Child Care Attendance Records: Comparing Paper and Electronic Processes

Child Care Attendance Records: Comparing Paper and Electronic Processes MAC TAYLOR LEGISLATIVE ANALYST DECEMBER 2018 Summary State Tasks Certain Entities With Collecting Monthly Child Care Attendance Records. The state relies on regional Alternative Payment (AP) agencies to administer certain child care programs. For these programs, the state specifically tasks AP agencies with verifying child attendance and calculating payments to providers in their regions. Although state law allows AP agencies to collect attendance records electronically, almost all AP agencies still process the vast bulk of attendance records in paper form. Earlier this year, the Legislature directed our office to gather more information on the pros and cons of using a paper versus electronic process to collect these records. Net Benefit of Processing Attendance Records Electronically Is Likely to Vary Widely Among Entities. In the near term, shifting to an electronic process would be costlier for all AP agencies and providers given the upfront costs associated with acquiring needed software and hardware. Over the long term, an electronic process could be lower cost for some entities, particularly if the new process yielded staff-related savings. Most notably, an electronic system likely could be designed to save considerable staff time by automatically identifying attendance record errors and calculating provider payments. The entities obtaining the greatest long-term net benefit likely would be those serving more children, processing more records, calculating more payments, and currently employing more staff. Small providers might see little or no net fiscal benefit. Even small entities, however, might view an electronic process as more convenient than a paper process. Recommend Legislature Continue to Allow AP Agencies to Decide Best Process for Their Regions. We believe the state’s current approach of allowing AP agencies to decide whether to collect monthly attendance records using a paper or electronic process is reasonable. Though we do not believe the state should require all agencies to use an electronic process, the Legislature could authorize a pilot program to amass greater knowledge and expertise regarding how to implement an electronic process. Under the pilot, a few AP agencies and a subset of interested providers could work together to develop or procure an electronic system. The pilot could be particularly helpful in getting a better sense of the cost of an electronic system and the implementation challenges, including available and desired technical support. The findings from the pilot could help other AP agencies decide if they want to implement an electronic process moving forward. Though creating a pilot is an option, the Legislature may first want to survey AP agencies and providers to explore whether other possible changes, such as phone upgrades, could be more beneficial than an electronic records system. analysis full gutter AN LAO REPORT INTRODUCTION determines the amount AP agencies receive for their provider payments. The department then The Supplemental Report of the 2018-19 provides additional funding to cover each AP Budget Act requires our office to assess the current agency’s operational costs. This allotment is processes Alternative Payment (AP) agencies use to equal to 21.21 percent of provider payments. This collect monthly attendance records from child care funding, together with the provider payments, providers. It directs us specifically to describe the comprise the total AP agency contract amount, pros and cons of using a paper versus electronic or “Maximum Reimbursable Amount” (MRA). For process. This report fulfills this requirement. example, an AP agency that receives $1 million for provider payments also receives $212,100 for BACKGROUND operational expenses, for a MRA of $1,212,100. AP Agency Funding Ranges From Very Below, we provide background on (1) AP Small to Large. AP agencies vary substantially agencies and their core responsibilities and in the size of their contract amounts. In 2017-18, (2) monthly attendance record distribution and total contract amounts (for CalWORKs Stage 2, storage. CalWORKs Stage 3, and the Alternative Payment Alternative Payment Agencies program combined) range from $122,000 to $145 million. Figure 1 shows the distribution of AP Agencies Administer Certain Subsidized AP agencies by contract amount. Whereas ten Child Care Programs. The state relies on AP agencies have total contract amounts less than various regional agencies to administer child care $1 million, two have contract amounts in excess of programs on its behalf. The California Department $100 million. of Education (CDE) currently contracts with 76 AP agencies to administer three child care programs— Monthly Attendance Records CalWORKs Stage 2, CalWORKs Stage 3, and Monthly Attendance Records Are Intended the Alternative Payment program. Of the 76 AP to Verify the Children Who Received Care. agencies, 51 are nonprofit community-based State law requires AP agencies to collect monthly organizations, 14 are county offices of education, attendance records from child care providers. 9 are county welfare departments, 1 is a school district, and 1 is a city government. Figure 1 AP Agencies Have a Variety of Number of Alternative Payment Agencies Administrative Responsibilities. By Contract Size AP agencies’ core administrative 2017-18 responsibilities include determining a family’s eligibility for child care, 30 making payments to child care 25 providers, and creating and maintaining detailed records about 20 each family and provider. State law 15 and regulations, as well as CDE’s contracts with AP agencies, are 10 highly prescriptive regarding how agencies conduct these and other 5 administrative activities. AP Agency Funding Is Based Less Than $1 million $5 million $10 million $20 million Over $1 million to $5 million to $10 million to $20 million to $60 million $100 million on a Percentage of Provider Payments. Each year, CDE first 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT The monthly attendance record includes the date monthly attendance records electronically, no and time the child received care. It also contains agency currently uses an electronic process with signatures from both the child’s parent and the all of its providers. Instead, most AP agencies provider verifying the information is accurate. At a distribute record sheets in paper form, typically minimum, AP agencies use these records to verify several days in advance of a monthly attendance which children received care and how much care cycle. Once the attendance records are signed at they received that month. AP agencies do not the end of the monthly attendance cycle, providers pay a provider until that provider has submitted mail or hand deliver the attendance records back its monthly attendance records. (The nearby box to the AP agencies. Once an AP agency receives discusses timing issues in more detail.) an attendance record, it verifies care was provided Monthly Attendance Records Are Sometimes and, in the case of variable schedules, calculates Used to Calculate Provider Payments. In certain provider payments. AP agencies are required to cases, AP agencies use monthly attendance store monthly attendance records for a minimum records not only for verification of care but also of five years. To date, storage primarily occurs in to determine provider payments. Specifically, AP paper form. agencies use the records in this way for families Virtually No Electronic Collection and that have variable, or changing, work schedules. Storage. Collecting records in this manner would For providers who care for children with parents require providers and parents to fill out and sign who have consistent, unchanging work schedules, electronic forms using a digital signature. To date, the contents of the attendance record are not used very few providers have acquired this capability. to calculate the providers’ payment. In these cases, Many Factors Likely Contribute to Lack of the amount paid is based on the hours of care the Electronic Processing. The following reasons family is eligible to receive, as determined annually could be contributing to the lack of electronic by the AP agency. collection and storage. Currently, All AP Agencies Collect Monthly • Different Agency Funding Priorities. The Attendance Records in Paper Form. Though most likely source of funding for AP agencies state law allows AP agencies to collect and store to shift to an electronic process is the portion The Timing of Record Collection and Provider Payments Timing Varies Among AP Agencies. Alternative Payment (AP) agencies determine when attendance records are due and when provider payments are processed. Some AP agencies require providers to submit attendance records by the 5th of each month, with payments made to providers by the 20th of each month. Rather than making provider payments once a month using this type of set schedule, some AP agencies effectively process payments continually throughout the month, making payment five days after receiving a monthly attendance record. Electronic Process Unlikely to Decrease Wait Time for Most Provider Payments. During our conversations with providers, some indicated they were interested in shifting to an electronic process because they believed such a process would lead to quicker payments from AP agencies. An electronic process alone, however, is unlikely to decrease the wait time for most provider payments. If an AP agency shifted to an electronic process but retained its payment schedule, providers working with that AP agency would see no change to the timing of their payments. The exception could be for those providers that currently get paid later than other providers because they submit their attendance records late or their records have errors. Were an electronic system to help in submitting records on time and with fewer errors, these providers likely could get paid sooner (that is, at the same time other providers are paid). www.lao.ca.gov 3 analysis full gutter AN LAO REPORT of funds they receive for administrative AP agency staff costs could be reduced over the purposes. AP agencies might want to use long term to the extent the new electronic system these funds for other operational costs, such automatically identified errors in attendance records as staff salaries, before using them for an and calculated provider payments. Achieving such electronic attendance system. savings would require AP agencies to reduce their • Perceived Lack of Interest From Providers. staffing levels (all else constant) moving forward. AP agencies may be hesitant to implement Such staff savings could be partly offset by any electronic attendance records if they believe annual licensing fee charged for use of digital providers are not interested in using an signature software. electronic process. In our conversations with Larger AP Agencies Likely to See Greatest providers and in their survey responses to Long-Term Benefit. Whether any specific us, some providers expressed interest in an AP agency found an electronic process to be electronic process, whereas others preferred cost-effective would depend on various factors, the current paper process. including their existing caseload and staffing levels • Lack of Use to Date Means No Clear Best as well as their existing technical capacity. Large Practices. Since no AP agency currently AP agencies likely would be the most notable has a comprehensive electronic attendance beneficiaries of an electronic process. These AP record collection or storage process, minimal agencies currently process many attendance information is available on how to develop records and calculate many provider payments, such a system. such that an electronic process could reduce their associated staff time considerably. These large agencies likely could recoup any initial upfront ASSESSMENT spending to build the electronic process within just a few years. Their staff savings also likely could Below, we offer our comparative assessment exceed any annual software licensing fee. Small AP of the paper and electronic means of processing agencies, by comparison, likely would take longer, monthly attendance records. perhaps much longer, before they would recoup Near Term, Electronic Process Likely to their initial upfront spending. Both large and small Be Higher Cost for Both AP Agencies and AP agencies also may be able to point to other Providers. Figure 2 identifies the core set of costs types of spending (for example, upgrading phone associated with administering monthly attendance systems) that they believe would have higher payoff records. As the figure shows, both the paper and for them and their clients. electronic processes entail costs relating to the Long Term, Electronic Process Might Not Be distribution, collection, and storage of records as Fiscally Advantageous for Providers. The net, well as staff costs. In the near term, implementing long-term fiscal impact on providers is unlikely to an electronic process is very likely to be costlier be notable. While an electronic process might result because of the upfront costs associated with in some reduction of initial errors in the attendance acquiring needed software and hardware. Most records that providers submit to their AP agencies, notably, AP agencies and providers would need to providers still would need to correct any errors obtain (through either internal or external means) ultimately identified by their AP agencies. Moreover, the capability to accept and transmit digital most providers do not have a staff person assigned signatures. Both types of agencies also would need solely to attendance record collections and to train staff how to use the new electronic system. corrections, such that most providers may achieve Long Term, Electronic Process Could Be little, if any, staff savings over the long run. Even Lower Cost for AP Agencies. Though higher cost were providers to achieve some staff savings, in the near term, an electronic process very likely those savings might be entirely offset by the cost could be less costly for AP agencies in the long of annual software licensing fees as well as the run due to potential staff savings. In particular, periodic cost entailed in replacing associated 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT Figure 2 The Costs of a Paper Process Compared With an Electronic Processa Paper Process Electronic Process Assessment Distribution and Collection Paper, ink, postage, and Digital-signature capability and Electronic process would be costlier in near Ongoing Costs gas means to transmit records term due to upfront development costs, but electronically could reduce distribution and collection costs in the long run. Storage Physical space and Electronic storage capacity For some AP agencies, an electronic One-Time Cost cabinets process would be costlier in near term if they needed to expand or purchase electronic storage capacity. Some AP agencies may already have sufficient electronic storage capacity given their other administrative responsibilities. Equipment Computers and printers Computers Electronic process would be costlier in near Periodic Costs term if providers and AP agencies had to purchase additional equipment. Some AP agencies likely already have sufficient equipment given their other administrative responsibilities. Staff Review Staff time to review Staff time to review attendance Electronic process would be substantially Ongoing Costs attendance forms, correct forms, correct errors, and less costly in long run if it flagged errors errors, and calculate calculate provider payments automatically, reduced staff review time, provider payments and calculated provider payments. Staff Training Initial training for new staff Initial training for all staff to use Electronic process likely would be costlier One-Time Costs in verifying eligibility, new electronic system and in near term as all staff would need to be checking attendance training thereafter for new staff trained on how to use the new system. records, and calculating in verifying eligibility, checking Electronic process could reduce training provider payments attendance records, and costs in long term if key processing steps calculating provider payments were automated. a Alternative Payment agencies and providers both incur many of the costs shown, but only AP agencies are required to store records and calculate provider payments. computer equipment (such as laptops) to maintain RECOMMENDATIONS a digital signature system. Recommend Continuing to Allow AP Agencies For Providers, Certain Practical Issues to to Determine Best Process for Their Regions. Consider. On the one hand, providers might We believe the state’s current approach of allowing have the greatest initial hesitation to implement AP agencies to decide whether to collect paper an electronic process due to concerns with their or electronic monthly attendance records is internal technical capabilities to navigate such reasonable. Given AP agencies differ significantly a system. An electronic system could appear in terms of contract size, and both AP agencies especially daunting given new associated software and providers differ significantly in terms of number and hardware that providers are unaccustomed of staff and technical capacity, a one-size-fits-all to using. Providers also might be concerned with approach does not seem warranted. Whereas the availability of external technical support to help some AP agencies, especially large ones, might them navigate a new system. On the other hand, determine that an electronic process would create some providers might view an electronic system as administrative efficiencies and be worthwhile to ultimately more convenient for themselves and their implement, other AP agencies might conclude the clients than the current paper system. net benefits are small and would take a long time www.lao.ca.gov 5 analysis full gutter AN LAO REPORT to achieve. Most providers also might conclude could shed greater light on the most appropriate that an electronic process, though potentially more role for CDE. In all these ways, the findings from convenient than a paper process, does not produce the pilot could help other AP agencies decide if savings, even over the long term. they want to implement an electronic process. State Could Create a Small Pilot Program. Alternatively, the State Could First Survey Though we do not believe the state should require AP Agencies and Providers to Determine If all agencies to use an electronic process, the Higher One-Time Priorities Exist. Before even Legislature could authorize a pilot program to creating a pilot program, the state might want amass greater knowledge and expertise regarding to explore whether other possible changes to how to implement an electronic process. Under child care administrative practices could be more the pilot, a few AP agencies and a subset of advantageous for AP agencies and providers than interested providers could work together to develop an electronic records system. To this end, the or procure an electronic system. AP agencies and Legislature could direct CDE to survey AP agencies providers could use the electronic system for a year and providers about their one-time priorities. The and then determine if it is worthwhile to continue department either could conduct the survey with using the system. The pilot could be particularly its existing staff or contract with a surveying entity helpful in getting a better sense of the cost of for such work. The department likely could absorb an electronic system and the implementation the minor one-time cost of such a survey. Upon challenges, including available and desired receiving the survey results, the Legislature could technical support. The pilot also could serve to use them to inform its future budget and policy begin identifying best practices. Additionally, it decisions. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT www.lao.ca.gov 7 analysis full gutter AN LAO REPORT LAO PUBLICATIONS This report was prepared by Sara Cortez and reviewed by Jennifer Kuhn. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 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