Report 94111 Summary - August 1995
Department of Education:
Has Not Spent Millions for Child Care and Development Services
The California Department of Education (department) is responsible for administering both federal- and statesubsidized child care and development programs. To carry out this responsibility, the department contracts with various public and local agencies that in turn provide child care and development services to eligible families in California. Our review focused on the department's administration of child care and development program funds, its contracting policies and procedures, and the oversight of child care contractors during fiscal years 199192 through 199394. Specifically, we noted the following key concerns:
- The department could not tell us the demand for services offered by the child care and development programs it funded during fiscal years 199192 through 199394. Furthermore, the department could not tell us the actual number of children currently served by its programs. However, in July 1995, the department estimated that it served approximately 130,000 to 140,000 eligible children during each fiscal year from 199192 through 199394. Additionally, in April 1995, the department reported to the Legislature that California provides subsidized child care and development services to less than 20 percent of eligible lowincome families.
- The department did not maximize the delivery of child care and development services because millions of dollars in state and federal funds remain unspent. For example, contractors providing child care and development services did not spend $84.7 million that the department had allocated to them.
In addition, the department did not allocate all of the Federal Child Care and Development Block Grant (FBG) funds it received. In April 1995, the department estimated that, as of June 30, 1995, $70 million of the FBG would remain available for allocation; however, this estimate does not include an additional $28.6 million. Furthermore, the department's plan to spend the funds is flawed. Specifically, the plan calls for increasing funding allocations to existing contractors but fails to specify how these contractors will use the increased allocations. And finally, the plan does not address the need to identify additional contractors that could provide child care and development services.
- Two department practices for reviewing and scoring applications increased the risk that biased scoring decisions were made.
- The department did not consistently process appeals of contract awards. It also did not consistently recommend adverse actions against contractors that submitted late audit reports. As a result, the department gave the impression that some contractors received special or preferential treatment.
- The department's process for reviewing annual audit reports submitted by contractors was deficient. Specifically, reviews of some audit reports were late, and other reviews were inadequate.
To maximize the provision of child care and development services, the department should take the following steps:
- Determine the level of unmet need for each child care and development program that it administers and the level of unmet need in each county;
- Periodically compare the allocations it provided to contractors with the amounts they actually spent to identify those not spending all of their allocations; and
- Identify options and implement solutions to assist the contractors so that they can provide more child care and development services to eligible families who need them.
Further, if the department identifies contractors whose allocations exceed need, it should identify other contractors that can use the excess funds to provide services to eligible families. If necessary, the department should issue a request for applications to identify additional contractors that wish to provide child care and development services.
To ensure that it consistently processes appeals of contract awards, the department should take the following steps:
- Develop written guidelines for use when considering whether an appeal issue should proceed to a hearing;
- Follow its procedures for hearing appeals of contract awards; and
- Develop and implement a system to track appeals of contract awards.
To improve its process for monitoring contractors, the department should ensure that the Office of External Audits assigns sufficient staff to review all the submitted audit reports between November and February of each fiscal year. In addition, the department should consistently recommend adverse actions against contractors who submit late audit reports.
In its response to our audit report, the department stated that it did not agree with some of our findings, conclusions, and recommendations. For example, the department does not concur with our finding that its three-year plan is flawed, does not concur with our conclusion that it did not maximize its efforts to provide child care and development services, and does not plan to identify additional contractors. However, the department stated that it agreed with other findings, conclusions, and recommendations. For example, the department agreed that the risk of bias would have been reduced had application readers not been the assigned consultant for the county, that it was a good idea to include appeal provisions in requests for applications, and that it should periodically evaluate contractors' performance by reviewing their spending patterns.