Finding Text
Criteria or Specific Requirement: Tier I day care homes are those operated by providers whose own household meets the income standards for free or reduced price meals, or those located in low-income areas. A low-income area is one where at least 50% of the children are eligible for free or reduced price school meals. Sponsoring organizations may use school enrollment data or census data to determine if a home is located in a low-income area. Condition: During our follow-up of prior-year finding 2024-003, we noted that the two day care homes identified as incorrectly classified as Tier II instead of Tier I were not reclassified during FY 2024-25 and continued to receive Tier II reimbursement rates. However, no exceptions were noted in the three additional day care home tier determinations tested during the current year. Questioned Costs: None. Context: The prior-year finding identified two of 35 day care home tier determinations that were based on outdated school enrollment data, resulting in the providers being incorrectly classified as Tier II rather than Tier I. During FY 2024-25, those two providers remained classified as Tier II. In addition, we tested three current-year tier determinations and noted no exceptions. Cause: Although the City appears to have implemented procedures to ensure current tier determinations utilize the most current school enrollment data, corrective action was not taken to address the two provider classifications identified in the prior-year finding. Effect: The affected providers continued to receive reimbursement rates associated with Tier II status rather than the higher reimbursement rates available under Tier I status. As a result, federal expenditures may have remained understated. Repeat Finding: This is a repeat of a finding from the immediately prior year, finding number 2024-003. Recommendation: The City should review and correct the tier classifications of the affected providers identified in finding 2024-003, make any necessary reimbursement adjustments, and continue its procedures to ensure current tier determinations are based on the most current school enrollment data available. This approach acknowledges the improvement in controls (which is important to be fair to the auditee) while still justifying a repeat finding because the original error was never remediated. View of Responsible Officials: There is no disagreement with the audit finding.