PERFORMANCE AUDIT

OF THE

SUBSIDIZED CHILD DAY CARE PROGRAM
ADMINISTERED BY THE

DEPARTMENT OF PUBLIC WELFARE

THROUGH THE

STATE-CONTRACTED CCIS AGENCIES

UNREGULATED PROVIDERS ON OR ABOUT
OCTOBER 12, 2000

December 18, 2001

The Honorable Mark S. Schweiker
Governor
Commonwealth of Pennsylvania
Harrisburg, PA 17120

Dear Governor Schweiker:

This report contains the results of the Department of the Auditor General's performance audit of the Subsidized Child Day Care Program administered by the Department of Public Welfare (DPW) through state-contracted child care information services (CCIS) agencies for unregulated providers on or about October 12, 2000.

The audit was conducted in accordance with Government Auditing Standards as issued by the Comptroller General of the United States, and under the authority granted to the Department of the Auditor General by The Fiscal Code. Section 402 of The Fiscal Code provides authority to conduct "special audits" of executive agencies whenever the Auditor General has determined such audits to appear necessary. Section 403 provides authority to audit the accounts and records of every "person, association, corporation, and public agency" receiving Commonwealth funds in order to determine if the funds were expended for their intended purposes.

Chapter I of the report discusses deficiencies which show that DPW, acting through CCIS agencies, provided public funds for child care services to unregulated providers whose backgrounds include convictions of serious crimes and to child care providers for supposedly caring for children while serving time in prison. Conclusion I-A discusses the results of criminal record checks conducted on certain unregulated providers. Conclusion I-B discloses the results of our review which determined that CCIS agencies issued payment to unregulated providers for supposedly providing child care services while being incarcerated in state correctional institutions.

Chapter II contains the results of our review of information provided and maintained by CCIS agencies. Conclusion II-A focuses on CCIS agencies' noncompliance with certain requirements contained in DPW's CCIS Policy and Procedures Manual. Conclusion II-B discusses missing and invalid computer file information on child care providers, as well as our concerns related to inaccurate and inconsistent information contained in unregulated provider files maintained by CCIS agencies.

The report also includes 18 recommendations related to the noted deficiencies that, if implemented, should help to improve oversight of the Subsidized Child Day Care Program. It is our hope that you will instruct DPW to act on these recommendations.

On October 22, 2001, we submitted drafts of this report to DPW Secretary Feather Houstoun and the applicable management staff. We also met with DPW staff to discuss our conclusions and received DPW's written response to our report. DPW's response appears throughout the report with the related conclusions.

Results in Brief

Introduction

Background

Audit Objective and Methodology

Recommendations

DPW Response

Auditors' Conclusion

Recommendations

DPW Response

Auditors' Conclusion

Recommendations

DPW Response

Auditors' Conclusion

Recommendations

DPW Response

Auditors' Conclusion

Appendix A - The Child Protective Services Law (Excerpt)

Appendix B - Interim Agreement

Appendix C - CCIS Agencies' Address Listing

Appendix D - Request for Criminal Record Check

Appendix E - Number of Unregulated Providers by County or CCIS Agency

RESULTS IN BRIEF

As discussed in Conclusion I-A, Child Care Information Services (CCIS) agencies paid Commonwealth child care funds totaling $103,000 to 25 unregulated child care providers who have criminal records. Of the 25, 11 unregulated providers were convicted of committing serious crimes. For our audit, we considered crimes listed in the Child Protective Services Law (CPSL) as serious crimes.

Conclusion I-B deals with CCIS agencies issuing checks totaling $9,667 payable to six individuals who were incarcerated in Pennsylvania state correctional institutions during a time they were supposed to be providing child care services. We found records indicating that two of the six providers were also arrested on days they were caring for children. We referred these suspected fraud cases for prosecutorial review directly to the respective District Attorney's Offices. We also provided DPW with information on these providers.

Conclusion II-A discusses compliance testing results for certain requirements in the Department of Public Welfare's (DPW) CCIS Policy and Procedures Manual. Some of the discrepancies found included CCIS agencies paying providers without having signed agreements on file, a CCIS agency paying a provider who was under 18 years of age, and CCIS agencies paying a provider who cared for more than three non-exempt children simultaneously.

In Conclusion II-B, we discuss analyzing computer files, created by CCIS agencies and submitted through DPW, that contained the names of 5,697 unregulated providers (See Appendix E for the number of unregulated providers by county). We found hundreds of concerns which included missing, invalid, or questionable social security numbers (SSN), dates of birth (DOB), or addresses; providers having the same SSN; duplicate names of providers; and providers who were never paid and should not have been included on the files. We also examined 245 unregulated child care provider files at four CCIS agencies and found inaccurate and inconsistent names, SSNs, and DOBs. We also found incorrect names and questionable SSNs on IRS Form 1099-Misc, and a child care provider who was overpaid. Additionally, two providers were referred to the Office of Inspector General by CCIS agencies for suspicion of fraud as a result of our audit inquiry.

Based on our conclusions presented in this audit report, we recommend that DPW:

1. Work with members of the General Assembly on legislation to require and pay for criminal record checks for all unregulated child care providers. [p. 7]

2. Help parents to select a different provider if their current provider, including a grandparent, aunt or uncle, was convicted of serious offenses (i.e. those listed in the CPSL). [p. 7]

3. Make available to parents all offenses identified on the Pennsylvania State Police criminal record checks for their provider in addition to serious crimes, so that the parents can decide if these providers should care for their children. [p. 7]

4. Strengthen its commitment to the Subsidized Child Day Care Program (program) by taking the following steps: [p. 17]

• ensure that people who are incarcerated do not get paid for providing child care;

• work with the Department of Corrections and the CCIS agencies to implement file matches that will ensure payments to providers for child care services are justified; and

• determine who actually received and cashed the checks for the incarcerated individuals and seek repayment of Commonwealth funds from those individuals who did not provide the child care services but were paid.

5. Consider evaluating whether the interim agreement is necessary. If the interim agreement is necessary, clarify the use of Attachment A in the manual or eliminate Attachment A and revise the interim agreement to include the Attachment A information. [p. 27]

6. Periodically perform provider computer matches to determine if an unregulated child care provider is participating with more than one CCIS agency and determine, in those situations found, whether the provider is caring for more than three non-exempt children at the same time. [p. 28]

7. Monitor CCIS agencies to ensure compliance with the manual. [p. 28]

8. Require CCIS agencies to obtain and maintain proof of name, SSN and DOB to confirm provider file information. [p. 41]

9. Periodically perform reasonableness tests, such as reviewing www.ssa.gov/foia/highgroup.htm to verify SSN has been issued and inserting SSN into www.rootsweb.com, Social Security Death Index to verify SSN is not associated with a dead person. [p. 41]

10. Revise the Child Account Management Information System (CAMIS) to include an audit trail that shows when information is added or changed. [p. 41]

We also recommend that the CCIS agencies:

1. Assist families in identifying other available child care services. [p. 7]

2. Establish controls and procedures that will reasonably allow them to ensure that: [p. 28]

• CCIS agencies do not pay providers until a signed interim or provider agreement is on file;

• the information in Attachment A is read and completed by all unregulated providers;

• providers are at least 18 years of age; and

• providers care for no more than three non-exempt children simultaneously.

3. Use the provider agreement published in the manual. [p. 28]

4. Ensure that all provider information is complete, consistent and correct. This can be done by: [pp. 41-42]

• obtaining and maintaining proof of provider name, SSN and DOB;

• reviewing provider or interim agreements to ensure the information is fully completed;

• comparing information on the IRS Form 1099-Misc to provider file information to ensure that the name and SSN on IRS Form 1099-Misc is consistent; and

• comparing CAMIS and the payment system information to the provider file to ensure that the information is consistent.

5. Periodically review manual adjustments to identify any overpayments due to human errors. [p. 42]

6. Recover overpayments made to providers. [p. 42]

7. Reconcile IRS Form 1099-Misc dollar amounts to appropriate documentation to ensure that the amounts are correct. [p. 42]

8. Ensure correctness of information before submitting it for audit. [p. 42]

INTRODUCTION

On August 1, 2001, the Department of Public Welfare (DPW) announced that the Commonwealth would once again require criminal record and child abuse background checks for some unregulated child care providers who participate in the state's Subsidized Child Day Care Program (program). This announcement reversed a policy that had been in place since February 1999 when DPW eliminated the requirement that all state-funded child care providers obtain these clearances.

DPW announced its latest policy change almost a year after the Department of the Auditor General (department) commenced this audit and more than six months after the department immediately notified DPW the criminal backgrounds of 22 unregulated child care providers initially received from the Pennsylvania State Police.

During the course of this audit, we found a total of 25 providers that had been paid with state funds, even though they had been convicted of - and in some cases incarcerated for - serious crimes, including statutory rape and corruption of minors.

DPW's new policy does not require criminal or child abuse background checks for grandparents, aunts or uncles before they are able to receive state funds for watching children in their homes. However, of the 25 providers our audit found with criminal backgrounds, two were identified as grandparents and one was identified as an uncle. One grandparent was convicted of a felony drug offense and the uncle was convicted of statutory rape and corruption of minors.

On October 16, 2001, DPW stated that CCIS agencies began submitting criminal record and child abuse background checks as of the end of August 2001 for unregulated providers of new families who applied for participation in the program (parents can request waivers for grandparents, aunts and uncles). We requested the number of background checks submitted by CCIS agencies since August 2001 and how many were completed for processing by the Pennsylvania State Police for criminal record checks and DPW for child abuse background checks. DPW management did not provide information on the number of background check applications received from CCIS agencies since August 2001. Management stated it "entered 1,000 applications into the review process of which 400 are completed (criminal and child abuse history) and the remaining 600 are being inputted into the system." DPW did not indicate if completed meant that the results were returned to the CCIS agency and the family.

BACKGROUND

Pennsylvania's Subsidized Child Day Care Program (program) serves approximately 100,000 low-income children each year. Families who receive Temporary Assistance for Needy Families (TANF) are served through the County Assistance Offices. Non-TANF, low-income working families are served through 59 Child Care Information Service (CCIS) agencies. Parents may select any child care provider, including those who are not regulated by the state (i.e. those who care for three or fewer children who are not related to them), to receive the subsidized child day care funds.

The Department of Public Welfare's (DPW) child care regulations seek "to provide standards to aid in protecting the health, safety, and rights of children and to reduce the risks to children" in child care facilities. In addition, Pennsylvania's Child Protective Services Law requires employees in child day care centers, group child day care homes, and family child day care homes to undergo criminal record and child abuse background checks.

Prior to February 1999, DPW did require these background checks of unregulated providers used by non-TANF families served by the CCIS agencies. However, in November 1998, the Independent Regulatory Review Commission considered and approved regulations promulgated by DPW that eliminated these criminal record and child abuse background checks for all unregulated providers paid with state funds.

In March 2000, the Department of the Auditor General (department) released a performance audit which found, among other things, that DPW did not impose even minimal requirements - such as criminal record and child abuse background checks - for these unregulated providers, even though it was estimated that 60 percent of children in the program were in unregulated care. That audit recommended that all unregulated providers who receive state funds to care for children (and all individuals 18 years of age and older who reside in their homes) should submit to criminal record and child abuse background checks at no cost to families or providers.

During the first week of September 2000, members of the General Assembly were informed that the administration was planning to change some of the requirements for unregulated child care providers to require additional safety standards. However, the changes did not include mandatory criminal record and child abuse background checks for all unregulated providers paid with tax dollars.

The announcement of this policy change made it clear that DPW had no intention of implementing the recommendations of the department's March 2000 performance audit. It also appeared to ignore evidence from audits and media investigations in other states, such as Michigan, New York, and Washington, which had discovered that millions of taxpayer dollars had been paid to individuals whose crimes included homicide, rape, criminal sexual conduct against minors, assault, and child abuse and neglect. In fact, Michigan documented payment of more than $11 million in public funds to 6,220 criminals whose crimes included 318 crimes against children. Washington exposed that it had paid 200 criminals, including 13 identified sex offenders.

As a result, on September 26, 2000, the department launched this performance audit of the program through the CCIS agencies. The objective was to evaluate whether DPW, acting through CCIS agencies, is providing public funds to unregulated child care providers whose backgrounds include convictions of serious crimes.

DPW provided the names of 5,697 unregulated child care providers who were paid through the CCIS agencies and participating in the program on or about October 12, 2000. A memo from DPW said that, "Concerning the additional request for the number of children served by these 5,700 providers, that data is not retained on a date-specific basis." The memo said that it was only possible to provide the number of children in unregulated care for the whole month of October: 10,455.

Once we had obtained this limited information about the unregulated child care providers, the administration was unwilling to cooperate with the department to conduct background checks on the providers in a cost-effective and efficient manner. Therefore, we checked for matches between the list of unregulated providers and a list of individuals incarcerated in state correctional institutions during the 19-month period from November 1998 to May 2000 and initially identified 26 matches. (We later identified another five providers bringing the total to 31 that may have criminal records).

On January 12, 2001, the department forwarded the initial 26 names to the Pennsylvania State Police (PSP), along with payment for criminal history background checks. PSP very promptly responded to the request. Of those 26 individuals, 22 - or 84.6 percent of the population for whom requests were made - were found to have criminal records, some of which included crimes which can fairly be characterized as serious. Of the five additional providers later identified, four were found to have criminal records. In total, 26 providers had criminal records, 25 of which were paid with Commonwealth funds.

The department immediately notified DPW, the Office of General Counsel, PSP, and the Office of the Budget of the results and urged the administration to take immediate and appropriate action to notify the families whose children are being cared for by them and to evaluate the propriety of providing public funds to these individuals.

In order to avoid unduly alarming families, as well as to preserve, to the maximum extent possible, the confidentiality of the information, the department exhausted every reasonable option for obtaining the administration's assistance in conducting background checks for the remaining providers in the most cost-effective and efficient manner.

Auditors subsequently requested background record checks on five additional providers: three providers were later matched to the list of individuals incarcerated in state correctional institutions; and two providers were referred to the Pennsylvania Office of Inspector General by the CCIS agencies.

AUDIT OBJECTIVE AND METHODOLOGY

In September 2000, we commenced a performance audit of the Pennsylvania Subsidized Child Day Care Program administered by the Department of Public Welfare (DPW) through the state-contracted Child Care Information Services (CCIS) agencies. This audit is a continuation of one aspect of our March 2000 audit entitled A Performance Audit of the Commonwealth's Oversight of Child Care in Pennsylvania.

We performed fieldwork from September 26, 2000, through July 26, 2001. Our audit population was based on unregulated child care providers receiving public funds on or about October 12, 2000.

Our audit objective was to evaluate whether DPW, acting through CCIS agencies, is providing public funds to unregulated child care providers whose backgrounds include convictions of serious crimes.

To complete our objective we:

• reviewed DPW's CCIS Policy and Procedures Manual;

• reviewed a copy of a CCIS agency contract;

• reviewed applicable DPW regulations;

• reviewed the Child Protective Services Law;

• reviewed our March 2000 audit report entitled A Performance Audit of the Commonwealth's Oversight of Child Care in Pennsylvania;

• reviewed criminal record checks on child care providers provided by the Pennsylvania State Police;

• reviewed incarceration information on child care providers submitted by the Department of Corrections (DOC); and

• requested and received a computer disk, through DPW, that contained unregulated child care provider data from each of the 59 CCIS agencies. The data for each provider was to include the full name, social security number (SSN), date of birth (DOB), and home address. Using this file of 5,697 provider names as our population, we combined the information into a master database and analyzed the information by:

• reviewing the database for missing information;

• reviewing SSNs and zip codes to ensure the correct number of digits were present;

• identifying questionable DOBs;

• comparing providers' SSNs and DOBs to a Look Up System Software Program to ensure the SSN was issued and that it was issued after the provider's DOB;

• identifying duplicate names of providers at different CCIS agencies;

• identifying providers with duplicate SSNs or duplicate addresses;

• comparing providers' name, SSN, and DOB to a DOC file of individuals incarcerated in a Pennsylvania state correctional institution between November 1998 and May 2000;

• inserting providers' SSN, who had questionable DOBs, into the internet genealogy site, www.rootsweb.com, Social Security Death Index, to determine if any providers' SSNs were listed;

• inserting providers' names that matched the DOC file of incarcerated individuals into the inmate locator at the DOC web site, www.cor.state.pa.us. The inmate locator identifies whether an individual is currently incarcerated in a Pennsylvania state correctional institution; and

• requesting follow-up information from 36 CCIS agencies on as many as three occasions.

We also visited four CCIS agencies and performed the following:

• compared our master database information to CCIS agency files for accuracy on 245 providers;

• determined if provider information submitted by the CCIS agencies was complete;

• reviewed CCIS agency files to ensure compliance with certain requirements in accordance with DPW's CCIS Policy and Procedures Manual; and

• verified that IRS Form 1099-Misc was properly completed.

Conclusion I-A: Commonwealth Funds Were Paid to Child Care Providers Convicted of Serious Crimes

Our audit of the Department of Public Welfare (DPW) found that Commonwealth funds were used to pay unregulated child care providers who were convicted of serious crimes.

For our audit, we considered the crimes listed in the Child Protective Services Law (CPSL) (Appendix A) §6344. (c) "Grounds for denying employment" as serious crimes for our criteria. Some of these crimes include voluntary manslaughter, aggravated assault, rape, and child abuse. Although this law does not apply to unregulated child care providers, it does apply to prospective employees of child care service providers and prospective self-employed family day care providers.

On September 26, 2000, we requested the 59 Child Care Information Services (CCIS) agencies (Appendix C) to provide us the full name, social security number (SSN), date of birth (DOB), and address for each unregulated child care provider participating in the Subsidized Child Day Care Program (program) and receiving Commonwealth funds. This information, provided to us through DPW on computer disks, contained 5,697 names (See Appendix E for the number of unregulated providers by county).

Once we had obtained this limited information about the unregulated child care providers, the administration was unwilling to cooperate with the department to conduct background checks on the providers in a cost-effective and efficient manner. Therefore, we checked for matches between the list of unregulated providers and a list of individuals incarcerated in state correctional institutions during the 19-month period from November 1998 to May 2000 and initially identified 26 matches. (We later identified another five providers bringing the total to 31 that may have criminal records).

On January 12, 2001, the department forwarded the initial 26 names to the Pennsylvania State Police (PSP), along with payment for criminal history background checks. PSP very promptly responded to the request. Of those 26 individuals, 22 - or 84.6 percent of the population for whom requests were made - were found to have criminal records, some of which included crimes which can fairly be characterized as serious. Of the five additional providers later identified, four were found to have criminal records. In total, 26 providers had criminal records, 25 of which were paid with Commonwealth funds.

To conduct a criminal record check, PSP requires identifiers such as provider name, SSN and DOB. If two of the three identifiers do not match PSP records, the report will be returned with the "No Record" box marked.

The results of the 31 criminal record checks indicated "No Record" for five child care providers and criminal records for 26 child care providers. Four of the five record checks returned by PSP as having "No Record" were for providers who matched the DOC file with only the SSN identifier. Because more than one person should not have the same SSN, one of the following situations exists: The provider's SSN at the CCIS agency is incorrect; the SSN on the DOC file is incorrect; or this is the same provider using different names and different DOBs. The fifth record check was a provider who was referred to OIG by the CCIS agency because of using two names and three SSNs. Because our first request using one of the names and SSNs came back "No Record," we used the other name and a different SSN for this provider and requested a new criminal record check. This record check again came back as "No Record." Because of the information provided to us, we do not know what is correct and we cannot determine if these five providers have criminal records.

To determine if the 25 paid providers with criminal records were convicted of serious crimes, we compared their offenses with the list of offenses cited in the CPSL. We determined that 11 providers had been convicted of crimes defined in the CPSL. Table I lists 27 serious convictions of these 11 providers, as found on the PSP criminal record check reports:

Table I

As shown in Table I, one provider was convicted of voluntary manslaughter. We determined that this provider was paid $4,746 to provide child care services during the period August 1, 2000, through March 12, 2001, even though this person was incarcerated at that time. According to DOC's records, this provider has been incarcerated since September 28, 1998, and remained in prison as of July 18, 2001 (See Conclusion I-B). Another provider convicted of a felony drug offense was listed as a multiple-state offender. Information regarding the arrests in other states is not provided on the PSP criminal record checks. Another provider was convicted of seven felony drug offenses and aggravated assault. This provider was paid $1,810 to provide child care services during the period August 1, 2000 through October 27, 2000.

In addition to the 11 child care providers definitely convicted of serious crimes (i.e. crimes listed in the CPSL), we also found that four of the remaining 14 providers were arrested for drug offenses, which may have given rise to conviction for serious crimes.¹ We determined that the 11 providers convicted of serious crimes and the four arrested for drug offenses were paid approximately $61,000 for the period December 1999 to May 2001. One provider, with felony drug convictions, was paid more than $12,000.

Of the remaining ten providers with criminal records, we noted that three were also listed as multiple-state offenders. Although the three providers were not convicted of serious crimes (i.e. crimes listed in the CPSL) in Pennsylvania, we do not know what offenses were committed in other states. Therefore, we could not determine if these providers were convicted of serious crimes. According to CCIS records, we found that these multiple-state offenders received approximately $12,500 for child care services between December 1999 and February 2001. The other seven providers were not convicted of serious crimes. In summary, CCIS agencies paid the 25 unregulated providers with criminal records approximately $103,000 for the period December 1999 to May 2001.

Table II lists 105 additional convictions, not listed in the CPSL, of the 25 child care providers, as found on the PSP criminal record check reports:

Table II

^*committed over 5 years ago.

On August 1, 2001, DPW announced that beginning that month, it "will begin phasing in a requirement that all relative-neighbor caregivers in the subsidized child-care program obtain child-abuse and criminal-history clearances." DPW is implementing the required clearances administratively because legislation on this issue has not been passed. "Clearances will be free for parents who receive a child-care subsidy and choose relative/neighbor caregivers [unregulated providers]." The plan, called CareCheck, will continue to allow parents "to choose their own relative-neighbor provider as long as the provider meets the standards of the existing CPSL." "Parents who choose their child's grandparents, aunts and uncles can waive the background clearances requirement." However, we determined that of the 25 paid providers with criminal records, two providers were identified as grandparents and one an uncle, two of which had serious offenses. One grandparent was convicted of a felony drug offense and the uncle was convicted of statutory rape and corruption of minors.

On October 16, 2001, DPW stated that CCIS agencies began submitting criminal record and child abuse background checks as of the end of August 2001 for unregulated providers of new families who applied for participation in the program (parents can request waivers for grandparents, aunts and uncles). We requested the number of background checks submitted by CCIS agencies since August 2001 and how many were completed for processing by the PSP for criminal record checks and DPW for child abuse background checks. Management did not provide information identifying how many background check applications it received from CCIS agencies since August 2001. Management stated it "entered 1,000 applications into the review process of which 400 are completed (criminal and child abuse history) and the remaining 600 are being inputted into the system." DPW did not indicate if completed meant that the results were returned to the CCIS agency and the family.

In our opinion, child care providers convicted of any crimes listed in the CPSL, including grandparents, aunts and uncles, should not be allowed to receive funds through the program. We believe that the Commonwealth has an obligation to implement effective measures to protect children whose care is being funded by the Commonwealth. Paying providers who have a history of serious crime convictions increases the possibility that the child being cared for will be in danger. In addition, we believe parents should be made aware of providers' complete criminal records so that they can make an informed decision regarding their child care.

RECOMMENDATIONS

We recommend DPW work with members of the General Assembly on legislation to require and pay for criminal record checks for all unregulated child care providers. We also recommend that DPW help parents to select a different provider if their current provider, including a grandparent, aunt or uncle, was convicted of serious offenses (i.e. those listed in the CPSL). Additionally, we recommend that DPW make available to parents all offenses identified on PSP criminal record checks for their provider in addition to serious crimes, so that the parents can decide if these providers should care for their children. We recommend that CCIS agencies assist families in identifying other available child care services.

DPW RESPONSE

The DPW agrees that Commonwealth funds were paid to some childcare providers who would not be allowed to work in a regulated daycare facility. However, the DPW disagrees with the AG's method of computing statistics regarding relative/neighbor providers convicted of serious crimes. The DPW also disagrees that paying these providers represented any breach of policy. While the AG's findings are informative, the DPW has begun to implement CareCheck, a program to require child abuse and criminal history clearances for relative/neighbor providers. The DPW will continue to phase in CareCheck over the next year.

Out of 5,697 relative/neighbor providers, the AG found 11, or 0.19%, that had been convicted of crimes that would prevent the provider from working in a regulated daycare facility as per the Child Protective Services Law (CPSL)¹.

The AG's statistical finding that 84.6% of relative/neighbor providers have a criminal record is patently misleading. This finding is based on a sample of 26 relative/neighbor providers out of the 5,697. Of those 26 relative/neighbor providers, the AG found 22 providers with criminal records. Again, only 11 of those providers have been convicted of crimes listed in the CPSL. It appears that these findings indicate that the sample was neither random, nor representative, of the relative/neighbor provider population.

It should be noted that when the AG initiated this audit, the DPW did not have a policy or legal basis for prohibiting payments to relative/neighbor providers who were convicted of crimes. Consequently, the AG audit did not cite any legal authority that the DPW could use to refuse payments to relative/neighbor providers convicted of crimes.

The DPW has been committed to doing voluntary background clearances for relative/neighbor providers at the request of parents who believe such care best meets their needs. As the DPW worked toward implementing a voluntary clearance process earlier this year, some legislators expressed support for mandatory clearances. The DPW supported legislation for mandatory clearances and when legislation did not pass, the DPW administratively implemented this requirement through CareCheck on August 15, 2001.

CareCheck prohibits any relative/neighbor provider who has a founded report of child abuse within the previous five-year period or who has been convicted of a crime listed in the CPSL from participating in the subsidy through the Child Care Works program. An exemption from the clearances is permitted for all relative/neighbor providers affirmed by the parent as being the child's grandparent, aunt, or uncle by blood or marriage. As of November 9, 2001, the DPW processed 2,029 CareCheck applications with four ineligible providers.

This finding does not, as DPW states in its response, present statistics indicating what percentage of the relative/neighbor provider population have criminal records. The finding addresses the fact that during our audit we found 25 providers with criminal records who allegedly received state funds and 11 of those individuals had been convicted of committing serious crimes. We clearly indicate in the finding that the providers found to have criminal records came from a stratified group of the overall provider population given to the auditors by DPW. The stratified group were those providers whose SSN matched the SSN of a person on a listing of incarcerated individuals.

The 84.6 percent number noted in the background section of the audit report simply represents the percentage of the stratified sample of providers, as described above in the first paragraph, who were also listed in the PSP criminal records file - nothing more. We never indicated in our report that 84.6 percent number represented the percentage of relative/neighbor providers having a criminal record.

What is "patently misleading" is DPW's response stating that the AG found less than two-tenths of one percent out of 5,697 relative/neighbor providers had been convicted of crimes that would prevent the provider from working in a regional daycare facility as per the CPSL. While DPW's response is a statement of fact, it is also a misuse of the facts. The AG had criminal record checks done on only 31 providers out of the 5,697 population of providers. DPW then takes the results of our limited stratified sample and calculates a percentage related to crime convictions that includes 5,666 providers on which there were no criminal record checks performed. This clearly is a misrepresentation of the AG's testing results.

Again, we have no idea what percentage of the 5,697 relative/neighbor providers submitted to us by DPW have criminal records or were convicted of serious crimes because we did not perform a criminal records check on all 5,697 providers or on even a statistical representative sample of the providers. We only had the criminal records check done on a limited stratified sample of the providers and nowhere in the finding do we state that our sample is random or representative of the relative/neighbor provider population.

Our finding does not cite DPW for failing to adhere to policies, regulations or laws that prevent payments from going to relative/neighbor providers who were convicted of crimes. What our finding cites is the lack of DPW policy and procedures to prevent state tax dollars from being paid to such providers, especially those convicted of serious crimes.

With respect to CareCheck, we believe that all unregulated providers should have criminal record checks conducted, including a grandparent, aunt or uncle. As noted in the audit report, we found one grandparent was convicted of a felony drug offense and an uncle was convicted of statutory rape and corruption of minors.

DPW provides no reasonable justification for delaying implementation of CareCheck. It states that when the audit was initiated it had no policy or legal basis for prohibiting payments to providers convicted of committing crimes and that it supported and was awaiting passage of legislation for mandatory clearances. However, as DPW also notes when legislation did not pass it proceeded to implement CareCheck administratively. This belated action contradicts DPW's excuse that legislation was required before it could act.

Conclusion I-B: Payments Made to Child Care Providers for Supposedly Caring for Children While Serving Time in Prison

Our audit of the Department of Public Welfare's (DPW) Subsidized Child Day Care Program (program) found that, according to records, payments were made to unregulated child care providers for supposedly providing child care services while serving time in a Pennsylvania state correctional institution (SCI).

During our audit, we received from the Pennsylvania State Police (PSP) criminal record checks (See Appendix D for request form) for the names of 31 unregulated child care providers and determined that 25 providers paid with Commonwealth funds had criminal records, including 11 with records of committing serious crimes (i.e. offenses listed in the Child Protective Services Law) (See Conclusion I-A). We requested from the Department of Corrections (DOC) the dates these 25 providers were in prison and compared the dates of their incarceration to the dates these individuals supposedly cared for children and were paid by CCIS agencies. We found that CCIS agencies issued checks for child care services payable to six individuals who were incarcerated in an SCI at the time the services were supposedly rendered. Two of the six providers were arrested the same day records indicated they were caring for children. Table I, which follows, lists dates the six providers were in prison, dates paid for providing child care while in prison, number of days each provider supposedly "cared for children" while in prison, amount paid while in prison, and reported crimes committed:

Table I

(a) DOC records.
(b) Provider remains in prison as of July 18, 2001.

As noted in Table I, CCIS agencies issued checks made out to six individuals totaling $9,667, even though these providers were incarcerated during the time they were supposedly providing child care services.

Following is a brief summary of these six providers:

CCIS of Allegheny County

• Provider 1 - This provider began receiving payments for providing child care services in May 2000. On March 30, 2001, after violating his parole, he went to prison to continue his drug offense sentence. He continued to receive payments for providing child care from the day he went to prison until May 31, 2001. During this period, the provider supposedly cared for children for 45 days and the CCIS agency issued checks in his name totaling $1,936. After we informed DPW of the situation in mid-June, DPW stated that payments had stopped. DOC records show this provider was still in prison as of July 18, 2001. DPW management stated that this case was referred to the Pennsylvania Office of Inspector General. The provider received a total of $12,050 for child care services from May 2000 through May 2001.

• Provider 2 - This provider was in prison from June 16 to July 13, 2000. According to CCIS agency records, the provider was paid $875 to care for children 18 of the 28 days DOC records show he was in prison. We also noted that the provider was arrested for simple assault and terroristic threats on June 9, 2000, the same day records indicate he was paid to provide child care. The provider received $4,099 for child care services from May 2000 through August 2000.

CCIS of Erie County

• Provider 3 - This provider was incarcerated for burglary from March 12, 1997, to January 28, 2000, a period of 1,053 days. The provider submitted an invoice in early February 2000 requesting payment for providing child care to three children during the last 23 days he was in prison. He was paid $592. According to the PSP criminal record check and CCIS agency files, this provider was subsequently arrested twice while caring for children: April 24, 2000, on drug violations and September 22, 2000, for criminal conspiracy/robbery and theft by unlawful taking or disposition. The provider received a total of $7,663 for child care services from January 2000 through September 2000.

• Provider 4 - Records indicate this provider went back to prison on September 22, 2000, after violating his parole. As of July 18, 2001, he was continuing to serve a drug offense sentence. However, for the first 36 days he was incarcerated, the CCIS agency issued checks totaling $757 for providing 21 days of child care.

CCIS of West/Southwest Philadelphia

• Provider 5 - According to DOC records, this provider was sent to prison on September 28, 1998, and was in prison as of July 18, 2001. During this period, specifically August 1, 2000, through March 12, 2001, the CCIS agency issued checks payable to the provider totaling $4,746 for supposedly performing child care services. When we notified DPW that the provider had been convicted of voluntary manslaughter and other charges, DPW contacted the provider's CCIS agency stating that they should inform the parents. The CCIS agency sent two letters, one on January 25, 2001 and another on February 8, 2001, to the parent of the children stating, "We have received notice that your child care provider [provider's name] of October 2000 has criminal history information on file with the Pennsylvania State Police." A letter dated February 19, 2001, addressed to the parent and purported to have been signed by the provider stated, ". . . I wanted to let you know that I cannot watch over the girls as of the 12th of March [2001]." We referred this matter to our Office of Special Investigations (OSI) in April 2001.

  OSI interviewed the children's parent, conducted reviews at a county assistance office, and reviewed third-party records. OSI's summary of findings states, "There is substantial evidence of fraud in connection with the payments: [provider] was an inmate in a state correctional institution during the time the child care services were supposedly provided. [Parent's name], the children's [parent], was present when the [CCIS agency] checks payable to [provider] were cashed and [parent's] photograph appears in the check cashing agency's records as the photograph of the person who cashed the checks."

  In addition to the $4,746 issued to the provider by the CCIS agency, the investigation also found that, according to DPW records, electronic benefit transfers totaling approximately $5,750 were paid to the parent for child care services supposedly performed by the provider from February 1999 to July 2000. As previously noted, the provider was in prison during that time.

  We referred this matter to the Philadelphia District Attorney's Office for prosecutorial review.

• Provider 6 - This provider was sent to an SCI on August 13, 1999, to continue serving his robbery sentence after violating his parole, and was transferred on April 24, 2000, to a pre-release center that provides a structured, supervised living arrangement. According to DOC management, the provider is considered incarcerated during his stay at the pre-release center and is responsible to seek and obtain employment. Therefore, we do not know if the provider cared for children between September 20 and October 26, 2000, for which he was paid $761.

RECOMMENDATIONS

DPW should strengthen its commitment to the program by taking the following steps:

• ensure that people who are incarcerated do not get paid for providing child care;

• work with DOC and the CCIS agencies to implement file matches that will ensure payments to providers for child care services are justified; and

• determine who actually received and cashed the checks for the incarcerated individuals and seek repayment of Commonwealth funds from those individuals who did not provide the child care services but were paid.

DPW RESPONSE

The DPW agrees that in all of the cases listed that the CCIS agency made payment to the address of the relative/neighbor provider as indicated in the report. However, since the relative/neighbor providers were incarcerated at the time of the payments, other individuals were fraudulently involved in cashing the checks.

The DPW vigorously pursues the prosecution of individuals who commit fraud, and works closely with the Office of Inspector General (OIG) to commence investigation and prosecution. Therefore, it is critical that the DPW have information about suspected fraud as quickly as possible. It is disappointing that the AG did not inform the DPW in a timely manner of five of the six cases involving fraud. The AG's delay in informing the DPW and the CCIS agencies may jeopardize prosecutions.

Provider One - On June 25, 2001, the DPW, after receiving information from the AG, notified the CCIS agency of Allegheny County that the individual was incarcerated. The CCIS agency terminated the provider agreement with the provider. In addition, the CCIS agency terminated the parent from subsidized childcare. The CCIS of Allegheny County referred this case to the OIG on July 6, 2001.

Provider Two - The AG did not report this case of suspected fraud to the DPW. Therefore, the CCIS of Allegheny County was unaware that the individual was incarcerated; thus, the CCIS agency was delayed in making its referral to the OIG.

Provider Three - The AG did not report this case of suspected fraud to the DPW. Therefore, the CCIS of Erie County was unaware that the individual was incarcerated and the CCIS agency was delayed in making its referral to the OIG. It should be noted that the CCIS of Erie County had terminated payments to the provider on September 30, 2000, for reasons unrelated to the case of suspected fraud.

Provider Four - The AG did not report this case of suspected fraud to the DPW. Therefore, the CCIS of Erie County was unaware that the individual was incarcerated and the CCIS agency was delayed in making its referral to the OIG. The CCIS of Erie County terminated payments to the provider on October 31, 2000, for reasons unrelated to the case of suspected fraud.

Provider Five - The AG did not report this case of suspected fraud to the DPW. In addition, the AG investigator advised the CCIS agency not to disclose any information on the provider until the investigation was completed. On November 5, 2001, the AG reported that the OIG was aware of the case and was working with the Philadelphia District Attorney's Office. The CCIS of West/Southwest Philadelphia terminated the payments to the provider on March 12, 2001, for reasons unrelated to the case of suspected fraud.

Provider Six - The AG did not report this case of suspected fraud to the DPW. Therefore, the CCIS of West/Southwest Philadelphia was unaware that the individual was incarcerated, and the CCIS agency was delayed in making its referral to the OIG. The CCIS of West/Southwest Philadelphia terminated payments to the provider on March 19, 2001, for reasons unrelated to the case of suspected fraud.

The DPW is taking the following two steps to prevent fraud:

1. Beginning September 2001, as part of the CareCheck requirements, the DPW began requiring all relative/neighbor providers paid through the CCIS agencies to come into the CCIS office for a face-to-face interview. During that interview, the relative/neighbor provider is required to present photo identification, proof of Social Security Number, proof of age, and validation of his or her current address. The CCIS agency explains to the relative/neighbor provider the conditions contained in the provider agreement and the relative/neighbor provider must certify that he or she will comply with all terms of the provider agreement.

2. The DPW is revising the current Memorandum of Understanding with the Department of Corrections to implement a system to match files of relative/neighbor providers to ensure that the relative/neighbor providers who are receiving payment from the CCIS agencies are not incarcerated.

AUDITORS' CONCLUSION

We are pleased that DPW agrees with the accurate information presented in Conclusion I-B and throughout the rest of the audit report. However, it is unfortunate that DPW's expressed interest in the vigorous pursuit of individuals who commit fraud did not motivate DPW to institute a procedure for obtaining criminal record checks of child care providers prior to August 2001, or to actively assist the Department of the Auditor General's efforts to get child care provider information directly from CCIS agencies, or to start file matches of child care provider lists with DOC much earlier.

When we concluded, based on reviews of the limited evidence we were able to obtain, the possibility of fraudulent activities likely occurred among the six child care providers supposedly caring for children while serving time in prison, we properly referred these suspected fraud cases for prosecutorial review directly to the respective District Attorneys' Offices. According to Government Auditing Standards, "In some circumstances, auditors should report illegal acts directly to parties external to the audited entity." We believe, that it is appropriate for these activities to be reported to agencies external to the audited entity. However, as per DPW's request, we also provided them with information on these providers.

Information concerning Provider 1 was brought to DPW's attention in the early stages of acquiring evidence because we found that Provider 1 was receiving payments during our fieldwork. Providers 2, 3, 4 and 6 were no longer receiving payments at the time we found suspected fraud. As noted in the audit report, our Office of Special Investigation properly referred the case, involving Provider 5, to the Philadelphia District Attorney's Office. Additionally, the suspected fraud cases involving Providers 1, 2, 3, 4 and 6 have been sent to their respective District Attorney's Offices for prosecutorial review. We are not aware of any evidence that any of the above suspected fraud information was not presented timely under the circumstances or that possible prosecutions have been jeopardized.

As emphasized throughout the report, and pointed out in the recommendation for Conclusion I-A, DPW should help parents who seek to select a reliable provider and CCIS agencies should assist families who request child care services. DPW and CCIS agencies need to work with families as well as potential providers to adequately manage the program in a cost- effective and efficient manner and devise solutions that do not disrupt parents' work schedules or place extraordinary demands on providers. Controls to prevent and detect fraud can be implemented in a practical manner that will minimize the risk of fraud while maintaining program accessibility for parents and providers.

Conclusion II-A: Noncompliance by CCIS Agencies With DPW's CCIS Policy and Procedures Manual

During our audit of unregulated child care providers in the Subsidized Child Day Care Program (program), we found that CCIS agencies failed to comply with certain requirements in the Department of Public Welfare's (DPW) CCIS Policy and Procedures Manual (manual).

DPW implements the program through contracts with CCIS agencies. DPW's responsibilities include: distributing available funding equitably, monitoring the contract through management reviews, and keeping records to assure compliance with regulations. CCIS agencies are established to manage this program. CCIS agencies' responsibilities include: determining the eligibility of families who are seeking child care services, establishing agreements with providers for participation in the program, and maintaining family files to assure compliance.

Our compliance test work with respect to the manual was limited to the use of provider and interim agreements, verifying the age of the provider, and ensuring that the number of children in the program cared for by a provider did not exceed requirements. We did not verify if CCIS agencies determined eligibility correctly and we did not evaluate if CCIS agencies pay child care providers the correct subsidy rate.

Use of Provider and Interim Agreements

A "provider agreement" is the standard agreement between the provider and the CCIS agency signed by providers who are willing and eligible to participate in the program. The provider agreement, published in the manual, includes information on the provider and the children to be cared for, the purpose of the program, the effective period, the participation standards (including health and safety requirements), and certain conditions.

An "interim agreement" (shown in Appendix B) is another agreement between the provider and the CCIS agency. It includes information on the provider and children, and an invoice showing what children were cared for on which days during the month. An Attachment A, which contains blanks to fill in the provider's date of birth (DOB) and health and safety requirements, is included with the interim agreement for unregulated providers. CCIS agencies use the interim agreement when the child care provider is unwilling to sign a provider agreement. The interim agreement can be used for up to 183 days (six months). A provider agreement must be in place by the 183rd day or a different provider must be chosen. Additionally, if the provider is unwilling to sign an interim agreement, the parent can complete the interim agreement and the CCIS agency will reimburse the parent for the cost of care, less the parent's assessed co-payment for up to 183 days.

The interim agreement appears to be a transitional agreement for providers of parents with children who are no longer on cash assistance. We found, however, that the CCIS of Northwest Philadelphia does not utilize interim agreements. Instead, it requires all unregulated providers to complete the provider agreement before being paid. Not using the interim agreement does not violate the manual, but it does pose a question as to whether the interim agreement is necessary. We did not analyze the necessity of the interim agreement. Rather, we examined whether CCIS agencies were in compliance with the use of the interim agreement as written in the manual.

Our examination, during our on-site testing at four CCIS agencies (See Conclusion II-B), found the following instances of noncompliance associated with the use of provider and interim agreements for unregulated providers:

1. CCIS agencies paid providers without having signed agreements on file.

   According to the manual, a CCIS agency is responsible "to ensure that signed agreements with child day care providers are on file to participate in the Subsidized Child Day Care Program." We found that four providers from the CCIS of West/Southwest Philadelphia were paid a total of $7,605 and one provider from the CCIS of Northwest Philadelphia was paid $843 during calendar year 2000 for child care services without having signed interim or provider agreements on file. There were no agreements in these provider files as of April 2001 during our on-site testing. CCIS agencies' payments to providers who have not signed agreements may be made to individuals with incorrect name, social security number (SSN), etc. In addition, the providers may not be aware of the laws, health and safety standards, or other requirements listed on the interim or provider agreements. CCIS agencies should follow the manual when paying providers for child care services.

2. A CCIS agency was not using the required provider agreement.

   The CCIS of Northwest Philadelphia does not use the provider agreement published in the manual. Their revised agreement did not include a place to indicate if the children cared for are grandchildren, in which case providers are exempt from the three-child limit (discussed later in this conclusion). It also does not include the times care is being given. This information is necessary to ensure that the provider is not exceeding the three-child limit and to ensure that child care services are given when the parent is working as generally required.

3. Nonuse of Attachment A.

   The manual addresses the use of the interim agreement and invoice in several places. In fact, it occasionally references the Appendix in the manual in which the interim agreement is located (See Appendix B of this report). The interim agreement includes two pieces of paper. The first requests basic information on the front and includes a blank invoice on the back. The second page, titled Attachment A, contains blanks to fill in the provider's DOB and lists health and safety requirements. The bottom of the first page states, "see invoice listed on back and Attachment A." This implies that Attachment A is part of the interim agreement, even though the manual does not address the use of Attachment A. In addition, we believe that the information contained on Attachment A is important and should be conveyed to all unregulated providers. The DOBs of providers are necessary for requesting criminal record checks.

   Therefore, as part of our on-site testing to verify name, SSN and DOB, we reviewed the provider files to determine whether Attachment A's were present for providers using interim agreements. We found that the CCIS of:

• West/Southwest Philadelphia was not aware Attachment A existed. CCIS management stated that it will use Attachment A beginning in July 2001. We found 21 interim agreements without Attachment A.

• Erie County used Attachment A; however, 12 Attachment A's could not be found in the provider files.

• Dauphin County used Attachment A; however, we found an Attachment A with only four of the 13 interim agreements we reviewed. CCIS management stated that Attachment A is not required, but began to use it consistently in the fall of 2000.

Given the above CCIS management responses, it appears that the use of the Attachment A varies by CCIS agency. We believe DPW needs to clarify the use of Attachment A in its manual or eliminate Attachment A and revise the interim agreement form to include the Attachment A information.

The interim and provider agreements require that "The Provider shall be 18 years of age or older." We found one provider's DOB on the computer file sent to us indicated the provider was 17-years old. After our inquiry, CCIS management of Center City/South Philadelphia stated that they received verbal verification that the provider was 17, but said that "her agreement was signed stating that she was 18 or over, and a birth year of 1982 was written." The CCIS agency requested a copy of her birth certificate and stated that it confirmed she was 17. The CCIS agency notified the parent that his/her provider was ineligible to participate in the program and another provider must be selected. The provider was paid $2,095 from February 1 through December 1, 2000, when the CCIS agency, through our inquiry, determined the ineligibility status. Paying a provider under 18 years of age violates DPW regulations.

Attachment A of the interim agreement and the provider agreement require certification that the provider does "not care for more than three children, who are not my children, my stepchildren, my foster children or my grandchildren." Additionally, the provider must certify he/she is aware that state law requires that persons providing child care services to more than three children who are not exempt because of their family relationship must be registered or be certified by the state.

We found that a provider had provider agreements with two CCIS agencies. Based on information available, the provider was being paid for three non-exempt children at one CCIS agency and two non-exempt children at another. In reviewing records from both CCIS agencies for the times the mothers of these children worked and when the children were being cared for, we found that the five children were listed as being cared for simultaneously during a portion of a day. Although the overlap in this case is for only part of the day, caring for five non-exempt children simultaneously violates DPW regulations.

RECOMMENDATIONS

We recommend that DPW:

• consider evaluating whether the interim agreement is necessary. If the interim agreement is necessary, clarify the use of Attachment A in the manual or eliminate Attachment A and revise the interim agreement to include the Attachment A information;

• periodically perform provider computer matches to determine if an unregulated child care provider is participating with more than one CCIS agency and determine, in those situations found, whether the provider is caring for more than three non-exempt children at the same time; and

• monitor CCIS agencies to ensure compliance with the manual.

  We also recommend that the CCIS agencies:

• establish controls and procedures that will reasonably allow them to ensure that:

• CCIS agencies do not pay providers until a signed interim or provider agreement is on file;

• the information in Attachment A is read and completed by all unregulated providers (See DPW recommendation);

• providers are at least 18 years of age; and

• providers care for no more than three non-exempt children simultaneously.

• use the provider agreement published in the manual.

DPW RESPONSE

This conclusion included several findings that will be addressed separately.

1. CCIS agencies paid providers without having signed agreements on file.

   The DPW agrees with this finding. In order to correct this finding, the DPW will implement enhanced monitoring procedures of the CCIS agencies to determine compliance with DPW requirements, which are included in the CCIS Policy and Procedures Manual. In particular, the DPW will review CCIS agency files to verify that they contain signed relative/neighbor provider agreements. In addition, the CareCheck requirements include that all relative/neighbor providers come into the CCIS office for a face-to-face interview, at which time the relative/neighbor provider signs the provider agreement.

2. A CCIS agency was not using the required provider agreement.

   The DPW agrees with this finding. In order to correct this finding, the DPW will include in the implementation of the enhanced monitoring procedures verification that the CCIS agencies are using the required provider agreement.

3. Nonuse of Attachment A.

   The DPW agrees with this finding. In order to correct this finding, the DPW will include in the implementation of the enhanced monitoring procedures verification that the CCIS agencies are using Attachment A.

4. Verifying the Age of the Provider.

   The DPW agrees with this finding. The finding indicated that the CCIS agency paid a provider who was younger than 18 years of age; the provider fraudulently misrepresented his or her age on the provider agreement. As a result, the CCIS of Center City/South Philadelphia is in the process of submitting this case to the OIG. At the face-to-face interview, required through CareCheck, the CCIS agencies will now verify the age of relative/neighbor providers.

5. Ensuring That the Number of Children in the Program Cared for by a Provider Did Not Exceed Requirements.

   The DPW agrees with this finding. The finding indicates that the relative/neighbor provider had five unrelated children in care at one time. It should be noted that the relative/neighbor provider was receiving a subsidy through two CCIS agencies.

   In Pennsylvania, if there are four or more unrelated children in the home at one time, the person providing the care must be regulated by the DPW. The DPW is concerned that the AG did not report this illegally operating facility to the DPW in a timely manner. An illegal daycare facility presents a risk to the health and safety of children in care.

   The provider agreement that relative/neighbor providers sign includes a provision that the caregiver will not care for more than three unrelated children at one time. During the face-to-face interview required under CareCheck, the CCIS worker explains this provision to relative/neighbor providers. In addition, the consumer education that is provided by CCIS workers to parents who are receiving a childcare subsidy includes an explanation of the legal requirements for all childcare providers.

   When the DPW implements the integrated childcare management information system with a centralized provider file, it will be able to determine the number of children who are enrolled with each relative/neighbor provider and prevent enrollment of more than three unrelated children at one time. In the interim, the DPW will conduct a sample review of relative/neighbor providers to determine if there is any duplication between CCIS agencies and if that duplication results in more than three unrelated children at one time.

AUDITORS' CONCLUSION

We applaud DPW's willingness to enhance its monitoring procedures of the CCIS agencies to ensure compliance with DPW's CCIS Policy and Procedures Manual and are pleased that it agrees with this conclusion. However, we take exception to remarks concerning the noncompliance issue regarding a provider caring for five non-exempt children simultaneously. DPW stated "that the AG did not report this illegally operating facility to the DPW in a timely manner."

In this situation, after we determined that an unregulated child care provider had provider agreements with two CCIS agencies and was caring for five children, we asked the director of the CCIS agency, where we were conducting our on-site testing, to contact the other CCIS agency to determine the time period during which these children were in care. The director refused to do so, stating that it would be better if we contacted that CCIS agency separately. Therefore, subsequent to our on-site visit, we sent the other CCIS agency a written request for documentation. The lack of cooperation by this CCIS agency delayed our determination of this noncompliance issue. We are not aware of any evidence that the above situation was not presented in a timely manner.

Conclusion II-B: Improvements Needed in CCIS Agencies' Record-keeping Procedures

CCIS Agencies' Computer Files for Child Care Providers Contained Missing and Invalid Information

At our request, the Department of Public Welfare (DPW) provided computer files created by CCIS agencies containing information on 5,697 providers from 59 CCIS agencies (See Appendix E for the number of unregulated providers by county). The files were to contain the name, social security number (SSN), date of birth (DOB), and address of each unregulated provider who received Commonwealth funds for participating in the Subsidized Child Day Care Program (program) on or about October 12, 2000. We found some of this information was missing and invalid.

We reviewed each CCIS agency computer file to ensure provider names were reasonable and not duplicated. We then combined the files into one master database and analyzed the information by:

• reviewing the database for missing information;

• reviewing SSNs and zip codes to ensure the correct number of digits were present;

• identifying questionable DOBs; and

• comparing providers' SSNs and DOBs to a Look Up System Software Program to ensure the SSN was issued and that it was issued after the provider's DOB.

Our tests identified providers with a missing or questionable DOB; a SSN that was issued prior to the DOB; a missing SSN and DOB; a missing or invalid SSN; and an incorrect or incomplete address. We also found some providers listed twice on the computer file. Therefore, we requested follow-up information from 31 CCIS agencies regarding 333 providers.

Responses received from the CCIS agencies provided some additional information. We incorporated this information into the master database and again performed the previous tests to ensure that the new information was reasonable. However, several concerns remained unresolved.

Subsequent to the above test work, we performed additional tests on the master database, including:

• identifying duplicate names of providers at different CCIS agencies;

• identifying providers with duplicate SSNs or duplicate addresses;

• comparing providers' name, SSN, and DOB to a Department of Corrections (DOC) file of individuals incarcerated in a Pennsylvania state correctional institution (SCI) between November 1998 and May 2000;

• inserting providers' SSN, who had questionable DOBs, into the internet genealogy site, www.rootsweb.com, Social Security Death Index, to determine if any providers' SSNs were listed; and

• inserting providers' names that matched the DOC file of incarcerated individuals into the inmate locator at the DOC web site, www.cor.state.pa.us. The inmate locator identifies if an individual is currently incarcerated in an SCI.

Based on our additional test work, we identified providers with: a missing SSN; a SSN issued prior to the DOB; a missing SSN and DOB; more than three children; the same address; an identical SSN and/or DOB; a missing or questionable DOB; incorrect or incomplete address; a SSN associated with a dead person; and a provider under 18 years of age. We also found providers who were incarcerated. Therefore, we again requested follow-up information from 30 CCIS agencies regarding 202 providers, including 130 unresolved concerns from a prior request.

In addition, we asked 23 CCIS agencies if any of their 3,943 provider names originally given to us were never paid with Commonwealth funds. We chose these 23 because they had other outstanding issues needing clarification or correction at that time. The responses identified 217 (five percent) providers who were never paid. These provider names were excluded from the population for test purposes during our on-site test work which is discussed later in this conclusion.

Based on CCIS agencies' responses, we were able to resolve most concerns. Table I shows the unresolved concerns by CCIS agency:

Table I

According to CCIS agency management, some problems cannot be resolved because certain providers are no longer part of the program. Other problems are pending, but some CCIS agencies are withholding payment until correct information is submitted. We believe that if proof of name, DOB and SSN were maintained at the CCIS agencies, most of these concerns would never have occurred.

In addition to the 75 unresolved concerns, we noted exceptions that include:

• CCIS agencies issued checks for child care services to providers incarcerated in an SCI (See Conclusion I-B);

• a CCIS agency paid a provider who was under 18 years of age (See Conclusion II-A); and

• an unregulated child care provider cared for more than three non-exempt children simultaneously (See Conclusion II-A).

Our audit also included performing on-site testing at four CCIS agencies: Dauphin County, Northwest Philadelphia, West/Southwest Philadelphia, and Erie County (See page 37). During our on-site testing, we compared provider information on 245 providers at these CCIS agencies to information CCIS agencies provided us in their computer files. We found that the CCIS agencies had submitted 21 (8 percent) typographical errors to us. We also performed completeness test work at the four CCIS agencies to determine if they submitted the correct provider names and if those providers were ever paid with Commonwealth funds.

The completeness test work found a specific problem at the CCIS of Northwest Philadelphia and a general problem at all CCIS agencies. The problem at Northwest Philadelphia involved CCIS management not including all unregulated providers on its computer file provided to us. Out of our random sample of 25 unregulated providers from the November 2000 check register for payments of October 2000 child care services who were not included in the computer file provided to us, we found 19 that should have been included in our file. Management stated that the problem occurred when the unregulated provider file was copied to another file. However, the error was not discovered by the CCIS agency until auditors performed completeness test work and requested reasons why some providers on the CCIS agency's records were not on the list submitted to us.

In addition to the CCIS of Northwest Philadelphia problem, we found that we could not determine if the four CCIS agencies submitted the correct provider names because the Child Account Management Information System (CAMIS), required to be used by all CCIS agencies to track the program, does not provide an audit trail to indicate when information is added or changed.

Our on-site test work revealed that 11 providers, not previously identified as the 217 providers who CCIS agencies had previously identified as never being paid, were also never paid by these CCIS agencies and should not have been included in the computer files. In addition, we tested 184 of these 217 providers to confirm that they were never paid. We found 19 (9 from the CCIS of West/Southwest Philadelphia and 10 from the CCIS of Erie County) of these 184 were in fact paid. Therefore, these 19 should have been included in our population for test purposes.

We believe that many of these concerns would have been avoided if proof of name, SSN and DOB were maintained in the provider file at the CCIS agencies. Additionally, information provided to auditors should be reviewed for accuracy and completeness. If we had requested criminal record checks on the 5,697 providers based on the original information provided through DPW, hundreds of criminal record checks could have been returned with incorrect conclusions because of inaccurate and/or incomplete information.

CCIS Agencies' Child Care Provider Files Contained Missing, Incomplete and Inconsistent Information

As indicated previously, we visited four CCIS agencies to perform on-site testing of child care provider files. Our test found missing, incomplete and inconsistent information.

As part of our audit, we examined 245 unregulated child care provider files. The four CCIS agencies visited were the CCIS of Dauphin County, Northwest Philadelphia, West/Southwest Philadelphia, and Erie County. The number of provider files examined at each CCIS agency, respectively, were 65 (100 percent of unregulated providers), 60 of 233 (25 percent of unregulated providers), 60 of 445 (13 percent of unregulated providers), and 60 of 375 (16 percent of unregulated providers).

Our examination was limited to reviewing providers' names, SSNs, and DOBs, on provider or interim agreements and on IRS Form 1099-Misc. Inaccurate provider information on file with a CCIS agency could result in the failure to identify or the untimely identification of a provider with a criminal record. According to the Pennsylvania State Police (PSP), two of three provider identifiers need to match criminal record information to produce a criminal record check for a provider. The identifiers include the correct name, SSN and DOB. If only one is correct a "No Record" report will be issued by PSP when the possibility of a criminal record exists. Therefore, it is critical that the provider's name, SSN and DOB listed in CCIS agency provider files be correct. We also verified the dollar amount on IRS Form 1099-Misc for calendar year 2000 was correct and tested for certain compliance issues (Conclusion II-A).

In addition to the discrepancies regarding the providers paid with no signed agreement and the provider who cared for more than three non-exempt children explained in Conclusion II-A, Table II summarizes the remaining 74 discrepancies found in the 245 CCIS provider files:

Table II

Additional information on each type of discrepancy noted in Table II is addressed below.

Misspelled Provider Names

• We found providers' names misspelled on provider or interim agreements, and/or IRS Form 1099-Misc, which is a report of earnings given to the provider and the IRS. One provider's name on IRS Form 1099-Misc was different than the name on the interim agreement and management at the CCIS of West/Southwest Philadelphia did not know the correct name.

Incorrect Social Security Numbers

• We found providers' SSNs were incorrect on provider or interim agreements, and/or on IRS Form 1099-Misc. Additionally, several files contained more than one SSN, and the CCIS agencies did not know which SSN was correct for many of them.

Missing or Incorrect Dates of Birth

• We found 34 provider files did not contain DOBs. Additionally, one provider's DOB was missing the year of birth; another provider's DOB was different on the prior year and current year provider agreements and management did not know the correct DOB; and two providers' DOBs listed on their provider agreements did not match the DOBs on the providers' licenses.

Incorrect Information on IRS Form 1099-Misc

• One provider's first name and another's last name on their IRS Form 1099-Misc were incorrect, even though the names were correct on the respective provider agreement.

• SSNs on IRS Form 1099-Misc for eight providers were different from SSNs found in their provider files. CCIS agency staff writes the SSN on the CAMIS printout for use by its central office to produce subsidy checks. Because a different office performs check production, we believe that the errors occurred when the numbers were handwritten or when staff in the check production office keypunched the SSN into the payment system. Management could not verify the correct SSN in four instances.

• A provider's IRS Form 1099-Misc was understated by $600 because the first three payments made to the provider for caring for children were not included on the form.

Provider Overpaid

• We found a provider was overpaid $189 due to a manual adjustment error. CCIS agency management was not aware of the error.

Providers Referred to the Office of Inspector General

• A SSN on the provider agreement did not match the SSN on IRS Form W-9. Upon our request for proof of the correct SSN, CCIS staff contacted the provider who stated that Form W-9 contained the correct number. Previously, we determined that the SSN on Form W-9 was incorrect because it was issued prior to the provider's DOB. Asked to show a Social Security card as proof, the provider produced a SSN different from the two previous SSNs and stated that at one time she had two SSNs. She received $6,415 from the CCIS agency during calendar year 2000. The different SSNs were uncovered as a result of our audit inquiry. This case was referred by the CCIS agency to the Office of Inspector General (OIG) because of our audit.

• The CCIS agency provided auditors with two SSNs for a provider. Upon our inquiry, the CCIS agency could not determine the correct SSN. However, through further inquiry, the CCIS agency determined that the provider used two names, three SSNs, and has an agreement with a different CCIS agency. This case was referred by the CCIS agency to the OIG because of our audit.

RECOMMENDATIONS

We recommend that DPW:

• require CCIS agencies to obtain and maintain proof of name, SSN and DOB to confirm provider file information. This would ensure that accurate information is available to complete criminal background requests. In addition, the use of IRS Form W-9 would not be necessary;

• periodically perform reasonableness tests, such as reviewing www.ssa.gov/foia/highgroup.htm to verify SSN has been issued and inserting SSN into www.rootsweb.com, Social Security Death Index to verify SSN is not associated with a dead person; and

• revise CAMIS to include an audit trail that shows when information is added or changed.

We recommend that the CCIS agencies:

• ensure that all provider information is complete, consistent and correct. This can be done by:

• obtaining and maintaining proof of provider name, SSN and DOB;

• reviewing provider or interim agreements to ensure the information is fully completed;

• comparing information on the IRS Form 1099-Misc to provider file information to ensure that the name and SSN on IRS Form 1099-Misc is consistent; and

• comparing CAMIS and the payment system information to the provider file to ensure that the information is consistent.

• periodically review manual adjustments to identify any overpayments due to human errors;

• recover overpayments made to providers;

• reconcile IRS Form 1099-Misc dollar amounts to appropriate documentation to ensure that the amounts are correct; and

• ensure correctness of information before submitting it for audit.

DPW RESPONSE

This conclusion included two findings that will be addressed separately.

• CCIS Agencies' Computer Files for Child Care Providers Contained Missing and Invalid Information.

  The DPW agrees with this finding. The enhanced monitoring procedures that the DPW will implement will reinforce and review the requirements for the CCIS agencies to keep accurate, complete, and consistent records on identifying information of relative/neighbor providers. In addition, when the DPW implements the integrated childcare management information system with a centralized statewide provider file, there will be checks for duplication and verification of accurate identifying information, such as Social Security Number and birth date. In addition, a centralized childcare information system with a provider database will allow the DPW to conduct matches with other agencies.

• CCIS Agencies' Child Care Provider Files Contained Missing, Incomplete and Inconsistent Information. This included misspelled provider names, incorrect Social Security Numbers, incorrect dates of birth, and incorrect information on the IRS Form 1099-Misc.

  The DPW agrees with this finding. The DPW will reinforce this requirement through its enhanced monitoring procedures. In addition, during the face-to-face interview that CareCheck requires the CCIS agencies to conduct with the relative/neighbor provider, the relative/neighbor provider will have to verify date of birth and Social Security Number. Finally, when the DPW implements the integrated childcare management information system, it will assure that this information is accurate.

AUDITORS' CONCLUSION

Based on DPW's response, the conclusion and recommendations remain as stated above.

DISTRIBUTION LIST

The Honorable Mark S. Schweiker
Governor
Commonwealth of Pennsylvania
Harrisburg, PA 17120

The Honorable Vincent J. Fumo
Chairman
Senate Minority Appropriations Committee
545 Main Capitol Building
Harrisburg, PA 17120

The Honorable Robert J. Thompson
Chairman
Senate Majority Appropriations Committee
B-48 Main Capitol Building
Harrisburg, PA 17120

The Honorable Dwight Evans
Chairman
House Minority Appropriations Committee
512-E-3, Main Capitol Building
Harrisburg, PA 17120

The Honorable John E. Barley
Chairman
House Majority Appropriations Committee
245 Main Capitol Building
Harrisburg, PA 17120

The Honorable Clarence D. Bell
Chairman
Senate Consumer Protection & Professional Licensure Committee
20 East Wing, Main Capitol Building
Harrisburg, PA 17120

The Honorable Edward J. Lucyk
House of Representatives
302 Main Capitol Building
Harrisburg, PA 17120

The Honorable Mark B. Cohen
C/O Leon Czikowsky
417 Main Capitol Building
Harrisburg, PA 17120

The Honorable Barbara Hafer
State Treasurer
129 Finance Building
Harrisburg, PA 17120

Ms. Judy Maietta
Child Care Network
CCIS of Dauphin County
110 N. 26th Street
Harrisburg, PA 17103

Ms. Shirley Thomas
CCIS of Northwest Philadelphia
6350 Green Street
GR Floor Office Suite
Philadelphia, PA 19144-2520

The Honorable Lynne M. Abraham
Philadelphia County District Attorney
1421 Arch Street
Philadelphia, PA 19102

The Honorable Martin F. Horn
Secretary of Administration
207 Finance Building
Harrisburg, PA 17120

Mr. Philip R. Durgin, Executive Director
Legislative Budget & Finance Committee
400 Finance Building
Harrisburg, PA 17120

The Honorable Roger A. Madigan
Chairman
Joint State Government Commission
108 Finance Building
Harrisburg, PA 17120

Mr. Robert J. DeSousa, Esq.
Inspector General
Executive House
101 South Second Street, 3rd Floor
Harrisburg, PA 17101

Mr. Bob Quade (4)
State Library of Pennsylvania
Serials Records Section (PA DOCS)
Room G-48, Forum Building
Harrisburg, PA 17120

The Honorable Feather O. Houstoun (3)
Secretary
Department of Public Welfare
333 Health and Welfare Building
Harrisburg, PA 17120

Mr. Robert A. Snyder (2)
Comptroller
Department of Public Welfare
103 Health and Welfare Building
Harrisburg, PA 17120

Mr. Michael J. Burns
Acting Assistant Comptroller for Audits
Department of Public Welfare
316 Eastgate
1010 North Seventh Street
Harrisburg, PA 17108

Mr. Paul Greenwald
CCIS of West/Southwest Philadelphia
3901 Market Street
P.O. Box 1969
Philadelphia, PA 19104

Mr. James Mack
Erie County Coordinated Day Care
CCIS of Erie County
155 W. 8th Street, Suite 316
Erie, PA 16501-1043

The Honorable Stephen A. Zappala
Allegheny County District Attorney
Allegheny County Courthouse, Room 303
436 Grant Street
Pittsburgh, PA 15219-2489

The Honorable Bradley H. Foulk
Erie County District Attorney
Erie County Courthouse
Room 16-2
140 West Sixth Street
Erie, PA 16501

This report is a matter of public record. Copies of this report may be obtained from the Pennsylvania Department of the Auditor General, Office of Communications, 318 Finance Building, Harrisburg, PA 17120.