - Reduction-Elimination of Provider Late Payment.pdf," pg 9-19)

Partial complete due to: Strengthening monitor check list of procurement and expenses. Greenbook training to management staffs. Review funding term and condition with management for allowable expenses. Document Retention is in process.

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

Recommendation #6 To: Community Child Care Council of Santa Clara County

To ensure that the amount of benefits it provides to families is justifiable, 4Cs should develop formal procedures by October 2018 for its eligibility determinations, including a policy to retain in the family case files the documentation it uses to determine eligibility.

6-Month Agency Response

The agency has made extensive improvements in this area and developed formal procedures, visual training tools, and audit checklists to ensure

documentation used to determine eligibility of family for services is included and retained in the case file. Supporting documentation: "Contents and Organization of Family Data File"; "Determining Eligibility & Documentation Retention"; "Case File Audit Forms"; "Case Manager Training Modules_Eligibility Determination"; "Color Coding Rubric for Case Files".

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

4Cs provided documentation of its formal procedures for determining eligibility and its policy for retaining the documentation used to make that determination.

60-Day Agency Response

The agency has convened a team of staff to develop procedures for eligibility determination and the policy that specifies the documentation kept in the family case file used to determine eligibility. Due to changes at the State level with regulations and new laws governing eligibility determination of families, effective January 12, 2018, the 4C Council is updating and modifying its case management practices. On January 12, 2018, Santa Clara County was designated as a Pilot County by the California Department of Education (CDE) for the 24-month eligibility of families for child development programs. As such, the agency has designated two staff to participate in the 24-month eligibility workgroup consisting of representatives from other CDE contracted child development agencies to develop the eligibility forms, documents, policies and procedures that all Santa Clara County CDE Child Development contractors will use when determining eligibility of families. 4C Council has implemented the new forms with new families and currently enrolled families. 4C Council will continue to develop policies and procedures in tandem with the workgroup. (Supporting documentation submitted: "24-Month Pilot Enrollment Work Group Agendas_FY 17-18"; "Santa Clara County Individualized Child Care Subsidy Program Pilot Handbook"; "Eligibility and Enrollment Process_Sample Language"; "Bay Area Pilot County Family Need and Eligibility Training PowerPoint"; "24-Month Eligibility Forms".

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

Recommendation #7 To: Community Child Care Council of Santa Clara County

To ensure that staff possess the required knowledge and skills to assist families with child-care programs, 4Cs should develop and implement procedures by October 2018 to identify staff training needs and create orientation and training plans to meet those needs.

6-Month Agency Response

Each program has an established training plan in place for staff. Subsidy Department (CAPP, C2AP, C3AP, CFCC, CCTR) have completed training plans. Each program (R&R, Subsidy, CFCC, CCTR) tracks staff development activities on a Training Tracking spreadsheet. Sign in sheets and staff signed Acknowledgement of Training Received forms are used to document staff's participation in training activities. Supporting Documentation: "Staff Development Plans and Training Tracking Spreadsheet."

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

4Cs provided documentation of its procedures and implementation efforts for identifying staff training needs, including creating orientation and training plans.

60-Day Agency Response

4C Council has completed staff training on 4/18/2018 for the 24 month pilot program. 4C Council is currently developing a step by step training and procedure for all case managers. We will be modifying the Case Management Procedure Handbook to incorporate the changes to regulations effective July 1, 2017 and 24-Month Pilot Project changes, effective January 12, 2018. (Supporting documentation submitted "Case Management Procedure Handbook_To Be Revised")

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

We look forward to reviewing 4Cs' six-month response to assess the extent to which it is able to implement procedures to identify staff training needs and create orientation and training plans to meet those needs.

Recommendation #8 To: Community Child Care Council of Santa Clara County

To ensure effective child-care programs, 4Cs should document separate self-evaluation and monitoring procedures for each child-care program when it prepares its future self-evaluation documents. Each of these self-evaluation processes should demonstrate how it used stakeholder feedback to improve each program and monitor each program's effectiveness.

Annual Follow-Up Agency Response From October 2019

5 CCR 18279 (3) requires each contractor include in their program self-evaluation process an assessment of the program by staff and board members. Board member participation in the process is key to providing clear oversight and governance to the agency. The 4C Council has established the following to meet this requirement:

1. Developed a Board Governance Training Plan

2. Established a Program Self-Evaluation Process for each CDE Child Development program

3. Monthly Corrective Action Plan Progress Reports

4. Review and approval by Board of monthly CDE Corrective Action Plan report

5. Arranged for Visit by Board Members to participating CFCC/CCTR providers

6. Approval by Board of program documents, forms, and Agency/CFCC/CCTR Provider

Agreements

7. Approval by Board of annual Program Self-Evaluation

The annual Program Self-Evaluation report (PSE) was submitted to CDE on May 31, 2019 in accordance with California Code of Regulations, Title 5 (5 CCR), Section 18279. As recommended by JLAC and in compliance with the requirements of the California Code of Regulations 5 CCR Sections 18279(b)(3), 18279(b)(5) and 18279(b)(6) each child-care program was reviewed separately and included separate self-evaluation and monitoring procedures for each of the programs.

Documents submitted:

1. Program Self-Evaluation Fiscal Year 2018-19

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

5 CCR 18279 (3) requires each contractor include in their program self-evaluation process an assessment of the program by staff and board members. Board member participation in the process is key to providing clear oversight and governance to the agency. The 4C Council has established the following to meet this requirement:

1. Developed a Board Governance Training Plan

2. Established a Program Self-Evaluation Process for each CDE Child Development program

3. Monthly Corrective Action Plan Progress Reports

4. Review and approval by Board of monthly CDE Corrective Action Plan report

5. Arranged for Visit by Board Members to participating CFCC/CCTR providers

6. Approval by Board of program documents, forms, and Agency/CFCC/CCTR Provider

Agreements

7. Approval by Board of annual Program Self-Evaluation

The annual Program Self-Evaluation report is due to CDE on June 1, 2019 and must be submitted by June 3, 2019, 5:00pm. The Program Self-Evaluation Report will contain evidence of Board participation.

Documents submitted:

1. Program Self Evaluation Process

2. Board Governance Training

3. Corrective Action Plan Progress Reports

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

Although 4Cs provided documentation of its process to evaluate each program separately, it indicates that its self-evaluation documents, due in June 2019, will contain evidence of board participation. We would also expect those documents to show how 4Cs incorporated stakeholder feedback.

6-Month Agency Response

The agency developed a Program Self-Evaluation Plan that includes activities and procedures to evaluate program quality and compliance with applicable laws, regulations, and contractual provisions. The plan includes how areas needing improvement are addressed with Board of Directors and Staff to ensure satisfactory progress and continued compliance to meet the required standards. Supporting documentation: "Program Self-Evaluation Plan"; "Monthly Progress Reports"; "OnGoing Quality Improvement and Monitoring Plan".

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

4Cs' program self-evaluation plan includes some of the elements 4Cs states in its six-month response but does not clearly identify the procedures that will address the recommendation, in particular, documenting its self-evaluations separately for each program and demonstrating in its self-evaluation documents how it used stakeholder feedback to improve each program and monitor each program's effectiveness.

60-Day Agency Response

To ensure the Board of Director's involvement in the Program Self-Evaluation process for each State funded Child Development program, every Board meeting updates will be presented and opportunity to obtain feedback from Board members. Each program will develop monitoring procedures to include feedback from Board members, families, and providers. Surveys will be sent quarterly to all stakeholders to obtain feedback on progress for improvement. Feedback will be used to change policies and procedures which will be presented to Board members for approval.

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

Recommendation #9 To: Education, Department of

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.

1-Year Agency Response

Education conducted a performance audit of the 4Cs to assess the agency'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. Education issued its final report on October 31, 2018, which identified $1,296,454 in questioned costs and 674 days in overstated child development attendance. The CSA's audit identified $11,216 in additional questioned costs for fiscal years 2014-15, 2015-16, and 2016-17.

Education billed the 4Cs based on the recalculated final contract earnings for each child development contract administered by the agency. The recalculated final contract earnings included results from the annual financial and compliance audit, the CSA's audit, and Education's audit. On November 29, 2019, the 4Cs appealed the amounts billed for the 2015-16 fiscal year to the Office of Administrative Hearings.

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

To clarify, the date of 4Cs' appeal that Education references is November 29, 2018.

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 recalculate the amount of 4C's reimbursable costs resulting from the CSA and Education's audits and take appropriate action.

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's audit of 4Cs is still in progress. Upon issuance of the final audit report, Education will recalculate the amount of 4C's reimbursable costs resulting from the CSA and Education's audits and take appropriate action. To recalculate the 4Cs' reimbursable costs related to the CSA's findings in this report, Education will require a breakdown of the unallowable costs by contract and fiscal year from the CSA.

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

We subsequently provided Education with the list of unallowable costs referenced on page 22 of our report.

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

Recommendation #11 To: Education, Department of

To ensure that 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 that their board members conduct a critical appraisal of each education program.

1-Year Agency Response

Education's status on this recommendation is unchanged; no additional comments will be forthcoming.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

We stand by our recommendation despite Education continuing not to concur. In its initial response to the audit, Education mischaracterizes our recommendation by stating that we expected 4Cs' board members to conduct a separate critical appraisal. As we state on page 32 of the audit report, we expected that the assessment involve board members actively identifying program strengths and weaknesses and suggesting approaches for the organization to take action. This effort can be performed in conjunction with staff's efforts through a comprehensive assessment. However, 4Cs' board minutes do not reference any involvement by board members in the assessment and instead indicate that the members were simply informed by staff of the status of 4Cs' contracts.

6-Month Agency Response

Education's status on this recommendation is unchanged; no additional comments will be forthcoming.

California State Auditor's Assessment of 6-Month Status: Will Not Implement

We stand by our recommendation despite Education continuing not to concur. In its initial response to the audit, Education mischaracterizes our recommendation by stating that we expected 4Cs' board members to conduct a separate critical appraisal. As we state on page 32 of the audit report, we expected that the assessment involve board members actively identifying program strengths and weaknesses and suggesting approaches for the organization to take action. This effort can be performed in conjunction with staff's efforts through a comprehensive assessment. However, 4Cs' board minutes do not reference any involvement by board members in the assessment and instead indicate that the members were simply informed by staff of the status of 4Cs' contracts.

60-Day Agency Response

Education continues to not concur with the CSA's recommendation for the reasons expressed in Education's prior response; the CSA misconstrues the intent of the Program Self Evaluation process requirement. The Program Self Evaluation process was adopted through the regulatory process. Education is the administrative and regulatory agency charged with implementation and oversight over the program. As such, its interpretation of its regulation is entitled to deference.

California State Auditor's Assessment of 60-Day Status: Will Not Implement

We continue to stand by our recommendation. In its initial response to the audit, Education mischaracterizes our recommendation by stating that we expected 4Cs' board members to conduct a separate critical appraisal. As we state on page 32 of the audit report, we expected that the assessment involve board members actively identifying program strengths and weaknesses and suggesting approaches for the organization to take action. This effort can be performed in conjunction with staff's efforts through a comprehensive assessment. However, 4Cs' board minutes do not reference any involvement by board members in the assessment and instead indicate that the members were simply informed by staff of the status of 4Cs' contracts.

Recommendation #12 To: Education, Department of

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.

1-Year Agency Response

Education completed updates to the monitoring review instrument and existing procedures to include two additional forms, the Family Data Worksheet and the Compliance Evidence Checklist. The two new forms will strengthen documentation of evidence used to support the contract monitoring reviews.

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

Education's response addresses the portion of the recommendation pertaining to creating and implementing procedures to document the evidence used in its monitoring reviews. We subsequently obtained documentation from Education that addresses its use of the results of these reviews to enhance its performance measures and develop training for its contractors. We expect that Education will continue to use the results of its monitoring reviews for these purposes.

6-Month Agency Response

Education is in the final stages of updating the monitoring review instrument to include two additional forms, the Family Data Worksheet and the Compliance Evidence Checklist, which will strengthen documentation of evidence used to support the contract monitoring reviews. Additionally, Education is finalizing procedure revisions to incorporate these new documents. Education anticipates full implementation of this recommendation by December 2018.

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

60-Day Agency Response

Education is in the process of updating the monitoring review instrument to strengthen documentation of evidence used to support contract monitoring reviews. Education already utilizes the results identified in the reviews to enhance its comparative performance measures and to formulate effective training for its contractors. Education anticipates full implementation of the recommendation by October 2018.

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

Recommendation #13 To: Community Child Care Council of Santa Clara County

To ensure that beneficiaries do not have restrictions limiting their ability to transfer their retirement funds, 4Cs should, by October 2018, move the funds for its primary and supplemental retirement plans out of the restrictive securities to the extent possible without incurring additional charges for beneficiaries. For any subsequent new participants, 4Cs should assign funds only to securities that do not have extensive charges associated with transferring or rolling over the funds.

Annual Follow-Up Agency Response From November 2020

The State Auditor did not receive an updated response to this recommendation from 4Cs since the previous annual follow up in 2019. According to Education, 4Cs ceased operations in June 2020.

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

Although it is unclear whether 4Cs took additional action to address this recommendation, we are classifying the recommendation as having been resolved based on 4Cs' inactive status.

Annual Follow-Up Agency Response From October 2019

The agency fully implemented the Primary Retirement Plan, a defined contribution retirement plan, with Mutual of Omaha for all eligible plan participants, effective July 1, 2019. The plan is in full compliance with the recommendations as set forth in the JLAC report and in full compliance with the Employee Retirement Income Security Act (ERISA).

The former restrictive securities under the old plan with Life Insurance of the Southwest (LSW) were surrendered. Any surrender fees imposed to participants by LSW were replenished to the participants' accounts using assets from the ERISA account from the Qualified Retirement Plan per ERISA guidelines.

For future distributions, to include withdrawals, transfers and roll overs, plan participants will not incur penalties other than those mandated or required by IRS guidelines.

The agency's Supplemental Retirement Plan - the Non-Qualified Retirement Plan - remains a pending matter under the current pending federal lawsuit concerning the agency's previous retirement plan - a defined benefit plan - with the Life Insurance of the Southwest (LSW) (a named defendant in the referenced pending federal lawsuit).

The corrective actions undertaken by 4Cs, in coordination with the counsels of the pending federal lawsuit, the agency's new retirement plan consultants and in compliance with ERISA, fulfilled the recommendations outlined by the JLAC under their Recommendation # 13 with the implementation of the new retirement plan, a defined contribution plan - with Mutual of Omaha.

Documents Submitted:

-Letter to current Retirement Plan Participants dated May 30, 2019

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Although the letter that 4Cs provided indicates that it established a new primary retirement plan, it did not provide evidence to demonstrate that this plan does not assign funds to securities that do not have extensive charges associated with transferring or rolling over the funds. Further, 4Cs indicates in its response that it has not yet resolved the issues regarding its supplemental retirement plan because of the pending lawsuit.

1-Year Agency Response

The agency is moving forward with setting up a new retirement plan for employees that is in full compliance with the recommendations as set forth in the JLAC report. The target date for full implementation is from June to July 2019 after the required notifications have been sent to all appropriate parties.

Attachment: Letter dated April 4, 2019 from Tad Devlin of Kaufman Dolowich & Voluck, LLP

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

The letter that 4Cs references indicates its intent to move forward with the process of setting up a new retirement plan that will address the issues discussed in the report.

6-Month Agency Response

While we have started the process of developing a new retirement plan that meets the requirements set out in the Joint Legislative Audit Committee's Report, we cannot implement a new plan absent approval of both the plaintiffs in the currently pending federal lawsuit and, where required, the federal court. We anticipate starting an alternative dispute resolution process with either mediation or a settlement conference with a federal magistrate judge once the pleadings are set. All defendants have filed Motions to Dismiss the federal lawsuit that are currently set for hearing on September 25, 2018. Assuming that no further motions to dismiss are filed, a mediation or settlement conference could be held as early as December 2018. However, the timing of mediation or a settlement conference is dependent on the participation of all parties, which we cannot control. If a resolution is reached at that time, an additional 90 to 120 days would be required to obtain any approval of that settlement by the Court and to begin the process of transitioning the current plan to a new plan. Supporting Documentation: "CDE Addendum-Corrective Action Plan - CSA Audit Report - Employee Retirement Plan Update September 10 2018"

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

60-Day Agency Response

4C Council is reviewing plan options.

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

Recommendation #14 To: Community Child Care Council of Santa Clara County

To ensure that its retirement plan participants can make appropriate financial planning decisions, 4Cs should provide the required disclosures in its retirement benefit statements, summary plan description, and annual report, and it should maintain documentation that it did so.

Annual Follow-Up Agency Response From November 2020

The State Auditor did not receive an updated response to this recommendation from 4Cs since the previous annual follow up in 2019. According to Education, 4Cs ceased operations in June 2020.

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

Although it is unclear whether 4Cs took additional action to address this recommendation, we are classifying the recommendation as having been resolved based on 4Cs' inactive status.

Annual Follow-Up Agency Response From October 2019

The agency fully implemented a defined contribution retirement plan for all its eligible plan participants. This plan became effective July 1, 2019. The plan is in full compliance with the recommendations as set forth in the JLAC report and most importantly, is in full compliance with the Employee Retirement Income Security Act (ERISA).

Retirement plan participants were provided with the following documents on May 31, 2019:

- Plan Participant Notification - Account Access

- Letter to Retirement Plan Participants with Mutual of Omaha packet

- Summary Plan Description

Documents Submitted:

- Email sent to eligible plan participants containing the required disclosures and summary plan description as attachments

- Plan Participant Notification - Account Access

- Letter to eligible Retirement Plan Participants with Mutual of Omaha packet

- Summary Plan Description (SPD)

- QDIA Notice

- Mutual of Omaha Blackout Notice

- Mutual of Omaha - Information Regarding Retirement Account

- Mutual of Omaha - Retirement Plan Fee Disclosure Notice

- Mutual of Omaha - Account Access - Anywhere , Anytime sheet

The above referenced "Mutual of Omaha - Account Access - Anywhere, Anytime" sheet completely fulfills the referenced JLAC's recommendation # 14 which provides plan participants with access to information which will help them make informed financial decisions about their retirement accounts and savings, to include those outlined in the referenced sheet (account balance, in a safe and secure manner - anywhere and anytime).

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

4Cs provided documentation of the required disclosures in its summary plan description, but it did not provide evidence of such disclosures in the other items cited in our recommendation. Although 4Cs subsequently informed us that it intends to include the required disclosures in its annual report, it is not required to submit that report until 2020.

1-Year Agency Response

The agency is moving forward with setting up a new retirement plan for employees that is in full compliance with the recommendations as set forth in the JLAC report. The target date for full implementation is from June to July 2019 after the required notifications have been sent to all appropriate parties.

Attachment: Letter dated April 4, 2019 from Tad Devlin of Kaufman Dolowich & Voluck, LLP

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

6-Month Agency Response

We will begin transitioning to a new plan once resolution and approval of the settlement by the Court of the federal lawsuit. (See response to Recommendation 13).

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

60-Day Agency Response

This will be completed once 4C Council has chosen a plan option.

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

Recommendation #15 To: Education, Department of

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.

Annual Follow-Up Agency Response From November 2020

The 4Cs ceased operating on June 30, 2020. The federal court register indicates that the class action lawsuit regarding 4Cs administration of its retirement plans may have been settled as a result of a court ordered mediation in January 2020; the court case has not yet been dismissed. Education continues to monitor available information related to the class action lawsuit. However, Title 28 United States Code Section 2462 is the "government-wide" statute of limitations, and limits the US government's recovery of any pecuniary claims to 5 years from the date when the claim first accrued. Additionally, it appears unlikely that Education will be able to obtain documentation that would be required to quantify and collect supplemental plan funds that may not have complied with federal requirements for costs incurred 21 or more years ago.

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

Based on Education's description of the status of 4Cs and the class action lawsuit, we have evaluated this recommendation as having been resolved.

Annual Follow-Up Agency Response From October 2019

The class action lawsuit regarding 4Cs administration of its retirement plans is still pending. Education will require 4Cs take appropriate action based on the outcome of the class action lawsuit.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The class action lawsuit regarding 4Cs administration of its retirement plans is still pending. Education will require 4Cs take appropriate action based on the outcome of the class action lawsuit.

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

6-Month Agency Response

The class action lawsuit regarding 4Cs administration of its retirement plans is still pending. Education will require 4Cs take appropriate action based on the outcome of the class action lawsuit.

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

60-Day Agency Response

Education concurs with the recommendation. The class action lawsuit regarding 4Cs administration of its retirement plans is still pending. Education will require 4Cs to take appropriate action based on the outcome of the class action lawsuit.

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

Recommendation #16 To: Community Child Care Council of Santa Clara County

To ensure compliance with legal requirements and to promote a safe and responsible workplace, 4Cs should, by October 2018, create an anti-retaliation policy that specifically follows federal guidance on such policies. Additionally, 4Cs should update its policy manual and include federally recommended elements in its policy addressing unlawful harassment.

6-Month Agency Response

The agency updated its Anti Retaliation and Unlawful Harassment policies to include the recommendations made by the California State Auditor. The Anti Retaliation policy includes: (1) Examples of Retaliation; (2) Proactive Steps for Avoiding Actual and Perceived Retaliation; and (3) Guidance on Interactions Between Managers and Employees. The agency's Unlawful Harassment policy includes the statement "The Company will immediately undertake an effective, thorough and impartial investigation of the allegation." Both policies were approved by the agency's Board of Directors on 7/19/2018. Supporting documentation: "Unlawful Harassment Policy" and "Anti Retaliation Policy".

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

60-Day Agency Response

The agency has created separate Unlawful Harassment and Anti-Retaliation policies. Anti-Retaliation policy includes statement that retaliation is in violation of the policy; provides examples of prohibited conduct and that actions will be taken against those who violates the policy. The Unlawful Harassment policy also includes language around bullying and that employees in violation of this policy may be subject to discipline.

The agency also updated the Unlawful Harassment policy to include descriptions of discrimination and consensual relationships as well as expanded on the descriptions of harassment and sexual harassment.

In this policy, the complaint process was also expanded to include a more detailed description of the complaint reporting system and change the number of reporting officials from 2 individuals in management to 5.

The new policy also includes a new section on confidentiality that informs employees that the agency will keep confidential to the best degree possible: information received, the privacy of the individuals involved, and the wishes of the complaining party, documents or notes received or written by the investigator.

Lastly, the agency also added new language stating that the agency's employee assistance program (EAP) is available for employees seeking confidential counseling services.

The two policies above, Anti-Retaliation and Unlawful Harassment were both approved by the Board of Directors on 5/30/2018. HR also reviewed the EEOC Anti-Harassment Policy to ensure that the language used in the policy followed federally recommended elements. (Supporting documentation submitted: "Unlawful Harassment Policy", "Anti Retaliation Policy", "EEOC Checklist for Employers."

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

Although 4Cs created a separate anti-retaliation policy, the policy does not include the elements of federal guidance that we specify in our report, including examples of retaliation, proactive steps for avoiding actual and perceived retaliation, and guidance on interactions between managers and employees. In addition, 4Cs' updated anti-harassment policy now includes multiple avenues of reporting and a discussion of confidentiality, but does not include any references to conducting the investigation in an impartial manner. We look forward to 4Cs informing us of additional updates to its policies in its six-month response.

Recommendation #17 To: Community Child Care Council of Santa Clara County

To ensure that it maintains the integrity and impartiality of its HR investigations, 4Cs should implement controls by October 2018 to ensure that it consistently follows its HR investigation process for all complaints, and it should maintain proper documentation of all actions taken.

60-Day Agency Response

The agency has reviewed the investigation process and has modified the HR Investigation Checklist to specify which items on the checklist are required or are optional and has been designated as, If Applicable. By adding the "required" notation in the checklist this will alert the assigned investigator that those items must be followed and processed, this will ensure that all complaints processed will include the same "required" items.

One of the "required" items on the checklist is, "the accused person informed of decision". Since this item is now noted as "required" the assigned investigator must complete this item. This means that any actions taken will be communicated to the necessary persons and that any actions taken will be documented in the investigation file.

The checklist will now also require the investigator to sign off on the checklist certifying that all items checked off are completed and are included in the confidential investigation file. This will ensure that documentation is maintained and accounted for.

(Supporting documentation submitted, "HR Investigation Checklist" and "4C Council HR Investigation Process")

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

Based on its response and supporting documentation, it appears that 4Cs implemented controls that, if followed properly, will allow it to maintain the integrity and impartiality of its HR investigations.

All Recommendations in 2017-116

Agency responses received are posted verbatim.