Region V TA Network

Chicago, IllSeptember, 2006

Management of Head Start ProgramsRisk Management For Improved Program Performance

Reginald Walker, MBA

This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

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Overview

Planning Against Uncertainty – Risk Management

– Risk Management Defined

– Sources of Risk

Risk Management

– Operational Risk

– Financial Risk

Developing a Risk Management Plan

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Planning Against Uncertainty – Risk Management

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What is Risk Management?

Risk Management is the process of measuring, or assessing risk and then developing strategies to manage the risk. In general, the strategies employed include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

In practice, the process of risk management can be very difficult. It requires balancing between risks with a high probability of occurrence, but lower loss vs. risk with high loss, but lower probability of occurrence.

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Sources of Operational Risk

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Sources of Risk within Head Start and Early Head Start ProgramsChild Development and Health Services

Disabilities Services

Class room

Health Services

Program Design and Management

Family and Community

Partnerships

Fiscal Management

Human Resource Management

Program Management

Wage comparability

ERSEA

Program Governance

Partnerships and collaborations

Head Start Risk

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Risk Management – Operational

Child Development and Health Services

Disabilities Services

– Compliance with “Architectural Barriers Act” related to accessibility of Head Start facilities

– Selection of toys that are safe for children with disabilities

– Sufficient funding is appropriated for disabilities services

Early Childhood Learning

– Challenging behavior in the classroom

– Home visits

– Adequate teacher training

Health

– Timely immunizations, screenings, health exams upon enrollment to control the spread of disease

– Record management and privacy requirements

– Nutrition and allergic reactions

– Medication administration

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Risk Management – Operational

Family and Community Partnerships

Eligibility, Recruitment, Selection, Enrollment and Attendance

– Domestic violence

– Erroneous Payments

Partnerships and collaborations

– Child care partners

– Social service providers

Program Design and Management

Eligibility and Enrollment Facilities, Materials and Equipment Human Resources Program Governance

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Sources of Financial Risk

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Layers of Potential Financial Risk

Internal Controls

and Program Oversight

Fiscal Accountability

and Grant Management

Cash

Management

Fiscal

Health

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The Risk Management Plan

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What is a Risk Management Plan?

A risk management plan is a resource for management, Policy Council and Board members that explains the program’s philosophy about risk and outline’s its risk management priorities and strategies. The risk management plan should be aligned with satisfying the Head Start performance standards, the agency’s culture and resources.

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Risk Management Plan Life Cycle

1. Establish the context

2. Identify the risk

3. Assess the risk

4. Determine treatment

5. Create the Plan6. Implement

the plan

7. Monitor results

8. Review and evaluate

plan

Operational and Financial

Risk

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Developing a Risk Management Plan

Establishing the Context– Establishing the context includes planning the process and mapping out the basis

upon which risks will be evaluated. Defining a framework for the process, the people on the team and agenda for identification and analysis are central to this step.

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Developing a Risk Management Plan (continued)

Identify Risk - This process provides the ability for any member of the project team to raise a program – related risk. During the assessment process, any member of the team may identify a risk (operational or financial) applicable to a particular aspect of the program. The team member completes a Risk Form and distributes the form to the team lead. In analyzing sources of risks there are two groups:

– Source Risk: May be internal or external to the program. Examples of source risk are: Policy Council members, employees of the program or cutbacks in State funding.

– Problem Risk: Are related to identified threats. For example: the threat of losing money, the threat of abuse of privacy information or the threat of accidents and casualties.

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Developing a Risk Management Plan (continued)

Assess the Risk – The team leader reviews all risks identified and determines whether or not each risk identified is applicable to the context of the current project. This decision will be primarily based upon whether it is a Source Risk or Problem Risk and if/how the risk impacts:

– Compliance with Federal Head Start

– Compliance with Federal Human Resources, ADA and EEO laws

– Davis — Bacon and other OSHA laws when applicable

– Compliance with Generally Accepted Accounting Principles

– Compliance with applicable OMB Circulars

– Changing external factors e.g. government, economic, social

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Developing a Risk Management Plan (continued)

Determine the treatment – The Self Assessment Team then completes a formal review of each risk listed in the Risk Register. The purpose of the review is to prioritize risk (based upon ‘impact’ and ‘likelihood’) and to take one of the following actions for each:

– Risk avoidance: Includes not performing an activity that could carry risk. Examples include:

Any violation of the HSPS

Maintaining facilities that endanger children in the program

– Risk reduction: Involves methods that reduce the severity of the loss. Examples include:

Installing fire extinguishers throughout the facilities

Removing lead and asbestos and repainting classrooms

– Risk transfer: Means causing another party to accept the risk, typically by contract. Examples include:

Liability insurance

Workers compensation insurance

– Risk retention: Involves accepting the loss when it occurs. True self – insurance.

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Developing a Risk Management Plan (continued)

Create the Plan

– Decide on the combination of methods to be used for each risk. Each risk management decision should be reviewed and approved by the appropriate level of management. For example, a risk concerning the accounting for grant fund should have Policy Council, Governing Body and the Program Director’s decision behind it whereas IT management would have the authority to decide on computer virus risks.

– The risk management plan should propose applicable and effective security controls for managing the risks. For example, an observed high risk of computer viruses could be mitigated by acquiring and implementing antivirus software. A good risk management plan should contain a schedule for control implementation and responsible persons for those actions.

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Summary Points

Head Start systems and services are fully integrated and require management

systems to be fully functional across multiple service areas.

Finance should be fully engaged in assuring that internal controls and ongoing

monitoring systems integrate seamlessly to provide prevention and early

intervention control over possible errors, omissions, or defalcation.

Finance should be engaged in programmatic activity to the extent that operational

risk are identified and treated appropriately.

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Summary Points (continued)

Information about risk should be communicated to all staff to facilitate staff to manage, and control operations effectively.

A risk plan should become part of the planning process to facilitate development of a coherent, strategic and commonly recognized set of policies and procedure.

The program’s ongoing monitoring system should integrate seamlessly into the internal control of the organization as a whole.

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Questions