April 5, 2018 2017-116
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report regarding the Community Child Care Council of Santa Clara County (4Cs) and its administration of seven child‑care and child development contracts with the California Department of Education (Education). This report concludes that 4Cs unfairly disrupted services to some families, misused state funds, and engaged in questionable management of its employee retirement plans.
4Cs did not give some families adequate time to respond to its notices for termination of services, and it did not provide enough information to families about the process for appealing those actions. 4Cs also paid some child‑care providers late, causing potential undue financial hardship for providers and families. Additionally, 4Cs caused disruptions in some families' child care by ending its preschool program contract.
4Cs used state funds for unallowable purposes in numerous instances and, for most of the transactions we reviewed, did not maintain sufficient documentation to justify their reimbursement from Education. Further, 4Cs did not always comply with the terms of its contracts with Education in its determination of eligibility, its staff development, and its program self‑evaluations. Education did not detect some of the types of noncompliance we identified at 4Cs, and it did not adequately document its compliance reviews.
Further, the former director of 4Cs committed the organization to follow questionable recommendations for its retirement plans made by its financial adviser, who subsequently received substantial financial commissions. In addition, 4Cs could not demonstrate that it met applicable reporting requirements for its primary retirement plan. Finally, 4Cs engaged in questionable management of its state-funded supplemental retirement plan.
ELAINE M. HOWLE, CPA