DiNapoli: State Needs to Improve Oversight of Child Care Grants

November 7, 2024

The Office of Children and Family Services (OCFS) failed to adequately oversee the use of child care stabilization grant funds received during the COVID-19 pandemic, according to an audit released today by State Comptroller Thomas P. DiNapoli. To help child care service providers stabilize their operations and retain their employees, in 2021 the American Rescue Plan Act and the Coronavirus Response and Relief Supplemental Appropriations Act provided federal grants that OCFS administered locally.

"In response to the detrimental impact of the pandemic on the child care sector, federal grants provided essential funding to keep facilities open and to help retain staff, enabling more parents to return to work," DiNapoli said. "However, this audit has uncovered that more oversight was needed to ensure the most effective use of these funds. Child care is vital for thriving communities, and enhanced controls and monitoring of child care grant programs is needed by the Office of Children and Family Services."

OCFS received over $1.4 billion in aid from the federal government to support child care stabilization grants for which child care providers could apply. OCFS awarded the grants in two rounds. The first round (Stabilization 1.0) was focused on shoring up the child care sector. The second round (Stabilization 2.0) was aimed at sustaining the child care workforce. Grants were awarded to private and not-for-profit providers as well as to special education providers. Special education providers primarily provide education services regulated by the State Education Department (SED) but may also provide day care services.

Inadequate Support for Expenses

OCFS did not, as a practice, request or review receipts to support expenses claimed to ensure that funds were used for allowable expenses. Instead, OCFS relied primarily on statements from providers and expense report claims to support payments. Of the $2.6 million in expenses reviewed from 39 non-special education providers, $373,182 (14%) reported to OCFS by 20 providers was either inadequately supported or not supported at all.

Grants Did Not Always Reflect Providers' Capacity and Enrollment

OCFS relied heavily on providers' established capacity (calculated by square footage of the provider's space) to determine the amount of grant funding to award. While federal guidelines allowed for flexibility, auditors found differences between the licensed capacity information OCFS used to determine grant awards and the child care providers' actual enrollment. OCFS could have obtained-from providers or other state entities-better information more aligned with current operating conditions and enrollment. When examining enrollment data for 27 of the 39 non-special education providers examined, auditors found that 10 operated at less than 50% of their established capacity.

Differences between the capacity information OCFS used to determine grant awards and actual enrollment of children was especially glaring for special education providers. This is due to differences in SED's and OCFS' criteria for determining capacity (SED requires more square footage per child). Auditors found that 45 of the 73 grant awards reviewed would have been a total of $1.09 million (18%) less based on SED's capacity requirement. For three grants, the awards would have been $95,000 higher. Coordination and information sharing with SED regarding these providers would have given OCFS information more aligned with the operations and enrollment of the provider.

Alignment of Grant Use with Program Goals

Although special education providers were eligible to receive stabilization grants, of the 16 providers visited, 10 of the 16 (63%) did not operate day care programs of any kind in addition to their special education programs. The remaining six operated day care programs that served only children enrolled in special education for the hours before and after their special education program.

Although Stabilization 2.0 focused on supporting the child care workforce, auditors found several providers used Stabilization 2.0 funds primarily to support the provider's executive staff. Four non-special education providers used $73,036 in Stabilization 2.0 funds for health care contributions, retirement contributions and bonuses (totaling over $14,000) for executive staff.

While these expenses were allowed under state and federal guidelines, DiNapoli's report stressed the importance of using child care grant funds for their intended purpose, especially if that intention is to support direct child care workers, who are largely underpaid for the valuable service they provide.

DiNapoli's audit recommends OCFS:

• Develop and implement enhanced controls and monitoring practices for the child care grant programs it administers, including reviewing supporting documentation for grant expenditures.
• Continue efforts to identify and recover unspent or inappropriately spent grant funds from providers.
• Align providers' grant awards to best meet the goals of child care grant programs, including:
  • Obtaining additional information and increasing communication with providers.
  • Coordinating and sharing information with SED regarding special education providers.
  • Evaluating whether additional factors should be considered when awarding grants.

In response, OCFS noted that they implemented a series of internal controls, made guidance regarding documentation requirements available to the providers Child Care Resource and Referral Agencies, and implemented a grant compliance review process. OCFS further stated that enrollment may fluctuate for a variety of reasons, and that it was one of several factors used to determine grant awards.

Report
Office of Children and Family Services: Child Care Stabilization Grants