Short title

This Act may be cited as the

Stop Child Care Scams Act of 2026

Strengthening the authority to withhold funds for fraud

Section 658I(b)(2)(B) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858g(b)(2)) is amended by striking Secretary may and inserting Secretary shall.

Program integrity and accountability

Section 658E(c)(2) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858c(c)(2)) is amended by adding at the end the following:

(W)

program integrity and accountability

The plan shall include a description of—(i)the State's internal controls to ensure program integrity and accountability;(ii)the processes in place—(I)to investigate and recover fraudulent payments; and(II)to impose sanctions on clients or providers in response to fraud; and(iii)the procedures in place to document and verify eligibility.

Such description shall include how the State utilizes data within and across other State and local agencies that have oversight of child care providers that serve children who receive assistance under this subchapter.

Preventing fraud in the child care and development block grant program

Section 658I(b) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858g(b)) is amended—(1)by redesignating paragraph (3) as paragraph (4); and(2)by inserting after paragraph (2) the following:

(3)

Determination of fraud

(A)

Investigation

The Secretary shall investigate fraud with respect to financial assistance available under this subchapter. (B)

Debarment

In the case that the Secretary makes, or finds that there has been, a final determination of fraud against a child care provider that received financial assistance available under this subchapter, the Secretary shall permanently debar such child care provider from receiving such financial assistance.(C)

Providers debarred from Child and Adult Care Food Program

In the case that a child care provider has been debarred from participating in the Child and Adult Care Food Program under section 17 of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766) in accordance with subsection (d)(5)(E)(i) of such section, the Secretary shall permanently debar such child care provider from receiving financial assistance under this subchapter.(D)

Final determination of fraud definition

In this paragraph, the term final determination of fraud means a determination reached in an administrative order or as part of a judicial decision, for which any rights to review or appeal have been exhausted or waived, that a child care provider—(i)knowingly submitted a false statement or documentation to obtain financial assistance available under this subchapter;(ii)misrepresented ownership of, enrollment at, attendance at, or services provided through a program of child care services, or the eligibility of the provider to provide such services, to obtain such financial assistance;(iii)to obtain such financial assistance, operated without the State licensing described in section 658E(c)(2)(F) and without receiving an exception to such licensing;(iv)made a knowing and improper expenditure of such financial assistance; or(v)engaged in any other conduct related to such financial assistance that constituted fraud under Federal or State law.

Improper payment rate requiring corrective action plan; conditional ineligibility

Section 658J of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858h) is amended—(1)by redesignating subsection (c) as subsection (e); and(2)by inserting after subsection (b) the following:

(c)

improper payment threshold requiring corrective action plan

If for a fiscal year the improper payment rate of a State is more than 5 percent of the aggregate amount of payments made to carry out this subchapter by such State for such fiscal year, then such State shall submit to the Secretary—(1)for review and approval a corrective action plan to reduce such rate to not more than 5 percent for each subsequent fiscal year; and(2)such reports as the Secretary may require to show that such State is complying with the requirements of such plan as approved by the Secretary.(d)

Conditional ineligibility

If for each of 2 consecutive fiscal years the improper payment rate of a State determined under this section is more 5 percent, then such State shall be ineligible to receive funds under this subchapter unless such State demonstrates to the satisfaction of the Secretary that such State for the next fiscal year will—(1)reduce such improper payment rate to not more than 5 percent for the next fiscal year; or(2)make significant progress to comply with the corrective action plan approved under subsection (c).

Cyclical monitoring of State performance

Section 658K of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858i) is amended by adding at the end the following:

(c)

Periodic monitoring by the Secretary

At 3-year intervals, the Secretary shall conduct a comprehensive review of the performance of each State that receives assistance under this subchapter. Based on the results of such review, the Secretary shall designate as high risk a State that has—(1)a high level of unresolved or repeated adverse audit findings submitted under subsection (b);(2)a high level of unresolved issues under, or repeated performance failures to carry out, corrective action plans submitted by such State under section 659J(c); or(3)unresolved or repeat findings of noncompliance with the State plan approved under section 658E(c).(d)

Required additional monitoring

If a State is designated as high risk under subsection (a), then the performance of such State shall be subject to additional monitoring, as determined by the Secretary.

Preventing fraud in the child and adult care food program

Section 17(d)(5) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)(5)) is amended—(1)by redesignating subparagraph (E) as subparagraph (F); and(2)by inserting after subparagraph (D) the following:

(E)

Termination due to fraud

(i)

Debarment

In the case that the participation of an institution or family or group day care home under the program is terminated due to a final determination of fraud, the Secretary shall permanently debar such institution or family or group day care home from participating in the program.(ii)

Providers debarred from Child Care and Development Block Grant program

In the case that an institution or family or group day care home has been debarred from receiving financial assistance under the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9857 et seq.) in accordance with section 658I(b)(3)(B) of such Act, the Secretary shall permanently debar such institution or family or group day care home from participating in the program.(iii)

Final determination of fraud definition

In this subparagraph, the term final determination of fraud means a determination reached in accordance with the procedures and requirements of this section, for which any rights to review or appeal have been exhausted or waived, that an institution or family or group day care home—(I)knowingly submitted a false statement or documentation to obtain funds disbursed under subsection (f)(1)(A);(II)misrepresented ownership, enrollment, attendance, or services in connection with the operation of the program by such institution or family or group day care home, or the eligibility of such institution or family or group day care home to operate the program, to obtain such funds;(III)made a knowing and improper expenditure of such funds; or(IV)engaged in any other conduct related to such funds that constituted fraud under Federal or State law.

Eliminating authority to waive sanctions

Section 658I(c) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858lg(c)) is amended—(1)in paragraph (1) by striking or sanctions imposed upon a State in accordance with subsection (b)(2);(2)in paragraph (2)—(A)in subparagraph (A) by striking sanction or; and(B)in subparagraph (B) by striking sanction or;(3)in paragraph (3) striking sanction or; and(4)in paragraph (7) by striking sanction(s) or.

GAO study and report on provider-related fraud

(a)

Study

The Comptroller General of the United States shall conduct a study regarding fraud prevention measures in Federal early childhood education, child care, and child nutrition programs that shall include an analysis of—(1)the effectiveness of procedures and measures to prevent fraud carried out by providers of services under such programs;(2)whether the data the Federal Government receives in connection with such programs (including through audits and reporting requirements) is—(A)sufficient to successfully identify fraud carried out under such programs; and(B)used effectively by the Federal Government to identify potential fraud carried out under such programs; and(3)with respect to the Child Care and Development Block Grant program established under the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9857 et seq.)—(A)the program integrity results for States that have delegated responsibilities related to program management and administration to counties, local municipalities, or other entities; and(B)whether any corrective action plans have been implemented by States to improve program integrity results, including any measurable outcomes from implementing such a corrective action plan.(b)

Report

Not later than 2 years after the date of enactment of this section, the Comptroller General of the United States shall submit to the Committee on Education and Workforce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate a report containing—(1)the results of the study conducted under subsection (a); and(2)any regulatory or legislative recommendations to improve fraud prevention measures in Federal early childhood education, child care, and child nutrition programs.(c)

Federal early childhood education, child care, and child nutrition programs defined

For the purposes of this section, the term Federal early childhood education, child care, and child nutrition programs includes—(1)Head Start programs (including Early Head Start programs) carried out under the Head Start Act (42 U.S.C. 9831 et seq.);(2)the Child and Adult Care Food Program under section 17 of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766); and(3)the Child Care and Development Block Grant program established under the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9857 et seq.).

10.

Fraudulent payments

Section 658J(b) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858h(b)) is amended—(1)in paragraph (1) by inserting (including fraudulent payments) after overpayments; and(2)by adding at the end the following:

(3)

Report

The State shall submit to the Secretary an annual report that identifies the dollar and percentage amount of improper payments made by the State, disaggregated as specified by the Secretary by standardized payment categories (including suspected and verified fraudulent payments, non-fraudulent overpayments, underpayments, and technically improper payments (e.g., system error payments)).