The CCDBG allows maximum flexibility for states to set critical policies. These may include establishing eligibility criteria, defining administrative structures that allow maximum choice for parents, and establishing fiscal management approaches.

The CCDF Plan addresses topics on internal controls to ensure integrity and accountability and that processes are in place to investigate and recover fraudulent payments and to impose sanctions on clients or providers in response to fraud. The Lead Agency is required to identify and recover misspent funds as a result of fraud, and it has the option to recover any misspent funds as a result of errors.

To promote accountability and program integrity, the Office of Child Care (OCC) has worked to emphasize transparency, public participation, coordination, and the importance of reducing improper payments and fraud. At the same time, OCC has encouraged states to consider the impacts of such efforts on eligible families seeking benefits. Efforts states use to improve program integrity include the following:

• Fiscal management: Lead agencies must ensure the integrity of the use of funds through sound fiscal management and must ensure that financial practices are in place (98.68(a)(1)), including the verification and process for billing records to ensure timely payments to providers; fiscal oversight of grants and contracts; and tracking systems used to ensure reasonable allowable costs.
• Risk Identification: Lead agencies must describe in the CCDF plan the processes they will use to identify risks in their CCDF program. The processes may include conducting a risk assessment of policies and procedures; establishing checks and balances to ensure program integrity; using supervisory reviews to ensure accuracy in eligibility determination; or others deemed appropriate by the Lead Agency.
• Fraud Identification: Lead Agencies conduct a wide variety of activities to fight fraud and ensure program integrity. Lead Agencies are required to have processes in place to identify fraud and other program violations to ensure program integrity. Program violations can include both intentional and unintentional client and/or provider violations, as defined by the Lead Agency. These violations and errors, identified through the error-rate review process, may result in payment or nonpayment (administrative) errors and may or may not be the result of fraud, based on the Lead Agency definition. Submission of the triennial CCDF Plan (ACF-118) includes reporting of Lead Agency actions to prevent, measure, reduce, and collect improper payments. Lead Agencies must have systems in place to document that CCDF funds have been spent in compliance with the law and the approved CCDF Plan, as well as the results of these activities and actions. As noted in previous sections, Lead Agencies must submit quarterly ACF-696 Financial Reports indicating the status of expenditures and uses of funds. Lead Agencies also submit administrative data reports on the number of children served and the characteristics of services and recipients, including the number of child fatalities occurring among children while in the care and facilities of child care providers receiving assistance (ACF-801 and ACF-800).
  • Improper payments error rate review process: Effective October 1, 2007, a final rule revised the CCDF regulations to require all states, Puerto Rico, and the District of Columbia to report on error rates in the expenditure of CCDF grant funds once every 3 years on a rotational cycle. OCC works with Lead Agencies to conduct triennial case record reviews to identify and reduce administrative errors in the CCDF program.
  • In response to the Improper Payments Elimination and Reduction Act (July 2010), OCC has instituted a Program Integrity Plan that offers technical assistance and support to states to increase program accountability and reduce improper payments, fraud, waste, and abuse.
  • Self-assessment of internal controls: OCC has created a Grantee Internal Controls Self-Assessment Instrument tool to help states better analyze risk and strengthen internal controls to prevent improper payments. This assessment is not mandatory but does assist states in reviewing systems and identifying weaker areas within those systems.
• Fiscal controls, program integrity, and accountability. In establishing fiscal controls and processes to support program integrity and accountability, the Lead Agency is required to identify and recover misspent funds as a result of fraud, and it has the option to recover any misspent funds as the results of errors, including identifying the agency responsible for pursuing fraud and overpayments and any activities the Lead Agency will use to investigate and recover improper payments due to unintentional program violations and agency errors. Should fraud be found, the Lead Agency needs to describe the type of sanctions that will be placed on clients and providers to help reduce improper payments due to program violations.
• Lead Agencies should consider how these processes apply to the following:
  • Memoranda of understanding (MOUs) within the Lead Agency’s various divisions that administer or carry out the various aspects of CCDF
  • MOUs, grants, or contracts to other state or territory agencies that administer or carry out various aspects of CCDF
  • Grants or contracts to other organizations that administer or carry out various aspects of CCDF, such as professional development and family engagement activities
  • Internal processes for conducting child care provider subsidy
• Contracts. As a means of administering all the components of CCDF, there may be times when the Lead Agency enters into contracts or agreements with other entities. In doing so, the final rule specifies that while the content of the written agreements may vary based on the role the agency is asked to assume or the type of project undertaken, agreements must, at a minimum, include the following:
  • Tasks to be performed
  • A schedule for completing tasks
  • A budget that itemizes categorical expenditures consistent with CCDF requirements at 45 C.F.R. § 98.65(h)
  • Indicators or measures to assess performance