[Federal Register Volume 78, Number 97 (Monday, May 20, 2013)]
[Proposed Rules]
[Pages 29442-29498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11673]



[[Page 29441]]

Vol. 78

Monday,

No. 97

May 20, 2013

Part II





Department of Health and Human Services





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45 CFR Part 98





Child Care and Development Fund (CCDF) Program; Proposed Rule

  Federal Register / Vol. 78 , No. 97 / Monday, May 20, 2013 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 98

RIN 0970-AC53


Child Care and Development Fund (CCDF) Program

AGENCY: Office of Child Care (OCC), Administration for Children and 
Families (ACF), Department of Health and Human Services (HHS).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Administration for Children and Families (ACF) proposes to 
amend the Child Care and Development Fund (CCDF) regulations. This 
proposed rule makes changes to CCDF regulatory provisions in order to 
strengthen health and safety requirements for child care providers, 
reflect current State and local practices to improve the quality of 
child care, infuse new accountability for Federal tax dollars, and 
leverage the latest knowledge and research in the field of early care 
and education to better serve low-income children and families.

DATES: In order to be considered, comments on this proposed rule must 
be received on or before August 5, 2013.

ADDRESSES: Interested persons are invited to submit comments to the 
Office of Child Care, 370 L'Enfant Promenade SW., Washington, DC 20024, 
Attention: Cheryl Vincent, Office of Child Care, or electronically via 
the Internet at http://www.regulations.gov. If you submit a comment, 
please include your name and address, identify the docket number for 
this rulemaking (ACF-2013-0001), indicate the specific section of this 
document to which each comment applies, and give the reason for each 
comment. You may submit your comments and material by electronic means, 
mail, or delivery to the address above, but please submit your comments 
and material by only one means. A copy of this Notice of Proposed 
Rulemaking may be downloaded from http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Cheryl Vincent, Office of Child Care, 
202-205-0750 (not a toll-free call). Deaf and hearing impaired 
individuals may call the Federal Dual Party Relay Service at 1-800-877-
8339 between 8 a.m. and 7 p.m. Eastern Time.

SUPPLEMENTARY INFORMATION:

Contents

I. Executive Summary
II. Background
    A. Child Care and Development Fund (CCDF)
    B. Discussion of Changes Made in this Proposed Rule
III. Statutory Authority
IV. Provisions of Proposed Rule
    Subpart A--Goals, Purposes and Definitions
    Subpart B--General Application Procedures
    Subpart C--Eligibility for Services
    Subpart D--Program Operations (Child Care Services) Parental 
Rights and Responsibilities
    Subpart E--Program Operations (Child Care Services) Lead Agency 
and Provider Requirements
    Subpart F--Use of Child Care and Development Funds
    Subpart G--Financial Management
    Subpart H--Program Reporting Requirements
    Subpart I--Indian Tribes
    Subpart J--Monitoring, Non-Compliance, and Complaints
    Subpart K--Error Rate Reporting
V. Paperwork Reduction Act
VI. Regulatory Flexibility Act
VII. Regulatory Impact Analysis
VIII. Unfunded Mandates Reform Act of 1995
IX. Congressional Review
X. Executive Order 13132
XI. Treasury and General Government Appropriations Act of 1999

I. Executive Summary

    Need for the regulatory action. The Child Care and Development Fund 
(CCDF) is the primary Federal funding source devoted to providing low-
income families with access to child care and improving the quality of 
child care. It has the twin goals of promoting families' economic self-
sufficiency by making child care more affordable, and fostering healthy 
child development and school success by improving the quality of child 
care. This proposed regulatory action is needed to improve 
accountability broadly across many areas of the CCDF program, but is 
especially focused on ensuring children supported by CCDF funds are in 
safe, healthy, quality child care, and empowering parents with 
transparent information about the child care choices available to them.
    Last reauthorized in 1996, the CCDF program has not undergone any 
significant review in more than 15 years, yet it has far-reaching 
implications for America's poorest children. It provides child care 
assistance to 1.6 million children from nearly 1 million low-income 
working families. Half of the children served are living at or below 
poverty level. In addition, children who receive CCDF are cared for 
alongside children who do not receive CCDF, by approximately 500,000 
participating child care providers, some of whom lack basic assurances 
needed to ensure children are safe, healthy and learning.
    National surveys have demonstrated that most parents logically 
assume their child care providers have had a background check, had 
training in child health and safety, and are regularly monitored 
(National Association of Child Care Resource and Referral Agencies, 
National Parent Polling Results, 2011). However, State policies 
surrounding the training and oversight of child care providers vary 
widely and may not include these requirements. In addition, 
approximately 10 percent of CCDF children are cared for in unregulated 
centers and homes, meaning there is little to no oversight with respect 
to compliance with basic standards designed to safeguard children's 
well-being, such as first-aid and safe sleep practices. This can leave 
children in unsafe conditions, even as their care is being funded with 
public dollars. There have been many documented instances of children 
being injured or even dying in child care, some of which were due to a 
lack of basic requirements for child care providers. While it is not 
possible to eliminate all tragic circumstances, this proposed rule 
focuses on preventing these situations by increasing accountability for 
protecting the health and safety of children in child care. It would 
add requirements for child care providers serving children receiving 
CCDF assistance, including background checks, pre-service training in 
specific areas of health and safety, and strengthened monitoring of 
providers.
    Yet, compliance with health and safety standards is not enough to 
ensure that children are getting the quality child care they need to 
support their healthy development and school success. A growing body of 
research demonstrates that the first five years of a child's cognitive 
and emotional development establish the foundation for learning and 
achievement throughout life. This is especially true for low-income 
children who face a school readiness and achievement gap and can 
benefit the most from high quality early learning environments. 
Children receiving CCDF subsidies come from low-income families and 
typically start school far behind their peers in key areas such as 
language development and problem-solving skills. Research shows that 
the quality and stability of adult, child relationships matter and 
positive, lasting interactions with caregivers can help foster the 
development and learning needed to help close those gaps. In light of 
this research, many States, Territories, and Tribes, working 
collaboratively with the Federal

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government, have taken important steps to make the CCDF program more 
child-focused and family-friendly; however, implementation of these 
evidence-informed practices is uneven across the country and critical 
gaps remain.
    Beyond improving health and safety, CCDF can address this in two 
ways; first by investing in the quality of child care and providing 
parents with the transparent information they need to find that care, 
and second by improving the stability of care through implementation of 
family-friendly policies.
    First, parents often lack basic information about child care 
providers--including whether they have a consistent track record of 
meeting health and safety standards and information about the quality 
and qualifications of the caregivers. This proposed rule includes a set 
of provisions designed to provide greater transparency to parents so 
they can make more informed choices for their families and to 
facilitate quality improvement efforts by child care providers. It 
makes available, for both CCDF parents and the general public, clear, 
easy-to-understand information about the quality of child care 
providers in their communities. In addition, it facilitates replication 
of best practices across the country by directing States, Territories, 
and Tribes toward making more purposeful investments in child care 
quality improvement and tracking the progress and success of those 
investments.
    Secondly, this proposed rule includes provisions to make the CCDF 
program more ``family friendly'' by reducing unnecessary administrative 
burdens on families (as well as State, Territory, and Tribal agencies 
administering the program), and by improving coordination with other 
programs serving low-income families. Currently, most families 
receiving CCDF-assistance participate in the program for only 3 to 7 
months, and many are still eligible when they leave the program. 
Parents often find it difficult to navigate administrative processes 
and paperwork required to maintain their eligibility and State policies 
can be inflexible to changes in a family's circumstances. In some 
States, if a parent loses their job they also lose their child care 
assistance right away, making it difficult to look for a new job. If a 
parent finds a new job they may have to reapply for CCDF and find 
themselves on a waiting list. This disrupts both the parents' economic 
stability and the relationship that a child has with his or her 
caregiver. Research has shown that breaks in the relationship that a 
child has with a caregiver is detrimental to optimal child development, 
especially for infants and toddlers. Changes in this proposed rule 
support a set of policies that will stabilize families' access to child 
care assistance and in turn, help stabilize their employment and 
maintain the stability of the child's care arrangement.
    Legal authority. This proposed regulation is being issued under the 
authority granted to the Secretary of Health and Human Services by the 
CCDBG Act (42 U.S.C. 9858, et seq.) and Section 418 of the Social 
Security Act (42 U.S.C. 618).
    Summary of the major provisions of this proposed regulatory action. 
This proposed rule includes regulatory changes for CCDF in four 
priority areas: (1) improving health and safety in child care; (2) 
improving the quality of child care; (3) establishing family-friendly 
policies; and (4) strengthening program integrity.
    The proposed rule would improve health and safety protections for 
children receiving CCDF assistance by specifying minimum State health 
and safety standards for their child care providers, including pre-
inspections for compliance with State and local fire, health, and 
building codes, criminal background checks and pre-service training in 
specific areas, such as first aid and CPR. The proposed rule requires 
States to take steps to improve the monitoring of child care providers 
who receive CCDF to care for children by conducting unannounced, on-
site visits to CCDF providers.
    In addition to establishing a floor of basic health and safety, 
this proposed rule seeks to improve the quality of child care and 
provide parents with information about child care providers available 
to them. It requires that States post information about health, safety 
and licensing history of child care providers on a user-friendly Web 
site and establish a hotline for parents to submit complaints about 
child care providers. The proposal builds on practices adopted by more 
than half the States by requiring establishment of provider-specific 
quality indicators, such as through a Quality Rating and Improvement 
System (QRIS), reflecting teaching staff qualifications, learning 
environment, and curricula and activities. This makes it easier for 
parents to compare child care providers and choose a provider that best 
meets their family's needs. It also encourages States to adopt an 
organized framework for their quality improvement activities including 
helping child care providers meet higher standards and helping them 
improve their education and training. Finally, the proposed rule 
addresses the lack of supply of high quality care, by asking States to 
identify areas of the highest need and use grants or contracts directly 
with child care providers to improve the quality in those places.
    To increase stability in the lives of low-income families receiving 
CCDF, this proposed rule includes family-friendly policies to make it 
easier for parents to access and maintain their child care assistance. 
It establishes a 12-month period for re-determining eligibility and 
allows parents who lose their job to remain eligible for a period of 
time while they look for a new job. It allows States more flexibility 
to minimize requirements for families to maintain their eligibility and 
to waive co-payments for families. These provisions also make it easier 
for States to align CCDF policies with other programs that may be 
serving the families, such as the Supplemental Nutrition Assistance 
Program (SNAP), Medicaid, the Children's Health Insurance Program, and 
Early Head Start and Head Start.
    Finally, this proposed rule improves program integrity by requiring 
States with high rates of improper payments for the CCDF program to 
develop a plan for reducing those rates in accordance with the Improper 
Payments Elimination and Reduction Act. It also adds new provisions 
requiring States to have in place effective internal controls for sound 
fiscal management, processes for identifying fraud and other program 
violations, and procedures for accurately verifying a family's 
eligibility.
    This proposed rule recognizes the importance of State, Territory, 
and Tribal flexibility in administration of the program. In many areas 
the proposed rule establishes a clear expectation for States, 
Territories and Tribes, but allows a range of implementation options to 
fit their individual circumstances. For example, it allows States, 
Territories, and Tribes to exempt relatives and caregivers in the 
child's home from some or all of the CCDF health and safety 
requirements and to set the period of time they allow for a family to 
search for a job. The preamble highlights the ways that the proposed 
rule incorporates practices common in many States and identifies 
alternative options for implementing new requirements. In many cases, 
the examples are illustrative and States can identify the best 
approaches for their jurisdictions. Similarly, we expect especially 
wide variation in approaches adopted by Tribes. ACF is committed to 
consulting with Tribal leadership on the provisions of this proposed 
rule and we

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look forward to working with Tribes on practices that are a good fit 
for Tribal communities.
    Cost and benefits. Changes in this proposed rule directly benefit 
children and parents who use CCDF assistance to pay for child care. The 
1.6 million children who are in child care funded by CCDF would have 
stronger protections for their health and safety, which addresses every 
parent's paramount concern. But the effect of these changes would go 
far beyond the children who directly participate in CCDF. Not only 
children who receive CCDF, but all the children in the care of a 
participating CCDF provider, will be safer because that provider has 
had a background check and is more knowledgeable about CPR, first aid, 
safe sleep for infants, and the safe transportation of children. The 
consumer education and transparency provisions in this proposed rule 
will benefit not only CCDF families, but all parents selecting child 
care by requiring States to post provider-specific information about 
child care providers on a public Web site with information about health 
and safety and licensing requirements. Several provisions in this 
proposed rule benefit child care providers by encouraging States to 
invest in high quality child care providers and professional 
development and to take into account quality when they determine child 
care payment rates. It also places a stronger emphasis on practices 
States use to reimburse providers, such as ensuring timely payments and 
paying for absence days which is a common practice in the child care 
market.
    There are a significant number of States, Territories, and Tribes 
that have already implemented many of these policies and we have been 
purposeful throughout to note these numbers. The cost of implementing 
the changes in this proposed rule will vary depending on a State's 
specific situation. ACF does not believe the costs of this proposed 
regulatory action would be economically significant and that the 
tremendous benefits to low-income children justify costs associated 
with this proposed rule.

II. Background

A. Child Care and Development Fund (CCDF)

    The CCDF program is administered by the Office of Child Care (OCC), 
Administration for Children and Families (ACF) in the Department of 
Health and Human Services (HHS). CCDF funds are allocated through 
formula grants to State, Territory, and Tribal Lead Agencies. CCDF 
provides financial assistance to low-income families to access child 
care so they can work or attend a job training or educational program. 
The program also provides funding to improve the quality of child care 
and increase the supply and availability of child care for all 
families, including those who receive no direct assistance through 
CCDF.
    Over 12 million young children regularly rely on child care to 
support their healthy development and school success. Additionally, 
more than 8 million children participate in a range of school-age 
programs before- and after-school and during summers and school breaks. 
CCDF is the primary Federal funding source devoted to providing low-
income families with access to child care and before-and after-school 
care and improving the quality of care. Each year, States, Territories, 
and Tribes invest $1 billion in CCDF funds to support child care 
quality improvement activities that are designed to create better 
learning environments and more effective caregivers in child care 
centers and family child care homes across the country.
    CCDF was created more than 15 years ago, after Congress enacted the 
Personal Responsibility and Work Opportunity Reconciliation Act 
(PRWORA) of 1996 (Pub. L. 104-193), a comprehensive welfare reform plan 
that included new work requirements and provided supports to families 
moving from welfare to work, including new consolidated funding for 
child care. This funding, provided under section 418 of the Social 
Security Act (42 U.S.C. 618), combined with funding from the Child Care 
and Development Block Grant (CCDBG) Act of 1990 (42 U.S.C 9858 et 
seq.), was designated by HHS as the Child Care and Development Fund. 
CCDF regulations published in 1998 at 45 CFR parts 98 and 99 
implemented the child care provisions of PRWORA and, excepting the 
addition of a new Subpart K to require Lead Agencies to report improper 
payments, the regulations have undergone only minor changes since 
becoming effective.
    At the time current CCDF regulations were drafted, policymakers 
were concentrated on re-positioning an entitlement-based welfare system 
into one that provided benefits provisionally based on work. The 
resulting focus of the CCDF regulations was largely dedicated to the 
goal of enabling low-income mothers to transition from welfare to work. 
This is evident in a fact sheet developed by HHS shortly after passage 
of PRWORA which stated that the new welfare law provided an increase in 
child care funding ``to help more mothers move into jobs.'' (http://www.acf.hhs.gov/programs/cse/pubs/1996/news/prwora.htm) CCDF was 
closely tied to the new Temporary Assistance for Needy Families (TANF) 
program which focused on assisting needy families through promotion of 
job preparation and work activities.
    In the decade and a half since PRWORA, the focus of the CCDF 
program has changed as we have learned a remarkable amount about the 
value of high quality early learning environments for young children. 
CCDF is a dual purpose Federal program with a two-generational impact. 
Low-income parents need access to child care in order to work and gain 
economic independence and low-income children benefit the most from a 
high quality early learning setting. Traditionally, CCDF has been 
understood as primarily providing access to child care to support work, 
with a secondary focus on supporting children's development by 
improving the quality of child care. We believe these purposes--access 
and quality--are not competing, but synergetic.
    Federal CCDF dollars should provide access to high quality care in 
recognition of the impact CCDF has on our nation's most disadvantaged 
and vulnerable children. We do not intend to diminish the importance of 
CCDF as a work support. Yet, in order to fully leverage the Federal 
investment, we must be accountable for ensuring that children supported 
with CCDF funds are placed in safe, healthy, nurturing settings that 
are effective in promoting learning, child development and school 
readiness. This dual purpose, two-generational framework envisions the 
program as an investment supporting the child's long-term development 
and providing the parent with an opportunity to work or participate in 
job training or educational activities with peace of mind about their 
children's safety and learning.
    CCDF regulations pre-date much of the current science on brain 
development in the early years of children's lives. Ten years ago, HHS 
(in collaboration with other Federal agencies and private partners) 
funded the National Academies of Science report, Neurons to 
Neighborhoods. (National Research Council and Institute of Medicine, 
From Neurons to Neighborhoods: The Science of Early Childhood 
Development, 2000) The findings from this report showed that brain 
development is most rapid during the first five years of life, and that 
early experiences matter for healthy development. Nurturing and 
stimulating care given in the early years of life build

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optimal brain architecture that allows children to maximize their 
enormous potential for learning. On the other hand, hardship in the 
early years of life can lead to later problems. Interventions in the 
first years of life are capable of helping to shift the odds for those 
at risk of poor outcomes toward more positive outcomes. A multi-site 
study conducted by the Frank Porter Graham Child Development Institute 
found that, ``. . . children who experienced higher quality care are 
more likely to have more advanced language, academic, and social 
skills. Moreover, the study found that quality child care matters more 
for at-risk children.'' (University of North Carolina, The Children of 
the Cost, Quality, and Outcomes Study Go to School: Executive Summary, 
1999)
    Evidence continues to mount regarding the influence children's 
earliest experiences have on their later success and the role child 
care can play in shaping those experiences. The most recent findings 
from the National Institute of Child Health and Human Development 
(NICHD) found that the quality of child care children received in their 
preschool years had small but detectable effects on their academic 
success and behavior all the way into adolescence. (U.S. Department of 
Health and Human Services, National Institutes of Health, Study of 
Early Child Care and Youth Development, 2010) A recent follow-up study 
to the well known Abecedarian Project, which began in 1972 and has 
followed participants from early childhood through adolescence and 
young adulthood, found that adults who participated in a high quality 
early childhood education program are still benefiting from their early 
experiences. According to the study, Abecedarian Project participants 
had significantly more years of education than peers and were four 
times more likely to earn college degrees. (Frank Porter Graham Child 
Development Institute, Developmental Psychology, 2012)
    In addition, millions of school-age children participate in before-
and after-school programs that support their learning and development. 
Participation in high quality out-of-school time programs is correlated 
with positive outcomes for youth, including improved academic 
performance, work habits and study skills. (Vandell, D., et al., The 
Study of Promising After-School Programs, Wisconsin Center for 
Education Research, 2005) An analysis of over 70 after-school program 
evaluations found that evidence-based programs designed to promote 
personal and social skills were successful in improving children's 
behavior and school performance. (Durlak, J. and Weissberg, R., The 
Impact of Afterschool Programs that Seek to Promote Personal and Social 
Skills, Collaborative for the Advancement of Social and Emotional 
Learning, 2007)
    After-school programs also promote youth safety and family 
stability by providing supervised settings during hours when children 
are not in school. Parents with school-aged children in unsupervised 
arrangements face greater stress that can impact the family's well-
being and successful participation in the workforce. (Barnett and 
Gareis, Parental After-School Stress and Psychological Well-Being, 
Journal of Marriage and the Family, 2006) CCDF plays a critical role in 
providing access to school-age care and improving the quality of 
programs, with over a third of children receiving CCDF subsidies being 
aged 6 to 12.
    Because of the strong relationship between early experience and 
later success, investments in improving the quality of early childhood 
and before-and after-school programs can pay large dividends. Nurturing 
and responsive relationships with parents and caregivers and engaging 
learning environments in early care and education settings can provide 
young children with the capacity for tremendous growth. Children 
attending high quality school-age programs are more likely to succeed 
in school and have stronger social and inter-personal skills. In short, 
high quality early education is a linchpin to creating an educational 
system that is internationally competitive and vital to the country's 
workforce development, economic security, and global competitiveness.
    As a block grant, CCDF offers a great deal of flexibility to State, 
Territory, and Tribal Lead Agencies administering the program. The 
first goal listed at section 658A of the CCDBG Act is ``to allow each 
State maximum flexibility in developing child care programs and 
policies that best suit the needs of children and parents within such 
State.'' This structure has allowed many States to test and experiment 
with subsidy policies that are child-focused, family-friendly and fair 
to child care providers, as well as to implement sophisticated quality 
improvement systems that aim to increase the number of low-income 
children in high quality child care. Many States also have made 
significant progress in shaping and developing coordinated systems of 
early learning and have pioneered professional development systems that 
offer child care providers opportunities to move towards professional 
advancement in their careers.
    CCDF is a core component of the early care and education spectrum 
and often operates in conjunction with other programs including Head 
Start, Early Head Start, State pre-kindergarten, and before-and after-
school programs. States have flexibility to use CCDF to provide 
children enrolled in these programs full-day, full-year care, which is 
essential to supporting low-income working parents. CCDF also provides 
the funding for quality improvements impacting children in all types of 
settings, not just those children receiving subsidies. CCDF has helped 
lay the groundwork for development of early learning systems, 
investments that are leveraged by the Race to the Top Early Learning 
Challenge (RTT-ELC), a grant competition administered jointly by the 
Department of Education and HHS. RTT-ELC provides incentives and 
supports to selected States to build a coordinated system of early 
learning and development to ensure more children from low-income 
families have access to high quality early learning programs and are 
able to start school with a strong foundation for future learning. RTT-
ELC is a vehicle for States to demonstrate ways to integrate and align 
resources and policies across the spectrum of early care and education 
programs. Much of the existing early learning systems and quality 
investments already in place and supported by CCDF parallel many of the 
goals and priorities of RTT-ELC, resulting in a complementary national 
strategy to improve the quality of early learning programs across the 
country.
    Finally, ACF recently overhauled and reorganized the structure and 
required content of the CCDF Plan (ACF-118). States, Territories, and 
Tribes must submit their CCDF Plans every two years. The Plan serves as 
the application for CCDF funds and provides a description of the Lead 
Agency's child care program and services available to eligible 
families. Changes were made to the CCDF Plan to enhance the health and 
safety and quality improvement sections with a focus on building 
systems for child care quality improvement.
    This proposed rule is driven by the same priorities and vision for 
child care reform reflected in the changes made to the CCDF Plan and 
follows many of the same principles for improvements in early care and 
education supported by Congress through creation of RTT-ELC. It is 
informed by the many documented tragedies of child injuries and deaths 
in child care, it recognizes what has been learned from early childhood 
development research, supports replication of best practices across the

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country, and infuses new accountability for Federal dollars to leverage 
the full impact of the CCDF dual investment for both parents and 
children.

B. Discussion of Changes Made in This Proposed Rule

    The changes included in this proposed rule cover four priority 
areas: (1) Improving health and safety in child care; (2) improving the 
quality of child care; (3) establishing family-friendly policies; and 
(4) strengthening program integrity.
    First, we know that health and safety is the foundation for 
building a high quality early learning environment. Research shows that 
licensing and regulatory requirements for child care affect the quality 
of care and child development. (Adams, G., Tout, K., Zaslow, M., Early 
care and education for children in low-income families: Patterns of 
use, quality, and potential policy implications, Urban Institute, 2007) 
All States receiving CCDF funds are required to have child care 
licensing systems in place and must ensure child care providers serving 
children receiving subsidies meet certain health and safety 
requirements. In this rule, we propose changes that strengthen health 
and safety requirements and monitoring of compliance with these 
requirements for child care providers serving children receiving CCDF 
assistance.
    Second, improving the quality of child care is essential to support 
low-income children's early learning and parents need more transparent 
information about the quality of child care choices available to them. 
States administering the CCDF program have already begun building 
quality improvement systems which make strategic investments to provide 
pathways for providers to reach higher quality standards. More than 
half the States have implemented Quality Rating and Improvement Systems 
(QRIS) and the majority of the remaining States are piloting or 
planning for implementation of such systems. Our priority for quality 
improvement would incorporate a systemic organizational framework for 
improving the quality of child care into CCDF regulations, and provide 
a consumer education mechanism that helps parents better understand the 
health, safety and quality standards met by child care providers.
    Third, we have prioritized establishing family-friendly policies in 
order to improve continuity of services for parents and stability of 
child care arrangements for children. Continuity of services 
contributes to improved job stability and is important to a family's 
financial health. One of the goals of the CCDF program is to help 
families achieve independence from public assistance. This goal can be 
undermined by policies that result in unnecessary disruptions to 
receipt of a subsidy due to administrative barriers or other processes 
that make it difficult for parents to maintain their eligibility and 
thus fully benefit from the support it offers. Continuity also is of 
vital importance to the healthy development of young children, 
particularly the most vulnerable. Unnecessary disruptions in services 
can stunt or delay socio-emotional and cognitive development because 
safe, stable environments allow young children the opportunity to 
develop the relationships and trust necessary to comfortably explore 
and learn from their surroundings. Research has also demonstrated a 
relationship between child care stability and social competence, 
behavior outcomes, cognitive outcomes, language development, school 
adjustment, and overall child well-being. (Adams, G., Rohacek, M., & 
Danzinger, A. Child Care Instability, The Urban Institute, 2010) This 
priority area includes a number of proposed changes including 
requirements for determining a child's eligibility for services and 
administrative processes for interactions with families and child care 
providers.
    Fourth, we have prioritized strengthening program integrity by 
proposing changes that address policies for internal controls, fiscal 
management, documenting and verifying eligibility, and processes for 
identifying fraud and improper payments. In November 2009, the 
President issued Executive Order 13520, which underscored the 
importance of reducing improper payments and eliminating waste in 
Federal programs (74 FR 62201). Program integrity efforts can help 
ensure that limited program dollars are going to low-income eligible 
families for which assistance is intended. The proposed changes seek to 
strengthen accountability while continuing to preserve access for 
eligible children and families.
    In large part, the changes in this proposed rule articulate a set 
of expectations for how Lead Agencies are to satisfy certain 
requirements in the CCDBG Act, which the current regulations either 
only minimally address or where they remain altogether silent. In some 
places, such as Sec.  98.41 regarding health and safety standards for 
providers serving subsidized children, the current regulations are 
silent as to specific standards providers are expected to meet. The 
lack of specificity in regulation effectively undermines the 
requirement since there is no clear guidance on what the requirements 
mean or the manner in which Lead Agencies should implement them. In 
other areas of the regulations, we have proposed changes to better 
balance the dual purposes of the program by adding provisions to ensure 
that healthy, successful child development is a consideration when Lead 
Agencies establish policies for the child care program. For example, 
authorization of child care services for eligible families should take 
into consideration the value of preserving continuity in child care 
arrangements so that young children have stability in their caregivers.
    Finally, we have proposed other changes to the regulations that do 
not impose new requirements on Lead Agencies, but rather formalize 
Federal support for certain best practices and policies. This can be 
seen in the proposed changes to Sec.  98.51 of the regulations which 
require Lead Agencies to spend a minimum of four percent on child care 
quality improvement activities. We have added regulatory language to 
this section describing a formal framework for quality spending that is 
focused on helping Lead Agencies organize, guide, and measure progress 
of quality improvement activities, but we are not requiring Lead 
Agencies to adopt that framework.
    In developing this proposed rule, we were mindful of the 
Administration's emphasis on flexibility as a guiding principle when 
considering ways to better accomplish statutory goals. Accordingly, we 
have sought to retain much of the flexibility that is afforded to Lead 
Agencies inherent within the CCDF block grant. In many areas where we 
have added new requirements we are deferring to Lead Agencies to decide 
how they will implement the provision and have provided examples of 
alternate ways in which the requirement could be met. In other areas we 
have added more flexibility to allow Lead Agencies to align eligibility 
and other requirements across programs and to tailor policies that 
better meet the needs of the low-income families they serve. For 
example, we are providing more flexibility for Lead Agencies to 
determine when it is appropriate to waive a family's co-pay 
requirement.
    We do not anticipate that these proposed changes will place 
significant new burden on States, Territories or Tribes because many 
Lead Agencies have already implemented these practices through their 
child care licensing systems and by using the flexibility in the CCDF 
program provided under current law. We have

[[Page 29447]]

made it a point throughout this rule to include information about the 
number of States and Territories that have already adopted the changes 
we are proposing. In addition, a number of Tribes have undertaken 
improvements in many of these areas, including health and safety 
requirements. This proposed rule at once embraces the progress and 
benefits that have resulted from devolving significant program 
authority to States, Territories, and Tribes while also identifying 
specific areas where new Federal standards and regulation will most 
benefit the core principles and goals of the CCDF program.
    ACF expects provisions included in a Final Rule to become effective 
30 days from the date of publication of the Final Rule. Compliance with 
provisions in the Final Rule would be determined through ACF review and 
approval of CCDF Plans and through the use of Federal monitoring in 
accordance with Sec.  98.90, including on-site monitoring visits as 
necessary. ACF expects that provisions included in a Final Rule would 
be incorporated into the review of FY 2016-2017 CCDF Plans that would 
become effective October 1, 2015. We recognize that some of the 
proposed changes may require action on the part of a State's 
legislature or require rulemaking in order to implement. It is our 
desire to work with Lead Agencies to ensure that adoption of any new 
requirements included a Final Rule is done in a thoughtful and 
comprehensive manner. ACF welcomes public comment on specific 
provisions included in this proposed rule that may warrant a longer 
phase-in period and will take these comments into consideration when 
developing the Final Rule.
    In this proposed rule, we have generally maintained the structure 
and organization of the current CCDF regulations. The preamble in this 
proposed rule discusses the changes to current regulations and contains 
certain clarifications based on ACF's experience in implementing the 
prior final rules. Where language of existing regulations remains 
unchanged, the preamble explanation and interpretation of that language 
published with all prior final rules also is retained unless 
specifically modified in the preamble to this proposed rule. (See 57 FR 
34352-34413, August 4, 1992; 63 FR 39936-39981, July 24, 1998; 72 FR 
27972-27980, May 18, 2007; 72 FR 50889-50900. September 5, 2007)

III. Statutory Authority

    This proposed regulation is being issued under the authority 
granted to the Secretary of Health and Human Services by the CCDBG Act 
(42 U.S.C. 9858, et seq.) and Section 418 of the Social Security Act 
(42 U.S.C. 618).

IV. Provisions of Proposed Rule

Subpart A--Goals, Purposes and Definitions

Goals and Purposes (Section 98.1)
    We are proposing changes to enhance the regulatory language 
describing purposes of the CCDF program to reflect the priorities of 
improving health and safety in child care, improving the quality of 
child care, establishing family-friendly policies, and strengthening 
program integrity. The first part of the regulations at Sec.  98.1(a) 
defines the goals of CCDF and mirrors the statutory language describing 
goals of the CCDBG Act. We are proposing no changes in this section. 
The second part at Sec.  98.1(b) uses regulatory authority to define 
purposes for the CCDF program which are based on purposes included in 
the conference report accompanying original passage of the CCDBG Act in 
1990. We propose to revise the purposes described at Sec.  98.1(b).
    We have retained all of the language in the original purposes with 
some enhancements and added two new purposes (proposed changes are 
represented in italics). Specifically, we propose to revise paragraph 
(b) to read: (1) Provide low-income families with the financial 
resources to find and afford high quality child care for their children 
and serve children in safe, healthy, nurturing child care settings that 
are highly effective in promoting learning, child development, school 
readiness and success; (2) Enhance the quality and increase the supply 
of child care and before-and after-school care services for all 
families, including those who receive no direct assistance under the 
CCDF, to support children's learning, development, and success in 
school; (3) Provide parents with a broad range of options in addressing 
their child care needs by expanding high quality choices available to 
parents across a range of child care settings and providing parents 
with information about the quality of child care programs; (4) Minimize 
disruptions to children's development and learning by promoting 
continuity of care; (5) Ensure program integrity and accountability in 
the CCDF program; (6) Strengthen the role of the family and engage 
families in their children's development, education, and health; (7) 
Improve the quality of, and coordination among Federal, State, and 
local child care programs, before-and after-school programs, and early 
childhood development programs to support early learning, school 
readiness, youth development, and academic success; and (8) Increase 
the availability of early childhood development and before- and after-
school care services.
    We believe these changes bring the purposes of CCDF into better 
alignment with the current knowledge in the field, result in a more 
comprehensive vision of the program, and provide the foundation for a 
more balanced approach to program administration that acknowledges the 
two-generational impact of the CCDF program.
Definitions (Section 98.2)
    We propose to make four technical changes at Sec.  98.2 by deleting 
the definition for group home child care provider and by making 
conforming changes to the definitions for categories of care, eligible 
child care provider, and family child care provider. The current 
regulation defines group home child care provider as meaning two or 
more individuals who provide child care services for fewer than 24 
hours per day per child, in a private residence other than the child's 
residence, unless care in excess of 24 hours is due to the nature of 
the parent(s)' work. When ACF revised the FY 2012-2013 CCDF Plan, we 
received public comments indicating that many States, Territories and 
Tribes do not consider group homes to be a separate category of care 
when administering their CCDF programs or related efforts, such as 
child care licensing. Some States use alternative terminology (e.g., 
large family child care homes), while others treat all family child 
care homes similarly regardless of size. Due to this variation, we 
propose to delete the separate definition for group home child care 
provider which requires a number of technical changes to the 
definitions section.
    We propose to revise the definition of categories of care at Sec.  
98.2 to delete group home child care. Under the proposed rule, 
categories of care would be defined to include center-based child care, 
family child care, and in-home care (i.e., a provider caring for a 
child in the child's home). Similarly, we propose to change the 
definition for eligible child care provider at Sec.  98.2 to delete a 
group home child care provider. The revised definition defines an 
eligible child care provider as a center-based child care provider, a 
family child care provider, an in-home child care provider, or other 
provider of child care services for compensation. Group home child care 
would be considered a family child care provider for these purposes. 
Accordingly, we propose to amend the definition for family child care 
provider at Sec.  98.2 to include larger family homes or group homes. 
The existing definition

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of family child care provider is limited to one individual who provides 
services as the sole caregiver. The revised definition defines a family 
child care provider as one or more individuals who provide child care 
services. The remainder of the definition remains the same, specifying 
that services are for fewer than 24 hours per day per child, in a 
private residence other than the child's residence, unless care in 
excess of 24 hours is due to the nature of the parent(s)' work.
    Many Lead Agencies will continue to provide CCDF services for 
children in large family child care homes or group homes, and this is 
allowable and recognized by the revised definition of family child care 
provider--which would now include care in private residences provided 
by more than one individual. This proposed change would eliminate group 
homes as a separately-defined category of care for purposes of 
administering the CCDF--thereby providing States, Territories, and 
Tribes with greater flexibility. As a practical impact, CCDF Lead 
Agencies will no longer be required to report separately on group homes 
in their CCDF Plans (for example, regarding health and safety 
requirements), or to consider group homes as a separate category for 
purposes of meeting parental choice requirements at Sec.  98.30 and 
equal access requirements at Sec.  98.43(b)(1). Rather, group homes 
will now be considered as family child care homes for these purposes.

 Subpart B--General Application Procedures

    Lead Agencies have considerable latitude in administering and 
implementing their child care programs. Subpart B of the regulations 
describes some of the basic responsibilities of a Lead Agency as found 
in the statute. A Lead Agency is designated by the chief executive of a 
State or Territory, or by the appropriate Tribal leader or applicant, 
and serves as the single point of contact for all child care issues. 
The Lead Agency determines the basic use of CCDF funds and the 
priorities for spending CCDF funds and promulgates the rules governing 
overall administration.
    Specifically, under existing rules, the Lead Agency 
responsibilities include oversight of CCDF funds spent by sub-grantees 
and contractors, monitoring programs and services, responding to 
complaints, and developing the CCDF Plan in the manner specified by the 
Secretary. In developing the CCDF Plan, the Lead Agency must consult 
with the appropriate representatives of local government, coordinate 
the provision of services with other Federal, State, and local child 
care and early childhood development programs and ``programs, including 
such programs for the benefit of Indian children, and hold at least one 
public hearing. Other Lead Agency responsibilities include having an 
independent audit conducted after the close of each program period, 
ensuring that sub-grantees are audited in accordance with appropriate 
audit requirements, and submission of fiscal and program reports as 
prescribed by HHS.
Lead Agency Responsibilities (Section 98.10)
    We propose to add a provision to Lead Agency responsibilities at 
Sec.  98.10 to require Lead Agencies to be responsible for implementing 
practices and procedures to ensure program integrity and accountability 
as a conforming change pursuant to the proposed new section at 98.68 
Program Integrity at Subpart G--Financial Management. We include an 
explanation for this new section and change later in this proposed 
rule.
Administration Under Contracts and Agreements (Section 98.11)
    Section 98.11 of the regulations currently requires Lead Agencies 
that administer or implement the CCDF program indirectly through other 
local agencies or organizations to have written agreements with such 
agencies that specify mutual roles and responsibilities. However, it 
does not address the content of such agreements. We propose amending 
regulatory language at Sec.  98.11(a)(3) to specify that, while the 
content of Lead Agency written agreements with other governmental or 
non-governmental agencies may vary based on the role the entity is 
asked to assume or the type of project undertaken, agreements must, at 
a minimum, include tasks to be performed, a schedule for completing 
tasks, a budget that itemizes categorical expenditures consistent with 
proposed CCDF requirements at Sec.  98.65(h), and indicators or 
measures to assess performance.
    Many Lead Agencies administer the CCDF program through the use of 
sub-recipients that have taken on significant programmatic 
responsibilities, including providing services on behalf of the Lead 
Agency. For example, some States operate primarily through a county-
based system, while other Lead Agencies devolve decision-making and 
administration to local workforce boards, school readiness coalitions 
or community-based organizations such as child care resource and 
referral agencies. ACF has learned through our efforts working with 
grantees to improve program integrity that the quality and specificity 
of written agreements vary widely, which hampers accountability and 
efficient administration of the program. These proposed changes 
represent minimum, common-sense standards for the basic elements of 
those agreements, while allowing latitude in determining specific 
content. The Lead Agency is ultimately responsible for ensuring that 
all CCDF-funded activities meet the requirements and standards of the 
program, and thus has an important role to play to ensure written 
agreements with sub-recipients appropriately support program integrity 
and financial accountability.
Plan Process (Section 98.14)
    Coordination. Currently, Sec.  98.14(a)(1) requires Lead Agencies 
to coordinate provision of program services with other Federal, State, 
and local early care and development programs as required by section 
658D(b)(1)(D) of the CCDBG Act. Lead Agencies also are required to 
consult and coordinate services with agencies responsible for public 
health, public education, employment services/workforce development, 
and TANF. Over time, the CCDF program has become an essential support 
in local communities to provide access to early care and education and 
before and afterschool settings and to improve the quality of care. 
Partnerships with these agencies and local communities have been an 
important factor in improving the availability and quality of child 
care. Many Lead Agencies work collaboratively to develop a coordinated 
system of planning that includes a governance structure composed of 
representatives from the public and private sector, parents, schools, 
community-based organizations, child care, Head Start and Early Head 
Start, home visitation, as well as health, mental health, child 
welfare, family support, and disability services. Local coordinating 
councils or advisory boards also often provide input and direction on 
CCDF-funded programs.
    We propose to amend Sec.  98.14(a)(1) to add new entities with 
which Lead Agencies are required to coordinate the provision of child 
care services. We have added parenthetical language to paragraph (C) 
public education, to specify that coordination with public education 
should also include agencies responsible for prekindergarten programs, 
if applicable, and educational services provided under Part B and C of 
the Individuals with Disabilities Education Act (IDEA) (20 U.S.C. Sec.  
1400). Other proposed new coordinating

[[Page 29449]]

entities include agencies responsible for child care licensing, 
afterschool networks, Head Start collaboration, the State Advisory 
Council on Early Childhood Education and Care authorized by the Head 
Start Act (42 U.S.C. 9831 et seq.) (if applicable); and emergency 
management and response.
    First, we propose to add a specification to the existing regulatory 
requirement to coordinate with agencies responsible for public 
education at Sec.  98.14(a)(1)(C) to include prekindergarten, if 
applicable, and educational services provided through Part B and C of 
IDEA. Part B of the IDEA provides funding for Special Education 
Preschool grants. According to the National Institute for Early 
Education Research (NIEER), 40 States funded preschool programs during 
the 2009-2010 school year. (The State of Preschool 2010, NIEER, Rutgers 
graduate School of Education) Prekindergarten programs generally serve 
3 and 4-year olds and aim to better prepare children to succeed in 
kindergarten. Similar to Head Start, many CCDF Lead Agencies coordinate 
services with children enrolled in prekindergarten programs to provide 
full-day, full-year care. Given the prevalence of State-funded 
prekindergarten programs and overlapping populations and purposes with 
the CCDF program we believe it is important to include these entities 
as a required coordinating partner.
    State education agencies use IDEA funds to provide special 
education and related services for preschool-aged children with 
disabilities. Part C of the IDEA provides funding to provide early 
intervention services for infants and toddlers with disabilities and 
their families. Since the establishment of the Part C early 
intervention program under IDEA, all States have established State 
Interagency Coordinating Councils (SICCs) to advise and assist in the 
implementation of Part C for infants and toddlers with disabilities and 
their families. We believe this specification is important to ensure 
that Lead Agencies take into account children with special needs in 
child care and coordinate with other services available to children 
with disabilities and their families. Linkages between child care 
providers caring for children who have physical, developmental, 
behavioral, or emotional conditions and medical and therapeutic 
services can help make inclusion a reality by integrating additional 
resources and expertise needed to help care for children in a 
continuous and comprehensive manner. In the FY 2012-2013 CCDF Plans, 
nearly all States and Territories reported coordinating with agencies 
responsible for children with special needs, including IDEA 
implementation. [Note: The analysis of CCDF Plans throughout this 
proposed rule includes a total of 56 State and Territorial CCDF Plans, 
including American Samoa, Guam, Northern Marianas Islands, Puerto Rico, 
and the Virgin Islands.] Through these partnerships, many Lead Agencies 
provide joint training and collaborative technical assistance on child 
development and on the inclusion of children with disabilities in child 
care programs.
    We propose to add child care licensing agencies as a required 
coordinating entity at new paragraph (E) to formalize a partnership 
that already exists in many States. Section 658A of the CCDBG Act 
provides that one of the goals of the program is ``to assist States in 
implementing the health, safety, licensing, and registration standards 
established in State regulations.'' According to the FY 2012-2013 CCDF 
Plans, 34 States and Territories indicate coordinating provision of 
CCDF services with agencies responsible for child care licensing. Child 
care licensing regulations and monitoring and enforcement policies help 
provide a baseline of protection for the health and safety of children 
in out-of-home care. According to the 2011 Child Care Licensing Study 
(prepared by the National Child Care Information and Technical 
Assistance Center and the National Association for Regulatory 
Administration), there are a total of 312,000 licensed facilities in 
the U.S. with more than 10 million licensed child care slots. In 
addition, the study found that most State licensing agencies use CCDF 
funds to hire and support child care licensing staff.
    We believe it is important that CCDF Lead Agencies collaborate with 
agencies responsible for child care licensing to ensure that 
information is shared about the licensing or regulatory status of 
providers serving children receiving subsidies, especially any history 
of licensing violations. To the extent that child care licensing 
agencies are responsible for monitoring compliance with State 
regulatory requirements, strong partnerships can help improve program 
integrity within CCDF by ensuring that providers serving children 
receiving subsidies are accountable for meeting health and safety and 
other regulatory requirements. We encourage CCDF Lead Agencies also to 
coordinate with licensing agencies when developing quality improvement 
systems to incorporate basic licensing requirements as part of the 
framework for determining program standards and a foundation for 
improving the quality of care.
    We propose to add the Head Start collaboration office as a required 
coordinating entity at new paragraph (F) because CCDF services can be 
linked with the Head Start program to help support provision of full-
day, full year care for children enrolled in Head Start and eligible 
for the CCDF program. The Head Start Act (42 U.S.C. 9801, et seq.) 
provides funding for each State to establish a Head Start collaboration 
office to promote linkages between Head Start, Early Head Start, and 
other child and family services. This proposed change has reciprocity 
with the requirement in the Head Start Act and would formalize a 
partnership that already exists in 46 States and Territories according 
to the FY 2012-2013 CCDF Plans. In both Head Start and CCDF, 
collaboration efforts extend to linking with other key services for 
young children and their families, such as medical, dental and mental 
health care, nutrition, services to children with disabilities, child 
support, refugee resettlement, adult and family literacy, and 
employment training. These comprehensive services are crucial in 
helping families progress towards self-sufficiency and in helping 
parents provide a better future for their young children.
    We propose to add the agency responsible for the State Advisory 
Council on Early Childhood Education and Care, if applicable, at new 
paragraph (G) in recognition of provisions included in the Head Start 
Reauthorization Act of 2007 (Pub. L. 110-134) which require States to 
create State Advisory Councils on Early Childhood Education and Care to 
improve coordination and collaboration among Head Start and Early Head 
Start agencies, pre-k programs, and other early childhood education 
providers. In FY 2009, the American Recovery and Reinvestment Act 
(ARRA) (Pub. L. 111-5) provided funding to States to convene these 
councils. Fifty States and Territories indicated in the FY 2012-2013 
CCDF Plans that they coordinate with the State Advisory Council. State 
Advisory Councils are often responsible for conducting a statewide 
needs assessment for early childhood education, developing 
recommendations for a statewide professional development and career 
plan for the early childhood education and care workforce, and 
developing recommendations for establishing a unified data collection 
system for publicly funded programs offering early childhood education 
services. Advisory councils may also play a role in making

[[Page 29450]]

linkages with Early Childhood Comprehensive Systems (ECCS) grantees 
within the State. Adding the State Advisory Council on Early Childhood 
Education and Care to the list of coordinating entities will ensure 
CCDF Lead Agencies continue to consult with and maintain effective 
collaboration with this important stakeholder.
    We propose to add agencies responsible for administering Statewide 
afterschool networks or other coordinating entities for out-of-school 
time care (if applicable) at new paragraph (H). Approximately, 39 
States have established statewide afterschool networks. (National 
Network of Statewide Afterschool Networks, 
www.statewideafterschoolnetworks.net) These networks bring together 
different stakeholders to consider ways to improve the quality, 
quantity, and sustainability of school-age programs in their State. The 
CCDF program provides assistance to children up to age 13, therefore we 
believe it is critical that child care administrators partner with 
statewide afterschool networks or other entities, such as State 
associations of school-age programs, in order to better understand and 
respond to the unique issues related to improving access to and the 
quality of before-and-after school programs.
    Finally, we propose to add coordination with State and local 
government agencies responsible for emergency management and response 
at new paragraph (I) because maintaining the safety of children in 
early care and school-age programs in the event of a disaster or 
emergency necessitates advance planning by Lead Agencies and child care 
providers. In many disasters, including Hurricane Katrina in 2005, the 
tornado disaster in Joplin, Missouri in 2011, and Hurricane Sandy in 
2012, the provision of emergency child care services and rebuilding of 
child care facilities emerged as a critical need. At the Federal level, 
ACF has worked with the National Commission on Children and Disasters 
(NCCD) and the Federal Emergency Management Agency (FEMA) to raise 
awareness of child care as a key component in disaster preparedness and 
response. For example, ACF published an Information Memorandum (CCDF-
ACF-IM-2011-01) that provided guidance to assist Lead Agencies in the 
development of comprehensive statewide emergency preparedness and 
response plans for child care and the CCDF program.
    State, Territorial, and Tribal Lead Agencies can play an important 
role in helping to better prepare child care providers and support 
programs after a disaster to help them quickly recover and provide care 
for children in a safe and effective manner. Child care providers need 
to be prepared to maintain the safety of children in the event of a 
disaster or emergency and facilitate safe return of children to 
families in the immediate aftermath of an event. Additionally, it is 
important that providers receive the support and help they need to 
repair damaged property and rebuild so they can re-open and provide 
child care services for families recovering from the disaster. Lead 
Agencies must be concerned with ensuring continuity of care and 
services for families receiving assistance through the CCDF program and 
providers caring for children who receive subsidies when a disaster 
strikes. Lead Agencies also may be called upon to assist emergency 
management officials and voluntary organizations with the provision of 
emergency child care services after a disaster. We believe adding 
emergency management agencies as a coordinating partner in the 
regulation will enable Lead Agencies to better handle these wide-
ranging and important roles. Paragraphs (b) and (c) of this section 
would remain unchanged. As a technical matter, upon publication of the 
Final Rule we propose to correct the paragraph designations in Sec.  
98.14 by changing (a)(1)(A) through (I) to (a)(1)(i) through (ix).
    Public availability of Plans. We propose to add a new paragraph 
Sec.  98.14(d) to require Lead Agencies to make their CCDF Plan and any 
Plan amendments publicly available. Ideally, Plans and Plan amendments 
would be available on the Lead Agency Web site or other appropriate 
State Web site to ensure that there is transparency for the public, and 
particularly for parents seeking assistance, about how the child care 
program operates. We believe this is especially important for Plan 
amendments, given that Lead Agencies often make substantive changes to 
program rules or administration during the two-year Plan period through 
submission of Plan amendments (subject to ACF approval), but are not 
currently required to make those amendments available to the public.
Plan Provisions (Section 98.16)
    Submission and approval of the CCDF Plan is the primary mechanism 
by which ACF works with Lead Agencies to ensure program implementation 
meets Federal regulatory requirements. All provisions that are 
currently required to be included in the CCDF Plan are outlined at 
Sec.  98.16. Accordingly, this section of the regulation is the point 
at which our four priorities converge. Nearly all of our proposed 
regulatory changes are reflected in this section. The revisions and 
proposed additions to this section correspond to proposed changes 
throughout the regulations, many of which we provide explanation for 
later in this proposed rule. In addition, these proposed changes are 
consistent with changes included in the overhaul of the CCDF Plan. The 
Plan has been reorganized to better reflect State and Territorial 
practice in CCDF, to focus on a number of areas that are of high 
interest to both the Federal government and CCDF grantees, and to 
better capture the hallmarks of CCDF programs throughout the country, 
which have evolved significantly since its inception in 1996. Paragraph 
(a) of section 98.16 would continue to require that the Plan specify 
the Lead Agency.
    Written agreements. A new paragraph Sec.  98.16(b) is proposed to 
correspond with changes at Sec.  98.11(a)(3) discussed earlier, related 
to administration of the program through agreements with other 
entities. In the CCDF Plan, the proposed change would require the Lead 
Agency to include a description of processes it will use to monitor 
administrative and implementation responsibilities undertaken by 
agencies other than the Lead Agency including descriptions of written 
agreements, monitoring, and auditing procedures, and indicators or 
measures to assess performance. This is consistent with the desire to 
strengthen program integrity within the context of current State 
practices that devolve significant authority for administering the 
program to sub-recipients. Current paragraphs (b) through (e) would be 
re-designated as paragraphs (c) through (f) and otherwise would remain 
unchanged.
    Job search. We propose to require Lead Agencies to allow for some 
period of job search for families receiving CCDF assistance that 
experience job loss. The goal of this change is to minimize temporary 
disruption to subsidy receipt to promote children's development and 
learning by helping to sustain their early learning or school-age care 
placement through temporary periods of parental unemployment. We know 
that parents are better able to find new jobs quickly if they are 
allowed to retain their subsidy eligibility, providing the stability 
and flexibility to search for new employment. This is also consistent 
with changes we are proposing at Sec.  98.20 describing a child's 
eligibility for services to promote continuity of subsidy receipt and 
care arrangements discussed later in this proposed rule.

[[Page 29451]]

    Families can experience rapid and multiple changes within a short 
period of time and unemployment and job loss are very disruptive to 
families. Instability in a family's child care arrangement can make it 
difficult for parents to seek new employment, and retention of 
eligibility during a job search or temporary period of unemployment can 
alleviate some of the stress on families and facilitate a smoother 
transition back into the workforce. According to analysis of the FY 
2012-2013 CCDF Plans, many States and Territories provide CCDF 
assistance during periods of job search. However, some States only 
offer job search for certain subsets of families receiving CCDF 
assistance, such as those also receiving assistance through TANF. Under 
this proposed change Lead Agencies must allow some period of job search 
for all families receiving CCDF.
    In order to implement this change we propose to add parenthetical 
language at paragraph Sec.  98.16(g)(6), as re-designated, to require 
the Lead Agency to include some period of job search in its definition 
of ``working'' in the CCDF Plan. Currently, paragraph (f) requires Lead 
Agencies to provide definitions for the following terms in the CCDF 
Plan: (1) Special needs child; (2) physical or mental incapacity (if 
applicable); (3) attending (a job training or educational program); (4) 
job training or educational program; (5) residing with; (6) working; 
(7) protective services (if applicable); (8) very low-income; and (9) 
in loco parentis.
    We propose to require job search in the definition of ``working'' 
in the regulation because we view job search as closely linked to work 
and most Lead Agencies that allow job search already include job search 
in that definition in the Plan. However, some Lead Agencies currently 
elect to define job search under their definition of ``attending (a job 
training or education program)'' rather than ``working'' in the Plan, 
since job search also can be associated with activities such as 
attending interviews, job fairs, and r[eacute]sum[eacute] building 
classes; completing applications; and/or participating in job shadowing 
or unpaid internship opportunities. Therefore, as a technical matter, 
and in deference to State flexibility, when determining compliance with 
this provision through review of the CCDF Plan, ACF will continue to 
allow Lead Agencies to decide whether to include job search in their 
definition of ``working'' or ``attending (a job training or educational 
program).''
    It should be noted that this proposed change continues to allow 
Lead Agencies discretion to determine the length of time that ``job 
search activities'' are counted as a qualifying activity and whether to 
allow job search as an eligible activity for families applying for 
subsidy in addition to those currently receiving a subsidy who 
subsequently become unemployed. This proposal is consistent with the 
practices that already exist in many programs as well as provisions in 
the revised CCDF Plan that requires that Lead Agencies describe their 
policies promoting continuity of care for children and stability for 
families.
    Continuity of care. We propose to add a provision at paragraph 
Sec.  98.16(h), as re-designated, requiring Lead Agencies to include a 
description of policies to promote continuity of care for children and 
stability for families receiving CCDF services, including policies 
which take into account developmental needs of children when 
authorizing child care services; timely eligibility determination and 
processing of applications; and policies that promote employment and 
income advancement for parents. This change complements proposed 
changes at Sec.  98.20 describing a child's eligibility for services, 
which are discussed later in this proposed rule.
    The Lead Agency would be required to specify in the Plan the time 
limit it has established for making eligibility determinations and 
processing applications. Lead Agencies have flexibility in determining 
the policies and practices related to parent applications and 
eligibility determination processes for CCDF subsidies. It is critical 
for Lead Agencies to design processes that promote timely eligibility 
determinations for CCDF subsidy applicants, particularly in cases where 
families need immediate assistance. For example, a parent may be unable 
to start employment or may risk losing their job if they cannot secure 
a child care arrangement while waiting for the CCDF subsidy application 
to be approved. Many Lead Agencies already have implemented policies to 
improve the timeframe between the receipt of an application and the 
approval of child care services using web-based application submissions 
and other systems enhancements to reduce processing time allowing for 
families and providers to receive authorization more quickly.
    A study of mid-western States found that the time for processing 
applications ranged from 7 to 45 days. (Adams, G., Synder, K., and 
Banghardt, P., Designing Subsidy Systems to Meet the Needs of Families, 
2008) This research also identified a number of customer-friendly State 
practices that promoted timely eligibility determinations, including 
certain administrative structures (such as consolidated eligibility 
units) and caseworker targets and timeframes for processing. Many Lead 
Agencies have established policies that set a time limit for 
eligibility determinations and electronically track and monitor the 
eligibility process.
    Grants or contracts. We propose to add language at paragraph Sec.  
98.16(i)(1), as re-designated, requiring a Lead Agency to include a 
description of how it will use grants or contracts to address shortages 
in the supply of high quality child care. Grants and contracts can play 
an important role in building the supply and availability of high 
quality child care in underserved areas and for underserved 
populations, and provide greater financial stability for child care 
providers. This regulatory change complements proposed changes at Sec.  
98.30(a)(1) describing parental choice requirements and Sec.  
98.50(b)(3) describing funding methods for child care services, 
discussed later in this proposed rule. The new provision regarding 
grants and contracts maintains the principle of parental choice and the 
requirement that parents be offered a certificate.
    Under this proposed change, the Lead Agency would be required to 
provide a description that identifies any shortages in the supply of 
high quality child care providers for specific localities and 
populations, includes the data sources used to identify shortages, and 
explains how grants or contracts for direct services will be used to 
address such shortages. To identify supply shortages, the Lead Agency 
may analyze available data from market price studies, resource and 
referral agencies, and other sources. ACF recommends that the Lead 
Agency examine all localities in its jurisdiction, recognizing that 
each local child care market has unique characteristics--for example, 
many rural areas face supply shortages. The Lead Agency also should 
consider the supply of child care for underserved populations such as 
infants and toddlers and children with special needs. Further, we 
recommend that the Lead Agency's analysis consider all categories of 
care, recognizing that a community with an adequate supply of one 
category of care (e.g., centers) may face shortages for another 
category (e.g., family child care).
    Eligibility policies. We also propose to add language at Sec.  
98.16(i)(5) in this section. Currently the provision requires Lead 
Agencies to describe any eligibility criteria, priority rules and 
definitions established pursuant to Sec.  98.20(b). We propose to 
expand the required information to include other eligibility policies, 
particularly any requirements

[[Page 29452]]

for families to report changes in circumstances that may impact 
eligibility between redetermination periods. The revised provision also 
adds a reference to Sec.  98.20(c), in addition to the existing 
reference to Sec.  98.20(b). This change complements proposed changes 
at Sec.  98.20, which are discussed later in this proposed rule.
    Consumer education and quality indicators. We also propose to add 
language at paragraph Sec.  98.16(j), as re-designated, requiring Lead 
Agencies to include a description of a transparent system of quality 
indicators that provides parents with provider-specific information 
about the quality of child care providers in their communities as part 
of the description of consumer education activities. This change 
complements proposed changes at Sec.  98.33 describing consumer 
education activities, which are discussed later in this proposed rule.
    Co-payments. We propose to revise language at paragraph Sec.  
98.16(k), as re-designated, requiring Lead Agencies to include a 
description of how payments are affordable for families as part of the 
requirement to implement a sliding fee scale that provides for cost 
sharing for families receiving CCDF subsidies. This proposed change is 
consistent with the existing regulatory requirement at Sec.  
98.43(b)(3), which requires Lead Agencies to provide a summary of facts 
relied upon to determine that its payment rates ensure equal access 
including how copayments based on a sliding fee scale are affordable. 
In addition, we propose to add language requiring the Lead Agency to 
include the criteria established for waiving contributions for 
families, pursuant to proposed changes at Sec.  98.42(c), discussed 
later in this proposed rule.
    Monitoring of health and safety requirements. We propose to add a 
provision at paragraph Sec.  98.16(l), as re-designated, requiring Lead 
Agencies to provide a description of unannounced, on-site monitoring 
and other enforcement procedures in effect to ensure that child care 
providers serving children receiving subsidies comply with applicable 
health and safety requirements. The change complements proposed changes 
at Sec.  98.41 describing health and safety requirements, which are 
discussed later in this proposed rule. Paragraph (k), requiring a 
description of the child care certificate payment system would be re-
designated as paragraph (m), but otherwise would remain unchanged.
    Payment rates. We propose to revise language at paragraph Sec.  
98.16(n), as re-designated, requiring a description of a biennial local 
valid market price study, or other alternate approved methodology, and 
a description of how the quality of child care providers serving 
children receiving subsidies is taken into account when determining 
payment rates. This change complements proposed changes at Sec.  98.43 
describing equal access provisions, which are discussed later in this 
proposed rule.
    Hotline for parental complaints. We propose to add language at 
paragraph Sec.  98.16(o), as re-designated, to require States to 
establish or designate a hotline for parental complaints. This change 
complements the proposed change at Sec.  98.32 describing requirements 
for maintaining a record of parental complaints, which is discussed 
later in this proposed rule. Current paragraph (n) would be re-
designated as paragraph (p), but otherwise would remain unchanged.
    Licensing exemptions. We propose to add language at paragraph Sec.  
98.16(q), as re-designated, requiring a description of any exemptions 
to licensing requirements and a rationale for such exemptions. This 
change complements the proposed change at Sec.  98.40 which asks Lead 
Agencies to certify they have in place licensing requirements for child 
care services, discussed later in this proposed rule. Paragraph (p), 
requiring a description of the definitions or criteria used to 
implement the exception to individual penalties in the TANF program 
would be re-designated as paragraph (r), but otherwise would remain 
unchanged.
    Provider payment practices and timely reimbursement. We propose to 
add a new paragraph Sec.  98.16(t) requiring CCDF Lead Agencies to 
describe payment practices for child care providers of services for 
which assistance is provided under this part, including timely 
reimbursement for services, how payment practices support providers' 
provision of high quality services, and to promote the participation of 
child care providers in the subsidy system.
    Lead Agencies have flexibility to determine payment processes for 
subsidies, and should use that flexibility to ensure payment practices 
are fair to child care providers and support the provision of high 
quality services. As noted in the preamble to the 1998 Final Rule, a 
system of child care payments that does not reflect the realities of 
the market makes it economically infeasible for many providers to serve 
low-income children--undermining the statutory and regulatory 
requirements of equal access and parental choice. In addition, failure 
to compensate in a timely manner may cause providers to refuse to care 
for children with subsidies (63 FR 39958). Surveys and focus groups 
with child care providers have found that some providers experience 
problems with late payments, including issues with receiving the full 
payment on time and difficulties resolving payment disputes. (Adams, 
G., Rohacek, M., and Snyder, K., Child Care Voucher Programs: Provider 
Experiences in Five Counties, 2008) This research also found that 
delayed payments creates significant financial hardships for the 
impacted providers, and forces some providers to stop serving or limit 
the number of children receiving child care subsidies.
    A number of Lead Agencies have developed streamlined, provider-
friendly payment policies and administrative processes, such as paying 
providers based on enrollment and paying for a limited number of 
absence days. Administrative improvements such as direct deposit, on-
line training for providers for electronic voucher reimbursement, 
provider self-service components in an automated system for children 
authorized into their care, and web-based electronic attendance and 
billing systems also can help facilitate the participation of providers 
in the subsidy system. Lead Agencies can allow providers to be paid for 
days when a child is absent due to an illness and/or allow families a 
limited number of vacation days where providers would continue to 
receive payment. These policies would promote continuity of care by 
allowing the provider to retain the slot for the child without a 
financial penalty. Private-paying parents generally pay for an entire 
period (e.g., a week, a month) even if the child is out sick within 
that period. This policy would align subsidy policies with the general 
child care market and positively affect subsidy providers while also 
enabling families to retain child care services.
    Program integrity. We propose to add a new paragraph Sec.  98.16(u) 
requiring a description of processes a Lead Agency has in place to 
investigate and recover fraudulent payments and to impose sanctions on 
providers or clients in response to fraud. This change complements 
proposed changes at section 98.68 describing program integrity 
requirements, which are discussed later in this proposed rule.
    Quality performance report. We also propose to add a new paragraph 
Sec.  98.16(v) requiring States and Territories to establish 
performance goals and targets in the Plan for expenditures on 
activities to improve the quality of care, and report annually a 
description of progress towards

[[Page 29453]]

meeting those goals. This change is consistent with proposed changes at 
Sec.  98.51(f) regarding quality improvement activities, which are 
discussed later in this preamble.
    The Quality Performance Report (QPR) was recently added as an 
appendix to the CCDF Plan to improve accountability for quality 
expenditures and encourage more strategic, intentional planning between 
the subsidy system and quality initiatives. The report is organized to 
align with the CCDF Plan and asks Lead Agencies to report on the goals 
and performance measures that they set for themselves in the Plan. In 
addition, it asks for key data on the quality of child care. Over time, 
this data will be used to report to Congress, stakeholders, and the 
general public on the quality of child care and CCDF's critical role in 
improving quality. This proposed change would mandate submission of the 
Quality Performance Report appendix as part of the CCDF Plan process.
    Assessment of serious injuries and deaths in child care. In this 
paragraph we also propose to add Sec.  98.16(v)(2) asking Lead Agencies 
to describe, as part of the Quality Performance Report, any changes to 
State regulations, enforcement mechanisms, or other State policies 
addressing health and safety based on an annual review and assessment 
of serious injuries or deaths of children occurring in child care. 
Currently, the Quality Performance Report gives Lead Agencies the 
option to list and describe the annual number of child injuries and 
fatalities in child care. We are proposing to require Lead Agencies to 
answer these questions and to describe the results of an annual review 
of all serious child injuries and deaths occurring in child care 
(including both regulated and unregulated child care centers and family 
child care homes). The review would be publicly available and would 
include an assessment of whether any State or local regulatory 
requirements, enforcement mechanism, or other State or local policies 
addressing health and safety were changed in response to the review. 
ACF strongly encourages Lead Agencies to work with the State entity 
responsible for child care licensing in conducting their review.
    The primary purpose of this proposed change is prevention of future 
tragedies. Often, incidents of child injury or death in child care are 
avoidable. For example, one State recently reviewed the circumstances 
surrounding a widely-publicized, tragic death in child care and 
identified several opportunities to improve State monitoring and 
enforcement that might otherwise have identified the very unsafe 
circumstances surrounding the child's death and prevented the tragedy. 
The State moved quickly to make several changes to its monitoring 
procedures. It is important to learn from these tragedies to better 
protect children in the future. Lead Agencies should review all serious 
child injuries and deaths in child care, including lapses in health and 
safety (e.g., unsafe sleep practices for infants, transportation 
safety, issues with physical safety of facilities, etc. * * *) to help 
identify training needs of providers.
    The utility of this assessment is reliant upon the State obtaining 
accurate, detailed information about any child injuries and deaths that 
occur in child care. Therefore, as discussed later in this preamble, we 
are requiring at 98.41(d)(4) that Lead Agencies establish policies and 
procedures for child care providers serving children receiving CCDF 
support to report any incidents of serious child injuries or deaths to 
a designated State, territorial or tribal agency, such as the licensing 
agency. We recommend that States, Territories and Tribes require all 
child care providers, regardless of subsidy receipt, to report 
incidents of serious child injuries or death to a designated agency.
    Lead Agencies are strongly encouraged to work with their 
established Child Death Review systems and with the National Center for 
the Review and Prevention of Child Death (www.childdeathreveiw.org) to 
conduct their annual reviews. The National Center for the Review and 
Prevention of Child Death, which is funded by the Maternal and Child 
Health Bureau in the Health Resources and Services Administration 
(HRSA), reports that all 50 States and the District of Columbia already 
review child deaths through 1,200 State and local Child Death Review 
panels (National Center for Child Death Review, Keeping Kids Alive: A 
Report on the Status of Child Death Review in the Unities States, 
2011). The Child Death Review system is a process in which 
multidisciplinary teams of people meet to share and discuss case 
information on deaths in order to understand how and why children die 
so that they can take action to prevent other deaths. These review 
systems vary in scope and in the types of death reviewed, but every 
review panel is charged with making both policy and practice 
recommendations which are usually submitted to the State governor and 
are publicly available. The National Center for the Review and 
Prevention of Child Death provides support to local and State teams 
throughout the child death review process through training and 
technical assistance designed to strengthen the review and the 
prevention of future deaths.
    Lead Agencies may also work in conjunction with the recently-
established National Commission to Eliminate Child Abuse and Neglect 
Fatalities, established by the Protect Our Kids Act, H.R. 6655. The 
Commission, consisting of 12 members appointed by the President and 
Congress, will work to develop recommendations to reduce the number of 
children who die from abuse and neglect. The Commission will hold 
hearings and gather information about current Federal programs and 
prevention efforts in order to recommend a comprehensive strategy to 
reduce and prevent child abuse and neglect fatalities nationwide. Their 
report will be issued to both Congress and the President no later than 
two years after the date on which the majority of members of the 
Commission have been appointed. Although this Commission will only be 
studying a subsection of child injuries and death, it is important that 
the commissioners examine the issue of child abuse and neglect in child 
care settings.
    Finally, we note that the requirement to submit a Quality 
Performance Report is not applicable to Tribal Lead Agencies, as we are 
mindful of the reporting burden on Tribes. In the future, ACF may 
consider asking Tribes to report performance outcomes associated with 
spending on quality improvement activities through the existing Tribal 
ACF-700 or ACF-696T reports using the information collection process, 
which would provide opportunity for public comment. We have re-
designated paragraph (r) as paragraph (w) with no other changes.
Approval and Disapproval of Plans and Plan Amendments (Section 98.18)
    This section of the regulations describes processes and timelines 
for CCDF Plan approvals and disapprovals, as well as submission of Plan 
amendments. CCDF Plans are submitted biennially and prospectively 
describe how the Lead Agency will implement the program. To make a 
substantive change to a CCDF program after the Plan has been approved, 
a Lead Agency must submit a Plan amendment to ACF for approval. The 
purpose of Plan amendments is to ensure that grantee expenditures 
continue to be made in accordance with the statutory and regulatory 
requirements of CCDF, if the grantee makes changes to the program 
during the two-year Plan period.
    Advance written notice. In conjunction with the change discussed

[[Page 29454]]

at Sec.  98.14(d) to make the Plan and any Plan amendments publicly 
available, we propose to add a provision at Sec.  98.18(b)(2) to 
require Lead Agencies to provide advance written notice to affected 
parties, specifically parents and child care providers, of changes in 
the program made through an amendment that adversely affect income 
eligibility, payment rates, or sliding fee scales. The Lead Agency must 
provide written notice to affected recipients and child care providers 
prior to a policy change that will reduce or terminate benefits. The 
notice should describe the action to be taken (including the amount of 
any benefit reduction), the reason for the reduction or termination, 
and the effective date of the action. We are providing Lead Agencies 
with flexibility to determine an appropriate, specific time period for 
advance notice, since this may vary depending on the type of policy 
change being implemented and/or the effective date of that policy 
change. Advance notice will add transparency to the Plan amendment 
process and provide a mechanism to ensure that affected parties remain 
informed of any substantial changes to the Lead Agency's CCDF Plan that 
may affect their ability to participate in the child care program. For 
example, if a Lead Agency submits a Plan amendment to revise its 
sliding fee scale and raise family co-pay amounts, it is important to 
give advance notice to those families and child care providers because 
this change may have implications for their ability to continue with 
their child care arrangement.
    We note that section 98.14(c)(1) of the current regulations 
requires Lead Agencies to conduct at least one statewide public hearing 
before the CCDF Plan is submitted to ACF. The public hearing serves as 
a mechanism to provide broad notice and comment for families, child 
care providers, and other stakeholders regarding key elements of the 
CCDF program. Lead Agencies routinely submit amendments to their CCDF 
Plans throughout the two-year period during which the Plan is in 
effect; yet there is no similar transparency requirement with regards 
to Plan amendments. We are not requiring the Lead Agency to hold a 
formal public hearing and solicit comments on each Plan amendment; 
however, we encourage solicitation of public input whenever possible. 
We are only requiring notification of substantial changes in the 
program that adversely affect income eligibility, payment rates, or 
sliding fee scales. This regulatory change is consistent with the 
spirit and intent of the public hearing provision. The Lead Agency may 
choose to issue the notification in a variety of ways, including a 
mailed letter or email sent to all participating child care providers 
and families. Paragraph (c) of this section describing appeal and 
disapproval of a Plan or Plan amendment would remain unchanged.

Subpart C--Eligibility for Services

    This subpart establishes parameters for a child's eligibility for 
child care services under the CCDF program and how Lead Agencies 
determine and verify eligibility. The current regulatory language 
defining an eligible child mirrors statutory language in the CCDBG Act. 
In order to be eligible for child care services, a child must be under 
the age of 13 (or at the option of the Lead Agency, be under age 19 and 
physically or mentally incapable of caring for himself or herself, or 
under court supervision); reside with a family whose income does not 
exceed 85 percent of State median income for a family of the same size; 
reside with a parent or parents who are working or attending a job 
training or educational program; or receive or need to receive 
protective services, at grantee option this may include children in 
foster care. The section also describes provisions related to 
establishment of additional eligibility conditions and priority rules 
by the Lead Agency. We propose to revise and update this section to 
promote continuity of care, make a technical change regarding the State 
Median Income (SMI), expand the scope of the protective services 
category to provide more flexibility, and refine the regulations 
concerning eligibility determinations.
A Child's Eligibility for Child Care Services (Section 98.20)
    We propose to make several revisions to eligibility requirements 
under this section that will promote continuity of child care services. 
As envisioned in this proposed rule, the purpose of CCDF is to develop 
high-quality child care programs that best suit the needs of children 
and families as they pursue the dual goals of financial self-
sufficiency and healthy development and school success for their 
children. With those two goals in mind, it is important to emphasize 
continuity of subsidy receipt when developing eligibility policies. 
Continuity of subsidy receipt supports financial self-sufficiency by 
offering working families stability to establish a strong financial 
foundation while also preparing children for school by creating stable 
conditions necessary for healthy child development and early learning.
    Many families receive CCDF assistance for only short periods of 
time and have frequent spells of cycling on and off the program. For 
example, a five-State study has shown that the median length of child 
care subsidy receipt is often very short, ranging from 3 to 7 months. 
(Meyers, M.K., et al., The Dynamics of Child Care Subsidy Use: A 
Collaborative Study of Five States, National Center for Children in 
Poverty, 2002) Preliminary findings from other studies using CCDF 
administrative data also indicate short subsidy spells. Short periods 
of subsidy receipt can be the result of a variety of factors, but 
developing eligibility policies that provide increased continuity for 
families that continue to need child care assistance would offer 
valuable support and relief to families working toward long-term 
stability.
    In addition, research has shown that children have better 
educational and developmental outcomes when they have continuity in 
their child care arrangements. (Raikes, H., Secure Base for Babies: 
Applying Attachment Theory Concepts to the Infant Care Setting, Young 
Children 51, no. 5, 1996) For young children, safe, stable environments 
provide the opportunity to develop the relationships and trust 
necessary to comfortably explore and learn from their surroundings. 
Concurrently, research has shown that frequent changes in care 
arrangements are associated with higher levels of distress and negative 
behavior in infants and toddlers. (Dicker, S., & Gordon, E., Ensuring 
the Healthy Development of Infants in Foster Care; A Guide for Judges, 
Advocates, and Child Welfare Professionals, Zero to Three, 2004)
    Continuity of care also is important for school-age children 
because the amount of exposure to programming, or dosage, has been 
shown to determine the impact such services have on a child. One study 
revealed that children who actively attended after-school programming 
showed marked improvement in test scores and school attendance when 
compared to their peers who were less active or did not participate in 
the program at all. (Welsh, M., Russell, C., Willimans, I., Reisner, 
E., and Whites, R., Promoting Learning and School Attendance through 
After-school Programs, Policy Studies Associates, 2002) The effect on 
attendance is of particular importance because school attendance has 
been found to be significantly related to sociological and academic 
outcomes for school-age children. (Gottfried, M., Evaluating the 
Relationship Between Student Attendance and Achievement in Urban 
Elementary and Middle

[[Page 29455]]

Schools: An Instrumental Variables Approach, American Education 
Research Journal, 2009)
    State eligibility policies should take into consideration the 
importance of continuity in arrangements for children receiving 
subsidies and what policies make the most sense for supporting the 
child's developmental outcomes and school readiness, especially if a 
child is enrolled with a high quality child care provider. Many of the 
proposed changes in this section seek to improve continuity through 
implementation of more family-friendly eligibility policies, while 
recognizing that Lead Agencies need flexibility to make decisions to 
ensure that funds are appropriately targeted to families in need. The 
Lead Agency, however, must ensure that its eligibility policies (e.g., 
related to frequency of eligibility re-determination) are not only 
included in policy, but also consistently implemented in practice--for 
example by the localities, sub-recipients, and eligibility workers that 
implement the program on the Lead Agency's behalf.
    As mentioned earlier, the revisions to Sec.  98.20, discussed 
below, complement new Sec.  98.16(h), which requires Lead Agencies to 
include in their CCDF Plans a description of policies to promote 
continuity of care for children and stability for families receiving 
CCDF services, including policies that take into account developmental 
needs of children when authorizing child care services, timely 
eligibility determination and processing of applications, and policies 
that promote employment and income advancement for parents.
    Income eligibility. Lead Agencies are required to report their 
income eligibility threshold in the CCDF Plan. However, neither the 
statute nor regulations specify a source or basis for SMI. Therefore, 
each Lead Agency currently has the ability to determine the data source 
for the SMI. From a national perspective, this means the SMI levels are 
not comparable--making it more difficult to get a true understanding of 
where Lead Agencies are setting their thresholds. We propose to revise 
Sec.  98.20(a)(2) by adding new paragraph (i) to clarify that 
eligibility threshold levels should be based on the most recent SMI 
data that is published by the Bureau of the Census. The proposed 
clarification would ensure that eligibility criteria are based on the 
most current and valid available data and provide consistency that 
allows for cross-State comparisons. SMI data may not be available from 
the Census Bureau for some Territories, in which case the Territory may 
use an alternative source.
    Income eligibility policies can also play an important role in 
promoting continuity of services. Lead Agencies have flexibility to 
establish income eligibility thresholds up to 85 percent of SMI, 
however many Lead Agencies set eligibility levels at a lower threshold 
due to resource constraints and competing budgetary priorities. When 
setting an eligibility threshold that is below 85 percent of SMI, some 
Lead Agencies have instituted a two-tiered eligibility threshold which 
provides for initial and continuing income eligibility limits. A 
preliminary analysis of the FY 2012-2013 CCDF plans shows that 16 
States and Territories have implemented policies which provide an entry 
level eligibility threshold and a higher exit income eligibility 
threshold.
    As an example, a Lead Agency may have a policy that families must 
have an income at or below 50 percent of SMI in order to access the 
subsidized child care system. The parent(s) may be determined eligible 
at an income level just below 50 percent of SMI. Over the course of the 
next 3 to 6 months the parent may receive a small hourly wage increase 
which results in exceeding the income eligibility level and losing the 
family's child care subsidy. This scenario not only could disrupt the 
child care arrangement, it undermines the goal of helping low-income 
parents to work and gain economic independence because the increase in 
child care costs experienced by the family may exceed the amount of the 
wage increase. The wage increase becomes detrimental to the family's 
financial success by jeopardizing receipt of a child care subsidy. As 
an alternative, the Lead Agency could have a policy which requires that 
parents applying for subsidies have income below 50 percent of SMI, but 
once determined eligible, allows those parents to have incomes up to 60 
percent of SMI before becoming ineligible for the subsidy. This two-
tiered approach supports financial success by allowing for a modest 
amount of wage growth and a gradual transition out of the program by 
minimizing abrupt disruptions in services.
    In recognition of the fact that many States set eligibility 
thresholds below 85 percent of SMI, we are not proposing a regulatory 
change to require a two-tiered eligibility policy. Yet, ACF recommends 
that Lead Agencies consider this policy as a strategy that allows 
families to retain child care assistance while experiencing modest 
success in the job market. This approach is consistent with the goal of 
improving continuity of child care services and can help prevent 
unnecessary churning on and off of the program by allowing for some 
amount of wage growth as families work towards greater self-
sufficiency.
    Protective services. Section 658P(3) of the CCDBG Act indicates 
that, for CCDF purposes, an eligible child includes a child who is 
receiving or needs to receive protective services. Under current 
regulations at Sec.  98.20(a)(3)(ii)(B), at the option of the Lead 
Agency, this category may include children in foster care. The 
regulations allow that children deemed eligible based on protective 
services may reside with a guardian or other person standing ``in loco 
parentis'' and that person is not required to be working or attending 
job training or education activities in order for the child to be 
eligible. In addition, the regulations allow grantees to waive income 
eligibility and co-payment requirements as determined necessary on a 
case-by-case basis, by, or in consultation with, an appropriate 
protective services worker for children in this eligibility category. 
According to a preliminary analysis of the FY 2012-2013 CCDF Plans, at 
least 44 States and Territories provide child care subsidies to 
children receiving or in need of protective services. Additionally, at 
least 35 States and Territories elect to waive, on a case-by-case 
basis, the fee and income eligibility requirements for cases in which 
children receive, or need to receive, protective services. For children 
in foster care, 11 States and Territories have elected to provide child 
care subsidies regardless of the foster parents' work status or 
participation in education or training activities.
    The regulatory provision concerning protective services was put in 
place in recognition of the unique and distinct aspects of children in 
protective services wherein child care serves the child's needs as much 
or more than the parents' needs. Additionally, because the statute 
references children who ``need to receive protective services,'' we 
believe the intent of this language was to provide services to at-risk 
children, not to limit this definition to serve children already in the 
child protective services system. We are proposing to formally clarify 
this in regulation by adding language as Sec.  98.20(a)(3)(ii) 
specifying that the protective services category may include specific 
sub-populations of vulnerable children as identified by the Lead 
Agency. Thus, children need not be formally involved with child 
protective services or the child welfare system in order to be 
considered eligible for CCDF assistance under this category. Similarly, 
we also propose to delete the language indicating that the case-by-

[[Page 29456]]

case determination of income and co-payment requirements for this 
category must be made by, or in consultation with, a protective 
services worker. These changes will provide Lead Agencies with 
additional flexibility to offer services to those who have the greatest 
need, including high-risk populations.
    As an example, a family living in a homeless shelter may not meet 
certain eligibility requirements (e.g. work or income requirements), 
but the child is in a vulnerable situation and could benefit greatly 
from access to high-quality child care services. This would have a dual 
benefit of offering the child access to care that supports child 
development, education, and health while also offering support to the 
family as they work towards finding a home and stabilizing their lives. 
Another vulnerable population that could benefit from access to child 
care services is the migrant worker community. Since the employment or 
income status of a migrant family may fluctuate throughout the year, 
stable access to child care services would prevent the child's 
development from being negatively impacted by variable working and 
living conditions.
    Eligibility re-determination periods. Neither the CCDBG Act nor the 
CCDF regulations currently address the frequency of eligibility re-
determinations or whether the Lead Agency must ensure the child is 
eligible on a continuous basis. We propose to add a new paragraph Sec.  
98.20(b) establishing that Lead Agencies may re-determine a child's 
eligibility for child care services no sooner than 12 months following 
the initial eligibility determination or most recent re-determination. 
In conjunction with this change, the proposed new paragraph provides 
that during the period of time between re-determinations, a Lead 
Agency, at its option, may consider a child to be eligible pursuant to 
some or all of the eligibility requirements specified in paragraph (a), 
if the child met all of the requirements in paragraph (a) on the date 
of the most recent eligibility determination or re-determination. 
Finally, this proposed change would require Lead Agencies to specify in 
the CCDF Plan any requirements for families to report changes in 
circumstances that may impact eligibility between re-determinations. 
These provisions would also apply to any localities or sub-recipients 
that implement the CCDF program on the Lead Agency's behalf.
    Over time, many Lead Agencies have changed their policies to allow 
for longer eligibility re-determination periods. One State found that 
86 percent of its families were still eligible for subsidies at the 
time of their required 6 month re-determination. As a result, in order 
to reduce administrative burden on families, the State switched to a 12 
month re-determination period for most families. Studies also suggest 
that a significant number of families are still income-eligible for 
child care services, by both Federal and State eligibility criteria, 
when they leave the CCDF program. (Grobe, D., Weber, R.B., & Davis, 
E.E., Why Do They Leave? Child Care Subsidy Use in Oregon. Oregon State 
University, 2006) According to the FY 2012-2013 CCDF Plans, slightly 
more than half of the States and Territories require eligibility re-
determination at 6 months, one State has an 8 month re-determination 
requirement, and the remainder have 12 month eligibility re-
determination periods.
    ACF believes a 12 month re-determination period is the most 
consistent with the programmatic goals of promoting continuity of care 
and financial self-sufficiency for CCDF families. Lead Agencies would 
be allowed to adopt re-determination periods longer than 12 months. For 
example, a Lead Agency could establish a child's eligibility to 
continue until kindergarten entry to align with Head Start or extend 
eligibility to facilitate partnerships between child care and Early 
Head Start programs serving infants and toddlers. We recognize that 
this proposed change would require some Lead Agencies to change policy 
in this area by moving from a 6 month to a 12 month re-determination 
period. Therefore we are requesting comment regarding the impact of 
this change, particularly any benefits or burdens it may have for CCDF 
families and to better understand implications for Lead Agencies.
    In conjunction with this change we propose to add language that 
would allow Lead Agencies the option to consider a child eligible 
(pursuant to some or all of the eligibility requirements) during the 
period of time between re-determinations, as long as the child met CCDF 
eligibility requirements on the date of eligibility determination or 
re-determination. We believe this proposed change would allow Lead 
Agencies to adopt more family-friendly eligibility policies, to align 
eligibility requirements with other assistance programs, and promote 
continuity in child care subsidy receipt. In the past, ACF has received 
questions from Lead Agencies seeking guidance regarding instances in 
which a family's circumstances may change after initial eligibility 
determination or between re-determination periods, and whether the Lead 
Agency would be subject to a disallowance if it was determined that, 
during those interim periods, the family no longer met CCDF eligibility 
requirements.
    This proposed change acknowledges that there are costs and other 
challenges associated with monitoring and verifying eligibility on a 
continuous basis to ensure that at any given point in time a family is 
eligible for services. These include costs to families that are trying 
to balance work and family obligations as well as costs to Lead 
Agencies administering the program. This proposed change clarifies that 
the Lead Agency is responsible for correctly determining and verifying 
eligibility at the time of initial eligibility determination and 
periodic re-determinations conducted thereafter, as the most reasonable 
and practical application of the statutory intent establishing 
eligibility criteria for CCDF. Lead Agencies are not required to 
implement policies that ``look back'' at a family's eligibility in the 
months prior to a re-determination and, if the family is found to be 
ineligible upon re-determination, seek to recoup funds from the family 
for benefits received in prior months.
    We note the proposed change indicates that a Lead Agency, at its 
option, may consider a child to be eligible pursuant to some or all of 
the eligibility requirements between eligibility re-determinations. 
This gives States latitude to decide which elements of CCDF 
eligibility, if any, to track between eligibility re-determinations. A 
Lead Agency may establish a family's eligibility for 12 months (or 
longer) and only identify changes to a family's circumstances at the 
time of the next re-determination and make necessary adjustments to the 
CCDF benefit then as appropriate. Alternately, a Lead Agency could set 
criteria for limited, significant changes that it will track between 
eligibility re-determinations, examining all other eligibility criteria 
at the time of the next re-determination. For example, the Lead Agency 
may establish criteria that require families to report changes in 
circumstances (if the State does not have other mechanisms for learning 
about the change) related to any changes in income above a certain 
threshold--but evaluate other eligibility criteria at the time of re-
determination. ACF recommends that States require parents receiving 
subsidies to report a job loss between eligibility determinations to 
initiate the allowable period of job search. However, State policies 
that track all eligibility criteria on a

[[Page 29457]]

continuous basis and require more frequent reporting of changes in 
circumstances remain allowable, but are not recommended. Under the 
proposed change, Lead Agencies would be required to specify in the Plan 
any requirements for families to report changes in circumstances that 
may impact eligibility between re-determinations.
    For school-age children, the proposed change would allow Lead 
Agencies to avoid terminating access to valuable high quality before-
and after-school care in a manner that may be detrimental to positive 
youth development and academic success or put the child at-risk if a 
parent is working and cannot be with the child after school. As an 
example, in order to promote continuity of care for a 12-year old child 
enrolled in a before-or after-school program and supported by CCDF, the 
Lead Agency could schedule the family's re-determination date at the 
beginning of the school year and schedule the next re-determination to 
occur after the school year has ended. Therefore, if the child turned 
13 during the school year, the child would continue to be able to 
participate in their before-or after-school program, as opposed to 
being abruptly removed immediately after the child's birthday. In 
addition, this type of policy can ease administration of school-age 
programs by making the eligibility of children receiving subsidies more 
commensurate with the school year.
    We strongly encourage Lead Agencies to adopt reasonable policies 
for tracking eligibility that minimize compliance burdens on families 
and promote self-sufficiency. Many low-income families have frequent 
fluctuations in work schedules and hours of work. Strict requirements 
that families report all changes in circumstances in a short time 
frame, even those that do not directly impact eligibility, can make it 
more difficult for working families to maintain their eligibility, 
increase administrative burden, and could result in children having to 
leave child care providers with whom they have bonded. According to the 
FY 2012-2013 CCDF Plans, 20 States and Territories report implementing 
policies to minimize reporting requirements for changes in family 
circumstances that have no effect on a family's eligibility in order to 
promote continuity of care.
    We also encourage Lead Agencies to consider how they can align CCDF 
eligibility policies with other programs serving low-income families. 
This proposed change is consistent with practices in other Federal 
programs serving low-income families which allow States the option to 
certify families as eligible for a specified period of time. For 
example, the Head Start program requires that families be eligible at 
an initial eligibility determination and allows the child to remain 
eligible until they enter school. A Lead Agency could establish 
eligibility periods longer than 12 months for children enrolled in Head 
Start and receiving CCDF, since children enrolled in Head Start remain 
eligible until they enter school--creating a better alignment between 
programs. Similarly, a Lead Agency could establish longer eligibility 
periods during an infant and toddler's enrollment in Early Head Start. 
The Supplemental Nutrition Assistance Program's (SNAP) simplified 
reporting requirements provide States the option of requiring 
households to report changes in income between certification and 
scheduled reporting periods only when total countable income rises 
above 130 percent of the poverty level. In SNAP, a Lead Agency may 
require a household that has been certified as eligible for a 12 or 6-
month period to submit a periodic report (as opposed to a face-to-face 
visit), generally about halfway through the certification period, for 
which certain changes that have occurred since certification must be 
reported. Similarly, provisions in the Medicaid and Children's Health 
Insurance Program (CHIP) allow States the option to provide children 
with continuous 12 month eligibility. The changes proposed in this rule 
promote conformity across Federal programs by providing options to Lead 
Agency's to simplify CCDF reporting and eligibility requirements for 
families receiving assistance from multiple programs.
    In proposing this change, ACF is cognizant of the importance of 
ensuring CCDF funds are effectively and efficiently targeted towards 
eligible low-income families. Policies to promote continuity, such as 
lengthening eligibility periods and allowing a child to remain eligible 
between re-determination periods, necessarily must be founded on a 
strong commitment to program integrity. ACF expects Lead Agencies to 
have rigorous processes in place to detect fraud and improper payments, 
but these should be reasonably balanced with family-friendly practices. 
In order to ensure that only eligible families receive CCDF assistance, 
Lead Agencies should focus administrative dollars on making sure that a 
family's eligibility is determined accurately at the initial 
determination and at times designated for re-determination. For this 
reason, the proposed rule includes the addition of a new section at 
Sec.  98.68 titled Program Integrity that requires Lead Agencies to 
have procedures in place for documenting and verifying that children 
meet eligibility criteria at the time of eligibility determination and 
re-determination.
    Lead Agencies receive a fixed amount of CCDF funds and often face 
challenges determining how to appropriately allocate resources. When 
implementing their CCDF programs, Lead Agencies must balance ensuring 
compliance with eligibility requirements with other considerations, 
including administrative feasibility, program integrity, promoting 
continuity of care for children, and aligning child care with Head 
Start, Early Head Start, and other early childhood programs to promote 
partnerships. This proposed change removes any uncertainty regarding 
applicability of Federal eligibility requirements for CCDF and the 
threat of potential penalties or disallowances that otherwise may 
inhibit a Lead Agencies' ability to balance these priorities in a way 
that best meets the needs of children in families within their 
jurisdiction.
    Developmental needs of the child. We propose to amend Sec.  98.20 
to add paragraph (d) requiring Lead Agencies to take into account the 
developmental needs of the child when authorizing child care services. 
Under this proposed change, Lead Agencies would not be restricted to 
limiting authorized child care services based on the work, training, or 
educational schedule of the parent(s). This is consistent with the 
current regulations at Sec.  98.20(a)(3)(i) requiring that the child 
``reside with'' a parent or parents who are working or attending a job 
training or educational program. One of the goals of this proposed rule 
is to enhance recognition of the role of CCDF as a child development 
program by emphasizing access to early learning and afterschool 
settings that support children's success, as well as enabling parents 
to work. In service of this goal, this proposed change clarifies that 
Lead Agencies should take into account the developmental and academic 
needs of children--not just their parents' work or training needs--as 
part of eligibility, intake, authorization, and other CCDF policies and 
practices.
    As an example, in serving a preschool aged child (e.g., age 3 or 
4), the Lead Agency should consider whether or not the child has access 
to a high quality preschool setting and how CCDF can make attendance at 
a high quality preschool more likely. Many Lead Agencies tie access to 
child care subsidies closely with parental work

[[Page 29458]]

hours, which may limit access to high quality settings. If most local 
high quality early learning programs offer only full-time slots, but 
the child care authorization reflects only the parent's part-time work 
schedule, the child may be unable to attend a high quality early 
learning program, which is especially critical for low-income children 
in the year preceding kindergarten. Lead Agencies are encouraged to 
authorize adequate hours to allow the child to participate in a high 
quality program. Alternatively, Lead Agencies can partner with Early 
Head Start, Head Start, prekindergarten, or other high quality programs 
to build an intentional package of arrangements for the child--that 
allows for both attendance at preschool and perhaps a second 
arrangement that accommodates the parents' work schedule.
    Specifically, it is important for infants and toddlers to build 
secure attachments and maintain relationships with caregivers over time 
to promote healthy child development. For example, a Lead Agency may 
wish to authorize part-day CCDF services that accommodate a child's 
participation in Early Head Start, while also maintaining a secondary 
child care arrangement to preserve the relationship with a familiar 
caregiver. A Lead Agency could also offer parents the choice to select 
high-quality infant slots that are funded through contracts or grants 
with infant and toddler programs. For children of all ages, a Lead 
Agency could provide more intensive case management for children with 
multiple risk factors to increase the likelihood that the family will 
find a stable, quality child care arrangement that will work with other 
services providers in assisting the child and family.
    This proposed provision acknowledges that both the child's 
development and the parent's need to work are factors in the service 
needs of each family. We recognize that given constraints on funding, 
limited human resource capacity, and the inadequate supply of high 
quality care, a perfect arrangement will not be found in all cases. 
Rather, we expect Lead Agencies to consider how they can infuse the 
needs of children into their policies and practices and encourage 
partnerships with high quality providers, child care resource and 
referral agencies, and case management partners to look for ways to 
strengthen CCDF's capacity to fulfill its child development mission for 
families. Lead Agencies retain flexibility on how to carry out this 
provision and ACF expects to provide technical assistance to support 
innovation in this area.

Subpart D--Program Operations (Child Care Services) Parental Rights and 
Responsibilities

    In the description of goals for the child care program, section 
658A(b)(2) of the CCDBG Act includes, ``to promote parental choice to 
empower working parents to make their own decisions on the child care 
that best suits their family's needs.'' Subpart D of the regulations 
describes parental rights and responsibilities and provisions related 
to parental choice, including unlimited parental access to their 
children, requirements that Lead Agencies maintain a record of parental 
complaints, and consumer education activities conducted by Lead 
Agencies to increase parental awareness of the range of child care 
options available to them. We have proposed a number of changes to this 
subpart including provisions directed towards increasing the supply of 
high quality child care, establishment of a hotline for parental 
complaints, consumer education activities to increase awareness of the 
quality of child care choices available to parents receiving subsidies, 
and ensuring parents receive specific information about the child care 
provider they select.
Parental Choice (Section 98.30)
    Use of grants or contracts. Section 658E(c)(2)(A)(i) of the CCDBG 
Act requires that Lead Agencies provide assurances that parents are 
given the option to enroll their child with a child care provider that 
has a grant or contract to provide child care services or to receive a 
child care certificate. Current regulations at Sec.  98.30(a) require 
that Lead Agencies offer eligible parents a child care certificate, or 
to enroll the child with a provider that has a grant or contract ``if 
such services are available.'' The statutory language does not include 
this clause; instead it was added through regulation. The proposed 
change would delete the phrase ``if such services are available'' at 
Sec.  98.30(a)(1) and add ``in accordance with Sec.  98.50.'' As 
discussed later in this preamble, we propose to modify Sec.  
98.50(b)(3) to read that child care services shall be provided using 
methods provided for in Sec.  98.30, which must include the use of 
grants or contracts for the provision of direct services, with the 
extent of such services determined by the Lead Agency after 
consideration of supply shortages described in the Lead Agency's Plan 
pursuant to Sec.  98.16(i)(1), and other factors as determined by the 
Lead Agency. We believe the current regulatory language undermines the 
strength of the parental choice statutory requirement by sending the 
message that contracts are of secondary importance to vouchers and need 
not be used as a mechanism for providing direct services. The proposed 
change would retain the requirement for Lead Agencies to offer parents 
a child care certificate or voucher.
    In 2011, CCDF administrative data showed that approximately 90 
percent of children receiving child care assistance were served through 
certificates (also referred to as vouchers). According to a preliminary 
analysis of the FY 2012-2013 CCDF Plans, only 21 States and Territories 
indicated that they provide child care services through grants or 
contracts through child care slots. We do not believe the intent of the 
CCDBG statute was to create a system solely operated through 
certificates. In fact, the statute does not give priority or preference 
to the use of certificates or vouchers, but reflects a balance between 
using both certificates and grants or contracts to provide child care 
assistance. Grants and contracts play a vital role in meeting the needs 
of underserved populations, and increase the choices available to 
parents.
    While the majority of States and Territories rely on certificates 
to provide child care assistance to eligible families, some States and 
Territories have reported in their CCDF Plans using grants and 
contracts to increase the supply of specific types of child care. These 
include contracts to fund programs to serve children with special 
needs, targeted geographic areas, infants and toddlers, and school-age 
children. Grants and contracts are also used to provide wrap-around 
services to children enrolled in Head Start and prekindergarten to 
provide full-day, full-year care and to fund programs that provide 
comprehensive services. Additionally, Lead Agencies report using grants 
and contracts to fund child care programs that provide higher quality 
child care services.
    The proposed revision retains the requirement that the Lead Agency 
operate a certificate program and that eligible families be offered a 
certificate, however the change requires Lead Agencies to find ways to 
also incorporate grants or contracts into their administration of the 
CCDF program, with specific consideration for how grants or contracts 
can be used to address shortage in the supply of high quality child 
care. Child care certificates can be an effective means of ensuring 
parental choice when providing child care assistance. However, demand-
side mechanisms like certificates are only fully effective when there 
is an adequate

[[Page 29459]]

supply of child care. Multiple research studies have shown a lack of 
supply of certain types of child care and for certain localities. Child 
care supply in many low-income and rural communities is often low, 
particularly for infant and toddler care, school-age children, children 
with disabilities, and families with non-traditional work schedules. 
Parents in low-income communities also report that the regulated infant 
and toddler care or care for special needs children that is available 
is often unaffordable or of low quality. (Paulsell, D., Nogales, R., 
and Cohen, Quality Child Care for Infants and Toddlers, 2003) We 
provide further discussion of this proposed change regarding grants and 
contracts at Subpart F--Use of Child Care and Development Funds. 
Current paragraphs (b), (c), and (d) would remain unchanged.
    We also propose a technical change at Sec.  98.30(e) to delete 
group home child care from the variety of child care categories from 
which parents receiving a certificate for child care service must be 
able to choose. This is consistent with the changes made at Sec.  98.2 
removing group home child care from the definition of categories of 
care and eligible child care provider. As discussed earlier, instead we 
have modified the definition of family child care provider to include 
one or more individuals to be inclusive of group home care within this 
category. Current paragraph (f) at this section would remain unchanged.
    Parental choice and child care quality. In order to be meaningful, 
we believe the parental choice requirements included in this section 
should give parents access to high quality child care arrangements 
across different types of providers that foster healthy development and 
learning for children. Many Lead Agencies have invested a significant 
amount of CCDF funds to implement quality rating and improvement 
systems (QRIS) to promote high quality early care and education 
programs, and some have expressed concerns that the current language of 
the parental choice regulatory provisions inhibits their ability to 
link the child care subsidy program to these systems. In order to fully 
leverage their investments, Lead Agencies are seeking to increase the 
number of children receiving CCDF subsidies that are enrolled with 
providers participating in the quality improvement system. ACF 
published a Policy Interpretation Question (CCDF-ACF-PIQ-2011-01) 
clarifying that parental choice provisions within regulations do not 
automatically preclude a Lead Agency from implementing policies that 
require child care providers serving subsidized children to meet 
certain quality requirements, including those specified within a 
quality improvement system. As long as certain conditions are met to 
protect a parent's ability to choose from a variety of categories of 
care, a Lead Agency could require that in order to provide care to 
children receiving subsidies, the provider chosen by the parent must 
meet requirements associated with a specified level in a quality 
improvement system.
    We propose to incorporate this policy interpretation into 
regulation by adding paragraph (g) at Sec.  98.30 to clarify that, as 
long as parental choice provisions at paragraph (f) of this section are 
met, parental choice provisions should not be construed as prohibiting 
a Lead Agency from establishing policies that require child care 
providers that serve children receiving subsidies to meet higher 
standards of quality as defined in a quality improvement system or 
other transparent system of quality indicators (discussed later in this 
proposed rule). Section 98.30(f) prohibits Lead Agencies from 
implementing health and safety or regulatory requirements that 
significantly restrict parental choice by expressly or effectively 
excluding any category or type of provider, as defined at Sec.  98.2, 
or any type of provider within a category of care. Section 98.2 
currently defines categories of care as center-based child care, group 
home child care, family child care, and in-home care (i.e., a provider 
caring for a child in the child's own home). (Note: We are proposing to 
delete group homes as a category of care at Sec.  98.30(e)(1)). Types 
of providers are defined as non-profit, for-profit, sectarian, and 
relative providers.
    When establishing such policies, we encourage Lead Agencies to 
assess the availability of care across categories and types, and 
availability of care for specific subgroups (e.g. infants, school-age 
children, families who need weekend or evening care) and within rural 
and underserved areas, to ensure that eligible parents have access to 
the full range of categories of care and types of providers before 
requiring them to choose providers that meet certain quality levels. 
Should a Lead Agency choose to implement a quality improvement system 
that does not include the full range of providers, the Lead Agency 
would need to have reasonable exceptions to the policy to allow parents 
to choose a provider that is not eligible to participate in the quality 
improvement system (e.g. relative care). As an example, a Lead Agency 
may implement a system that incorporates only center-based and family 
child care providers. In cases where a parent selects a center-based or 
family child care provider, the Lead Agency may require that the 
provider meet a specified level or rating. However, the policy also 
must allow parents to choose other categories and types of child care 
providers that may not be eligible to participate in the quality 
improvement system or when a parent decides that the rated providers 
are not suited to their family's needs or preferences. This is 
particularly important for geographic areas where an adequate supply of 
child care is lacking or when a parent has scheduling, transportation, 
or other issues that prevent the use of a preferred provider within the 
system.
    In a similar manner, we propose adding paragraph (h) at Sec.  98.30 
to clarify that Lead Agencies may provide parents with information and 
incentives that encourage the selection of high quality child care 
without violating parental choice provisions. As discussed below, this 
proposed rule would require Lead Agencies to establish a system of 
quality indicators and to provide information about the quality of 
child care providers to parents receiving subsidies. Accordingly, this 
provision would allow Lead Agencies to adopt policies that incentivize 
parents to choose high quality providers as determined in a system of 
quality indicators. Lead Agencies may provide brochures or other 
products that encourage parents to select a high quality provider 
without violating parental choice provisions.
Parental Complaints (Section 98.32)
    Hotline for parental complaints. Section 658E(c)(2)(C) of the CCDBG 
Act requires that a Lead Agency ``maintain a record of substantiated 
parental complaints and makes information regarding such parental 
complaints available to the public on request and provide a detailed 
description of how such record is maintained and is made available.'' 
Current language at Sec.  98.32 mirrors the statutory requirement. We 
propose to add Sec.  98.32(a) to require the Lead Agency to establish 
or designate a hotline for parents to submit complaints about child 
care providers. Paragraphs (a), (b), and (c) in the current regulations 
have been re-designated as paragraphs (b), (c), and (d) but otherwise 
remain unchanged.
    States vary in how they meet the current requirement to keep a 
record of and make public substantiated parental complaints. In the FY 
2012-2013 CCDF plans, 10 States reported having a toll-free hotline for 
parents to submit child care-related complaints, including 9

[[Page 29460]]

States with dedicated child care hotlines and one State that utilizes 
the child abuse and neglect hotline. An additional 16 States list 
public toll-free numbers on their Web sites for parents to contact the 
child care office. Not all are listed as hotlines, but may still 
provide parents with a means for submitting complaints and seeking 
additional information.
    The Department of Defense (DoD) military child care program also 
runs a national parental complaint hotline. The Military Child Care Act 
of 1989 (P.L. 101-189) required the creation of a national 24 hour 
toll-free hotline that allows parents to submit complaints about 
military child care centers anonymously. DoD has found the hotline to 
be important tool in engaging parents in child care. In addition, 
complaints received through the hotline have helped DoD identify 
problematic child care programs. For example, information that was 
submitted through the hotline led to an investigation and the closure 
of some child care facilities in the early 1990s. (Campbell, N., 
Appelbaum, J., Martinson, K., Martin, E., Be All That We Can Be: 
Lessons from the Military for Improving Our Nation's Child Care System, 
2000)
    Lead Agencies have flexibility to design the hotline to fit the 
needs of the families they serve. Lead Agencies may also choose to work 
with other agencies to adapt existing hotlines, such as modifying 
hotlines used to report child abuse and neglect to include an option 
for reporting child care complaints.
    We strongly encourage the Lead Agency to widely publicize the child 
care hotline number, and to consider requiring child care providers to 
publicly post the hotline number in their center or family child care 
home to increase parental awareness. Other areas for posting may be the 
Web site proposed at Sec.  98.33(a), the child care resource and 
referral network and Web site, and consumer education materials, 
including the proposed consumer statement for parents receiving subsidy 
at Sec.  98.33(c).
    Lead Agencies are encouraged to establish a toll-free hotline that 
includes multilingual options and has a TTY/TDD option to ensure it is 
accessible to those with hearing impairments. It is important that all 
parents have access to the hotline, regardless of ability to pay for 
the call, English proficiency, or hearing ability. As with the military 
child care hotline, we recommend that the hotline be available for 24 
hours a day. Allowing parents to submit complaints any time of the day 
gives them the flexibility to call when their work schedule allows. 
Parents should also have the option to report complaints anonymously. 
For some parents, reporting these issues may be difficult, and the 
option of anonymity may make them more comfortable with coming forward 
with a complaint.
    Finally, Lead Agencies should have a complaint response plan in 
place that includes time frames for following up on a complaint 
depending on the urgency or severity of the parent's concern. This plan 
relates to the proposed regulatory change at Sec.  98.41(d)(3) that 
Lead Agencies must do an unannounced, on-site monitoring visit in 
response to receipt of a complaint pertaining to the health and safety 
of children in the care of a provider serving children receiving CCDF 
subsidies.
Consumer Education (Section 98.33)
    Section 658E(c)(2)(D) of the CCDBG Act requires that Lead Agencies 
``collect and disseminate to parents of eligible children and the 
general public, consumer education information that will promote 
informed child care services.'' Current language at Sec.  98.33(a) 
requires that, at a minimum, consumer education information should be 
provided about: (1) Full range of providers available; and (2) health 
and safety requirements.
    Consumer education activities carried out across the country vary 
by who provides the information, how the information is presented, and 
what information is included. In some States and Territories, consumer 
education materials and referrals to providers are offered by the Lead 
Agency or by State or local TANF offices. In others, resource and 
referral agencies provide information about child care choices and 
referrals to all types of child care providers. The way information is 
presented to parents includes checklists, brochures, telephone 
hotlines, and in-person meetings. In addition to providing materials 
and referrals to parents receiving child care assistance, Lead Agencies 
engage in a variety of consumer education activities, including public 
awareness campaigns, planning or implementing quality rating systems, 
and translating outreach and education materials into other languages.
    Current regulations do not specify mechanisms for how Lead Agencies 
should collect and disseminate consumer education information to the 
public or to parents determined eligible for CCDF assistance. In many 
States, the process for applying for and receiving a subsidy is 
disconnected from consumer education services offered by the Lead 
Agency, leaving the parent to find out what child care options are 
available to them with little to no information about the quality of 
that care. Additionally, it is unclear what information, if any, is 
provided to parents regarding the child care provider they choose, such 
as licensing or other regulatory requirements met by the provider.
    We are proposing several changes to Sec.  98.33 describing consumer 
education activities. Since the proposed regulatory changes at this 
section are extensive, the first part of this section briefly 
summarizes all of the proposed regulatory changes, and then each change 
is explained in more detail in the discussion that follows.
     Consumer education Web site. We propose to add language to 
Sec.  98.33(a) requiring Lead Agencies to collect and disseminate, 
through a user-friendly, easy-to-understand Web site and other means 
identified by the Lead Agency, consumer education information that will 
promote informed child care choices. At Sec.  98.33(a)(1) current 
regulations require that consumer education information, at a minimum, 
include information about the full range of available providers. We 
propose to add new provisions to require that the Lead Agency make 
available on a Web site: (i) Provider-specific information about any 
health and safety, licensing or regulatory requirements met by the 
provider, including the date the provider was last inspected; (ii) any 
history of violations of these requirements; and (iii) any compliance 
actions taken. We also propose to revise Sec.  98.33(a)(2) to require 
that Lead Agencies include on the Web site a description of health and 
safety and licensing or regulatory requirements for child care 
providers and processes for ensuring that child care providers meet 
those requirements. The description must include information about the 
background check process for providers, as well as any other 
individuals in the child care setting (as applicable), and what 
offenses preclude a provider from serving children.
     Transparent system of quality indicators. We propose to 
add new paragraph Sec.  98.33(b) to require Lead Agencies to collect 
and disseminate consumer education through a transparent system of 
quality indicators, such as a quality rating and improvement system or 
other system established by the Lead Agency, to provide parents with a 
way to differentiate between the quality of different child care 
providers in their communities using a rating or other descriptive 
method. The system must: (1) Include provider-specific information 
about the quality of child

[[Page 29461]]

care; (2) Describe the standards used to assess the quality of child 
care; (3) Take into account teaching staff qualifications and/or 
competencies, learning environment, and curricula and activities; and 
(4) Disseminate provider-specific quality information, if available, 
through the Web site described in Sec.  98.33(a), or through an 
alternate mechanism which the Lead Agency shall describe in the CCDF 
Plan, including a description of how the mechanism makes the system of 
quality indicators transparent.
     Providing consumer education to families receiving 
subsidies. Finally, we propose to add a new paragraph Sec.  98.33(c) 
requiring that Lead Agencies provide information to parents receiving 
subsidies about the child care providers available to them, as 
described in paragraphs (a) and (b), and specific information about the 
child care provider they choose, including health and safety 
requirements met by the provider described at Sec.  98.41(a), licensing 
and regulatory requirements met by the provider, any voluntary quality 
standards met by the provider, and any history of violations of 
licensing or health and safety requirements.
    Paragraphs (b) and (c) in the current regulations have been re-
designated as paragraphs (d) and (e) but otherwise remain unchanged.
    Consumer education Web site. We propose amending paragraph (a) of 
Sec.  98.33 to require Lead Agencies to post provider-specific 
information to a user-friendly, easy-to-understand Web site as part of 
its consumer education activities. Making available a Web site with 
accessible, easy-to-understand basic information about how child care 
is regulated and monitored, as well as regulatory requirements met by 
individual child care providers can improve transparency and greatly 
reduce burden on families. Parents often lack information regarding 
specific requirements that individual child care providers may or may 
not meet. Some States and Territories currently post lists of licensed 
providers online, but not all licensing information is available, such 
as history of licensing violations or when the provider was last 
inspected or monitored. Limiting access to this information creates a 
burden for parents, makes it difficult for them to make informed 
decisions about their child's care, and denies parents information 
about providers' ability to protect their children's health and safety.
    We believe parents choosing a provider should be able to do so with 
access to any information that the State may have about that provider, 
including information about, the date the provider was last inspected, 
licensing violations or compliance actions taken by the State against a 
provider. Similarly, if a provider is exempt from State licensing or 
regulatory requirements then the parent should be given that 
information and provided an explanation about why the provider is not 
required to be licensed.
    The Web site also should make it easy for parents to know how the 
State regulates child care providers and what requirements they must 
meet. This must include a description of health and safety and 
licensing or regulatory requirements and processes for monitoring 
providers. We strongly recommend that the State tell parents how 
frequently providers are monitored or maximum amount of time between 
inspections. The Web site also must include a plain language 
description of the provider background check process including what the 
State looks at as part of a comprehensive background check (i.e., use 
of fingerprints for checks of Federal and State criminal history, as 
well as check of child abuse and neglect and sex offender registries). 
There must be information about what types of offenses that could 
preclude a provider from serving children, as well as offenses that 
would not disqualify a provider. We recommend using accessible terms 
when referring to criminal offenses, such as child abuse and violent 
crime, since terms like felony and misdemeanors might not have meaning 
for parents.
    In order for a Web site to be a useful tool for parents, it should 
be easy to navigate, searchable, and in plain language. We recommend 
that Web sites be comprehensive, including a detailed profile for each 
licensed provider, which may include the provider's contact 
information, enrollment capacity, years in operation, languages spoken, 
etc . . . In addition, parents should be able to use many search terms 
when deciding on a provider, including name, type of care, county, zip 
code, or school district. All relevant licensing information should 
also be available on one Web site. Lead Agencies have flexibility to 
determine how to present information regarding child care provider 
licensing violations and compliance actions taken. This includes 
determining the length of the history to be included for providers, 
distinguishing between the severities of different violations, or 
posting information about compliance action or fines only after the 
provider has exhausted their due process rights or waives their rights.
    This proposed change is consistent with current practices in many 
States to increase availability of information about licensing process, 
standards and violations to parents and the general public. According 
to a preliminary analysis of the FY 2012-2013 CCDF Plans, at least 30 
States and Territories make all licensing information available to 
parents and the public online. Ten States and Territories reported 
making at least some licensing information available on a public Web 
site or other online tool, such as a provider training registry.
    Research suggests that online publishing of licensing violations 
and complaints impact both inspector and provider behavior. One study 
found that after inspection reports are posted online, there was an 
improvement in the quality of care, specifically the classroom 
environment and improved management at child care centers serving low-
income children. (Witte, A. & Queralt, M., What Happens When Child Care 
Inspections and Complaints Are Made Available on the Internet? NBER 
Working Paper No. 10227, 2004) Making provider compliance information 
widely available on a dedicated Web site allows all parents to make 
informed choices, and for purposes of the CCDF subsidy program, is key 
to ensuring that parental choice is meaningful for families receiving 
subsidies.
    A transparent system of child care quality indicators. We propose 
to add new paragraph (b) at Sec.  98.33 to require use of a transparent 
system of quality indicators, such as a quality rating and improvement 
system or other system established by the Lead Agency, to collect and 
disseminate consumer education information. As part of this proposed 
change, Lead Agencies would be required to implement a system that 
includes: Provider-specific information about the quality of child 
care; describes standards used to assess the quality of child care 
providers; takes into account teaching staff qualifications and/or 
competencies, learning environment, and curricula and activities; and 
disseminates provider-specific quality information through the Web site 
described above, or alternate mechanism established by the Lead Agency. 
This system would act as a basic tool that can be used not only to 
assess and collect quality information about specific child care 
providers, but also a straightforward way to provide parents with 
quality information and promote more informed child care choices. A 
system of quality indicators should include indicators which are 
appropriate to different types of

[[Page 29462]]

provider settings, including child care centers and family child care 
homes. Additionally, quality indicators should be appropriate for 
providers serving different age groups of children, including infants 
and toddlers, preschool, and school-age children.
    In order for a transparent system of quality indicators to be 
useful, Lead Agencies must provide parents information that describes 
the standards used to assess the quality of child care providers, what 
the quality indicators mean, and if any providers are not covered in 
the system. In addition, the transparent system of quality indicators 
must take into account teaching staff qualifications and/or 
competencies, learning environments, and curricula and learning 
activities in child care settings. Teaching staff qualifications refer 
to specific education or training requirements attained by the teaching 
staff, program director, or family child care provider. Staff 
competencies reflect actual provider performance, typically measured 
with observational tools. Some research suggests that higher levels of 
education and credentials are related to better interactions between 
providers and the children in their care, leading to higher quality 
child care settings, when these training programs are informed by 
evidence and well-implemented. (Whitebook, M., Early Education Quality: 
Higher Teacher Qualifications for Better Learning Environments--A 
Review of the Literature, 2003; U.S. Department of Health and Human 
Services, National Institutes of Health, The NICHD Study of Early Child 
Care and Youth Development, 2006) Learning environments are the 
activities, practices, materials and provisions in the environment to 
promote children's optimal learning and development. The elements of a 
learning environment play an important role in determining the safety 
of a child's environment and the quality of a child's learning 
experience. Curricula and learning activities are the plan and 
activities used to help meet a child's developmental goals. ACF 
recommends curriculum indicators be linked with State early learning 
guidelines.
    Finally, under proposed Sec.  98.33(b)(3), Lead Agencies must 
disseminate the provider-specific quality information to the public, 
either through the Web site described at Sec.  98.33(a), or, 
alternately, a Lead Agency may use another mechanism, such as 
dissemination through local resource and referral agencies or another 
approach, that the Lead Agency will describe in its CCDF Plan; the Plan 
will include a description of how the mechanism makes the system of 
quality indicators transparent.
    We strongly encourage Lead Agencies to meet the requirement 
proposed in paragraph Sec.  98.33(b) through the implementation of a 
Quality Rating and Improvement System (QRIS). QRIS provides a framework 
for organizing, guiding, and gauging the progress of early care and 
education quality initiatives at the State, Territorial, or Tribal 
level. In many cases, QRIS is the foundation of a cross-sector ECE 
system. States' leadership in creating and implementing QRIS has 
produced a more systemic approach to quality efforts and 
accountability. This move to a more systemic approach to improving 
child care quality also was reflected in the inclusion of a QRIS in the 
application for the Race to the Top- Early Learning Challenge (RTT-ELC) 
grant program.
    As discussed earlier, more than half of the States have implemented 
QRIS as a framework for organizing and guiding the progress of early 
care and education quality initiatives and communicating the level of 
quality to parents. The rating structure of the QRIS typically uses a 
building block design, points, or some combination of the two to 
determine the rating earned by a provider. In a building block design, 
all of the standards in one level must be met in order to move to the 
next higher level. In a points system, points are earned for each 
standard and then are added together to determine the level. Each 
rating level includes a range of possible scores. These levels are then 
usually represented through symbols, such as one star, two stars, or 
three stars, providing an easy to understand means for parents to 
determine the quality of care available at a certain provider. Later in 
this rule we discuss proposed changes to Sec.  98.51(a)(2) which 
describe activities to improve the quality of child care. We propose to 
add a description of a framework for organizing, guiding, and measuring 
progress of quality investments. A QRIS, or other system of quality 
improvement, is one key component of this larger framework and can help 
improve the ability to evaluate and communicate the quality of child 
care programs.
    While ACF encourages all States to implement a systemic framework 
for evaluating, improving and communicating the level of quality in 
child care programs, we are not requiring Lead Agencies to implement a 
QRIS in order to meet the requirement to implement a transparent system 
of quality indicators. Lead Agencies have the flexibility to meet the 
requirement proposed at paragraph Sec.  98.33(b)(3) by implementing, 
more limited, alternative systems of quality indicators. However, we 
recommend that these be an interim step for Lead Agencies on the path 
to developing a full QRIS. Over time, Lead Agencies are encouraged to 
work on linking their quality improvement initiatives and strategies, 
culminating in a comprehensive QRIS with adequate support for providers 
to attain higher levels of quality and transparency for parents and the 
community regarding the quality of child care.
    Lead Agencies also could meet the new requirement for a transparent 
system of quality indicators by providing a profile or report card of 
information about the child care provider to parents that could include 
compliance with State licensing or health and safety requirements, 
information about ratios and group size, average teacher training or 
credentials, type of curriculum used, any private accreditations held, 
and presence of staff to work with young dual language learners or 
children with special needs. We encourage Lead Agencies to incorporate 
mandatory licensing requirements into a system of quality indicators, 
as a baseline of information for parents to use. For example, one State 
currently has a Licensed Plus option that designates providers who have 
met certain quality levels beyond that of the State's regular licensing 
program. By building on existing licensing structures, Lead Agencies 
may have an easier transition into a more sophisticated system that 
differentiates between indicators of quality. Lead Agencies should 
explain the licensing system to parents, as well as what a provider 
must do in order to receive a higher level license, and how violations 
of licensing standards are handled.
    Another option for designing a transparent system of quality 
indicators to meet the new requirement at Sec.  98.33(b), is to rely on 
accreditation programs to differentiate between quality of child care 
providers. The accreditation system may have different levels or steps 
in the process to indicate a progressive change in quality that would 
give a more useful picture of quality available to parents than if the 
system simply differentiates between accredited and not accredited. 
Lead Agencies that choose this type of system should provide 
information to parents about which type of accreditation options are 
available, what the accreditations mean, and what type of providers are 
eligible to participate. One limitation of this approach is that only a 
small proportion of child care providers are nationally accredited. To 
address this situation, many States

[[Page 29463]]

embed accreditation into a more widely-applicable set of quality 
indicators.
    In designing a transparent system of quality indicators, we suggest 
considering the following key principles: Provide outreach to targeted 
audiences; ensure indicators are research-based and incorporate the use 
of validated observational tools when feasible and that assessments of 
quality include program standards that are developmentally appropriate 
for different age groups; incorporate feedback from child care 
providers and from parents and families; make linkages between consumer 
education and other family-specific issues such as care for children 
with special needs; engage community partners; and establish 
partnerships that build upon the strengths of resource and referral 
programs and public agencies that serve low-income parents.
    Under the proposed change, each Lead Agency has the flexibility to 
develop a system of quality indicators, such as a QRIS, based on its 
specific needs. Lead Agencies may develop a system that is voluntary 
for child care providers to participate in or could choose to exempt 
certain providers, such as faith-based providers, from its system of 
quality indicators. A Lead Agency also could choose to incorporate 
licensing as part of the base level of indicators (e.g., some States 
automatically incorporate all licensed providers into their QRIS). We 
encourage Lead Agencies to establish a system of quality indicators 
that is inclusive of all types of providers, including family child 
care providers and providers serving school-age children.
    We recognize that it takes time to build a comprehensive system 
that is inclusive of a large number of providers across a wide 
geographic area. However, in order for a system of quality indicators 
to be meaningful it should include as many providers as possible so 
that parents can benefit from having information about the quality of a 
wide range and variety of child care providers. While we are not 
mandating a specific approach or participation rate, the public needs 
contextual information regarding the extent of participation by 
providers in a system of quality indicators. For example, the Quality 
Performance Report, which has been implemented as an attachment to the 
CCDF Plan, asks States to track and report on the participation of 
providers in State QRIS.
    Providing consumer education to families receiving subsidies. This 
discussion has focused on Lead Agency responsibilities for providing 
consumer education to the general public and all parents; however, we 
believe those families receiving subsidies deserve particular 
attention. We propose adding a new paragraph (c) to Sec.  98.33 to 
require Lead Agencies to provide parents determined eligible for CCDF 
assistance with information about the child care provider options 
available to them, as described at paragraphs (a) and (b), and specific 
information on the child care provider they choose, including CCDF 
health and safety requirements met by the provider, any licensing and 
regulatory requirements met by the provider, any voluntary or State or 
locally mandated quality standards met by the provider, and any history 
of violations of health and safety, licensing or regulatory 
requirements.
    Lead Agencies should also provide information necessary for parents 
to understand the components of a comprehensive criminal background 
check, as well as the types of findings that may preclude a provider 
from serving children receiving subsidies. In addition, if the parent 
chooses a provider that is legally-exempt from State regulatory 
requirements or exempt from CCDF health and safety requirements (e.g., 
relatives or in-home providers at Lead Agency option, as described 
later in this proposed rule), the Lead Agency or its designee should 
explain the exemption to the parent and the rationale for the 
exemption.
    When providing this information, which is essentially a consumer 
statement for subsidy parents, a Lead Agency may provide that 
information using the Web site required by Sec.  98.33(a) or through 
the alternative mechanism allowed by Sec.  98.33(b). In such cases, the 
Lead Agency should ensure that parents have access to the internet or 
provide access on-site in the subsidy office. However, once a parent 
receiving a subsidy selects a particular provider, the Lead Agency must 
provide the health and safety and quality information about that 
specific provider, such as by providing a hard copy report or email 
(for parents with internet access and an email address) with a link to 
the specific information online.
    We strongly encourage Lead Agencies to incorporate child care 
consumer education services directly into the intake and eligibility 
process for families applying for CCDF assistance to explain the full 
range of child care options and meaning of licensing violations and 
quality standards. Parents seeking subsidies should have access to 
information that the Lead Agency collects regarding the child care 
providers in their community, especially information about the quality 
of those child care providers. Parents of eligible children often lack 
the information necessary to make informed decisions about their child 
care arrangement. The child care market often faces the issue of 
information asymmetry, where parents may have difficulty accessing 
complete information about a particular provider without assistance. 
Low-income working families may face additional barriers when trying to 
find information about child care providers, such as limited access to 
the Internet, limited literacy skills, or limited English proficiency. 
Lead Agencies can play an important role in bridging the gap created by 
these barriers by providing information for families receiving CCDF 
subsidies to ensure the parent fully understands their child care 
options and feels comfortable in assessing the quality of providers.
    Finally, ACF encourages Lead Agencies to provide parents receiving 
CCDF assistance with any updated information on the child care provider 
they select (or information about any new provider they may select if 
the child care provider changes), including notifying the parent of any 
violations incurred by the provider. These updates should be provided 
on a periodic basis, such as providing an update at the time of the 
family's next eligibility re-determination. We also encourage strong 
ties between the CCDF Lead Agency and the licensing agency to ensure 
that families are not referred to providers seriously out-of-compliance 
with health and safety requirements, and that placement and payment of 
subsidy does not continue where children's health and safety are at-
risk.
    The goal of all the proposed revisions at Sec.  98.33 is to make 
the child care system as transparent as possible for parents and the 
public. In order to ensure a robust consumer education system, we are 
specifically seeking comment on the new proposals at Sec.  98.33 and 
ask for feedback about areas that should be included in the system. We 
also ask for State, Tribal, and Territorial experiences with collecting 
and sharing child care provider information, including greater detail 
on what types of information from provider background checks are shared 
with parents seeking child care.

Subpart E--Program Operations (Child Care Services) Lead Agency and 
Provider Requirements

    Subpart E of the regulations describes Lead Agency and provider 
requirements for compliance with applicable State and local regulatory 
and health and safety requirements. It also includes

[[Page 29464]]

provisions requiring the Lead Agency to establish a sliding fee scale 
that provides for cost sharing for families receiving assistance, to 
ensure that payment rates to providers serving children receiving 
subsidies ensure equal access to the child care market, and to 
establish priorities for child care services. We propose to make 
several changes to this subpart specifically regarding health and 
safety requirements, procedures for monitoring providers, sliding fee 
scales, and equal access provisions.
Compliance With Applicable State and Local Regulatory Requirements 
(Section 98.40)
    Section 658E(c)(2)(E) of the CCDBG Act requires every Lead Agency 
to certify that it has in effect licensing requirements applicable to 
child care services within its jurisdiction. Correspondingly, Sec.  
98.40 of the regulations implements section 658E(c)(2)(E), and asks 
Lead Agencies to provide a description of licensing requirements for 
child care services and how they are effectively enforced. We propose 
to make one change in this section to add language at paragraph Sec.  
98.40(a)(2) requiring the Lead Agency to provide a description of any 
exemptions to licensing requirements and a rationale for such 
exemptions in the CCDF Plan.
    According to the 2011 Child Care Licensing Study (prepared by the 
National Child Care Information and Technical Assistance Center and the 
National Association for Regulatory Administration), half of the States 
have exemptions from licensing for child care centers. The most common 
licensing exemptions include: Facilities with the parents are on the 
premises (e.g. child care services in shopping malls or health clubs); 
facilities with a small number of children in care; facilities 
consisting of recreation programs, instructional classes, and/or club 
programs; and facilities with a small number of hours per day or week. 
Lead Agencies will now be asked in their CCDF Plan, as reflected in the 
proposed change at Sec.  98.16(q), to describe their licensing 
exemptions and to explain the necessity of those exemptions. Asking 
States to provide a rationale can help ensure that exemptions are 
issued in a thoughtful, purposeful manner that keeps children safe. 
Information about licensing and regulatory exemptions should be made 
publicly available on the Lead Agency's Web site, pursuant to Sec.  
98.33(a).
Health and Safety Requirements (Section 98.41)
    The CCDBG Act also includes a provision at 658E(c)(2)(F) to require 
that Lead Agencies establish health and safety requirements applicable 
to child care providers serving children supported by CCDF subsidies. 
Congress included this additional section, separate from the 
certification of State licensing requirements discussed above, to apply 
specifically to providers serving subsidized children and identified 
three categories required to be addressed as part of health and safety 
requirements: (1) Prevention and control of infectious diseases 
(including immunization); (2) building and physical premises safety; 
and (3) minimum health and safety training appropriate to the provider 
setting.
    Existing CCDF regulations at Sec.  98.41, implementing section 
658E(c)(2)(F), elaborate on only one of these three categories 
describing requirements related to immunizations as part of prevention 
and control of infectious diseases. The regulations are silent as to 
what the language ``building and physical premises safety'' and 
``minimum health and safety training'' actually means for providers 
serving subsidized children. We believe this has resulted in a lack of 
accountability in the use of Federal funds for child care subsidies 
despite the fact that the statute clearly intended to establish minimum 
standards. The changes described in this section of the proposed rule 
would provide further specificity regarding expectations for how Lead 
Agencies are to meet these requirements.
    State child care licensing regulations and monitoring and 
enforcement policies help provide a baseline of protection for the 
health and safety of children in out-of-home care. However, States vary 
greatly in the extent to which they require different types of child 
care providers to meet licensing and regulatory requirements. According 
to the 2011 Child Care Licensing Study (prepared by the National Child 
Care Information and Technical Assistance Center and the National 
Association for Regulatory Administration), every State licenses child 
care centers; however, 3 States do not license small family child care 
homes (defined in the study as one adult caring for a group of children 
in the provider's residence). Fifteen States require family child care 
homes to be licensed when they care for two or more children; 8 States 
require homes to be licensed when they care for three or more children; 
11 States require homes to be licensed when they care for four or more 
children; and 14 States don't require homes to be licensed until they 
care for 5 children or more.
    Recognizing that these exemptions may leave children unprotected, 
the RTT-ELC, administered by the Department of Education, established a 
competitive priority for State applicants that implemented a licensing 
and inspection system covering all programs that regularly care for two 
or more unrelated children for a fee in a provider setting.
    There also is considerable variation among States in what they 
include in their child care licensing requirements. Some State 
licensing standards do not require providers to have pre-service 
training, such as in first-aid or CPR, or they do not require providers 
to undergo background checks before caring for children.
    We believe revisions to this part are especially important because 
many child care providers serving children receiving CCDF subsidies 
either are not required to be licensed or have been exempted from 
licensing requirements by States, meaning that CCDF health and safety 
requirements are the primary, and in most cases, the only safeguard in 
place to protect those children--along with any other children the 
provider may be caring for. Approximately 10 percent of CCDF children 
are cared for by non-relatives in unregulated centers and homes.
    When States exempt certain types of child care from licensing, the 
safety of children is left unmonitored and there can be a lack of 
accountability for children receiving CCDF subsidies. All too 
frequently, there are reports of child injury or death in child care 
homes or facilities not licensed or monitored by the State. A national 
study of child fatality rates in child care showed variation in 
fatality rates based on the strength of licensing requirements and 
suggested that licensing not only raises standards of quality, but 
serves as an important mechanism for identifying high-risk facilities 
that pose the greatest threat to child safety. (Dreby, J., Wrigley, J., 
Fatalities and the Organization of Child Care in the United States, 
1985-2003, American Sociological Review, 2005) Additionally, child 
deaths at unlicensed child care homes or facilities have prompted some 
State legislatures to take action by passing laws to strengthen 
licensing requirements.
    Because many child care providers may not fall under the purview of 
the State's licensing program, or licensing requirements themselves may 
not be rigorous, we believe it is important to provide additional 
detail in this section to ensure that all providers serving CCDF-
subsidized children meet

[[Page 29465]]

minimum health and safety standards, whether or not they are licensed 
by the State (excepting relative providers and in-home providers that 
care for children in the child's home at the option of the Lead Agency, 
as discussed later in this proposed rule). Health and safety is the 
foundation of quality in child care and health promotion in child care 
settings can improve children's development. We believe the proposed 
changes will make significant strides in strengthening standards to 
ensure the basic safety, health, and well-being of children receiving a 
child care subsidy.
    Our first proposed change to this section would amend the 
regulatory language at 98.41(a)(1)(i) to replace ``States and 
Territories'' with ``Lead Agencies'' to be inclusive of Tribes. When 
the 1998 Final Rule was issued, Tribes were exempt from this 
requirement because minimum tribal health and safety standards had not 
yet been developed and released by HHS at that time. However, minimum 
tribal standards have subsequently been developed and released, and the 
standards address immunization in a manner that is consistent with the 
requirements of this section. As a result, there is no longer a 
compelling reason to continue to exempt Tribes from this regulatory 
requirement.
    Building and physical premises safety. Section 658E(c)(2)(F) of the 
CCDBG Act requires that Lead Agencies have in effect requirements 
designed to protect the health and safety of children that are 
applicable to providers serving children receiving subsidies which must 
include ``building and physical premises safety.'' However, the CCDBG 
Act and current regulations do not specify expectations for this 
requirement. We propose to amend Sec.  98.41(a)(2) to describe minimum 
requirements for ``building and physical premises safety.'' The 
proposed change would specify that this requirement shall include:
    i. Comprehensive background checks on child care providers that 
include use of fingerprints for State checks of criminal history 
records, use of fingerprints for checks of Federal Bureau of 
Investigation (FBI) criminal history records, clearance through the 
child abuse and neglect registry, if available, and clearance through 
sex offender registries, if available;
    ii. Compliance with State and local fire, health, and building 
codes for child care, which must include ability to evacuate children 
in the case of an emergency. Compliance must be determined prior to 
child care providers serving children receiving assistance under this 
part; and
    iii. Emergency preparedness and response planning, including 
provisions for evacuation and relocation, shelter-in-place, and family 
reunification.
    Comprehensive criminal background checks. First, we believe the 
proposed change at Sec.  98.41(a)(2)(i), to require comprehensive 
background checks, is a basic safeguard essential to minimize 
children's risk of abuse and neglect. This proposed change is 
consistent with a discussion in the preamble to the 1998 regulations 
which stated that, ``ACF considers [criminal background checks] to fall 
under the building and physical premises safety standard in the 
statute.'' (63 FR 39956) Chief among health and safety standards is 
that children are safe in the care of child care providers. Parents 
have the right to know that their child care providers and others who 
come into contact with children do not have a record of violent 
offenses, sex offenses, child abuse or neglect, and have not engaged in 
other behaviors that would disqualify them from caring for children. A 
GAO report issued in September 2011 found several cases in which 
individuals convicted of serious sex offenses had access to children in 
child care facilities as employees, because they were not subject to a 
criminal history check prior to employment. (GAO-11-757) This change 
also is consistent with other program policies such as Head Start, 
which requires all prospective Head Start and Early Head Start 
employees to receive a criminal background check.
    According to a preliminary analysis of the FY 2012-2013 CCDF Plans, 
all States and Territories require that child care center staff undergo 
at least one type of criminal background check and approximately 40 
require a fingerprint check. Fifty States and Territories require 
family child providers to have a criminal background check and 
approximately 36 require a fingerprint check. For some States and 
Territories, these requirements are currently limited to licensed 
providers rather than all providers that serve children receiving CCDF 
subsidies. Under this proposed rule, we would require that all 
providers serving CCDF-subsidized children (with the exception, at Lead 
Agency option, of relatives and providers in the child's own home) must 
undergo a comprehensive criminal background check that includes: (1) 
Use of fingerprints for State checks of criminal history records; (2) 
use of fingerprints for checks of Federal Bureau of Investigation (FBI) 
criminal history records; (3) clearance through the child abuse and 
neglect registry, if available; and (4) clearance through sex offender 
registries, if available. ACF recently published an Information 
Memorandum (CCDF-ACF-IM-2011-05) that provides further guidance and 
information regarding these four components of a comprehensive 
background check.
    We are specifically seeking comments on whether requirements for a 
comprehensive criminal background check should also be applicable to 
other individuals in a child care center, such as food service and 
office personnel. In addition, we request comment on whether other 
individuals in a family child care home that provides services to 
children receiving CCDF subsidies should be required to undergo a 
background check, and at what age. Forty-three States require some type 
of background check of family members 18 years of age or older that 
reside in the family child care home. (Leaving Child Care to Chance: 
NACCRRA's Ranking of State Standards and Oversight for Small Family 
Child Care Homes, National Association of Child Care Resource and 
Referral Agencies, 2012)
    Pre-inspections and ability to evacuate children. Secondly, we 
propose to add Sec.  98.41(a)(2)(ii) requiring compliance with State 
and local applicable fire, health, and building codes, as part of the 
building and physical premises safety standard, including demonstration 
of the ability to evacuate children in the case of an emergency. 
Compliance must be determined before a provider serves a child care 
receiving a CCDF subsidy and phased in within an appropriate timeframe 
for providers currently caring for children. Building codes are 
designed to ensure that a building is safe for occupants and regular 
fire safety checks by trained officials can ensure that a child care 
facility or family child care home meets all applicable requirements as 
established by the State or locality.
    According to the 2011 Child Care Licensing Study (prepared by the 
National Center on Child Care Quality Improvement and the National 
Association of Regulatory Administrators), 39 States require fire, 
health, and building code inspections, also referred to as 
environmental inspections, for child care centers. In addition, many 
States conduct separate licensing inspections prior to issuing a 
license to a child care center. The study reports that 12 States 
require fire, health, and building code inspections for family child 
care providers. In addition, of the 42 States that license small family 
child care homes, 37 conduct an inspection before issuing a license to 
a family child care home.
    Child care centers and family child care homes may be governed by

[[Page 29466]]

different fire, health, and building codes depending on the State or 
locality. Child care centers are a non-residential setting and serve 
more children and there may be more extensive fire, health and building 
codes in place for centers as opposed to family child care homes. The 
proposed requirement at Sec.  98.41(a)(2)(ii) does not prescribe the 
fire, health, or building codes that should be applied to child care 
centers or family child care homes. Rather, Lead Agencies have the 
flexibility to determine the appropriate codes to apply to different 
providers.
    We propose that Lead Agencies must take into account if the child 
care provider can evacuate children in the case of an emergency when 
determining whether a child care center or family child care home meets 
the building and physical premises safety standards. To ensure that 
children are in safe settings, Lead Agencies need to establish 
appropriate group sizes for child care providers that meet the health 
and safety needs of young children. Child-staff ratios should also be 
set such that providers can demonstrate the capacity to evacuate all of 
the children in their care in a timely manner. Currently, all States 
that license child care centers have requirements for child-staff 
ratios, and all States that license family child care homes have 
requirements about the maximum number of children (including infants, 
toddlers, preschool, and school-age children) that can be cared for by 
one adult provider. (2011 Child Care Licensing Study, National Center 
on Child Care Quality Improvement and National Association for 
Regulatory Administration, 2011)
    One resource for determining the appropriate child-staff ratios and 
group sizes is NFPA 101: Life Safety Code from The National Fire 
Protection Association (NFPA) which recommends that small family child 
care homes with one provider serve no more than two children incapable 
of self-preservation. For large family child care homes, the NFPA 
recommends that no more than three children younger than two years of 
age be cared for where two staff members are caring for up to twelve 
children. (National Fire Protection Association. NFPA 101: Life Safety 
Code. 2009)
    We are specifically seeking comments on the provision at 
98.41(a)(2)(ii) requiring that health and safety inspections be 
completed prior to serving children receiving child care assistance. 
While we feel that requiring child care programs to meet State and 
local fire, health, and building codes prior to serving children is a 
crucial step in ensuring that the 1.6 million children served by CCDF 
are cared for in safe environments from day one, we recognize that this 
could create a burden for Lead Agencies, providers, and families. 
Additionally, we do not want to create additional barriers to parents 
finding care for their children because of delays in the availability 
of child care slots. We are also seeking comment about the process for 
inspecting programs that may already be serving children when this 
Final Rule is published.
    Emergency preparedness and response planning. Third, consistent 
with the proposed changes at Sec.  98.14, requiring Lead Agencies to 
coordinate with agencies responsible for emergency management and 
response when preparing the CCDF Plan, we propose adding Sec.  
98.41(a)(2)(iii) requiring Lead Agencies to include emergency 
preparedness and response planning requirements for child care 
providers serving children receiving CCDF subsidies. The importance of 
the need to improve emergency preparedness and response in child care 
was highlighted in an October 2010 report released by the National 
Commission on Children and Disasters (NCCD). The Commission was 
appointed by the President and Congress to conduct a comprehensive 
review of Federal disaster-related laws, regulations, programs, and 
policies to assess their responsiveness to the needs of children and 
make recommendations to close critical gaps. The Commission's report 
included two primary recommendations for child care: (1) To improve 
disaster preparedness capabilities for child care; and (2) to improve 
capacity to provide child care services in the immediate aftermath and 
recovery from a disaster. (2010 Report to the President and Congress, 
National Commission on Children and Disasters, p. 81, October 2010) 
Child care also has been recognized by the Federal Emergency Management 
Agency (FEMA) as an important part of disaster response (see FEMA 
Disaster Assistance Fact Sheet 9580.107, Public Assistance for Child 
Care Services, 2013).
    This proposed change requires child care providers serving children 
supported by CCDF funds to appropriately plan for disasters and 
emergencies. Lead Agencies have flexibility to determine specific 
guidelines for what child care providers should include in emergency 
preparedness and response planning; however, planning must include 
provisions for evacuation and relocation, shelter-in-place, and family 
reunification. The National Resource Center for Health and Safety in 
Child Care and Early Education, funded by the Maternal and Child Health 
Bureau in HHS, publishes Caring for Our Children: National Health and 
Safety Performance Standards: Guidelines for Out-of-Home Child Care, 
2nd Edition. This guidance includes recommended standards for written 
evacuation plans and drills, planning for care for children with 
special needs, and emergency procedures related to transportation and 
emergency contact information for parents. In addition, the National 
Association of Child Care Resource and Referral Agencies (NACCRRA) and 
Save the Children recently released a publication titled, Protecting 
Children in Child Care During Emergencies: Recommended State and 
National Standards for Family Child Care Homes and Child Care Centers, 
that includes recommended State regulatory and accreditation standards 
related to emergency preparedness for family child care homes and child 
care centers. Finally, ACF has published guidance for Lead Agencies to 
use for developing State-level emergency response plans for child care 
and resources for child care providers. These resources are available 
on our Web site at: http://www.acf.hhs.gov/programs/occ/resource/child-care-resources-for-disasters-and-emergencies.
    Since all three of these building and physical premises safety 
requirements would apply to providers serving children receiving CCDF 
assistance, upon publication of a Final Rule, we are seeking comment as 
to what an appropriate phase-in or timeframe would be for ensuring that 
providers not meeting these requirements at that time are brought into 
compliance. We do not intend that these requirements cause disruption 
in the child care arrangements of children receiving subsidies, but 
expect that we would need to establish some reasonable period of time 
to ensure child care providers meet the conditions outlined at this 
section.
    Minimum health and safety training. Adequate training in basic 
health and safety is essential to ensuring that the child care 
workforce is properly equipped to care for children receiving 
subsidies. The current regulations require minimum health and safety 
training, but do not define the requirement. Child care providers 
should have a firm grasp on essential health and safety areas prior to 
working with children so that they are fully prepared to meet the needs 
of all subsidy children from the very first professional interaction. 
Research has shown that caregivers who receive specialized training are 
better able to facilitate a positive learning

[[Page 29467]]

environment and tend to have children who exhibit fewer negative 
behaviors. (Fiene, R., 13 Indicators of Quality Child Care: Research 
Update, Pennsylvania State University, National Resource Center for 
Health and Safety in Child Care, 2002) Given the breadth of health and 
safety issues related to young children, we believe it is important to 
establish a minimum baseline for pre-service and orientation training 
that applies uniformly across all providers serving children receiving 
CCDF subsidies. This proposed change will ensure that all child care 
providers responsible for the health and safety of children have 
received specific and basic training commensurate with their 
professional responsibilities.
    We propose adding a list of minimum health and safety pre-service 
and orientation training, appropriate to the provider setting and ages 
of children served, at Sec.  98.41(a)(3) to include the following: (i) 
First-aid and Cardiopulmonary Resuscitation (CPR); (ii) medication 
administration policies and practices; (iii) poison prevention and 
safety; (iv) safe sleep practices including Sudden Infant Death 
Syndrome (SIDS) prevention; (v) shaken baby syndrome and abusive head 
trauma prevention; (vi) age-appropriate nutrition, feeding, including 
support for breastfeeding, and physical activity; (vii) procedures for 
preventing the spread of infectious disease, including sanitary methods 
and safe handling of foods; (viii) recognition and reporting of 
suspected child abuse and neglect; (ix) emergency preparedness planning 
and response procedures; (x) management of common childhood illnesses, 
including food intolerances and allergies; (xi) transportation and 
child passenger safety (if applicable); (xii) caring for children with 
special health care needs, mental health needs, and developmental 
disabilities in compliance with the Americans with Disabilities Act 
(ADA); and (xiii) child development, including knowledge of 
developmental stages and milestones of all developmental domains 
appropriate for the ages of children receiving services.
    The proposed minimum requirements are based on health and safety 
training recommendations from Caring for Our Children: National Health 
and Safety Performance Standards; Guidelines for Early Care and 
Education Programs, 3rd Edition. The proposed list is focused on those 
items that we believe represent the most immediate needs related to 
basic health and safety for children receiving subsidies. However, Lead 
Agencies are encouraged to develop a comprehensive and robust training 
program that also covers additional areas related to program design, 
worker safety, and child developmental needs, using the Caring for our 
Children guidelines as best practices in the field. In addition, 
training requirements should be appropriate to the provider setting and 
ages of children served. For example, training on SIDS is only 
necessary if a program cares for infants. If providers are caring for 
children of different ages, training in first-aid and CPR should 
include elements which take into account that practices differ for 
infants versus school-age children.
    We propose to include Sec.  98.41(a)(3)(i), first-aid and CPR, in 
the list of health and safety training requirements because studies 
show that training in these areas is associated with higher quality of 
care. A study of providers in four mid-western States, who had 
completed CPR or first-aid training within the past two years, showed 
that the training was associated with higher quality scores from the 
Family Day Care Rating Scale (FDCRS) and Early Childhood Environment 
Rating Scale Revised (ECERS-R) in family child care homes and centers. 
(Raikes, H. et al., Child Care Quality and Workforce Characteristics in 
Four Midwestern States, Omaha, NE, Gallup Organization, 2003)
    It is important that someone who is qualified to respond to common 
injuries and life-threatening emergencies be in attendance in a child 
care setting at all times. A staff member trained in pediatric first-
aid, including pediatric CPR can reduce the potential for serious 
injury. It also important to be trained specifically in first-aid and 
CPR for young children because first aid in the child care setting 
requires a more child-specific approach and technique than adult-
oriented first-aid generally offers. Training in basic first-aid and 
CPR for children also has been shown to reduce the number of accidental 
injuries in child care. (Ulione, M.S., Health Promotion and Injury 
Prevention in a Child Development Center, Journal of Pediatric Nursing, 
1997)
    According to the FY 2012-2013 CCDF Plans, approximately 42 State 
and Territories have CPR pre-service training requirements for child 
care centers and 43 State and Territories have first-aid pre-service 
training requirements. For family child care providers, 44 have CPR 
pre-service training requirements and 43 have first-aid pre-service 
training requirements. (Note, throughout this section we have cited 
information from the most recent CCDF Plans which indicate the number 
of States and Territories that have pre-service training requirements 
in the areas discussed, consistent with the proposed change at Sec.  
98.41(a)(3) discussed later in this proposed rule. However, the CCDF 
Plan also asks Lead Agencies to indicate whether they have ongoing 
training requirements in certain areas, and in nearly all of the areas 
cited a higher number of Lead Agencies indicated they require ongoing 
training. Ongoing training requires the provider to receive specific 
training on some regular established basis, rather than, prior to 
provision of services.)
    We propose to include Sec.  98.41(a)(3)(ii), medication 
administration policies and practices, in the list of health and safety 
training requirements. We believe it is important that any child care 
provider who administers medication receive standardized training that 
educates the provider about the necessary skills and competencies 
needed to do so safely. Increasing numbers of children entering child 
care take medications (Caring for Our Children, Section 3.6.3). 
Medication will only be effective if appropriately administered and can 
be extremely dangerous if administered inappropriately. According to 
the FY 2012-2013 CCDF Plans, approximately 23 States and Territories 
have a medication administration pre-service training requirement for 
child care centers. For family child care homes, 15 States and 
Territories require pre-service training in medication administration.
    We propose to include Sec.  98.41(a)(3)(iii), poison prevention and 
safety, in the list of health and safety training requirements, so that 
staff can respond appropriately and in a timely manner to exposure to 
poisonous or toxic elements. There are over two million human poison 
exposures reported to poison centers every year, and children less than 
six years of age account for over half of those potential poisonings. 
(Caring for Our Children, Section 5.2.9.1) The substances most commonly 
involved in poison exposures of children are cosmetics and personal 
care products, cleaning substances, and medications. Toxic substances, 
when ingested, inhaled, or in contact with skin, may react immediately 
or slowly, with serious symptoms occurring much later. It is important 
for the caregiver to have the appropriate training to recognize 
symptoms, alert the poison center, and undertake the appropriate 
response. This precaution is essential to the health and well-being of 
staff and children alike.
    We currently do not have data in the CCDF Plans regarding the 
number of Lead Agencies requiring poison prevention and safety 
training.

[[Page 29468]]

However, according to the 2011 Child Care Licensing Study (prepared by 
the National Child Care Information and Technical Assistance Center and 
the National Association for Regulatory Administration), 46 States 
require an inaccessibility of toxic substances policy as part of their 
licensing system for child care centers, and 45 have the same 
requirement for family child care providers.
    We propose to include Sec.  98.41(a)(3)(iv), safe sleep practices 
including Sudden Infant Death Syndrome (SIDS) prevention in the list of 
health and safety training requirements. Despite the decrease in deaths 
attributed to SIDS and the decreased frequency of prone or side infant 
sleep position over the past two decades, many child care providers 
continue to place infants to sleep in positions or environments that 
are not safe and potentially fatal. According to the American 
Association of Pediatrics Task Force on Infant Sleep Position and 
Sudden Infant Death Syndrome, nearly 20 percent of SIDS deaths occur 
while the infant is in the care of a non-parental caregiver, with 60 
percent of these occurring in family child care, 20 percent in child 
care centers, and 20 percent in relative care. (American Academy of 
Pediatrics, Reducing the Risk of SIDS in Child Care training, 2008)
    Infants who are cared for by adults other than their parent/
guardian or primary caregiver/teacher are at increased risk for dying 
from SIDS. According to Caring for Our Children, recent research and 
demonstration projects have revealed that caregivers/teachers are often 
unaware of the dangers or risks associated with prone infant sleep 
positioning, and many believe that they are using the safest practices 
possible, even when they are not. (Caring for Our Children, Section 
3.1.4) Training has been shown to lead to an increase in healthy sleep 
practices which can help decrease the instance of injury or death in 
child care. According to the FY 2012-2013 CCDF Plans, approximately 25 
States and Territories have safe sleep and SIDS prevention pre-service 
training requirements for child care centers, and 25 States and 
Territories have SIDS prevention pre-service training requirements for 
family child care homes.
    We propose to include Sec.  98.41(a)(3)(v), shaken baby syndrome 
and abusive head trauma prevention, in the list of health and safety 
training requirements. Over the past several years there has been 
increasing recognition of shaken baby syndrome which is the occurrence 
of brain injury in young children under three years of age due to 
shaking. Even mild shaking can result in serious, permanent brain 
damage or death. It is important for child care providers to be 
educated about the risks of shaking and supports should be in place to 
provide child care providers with healthy coping mechanisms to deal 
with frustrations that may arise when working with a challenging child. 
Research has suggested that approximately 1,300 U.S. children 
experience severe or fatal head trauma from child abuse every year and 
that approximately 30 per 100,000 children under age 1 suffered 
inflicted brain injuries (www.dontshake.org). It is important that 
child care providers are properly trained in healthy practices and how 
to prevent trauma from unsafe treatment of children.
    We propose to add Sec.  98.41(a)(3)(vi), age-appropriate nutrition, 
feeding, including support for breastfeeding, and physical activity, in 
the list of health and safety training requirements. Over the past 
three decades, childhood obesity rates in America have tripled, and 
today, nearly one in three children in America are overweight or obese. 
The persistence of childhood obesity can lead to significant health 
problems including diabetes, heart disease, high blood pressure, 
cancer, and asthma. (Let's Move! Child Care, Learn the Facts, 2010) 
Educating caregivers on appropriate nutrition and physical activity is 
essential to provide young children with a healthy environment to 
prevent long-term negative health implications. According to the FY 
2012-2013 CCDF Plans, 19 States and Territories have a nutrition pre-
service training requirement for child care centers, and 15 States and 
Territories require pre-service training in this area for family child 
care homes.
    In May 2010, the White House Task Force on Childhood Obesity 
reported that physical activity assists children in obtaining and 
improving fine and gross motor skill development, coordination, balance 
and control, hand-eye coordination, strength, dexterity, and 
flexibility--all of which are necessary for children to reach 
developmental milestones. In addition, daily physical activity provides 
numerous health benefits including improved fitness and cardiovascular 
health, healthy bone development, improved sleep, and improved mood and 
sense of well-being. Daily physical activity is an important part of 
preventing excessive weight gain and childhood obesity. Early childhood 
years, in particular, are crucial for obesity prevention due to the 
timing of the development of fat tissue, which typically occurs from 
ages 3 to 7. During these preschool years, children's body mass index 
(BMI) typically reaches its lowest point and then increases gradually 
through adolescence and most of adulthood. However, if this BMI 
increase begins before ages 4 to 6, research has suggested that 
children face a greater risk of obesity in adulthood. (White House Task 
Force on Obesity, Report to the President, 2010)
    Nutrition and age-appropriate feeding is important to ensure that 
children receive the proper nutritional content to provide for healthy 
development. This is of particular importance when working with 
families who may be facing nutritional challenges in the home as well. 
Eating well is equally important for the healthy development of young 
children, and research has shown that public programs can improve the 
nutritional quality of the food, as children who receive food through 
government-regulated programs (e.g., the U.S. Department of Agriculture 
Child and Adult Care Food Program) eat healthier than those bringing 
food from home. (White House Task Force, 2010) Age-appropriate feeding 
in particular is important to avoid potential health hazard (e.g. 
choking and allergies), particularly when introducing solid foods to 
young children. Age-appropriate feeding also means encouraging, 
providing arrangement for, and supporting breastfeeding in the child 
care environment.
    We propose to include Sec.  98.41(a)(3)(vii), procedures for 
preventing the spread of infectious disease, including sanitary methods 
and safe handling of foods, in the list of health and safety training 
requirements. Attendance at a child care facility may expose a child to 
the risk of acquiring infectious diseases. Staff members face 
challenges in terms of enforcing recommended hygiene measures including 
hand hygiene, maintenance of proper environmental sanitation, food 
safety, and the proper inclusion or exclusion due to illness for both 
children and staff. Training in such procedures for preventing and 
managing the spread of infectious disease will help mitigate the 
effects of an illness in the child care setting and protect children, 
staff, and families from unnecessary exposure. According to the FY 
2012-2013 CCDF Plans, approximately 22 States and Territories have a 
pre-service training requirement on preventing the spread of infectious 
disease for its child care centers, and 20 States and Territories pre-
service training in this area for family child care providers.
    We propose to include Sec.  98.41(a)(3)(viii), recognition and

[[Page 29469]]

reporting of suspected child abuse and neglect, in the list of health 
and safety training requirements. It is important for child care 
providers to be trained in child abuse and neglect prevention in order 
to be able to recognize the manifestations of child maltreatment. While 
child care providers are not expected to diagnose or investigate child 
abuse and neglect, it is important that they be aware of common 
physical and emotional signs and symptoms of child maltreatment. All 
States have laws mandating the reporting of child abuse and neglect to 
child protection agencies and/or the police. While the laws about when 
and to whom to report may vary by State, child care providers are often 
considered mandatory reporters of child abuse and neglect and therefore 
responsible for notifying the proper authorities in accordance with 
their State's child abuse reporting laws. Child care providers should 
use child abuse and neglect training to educate and establish child 
abuse and neglect prevention and recognition measures for children, 
providers, and parents. According to the FY 2012-2013 CCDF Plans, 
approximately 31 States and Territories have a pre-service training 
requirement on mandatory reporting of suspected abuse or neglect for 
child care centers, and 25 States and Territories require pre-service 
training in this area for family child care providers.
    We propose to include Sec.  98.41(a)(3)(ix), emergency preparedness 
planning and response procedures, in the list of health and safety 
training requirements. This is consistent with the earlier discussion 
in this proposed rule highlighting the importance of emergency 
preparedness and response planning for child care providers. These new 
requirements would ensure providers are trained on procedures and 
practices included in emergency preparedness and response plans. Given 
the extreme vulnerability of young children, it is important that 
providers be prepared to follow the necessary evacuation, shelter-in-
place or re-location procedures, including emergency response practices 
for children with special needs, family reunification, and procedures 
related to transportation and accessing emergency contact information 
for parents. According to the FY 2012-2013 CCDF Plans, approximately 29 
States and Territories have emergency preparedness and response 
training requirements for child care centers, and 22 States and 
Territories require training in this area for family child care 
providers. We note that Lead Agencies have flexibility to determine if 
health and safety training proposed in this section should occur pre-
service or as part of orientation. In the case of emergency 
preparedness and response, it may be more appropriate for the provider 
to receive this training as part of orientation since emergency 
procedures are often site-specific.
    We propose to include Sec.  98.41(a)(3)(x), management of common 
childhood illnesses, including food intolerances and allergies, in the 
list of health and safety training requirements. Management of common 
childhood illnesses is essential to safeguarding the spread of illness 
throughout child care settings. Caregivers/teachers should be 
knowledgeable about infectious disease in order to recognize and 
properly contain the spread of illness among children, staff, and the 
greater community. Since young children are particularly susceptible to 
illness, the proper management of the child care environment through 
hygiene and sanitation trainings can drastically reduce the spread of 
common childhood illnesses. Similarly, proper feeding practices can 
prevent health problems for children with food intolerances and 
allergies.
    We propose to include Sec.  98.41(a)(3)(xi), transportation and 
child passenger safety, in the list of health and safety training 
requirements. We recognize that not all child care providers provide 
transportation services, so we have added ``if applicable.'' For child 
care providers that do provide transportation, we believe it is 
important that the provider is properly trained in age and size-
appropriate child restraint practices for car safety seats and 
seatbelts. Additionally, child passenger safety training should include 
awareness of the incidence of death and injury associated with 
forgetting or leaving children unattended in a vehicle.
    We propose to include Sec.  98.41(a)(3)(xii), caring for children 
with special health care needs, mental health needs, and developmental 
disabilities, in the list of health and safety training requirements. 
In order to provide appropriate services, providers should be trained 
on caring for children with special health care needs, mental health 
needs, and developmental disabilities in compliance with the American 
with Disabilities Act (ADA) (42 U.S.C. 12101, et seq.) and other 
relevant Federal laws. (Caring for Our Children, Section 8.2.0.2) This 
is important to ensure that all children are included in all activities 
possible unless a specific medical contraindication exists. The goal is 
to provide fully integrated care to the extent feasible given each 
child's limitations. Federal and State laws do not permit 
discrimination on the basis of disability per the ADA.
    Training to support a developmentally appropriate and inclusive 
environment is crucial because studies have found the following 
benefits of inclusive child care: Children with special needs develop 
increased social skills and self-esteem; families of children with 
special needs gain social support and develop more positive attitudes 
about their child; children and families without special needs become 
more understanding and accepting of differences and disabilities; 
caregivers/teachers learn from working with children, families, and 
service providers and develop skills in individualizing care for all 
children. A basic understanding of developmental disabilities and 
special care requirements of any child in care is a fundamental part of 
any orientation for new employees. Staff should obtain appropriate 
training in order to include children with special needs, such as 
children with severe disabilities and children with special health care 
needs such as chronic illnesses, into child care settings. These may 
include technology-dependent children and children with serious and 
severe chronic medical problems.
    Finally, we propose to add Sec.  98.41(a)(3)(xiii) child 
development, including knowledge of the stages and milestones of all 
developmental domains for the ages of children enrolled in the 
facility, in the list of health and safety training requirements. In 
addition to being integral to professional development, child 
development is an essential component for the health and safety of 
children, both in and outside the child care setting. From a protection 
standpoint, research has shown that improving parental understanding of 
child development reduces the incidence of child abuse and neglect 
cases. (Daro, D. and McCurdy, K., ``Preventing Child Abuse and neglect: 
Programmatic Interventions,'' Child Welfare, 1994); (Reppucci, N., 
Britner, P., and Woodard, J., Preventing Child Abuse and Neglect 
Through Parent Education, 1997) Child care providers should be 
knowledgeable of the important developmental milestones to support the 
healthy development of children in their care, but also so they can be 
a resource for parents and provide valuable parent education. Child 
abuse is often a result of frustration, which can be exacerbated by an 
improper understanding of a child's capabilities. Knowledge of

[[Page 29470]]

developmental stages and milestones minimizes this frustration and 
reduces the odds of child abuse and neglect by establishing more 
reasonable and appropriate expectations for children.
    Child development training is also an important component of health 
and safety because it equips child care providers with the information 
necessary to recognize any significant developmental delays such as 
autism spectrum disorders, motor delays, or other conditions. Early 
detection and intervention, access to the appropriate developmental 
screenings, and referrals to the appropriate services provides a 
safeguard against avoidable developmental delays. According to Caring 
for Our Children, 70 percent of children with developmental 
disabilities and mental health problems are not identified until school 
entry. The report identifies child care professionals as playing an 
important role in early detection due to their daily interaction with 
children and families and their knowledge in child development 
principles and milestones. (Caring for Our Children, Section 2.1.1.4) 
Child development training must address all developmental domains, 
including social and emotional, physical, and cognitive domains. This 
comprehensive training will ensure that providers are able to recognize 
and provide appropriate services or referrals in all developmental 
areas, such as mental health services for children who are experiencing 
trauma or stress.
    Pre-service or orientation training. In this proposed rule at Sec.  
98.41(a)(3) we also have added language to specify that the health and 
safety training requirements described above, proposed in paragraphs 
(a)(3)(i)-(xii,) should be met during pre-service or orientation 
training. We believe it is important that child care providers be well-
prepared and have a firm grasp on basic health and safety issues prior 
to serving children receiving subsidies. Many Lead Agencies have 
already established pre-service training requirements for child care 
providers serving children receiving subsidies, which generally differ 
for child care center staff and family child care homes, as shown in 
the discussion above using data from the most recent CCDF Plans. These 
requirements may include a minimum number of training hours prior to 
employment through participation in workshops, meetings, or one-to-one 
consultation, and a minimum number of ongoing hours of training. Lead 
Agencies often allow requirements to be satisfied through completion of 
a certification course or vocational or occupational education program. 
In addition, while the proposed regulatory requirements focus on pre-
service or orientation training, we strongly encourage Lead Agencies to 
establish requirements for ongoing training as well. Requiring periodic 
training on an ongoing basis will ensure that providers retain their 
knowledge and skills over time and are updated on the most current 
practices and information to ensure children's health and safety.
    We are specifically seeking comment on whether regulatory changes 
should include a minimum number of pre-service training hours and 
ongoing hours of training in these areas. Caring for our Children 
guidelines recommend at least 30 hours of initial pre-service training 
for child care staff, at least 30 hours during the first year, and at 
least 24 hours per year of continuing education and professional 
development thereafter. (Caring for our Children, Section 1.4.1.1 and 
1.4.4.1) We also request comment on whether the Final Rule should 
specify a format for the training and whether the training requirements 
should be linked to measures of accountability, such as continuing 
education credits, to ensure that ongoing training requirements lead to 
a progression or advancement in a provider's knowledge base.
    We recognize that it may not be possible for child care providers 
serving subsidized children to meet all the listed minimum health and 
safety training requirements prior to the first day of service. 
Therefore, we are allowing Lead Agencies to require the training prior 
to the provider's start of service (i.e., pre-service) or during the 
initial service period (i.e., orientation). We are leaving it to the 
Lead Agency's discretion to specifically define ``pre-service'' and 
``orientation'', which may include stipulations that the training be 
completed within the first weeks or month of providing child care 
services to children receiving CCDF assistance. Lead Agencies should 
also offer a grace period to providers who are already serving children 
receiving CCDF assistance to minimize disruptions to child care 
arrangements for children currently enrolled with a provider and 
receiving subsidies. A significant number of the proposed training 
requirements in this section are already being met by many child care 
providers that are subject to Lead Agency licensing or regulatory 
requirements. Additionally, many of the areas included in the proposed 
new requirements are readily available through on-line trainings, which 
should minimize burden on Lead Agencies.
    Monitoring. The CCDBG Act at 658E(c)(2)(G) requires Lead Agencies 
to certify that procedures are in effect to ensure that child care 
providers serving children receiving CCDF subsidies comply with all 
applicable State and local health and safety requirements, including 
those described at Sec.  98.41(a). Currently, Sec.  98.41(d) of the 
regulations incorporates this language but does not provide further 
clarification of this requirement. The regulation as written states 
that ``Each Lead Agency shall certify that procedures are in effect to 
ensure that child care providers of services for which assistance is 
provided under this part, within the area served by the Lead Agency, 
comply with all applicable State, local, or Tribal health and safety 
requirements. . . .'' There is no further definition as to what 
procedures are appropriate for the Lead Agency to employ to meet this 
certification requirement or specific mention of monitoring as a key 
component to ensure child care providers comply with health and safety 
requirements.
    We propose to amend Sec.  98.41(d) to require that Lead Agencies 
procedures must include unannounced on-site monitoring and to add Sec.  
98.41(d)(1) to require that all providers serving children receiving 
CCDF subsidies must be subject to on-site monitoring, including 
unannounced visits. We propose to add Sec.  98.41(d)(2) stating that 
the Lead Agency may not solely rely on child care provider self-
certification of compliance with health and safety requirements 
included in paragraph (a) without documentation or other verification 
that requirements have been met. Finally, we propose to add Sec.  
98.41(d)(3) to require that Lead Agency monitoring procedures must 
require an unannounced visit in response to receipt of a complaint 
pertaining to the health and safety of children in the care of a 
provider serving children receiving CCDF subsidies.
    These changes would add much needed clarity to the current 
regulations, which is especially important given the new proposed 
health and safety requirements at Sec.  98.41(a), discussed above. CCDF 
requires Lead Agencies to provide assurances that providers caring for 
subsidized children, including providers that are not otherwise 
regulated or licensed, meet minimum health and safety requirements. We 
believe it makes sense also to articulate expectations for how 
compliance with those requirements should be monitored.

[[Page 29471]]

    There is currently significant variation across States regarding 
the nature and intensity of on-site monitoring and unannounced visits, 
with a variation in the frequency of monitoring. According to a 
preliminary analysis of the 2012-2013 CCDF Plans, all 56 Lead Agencies 
currently have some unannounced visit component in place for licensed 
centers and 47 of the Lead Agencies currently have unannounced visits 
for licensed family child care providers. However, only 13 Lead 
Agencies indicate use of unannounced visits for license-exempt CCDF 
child care providers. ACF believes the use of unannounced visits more 
effectively influences provider behavior because the possibility of an 
unannounced visit may compel providers to maintain compliance with 
basic requirements.
    The proposed change requires that all providers serving children 
receiving subsidies be subject to on-site unannounced monitoring. The 
Lead Agency may choose to inform providers before monitoring staff 
depart for unannounced visits that involve significant travel time, 
such as those in rural areas, to avoid staff visits when the provider 
or children are not present. A Lead Agency's on-site monitoring 
practices must require both regulated and unregulated family child care 
homes and centers that provide care to children receiving CCDF 
subsidies to be inspected. Further, Lead Agencies may not limit on-site 
monitoring solely to licensed or regulated providers if unregulated 
providers also are providing services to children receiving CCDF 
assistance, and Lead Agencies must conduct unannounced visits. Note 
that, pursuant to 98.41(e) and discussed later in this proposed rule, 
the Lead Agency may choose to exempt relative and in-home child care 
providers from monitoring requirements.
    In recognition of resource constraints, we recommend, that Lead 
Agencies ensure child care providers caring for children receiving a 
subsidy receive an initial on-site monitoring visit and at least one 
annual unannounced on-site monitoring visit. We recognize that on-site 
monitoring requires adequate licensing and monitoring staff and other 
resources. Therefore, we are specifically requesting public comment on 
this recommendation and whether it should become a requirement and 
welcome input as to alternative monitoring frequencies.
    ACF encourages Lead Agencies to consider the use of differential 
monitoring as a method for determining the use or frequency of on-site, 
unannounced monitoring based on an assessment of the child care 
provider's past level of compliance with health and safety requirements 
or with information received that could indicate violations. This 
allows Lead Agencies to prioritize monitoring of providers that have 
previously been found out of compliance or that receive parental 
complaints. Lead Agencies should make data-driven decisions, and make 
any necessary adjustments to these policies regarding the frequency of 
on-site monitoring visits over time based on the latest available data. 
For example, if the Lead Agency finds widespread or significant 
compliance issues under its existing monitoring protocol, it should 
consider increasing the number and frequency of inspections for those 
providers.
    According to the 2011 Child Care Licensing Study (prepared by the 
National Child Care Information and Technical Assistance Center and the 
National Association for Regulatory Administration), 26 States use 
differential or risk-based monitoring for child care centers and 21 
States use this method for family child care homes. If a risk-based 
methodology is not feasible, Lead Agencies might consider random 
sampling.
    Lead Agencies are also encouraged to coordinate with other entities 
that already have inspection and on-site monitoring mechanisms in place 
such as licensing, QRIS, and Head Start. Another key partner in 
ensuring health, safety and quality in child care is the U.S. 
Department of Agriculture's Child and Adult Care Food Program (CACFP), 
which provides funding to State agencies to reimburse child care 
providers for meals and snacks served to participants. The program 
requires CACFP agencies to conduct periodic unannounced site visits to 
prevent and identify management deficiencies, fraud and abuse under the 
program as well as to improve program operations. As an example of 
interagency coordination, one State holds monthly meetings with 
representation from its licensing division, the CCDF Lead Agency, 
CACFP, and other public agencies with child care monitoring 
responsibilities. These divisions and agencies identify areas of 
overlap in monitoring and coordinate accordingly to leverage combined 
resources and minimize duplication of efforts.
    Coordinating with other monitoring agencies can be beneficial to 
both agencies as they prevent unnecessary duplication of services. To 
the extent that other agencies provide an on-site monitoring component 
that may satisfy or partially satisfy the new monitoring requirement 
under this proposed rule, the Lead Agency is encouraged to pursue this 
type of collaboration. It is important that any such collaboration does 
not impose additional burden or inappropriate authority on any one 
partner or its participating agencies and that any shared costs are 
properly allocated between the partnering organizations benefiting.
    The regulatory revision at 98.41(d)(2) is being proposed because we 
feel that self-certification without documentation or other 
verification is an insufficient certification of compliance with health 
and safety requirements and represents a significant risk for unsafe 
conditions that endanger children, as well as for fraudulent or 
improper payments. In some States, child care providers caring for 
subsidized children can self-certify that they have met minimum health 
and safety standards without additional verification, monitoring or 
enforcement of those provisions. According to the FY 2012-2013 CCDF 
Plans, 21 States and Territories allow license-exempt family child care 
providers to self-certify that they have met the CCDF health and safety 
requirements and 6 Lead Agencies allow license-exempt child care 
centers to self-certify. Under the proposed rule, Lead Agencies must, 
at a minimum, verify any self-certification claims with supporting 
documentation. Some examples of documentation include inspection by a 
Fire Marshall, a current CPR certificate, certificates demonstrating 
completion of training hours, or confirmation of completion of on-line 
training.
    Finally, the proposed regulation at 98.41(d)(3) provides that Lead 
Agency monitoring procedures must require an unannounced visit in 
response to receipt of a complaint pertaining to the health and safety 
of children in the care of a provider serving children receiving CCDF 
subsidies. We believe that it is incumbent upon a Lead Agency to 
investigate complaints related to possible health and safety violations 
for child care providers serving CCDF children and that it is 
reasonable to require that a complaint should automatically trigger an 
unannounced visit to the provider.
    Finally, we propose at 98.41(d)(4) that Lead Agencies establish 
procedures that require child care providers that care for children 
receiving CCDF subsidies to report to a designated State, territorial, 
or tribal entity any serious injuries or deaths of children occurring 
in child care. We strongly recommend that States, Territories, and 
Tribes extend this requirement to all child care providers, including 
those not serving CCDF children. According to the 2011 Child Care 
Licensing Study, 34 States

[[Page 29472]]

require child care centers to report all serious injuries that occur to 
children in programs, and 33 States require deaths that occur to 
children in programs to be reported. For family child care, 31 States 
require reporting of all serious injuries and 25 States require 
reporting of child deaths. Therefore, this requirement is in line with 
current State practice, and provides an important tool for States in 
monitoring the health and safety of child care providers. The 
information collected from these providers should be used to inform the 
proposed assessment of child injuries and deaths in child care as 
required at Sec.  98.16(v)(2).
    In-home and relative providers. Regulations at Sec.  98.41(e) 
currently allow Lead Agencies to exempt relative caregivers, including 
grandparents, great grandparents, siblings (if such providers live in a 
separate residence), and aunts or uncles from health and safety and 
monitoring requirements described in this section. We propose to add 
language at Sec.  98.41(e) to expand the Lead Agency's flexibility to 
also exempt in-home child care providers (i.e., an individual who 
provides child care services in the child's own home). Accordingly, at 
the Lead Agency's option, they may choose to exempt relative-caregivers 
and in-home caregivers from some or all of their health and safety 
training requirements and monitoring procedures. If the Lead Agency 
chooses to exempt either of these categories of providers, the Lead 
Agency must provide a description and justification in the CCDF Plan of 
requirements, if any, that apply to these providers. We believe this 
additional flexibility is important because we recognize that some of 
the proposed requirements, such as compliance with building, health, 
and fire codes, emergency preparedness and response planning, and 
unannounced on-site monitoring may not be appropriate for that type of 
care setting. However, we do not intend for in-home providers serving 
children receiving subsidies to meet no minimum standards. Lead 
Agencies should think carefully about what types of health and safety 
requirements should apply to in-home providers such as criminal 
background checks and minimum health and safety training, in a similar 
manner that is done when considering which of the requirements should 
apply to relative caregivers.
Sliding Fee Scales (Section 98.42)
    CCDF regulations at Sec.  98.42(c) currently state that ``Lead 
Agencies may waive contributions from families whose incomes are at or 
below the poverty level for a family of the same size.'' We propose 
amending this section so that Lead Agencies can waive contributions 
from families ``meeting criteria established by the Lead Agency.'' Lead 
Agencies have often requested more flexibility to waive co-payments 
beyond just those families at or below the poverty level. This change 
would increase flexibility to determine waiver criteria that the Lead 
Agency believes will best serve subsidy families. For example, a Lead 
Agency could use this flexibility to target particularly vulnerable 
populations, such as homeless families or migrant workers, or to better 
align services for children dually funded through both CCDF and Head 
Start. While we are allowing Lead Agencies to define criteria for 
waiving co-payments, the criteria must be described and approved in the 
CCDF Plan pursuant to the proposed change at Sec.  98.16(k). Lead 
Agencies may not use this revision as an authority to eliminate the co-
payment requirement for all families receiving CCDF assistance. We 
continue to expect that Lead Agencies will have co-payment requirements 
for a substantial number of families receiving CCDF subsidies.
    Finally, we are also proposing to add paragraph Sec.  98.42(d) to 
provide that Lead Agencies may not use cost or price of care or subsidy 
payment rate as a factor in setting co-payment amounts, but may use 
quality of care. This corrects a contradiction between the 1992 and 
1998 preamble discussions. The 1992 preamble stated that ``Grantees may 
take into account the cost of care in establishing a fee scale,'' (57 
FR 34380), while the 1998 preamble states that ``As was stated in the 
preamble to the regulations published on August 4, 1992, basing fees on 
the cost or category of care is not allowed.'' (63 FR 39960) This 
proposed change will correct this discrepancy by clearly stating that 
Lead Agencies may not use cost or price of care when setting their co-
pay amounts, which could violate the statutory requirements to preserve 
equal access and parental choice.
Equal Access (Section 98.43)
    Section 658E(c)(4) of the CCDBG Act requires the CCDF Plan to 
provide assurances that payment rates for CCDF subsidies are sufficient 
to ensure equal access for eligible children to comparable child care 
services that are provided to children whose parents are not eligible 
to receive child care assistance. The statute also requires the CCDF 
Plan to provide a summary of the facts on which the Lead Agency relied 
to determine that payment rates are sufficient to ensure equal access. 
The existing regulation at Sec.  98.43(b) requires a Lead Agency to 
show that it considered the following three key elements in determining 
that its child care program provides equal access for eligible families 
to child care services: (1) Choice of the full range of categories and 
types of providers; (2) adequate payment rates, based on a local market 
rate survey conducted no earlier than two years prior to the effective 
date of the current Plan; and (3) affordable copayments. The proposed 
rule largely maintains these three key elements at Sec.  98.43(b)(2), 
but proposes some revisions regarding payment rates and the market rate 
survey.
    First, for purposes of clarity, we propose to replace the term 
market rate survey with the term valid local market price study in 
paragraph Sec.  98.43(b)(2). This is not a substantive change, but 
rather a change in terminology that more accurately reflects the scope 
and nature of the requirement. As in the past, the purpose of the 
market price study is to ensure that payment rates are established 
within the context of market conditions so that the rates are 
sufficient to provide equal access to child care services in the open 
market. We propose to use the term price rather than rate since Sec.  
98.43(b)(2) requires the Lead Agency to systematically collect 
information about the prices (not rates) charged in the market by child 
care providers. Once a Lead Agency gathers and analyzes this price 
information, it is used to help determine the rates paid by the Lead 
Agency to providers that serve children who receive CCDF. The change in 
terminology in the regulatory language more clearly distinguishes 
between the initial collection of price data, and the subsequent 
analysis and setting of payment rates. We also propose to use the term 
study rather than survey since Lead Agencies have the flexibility to 
use data collection methodologies other than a survey. For example, 
Lead Agencies may use administrative data from resource and referral 
agencies or other sources.
    We also propose to require that the market price study must be 
valid--meaning that it accurately reflects the prices charged for child 
care in the local community. If a market price study is not valid, it 
will provide misleading results that cannot serve as a sound basis for 
establishing payment rates to providers or for measuring the adequacy 
of the rates. A recent report funded by ACF using CCDF research dollars 
identified components of a valid market price study (Grobe, D., Weber, 
R., Davis, E., Kreader, L., and Pratt, C., Study of Market Prices: 
Validating Child Care Market Rate Surveys, 2008). Based

[[Page 29473]]

largely on this research, a market price study will be considered valid 
if it meets the following benchmarks:
     Includes the priced child care market. The study includes 
child care providers within the priced market (i.e., providers that 
charge parents a price established through an arm's length 
transaction). In an arm's length transaction, the parent and the 
provider do not have a prior relationship that is likely to affect the 
price charged. For this reason, some unregulated, license-exempt 
providers, particularly providers who are relatives or friends of the 
child's family, are generally not considered part of the priced child 
care market and therefore are not included in a market price study. 
These providers typically do not have an established price that they 
charge the public for services, and the amount that the provider 
charges is often affected by the relationship between the family and 
the provider. In addition, from a practical standpoint, many Lead 
Agencies are unable to identify a comprehensive universe of family, 
friend, and neighbor caregivers since these providers frequently are 
not included on lists maintained by licensing agencies, resource and 
referral agencies, or other sources. In the absence of findings from a 
market price study, Lead Agencies often use other facts to establish 
payment rates for providers outside of the priced market (e.g., family, 
friend, and neighbor providers); for example, many Lead Agencies set 
these payment rates as a percentage of the rates for providers in the 
priced market.
     Provides complete and current data. The study uses data 
sources (or combinations of sources) that fully capture the universe of 
providers in the priced child care market. The study should use lists 
or databases from multiple sources, including licensing, resource and 
referral, and the subsidy program, if necessary for completeness. In 
addition, the study should reflect up-to-date information for a 
specific time period (e.g., all of the prices in the study are 
collected within a three month time period). The existing regulation at 
Sec.  98.43(b)(2) requires that the market price study be completed no 
earlier than two years prior to the effective date of the Plan, thereby 
ensuring that the study reflects recent prices. ACF expects a Lead 
Agency to use its current market study completed within the past two 
years, rather than an older study, when setting its payment rates, 
though the Lead Agency retains discretion on where to set payment 
levels as compared to the market study findings, provided that it meets 
the requirements for providing equal access at Sec.  98.43.
     Represents geographic variation. The study includes 
providers from all geographic parts of the State, Territory, or Tribal 
Service Area. It should also collect and analyze data in a manner that 
links prices to local geographic areas. The existing regulation at 
Sec.  98.43(b)(2) requires the market price study to be ``local'', 
meaning that it should measure differences in local child care markets.
     Uses rigorous data collection procedures. The study uses 
good data collection procedures, regardless of the method (mail, 
telephone, or web-based survey; administrative data). This includes a 
response from a high percentage of providers (65 percent or higher is 
desirable; below 50 percent is highly suspect).
     Analyzes data in a manner that captures market 
differences. The study should examine the price per child care slot, 
recognizing that all child care facilities should not be weighted 
equally because some serve more children than others. This approach 
best reflects the experience of families who are searching for child 
care. When analyzing data from a sample of providers, as opposed to the 
complete universe, the sample should be appropriately weighted so that 
the sample slots are treated proportionally to the overall sample 
frame. The study should collect and analyze price data separately for 
each age group and category of care to reflect market differences.
    In addition, we propose regulatory revisions designed to promote 
alternative or additional methodologies to market price studies as a 
basis for setting rates. Specifically, under new Sec.  98.43(b)(2)(ii) 
a Lead Agency may propose an alternative methodology, such as a model 
that estimates the cost of providing various levels of quality child 
care, in lieu of a market price study. The Lead Agency must receive 
advance ACF approval prior to substituting the methodology for a market 
price study. We also propose to add new Sec.  98.43(b)(4) which 
requires the Lead Agency to provide any additional facts the Lead 
Agency considered in determining that its payment rates ensure equal 
access, such as information on the cost of providing quality child 
care. We encourage Lead Agencies to use the flexibility afforded them 
under the CCDF rules to adopt innovative approaches to setting subsidy 
payment rates in a way that also is linked to child care quality.
    We are concerned that many Lead Agencies currently are setting 
payment rate ceilings that are inadequate to ensure equal access. The 
preamble to the 1998 Final Rule indicated that payments established at 
least at the 75th percentile of the market would be regarded as 
providing equal access (63 FR 39959). In order to provide access to the 
highest quality care, even higher payment rates may be necessary. 
However, the vast majority of States set rate ceilings that are below 
the 75th percentile, and in some cases significantly below that 
benchmark. This means that families are unable to access a significant 
portion of the child care market.
    We recognize that Lead Agencies face resource constraints that 
limit their ability to increase payment rates, and we are not requiring 
an increase in payment rates through this proposed rule; however, we 
continue to be concerned about families' ability to access high quality 
care when rates are low. Many child care providers report that they are 
unable to set published prices that reflect the full cost of providing 
quality services because parents would be unable to pay these prices. 
(Report of the Build Subsidized Child Care Rate Policy Task Force, 
Pennsylvania Build Initiative, 2004) As a result, the published prices 
that are reflected in market price studies (and which are used as the 
basis for setting CCDF subsidy payment rates) are not always adequate 
to cover the providers' full costs, particularly for high quality care.
    To address this situation, Lead Agencies could adopt new 
methodologies and approaches for setting payment rates. One approach is 
to conduct cost studies (in contrast to price studies) that document 
the full cost to providers of quality child care. Another method is to 
develop models that estimate the cost to providers at various levels of 
quality. We considered mandating new rate-setting approaches for all 
Lead Agencies through this proposed rule; however, we do not yet have 
sufficient State experience using alternative methods to mandate them 
at this time.
    There is an urgent need for States to explore and document new 
rate-setting practices, and our intent is to spur innovation in this 
area. Therefore, we would like to solicit public comments on innovative 
rate setting approaches and possible new Federal requirements that 
would better ensure that subsidy rates provide equal access, as 
required by statute. In addition to providing a basis for setting 
subsidy payment rates, new methodologies may also help the State 
determine what level of financial supports and incentives, such as 
grants and bonuses, are necessary to support quality enhancements for 
providers (for

[[Page 29474]]

example, the level of support necessary to sustain providers at the top 
level of a QRIS or other system of quality indicators).
    Because the market price study is a long-standing practice that can 
provide important contextual information for setting rates, we propose 
to require advance ACF approval before a Lead Agency replaces its 
market price study with an alternative methodology. After enactment of 
a Final Rule, ACF will provide additional guidance to Lead Agencies 
regarding the process for proposing an alternative methodology to be 
used in place of a market price study, and the specific criteria for 
ACF approval. To obtain approval, we anticipate that the Lead Agency 
will need to demonstrate how the alternative methodology provides a 
sound basis for setting payment rates. ACF approval will only be 
necessary if the Lead Agency plans to replace the market price study 
with an alternative methodology. Approval will not be required if the 
Lead Agency plans to implement both a market price survey and an 
additional methodology to inform rate-setting.
    We also note that ACF has previously issued guidance (Program 
Instruction CCDF-ACF-PI-2009-02) that describes conditions under which 
Tribal and Territorial Lead Agencies may provide alternative 
documentation in lieu of conducting or using a market price study. 
Specifically, this includes circumstances where the Lead Agency funds 
direct services solely in settings outside the scope of a market price 
study. This guidance remains effective, and is not altered by this 
proposed rule.
    We propose adding a new paragraph Sec.  98.43(c) to clarify that a 
Lead Agency shall take into account the quality of child care when 
determining payment rates for child care providers. Higher quality care 
is often more expensive to provide, whether that is reflected in the 
price or not. Therefore, it is important for payment rates to consider 
quality in order to ensure that parents receiving CCDF subsidies have 
equal access to quality child care. Taken together, revised paragraph 
(b) and new paragraph (c) identify the key elements required for equal 
access--the full range of providers, affordable copayments, and 
adequate payment rates which take into account the quality of child 
care.
    We recommend that Lead Agencies pay higher subsidy rates for higher 
quality care. The taxpaying public rightly expects the government to 
pay for results, and research shows that quality is a prerequisite for 
supporting children's learning and development through child care. By 
paying more for quality, Lead Agencies provide a financial incentive 
for providers to increase the quality of care. The higher rates also 
help give providers the necessary resources to pay for higher levels of 
compensation for child care professionals, as well as other components 
of quality care.
    When determining the differential rate for higher quality, we 
encourage Lead Agencies to make certain that rates are sufficient to 
ensure access at the higher levels of quality. At the same time, a Lead 
Agency's base rates (i.e., before any quality incentives are included) 
must be sufficient for all children to access care that meets a 
baseline of quality and health and safety. In addition, higher subsidy 
rates alone may not be sufficient to promote quality, particularly for 
child care providers that serve only a limited number of children 
receiving CCDF assistance. We encourage Lead Agencies to use grants, 
contracts, training and scholarship opportunities and other forms of 
support to help providers increase their quality. Linking enhanced 
subsidy rates to higher quality is an important component of promoting 
quality when implemented in conjunction with other ongoing financial 
supports, assistance, and incentives. In the FY2012-2013 CCDF Plans, 32 
States and Territories indicated that they provide tiered or 
differential rates for higher quality.
    With regard to paying higher rates for quality, we note that, in 
the preamble to the 1998 Final Rule, we reminded Lead Agencies of the 
general principle that Federal subsidy funds cannot pay more for 
services than is charged to the general public for the same service (63 
FR 39959). We would like to clarify, however, that Lead Agencies may 
pay amounts above the provider's private pay rate, as a quality bonus 
or incentive. Recognizing that private pay rates are often not 
sufficient to support high quality, many Lead Agencies have already 
implemented tiered reimbursement systems that support quality and 
produce the school readiness and success outcomes that children 
deserve. Lead Agencies may use CCDF quality dollars to recognize higher 
quality care, or to provide incentives to increase the availability of 
child care otherwise in short supply in the market. This can be 
achieved through provider bonuses or incentives that may be implemented 
through tiered or quality reimbursement systems or other mechanisms. 
These payments may exceed private pay rates if they are designed to 
reimburse providers for additional costs associated with offering 
higher quality care or types of care that are not produced in 
sufficient amounts by the market (e.g., non-standard hour care, care 
for children with special health care needs, etc. . . . ). These 
bonuses or incentives may be provided in the form of an hourly, monthly 
or other augment to provider reimbursement for the care of an eligible 
child.
    We also propose to make a technical correction at Sec.  98.43(b)(3) 
to clarify the reference to how copayments are affordable as described 
at Sec.  98.42. The previous language read in such a way as to suggest 
that Sec.  98.42 described affordable copayments in reference to the 
sliding fee scale, when in fact it does not. Current paragraphs (c) 
through (e) would be re-designated as (d) through (f) but otherwise 
would be unchanged.

Subpart F--Use of Child Care and Development Funds

    Subpart F of CCDF regulations establishes allowable uses of CCDF 
funds related to the provision of child care services, activities to 
improve the quality of child care, administrative costs, Matching fund 
requirements, restrictions on the use of funds, and cost allocation.
Child Care Services (Section 98.50)
    We propose a technical change to Sec.  98.50(a) which states that 
the Lead Agency shall spend a substantial portion of the funds 
remaining after applying provisions at (c), (d), and (e) of this 
section to provide child care services to low-income working families. 
Paragraphs (c), (d), and (e), respectively, require the Lead Agency to 
spend a minimum of 4 percent on activities to improve the quality of 
care, not more than 5 percent for administrative activities, and not 
less than 70 percent of the Mandatory and Matching funds to meet the 
needs of families receiving Temporary Assistance for Needy Families 
(TANF), families transitioning from TANF, and families at-risk of 
becoming dependent on TANF. We propose to specify that Sec.  98.50(b) 
is describing use of funds for direct child care services. In the past, 
we have been asked to interpret whether this section would allow States 
to use a substantial portion of funds for activities other than direct 
services.
    In accordance with the proposed change at Sec.  98.30(a)(1) 
discussed earlier, we propose to add language to Sec.  98.50(b)(3) of 
the regulations to clarify that child care services shall be provided 
using funding methods described at Sec.  98.30 (i.e., using grants or 
contracts or certificates), which must include some use of grants or 
contracts for the provision of direct services, with

[[Page 29475]]

the extent of such services determined by the Lead Agency after 
consideration of the supply shortages described and other factors as 
determined by the Lead Agency. As discussed earlier, existing language 
at Sec.  98.30 provides that parents must be offered a choice of a 
grant or contract ``if such services are available,'' or a certificate. 
This proposed change, in conjunction with the proposed change at Sec.  
98.30, is intended to promote the use of grants or contracts, along 
with certificates, as funding mechanisms for child care services. As 
noted earlier, the majority of children (approximately 90 percent) 
currently receiving child care subsidies are served through 
certificates. We recognize that there may be geographic areas or other 
circumstances where grants or contracts may not be a viable option to 
offer every parent applying for subsidies; therefore, we allow Lead 
Agencies to determine the extent to which grants or contracts are used 
based on supply shortages and other relevant factors. However, this 
proposed change would require Lead Agencies to employ some use of 
grants or contracts to provide child care services.
    Grants or contracts should play a role in building the supply and 
availability of child care, particularly high quality care, in 
underserved areas and for underserved populations. For example, 
contracts can be used to fund programs to serve children with special 
needs, specific geographic areas, infants and toddlers, and school-age 
children. Grants or contracts may also be used to provide wrap-around 
services in Head Start and pre-kindergarten and to fund programs that 
provide comprehensive services. Another factor a Lead Agency may wish 
to consider in the use of grants or contracts might be the ability of 
the child care market to sustain high quality child care providers in 
certain localities or for specific populations.
    Grants or contracts provide greater financial stability for child 
care providers by funding a specified number of slots even if 
individual children leave the program, whereas certificates are 
portable allowing parents to leave a given provider at any time. Child 
care providers that receive funding through certificates face a 
constant threat of losing funding and children. Without stable funding, 
it is difficult for providers to pay for the higher costs associated 
with providing high quality child care, most child care providers, 
especially those in low-income or rural areas, cannot afford the 
qualified staff, equipment, and facilities that are necessary to meet 
high quality program standards. With greater financial stability, 
providers may be more willing to provide higher cost care, such as for 
infants and toddlers, or to locate in low-income or rural communities. 
Finally, grants or contracts also can improve accountability and fiscal 
integrity by giving the Lead Agency more access to monitor child care 
provider's compliance with health and safety requirements and 
appropriate billing practices.
Activities To Improve the Quality of Child Care (98.51)
    We propose making a technical change at Sec.  98.51(a) by 
substituting ``from each fiscal year's allotment'' for ``for a fiscal 
year.'' The purpose for this change is to make clearer that the four 
percent minimum quality expenditure is calculated based on each fiscal 
year's allotment (rather than a fiscal year's expenditure) as Lead 
Agencies have multiple years to spend an entire CCDF allotment in 
accordance with the liquidation timeframes at Sec.  98.60(d) and (e). 
The revision also is consistent with existing language at Sec.  
98.52(a) describing the five percent limitation on administrative 
costs.
    Framework for quality improvement activities. Under Section 658G of 
the CCDBG Act and existing regulations at Sec.  98.51(a)(1), Lead 
Agencies must use not less than 4 percent of the CCDF funds for 
activities that are designed to provide comprehensive consumer 
education to parents and the public, activities that increase parental 
choice, and activities designed to improve the quality and availability 
of child care, including resource and referral services. Lead Agencies 
have broad flexibility to determine what may constitute quality 
activities as long as those definitions fit within the broad statutory 
requirement.
    Current regulations at Sec.  98.51(a)(2) describe a list of 
potential activities which may be considered allowable in order to meet 
this minimum quality expenditure requirement. The current list of 
suggested activities includes: (i) Operating directly or providing 
financial assistance to organizations (including private non-profit 
organizations, public organizations, and units of general purpose local 
government) for the development, establishment, expansion, operation, 
and coordination of resource and referral programs specifically related 
to child care; (ii) Making grants or providing loans to child care 
providers to assist such providers in meeting applicable State, local, 
and tribal child care standards, including applicable health and safety 
requirements, pursuant to Sec. Sec.  98.40 and 98.41; (iii) Improving 
the monitoring of compliance with, and enforcement of, applicable 
State, local, and tribal requirements pursuant to Sec. Sec.  98.40 and 
98.41; (iv) Providing training and technical assistance in areas 
appropriate to the provision of child care services, such as training 
in health and safety, nutrition, first-aid, the recognition of 
communicable diseases, child abuse detection and prevention, and care 
of children with special needs; (v) Improving salaries and other 
compensation (such as fringe benefits) for full-and part-time staff who 
provide child care services for which assistance is provided under this 
part; and (vi) and other activities that are consistent with the intent 
of this section.
    This list of activities is based on specific activities formerly 
contained in the CCDBG Act of 1990 prior to its reauthorization in 
1996, which were retained in the 1998 Final Rule. We believe this list 
includes worthwhile quality activities, but does not reflect the great 
progress that has been made in the last decade toward organizing 
quality activities into an intentional, systematic approach to helping 
child care programs meet higher standards and child care professionals 
advance in their skills and knowledge. Therefore, we propose to delete 
the current list of suggested quality improvement activities at Sec.  
98.51(a)(2) and insert the activities that follow: (We note that all of 
the previously listed activities are incorporated into this new 
framework, and the proposed revision should not be interpreted as an 
indication that the previously delineated activities are no longer 
allowable activities toward meeting the minimum quality expenditure 
requirement.)
    As proposed, activities to improve the quality of child care 
services may include, but are not limited to, implementation of a 
systemic framework for organizing, guiding, and measuring progress of 
quality improvement activities that includes the following key 
components: (i) Activities to ensure the health and safety of children 
through licensing and health and safety standards pursuant to 
Sec. Sec.  98.40 and 98.41; (ii) Establishment and implementation of 
age-appropriate learning and development guidelines for children of all 
ages, including infants, toddlers, and school-age children; (iii) 
Establishment and implementation of systems of quality improvement to 
evaluate, improve and communicate the level of quality of child care 
programs that may contain the following elements:
    (A) Establishment of program standards to define expectations for 
quality and indicators of different levels

[[Page 29476]]

of quality appropriate to the provider setting;
    (B) Provision of supports, training and technical assistance to 
assist child care programs in meeting child care quality improvement 
standards;
    (C) Provision of financial incentives and monetary supports to 
assist child care programs in meeting child care quality improvement 
standards;
    (D) Provision of quality assurance and monitoring to measure child 
care program quality over time; and
    (E) Implementation of strategies for outreach and consumer 
education efforts to promote knowledge of child care quality 
improvement standards to child care programs and to provide parents, 
including parents receiving assistance under this part, with provider-
specific information about the quality of child care provider options 
available to them and the child care provider they select consistent 
with Sec.  98.33;
    (iv) Implementation of professional development systems to ensure a 
well-qualified child care workforce that may contain the following 
elements:
    (A) Establishment of core knowledge and competencies to define what 
the workforce should know (content) and be able to do (skills) in their 
role working with children and their families;
    (B) Establishment of career pathways to define options and a 
sequence of qualifications and ongoing professional development 
opportunities;
    (C) Conducting professional development assessments to build 
capacity of higher education systems and other training institutions to 
meet the diverse needs of the child care workforce and address the full 
range of development and needs of children;
    (D) Provision of access to professional development to ensure 
practitioners are made aware of, and receive supports and assistance to 
utilize professional development opportunities;
    (E) Provision of rewards or financial supports to practitioners for 
participating in and completing education or training and for increased 
compensation;
    (v) Implementation of an infrastructure of support to build child 
care provider capacity to promote health through wellness, physical 
activity and nutrition programs, to serve children with special needs, 
dual language learners and other vulnerable children (e.g., children in 
the child welfare system and homeless children), to implement family 
engagement strategies;
    (vi) Assessment and evaluation of the effectiveness of quality 
improvement activities; and
    (vii) Any other activities consistent with the intent of this 
section.
    This proposed change envisions a more comprehensive approach aimed 
at systems-level change by providing a framework Lead Agencies can use 
to determine whether CCDF-funded quality initiatives have actually made 
a measurable difference to improve the quality of care. The proposed 
change provides a list of suggested quality improvement activities that 
Lead Agencies may consider for purposes of meeting the minimum quality 
spending requirement. We are not proposing to limit Lead Agencies to 
only these activities or requiring that Lead Agencies use quality 
dollars for these purposes. However, we believe this framework will 
help promote strategic investments that are coordinated and planned to 
achieve goals more efficiently.
    Nationally, there is an increased call for improvement in child 
care quality. The quality of child care across the country is uneven, 
and too often the quality is insufficient to promote children's growth 
and development. Research has shown that it is possible to improve the 
quality of child care, for example by increasing the caregiver to child 
ratios and supporting more qualified caregivers by helping them attain 
educational credentials and training. (NICHD Early Child Care Research 
Network, Child Outcomes When Child Care Center Classes Meet Recommended 
Standards for Quality, American Journal of Public Health, 1999) States, 
Territories, and Tribes have pioneered new pathways to excellence to 
help center and home-based providers move toward continuous quality 
improvement. Many Lead Agencies have used CCDF quality funds to build a 
strong child care infrastructure that is focused on ensuring child care 
providers are supporting children's learning and development to help 
them succeed in school and life. In FY 2011, States and Territories 
reported spending approximately $1 billion or 12 percent of CCDF 
expenditures on quality improvement activities. This exceeds the 
statutory quality spending requirement, demonstrating the commitment 
Lead Agencies have shown to improving child care quality. These quality 
investments reach millions of children not receiving CCDF subsidies 
across a wide array of settings in the child care market.
    Health and safety and licensing standards. We propose to add new 
paragraph at Sec.  98.51(a)(2)(i) to include compliance with health and 
safety standards pursuant to Sec. Sec.  98.40 and 98.41 in the list of 
quality improvement activities. This consolidates some of the separate 
activities already currently listed at Sec.  98.51(a)(2). This activity 
is of particular importance given the proposed changes we have 
discussed regarding minimum health and safety requirements for child 
care providers serving children receiving subsidies. Assisting 
providers in meeting these requirements and appropriately monitoring 
compliance is a fundamental quality improvement activity, as health and 
safety is the foundation of quality. For example, many QRIS tie 
eligibility to participate directly to licensing. Many Lead Agencies 
also report using CCDF quality funds to support monitoring of 
compliance with licensing and regulatory requirements, to support 
training for licensing staff, and funding data system automation.
    Learning guidelines. We propose to add new paragraph 
98.51(a)(2)(ii) to include establishment and implementation of age-
appropriate learning guidelines or standards for children of all ages, 
including infants, toddlers, and school-age children in the list of 
quality improvement activities. Early learning guidelines (sometimes 
called early learning standards) describe what children need to know 
and be able to do and their disposition toward learning and can help 
Lead Agencies measure and promote the physical, cognitive, and social 
and emotional development of children. In the FY 2012-2013 CCDF Plans, 
47 States and Territories indicated that they have developed early 
learning guidelines for infants and toddlers, 55 for three-to-five year 
olds, and 21 States and Territories have developed them for children 
five and older. Almost all States and Territories report aligning early 
learning guidelines with K-12 content standards or other content 
standards, such as the Head Start Child Development and Early Learning 
Framework or State or Territory pre-kindergarten expenditures. For 
school-aged children, Lead Agencies may use existing standards for K-12 
education, or build on them to include other domains of development, 
such as social and emotional competencies. This proposed regulatory 
change formally encourages Lead Agencies to use CCDF quality funds to 
continue their efforts to implement early learning guidelines across 
the domains of early learning and development.
    Systems of quality improvement. We propose to add new paragraph 
98.51(a)(2)(iii) to include implementation of systems of quality 
improvement to evaluate, improve and communicate the level of quality 
of child care programs in the list of

[[Page 29477]]

suggested quality improvement activities. ACF encourages that the 
system contain the following five elements: (1) Program standards to 
define expectations for quality and quality indicators indicating 
different levels of quality; (2) supports, training and technical 
assistance to assist child care programs in meeting child care quality 
improvement standards; (3) financial incentives and monetary supports 
to assist child care programs in meeting child care quality improvement 
standards; (4) quality assurance and monitoring to measure child care 
program quality over time; and (5) strategies for outreach and consumer 
education efforts to promote knowledge of child care quality 
improvement standards to child care programs and to provide parents, 
including parents receiving assistance under this part, with 
information about the quality of child care provider options available 
to them, pursuant to Sec.  98.33.
    As discussed earlier, QRIS is one approach that has been gaining 
momentum as a key strategy for promoting child care quality and more 
informed child care choices throughout the country. Many States have 
found QRIS a useful mechanism for providing parents with tools and 
information to select high-quality care for their children, to provide 
incentives, resources and technical assistance to help programs attain 
higher levels of quality, and to improve cross-sector coordination 
within the early care and education system. The five content areas 
proposed in this section were included in the revisions to the FY 2012-
2013 CCDF Plan and also align with the definition of a ``Tiered Quality 
Rating and Improvement System'' included in the Race to the Top Early 
Learning Challenge (RTT-ELC). ACF encourages Lead Agencies to implement 
QRIS that are applicable to all child care sectors and address the 
needs of all children, including children of all ages, families of all 
cultural-socio-economic backgrounds, and practitioners. We also 
encourage Lead Agencies to incorporate strategies for family engagement 
into their QRIS to enhance the capacity of families to support their 
children's education and development.
    ACF's Child Care Technical Assistance Network has provided key 
resources to States and Territories regarding QRIS, including a QRIS 
Resource Guide and a QRIS Cost-Estimation Tool. In 2011-2012, ACF's 
National Center on Child Care Quality Improvement provided technical 
assistance related to QRIS to 32 States, responded to information 
requests from CCDF Administrators on QRIS, conducted regional 
roundtables to assist and inform State QRIS development, and 
participated and partnered in efforts to coordinate and connect QRIS 
technical assistance and research at the national level. Additionally, 
ACF's Office of Planning, Research and Evaluation (OPRE), released a 
Compendium of Quality Rating Systems and Evaluations providing 
information, analysis, and resources about quality rating systems for 
States and other key stakeholders.
    A system of quality improvement, such as a QRIS, should include 
program standards that link to the other components of the quality 
framework. For example, the program standards should require child care 
providers to use curricula and learning activities that are based on 
the State's early learning guidelines, and should address the use of 
information about children's growth and development to improve 
services. The program standards should also address teacher 
qualifications and skills consistent with the State's professional 
development system.
    Professional development systems. We propose to add new paragraph 
98.51(a)(2)(iv) to include implementation of professional development 
systems in the list of quality improvement activities. We believe these 
activities are important to ensure a well-qualified child care 
workforce and propose that professional development systems contain the 
following five elements: (1) Core knowledge and competencies to define 
what the workforce should know (content) and be able to do (skills) in 
their role working with children and their families; (2) career 
pathways to define options and a sequence of qualifications and ongoing 
professional development opportunities; (3) professional development 
assessments to build capacity of higher education systems and other 
training institutions to meet the diverse needs of the child care 
workforce and address the full range of development and needs of 
children; (4) access to professional development to ensure 
practitioners are made aware of, and receive supports and assistance to 
utilize professional development opportunities; and (5) rewards or 
financial supports to practitioners for participating in and completing 
education or training and for increased compensation. The five 
components of a professional development system proposed in this 
section were included in the FY 2012-2013 CCDF Plan and also are 
reflected in the RTT-ELC focus on creating a strong early childhood 
workforce.
    Responsive, well-qualified caregivers are the most important factor 
in children's development and learning in child care settings. In the 
FY 2012-2013 CCDF Plans, the majority of States and Territories 
indicated that they have implemented components of a professional 
development system, including core knowledge and competencies for 
practitioners and career pathways that define a sequence of 
qualifications related to professional development and experience. 
There are other areas where more progress is needed, such as providing 
sustained financial support on a periodic, predictable basis for high 
levels of training and education.
    Professional development and workforce supports are needed to 
increase the stability of a child care workforce that experiences 
turnover rates of approximately 30 percent per year, a national average 
wage of $10.15 an hour and a decline in the number of teachers with 
college degrees. (National Association of Child Care Resource and 
Referral Agencies, Child Care Workforce, 2012) In May 2012, the Bureau 
of Labor Statistics data estimated there were 624,520 child care 
workers in the US. These numbers, however, only include professionals 
in licensed facilities. According to a study by the Center for the 
Child Care Workforce and Human Services Policy Center, there are an 
estimated 2.3 million paid child care providers working in varied 
settings including public and private, for-profit and nonprofit, faith-
based, community-based, school-based, home-based, and employer-
sponsored providers. Approximately 35 percent of child care workers are 
self-employed, with the majority of these workers serving as family 
child care providers. Of these 2.3 million paid child care providers, 
nearly half care for toddlers aged 19 through 36 months. (Estimating 
the Size and Components of the U.S. Child Care Workforce and Caregiving 
Population, Center for the Child Care Workforce and Human Services 
Policy Center, May 2002) There is little data available about the 
informal sector of child care, although it makes up a large number of 
child care providers in the U.S.
    Because the professional development needs of child care providers 
can vary based on the ages of the children in a provider's care, Lead 
Agencies should ensure their professional development systems are 
applicable to all providers, including school-age practitioners, 
infant-toddler care providers, and family child care. For example, core 
knowledge and competencies and available trainings should be specific 
to

[[Page 29478]]

the needs of child care providers whether they work with infants and 
toddlers, preschool-age, or school-age children. Additionally, States 
may want to create credentials tailored to specific categories of 
practitioners, such as a school-age professional or youth development 
credential, or an infant and toddler credential.
    All sectors of the early care and education field require a well-
qualified workforce with opportunities for growth from entry level 
through master teacher, including the many additional roles in the 
child care system (e.g., consultants, technical assistance providers, 
trainers, and higher education faculty). Lack of access to professional 
development that leads to progressively higher levels of competency is 
a barrier to providing access to high-quality early childhood education 
for all children.
    Infrastructure of support to build child care provider capacity. We 
propose to add new paragraph 98.51(a)(2)(v), to include implementation 
of an infrastructure of support to build child care provider capacity 
to deliver comprehensive services that meet the needs of children and 
families, including: promoting health and wellness; serving children 
with special needs, dual language learners and other vulnerable 
children (e.g., children in the child welfare system and homeless 
children); and implementing family engagement strategies. We believe it 
is important to dedicate resources towards building community-wide 
infrastructure for early care and afterschool programs to increase 
quality and provide comprehensive services. This infrastructure could 
include: coordinating referrals to health and social services; 
providing relevant training and professional development; supplying 
curricula, materials and resources; collecting and disseminating 
relevant data on the well-being of children and families to guide 
services; and including families and a broad range of community 
representatives in planning and leadership efforts.
    Many States and localities have invested in infrastructure for 
early care and afterschool programs to increase their quality and 
provide comprehensive services. For example, one State contracts with 
programs that provide high quality early education and care services 
for homeless children. In addition to providing children a stable, 
nurturing and stimulating environment that meets the individual 
developmental, behavioral, and emotional needs, these programs offer 
services to parents like on-site GED classes, job skills training, and 
counseling and advocacy services.
    Another example is a community-based organization that built a 
comprehensive system aimed at ensuring children are ready to succeed in 
school and helping families achieve economic success. The program 
collaborates with the local school district to provide education to 
three- and four-year olds with special needs. It also partners with 
family and children's services to provide family support, parent 
education, case management crisis intervention, and family counseling 
services. Lastly, it works with the local university to provide 
healthcare to enrolled children, their parents, and their siblings.
    Family engagement is also an example of an approach for involving 
families in decisions about their children, services, and communities. 
It includes a wide array of activities, such as direct relationships 
with child care and other service providers, mutual support shared 
among parents, advocacy by parents on behalf of their families, 
decision-making and advisory roles in agencies, and leadership in the 
community. Lead Agencies should consider use of CCDF quality funds to 
encourage partnerships between child care providers and public, 
private, and grassroots organizations to implement parent and family 
engagement strategies. Local and community networks and infrastructure 
are strongest when built with input from engaged parents and other 
residents.
    The Strengthening Families framework, developed by the Center for 
the Study of Social Policy, is a widely-used approach that gives child 
care and early education programs common-sense strategies to support 
vulnerable families. Many States and communities have employed the 
framework to anchor efforts to build comprehensive early childhood 
systems at State and local levels. The approach focuses on science-
based parenting skills, children's life skills, and family life skills 
specifically designed to build protective factors that prevent abuse 
and neglect and promote family strength. Many States have incorporated 
the core concepts of Strengthening Families into child care staff 
training and professional development, as well as into quality 
standards for QRIS.
    Assessment and evaluation of quality improvement activities. We 
propose to add new paragraph 98.51(a)(2)(vi) to include assessment and 
evaluation of the effectiveness of quality improvement activities in 
the list of suggested quality improvement activities. Lead Agencies are 
encouraged to evaluate and assess the success of their quality 
investments. A good evaluation design can provide information critical 
to improving a quality initiative at many points in the process, and 
increase the odds of its ultimate success. The importance of these 
activities is highlighted in a September 2002 GAO report that looks at 
evaluations of State quality initiatives. This report notes that the 
descriptive information collected from State-sponsored studies can 
provide reliable information required to address program design issues, 
as well as to assess program implementation, which can then be useful 
in planning more rigorous evaluations of program impacts. (GAO-02-897)
    Lead Agencies with a QRIS or that plan to implement a QRIS are 
encouraged to use a QRIS validation study to assess whether rating 
components and summary ratings can be relied on as accurate indicators 
of quality. Validation is important because it promotes increased 
credibility and support for QRIS, as well as efficient use of limited 
quality improvement resources. Factors that Lead Agencies should 
consider when designing a QRIS validation study include the strength of 
evidence required to address research questions and program improvement 
inputs needed to inform program management, stage of QRIS development, 
available funding; and timeframe in which research questions must be 
answered. Similar to implementation of QRIS, States should also 
consider using CCDF quality funds to test the effectiveness or validate 
the different elements of their professional development system.
    Paragraph Sec.  98.51(a)(2)(vii), as re-designated, would continue 
to allow any activites consistent with the intent of this section. 
Paragraphs (b) and (c) of this section would remain unchanged.
    We propose to add a new paragraph at Sec.  98.51(d) to clarify that 
activities to improve the quality of child care are not restricted to 
children meeting eligibility requirements under Sec.  98.20 or to the 
child care providers serving children receiving subsidies. Children or 
providers benefiting from Lead Agency quality improvement activities 
and investments are not required to meet applicable CCDF eligibility 
requirements at Sec.  98.20. Thus, CCDF quality funds may be used to 
enhance the quality and increase the supply of child care for all 
families, including those who receive no direct assistance.
    We propose to add a new paragraph at Sec.  98.51(e) to codify 
longstanding ACF policy that targeted funds for quality improvement and 
other activities that

[[Page 29479]]

may be included in appropriations law may not count towards meeting the 
4 percent minimum quality requirement, unless so specified by Congress. 
Since FY 2000, Congress has included language in annual appropriations 
legislation for CCDF discretionary funds requiring States and 
Territories to spend portions of their CCDF Discretionary Funds on 
specified activities, including: child care resource and referral and 
school-aged child care activities (this requirement also applies to 
Tribes); improving the quality of infant and toddler child care; and 
additional quality expansion activities intended to be in addition to 
the 4 percent requirement.
    We propose to add a new paragraph at Sec.  98.51(f) to require that 
Lead Agencies must include in the Plan a description of performance 
goals associated with expenditure of funds on activities to improve the 
quality of care and report annually on whether goals have been met, 
pursuant to quality performance report described at Sec.  98.16(v). The 
CCDF Plan is a prospective document, but in many cases, Lead Agencies 
are primarily describing the child care system that is currently 
operating in the State or Territory. In keeping with our commitment to 
CCDF Lead Agency flexibility, we asked Lead Agencies to set goals for 
themselves for each upcoming biennium in the FY 2012-2013 Plans. We 
also asked Lead Agencies to tell us what performance measures they use 
to track progress on child care quality. This information will be a 
resource as we update national performance measures on child care 
quality. These self-reported goals and measures will guide ACF 
technical assistance and serve as the basis for reporting under the new 
CCDF Quality Performance Report.
Administrative Costs (Section 98.52)
    Section 658E(c)(3) of the CCDF Act and regulations at Sec.  98.52 
prohibit Lead Agencies from spending more than 5 percent of CCDF funds 
for administrative activities, such as salaries and related costs of 
administrative staff and travel costs. Section 98.52 (b) specifically 
provides that this limitation applies only to States and Territories 
(Note that a 15 percent limitation applies to Tribes under Sec.  
98.83(g)). We propose to add a provision at Sec.  98.52(d) to formally 
add a list of activities which should not be counted towards the 5 
percent limitation on administrative activities. These include: (1) 
Establishment and maintenance of computerized child care information 
systems; (2) Establishing and operating a certificate program; (3) 
Eligibility determination; (4) Preparation/participation in judicial 
hearings; (5) Child care placement; (6) Recruitment, licensing, 
inspection of child care providers; (7) Training for Lead Agency or 
sub-recipient staff on billing and claims processes associated with the 
subsidy program; (8) Reviews and supervision of child care placements; 
(9) Activities associated with payment rate setting; (10) Resource and 
referral services; and (11) Training for child care staff. These 
activities were included in the preamble to the 1998 Final Rule, which 
stated that the Conference Agreement (H.R. Rep. 104-175 at 411) of 
PRWORA specified that these activities should not be considered 
administrative costs. (63 FR 39962) We propose to incorporate this list 
into the regulation itself for clarity and easy reference.
    Administrative costs and sub-recipients. Current CCDF regulations 
at Sec.  98.52(a) provides a listing of activities that may constitute 
administrative costs and defines administrative costs to include 
administrative services performed by grantees or sub-grantees or under 
agreements with third-parties. However, we have received questions from 
CCDF Lead Agencies to clarify whether activities performed through sub-
recipients or contractors are subject to the 5 percent administrative 
cost limitation. Our interpretation is that sub-recipients (contractors 
or sub-grantees) that receive funds from the Lead Agency are not 
individually bound by this requirement. However, the Lead Agency 
continues to be responsible for ensuring that the program complies with 
all Federal requirements and is required to oversee the expenditures of 
funds by sub-recipients. As such, while we do not as a technical matter 
separately apply the administrative cap to funds provided to each sub-
recipient, the Lead Agency continues to be responsible for ensuring 
that the total amount of CCDF funds expended on administrative 
activities--regardless of whether it is expended by the Lead Agency 
directly or via sub-grant, contract, or other mechanism does not exceed 
the administrative cost limitation. Therefore, we propose to add Sec.  
98.52(e) to clarify that if a Lead Agency enters into agreements with 
sub-recipients for operation of the CCDF program, the amount of the 
contract or grant attributable to administrative activities as 
described at Sec.  98.52(a) shall be counted towards the administrative 
cost limit.
    Determining whether a particular service or activity provided by a 
sub-recipient under a contract, sub-grant, or other mechanisms would 
count as an administrative activity towards the 5 percent 
administrative cost limitation depends on the function or nature of the 
contract/sub-grant/mechanism. If a Lead Agency provides a contract or 
sub-grant for direct services, the entire cost of the contract could 
potentially be counted as direct services if there is no countable 
administrative component. On the other hand, if the entire sub-grant or 
contract was administrative in nature (e.g., for payroll services for 
employees), then the entire cost of the contract would count towards 
the administrative cost cap. If a sub-grant/contract includes a mix of 
administrative and programmatic activities, the Lead Agency would need 
to develop a method for attributing an appropriate share of the sub-
grant/contract costs to administrative costs.
Restrictions on Use of Funds (Section 98.54)
    Current CCDF regulations at Sec.  98.54(b)(1) stipulate that for 
States and local agencies, no funds shall be expanded for the purchase 
or improvement of land or for the purchase, construction, or permanent 
improvement of any building or facility. However, funds may be expended 
for minor remodeling, and for upgrading child care facilities to assure 
that providers meet State and local child care standards, including 
applicable health and safety requirements. This rule does not apply to 
Tribal Lead Agencies, which may request approval to use CCDF funds for 
construction and major renovation of child care facilities (Sec.  
98.84).
    Under current regulations at Sec.  98.2 major renovation is defined 
as (1) structural changes to the foundation, roof, floor, exterior, or 
load-bearing walls of a facility, or the extension of a facility to 
increase its floor area; or (2) extensive alternation of a facility 
such as to significantly change its function and purpose, even if such 
renovation does not include any structural change. We propose to modify 
Sec.  98.54(b) to include the following language: Improvements or 
upgrades to a facility that are not specified under the definitions of 
construction or major renovation at Sec.  98.2 may be considered minor 
remodeling and are, therefore, allowable. The preamble to the 1998 
Final Rule included a discussion regarding minor remodeling and stated 
that, ``. . . rather than create a separate definition for minor 
remodeling State Lead Agencies may assume that an improvement or 
upgrade to a facility which is not specified under the definition of 
major renovation adopted by this rule may, by default, be

[[Page 29480]]

considered a minor renovation and, therefore is allowable under the 
Act.'' (63 FR 39940) This proposed change formally incorporates this 
policy into regulatory language.

Subpart G--Financial Management

    The focus of Subpart G is to ensure proper financial management of 
the CCDF program, both at the Federal level by HHS and the Lead Agency 
level. The proposed changes to this section include increasing the 
amount of CCDF funds the Secretary may set-aside for technical 
assistance, incorporating targeted funds that have been included in 
appropriations language, but are not in the current regulations, and 
inclusion of the details of required financial reporting by Lead 
Agencies. Lastly, we propose clarifications regarding obligations and 
reallotment of matching funds.
Availability of Funds (Section 98.60)
    Technical assistance. Sections 658(a)(3) and (b)(1) of the CCDBG 
Act authorize the Secretary to provide technical assistance to help 
States carry out the requirements of these rules, as well as requiring 
the Secretary to ``review and monitor State compliance'' with the 
statute and the Plan approved by HHS. Under current regulation at Sec.  
98.60(b)(1), the Secretary may withhold one quarter of one percent of a 
fiscal year's appropriation for technical assistance. We propose 
amending paragraph (b) to allow the Secretary to withhold up to 
[frac12] of 1 percent of CCDF funds for technical assistance.
    The increased set-aside for technical assistance and monitoring 
will allow ACF to invest in efforts to improve program integrity by 
providing increased technical assistance to States on reducing waste, 
fraud, and abuse and improving the quality of care. This training and 
technical assistance involves assessing Lead Agency needs, identifying 
innovations in child care administration, and promoting the 
dissemination and replication of solutions to the challenges that Lead 
Agencies and local child care programs face. The support provided by 
ACF and our technical assistance providers helps States, Territories, 
Tribes and local communities build integrated child care systems that 
enable parents to work and promote the health and development of 
children. We believe increasing the set-aside for technical assistance 
is necessary for ACF to meet its responsibility to support Lead 
Agencies as they begin to improve health and safety standards, 
implement a transparent system of quality indicators, and invest in 
improving access to high quality child care.
    Currently, ACF funds the Child Care Technical Assistance Network 
(CCTAN) to provide training and technical assistance to CCDF Lead 
Agencies. The CCTAN includes the National Center on Child Care Quality 
Improvement, the National Center on Child Care Professional Development 
Systems and Workforce Initiatives, and the National Center on Child 
Care Subsidy Innovation and Accountability. In addition to these 
Centers, a National Center on Tribal Child Care Implementation and 
Innovation, a National Center on Child Care Data and Technology, and a 
Network of State Child Care Systems Specialists provide TA that meets 
the individual needs of States, Territories, and Tribes. The CCTAN 
supports CCDF grantees in their efforts to improve the quality of early 
care and education and school-age care and helps the States, 
Territories, and Tribes reach their CCDF Plan goals. The new resources 
made available under this proposed rule would build on these efforts 
and allow increased assistance to Lead Agencies administering CCDF.
    Over the past several years there has been a heightened focus on 
program integrity in child care, Head Start and other ACF programs. 
Recent investigations into CCDF programs have brought the program 
integrity of several States into question. For example, a GAO 
investigation found that five test States included in the GAO 
investigation ``lacked controls over child care assistance application 
and billing processes for unregulated child care providers, leaving the 
program vulnerable to fraud and abuse.'' (GAO-10-1062) We believe it is 
necessary to increase the resources available for technical assistance 
in order to strengthen program integrity by ensuring that CCDF dollars 
are used to provide child care to eligible families and to make 
investments in improving the quality of child care programs, and are 
not lost to fraud or improper payments. See the discussion in Subpart J 
for more information on monitoring and oversight.
    Obligations. We propose to add a paragraph at Sec.  98.60(d)(7) to 
clarify that the transfer of funds from a Lead Agency to a non-
governmental third party or sub-recipient counts as an obligation, even 
when these funds will be used for issuing child care certificates. Some 
Lead Agencies contract with local units of government or non-
governmental third parties, such as Child Care Resource and Referral 
Agencies (CCR&Rs), to administer their CCDF programs. The functions 
included in these contracts could include eligibility determination, 
subsidy authorization, and provider payments. The contracting of some 
of these duties to a third party has led to many policy questions as to 
whether CCDF funds that are used by non-governmental third parties to 
administer certificate programs are considered obligated at the time 
the sub-grant or contract is executed between the Lead Agency and the 
third party pursuant to current regulation at Sec.  98.60(d)(5), or 
rather at the time the voucher or certificate is issued to a family 
pursuant to current regulation at Sec.  98.60(d)(6).
    The preamble to the August 4, 1992 CCDBG Regulations (57 FR 34395) 
helps clarify the intent of Sec.  98.60(d). It states, ``The 
requirement that State and Territorial grantees obligate their funds 
[within obligation timeframes] applies only to the State or Territorial 
grantee. The requirement does not extend to the Grantee's sub-grantees 
or contractors unless State or local laws or procedures require 
obligation in the same fiscal year.'' It follows that, in the absence 
of State or local laws or procedure to the contrary, Sec.  98.60(d)(6) 
would not apply when the issuance of a voucher or certificate is 
administered by a non-governmental third party because the funds used 
to issue the vouchers or certificates would have already been obligated 
by the Lead Agency. Based on this language, we have interpreted the 
obligation to take place at the time of contract execution between the 
Lead Agency and the third party. The addition of proposed paragraph 
(d)(7) simply codifies current ACF policy, and does not change existing 
obligation and liquidation requirements. Note that a local office of 
the Lead Agency, and certain other entities specified in regulation at 
Sec.  98.60(d)(5) are not considered third parties.
    Finally, we propose to make a technical change at Sec.  98.60(h) to 
eliminate a reference to [Sec.  98.51(a)(2)(ii)] of the regulation 
which would otherwise becomes obsolete since this proposed rule 
proposes to delete it. This technical change does not change the 
meaning or the substance of paragraph (h), which specifies that 
repayment of loans made to child care providers as part of a quality 
improvement activity may be made in cash or in services provided in-
kind.
Allotments From Discretionary Funds (Section 98.61)
    Targeted funds. We propose to add paragraph Sec.  98.61(f) to 
reference funds targeted through annual appropriations law. Since FY 
2000, annual appropriations law has required the use

[[Page 29481]]

of specified amounts of CCDF funds for targeted purposes (i.e., 
quality, infant and toddler quality, school-age care and resource and 
referral). This proposed addition is for clarification so that the 
regulations will provide a complete picture of CCDF funding parameters. 
New paragraph (f) provides that Lead Agencies shall expend any funds 
set-aside for targeted activities as directed in appropriations law.
Audits and Financial Reporting (Section 98.65)
    We propose revising Sec.  98.65(g), which currently provides that 
the Secretary shall require financial reports as necessary, to specify 
that States must submit quarterly expenditure reports for each fiscal 
year. Currently, States and Territories file quarterly expenditure 
reports (ACF-696); however, the current regulations do not describe 
this reporting in detail. Under proposed paragraph (h), States and 
Territories will be required to include the following information on 
expenditures of CCDF grant funds, including Discretionary (which 
includes any reallotted funds and funds transferred from the TANF block 
grant), Mandatory, and Matching funds; and State Matching and 
Maintenance-of-Effort (MOE) funds: (1) Child care administration; (2) 
Quality activities excluding targeted funds; (3) Targeted funds 
identified in appropriations law; (4) Direct services; (5) Non-direct 
services including: a. Systems, b. Certificate program cost/eligibility 
determination, c. All other non-direct services; and (6) Such other 
information as specified by the Secretary.
    We propose adding greater specificity to the regulation in light of 
the important role expenditure data play in ensuring compliance with 
the four percent quality expenditure requirement at Sec.  98.51(a), 
administrative cost cap at Sec.  98.52(a), and obligation and 
liquidation deadlines at Sec.  98.60(d). Additionally, expenditure data 
provide us with important details about how Lead Agencies are spending 
both their Federal and State CCDF funds, including what proportion of 
funds are being spent on direct services to families or how much has 
been invested in quality activities. These reporting requirements do 
not create an additional burden on Lead Agencies because we are simply 
updating the regulations to reflect current expenditure reporting 
processes.
    Tribal financial reporting. We propose to add paragraph (i) at 
Sec.  98.65 requiring Tribal Lead Agencies to submit annual expenditure 
reports to the Secretary (ACF-696T). As with State and Territorial 
grantees, these expenditure reports help us to ensure that tribal 
grantees comply with obligation and liquidation deadlines at Sec.  
98.60(e), the fifteen percent administrative cap at Sec.  98.83(g), and 
the four percent quality expenditure requirement at Sec.  98.51(a). 
This reporting requirement is current practice and does not create an 
additional reporting burden on tribal grantees.
    Program Integrity. We propose to add a new section Sec.  98.68 
Program Integrity--to include requirements that Lead Agencies have 
effective procedures and practices that ensure integrity and 
accountability in the CCDF program. These proposed changes formalize 
changes made to the CCDF Plan which require Lead Agencies to report in 
these areas. The Plan now includes questions on internal controls, 
monitoring sub-recipients, identifying fraud and errors, methods of 
investigation and collection of identified fraud, and sanctions for 
clients and providers who engage in fraud. ACF has been working with 
State, Territorial and Tribal CCDF Lead Agencies to strengthen program 
integrity to ensure that funds are maximized to benefit eligible 
children and families. For example, ACF issued a Program Instruction 
(CCDF-ACF-PI-2010-06) that provides stronger policy guidance on 
preventing waste, fraud, and abuse and has worked with States to 
conduct case record reviews to reduce administrative errors. The 
requirements proposed in this section build on these efforts and are 
designed to reduce errors in payment and minimize waste, fraud and 
abuse to ensure that funds are being used for allowable program 
purposes and for eligible beneficiaries.
    At Sec.  98.68(a) we propose to require Lead Agency internal 
controls to include processes to ensure sound fiscal management, 
processes to identify areas of risk, and regular evaluation of internal 
control activities. Examples of internal controls include practices 
that identify and prevent errors associated with recipient eligibility 
and provider payment such as: checks and balances that ensure accuracy 
and adherence to procedures; automated checks for red flags or warning 
signs; and established protocols and procedures to ensure consistency 
and accountability. The Grantee Internal Control Self Assessment 
Instrument is available as a resource for assisting Lead Agencies in 
assessing how well their policies and procedures meet the CCDF 
regulatory requirements for supporting program integrity and financial 
accountability.
    At Sec.  98.68(b) we propose to require Lead Agencies to have 
processes in place to identify fraud and other program violations 
associated with recipient eligibility and provider payment. These 
processes may include, but are not limited to, record matching and 
database linkages, review of attendance and billing records, quality 
control or quality assurance reviews, and staff training on monitoring 
and audit processes. Lead Agencies may wish to use unique identifiers 
to crosscheck information provided by parents and providers across 
State and national data systems. For example, income reported on the 
application for child care assistance may be checked with State 
quarterly wage databases or other benefit programs (i.e., SNAP, TANF, 
or Medicaid). Many such data systems can be structured to automatically 
flag potential improper payments. States should also provide training 
to caseworkers responsible for eligibility determination and 
redetermination and make efforts to simplify forms.
    At Sec.  98.68(c) we propose to require Lead Agencies to have 
procedures in place for documenting and verifying that children meet 
eligibility criteria at the time of eligibility determination. Lead 
Agencies are responsible for ensuring that all children served in CCDF 
are eligible at the time of eligibility determination or re-
determination and receiving care from eligible child care providers. 
Lead Agencies should, at a minimum, verify and maintain documentation 
of the child's age, family income, and require proof that parents are 
engaged in eligible activities. Income documentation may include pay 
stubs, tax records, child support enforcement documentation, alimony 
court records, government benefit letters, and receipts for self-
employed applicants. Documentation of participation in eligible 
activities may include school registration records, class schedules, or 
job training forms. Lead Agencies are encouraged to use automated 
verification systems and electronic recordkeeping practices to reduce 
paperwork. In addition, Lead Agencies may use client information 
collected and verified by other State programs (e.g., through the use 
of consolidated application forms) to streamline the eligibility 
determination process for CCDF. This new amendment would require Lead 
Agencies to institute procedures that ensure eligibility is 
appropriately verified and to monitor State, local, and non-
governmental agencies directly engaged in eligibility determination and 
would provide additional safeguards to ensure that

[[Page 29482]]

children receiving child care subsidies are eligible pursuant to 
requirements found at Sec.  98.20.
    At Sec.  98.68(d) we propose to require Lead Agencies to have 
processes in place to investigate and recover fraudulent payments and 
to impose sanctions on clients or providers in response to fraud. This 
new provision complements the existing requirement at Sec.  98.60(h)(1) 
that requires Lead Agencies to recover child care payments that are 
made as the result of fraud; these payments must be recovered from the 
party responsible for committing the fraud. The proposed new provisions 
ensure that Lead Agencies have the necessary processes in place to 
identify fraud and program violations so that recovery can be pursued 
and so that the Lead Agency can better design practices and procedures 
that prevent fraud from occurring in the first place. Lead Agencies are 
encouraged to use automated payment systems for child care providers, 
such as direct deposit, in order to minimize the risk of fraud. We also 
recommend that each Lead Agency include staff dedicated to program 
integrity efforts and that these staff should partner with law 
enforcement as appropriate to address fraud.
    Program integrity efforts can help ensure that limited program 
dollars are going to low-income eligible families for which assistance 
is intended; however, it is important to ensure that these efforts do 
not inadvertently impair access for eligible families. The 
Administration has emphasized that efforts to reduce improper payments 
and fraud must be undertaken with consideration for impacts on eligible 
families seeking benefits. In November 2009, the President issued 
Executive Order 13520, which underscored the importance of reducing 
improper payments in Federal programs while protecting access to 
programs by their intended beneficiaries (74 FR 62201). It states, 
``The purpose of this order is to reduce improper payments by 
intensifying efforts to eliminate payment error, waste, fraud, and 
abuse in the major programs administered by the Federal Government, 
while continuing to ensure that Federal programs serve and provide 
access to their intended beneficiaries.''
    It is important to have a strategic and intentional planning 
process to formalize mechanisms to promote program integrity and 
financial accountability while balancing quality and access for 
eligible families. Efforts to promote program integrity and financial 
accountability should not compromise child care access for eligible 
children and families. A foundation for accountability should be 
policies and procedures that help low-income parents' access child care 
assistance to support their work and training and promote children's 
success in school. Once a Lead Agency has established policies and 
procedures, steps should be taken to implement the program with 
fidelity and to include a variety of checks to detect areas both where 
there may be vulnerability to error or fraud and areas in which the 
system is failing to serve families well. Lead Agencies also can 
promote program integrity by clearly communicating specific policies to 
staff, parents, and providers. When policies are easily understood by 
the public and clearly communicated, parents and providers can better 
understand reporting requirements and deadlines.

Subpart H--Program Reporting Requirements

Content of Reports (Section 98.71)
    Section 98.71 describes administrative data elements that Lead 
Agencies are required to report to ACF, including basic demographic 
data on the children served, the reason they are in care, and the 
general type of care (center-based, family child care home, regulated 
vs. unregulated provider). While this data provides useful contextual 
information on the population of children and families receiving CCDF 
subsidies, it does not include information on the quality of care for 
subsidized children, which is a gap in our ability to track our goals 
to serve more low-income children in high quality care.
    We propose to add new Sec.  98.71(a)(15) to require State and 
Territorial Lead Agencies to submit an indicator of the quality of the 
child care provider as part of the quarterly family case-level 
administrative data report. This data will allow ACF and Lead Agencies 
to describe the quality of child care for each child receiving a child 
care subsidy and is consistent with revisions proposed at Sec.  98.33 
related to consumer education that would require Lead Agencies to 
implement a system of transparent quality indicators to provide parents 
with a way to differentiate the quality of child care providers. Many 
States pay higher subsidy rates for quality care, and therefore already 
track some information on the quality of care for at least a portion of 
child care providers in the subsidy system. This information may 
include the provider's level under a QRIS, accreditation status, 
compliance with State pre-kindergarten standards, compliance with Head 
Start performance standards, or compliance with other State-defined 
measures of child care quality.
    However, States vary greatly in the extent to which they use this 
quality data to improve management of their CCDF program, track quality 
improvement initiatives, and target financial incentives and technical 
assistance. In addition, none of this data is available at the national 
level. The limited and dated information that we have from research 
studies in selected States suggests that the quality of care in too 
many instances is mediocre or poor. Greater attention needs to be paid 
to quality of care that children receive, particularly low-income 
children in the subsidy system, to ensure that their care is promoting 
their learning and development to support success in school and life.
    To address this situation, ACF has separately revised the CCDF 
quarterly family case-level administrative data report (ACF-801) in 
order to add data elements related to the quality of care for children 
receiving CCDF subsidies (76 FR 44934). The revisions at Sec.  98.71 
reflect this change to the ACF-801 form. In our revisions to the form, 
we have allowed for a range of potential responses in recognition of 
State flexibility and variation in implementing CCDF, and a phased-in 
implementation period to allow States the necessary time to modify 
systems and implement the reporting. Current paragraph (a)(15) would be 
re-designated as paragraph (a)(16) but otherwise is unchanged.

Subpart I--Indian Tribes

    This subpart addresses requirements and procedures for Indian 
Tribes and Tribal organizations applying for or receiving CCDF funds. 
CCDF currently provides funding to approximately 260 Tribes and Tribal 
organizations that, either directly or through consortia arrangements, 
administer child care programs for over 500 federally-recognized Indian 
Tribes. Tribes and Tribal organizations receive 2 percent of CCDF 
funds, equaling over $100 million. With few exceptions, Tribal CCDF 
grantees are located in rural and economically challenged areas. In 
these communities, the CCDF program plays a crucial role in offering 
child care options to parents as they move toward economic self-
sufficiency, and in promoting learning and development for children. In 
many cases, Tribal child care programs also emphasize traditional 
culture and language.
    Tribal Consultation. ACF is committed to consulting with Tribal 
leadership on the provisions of this proposed rule. The requirements in 
this

[[Page 29483]]

rule were informed by past consultations and meetings with Tribal 
representatives on related topics, such as the recent revisions to the 
CCDF Tribal Plan, which addressed many of the same issues as this 
proposed rule--including health and safety, quality improvement, and 
program integrity. ACF has not yet formally consulted with Tribal 
leaders on the specific provisions of this proposed rule, but will 
consult with Tribes through appropriate venues during the public 
comment period. The consultations will be conducted in accordance with 
ACF's newly-revised Tribal Consultation Policy (76 FR 55678). Advance 
notice regarding these consultations will be disseminated to Tribes. 
Furthermore, we encourage Tribes to submit written comments during the 
public comment period.
    In light of unique tribal circumstances, this proposed rule 
continues to balance flexibility for Tribes with the need to ensure 
accountability and quality child care for children. In Subpart I, the 
proposed rule maintains all existing provisions at Sec.  98.80 (General 
Procedures and Requirements), Sec.  98.81 (Application and Plan 
Procedures) and Sec.  98.82 (Coordination). It proposes three changes 
to Sec.  98.83 (Requirements for Tribal Programs). Below we discuss 
broader contextual issues, including how provisions located outside of 
Subpart I apply to Tribes, before moving to a discussion of the 
proposed changes to Sec.  98.83.
    First, we would note that Tribes continue to have the option to 
consolidate their CCDF funds under a plan authorized by the Indian 
Employment, Training and Related Services Demonstration Act of 1992 
(Pub. L. 102-477). This law permits tribal governments to integrate a 
number of their Federally-funded employment, training, and related 
services programs into a single, coordinated comprehensive program. ACF 
does publish annual program instructions providing directions for 
Tribes wishing to consolidate CCDF funds under an Indian Employment, 
Training and Related Services plan. The Department of the Interior has 
lead responsibility for administration of Public Law 102-477 programs.
    Subpart I continues to specify the extent to which general 
regulatory requirements apply to Tribes. In accordance with Sec.  
98.80(a), a Tribe shall be subject to all regulatory requirements in 
Parts 98 and 99, unless specifically exempted. We propose to add a new 
exemption for Tribes, from the requirements at Sec.  98.50(b)(3) 
regarding funding mechanisms (which is discussed further below). 
However, Tribal Lead Agencies are generally subject to the new and 
revised provisions in this proposed rule--including, but not limited 
to, changes regarding: a child's eligibility for services at Sec.  
98.20, consumer education at Sec.  98.33; health and safety 
requirements at Sec.  98.41; and new program integrity provisions at 
Sec.  98.68. We have included further discussion below regarding how a 
number of these specific provisions would apply to Tribes and Tribal 
organizations.
    Health and safety standards. Tribes would be required to meet 
proposed revisions to Sec.  98.41 which provide greater specificity 
regarding CCDF health and safety requirements. (In addition, as 
discussed below, we are proposing that Tribes be subject to 
immunization requirements that currently apply only to States and 
Territories; see discussion below).
    The CCDBG Act, as amended by PRWORA, required HHS to develop 
minimum child care standards for Indian Tribes and Tribal Organizations 
receiving funds under the CCDF. These health and safety standards were 
first published in 2000 after three years of consultation with Tribes, 
Tribal organizations, and Tribal child care programs, and the standards 
were updated and reissued in 2005. The HHS minimum standards are 
voluntary guidelines that represent the baseline from which all 
programs should operate to ensure that children are cared for in 
healthy and safe environments and that their basic needs are being met.
    Tribes may comply with the proposed new requirements at Sec.  98.41 
by adopting and implementing components of the minimum tribal standards 
issued by HHS, or by developing and implementing their own tribal child 
care standards. Many Tribes already exceed the minimum tribal standards 
issued by HHS, and some Tribes have used the minimum standards as the 
starting point for developing their own more specific tribal standards. 
The minimum Tribal standards issued by HHS are generally consistent 
with the proposed revisions at Sec.  98.41, but we will be reviewing 
the standards to ensure that they adequately address all aspects of the 
proposed rule. We welcome comments that provide recommendations on any 
necessary updates to the minimum standards.
    Consumer education. Tribes would also be subject to proposed new 
requirements at Sec.  98.33 related to consumer education, with the 
exception of the requirement for a Web site at Sec.  98.33(a), see 
further discussion below. These new provisions require Lead Agencies to 
collect and disseminate information on the quality of child care 
providers, using information from a transparent system of child care 
provider quality standards, such as a QRIS. We recognize that many 
Tribes lack the resources necessary to implement their own 
comprehensive quality standards or QRIS. However, Tribal Lead Agencies 
may encourage child care providers in their service areas to 
participate in State quality initiatives, such as QRIS, to the extent 
that such systems are available and culturally relevant to Tribes. 
Tribes may also satisfy the requirements at revised Sec.  98.33 by 
tracking and disseminating other information related to quality of 
providers, such as: compliance with health and safety requirements; 
training that the provider has completed; the group size and adult-
child ratio for the provider; whether the provider is accredited; or 
whether the provider meets certain quality standards. We also encourage 
Tribes to explore innovative new models for tracking and disseminating 
quality information as a consumer education strategy, and we look 
forward to providing technical assistance to support these efforts. 
Please see further discussion below regarding the applicability of new 
quality provisions at Sec.  98.51 to Tribes.
    Increased Lead Agency flexibility. Provisions in this proposed rule 
that are designed to increase Lead Agency flexibility (e.g., waiving 
family copayments at Sec.  98.43; allowing higher standards of CCDF 
providers at Sec.  98.30(g)) all apply to Tribes and will increase the 
ability of Tribal Lead Agencies to design programs that meet the unique 
needs of tribal communities. In addition, with two exceptions (related 
to immunization requirements and quality expenditures, which are 
discussed further below), the proposed rule would maintain all existing 
tribal exemptions from CCDF requirements. These existing provisions 
exempt Tribes from a number of CCDF requirements that apply to State 
Lead Agencies, in recognition of the unique social and economic 
circumstances of many tribal communities. For example, as is the case 
with the existing rule, Tribes continue to be subject to a 15 percent 
administrative cost limit, rather than the five percent limit that 
applies to States. Similarly, Tribes may use either State median income 
or Tribal median income when determining a child's eligibility.
Requirements for Tribal Programs (Section 98.83)
    We propose four changes to section 98.83. First, we propose to 
exempt

[[Page 29484]]

Tribes from the requirement for a Web site at Sec.  98.33(a). Under the 
proposed rule, this provision would require Lead Agencies to establish 
a user-friendly, easy-to-understand Web site to disseminate consumer 
education information about the full range of available providers and 
provider-specific information about health and safety requirements; 
including history of violation of requirements and any compliance 
actions taken. Where appropriate, we encourage Tribes to implement Web 
sites for consumer education, but we are exempting Tribes from the 
mandate in recognition of the unique circumstances of tribal programs. 
For example, in cases where tribal child care providers are licensed by 
the State, information about compliance with health and safety 
requirements should already be available on the State's Web site. 
Furthermore, in some instances, the small number of child care 
providers in the Tribe's service area may not warrant the development 
and maintenance of a Web site. Although we are exempting Tribes from 
the Web site requirement, Tribes will still be required to meet other 
provisions of Sec.  98.33(a), (b) and (c)--specifically to disseminate 
consumer education information on the full range of available 
providers, including provider-specific information about health and 
safety, a transparent system of quality indicators, and specific 
information about the provider selected by a parent receiving a CCDF 
subsidy. Tribes will have flexibility for determining the most 
effective approaches for providing this information.
    Second, we propose to exempt Tribes from the requirement at Sec.  
98.50(b)(3). As revised by this proposed rule, that provision would 
require direct services to be provided using funding methods provided 
for in Sec.  98.30 (i.e., grant or contract, certificate), which must 
include some use of grants or contracts, with the extent of such 
services determined by the Lead Agency after consideration of the 
supply of high quality care, the needs of underserved populations, and 
the circumstances of local communities. This would require Lead 
Agencies to employ some use of grants or contracts to provide child 
care services. We are exempting Tribes from this requirement because we 
recognize that some Tribes, particularly those receiving smaller CCDF 
grant awards, may lack the resources necessary to provide services 
through a grant or contract. In addition, we recognize that many Tribes 
directly administer their own tribally-operated child care facilities, 
rather than purchasing slots through a grant or contract. These 
tribally-operated centers can accomplish many of the same goals as the 
use of grants and contracts (i.e., building supply, strengthening 
quality). For home-based care, grants or contracts with family child 
care providers or networks of family child care providers can be an 
effective approach to increase quality and supply in rural areas, 
including tribal service areas. The provision of services by Tribal 
Lead Agencies through certificates is already separately addressed at 
Sec.  98.83(f), and is discussed in this preamble further below.
    In addition, consistent with this proposed rule's overall focus on 
promoting high quality care that supports children's learning and 
development, we propose two changes in Sec.  98.83 in order to 
strengthen health and safety requirements and quality initiatives for 
Indian children. First, we propose to revise Sec.  98.83(d) to remove 
reference to Sec.  98.41(a)(1)(i) and thereby extend coverage of CCDF 
health and safety requirements related to immunization so that the 
requirements would apply to Tribes, whereas previously Tribes were 
exempt. Second, we propose to revise Sec.  98.83(f) so that all Tribes 
would be required to spend a minimum of 4 percent of CCDF expenditures 
on quality improvement activities; previously this requirement only 
applied to larger Tribes.
    Immunization requirement. Under Sec.  98.83(d) of the existing 
regulation, Tribes are currently exempt from the requirement at Sec.  
98.41(a)(1)(i) to assure that children receiving services under CCDF 
are age-appropriately immunized. The preamble to the 1998 Final Rule 
(63 FR 39953) indicated that Tribes were not subject to this regulatory 
requirement due to the anticipated development of tribal health and 
safety standards. The minimum tribal health and safety standards, 
required by section 658E(c)(2)(E)(ii) of the CCDBG Act, had not yet 
been developed and released by HHS at the time that the 1998 final rule 
was issued. Since HHS planned to consider immunization requirements as 
part of the consultation and development of the minimum tribal 
standards, it was premature at that time to address immunization 
requirements for Tribes through regulation.
    However, the minimum tribal standards have subsequently been 
developed and released, and the standards address immunization in a 
manner that is consistent with the requirements at Sec.  
98.41(a)(1)(i). As a result, there is no longer a compelling reason to 
continue to exempt Tribes from this regulatory requirement. We believe 
that many Tribes have already moved forward with implementing 
immunization requirements for children receiving CCDF assistance. By 
extending the requirement to Tribes, we will ensure that Indian 
children receiving CCDF assistance are age-appropriately immunized as 
part of efforts to prevent and control infectious diseases.
    As with States and Territories, Tribal Lead Agencies will have 
flexibility to determine the method to implement the immunization 
requirement. For example, they may require parents to provide proof of 
immunization as part of CCDF eligibility determinations, or they may 
require child care providers to maintain proof of immunization for 
children enrolled in their care. As indicated in the regulation, Lead 
Agencies have the option to exempt the following groups: (1) Children 
who are cared for by relatives; (2) children who receive care in their 
own homes; (3) children whose parents object on religious grounds; and 
(4) children whose medical condition requires that immunizations not be 
given. In determining which immunizations will be required, Tribal Lead 
Agencies have the flexibility to apply its own immunization 
recommendations or standards. Many Tribes may choose to adopt 
recommendations from the Indian Health Service or the State's public 
health agency.
    Quality improvement activities. The existing rule at Sec.  98.83(f) 
currently exempts smaller Tribes and tribal organizations (with total 
CCDF allocations less than an amount established by the Secretary) from 
the 4 percent quality requirement at Sec.  98.51(a) and the requirement 
to operate a certificate program at Sec. Sec.  98.15(a)(2) and 98.30(a) 
and (d). We propose to amend Sec.  98.83(f) by deleting paragraph (3) 
so that smaller Tribes would continue to be exempt from operating a 
certificate program, but all Tribes regardless of size would now be 
required to spend at least 4 percent on quality improvement activities.
    As discussed elsewhere in this preamble, a primary goal of this 
proposed rule is to promote high quality child care to support 
children's learning and development. Since comprehensive CCDF 
regulations were last issued in 1998, policymakers and administrators 
have increasingly focused on promoting school-readiness and positive 
child outcomes through systemic efforts to improve the quality of child 
care. We want to ensure that Indian children and Tribes benefit from 
these quality improvement efforts. Therefore, we plan to require that 
all Tribes meet the 4

[[Page 29485]]

percent quality requirement, which already applies to larger Tribes, 
States, and Territories under the existing statute and regulation. 
Approximately 50 Tribal Lead Agencies currently receive over $500,000 
and are therefore already subject to the 4 percent quality requirement. 
This rule proposes to require that the remaining Tribes (over 200 
Tribal Lead Agencies) meet the 4 percent quality requirement as well.
    Since the quality requirement is applied as a percentage of the 
Tribe's CCDF expenditures, the amount required will be relatively 
small, and therefore not burdensome, for Tribes receiving smaller CCDF 
grant awards. There are a wide range of quality improvement activities 
that Tribes have the flexibility to implement, and the scope of these 
efforts can be adjusted based on the resources available so that even 
smaller Tribal Lead Agencies can effectively promote the quality of 
child care. We will provide technical assistance to help Tribes 
identify current activities that may count towards meeting the 4 
percent quality requirement, as well as appropriate new opportunities 
to spend at least 4 percent on quality.
    The proposed revisions to Sec.  98.51 (Activities to Improve the 
Quality of Child Care), discussed earlier in this preamble, provide a 
systemic framework for organizing, guiding, and measuring progress of 
quality improvement activities. We recognize that this systemic 
framework may be more relevant for States, than for many Tribes, since 
the framework is based on the innovative work occurring in States 
related to quality improvement, such as the development of a QRIS. Such 
large-scale, comprehensive systemic initiatives may not always be 
appropriate for Tribes, given the unique circumstances of tribal 
communities. However, Tribes may implement selected components of the 
quality framework at Sec.  98.51--such as training for child care 
providers or grants to improve health and safety.
    While proposed revisions to Sec.  98.51 lay out a new quality 
vision and framework, the revisions in no way restrict Tribes' ability 
to spend CCDF quality dollars on a wide range of quality improvement 
activities. Under existing Sec.  98.51(a)(1), Tribes continue to have 
the flexibility to use quality dollars for activities that include, but 
are not limited to: activities designed to provide comprehensive 
consumer education to parents and the public; activities that increase 
parental choice; and activities designed to improve the quality and 
availability of child care. As is currently the case, these activities 
could include: resource and referral activities, consumer education, 
grants or loans to assist providers, training and technical assistance 
for providers, improving salaries and compensation of practitioners, 
monitoring or enforcement of health and safety standards, and other 
activities to improve the quality of child care. While Tribes have 
broad flexibility, to the degree possible Tribes should plan 
strategically and systemically when implementing their quality 
initiatives in order to maximize the effectiveness of those efforts.
    In addition, we encourage strong Tribal-State partnerships that 
promote Tribal participation in States' systemic initiatives, as well 
as State support for Tribal initiatives. For example, Tribes and States 
can work together to ensure that quality initiatives in the State are 
culturally relevant and appropriate for Tribes, and to encourage Tribal 
child care providers to participate in State initiatives such as QRIS 
and professional development systems. Under existing Sec.  98.82(a), 
Tribes must coordinate to the maximum extent feasible with the State 
CCDF Lead Agencies. At the same time, Sec.  98.12(c) requires State 
CCDF Lead Agencies to coordinate, to the maximum extent feasible, with 
any Indian Tribes in the State receiving CCDF funds.
    Certificate program. Under revised Sec.  98.83(f) in the proposed 
rule, Tribes receiving smaller CCDF grants would continue to be exempt 
from operating a certificate program. We recognize that small Tribal 
grantees may not have sufficient resources or infrastructure to 
effectively operate a certificate program. In addition, many smaller 
Tribes are located in less-populated, rural communities that frequently 
lack the well-developed child care market and supply of providers that 
is necessary for a robust certificate program.
    The dollar threshold for determining which Tribes are exempt from 
operating a certificate program is established by the Secretary. The 
threshold is not included in regulation, and therefore revising the 
threshold does not require a regulatory change. However, we would like 
to inform Tribes of our intent to update the threshold--which has been 
set at $500,000 since 1998. We are planning to increase the threshold 
to $700,000 starting with grants awarded in FY 2015. This change will 
recalibrate the threshold to a level that is comparable to the original 
threshold, after adjusting for inflation. It will expand the number of 
Tribes that are exempt from operating a certificate program, thereby 
ensuring that only Tribes of sufficient size are required to meet the 
certificate requirement. With this change, Tribal Lead Agencies with 
total CCDF allocations less than $700,000 in a fiscal year will be 
exempt from the requirement to operate a certificate program. Tribal 
Lead Agencies with allocations equal to or greater than $700,000 will 
be required to operate a certificate program.
    Base amount. Similarly, although a regulatory change is not 
required, we are planning to update the base amount of funding that 
each Tribal Lead Agency receives as part of its Discretionary Fund 
award per the current Sec.  98.61(c)(1)(i). For grants awarded starting 
in FY 2015, we are planning to increase the base amount from $20,000 to 
$30,000 in order to account for inflation that has eroded the value of 
the base amount since it was originally established in 1998. As 
referenced at the existing Sec.  98.83(e), the base amount of any 
tribal grant is not subject to the administrative costs limitation at 
Sec.  98.83(g) or the quality expenditure requirement at Sec.  
98.51(a). The base amount for each Tribal grant may be used for any 
activity consistent with the purposes of CCDF, including the 
administrative costs of implementing a child care program.

Subpart J--Monitoring, Non-Compliance, and Complaints

    We propose no changes at Subpart J.

Subpart K--Error Rate Reporting

    On September 5, 2007, ACF published a final rule that added subpart 
K to the CCDF regulations. This subpart, which was effective October 1, 
2007, established requirements for the reporting of error rates in the 
expenditure of CCDF grant funds by the 50 States, the District of 
Columbia and Puerto Rico. The error reports were designed to implement 
provisions of the Improper Payments Information Act of 2002 (IPIA; Pub. 
L. 107-300). In July 2010, the President signed into law the Improper 
Payments Elimination and Recovery Act (IPERA) (Pub. L. 111-204) which 
amended the IPIA of 2002 and provided a renewed focus on government-
wide efforts to control improper payments. In recent years, ACF has 
provided technical assistance and guidance to CCDF Lead Agencies to 
assist their efforts in preventing and controlling improper payments. 
These program integrity efforts help ensure that limited program 
dollars are going to low-income eligible families for which assistance 
is intended.
    This proposed rule retains the error reporting requirements at 
subpart K, but proposes two changes which are discussed below. In 
addition to the

[[Page 29486]]

regulatory requirements at subpart K, details regarding the error rate 
reporting requirements are contained in forms and instructions that are 
established through the Office of Management and Budget's (OMB) 
information collection process. As part of the renewal process for 
these forms and instructions, ACF recently revised the methodology in 
the forms and instructions to measure improper payments rather than 
improper authorizations for payment recognizing that an improper 
authorization does not always lead to an improper payment.
Error Rate Reports and Content of Error Rate Reports (Sections 98.100 
and 98.102)
    Estimated annual amount of improper payments. As provided below, in 
this proposed rule, we propose to delete existing Sec.  98.102(a)(5), 
thereby eliminating one of the data elements currently required as part 
of the error rate report submitted by Lead Agencies. With this change, 
Lead Agencies would no longer be required to submit the estimated 
annual amount of improper payments. We propose a corresponding deletion 
at Sec.  98.100(b), which also describes the content of the error 
reports.
    It is no longer necessary to require Lead Agencies to report the 
estimated annual amount of improper payments. ACF can use other 
existing sources of data (i.e., CCDF outlay data) along with the 
percentage of improper payments reported by Lead Agencies for the 
representative samples, in order to estimate the annual amount of 
improper payments for the program as a whole. The resulting standard 
methodology will eliminate inconsistencies resulting from separate Lead 
Agency estimates. This proposed change will also reduce the reporting 
burden currently imposed on the 50 States, DC, and Puerto Rico. A 
number of Lead Agencies have experienced challenges in reporting this 
information in the past. ACF plans to revise the error rate forms and 
instructions, through the information collection approval process, to 
eliminate this data element once the final rule is published.
    Corrective action plan. We propose to add paragraph Sec.  98.102(c) 
to require that any Lead Agency with an improper payment rate that 
exceeds a threshold established by the Secretary must submit a 
comprehensive corrective action plan, as well as subsequent reports 
describing progress in implementing the plan. This is a conforming 
change to match new requirements for corrective action plans that were 
contained in the recent revisions to the forms and instructions. The 
corrective action plan must be submitted within 60-days of the deadline 
for submission of the Lead Agency's standard error rate report required 
by Sec.  98.102(c). The corrective action plan must include: 
identification of a senior accountable official, milestones that 
clearly identify actions to be taken to reduce improper payments and 
the individual responsible for completing each action, a timeline for 
completing each action within one year of ACF approval of the plan and 
for reducing improper payments below the threshold established by the 
Secretary, and targets for future improper payment rates. Subsequent 
progress reports must be submitted as requested by the Assistant 
Secretary. Failure to carry out actions described in the approved 
corrective action plan will be grounds for a penalty or sanction under 
Sec.  98.92.
    This proposed new requirement will strengthen CCDF program 
integrity and accountability. Existing CCDF regulations at Sec.  
98.102(a)(6) and (8) currently require all 50 States, DC and Puerto 
Rico to report error rate targets for the next reporting cycle and to 
describe actions that will be taken to correct causes of improper 
payments. However, the information reported by Lead Agencies sometimes 
lacks detail or specificity, is only reported on a three-year cycle, 
and does not include status updates about the Lead Agency's progress in 
implementing corrective action. More specific and timely requirements 
are necessary for Lead Agencies with high improper payment rates. 
Therefore, we propose that any Lead Agency exceeding a threshold of 
improper payments be required to submit a formal, comprehensive 
corrective action plan with a detailed description and timeline of 
action steps of how it will meet targets for improvement. The 
corrective action plan should also address any relevant findings from 
annual audits required by existing regulation at Sec.  98.65(a), OMB 
Circular A-133, and the Single Audit Act. The Lead Agency would also be 
required to submit subsequent reports, on at least an annual basis, 
describing progress in implementing corrective action. These new 
requirements will ensure that Lead Agencies engage in a strategic and 
thoughtful planning process for reducing improper payments, take action 
in a timely fashion, and provide information on action steps that is 
transparent and available to the public.
    The proposed rule indicates that the improper payment threshold, 
which triggers the requirement for a corrective action plan, will be 
established by the Secretary. Although the proposed rule provides 
flexibility to adjust the threshold in the future, the initial 
threshold will be an improper payment rate of 10 percent or higher. In 
other words, if a Lead Agency indicates that its improper payment rate 
reported in accordance with Sec.  98.102(a)(3) equals or exceeds 10 
percent, the Lead Agency will be subject to corrective action under 
proposed Sec.  98.102(b). This 10 percent threshold is consistent with 
the IPERA which indicates that an improper payment rate of less than 10 
percent for a Federal program is necessary for compliance. Under IPERA, 
ACF must submit a corrective action plan if the national improper 
payment rate for CCDF exceeds 10 percent. Since CCDF is administered by 
State and Territory Lead Agencies and the error rate review process is 
executed by States, the only effective way for ACF to achieve and 
maintain an improper payment rate below the 10 percent threshold is to 
hold Lead Agencies accountable.

V. Paperwork Reduction Act

    A number of sections in this proposed rule refer to collections of 
information. These collections of information are subject to review by 
the Office of Management and Budget (OMB) under the Paperwork Reduction 
Act of 1995 (the PRA) (44 U.S.C. 3501-3520). In several instances, the 
collections of information for the relevant sections of this proposed 
rule have been approved previously under a series of OMB control 
numbers as indicated in the following table. The proposed rule does not 
modify these currently-approved collections.

----------------------------------------------------------------------------------------------------------------
                                  Relevant section in    OMB control
        CCDF title/code            the proposed rule       number                   Expiration date
----------------------------------------------------------------------------------------------------------------
ACF-700 (CCDF Annual Report for  Sec.   98.71........       0980-0241  12/31/2013
 Tribal Lead Agencies).
ACF-800 (Annual Aggregate Data   Sec.   98.71........       0970-0150  06/30/2015
 Reporting).
ACF-801 (Monthly Case-Level      Sec.   98.71........       0970-0167  04/30/2015
 Data Reporting).

[[Page 29487]]

 
ACF-696 (Financial Reporting-    Sec.   98.65........       0970-0163  05/31/2016 (renewal is under review at
 States).                                                               OMB)
ACF-696-T (Financial Reporting-  Sec.   98.65........       0970-0195  05/31/2016 (renewal is under review at
 Tribal Organizations).                                                 OMB)
ACF-403, ACF-404, ACF-405 (CCDF  Sec.  Sec.   98.100        0970-0323  09/30/2015
 Error Rate Reporting).           and 98.102.
CCDF-ACF -PI-2013-01 (Tribal     Sec.   98.84........       0970-0160  03/31/2016
 Application for Construction
 Funds).
----------------------------------------------------------------------------------------------------------------

    In other instances, the proposed rule seeks to modify several 
currently-approved information collections. HHS will publish Federal 
Register notices soliciting public comment on specific revisions to 
those information collections and will make available the proposed 
forms and instructions for review. To assist the public in reviewing 
the relevant provisions of the proposed rule, below is a summary of the 
status of these collections.
    ACF-118 CCDF State Plan. The rule, at 45 CFR Sec. Sec.  98.14, 
98.16, 98.18, and 98.43, proposes to modify this existing information 
collection approved under OMB control number 0970-0114. The proposed 
rule adds several new requirements which States and Territories will be 
required to report in the biennial CCDF Plans, including provisions 
related to health and safety requirements, consumer education, and 
eligibility policies. As described earlier in the preamble, provisions 
included in a Final Rule will be incorporated into the review of FY 
2016-2017 CCDF Plans that become effective October 1, 2015. HHS plans 
to publish separate Federal Register notices seeking public comment on 
this proposed information collection and the annual burden estimate.
    ACF-118-A CCDF Tribal Plan. The rule, at 45 CFR 98.14, 98.16, 
98.18, 98.43, 98.81, and 98.83, proposes to modify this existing 
information collection approved under OMB control number 0970-0198. The 
proposed rule adds several new requirements that Tribes and Tribal 
organizations will be required to report in the biennial CCDF Plans, 
including provisions related to health and safety requirements, 
consumer education, and eligibility policies. Provisions included in a 
Final Rule will be incorporated into the review of FY 2016-2017 CCDF 
Plans that become effective October 1, 2015. HHS plans to publish 
separate Federal Register notices seeking public comment on this 
proposed information collection and the annual burden estimate.
    The table below provides annual burden estimates for existing 
information collections that are modified by this proposed rule. These 
estimates reflect the total burden of each information collection, 
including the changes made by this proposed rule.

                                             Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                   Instrument                        Number of     responses per   burden hours    Total  burden
                                                    respondents     respondent     per response        hours
----------------------------------------------------------------------------------------------------------------
ACF-118 CCDF State Plan.........................              56             0.5           163.5           4,578
ACF-118-A CCDF Tribal Plan......................             257             0.5             121          15,549
----------------------------------------------------------------------------------------------------------------

    Finally, the proposed rule contains two new information collection 
requirements, and the table below provides an annual burden hour 
estimate for these collections. First, Sec.  98.33 requires Lead 
Agencies to post provider-specific information to a user-friendly, easy 
to understand Web site as part of its consumer education activities 
(described earlier in this preamble). This Web site will provide 
information to parents about the degree to which specific child care 
providers meet State health and safety requirements and quality 
indicators. This requirement applies to the 50 States, District of 
Columbia, and five Territories that receive CCDF grants. States will 
have significant flexibility regarding how to implement this provision 
and each State will determine its own tailored approach based on 
existing practices, available resources, and other circumstances.
    In estimating the burden estimate, we considered the fact that many 
States already have existing Web sites. Even in States without an 
existing Web site, much of the information will be readily available 
from licensing agencies, quality rating and improvement systems, and 
other sources. The burden hour estimate below reflects an average 
estimate, recognizing that there will be significant State variation. 
The estimate is annualized to encompass initial data entry as well as 
updates to the Web site over time. The total estimated dollar cost for 
all Lead Agencies is $2,000,000.
    Second, Sec.  98.41 requires Lead Agencies to establish procedures 
that require child care providers that care for children receiving CCDF 
subsidies to report to a designated State, territorial, or tribal 
entity any serious injuries or deaths of children occurring in child 
care. This is necessary for States to be able to examine the 
circumstances leading to serious injury or death of children in child 
care, and, if necessary, make adjustments to health and safety 
requirements and enforcement of those requirements in order to prevent 
any future tragedies
    The requirement would potentially apply to the approximately 
500,000 child care providers who serve children receiving CCDF 
subsidies, but only a portion of these providers would need to report, 
since our burden estimate assumes that no report is required in the 
absence of serious injury or death. Using currently available aggregate 
data on child deaths and injuries, we estimated the average number of 
provider respondents would be approximately 10,000 annually.
    In estimating the burden, we considered that more than half the 
States already have reporting requirements in place as part of their 
licensing procedures for child care providers. States, Territories and 
Tribes have flexibility in specifying the

[[Page 29488]]

particular reporting requirements, such as timeframes and which serious 
injuries must be reported. While the reporting procedures will vary by 
jurisdiction, we anticipate that most providers will need to complete a 
form or otherwise provide written information.

                                             Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
            Instrument                 Number of respondents       responses per   burden  hours   Total burden
                                                                    Respondent     per  response       hours
----------------------------------------------------------------------------------------------------------------
Consumer Education Web site......  56 States/Territories........               1             260          14,560
Reporting of Serious Injuries and  10,000 child care providers..               1               1          10,000
 Death.
----------------------------------------------------------------------------------------------------------------

    We will consider public comments regarding information collection 
in the following areas: (1) Evaluating whether the proposed collection 
is necessary for the proper performance of the CCDF program, including 
whether the information will have practical utility; (2) evaluating the 
accuracy of the estimated burden of the proposed collection; (3) 
enhancing the quality, usefulness, and clarity of the information to be 
collected; and (4) minimizing the burden of the collection of 
information, including the use of appropriate technology.
    Written comments regarding information collection should be sent to 
ACF, and to the Office of Management and Budget, Office of Information 
and Regulatory Affairs (Attention: Desk Officer for the Administration 
for Children and Families) by email to: [email protected], 
or by fax to (202) 395-7285.

VI. Regulatory Flexibility Act

    The Secretary certifies that, under 5 U.S.C. 605(b), as enacted by 
the Regulatory Flexibility Act (Pub. L. 96-354), this proposed rule 
will not result in a significant economic impact on a substantial 
number of small entities. This proposed rule is intended to ensure 
accountability for Federal funds consistent with the purposes of the 
CCDBG Act and regulations and is not duplicative of other requirements. 
The primary impact of this proposed rule is on State, Tribe, and 
Territorial grantees since the proposed changes articulate a set of 
expectations for how grantees are to satisfy certain requirements in 
the CCDBG Act. To a lesser extent the proposed rule could affect 
individuals and small businesses, particularly family child care 
providers, however the number of entities affected should be limited 
and the economic impact has not been determined to be significant. We 
have proposed changes to better balance the dual purposes of the 
program by adding provisions which would ensure that healthy, 
successful child development is a consideration when establishing 
policies for the CCDF program (e.g., preserving continuity in child 
care arrangements), and to ensure that child care providers caring for 
children receiving subsidies meet basic standards for ensuring the 
safety of children and have minimum training in health and safety. 
These include requirements for comprehensive criminal background checks 
and health and safety training in areas such as first-aid and CPR that 
may impact child care providers caring for children receiving CCDF 
subsidies. Some child care providers, particularly family child care 
providers that do not already meet these requirements, may incur some 
burden. However, we do not believe these new requirements will have a 
significant economic impact on a substantial number of small entities 
since we expect Lead Agencies to use CCDF funds to assist child care 
providers in meeting the requirements. For example, as indicated at 
proposed Sec.  98.51(a)(2)(i), Lead Agencies may use quality funds to 
support activities that ensure the health and safety of children.

VII. Regulatory Impact Analysis

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This proposed rule meets the criteria for a significant 
regulatory action under E.O. 12866 and thus has been reviewed by OMB. 
For the reasons set forth below, ACF does not believe the impact of 
this proposed regulatory action would be economically significant and 
that the total cost would fall well below the $100 million threshold.
    Need for the proposed rule. The impetus for this proposed rule is 
based on the need to reform and update the CCDF program, which has not 
undergone a significant regulatory review or revision in more than 15 
years. Since then, there has been a growing body of research on early 
childhood development underscoring the importance of children's 
earliest experiences and impacts on their later success. Given that 
CCDF is a program that provides Federal financial assistance to pay for 
child care for low-income children, it is absolutely essential that 
policy and program priorities be informed by this research. It is no 
longer sufficient to consider the quality of care arrangements for 
children receiving CCDF assistance as an afterthought to the function 
of the program as a work support for low-income parents. The CCDF 
program must necessarily be concerned with ensuring that child care 
providers caring for children meet minimum requirements for maintaining 
healthy and safe environments and work to improve the quality of those 
environments to the greatest extent possible. Many States, Territories, 
and Tribes administering CCDF have long since recognized this dual-
purpose framework and have used their flexibility within the block 
grant program to adopt practices and policies that reflect these goals. 
However, implementation of the CCDF program across the country varies 
greatly. Lack of substantive Federal regulatory guidance in areas such 
as health and safety, quality, and eligibility policy jeopardizes 
accountability in the sense that all families receiving CCDF 
assistance, regardless of what State, Territory or Tribe they may 
reside in, should have basic assurances about the quality of services 
they receive. This proposed rule seeks to establish concrete 
expectations in these areas to better balance the dual purposes of the 
CCDF program and fully leverage its two-generational impact.

[[Page 29489]]

    Benefits of the proposed rule. CCDF provides financial assistance 
to make child care more affordable so that parents can work or attend 
job training or educational programs. As stated throughout this 
proposed rule, we envision the program as also providing children in 
those families access to high quality care to ensure their healthy, 
safe development. In FY 2011, the CCDF program provided assistance to 
nearly 1.6 million children in nearly 1 million families. In addition, 
approximately 500,000 child care providers provided services to 
children receiving CCDF subsidies. The changes in this proposed rule 
are almost wholly directed towards improving the lives of the children 
and families we serve and improving health and safety and quality of 
child care providers caring for those children. In short, the changes 
in this proposed rule have three primary beneficiaries--low-income 
working parents, low-income children, and child care providers serving 
these families.
    We have included several changes in this proposed rule that we 
believe will improve the continuity of services and stability of child 
care arrangements for families receiving CCDF. The benefits of these 
changes are not easily quantified, but can have a profound effect on 
the lives of the low-income parents and children we serve. For example, 
we anticipate that changes in the proposed rule will mean that a parent 
can retain their subsidy after experiencing job loss in order to search 
for new employment. In some States, parents enter into downward spirals 
when they lose their jobs and potentially lose their child care, 
jeopardizing the stability of care arrangements and stifling any 
positive impacts the arrangements may have had on their children's 
development. In other States, when parents lose their jobs, they 
maintain their subsidies and child care while they search for new jobs, 
leading to less stress on their families and preserving their 
children's relationships with their caregivers. We know that about half 
of the States already allow for a certain period of job search for 
parents that lose employment. Therefore, the benefits of this 
particular policy change will primarily be directed towards the CCDF 
families and children in the remaining States that have yet to adopt 
this practice.
    Several of the changes in this proposed rule benefit child care 
providers and the children they serve. To the extent that the proposed 
rule causes a child care provider to receive training in basic areas of 
health and safety where they might not otherwise have been compelled 
to, this proposed rule will have spillover effects that reach not only 
the CCDF child in that providers' care, but all the children cared for 
by that provider. We believe the new health and safety requirements are 
a benefit to public health and safety because they are aimed at 
practices that ultimately are intended to reduce the incidence of 
injury and death for children in child care. For example, if a child 
care provider receives certification in CPR or is knowledgeable in 
poison prevention and safety then they are in a better position to 
respond to or prevent an emergency if a child is in danger. If a child 
care provider is trained in SIDS prevention then children in their care 
are less likely to be at risk. We believe that improving accountability 
for Federal dollars means paying for safe, healthy child care and 
ensuring children are cared for by providers with a minimum of health 
and safety training. The requirement for child care providers to have a 
core body of knowledge will also place more providers on a career 
pathway, increasing their opportunities to develop professional 
knowledge necessary for advancement.
    Finally, changes in this proposed rule related to quality 
improvement and consumer education activities also will benefit not 
only CCDF families, but also the general public. For example, if a 
child care provider receives a grant funded by CCDF to implement a new 
curriculum as part of a quality improvement activity, then that 
investment will benefit all the children in that provider's care. In 
addition, one of the changes in this proposed rule would require States 
to post provider-specific information on a Web site with information 
about health and safety and licensing or regulatory requirements met by 
the provider, including the history of licensing violations and date of 
last inspection. We believe making this information readily available 
and transparent to parents will promote more informed child care 
choices. In all of these ways we believe that changes in this proposed 
rule will not only directly benefit CCDF parents, children and 
providers, but also have a valuable public benefit with the possibility 
of impacting many families far beyond the immediate reach of the CCDF 
program.
    Costs of the proposed rule. At the beginning of this proposed rule, 
we explain that one of the reasons for revising the CCDF regulations is 
to better reflect State and local practices to improve the quality of 
child care and the tremendous strides that have been made in 
implementation of evidence-based policies. As such, in many of the 
areas where changes are proposed there are a significant number of 
States and Territories that have already implemented these policies, 
and we have been purposeful throughout to note these numbers. The cost 
of implementing the changes in this proposed rule will vary depending 
on a State's specific situation. We conducted an analysis of State and 
Territory responses in the FY 2012-2013 CCDF Plans covering five of the 
key policy areas where we anticipate there could be cost implications. 
[Note: The analysis of CCDF Plans throughout this proposed rule 
includes a total of 56 State and Territorial CCDF Plans, including 
American Samoa, Guam, Northern Marianas Islands, Puerto Rico, and the 
Virgin Islands.]
    Parental complaint hotline. The proposed rule includes a new 
requirement at Sec.  98.32(a) that Lead Agencies must establish or 
designate a hotline for parents to submit complaints about child care 
providers. In the FY 2012-2013 CCDF plans, 10 States reported having a 
toll-free hotline for parents to submit child care-related complaints. 
An additional 16 States list public toll-free numbers on their Web 
sites for parents to contact the child care office. Establishing or 
designating a hotline may lead to additional costs for States, such as 
those associated with establishing a new hotline system or staff time 
used to answer the hotline. However, Lead Agencies have flexibility in 
implementing the proposed hotline and may work with other agencies in 
the State to adapt existing hotlines, such as those used to report 
child abuse and neglect.
    Consumer Education. The proposed rule includes two new requirements 
that may increase costs as part of the statutory requirement that Lead 
Agencies collect and disseminate consumer education information about 
child care. The first of these requirements is that Lead Agencies must 
post provider-specific information on a Web site. The second is that 
Lead Agencies must implement a transparent system of quality 
indicators.
    We propose amending paragraph (a) of Sec.  98.33 to require Lead 
Agencies to post provider-specific information to a user-friendly, easy 
to understand Web site as part of its consumer education activities. 
The proposed change would require Lead Agencies to list available child 
care providers on a Web site with provider-specific information about 
any health and safety, licensing or regulatory requirements met by the 
provider, any history of violations of these requirements, and any 
compliance actions taken, as well as information about the quality of 
the provider, if available, as identified through a

[[Page 29490]]

transparent system of quality indicators. The Web site must also 
include a description of health and safety, licensing or regulatory 
requirements for child care providers within the Lead Agency's 
jurisdiction and processes for ensuring providers meet those 
requirements, including the background check process for providers and 
any other individuals in the child care setting, and offenses that may 
preclude a provider from serving children. Lead Agencies have 
flexibility to determine how to improve transparency to the public 
regarding child care provider licensing violations and compliance 
actions taken. Making provider compliance information widely available 
on a dedicated Web site allows parents to make informed choices, and 
for purposes of the CCDF subsidy program, is key to ensuring that 
parental choice is meaningful.
    Creating and maintaining a Web site with provider-specific 
information may come with new costs for Lead Agencies. However, as the 
majority of States already have these Web sites in place, we do not 
expect this requirement to create a significant financial burden. 
According to a preliminary analysis of the FY 2012-2013 CCDF Plans, at 
least 30 States and Territories make all licensing information 
available to parents and the public online. Ten States and Territories 
reported making at least some licensing information available on a 
public Web site or other online tool. Therefore, this proposed change 
is consistent with current practices in many States and will not create 
new costs for them.
    At new paragraph Sec.  98.33(b) we propose to require Lead Agencies 
to collect and disseminate consumer education through a transparent 
system of quality indicators. The system must include provider-specific 
information about the quality of child care providers; (2) describe the 
standards used to assess the quality of child care; (3) take into 
account teaching staff qualifications, learning environment, curricula 
and activities; and (4) disseminate provider-specific quality 
information through a Web site or other alternate mechanism. Each Lead 
Agency has the flexibility to develop a system of quality indicators 
based on its specific needs. The costs associated with implementing a 
transparent system of quality indicators will depend on what consumer 
education activities the Lead Agency currently has in place. According 
to the FY 2012-2013 CCDF Plans, more than half the States have 
implemented quality rating and improvement systems (QRIS) and 
additional States have a QRIS in one or more localities that has not 
been implemented statewide. Therefore, additional costs would be 
associated with expanding the QRIS or creating a means of disseminating 
quality information to parents and the public in an easy-to-understand 
manner.
    Background Checks. We propose to amend Sec.  98.41(a)(2)(i) of the 
regulations to include comprehensive background checks on child care 
providers serving children receiving CCDF subsidies (excepting relative 
and in-home providers at the State's discretion), including use of 
fingerprints for State checks of criminal history records, use of 
fingerprints for checks of FBI criminal history records, clearance 
through the child abuse and neglect registry, if available, and 
clearance through the sex offender registry. According to the FY 2012-
2013 CCDF Plans, all States and Territories have some infrastructure in 
place to conduct criminal background checks on child care providers. 
However, States vary in the extent to which they require different 
types of providers to receive background checks and many do not require 
the use of fingerprints for background checks.
    For example, 53 States and Territories already require that child 
care center staff undergo at least one type of criminal background 
check, however only 40 States and Territories conduct FBI checks that 
include fingerprints. Similarly, 50 States and Territories require 
family child care providers to have a criminal background check and 36 
require an FBI background check that includes fingerprints. The 
majority of States and Territories already have requirements in place 
for checks of child abuse and neglect registries and over half have a 
sex offender registry requirement in place. While some States may have 
to revise their background check policies or expand the requirement to 
be inclusive of additional providers, all States are already in partial 
compliance with the proposed provision.
    Additionally, the Lead Agency can work with other State or local 
organizations that may already have the necessary equipment and 
resources to carry out the comprehensive background checks as a way of 
reducing administrative burden and associated costs. Many State 
agencies have already purchased Livescan technology that significantly 
decreases delays and administrative burdens associated with 
fingerprint-based checks. The cost of conducting criminal background 
checks will vary from State to State, but an FBI background check 
should only cost between $18 and $24. States currently have several 
methods for allocating the expense of background checks. Lead Agencies 
may use CCDF funds to pay for comprehensive background checks, and can 
potentially obtain funds from other Federal sources such as the 
National Criminal History Improvement Program (NCHIP) and the Adam 
Walsh Implementation Grants. Lead Agencies may also require that 
providers assume responsibility for background check fees as a cost of 
doing business. In some States, the child care facility pays for staff 
members' background checks. Almost half of the States currently require 
individuals to pay for their own background checks. Since the cost of 
the background check requirement is not borne solely by the State, the 
cost of implementing this provision will be diffused throughout the 
field. While this may represent an additional burden for some child 
care providers, current practice indicates that background check 
expenses are already considered a reasonable cost of doing business 
within the field of child care. In addition, States can implement 
systems to facilitate making background check verifications portable, 
reducing the cost to providers in an industry with traditionally high 
turnover.
    Pre-inspections for compliance with fire, health and building 
codes. The proposed rule adds a new requirement at Sec.  
98.41(a)(2)(ii) requiring States to ensure providers are in compliance 
with State and local applicable fire, health, and building codes, prior 
to serving children receiving CCDF subsidies. According to the 2011 
Child Care Licensing Study (prepared by the National Center on Child 
Care Quality Improvement and the National Association of Regulatory 
Administrators), 39 States require fire, health, and building code 
(also called environmental) inspections for child care centers. Many 
States also conduct separate licensing inspections prior to issuing a 
license to a child care center. For family child care providers, 12 
states require fire, health, and building code inspections. Further, of 
the 42 states that license family child care homes, 37 conduct an 
inspection before issuing a license to a family child care home. Since 
fire, health, and building codes vary across States, the financial 
impact of this new requirement will also vary. States already have 
systems in place to conduct these inspections, and enforcement of the 
applicable codes may already be happening at the local level. Further, 
we are seeking public comment on an appropriate phase-in and timeframe 
for this provision, as well

[[Page 29491]]

as the requirement for comprehensive criminal background checks.
    Health and safety training. We propose adding a list of minimum 
health and safety pre-service or orientation training for providers 
serving children receiving CCDF assistance. A preliminary analysis of 
the 2012-23 CCDF Plans shows that many States have a number of these 
trainings already in place for their licensed providers. Thirty-eight 
States already require pre-service CPR training for child care centers 
and 43 require it for family child care providers. Forty States already 
require pre-service first-aid training for centers and 43 require it 
for family child care providers. Most of the other trainings are 
offered to licensed center and family child care providers in 
approximately half of the States. However, since this only captures the 
current training data for licensed providers, the new requirements will 
most likely require an expansion of the trainings offered to license-
exempt CCDF providers. This is important because many child care 
providers serving children receiving CCDF subsidies either are not 
required to be licensed or have been exempted from licensing 
requirements by States. Approximately 10 percent of CCDF children are 
cared for by non-relatives in unregulated centers and homes. In these 
cases, CCDF health and safety requirements are the primary, and in most 
cases, the only safeguard in place to protect children in this type of 
care.
    We recognize that it may not be possible for child care providers 
serving subsidized children to meet all the listed minimum health and 
safety training requirements prior to the first day of service. 
Therefore, we are allowing Lead Agencies to require the training prior 
to the provider's start of service (i.e., pre-service) or during the 
initial service period (i.e., orientation). We are leaving it to the 
Lead Agency's discretion to specifically define ``pre-service'' and 
``orientation,'' which may include stipulations that the training be 
completed within the first weeks or month of providing child care 
services to children receiving CCDF assistance. Lead Agencies should 
also offer a grace period to providers who are already serving children 
receiving CCDF assistance to minimize disruptions to child care 
arrangements for children currently enrolled with a provider and 
receiving subsidies. Additionally, many of the areas included in the 
proposed new requirements are readily available through on-line 
trainings, which should minimize burden on Lead Agencies.
    Monitoring. We propose to amend 98.41(d) to require that Lead 
Agencies include unannounced on-site monitoring as part of their 
procedures to ensure providers serving children receiving CCDF 
assistance meet health and safety requirements. All providers serving 
children receiving CCDF subsidies must be subject to unannounced on-
site monitoring. Further, Lead Agencies may not solely rely on self-
certification of compliance with health and safety requirements and 
must include unannounced visits. The proposed change would allow Lead 
Agencies to retain the flexibility to determine the frequency and 
components of unannounced on-site monitoring visits. However, we are 
seeking comment on the recommendation that States conduct an initial 
on-site monitoring visit and at least one annual unannounced visit.
    There is currently significant variation across States regarding 
the nature and intensity of on-site monitoring. According to the FY 
2012-2013 CCDF Plans, States and Territories report using both 
announced and unannounced routine visits as a way to enforce licensing 
requirements with different policies applicable to child care centers 
versus family child care homes. Almost all Lead Agencies have an on-
site monitoring component in place for licensed center and family child 
care providers, but 28 do not monitor unlicensed providers. Therefore, 
about half of the Lead Agencies will need to expand their on-site 
monitoring practices to include unlicensed providers caring for 
children receiving CCDF subsidies.
    The new requirement may create additional costs for Lead Agencies 
because it could potentially expand the number of child care providers 
subject to unannounced on-site monitoring. These costs may include the 
need for additional monitoring staff or funding of contracts to carry 
out monitoring visits, new training for staff to ensure knowledge of 
new health and safety requirements, or additional tools and supplies 
necessary to carry out effective monitoring visits. However, because 
all States have an infrastructure for on-site monitoring visits through 
their licensing systems, we do not believe this requirement will create 
a significant financial burden for the majority of States. In FY 2011, 
there were approximately 500,000 providers caring for children 
receiving CCDF subsidies. Of these, approximately 180,000 were relative 
providers and approximately 39,000 in-home providers providing care in 
the child's home. The proposed rule allows Lead Agencies the option to 
exempt both relative and in-home providers from the health and safety 
and monitoring requirements. The remaining 205,000 child care providers 
must be subject to health and safety and monitoring requirements and 
about two-thirds of these providers are reported as licensed or 
regulated by the State and thus would potentially already be subject to 
monitoring. Therefore, we estimate approximately 90,000 providers (that 
are not relatives or in-home providers) caring for children receiving 
CCDF subsidies are currently unlicensed and would now be subject to 
monitoring. This number is potentially larger to the extent that States 
choose to apply monitoring and health and safety requirements to 
relative and in-home providers. This total is a national total and the 
distribution varies by State.

VIII. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a written statement before promulgating a 
rule that includes any Federal mandate that may result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year. If 
an agency must prepare a budgetary impact statement, section 205 
requires that it select the most cost-effective and least burdensome 
alternative that achieves the objectives of the rule consistent with 
the statutory requirements. Section 203 requires a plan for informing 
and advising any small government that may be significantly or uniquely 
impacted. The Department has determined that this proposed rule would 
not impose a mandate that will result in the expenditure by State, 
local, and Tribal governments, in the aggregate, or by the private 
sector, of more than $100 million in any one year.

IX. Congressional Review

    This regulation is not a major rule as defined in 5 U.S.C. Chapter 
8.

X. Executive Order 13132

    Executive Order 13132, Federalism, requires that Federal agencies 
consult with State and local government officials in the development of 
regulatory policies with federalism implications. This proposed rule 
will not have substantial direct effect on the States, on the 
relationship between the Federal Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. This proposed rule does not preempt State law. In large 
part, the changes included in the proposed rule are based upon 
practices

[[Page 29492]]

already implemented by many States. Therefore, in accordance with 
section 6 of Executive Order 13132, it is determined that this proposed 
rule does not have sufficient federalism implications to warrant the 
preparation of a federalism summary impact statement.

XI. Treasury and General Government Appropriations Act of 1999

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 (Pub. L.105-277) requires Federal agencies to issue a 
Family Policymaking Assessment for any rule that may affect family 
well-being. This proposed rule would not have any impact on the 
autonomy or integrity of the family as an institution. Accordingly, HHS 
has concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

List of Subjects in 45 CFR Part 98

    Child Care, Grant programs-social programs.

    For the reasons set forth in the preamble, we propose to amend part 
98 of 45 CFR as follows:

PART 98--CHILD CARE AND DEVELOPMENT FUND

0
1. The authority citation for part 98 continues to read:

    Authority: 42 U.S.C. 618, 9858, et seq.

0
2. Amend Sec.  98.1 by revising paragraph (b) to read as follows:


Sec.  98.1  Goals and purposes.

* * * * *
    (b) The purpose of the CCDF is to increase the availability, 
affordability, and quality of child care services. The program offers 
Federal funding to States, Territories, Indian Tribes, and tribal 
organizations in order to:
    (1) Provide low-income families with the financial resources to 
find and afford high quality child care for their children and serve 
children in safe, healthy, nurturing child care settings that are 
highly effective in promoting learning, child development, school 
readiness and success;
    (2) Enhance the quality and increase the supply of child care and 
before- and after-school care services for all families, including 
those who receive no direct assistance under the CCDF, to support 
children's learning, development, and success in school;
    (3) Provide parents with a broad range of options in addressing 
their child care needs by expanding high quality choices available to 
parents across a range of child care settings and providing parents 
with information about the quality of child care programs;
    (4) Minimize disruptions to children's development and learning by 
promoting continuity of care;
    (5) Ensure program integrity and accountability in the CCDF 
program;
    (6) Strengthen the role of the family and engage families in their 
children's development, education, and health;
    (7) Improve the quality of, and coordination among Federal, State, 
and local child care programs, before- and after-school programs, and 
early childhood development programs to support early learning, school 
readiness, youth development and academic success; and
    (8) Increase the availability of early childhood development and 
before- and after-school care services.
* * * * *
0
3. Amend Sec.  98.2 by revising the definition for Categories of care, 
the introductory text of paragraph (1) in the definition of Eligible 
child care provider, and the definition of Family child care provider 
and removing the definition of Group home child care provider.
    The revisions read as follows:


Sec.  98.2  Definitions.

* * * * *
    Categories of care means center-based child care, family child care 
and in-home care;
* * * * *
    Eligible child care provider means:
    (1) A center-based child care provider, a family child care 
provider, an in-home child care provider, or other provider of child 
care services for compensation that--
* * * * *
    Family child care provider means one or more individual(s) who 
provide child care services for fewer than 24 hours per day per child, 
as the sole caregiver(s), in a private residence other than the child's 
residence, unless care in excess of 24 hours is due to the nature of 
the parent(s)' work;
* * * * *
0
4. Amend Sec.  98.10 by revising paragraphs (d) and (e) and adding 
paragraph (f) to read as follows:


Sec.  98.10  Lead Agency responsibilities.

* * * * *
    (d) Hold at least one public hearing in accordance with Sec.  
98.14(c);
    (e) Coordinate CCDF services pursuant to Sec.  98.12; and
    (f) Implement practices and procedures to ensure program integrity 
and accountability pursuant to Sec.  98.68.
0
5. Amend Sec.  98.11 by adding a sentence to the end of paragraph 
(a)(3) to read as follows:


Sec.  98.11  Administration under contracts and agreements.

    (a) * * *
    (3) * * * The contents of the written agreement may vary based on 
the role the entity is asked to assume or the type of project 
undertaken, but must include, at a minimum, tasks to be performed, a 
schedule for completing tasks, a budget which itemizes categorical 
expenditures consistent with CCDF requirements at Sec.  98.65(h), and 
indicators or measures to assess performance.
* * * * *
0
6. Amend Sec.  98.14 by revising paragraphs (a)(1)(C) and adding 
paragraphs (a)(1)(E), (F), (G), (H), and (I), and (d) to read as 
follows:


Sec.  98.14  Plan process.

* * * * *
    (a)(1) * * *
    (C) Public education (including agencies responsible for pre-
kindergarten services, if applicable, and educational services provided 
under Part B and C of the Individuals with Disabilities Education Act 
(20 U.S.C. 1400));
* * * * *
    (E) Child care licensing;
    (F) Head Start collaboration;
    (G) State Advisory Council on Early Childhood Education and Care 
authorized by the Head Start Act (42 U.S.C. 9831 et seq.) (if 
applicable);
    (H) Statewide afterschool network or other coordinating entity for 
out-of-school time care (if applicable); and
    (I) Emergency management and response.
* * * * *
    (d) Make the Plan and any Plan amendments publicly available.
0
7. Amend Sec.  98.16 by
0
a. Redesignating paragraph (r) as paragraph (w), paragraphs (g) through 
(q) as (i) through (s), and paragraphs (b) through (f) as (c) through 
(g);
0
b. Adding new paragraphs (b) and (h);
0
c. Revising newly redesignated paragraphs (g)(6), (i)(1), (i)(5), (j), 
(k), (l),(n), (o), and (q); and
0
d. Adding new paragraphs (t), (u), and (v).
    The additions and revisions read as follows:


Sec.  98.16  Plan provisions.

* * * * *
    (b) A description of processes the Lead Agency will use to monitor 
administrative and implementation responsibilities undertaken by 
agencies other than the Lead Agency including

[[Page 29493]]

descriptions of written agreements, monitoring and auditing procedures, 
and indicators or measures to assess performance pursuant to Sec.  
98.11(a)(3);
* * * * *
    (g) * * *
    (6) Working (which must include some period of job search);
* * * * *
    (h) A description of policies to promote continuity of care for 
children and stability for families receiving services for which 
assistance is provided under this part, including:
    (1) Policies that take into account developmental needs of children 
when authorizing child care services pursuant to Sec.  98.20(d);
    (2) Timely eligibility determination and processing of 
applications; and
    (3) Policies that promote employment and income advancement for 
parents.
    (i) * * *
    (1) A description of such services and activities, including how 
the Lead Agency will address supply shortages through the use of grants 
or contracts. The description should identify any shortages in the 
supply of high quality child care providers, including for specific 
localities and populations, list the data sources used to identify 
shortages, and explain how grants or contracts for direct services will 
be used to address such shortages;
* * * * *
    (5) Any additional eligibility criteria, priority rules, 
definitions, and policies, including any requirements for families to 
report changes in circumstances that may impact eligibility, 
established pursuant to Sec.  98.20(b) and (c);
    (j) A description of the activities to provide comprehensive 
consumer education, which must include a transparent system of quality 
indicators, pursuant to Sec.  98.33(b), that provides parents with 
provider-specific information about the quality of child care providers 
in their communities; to increase parental choice; and to improve the 
quality and availability of child care, pursuant to Sec.  98.51;
    (k) A description of the sliding fee scale(s) (including any 
factors other than income and family size used in establishing the fee 
scale(s)) that provide(s) for cost sharing by the families that receive 
child care services for which assistance is provided under the CCDF and 
how co-payments are affordable for families, pursuant to Sec.  98.42. 
This shall also include a description of the criteria established by 
the Lead Agency, if any, for waiving contributions for families;
    (l) A description of the health and safety requirements, applicable 
to all providers of child care services for which assistance is 
provided under the CCDF, in effect pursuant to Sec.  98.41, which must 
include a description of unannounced, on-site monitoring and other 
enforcement procedures in effect to ensure that providers of child care 
services for which assistance is provided under the CCDF comply with 
all applicable health and safety requirements pursuant to Sec.  
98.41(d);
* * * * *
    (n) Payment rates and a summary of the facts, including a biennial 
valid local market price study or alternate approved methodology, 
relied upon to determine that the rates provided are sufficient to 
ensure equal access pursuant to Sec.  98.43, which must include a 
description of how the quality of providers of child care services for 
which assistance is provided under this part is taken into account when 
determining payment rates;
    (o) A detailed description of the hotline established or designated 
by the State for receiving parental complaints, of how the State 
maintains a record of substantiated parental complaints and how it 
makes information regarding those complaints available to the public on 
request, pursuant to Sec.  98.32;
* * * * *
    (q) A detailed description of licensing requirements applicable to 
child care services provided, any exemptions to those requirements and 
a rationale for such exemptions, and a description of how such 
licensing requirements are effectively enforced, pursuant to Sec.  
98.40;
* * * * *
    (t) A description of payment practices for child care services for 
which assistance is provided under this part, including timely 
reimbursement for services, how payment practices support providers' 
provision of high quality child care services, and practices to promote 
the participation of child care providers in the subsidy system;
    (u) A description of processes in place to investigate and recover 
fraudulent payments and to impose sanctions on clients or providers in 
response to fraud pursuant to Sec.  98.68(d);
    (v) An annual quality performance report by the States and 
Territories to the Secretary, which must be made publicly available, 
and include:
    (1) A description of progress related to meeting performance goals 
through activities to improve the quality of child care pursuant to 
Sec.  98.51(f); and
    (2) A report describing any changes to State regulations, 
enforcement mechanisms, or other State policies addressing health and 
safety based on an annual review and assessment of serious injuries or 
deaths of children occurring in child care (including both regulated 
and unregulated child care centers and family child care homes).
* * * * *
0
8. Amend Sec.  98.18 by designating paragraph (b) and paragraph (b)(1) 
and adding paragraph (b)(2) to read as follows:


Sec.  98.18  Approval and disapproval of Plans and Plan amendments.

* * * * *
    (b) * * *
    (2) Lead Agencies must provide advance, written notice to affected 
parties (i.e., parents and child care providers) of substantial changes 
in the program that adversely affect income eligibility, payment rates, 
and/or sliding fee scales.
* * * * *
0
9. Amend Sec.  98.20 by:
0
a. Revising paragraphs (a)(2), (a)(3)(ii) introductory text and 
(a)(3)(ii)(A);
0
b. Redesignating paragraph (b) as paragraph (c);
0
c. Adding a new paragraph (b); and
0
d. Adding paragraph (d)
    The revisions and additions read as follows:


Sec.  98.20  A child's eligibility for child care services.

    (a) * * *
    (2) Reside with a family whose income does not exceed 85 percent of 
the State's median income (SMI) for a family of the same size. The SMI 
used to determine the eligibility threshold level must be based on the 
most recent SMI data that is published by the Bureau of the Census; and
    (3) * * *
    (ii) Receive, or need to receive, protective services, which may 
include specific populations of vulnerable children as identified by 
the Lead Agency, and reside with a parent or parents (as defined in 
Sec.  98.2) other than the parent(s) described in paragraph (a)(3)(i) 
of this section.
    (A) At grantee option, the requirements in paragraph (a)(2) of this 
section and in Sec.  98.42 may be waived for families eligible for 
child care pursuant to this paragraph, if determined to be necessary on 
a case-by-case basis.
* * * * *
    (b) A Lead Agency shall re-determine a child's eligibility for 
child care services no sooner than 12 months following the initial 
determination or most recent re-determination, subject to the 
following:
    (1) During the period of time between re-determinations a Lead 
Agency, at its option, may consider a child to be

[[Page 29494]]

eligible pursuant to some or all of the eligibility requirements 
specified in paragraph (a) of this section, if the child met all of the 
requirements in paragraph (a) on the date of the most recent 
eligibility determination or re-determination.
    (2) The Lead Agency shall specify in the Plan any requirements for 
families to report changes in circumstances that may impact eligibility 
between re-determinations.
* * * * *
    (d) Lead Agencies must take into consideration developmental needs 
of children when authorizing child care services and are not restricted 
to limiting authorized child care services based on the work, training, 
or educational schedule of the parent(s).
0
10. Amend Sec.  98.30 by:
0
a. Revising paragraph (a)(1);
0
b. Removing paragraph (e)(1)(ii) and redesignating paragraphs 
(e)(1)(iii) and (iv) as paragraphs (e)(1)(ii) and (iii);
0
c. Adding paragraphs (g) and (h).
    The revisions and additions read as follows:


Sec.  98.30  Parental choice.

    (a) * * *
    (1) To enroll such child with an eligible child care provider that 
has a grant or contract for the provision of such services, in 
accordance with Sec.  98.50; or
* * * * *
    (g) As long as provisions at paragraph (f) of this section are met, 
parental choice provisions shall not be construed as prohibiting a Lead 
Agency from establishing policies that require providers of child care 
services for which assistance is provided under this part to meet 
higher standards of quality as identified in a quality improvement 
system or other transparent system of quality indicators pursuant to 
Sec.  98.33.
    (h) Parental choice provisions shall not be construed as 
prohibiting a Lead Agency from providing parents with information and 
incentives that encourage the selection of high quality child care.
0
11. Amend Sec.  98.32 by redesignating paragraphs (a) through (c) as 
paragraphs (b) through (d) and adding a new paragraph (a) to read as 
follows:


Sec.  98.32  Parental complaints.

* * * * *
    (a) Establish or designate a hotline for parents to submit 
complaints about child care providers;
* * * * *
0
12. Amend Sec.  98.33 by:
0
a. Revising paragraph (a);
0
b. Redesignating paragraphs (b) and (c) as paragraphs (d) and (e);
0
c. Adding new paragraphs (b) and (c); and
0
d. In newly redesignated paragraph (e) removing ``paragraph (b)'' and 
adding in its place ``paragraph (d)''.
    The revision and additions read as follows:


Sec.  98.33  Consumer education.

* * * * *
    (a) Certify that it will collect and disseminate to parents and the 
general public, through a user-friendly, easy-to-understand Web site 
and other means identified by the Lead Agency, consumer education 
information that will promote informed child care choices including, at 
a minimum, information about:
    (1) The full range of available providers, including:
    (i) Provider-specific information about any health and safety, 
licensing or regulatory requirements met by the provider, including the 
date the provider was last inspected;
    (ii) Any history of violations of these requirements; and
    (iii) Any compliance actions taken.
    (2) A description of health and safety requirements and licensing 
or regulatory requirements for child care providers and processes for 
ensuring that child care providers meet those requirements. The 
description must include information about the background check process 
for providers, and any other individuals in the child care setting (if 
applicable), and what offenses may preclude a provider from serving 
children.
    (b) As part of its consumer education activities, implement a 
transparent system of quality indicators appropriate to the provider 
setting, such as those reflected in a quality rating and improvement 
system or other system established by the Lead Agency, to provide 
parents with a way to differentiate the quality of child care providers 
available to them in their communities through a rating or other 
descriptive method. The system must:
    (1) Include provider-specific information about the quality of 
child care;
    (2) Describe the standards used to assess the quality of child care 
providers;
    (3) Take into account teaching staff qualifications and/or 
competencies, learning environment, curricula and activities; and
    (4) Disseminate provider-specific quality information, if 
available, through the Web site described in paragraph (a) of this 
section, or through an alternate mechanism which the Lead Agency shall 
describe in the CCDF Plan, which shall include a description of how the 
mechanism makes the system of quality indicators transparent.
    (c) For families that receive assistance under this part, provide 
information about the child care options available to them as described 
in paragraphs (a) and (b) of this section, and specific information 
about the child care provider selected by the parent, including health 
and safety requirements met by the provider described at 98.41(a), any 
licensing or regulatory requirements met by the provider, any voluntary 
quality standards met by the provider pursuant to paragraph (b) of this 
section, and any history of violations of health and safety, licensing 
or regulatory requirements.
* * * * *
0
13. Amend 98.40 by redesignating paragraph (a)(2) as (a)(3) and adding 
new paragraph (a)(2) to read as follows:


Sec.  98.40  Compliance with applicable State and local regulatory 
requirements.

    (a) * * *
    (2) Any exemptions to licensing requirements and a rationale for 
such exemptions;
* * * * *
0
14. Amend Sec.  98.41 by revising paragraphs (a)(1)(i), (a)(2), (a)(3), 
(d), and (e) to read as follows:


Sec.  98.41  Health and safety requirements.

    (a) * * *
    (1) * * *
    (i) As part of their health and safety provisions in this area, 
Lead Agencies shall assure that children receiving services under the 
CCDF are age-appropriately immunized. Those health and safety 
provisions shall incorporate (by reference or otherwise) the latest 
recommendation for childhood immunizations of the respective State or 
territorial public health agency.
* * * * *
    (2) Building and physical premises safety, which shall at a minimum 
include the following:
    (i) Comprehensive background checks on child care providers that 
include use of fingerprints for State checks of criminal history 
records, use of fingerprints for checks of Federal Bureau of 
Investigation (FBI) criminal history records, clearance through the 
child abuse and neglect registry (if available) and clearance through 
sex offender registries (if available);
    (ii) Compliance with applicable State and local fire, health and 
building codes, which must include ability to evacuate children in the 
case of an emergency. Compliance must be determined prior to child care 
providers

[[Page 29495]]

serving children receiving assistance under this part; and
    (iii) Emergency preparedness and response planning including 
provisions for evacuation and relocation, shelter-in-place, and family 
reunification; and
    (3) Minimum health and safety training appropriate to the provider 
setting and age of children served, which shall, at a minimum, include 
pre-service or orientation training in the following areas:
    (i) First-aid and Cardiopulmonary Resuscitation (CPR);
    (ii) Medication administration policies and practices;
    (iii) Poison prevention and safety;
    (iv) Safe sleep practices including Sudden Infant Death Syndrome 
(SIDS) prevention;
    (v) Shaken baby syndrome and abusive head trauma prevention;
    (vi) Age-appropriate nutrition, feeding, including support for 
breastfeeding, and physical activity;
    (vii) Procedures for preventing the spread of infectious disease, 
including sanitary methods and safe handling of foods;
    (viii) Recognition and reporting of suspected child abuse and 
neglect;
    (ix) Emergency preparedness planning and response procedures;
    (x) Management of common childhood illnesses, including food 
intolerances and allergies;
    (xi) Transportation and child passenger safety (if applicable);
    (xii) Caring for children with special health care needs, mental 
health needs, and developmental disabilities in compliance with the 
Americans with Disabilities (ADA) Act; and
    (xiii) Child development, including knowledge of stages and 
milestones of all developmental domains appropriate for the ages of 
children receiving services.
* * * * *
    (d) Each Lead Agency shall certify that procedures are in effect to 
ensure that child care providers of services for which assistance is 
provided under this part, within the area served by the Lead Agency, 
comply with all applicable State, local, or tribal health and safety 
requirements, including those described in paragraph (a) of this 
section. The Lead Agency's procedures:
    (1) Must include unannounced on-site monitoring. All child care 
providers of services for which assistance is provided under this part 
must be subject to on-site monitoring, including unannounced visits;
    (2) May not solely rely on child care provider self certification 
of compliance with health and safety requirements included in paragraph 
(a) of this section without documentation or other verification that 
requirements have been met;
    (3) Must require an unannounced visit in response to the receipt of 
a complaint pertaining to the health and safety of children in the care 
of a provider of services for which assistance is provided under this 
part; and
    (4) Must require child care providers of services for which 
assistance is provided under this part to report to a designated State, 
territorial, or tribal entity any serious injuries or deaths of 
children occurring in child care.
    (e) For the purposes of this section only, the term ``child care 
providers,'' at the option of the Lead Agency, may not include in-home 
child care providers, pursuant to Sec.  98.2, and grandparents, great 
grandparents, siblings (if such providers live in a separate 
residence), aunts or uncles, pursuant to Sec.  98.2. If the Lead Agency 
chooses not to include these providers, the Lead Agency shall provide a 
description and justification in the CCDF Plan, pursuant to Sec.  
98.16(l), of requirements, if any, that apply to these providers.
0
15. Amend Sec.  98.42 by revising paragraph (c) and adding paragraph 
(d) to read as follows:


Sec.  98.42  Sliding fee scales.

* * * * *
    (c) Lead Agencies may waive contributions from families meeting 
criteria established by the Lead Agency.
    (d) Lead Agencies may not use cost of care or subsidy payment rate 
as a factor in setting co-payment amounts.
0
16. Amend Sec.  98.43 by:
0
a. Revising paragraphs (b)(1) through (3);
0
b. Redesignating paragraphs (c), (d), and (e) as paragraphs (d), (e) 
and (f); and;
0
c. Adding new paragraphs (b)(4) and (c),
    The revisions and additions read as follows:


Sec.  98.43  Equal access.

* * * * *
    (b) * * *
    (1) How a choice of the full range providers, e.g. center, family, 
and in-home care, is made available;
    (2) How payment rates are adequate based on either:
    (i) a valid, local market price study conducted no earlier than two 
years prior to the effective date of the currently approved plan; or
    (ii) an alternative methodology, such as a cost estimation model, 
that has been proposed by the Lead Agency and approved in advance by 
the Assistant Secretary;
    (3) How copayments based on a sliding fee scale, as stipulated at 
Sec.  98.42, are affordable; and
    (4) Any additional facts the Lead Agency considered in determining 
that its payment rates ensure equal access, such as information on the 
cost of providing quality child care.
    (c) The Lead Agency shall take into account the quality of child 
care when determining payment rates.
* * * * *
0
17. Amend Sec.  98.50 by revising paragraphs (a) and (b)(3) to read as 
follows:


Sec.  98.50  Child care services.

    (a) Of the funds remaining after applying the provisions of 
paragraphs (c), (d), and (e) of this section the Lead Agency shall 
spend a substantial portion to provide direct child care services to 
low-income working families.
    (b) * * *
    (3) Using funding methods provided for in Sec.  98.30, which must 
include some use of grants or contracts for the provision of direct 
services, with the extent of such services determined by the Lead 
Agency after consideration of supply shortages described in the Plan 
pursuant to Sec.  98.16(i)(1) and other factors as determined by the 
Lead Agency; and
* * * * *
0
18. Amend Sec.  98.51 by revising paragraphs (a) introductory text and 
(a)(2) and adding paragraphs (d), (e), and (f) to read as follows:


Sec.  98.51  Activities to improve the quality of child care.

    (a) No less than four percent of the aggregate funds expended by 
the Lead Agency from each fiscal year's allotment, and including the 
amounts expended in the State pursuant to Sec.  98.53(b), shall be 
expended for quality activities.
* * * * *
    (2) Activities to improve the quality of child care services may 
include, but are not limited to, implementation of a systemic framework 
for organizing, guiding, and measuring progress of quality improvement 
activities which includes the following key components:
    (i) Activities to ensure the health and safety of children through 
licensing and health and safety standards pursuant to Sec. Sec.  98.40 
and 98.41;
    (ii) Establishment and implementation of age-appropriate learning 
and development guidelines for children of all ages, including infants, 
toddlers, and school-age children;
    (iii) Implementation of systems of quality improvement to evaluate,

[[Page 29496]]

improve and communicate the level of quality of child care programs 
that may contain the following elements:
    (A) Establishment of program standards that define expectations for 
quality and indicators of different levels of quality appropriate to 
the provider setting;
    (B) Provision of supports, training and technical assistance to 
assist child care programs in meeting child care quality improvement 
standards;
    (C) Provision of financial incentives and monetary supports to 
assist child care programs in meeting child care quality improvement 
standards;
    (D) Provision of quality assurance and monitoring to measure child 
care program quality over time; and
    (E) Implementation of strategies for outreach and consumer 
education efforts to promote knowledge of child care quality 
improvement standards to child care programs and to provide parents, 
including parents receiving assistance under this part, with provider-
specific information about the quality of child care provider options 
available to them, pursuant to Sec.  98.33(b).
    (iv) Implementation of professional development systems to ensure a 
well-qualified child care workforce that may contain the following 
elements:
    (A) Establishment of core knowledge and competencies to define what 
the workforce should know (content) and be able to do (skills) in their 
role working with children and their families.
    (B) Establishment of career pathways to define options and a 
sequence of qualifications and ongoing professional development 
opportunities;
    (C) Conducting professional development assessments to build 
capacity of higher education systems and other training institutions to 
meet the diverse needs of the child care workforce and address the full 
range of development and needs of children;
    (D) Provision of access to professional development to ensure 
practitioners are made aware of, and receive supports and assistance to 
utilize professional development opportunities; and
    (E) Provision of rewards or financial supports to practitioners for 
participating in and completing education or training and for increased 
compensation;
    (v) Implementation of an infrastructure of support to build child 
care provider capacity to promote health through wellness, physical 
activity and nutrition programs, to serve children with special needs, 
dual language learners, and other vulnerable children (e.g., children 
in the child welfare system and homeless children), to implement family 
engagement strategies;
    (vi) Assessment and evaluation of the effectiveness of quality 
improvement activities; and
    (vii) Any other activities consistent with the intent of this 
section.
* * * * *
    (d) Activities to improve the quality of child care services are 
not restricted to activities affecting children meeting eligibility 
requirements under Sec.  98.20 or to child care providers of services 
for which assistance is provided under this part.
    (e) Unless expressly authorized by law, targeted funds for quality 
improvement and other activities that may be included in appropriations 
law may not count towards meeting the four percent minimum requirement 
in paragraph (a) of this section.
    (f) The Lead Agency must include in the Plan a description of 
performance goals associated with expenditure of funds on activities to 
improve the quality of child care pursuant to the quality performance 
report described at Sec.  98.16(v).
0
19. Amend Sec.  98.52 by adding paragraphs (d) and (e) to read as 
follows:


Sec.  98.52  Administrative costs.

* * * * *
    (d) The following activities do not count towards the five percent 
limitation on administrative expenditures in paragraph (a) of this 
section:
    (1) Establishment and maintenance of computerized child care 
information systems;
    (2) Establishing and operating a certificate program;
    (3) Eligibility determination;
    (4) Preparation/participation in judicial hearings;
    (5) Child care placement;
    (6) Recruitment, licensing, inspection of child care providers;
    (7) Training for Lead Agency or sub-recipient staff on billing and 
claims processes associated with the subsidy program;
    (8) Reviews and supervision of child care placements;
    (9) Activities associated with payment rate setting;
    (10) Resource and referral services; and
    (11) Training for child care staff.
    (e) If a Lead Agency enters into agreements with sub-recipients for 
operation of the CCDF program, the amount of the contract or grant 
attributable to administrative activities as described at Sec.  
98.52(a) shall be counted towards the five percent limit.
0
20. Revise Sec.  98.54(b)(1) to read as follows:


Sec.  98.54  Restrictions on the use of funds.

* * * * *
    (b) Construction. (1) For State and local agencies and nonsectarian 
agencies or organizations, no funds shall be expended for the purchase 
or improvement of land, or for the purchase, construction, or permanent 
improvement of any building or facility. However, funds may be expended 
for minor remodeling, and for upgrading child care facilities to assure 
that providers meet State and local child care standards, including 
applicable health and safety requirements. Improvements or upgrades to 
a facility which are not specified under the definitions of 
construction or major renovation at Sec.  98.2 may be considered minor 
remodeling and are, therefore, allowable.
* * * * *
0
21. Amend Sec.  98.60 by revising paragraph (b)(1), redesignating 
(d)(7) as paragraph (d)(8), and adding a new paragraph (d)(7), and 
revising paragraph (h) to read as follows:


Sec.  98.60  Availability of funds.

* * * * *
    (b) * * *
    (1) May withhold up to one half of one percent of the CCDF funds 
made available for a fiscal year for the provision of technical 
assistance; and
* * * * *
    (d) * * *
    (7) In instances where third party agencies issue child care 
certificates, the obligation of funds occurs upon entering into 
agreement through a subgrant or contract with such agency, rather than 
when the third party issues certificates to a family.
* * * * *
    (h) Repayment of loans made to child care providers as part of 
quality improvement activities pursuant to Sec.  98.51, may be made in 
cash or in services provided in-kind. Payment provided in-kind shall be 
based on fair market value. All loans shall be fully repaid.
* * * * *
0
22. In Sec.  98.61, add paragraph (f) to read as follows:


Sec.  98.61  Allotments from the Discretionary Fund.

* * * * *
    (f) Lead Agencies shall expend any funds that may be set-aside for 
targeted activities pursuant to annual appropriations law as directed 
by the Secretary.
0
23. Amend Sec.  98.65 by revising paragraph (g) and adding paragraphs 
(h) and (i) to read as follows:

[[Page 29497]]

Sec.  98.65  Audits and financial reporting.

* * * * *
    (g) The Secretary shall require financial reports as necessary. 
Lead Agencies shall submit financial reports to the Department in a 
manner specified by the Secretary quarterly for each fiscal year until 
funds are expended.
    (h) At a minimum, a State or territorial Lead Agency's quarterly 
report shall include the following information on expenditures under 
CCDF grant funds, including Discretionary (which includes realloted 
funding and any funds transferred from the TANF block grant), 
Mandatory, and Matching funds (which includes redistributed funding); 
and State Matching and Maintenance-of-Effort (MOE) funds:
    (1) Child care administration;
    (2) Quality activities excluding targeted funds;
    (3) Targeted funds identified in appropriations law;
    (4) Direct services;
    (5) Non-direct services, including:
    (i) Systems,
    (ii) Certificate program cost/eligibility determination;
    (iii) All other non-direct services; and
    (6) Such other information as specified by the Secretary;
    (i) Tribal Lead Agencies shall submit financial reports annually.
0
24. Add Sec.  98.68 to subpart G to read as follows:


Sec.  98.68  Program integrity.

    (a) Lead Agencies are required to have effective internal controls 
in place to ensure integrity and accountability in the CCDF program. 
These shall include:
    (1) Processes to ensure sound fiscal management;
    (2) Processes to identify areas of risk; and
    (3) Regular evaluation of internal control activities.
    (b) Lead Agencies are required to have processes in place to 
identify fraud or other program violations which may include, but are 
not limited to the following:
    (1) Record matching and database linkages;
    (2) Review of attendance and billing records;
    (3) Quality control or quality assurance reviews; and
    (4) Staff training on monitoring and audit processes.
    (c) Lead Agencies must have procedures in place for documenting and 
verifying that children receiving assistance under this part meet 
eligibility criteria at the time of eligibility determination.
    (d) Lead Agencies are required to have processes in place to 
investigate and recover fraudulent payments and to impose sanctions on 
clients or providers in response to fraud.
0
25. Amend Sec.  98.71 by redesignating paragraph (a)(15) as paragraph 
(a)(16) and adding a new paragraph (a)(15) to read as follows:


Sec.  98.71  Content of reports.

    (a) * * *
    (15) Indicator of the quality of the child care provider pursuant 
to Sec.  98.33(b); and
* * * * *
0
26. Amend Sec.  98.81 by revising paragraph (b)(6) to read as follows:


Sec.  98.81  Application and Plan procedures.

* * * * *
    (b) * * *
    (6) The Plan is not subject to requirements in Sec.  98.16(g)(8), 
(i)(1), or (i)(4).
0
27. Amend Sec.  98.83 by revising paragraphs (d), (f)(1), and (f)(2) 
and removing paragraph (f)(3) to read as follows:


Sec.  98.83  Requirements for tribal programs.

* * * * *
    (d) Tribal Lead Agencies shall not be subject to the requirements 
at Sec. Sec.  98.33(a), limited to the Web site requirement, 98.44(a), 
98.50(b)(3), 98.50(e), 98.52(a), 98.53, and 98.63.
* * * * *
    (f) * * *
    (1) The assurance at Sec.  98.15(a)(2); and
    (2) The requirement for certificates at Sec.  98.30(a) and (d).
* * * * *
0
28. Amend Sec.  98.100 by revising the second sentence in paragraph (b) 
to read as follows:


Sec.  98.100  Error Rate Report.

* * * * *
    (b) * * * States, the District of Columbia and Puerto Rico must use 
this report to calculate their error rates, which is defined as the 
percentage of cases with an error (expressed as the total number of 
cases with an error compared to the total number of cases); the 
percentage of cases with an improper payment (expressed as the total 
number of cases with an improper payment compared to the total number 
of cases); the percentage of improper payments (expressed as the total 
amount of improper payments in the sample compared to the total dollar 
amount of payments made in the sample); and the average amount of 
improper payment. * * *
* * * * *
0
29. Amend Sec.  98.102 by:
0
a. Removing paragraph (a)(5);
0
b. Redesignating paragraphs (a)(6) through (10) as (a)(5) through (9); 
and
0
c. Adding paragraph (c).
    The addition reads as follows:

Sec.  98.102  Content of Error Rate Reports

* * * * *
    (c) Any Lead Agency with an improper payment rate that exceeds a 
threshold established by the Secretary must submit to the Assistant 
Secretary for approval a comprehensive corrective action plan, as well 
as subsequent reports describing progress in implementing the plan.
    (1) The corrective action plan must be submitted within 60 days of 
the deadline for submitting the Lead Agency's standard error rate 
report required by Sec.  98.102(b).
    (2) The corrective action plan must include the following:
    (i) Identification of a senior accountable official;
    (ii) Milestones that clearly identify actions to be taken to reduce 
improper payments and the individual responsible for completing each 
action;
    (iii) A timeline for completing each action within 1 year of the 
Assistant Secretary's approval of the plan, and for reducing the 
improper payment rate below the threshold established by the Secretary; 
and
    (iv) Targets for future improper payment rates.
    (3) Subsequent progress reports must be submitted as requested by 
the Assistant Secretary.
    (4) Failure to carry out actions described in the approved 
corrective action plan will be grounds for a penalty or sanction under 
Sec.  98.92.
* * * * *


Sec. Sec.  98.16, 98.20, 98.30, 98.50, 98.51, 98.53, 98.81, and 
98.102  [Amended]

0
30. In the table below, for each section indicated in the left column, 
remove the cross-reference indicated in the middle column from wherever 
it appears in the section, and add the cross-reference indicated in the 
right column:

[[Page 29498]]



                           Redesignation Table
------------------------------------------------------------------------
                                                     Add, in its place,
      Amended sections            Remove cross-      new cross-reference
                               reference citations        citations
------------------------------------------------------------------------
Sec.   98.16(r), as           Sec.   98.33(b).....  Sec.   98.33(d).
 redesignated.
Sec.   98.20(a)(3)((ii)(B)..  Sec.   98.16(f)(7)..  Sec.   98.16(g)(7).
Sec.   98.20(c), as           Sec.   98.16(g)(5)..  Sec.   98.16(i)(5).
 redesignated.
Sec.   98.30(e)(1)(iii), as   Sec.   98.16(g)(2)..  Sec.   98.16(i)(2).
 redesignated.
Sec.   98.50(f).............  Sec.   98.16(g)(4)..  Sec.   98.16(i)(4).
Sec.   98.51(b).............  Sec.   98.16(h).....  Sec.   98.16(j).
Sec.   98.53(f).............  Sec.   98.16(c)(2)..  Sec.   98.16(d)(2).
Sec.   98.53(h)(2)..........  Sec.   98.16(q).....  Sec.   98.16(s).
Sec.   98.81(b)(5)..........  Sec.   98.16(g)(2)..  Sec.   98.16(i)(2).
Sec.   98.81(b)(5)..........  Sec.   98.16(k).....  Sec.   98.16(m).
Sec.   98.102(b)(2).........  Sec.   98.102(a)(1)   Sec.   98.102(a)(1)
                               through (5).          through 4.
------------------------------------------------------------------------

(Catalog of Federal Domestic Assistance Program Number 93.575, Child 
Care and Development Block Grant; 93.596, Child Care Mandatory and 
Matching Funds)

    Dated: January 12, 2012.
George H. Sheldon,
Acting Assistant Secretary for Children and Families.
    Approved: January 19, 2012.
Kathleen Sebelius,
Secretary.

    Note: This document was received by the Office of the Federal 
Register on May 13, 2013.

[FR Doc. 2013-11673 Filed 5-16-13; 11:15 am]
BILLING CODE 4184-01-P