Measuring Improper Payments in the Child Care Program: A Project of ACF/Child Care Bureau, Phase I Findings: Information from States
Working Papers for Discussion Distributed at the State Partners Meeting, September 28-29, 2004
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Background
The Improper Payment Information Act of 2002 (IPIA) and related OMB guidance describes certain federal programs that are to have a national error rate. The Child Care Program has been identified as a federal program that falls within the terms of the Act. The Child Care Program has been included among a number of HHS programs working on developmental projects under this legislation. Given the variables in State child care operations, the Child Care Bureau (the Bureau) conducted a pilot project with selected Partner States for the purpose of determining whether there is an efficient and cost-effective approach/methodology for estimating improper payment amounts or rates in the Child Care Program. In addition, the Bureau used this pilot to discover methods that could help States identify, measure, and prevent errors in the administration of child care funds. The pilot objectives were:
- To evaluate the feasibility of developing a strategy for estimating improper payments in the Child Care program;
- To produce recommendations for improved monitoring regarding improper payments and fraud;
- To provide better definitions of child care payment error and child care fraud;
- To gather documented "best practices," plus other technical assistance materials, as well as data and reporting protocols.
The Child Care and Development Fund (CCDF) is a block grant composed of three distinct funding elements (Mandatory, Discretionary and Matching) authorized in two different statutes. It is managed by HHS as a unitary funding stream and treated that way by States, Territories and Tribes, although adjustments are sometimes required to accommodate such things as differing rules for expensing appropriated funds. The statute provides maximum flexibility for States in setting critical policies such as eligibility criteria, defining administrative structures, and providing maximum choice for parents to select the type of child care - center-based, family child care, relative care, friends and neighbors, etc. - that best meets their family's needs, and establishing fiscal approaches that best meet States' needs.
Because of the discretion given to States, such critical policies as eligibility rules for parents, amount of co-pay, regulation of child care providers, maintenance of waiting lists, and payment mechanisms vary widely from jurisdiction to jurisdiction. There are also substantial variations in administrative structures ranging from locally-administered to fully-centralized systems. Some Child Care Administrators are located in the State's education agency, while others are in the social services or workforce development agency. Often, the licensing function is located in a separate agency.
The provision for parental choice also leads to variations from State to State. Some States rely heavily on providing vouchers to parents; some lean more toward buying slots from providers. Transfer of significant amounts of Temporary Assistance for Needy Families (TANF) funds to CCDF is common among several States, but not among others. A few leave millions of CCDF dollars on the table during any given year because for one reason or another they choose not to supply the non-federal share. Information systems - both fiscal and programmatic - differ greatly among the States, Territories, and Tribes.
The result of all this block grant flexibility is a responsive, supple federal funding stream that States can and do adjust as budget pressures and market forces change or families' needs shift. This flexibility a strength for the program - also makes it difficult to develop common definitions or approaches for identifying and managing improper payments. ACF has no oversight activity concerning the issues of improper payments or management of the roughly $8.5 billion in CCDF and TANF funds spent on child care. This is further compounded by the lack of authority and resources to conduct monitoring and oversight reviews of CCDF. The various fiscal and programmatic data elements such as single State audits and State financial expenditures reporting do not capture information about the various strategies and tools that States have in place for managing improper payments. In the absence of such information, HHS cannot determine if the CCDF programs are susceptible to significant improper payments.