[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)]
[Proposed Rules]
[Pages 80466-80582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31883]



[[Page 80465]]

Vol. 80

Thursday,

No. 247

December 24, 2015

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





45 CFR Part 98





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

  Federal Register / Vol. 80 , No. 247 / Thursday, December 24, 2015 / 
Proposed Rules  

[[Page 80466]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 98

[Docket Number ACF-2015-0011]
RIN 0970-AC67


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 (NPRM).

-----------------------------------------------------------------------

SUMMARY: The Department of Health and Human Services, Administration 
for Children and Families, proposes to amend the Child Care and 
Development Fund (CCDF) regulations. This proposed rule makes changes 
to CCDF regulations to detail provisions of the Child Care and 
Development Block Grant Act of 2014 in order to protect the health and 
safety of children in child care; help parents make informed consumer 
choices and access information to support child development; provide 
equal access to stable, high quality child care for low-income 
children; and enhance the overall quality of child care and the early 
childhood workforce.

DATES: In order to be considered, written comments on this proposed 
rule must be received on or before February 22, 2016.

ADDRESSES: You may submit comments, identified by docket number ACF-
2015-0011and/or RIN number 0970-AC67, by either of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit comments to the Office of Child Care, 
Administration for Children and Families, 330 C Street SW., Washington, 
DC 20201, Attention: Office of Child Care Policy Division.
    Instructions: All submissions received must include the agency name 
and docket number or RIN number for this rulemaking. To ensure we can 
effectively respond to your comment(s), clearly identify the issue(s) 
on which you are commenting. Provide the page number, identify the 
column, and cite the relevant paragraph/section from the Federal 
Register document, (e.g., On page 10999, second column, Sec.  
98.20(a)(1)(i).). All comments received are a part of the public record 
and will be posted for public viewing on www.regulations.gov, without 
change. That means all personal identifying information (such as name 
or address) will be publicly accessible. Please do not submit 
confidential information, or otherwise sensitive or protected 
information. We accept anonymous comments. If you wish to remain 
anonymous, enter ``N/A'' in the required fields.

FOR FURTHER INFORMATION CONTACT: Andrew Williams, 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
I. Background
    A. Child Care and Development Fund (CCDF)
    B. Discussion of Changes Made in This Proposed Rule
    C. Effective Date
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. Executive Orders 12866 and 13563
VIII. Regulatory Impact Analysis
IX. Unfunded Mandates Reform Act of 1995
X. Executive Order 13045 on Protection of Children
XI. Congressional Review
XII. Executive Order 13132
XIII. Treasury and General Government Appropriations Act of 1999
XIV. Executive Order 13175 on Consultation With Indian Tribes

I. Executive Summary

    Overview. On November 19, 2014, President Barack Obama signed the 
Child Care and Development Block Grant (CCDBG) Act of 2014 (Pub. L. 
113-186) into law following its passage in the 113th Congress. The 
CCDBG Act (to be codified, as amended, at 42 U.S.C. 9858 et seq., and 
hereinafter referred to as the ``Act'') (along with Section 418 of the 
Social Security Act (42 U.S.C. 618)) authorizes the Child Care and 
Development Fund (CCDF), which is the primary Federal funding source 
devoted to providing low-income families who are working or 
participating in education or training activities with help paying for 
child care and improving the quality of child care for all children.
    The bipartisan CCDBG Act of 2014 made sweeping statutory changes 
that will require significant reforms to State and Territory CCDF 
programs to raise the health, safety, and quality of child care and 
provide more stable child care assistance to families. It expanded the 
purposes of the CCDF for the first time since 1996, ushering in a new 
era for child care in this country. Since 1996, a significant body of 
research has demonstrated the importance of early childhood development 
and how stable, high quality early experiences can positively influence 
that development and contribute to children's futures. In particular, 
low-income children stand to benefit the most from a high quality early 
childhood experience. Research has also shown the important role of 
child care financial assistance in helping parents afford reliable 
child care in order to get and keep stable employment or pursue 
education. The reauthorized law recognizes CCDF as an integral program 
to promote both the healthy development of children and parents' 
pathways to economic stability.
    In Fiscal Year 2014, CCDF provided child care assistance to 1.4 
million children from nearly 1 million low-income working families in 
an average month. The Congressional reauthorization of CCDBG made clear 
that the prior law was inadequate to protect the health and safety of 
children in care and that more needs to be done to increase the quality 
of CCDF-funded child care. It also recognized the central importance of 
access to subsidy continuity in supporting parents' ability to achieve 
financial stability and children's ability to develop nurturing 
relationships with their caregivers, which creates the foundation for a 
high quality early learning experience.
    Purpose of this Regulatory Action. The majority of current CCDF 
regulations at 45 CFR parts 98 and 99 were last revised in 1998 (with 
the exception of some more recent updates related to State match and 
error reporting). This proposed regulatory action is needed to update 
the regulations to accord with the reauthorized law and to update CCDF 
regulations to reflect what has been learned since 1998 about child 
care quality and child development, and changes in the law. The 
purposes of the law, as revised by Congress, have guided regulation 
development.

[[Page 80467]]

    Legal authority. This proposed regulation is being issued under the 
authority granted to the Secretary of Health and Human Services by the 
CCDBG Act of 1990, as amended, (42 U.S.C. 9858 et seq.) and Section 418 
of the Social Security Act (42 U.S.C. 618).
    Major Provisions of the Proposed Rule. The proposed rule addresses 
the CCDBG Act of 2014, which includes provisions to: (1) Protect the 
health and safety of children in child care; (2) help parents make 
informed consumer choices and access information to support child 
development; (3) provide equal access to stable, high quality child 
care for low-income children; and (4) enhance the quality of child care 
and the early childhood workforce.
    Protect Health and Safety of Children in Child Care. This proposed 
rule would provide detail on the health and safety standards 
established in the new law, including health and safety training, 
comprehensive background checks, and monitoring. The law requires 
providers receiving CCDF funds (including those that are license-
exempt) to be monitored, at least annually, to determine whether health 
and safety practices and standards are being followed in the child care 
setting, including a pre-licensure visit for licensed providers. 
Regular monitoring of child care settings is necessary to ensure 
compliance with appropriate standards that protect the health and 
safety of children. The proposed rule would allow Lead Agencies to 
develop alternative monitoring requirements for CCDF-funded care 
provided in the child's home and would exempt relative caregivers from 
the monitoring requirement at the option of Lead Agencies.
    In this proposed rule, we address the Act's (i.e., the Child Care 
and Development Block Grant Act's) background check requirement by 
proposing to require all child care staff members (including 
prospective staff members) of all licensed, regulated, or registered 
child care providers and all child care providers eligible to deliver 
CCDF services to have a comprehensive background check, unless they are 
related to all children in their care. We propose to extend the 
background check requirement to all adults residing in family child 
care homes. Based on our interpretation of the statutory provisions, we 
believe that all parents, regardless of whether they receive CCDF 
assistance, deserve this basic protection of knowing that those 
individuals who have access to their children do not have prior records 
of behavior that could endanger their children.
    The Act requires Lead Agencies to establish standards in ten topic 
areas related to health and safety that are fundamental for any child 
care setting, such as first aid, CPR, and safe sleep practices. We 
propose to add recognizing and reporting child abuse and neglect to 
this list. The Act also requires Lead Agencies to maintain records of 
substantiated parental complaints about child care. In this NPRM, we 
propose requiring Lead Agencies to designate a hotline or similar 
reporting process for parental complaints. Child care providers would 
also be required to report serious injuries or deaths that occur in 
child care settings in order to inform regulatory or other policy 
changes to improve health and safety.
    Help Parents Make Informed Consumer Choices and Access Information 
to Support Child Development. The Act expanded requirements for the 
content of consumer education to be made available to parents receiving 
CCDF assistance, the public, and where applicable, child care 
providers. By adding providers, Congress recognized the positive role 
trusted caregivers can play in communicating and partnering with 
parents on a daily basis regarding their children's development and 
available resources in the community. Effective consumer education 
strategies are important to inform parental choice of child care and 
also to engage parents in the development of their children in child 
care settings--a new purpose of the CCDF. States and Territories have 
the opportunity to consider how information can be best provided to 
low-income parents through their interactions with CCDF, partner 
agencies, and child care providers, as well as through electronic means 
such as a Web site. Parents face great challenges in finding reliable 
information and making informed consumer choices about child care for 
their children. The new law strengthens and builds on a foundational 
tenet of CCDF--the primacy of parental choice--by requiring that Lead 
Agencies provide parents information about their child care options and 
the quality of child care providers as available.
    The Act requires Lead Agencies to make available via a consumer-
friendly and easily-accessible Web site, information on policies and 
procedures regarding: (1) Licensing child care providers; (2) 
conducting background checks and the offenses that would keep a 
provider from being allowed to care for children; and (3) monitoring of 
child care providers. We are proposing this be done through a single 
Web site that is easy for families to navigate and provides widest 
possible access to individuals who speak languages other than English 
and persons with disabilities. We propose that Lead Agencies provide 
information about the quality of providers on the consumer Web site, if 
available, and give parents receiving CCDF information about the 
quality of their chosen providers.
    The law requires Lead Agencies to make results of monitoring 
available in a consumer-friendly and easily accessible manner. We are 
proposing that this include posting at least five years of full 
monitoring reports, beginning with the effective date and going 
forward, in a timely manner for parents and providers. In the case that 
full reports are not in plain language, Lead Agencies must post a plain 
language summary or interpretation in addition to the full monitoring 
and inspection report. Parents should not have to parse through 
administrative code or understand advanced legal terms to determine 
whether safety violations have occurred in a child care setting.
    Congress added a number of content areas that will support parents 
in their role as their child's first and most important teacher. In 
keeping with a new purpose of the CCDF program to ``promote involvement 
by parents and family members in the development of their children in 
child care settings,'' the law requires information related to best 
practices in child development and State policies regarding child 
social and emotional development, including any State policies relevant 
to expulsion of children under age 5 from child care settings, be made 
available. The reauthorized law also requires that Lead Agencies 
provide information that can help parents identify other financial 
benefits and services that may support their pathway to economic 
stability. Families eligible for child care assistance are often 
eligible for other supports, and the law specifies that information on 
several public benefit programs, including Temporary Assistance for 
Needy Families (TANF), Supplemental Nutrition Assistance Program 
(SNAP), Medicaid, and the Children's Health Insurance Program (CHIP), 
be provided to them. In addition, the law requires information be 
provided on the programs and services that are part of Individuals with 
Disabilities Education Act (IDEA), such as early intervention and 
special education services and that parents are given information on 
how to obtain a developmental screening for their child. Low-income 
parents deserve to have easy access to the full range of

[[Page 80468]]

information, programs, and services that can support them in their 
parenting efforts. To ensure equal access for persons with limited 
English proficiency and for persons with disabilities, Lead Agencies 
would be required to provide child care program information in multiple 
languages and alternative formats.
    Provide Equal Access to High Quality Child Care for Low-Income 
Children. Congress established requirements that will provide more 
stable child care financial assistance to families, including extending 
children's eligibility for child care for a minimum of 12 months, 
regardless of increases in parents' earnings (as long as income remains 
at or below the Federal eligibility limit) and temporary changes in 
participation in work, training, or education. This will make it easier 
for parents to maintain employment or complete education programs and 
supports both family financial stability and the relationship between 
children and their caregivers. Under the law, Lead Agencies that choose 
to end assistance prior to 12 months, due to a non-temporary change in 
a parent's work, training, or education participation, must continue 
assistance for a minimum of three months to allow for job search 
activities.
    This proposed rule would require a set of policies intended to 
stabilize families' access to child care assistance and, in turn, help 
stabilize their employment or education and their child's care 
arrangement. These policies also have the potential to stabilize the 
revenue of child care providers who receive CCDF funds, as they would 
experience more predictable, reliable, and timely payments for 
services. We propose to reduce reporting requirements for families that 
can result in them unduly losing their assistance. 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. These provisions 
also make it easier for Lead Agencies to align CCDF policies with other 
programs, such as SNAP, Medicaid, CHIP, Early Head Start, and Head 
Start. More than half of children receiving CCDF-funded child care have 
incomes under poverty and qualify for Head Start and significant 
proportions of CCDF families are also eligible for SNAP. In this 
proposed rule, while families may be determined to be ineligible within 
the minimum 12 month eligibility period if their income exceeds 85% SMI 
(taking into account irregular fluctuations in income) or, at Lead 
Agency option, the family experiences a non-temporary cessation in job, 
training, or education, we clarify that additional State-imposed 
eligibility criteria apply only at the time of initial eligibility 
determination and redetermination and provide examples of changes in 
parents' scheduling and conditions of employment that meet the 
statutory intent of stabilizing assistance for families through changes 
in circumstance. We propose that Lead Agencies that set their income 
eligibility threshold below 85 percent of State median income (SMI) 
must allow parents who otherwise qualify for CCDF assistance to 
continue receiving assistance, at subsequent redeterminations, until 
their income exceeds the Federal income limit (85 percent of SMI for a 
family of the same size) or for a period of at least one year after the 
point at which the family's income exceeds the State eligibility 
threshold. This approach promotes continuity of care for children while 
allowing for wage growth for families to move on a path toward economic 
stability. All too often, getting and keeping CCDF assistance is overly 
burdensome for parents, resulting in short durations of assistance and 
churning on and off CCDF as parents lose assistance and then later 
return. This instability disrupts parental employment and education, 
harms children, and runs counter to nearly all of CCDF's purposes. We 
believe this full set of provisions that facilitates easier and 
sustained access to assistance is necessary to strengthen CCDF as a 
two-generation program that supports work, training, and education, as 
well as access to high quality child care.
    Congress reaffirmed the core belief that families receiving CCDF-
funded child care should have equal access to child care that is 
comparable to that of non-CCDF families. The Act requires Lead Agencies 
to set provider payment rates based on a valid market rate survey or 
alternative methodology. To allow for equal access, we propose that 
Lead Agencies set base payment rates at least at a level sufficient to 
cover the costs to providers of the health, safety, and quality 
requirements included in the NPRM and provide equal access to child 
care available to families with incomes above 85 percent of SMI. This 
could be assured by setting payment rates at the 75th percentile of a 
recent market rate survey, which we believe remains an important 
benchmark for gauging equal access. Lead Agencies that set rates below 
the 75th percentile would be required to demonstrate that their payment 
rates allow CCDF families to purchase care that is of comparable 
quality to care that is available to families with incomes above 85 
percent of SMI. Low payment rates limit access to high quality care for 
children receiving CCDF-funded care and violate the equal access 
provision that is central to CCDF. We believe higher provider payment 
rates are necessary to ensure that providers receiving CCDF funds have 
the means to provide high quality care for our country's low-income 
children. We also propose that Lead Agencies be required to use some 
direct contracts or grants, in addition to vouchers or certificates, in 
order to build the supply of high quality care.
    In this NPRM, we provide detail on the statutory requirements for 
Lead Agencies to pay providers in a timely manner based on generally 
accepted payment practices for non-CCDF providers and that Lead 
Agencies delink provider payments from children's absences to the 
extent practicable. We establish a new Federal benchmark for affordable 
parent fees of 7 percent of family income and allow Lead Agencies more 
flexibility to waive co-payments for vulnerable families. We propose 
that Lead Agencies be permitted to increase parent fees only at 
redetermination or during a period of graduated phaseout when families' 
incomes have increased above the Lead Agency's initial income 
eligibility threshold, but seek comment around several elements of 
these policies.
    This proposed rule would require Lead Agencies to take into 
consideration children's development and learning and promote 
continuity of care when authorizing child care services; offer 
increased flexibility for determining eligibility of vulnerable 
children; and clarify that Lead Agencies are not required to restrict a 
child's care to the hours of a parent's work or education. We believe 
these changes are important to make the program more child-focused and 
ensure that the most vulnerable children have access to and benefit 
from high quality care. These provisions may be implemented broadly in 
ways that best support the goals of Lead Agencies.
    Enhance the Quality of Child Care and the Early Childhood 
Workforce. In this NPRM, we provide detail on the statutory requirement 
to increase spending on initiatives that improve the quality of care. 
The law increases the share of CCDF funds directed towards quality 
improvement activities, authorizes a new set-aside for infant-toddler 
care, and drives investments towards increasing the supply of high 
quality care for infant, toddlers, children with special needs, 
children experiencing homelessness, and other vulnerable populations 
including

[[Page 80469]]

children in need of nontraditional hour care and children in poor 
communities. The law requires States and Territories to submit an 
annual report on quality expenditures, including measures created by 
the Lead Agency to evaluate progress on quality improvement. This 
proposed rule would require Lead Agencies to report data on their 
progress on those measures. The law also increases quality through more 
robust program standards, including training and professional 
development standards for caregivers, teachers, and directors to help 
those working with children promote their social, emotional, physical, 
and cognitive development.
    In this rule, we address the law's training requirements by 
proposing that child care caregivers, teachers, and directors of CCDF 
providers receive training prior to caring for children, or during an 
orientation period not to exceed three months, and on an annual basis. 
In order for the health and safety requirements to be implemented, and 
because these are areas that the Lead Agency will monitor, we propose 
that training include 10 basic health and safety topics identified in 
the Act, as well as recognizing and reporting child abuse and neglect 
in order to comply with child abuse reporting requirements.
    Under the proposed regulation, Lead Agencies must provide for a 
progression of professional development for caregivers, teachers, and 
directors that may include postsecondary education. Through this NPRM, 
we propose definitions for six key components of a professional 
development framework and propose, to the extent practicable, that 
ongoing training yields continuing education units or is credit-
bearing. These components advance expert recommendations to improve the 
knowledge and competencies of those who care for young children, which 
is central to children's learning experiences and the quality of child 
care.
    In addition, the Act includes a number of provisions to improve 
access to high quality child care for children experiencing 
homelessness. The law requires Lead Agencies to establish a grace 
period that allows children experiencing homelessness (and children in 
foster care) to receive CCDF services while allowing their families 
(including foster families) a reasonable time to comply with 
immunization and other health and safety requirements. Through this 
NPRM, we propose to require Lead Agencies to help families comply with 
such requirements and coordinate with licensing agencies and other 
relevant State and local agencies to provide referrals and support to 
help families experiencing homelessness comply with immunization and 
health and safety requirements. The proposed rule would also require 
Lead Agencies to use the definition of homeless applicable to school 
programs from the McKinney-Vento Act to align with other Federal early 
childhood programs (42 U.S.C. 11434a).
    The Act does not indicate the extent to which CCDF provisions apply 
to Tribes. Starting in early 2015, OCC began a series of formal 
consultations with Tribal leaders to determine how the provisions in 
the newly reauthorized child care law should apply to Tribes and Tribal 
organizations. We heard from many Tribal leaders and CCDF 
Administrators asking for flexibility to implement child care programs 
that meet the individual needs of their communities. The proposals 
included in this NPRM are intended to increase Tribal Lead Agency 
flexibility, in a manner consistent with the CCDF dual goals of 
promoting families' financial stability and fostering healthy child 
development. We are proposing to differentiate and exempt some Tribal 
grantees from a progressive series of CCDF provisions based on three 
categories of CCDF grant allocations: Large, medium and small. We are 
also allowing Tribes flexibility to consider any Indian child in the 
Tribe's service area to be eligible to receive CCDF funds, regardless 
of the family's income or work, education, or training status, if a 
Tribe's median income is below a threshold established by the 
Secretary.
    Costs, benefits and transfer impacts. Changes made by the CCDBG Act 
of 2014 and this proposed rule would have the most direct benefit for 
the 1.4 million children and their parents who use CCDF assistance to 
pay for child care. Many of the Act's changes will also positively 
impact children who do not directly participate in CCDF. Many children 
who receive no direct assistance from CCDF will benefit from more 
rigorous health and safety standards, provider inspections, criminal 
background checks for child care staff, and accessible consumer 
information and education for their parents and caregivers. The 
attention to quality goes beyond health and safety. Caregivers, 
teachers, and directors of CCDF providers will be supported in their 
ongoing professional development. Under the Act, States and Territories 
must direct an increasingly greater share of their CCDF grant towards 
activities that improve the quality of child care, including a new 
share dedicated to improving the quality of infant and toddler care. 
Low-income parents who receive CCDF assistance will benefit from more 
stable financial assistance as they work toward economic stability and 
their children will benefit from more continuous relationships with 
their caregivers. Providers will benefit from improved provider payment 
rates (by certificate or grant or contract), as well as payment 
practices that support their financial stability. These include timely 
payments so that providers can sustain their operations and quality and 
paying providers for a reasonable number of absent days. The positive 
impacts of this law and the proposed rule will impact children, 
families, and providers now and into the future.
    The cost of implementing changes made by the Act and this proposed 
rule would vary depending on a State's specific situation. There are a 
significant number of States and Territories that have already 
implemented many of these policies. ACF conducted a regulatory impact 
analysis to estimate costs and benefits of provisions in the final rule 
taking into account current State practices. We evaluated major areas 
of policy change, including monitoring and inspections (including a 
hotline for parental complaints), background checks, training and 
professional development, consumer education (including Web site and 
consumer statement), quality spending, minimum 12-month eligibility and 
related provisions, increased subsidies, and supply building.
    Based on our analysis, annualized costs associated with these 
provisions, averaged over a ten year window, are $256 million and the 
annualized amount of transfers is approximately $840 million (both 
estimated using a 3 percent discount rate), which amounts to a total 
annualized impact of $1.10 billion. Of that amount, $1.09 billion is 
directly attributable to the statute, with only an annualized cost of 
$1.6 million (or less than 1% of the total estimated impact) 
attributable to discretionary provisions of this proposed regulation. 
While this analysis does not attempt to fully quantify the many 
benefits of the reauthorization and this NPRM, we do conduct a 
breakeven analysis to compare requirements clarified through this 
regulation against a potential reduction in child fatalities and 
injuries. Further detail and explanation can be found in the regulatory 
impact analysis.

II. Background

A. Child Care and Development Fund

    Nearly 13 million young children, under age 5, regularly rely on 
child care to support their healthy development

[[Page 80470]]

and school success. (Census Bureau, Who's Minding the Kids? Child Care 
Arrangements, Spring 2011). Additionally, more than 10 million children 
participate in a range of school-age programs, before- and after-school 
and during summers and school breaks. (Afterschool Alliance, American 
After 3PM: Afterschool Programs in Demand, 2014) 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 and, thus, an integral part of the nation's child 
care and early education system. Each year, more than $5 billion in 
Federal CCDF funding is allocated to State, Territory and Tribal 
grantees. Combined with State funds and transfers from the Temporary 
Assistance for Needy Families (TANF) program, States and Territories 
spend nearly $9 billion annually to support child care services to low-
income families and to improve the quality of child care. More than $1 
billion of this spending is directed towards supporting child care 
quality improvement activities 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 nearly 20 years ago, upon the enactment of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
(PRWORA) in 1996 (Pub. L. 104-193), in which Congress replaced the 
former Aid to Families with Dependent Children with the framework of 
TANF block grants, and established a new structure of 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).
    The CCDBG Act of 2014 (Pub. L. 13-186) was the first 
reauthorization of CCDBG since 1996. The reauthorized CCDBG affirms the 
importance of CCDF as a two-generation program that supports parents' 
financial success and children's healthy development. Since PRWORA, the 
focus of CCDF has shifted from one largely dedicated to the goal of 
enabling low-income parents to work to one that includes a focus on 
promoting positive child development as we have learned a great deal 
about the value of high quality child care for young children. While 
low-income parents continue to need access to child care in order to 
work and gain economic independence, policymakers and the public now 
recognize that the quality of child care arrangements is also 
critically important.
    Fifteen years ago, HHS (in collaboration with other federal 
agencies and private partners) funded the National Academies of 
Sciences to evaluate and integrate the research on early childhood 
development and the role of early experiences. (National Research 
Council and Institute of Medicine, From Neurons to Neighborhoods: The 
Science of Early Childhood Development, Board on Children, Youth, and 
Families, Commission on Behavioral and Social Sciences and Education, 
2000.) An overarching conclusion was that early experiences matter for 
healthy child development. Nurturing and stimulating care given in the 
early years of life build 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,'' and, ``. . . children 
who have traditionally been at risk of not doing well in school are 
affected more by the quality of child care experiences than other 
children.'' (E. Peisner-Feinberg, M. Burchinal, et al., The Children of 
the Cost, Quality, and Outcomes Study Go to School: Executive Summary, 
University of North Carolina at Chapel Hill, Frank Porter Graham Child 
Development Center, 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) showed that the quality of child care children received in 
their preschool years had small but detectable associations with their 
academic success and behavior into adolescence. (NICHD, Study of Early 
Child Care and Youth Development, 2010) Recent follow-up studies to the 
well-known Abecedarian Project, which began in 1972 and has followed 
participants from early childhood through young adulthood, found that 
adults who participated in a high quality early childhood education 
program are still benefiting from their early experiences. Abecedarian 
Project participants had significantly more years of education than 
their control group peers, were four times more likely to earn college 
degrees, and had lower risk of cardiovascular and metabolic diseases in 
their mid-30s. (Campbell, Pungello, Burchinal, et al., Adult Outcomes 
as a Function of an Early Childhood Educational Program: An Abecedarian 
Project Follow-Up, Frank Porter Graham Child Development Institute, 
Developmental Psychology, 2012 and Campbell, Conti, Heckman et al, 
Early Childhood Investments Substantially Boost Adult Health, Science 
28 March 2014, Vol. 343.)
    Research also confirms that consistent time spent in afterschool 
activities during the elementary school years is linked to narrowing 
the gap in math achievement, greater gains in academic and behavioral 
outcomes, and reduced school absences. (Auger, Pierce, and Vandell, 
Participation in Out-of-School Settings and Student Academic and 
Behavioral Outcomes, presented at the Society for Research in Child 
Development Biennial Meeting, 2013.) 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, Weissberg, and 
Pachan, The Impact of Afterschool Programs that Seek to Promote 
Personal and Social Skills in Children and Adolescents, American 
Journal of Community Psychology, 2010.) 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 often operates in conjunction with other programs including 
Head Start, Early Head Start, state pre-kindergarten, and before-and 
after-school programs. States and Territories 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 funds quality improvements for settings beyond those that serve 
children receiving subsidies. CCDF has helped lay the groundwork for 
development of State early learning systems. Lead Agencies have used 
CCDF funds to make investments in professional development systems to

[[Page 80471]]

ensure a well-qualified and effective early care and education 
workforce. Lead Agencies have provided scholarships for child care 
teachers and worked closely with higher education, especially community 
colleges, to increase the number of teachers with training or a degree 
in early childhood or youth development. Lead Agencies have used CCDF 
funds to build quality rating and improvement systems (QRIS) to provide 
consumer education information to parents, help providers raise 
quality, and create a more systemic approach to child care quality 
improvement efforts and accountability. These investments have likely 
also generated benefits for children enrolled in unsubsidized child 
care programs.
    Child care is a core early learning and care program and plays an 
important role within a broad spectrum of early childhood programs 
supporting young children. The Administration has consistently sought 
to support State and Territory efforts to improve the coordination and 
alignment of early childhood programs through multiple efforts, 
including the Race to the Top-Early Learning Challenge and the Early 
Head Start-Child Care Partnerships. Most recently, ACF published Caring 
for our Children Basics, a set of recommendations intended to create a 
common framework to align basic health and safety efforts across all 
early childhood settings. This proposed rule builds on the alignment 
and coordination work that has been advanced by the Administration. For 
example, Lead Agencies would be required to collaborate with multiple 
entities, including State Advisory Councils on Early Childhood 
Education and Care, authorized by the Head Start Act, or similar 
coordinating bodies. In addition, minimum 12-month eligibility periods 
will make it easier to align child care assistance with eligibility 
periods for other programs, such as Early Head Start, Head Start, and 
state prekindergarten. Policies that stabilize access to child care 
assistance for families and bring financial stability to child care 
providers will play an important role in supporting the success of 
Early Head Start-Child Care Partnerships.
    According to a recent report by the President's Council of Economic 
Advisors, investments in early childhood development will reap economic 
benefits now and in the future. Immediate benefits include increased 
parental earnings and employment; future benefits come when children 
who experience high quality early learning opportunities are prepared 
for success in school and go on to earn higher wages as adults. 
(Council of Economic Advisors, Executive Office of the President of the 
United States, The Economics of Early Childhood Investments, 2014.) 
Decades of research show that experiences babies and toddlers have in 
their earliest years shape the architecture of the brain and have long-
term impacts on human development. At the same time, increasing the 
employability and stability of parents reduces the impact of poverty on 
children and sustains our nation's workforce and economy. Studies have 
shown that access to reliable child care contributes to increased 
employment and earnings for parents. (National Research Council and 
Institute of Medicine, From Neurons to Neighborhoods: The Science of 
Early Childhood Development, Board on Children, Youth, and Families, 
Commission on Behavioral and Social Sciences and Education, 2000 and 
Council of Economic Advisors, The Economics of Early Childhood 
Investments.) In short, high quality child care is a linchpin to 
creation of an educational system that successfully supports the 
country's workforce development, economic security, and global 
competitiveness. Successful implementation of the CCDBG Act of 2014 
will ensure that child care is not only safe, but also supports 
children's healthy development and their future academic achievement 
and success.
    Development of Regulation. After enactment of the law, the Office 
of Child Care (OCC) and the Office of the Deputy Assistant Secretary 
for Early Childhood Development in ACF conducted outreach to engage 
with a variety of stakeholders to better understand the implications of 
its provisions. OCC created a CCDF reauthorization page on its Web site 
to provide public information and an email address to receive 
questions. OCC received approximately 650 questions and comments 
through this email address, webinars, inquiries to regional offices, 
and meetings with State, Territory and Tribal Administrators. OCC 
leadership and staff participated in more than 21 listening sessions 
with approximately 675 people representing diverse national, state, and 
local stakeholders regarding the law, held webinars, and gave 
presentations at national conferences. Participants included state 
human services agencies, child care caregivers and providers, parents 
with children in child care, child care resource and referral agencies, 
national and State advocacy groups, national stakeholders including 
faith-based communities, after-school and school-age caregivers and 
providers, child care researchers, State and local early childhood 
organizations, provider associations, labor unions, and Head Start 
grantees. In addition, OCC held five meetings with State and Territory 
CCDF administrators and a series of consultations with Tribal leaders 
to describe the law and to gather input from Federal grantees with 
responsibility for operating the CCDF program. This process informed 
and was invaluable to ACF's development of this proposed rule.
    ACF had previously issued an NPRM for CCDF in May 2013, prior to 
passage of the CCDBG Act of 2014 (78 FR 29442, May 20, 2013). While 
that NPRM has since been withdrawn (80 FR 25260, May 4, 2015), public 
comments received by ACF in 2013 have informed the development of 
content for this proposed rule. Where relevant, we refer to comments 
received in response to the 2013 CCDF NPRM in the preamble for this 
proposed rule.
    Use of terms. Terminology used to refer to child care settings and 
the individuals who provide care for children vary throughout the early 
childhood and afterschool fields. In this proposed rule, the terms 
caregiver, director, and teacher refer to individuals. The term 
provider refers to the entity providing child care services. This may 
be a child care program, such as a child care center, or an individual 
in the case of family child care or in-home care. Complete descriptions 
of these terms are included in Subpart A of this proposed rule.

B. Discussion of Changes Made in This Proposed Rule

    The changes included in this proposed rule provide detail on major 
provisions of the CCDBG Act of 2014 to: (1) Protect the health and 
safety of children in child care; (2) help parents make informed 
consumer choices and access information to support child development; 
(3) provide equal access to stable, high quality child care for low-
income children; and (4) enhance the quality of child care and the 
early childhood workforce.
    First, Congress established minimum health and safety standards 
including mandatory criminal background checks, at least annual 
monitoring of providers, and health and safety training. Children in 
CCDF-funded child care will now be cared for by caregivers who have had 
basic training in health and safety practices and child development. 
Parents will know that individuals who care for their children do not 
have prior records of behavior that endanger their children. Health and 
safety is a

[[Page 80472]]

necessary foundation for quality child care that supports early 
learning and development. 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).
    Second, Congress increased consumer education requirements for 
States and Territories and made clear that parents need transparent 
information about health and safety practices, monitoring results, and 
the quality of child care providers. Parents will now be able to easily 
view on a Web site the standards a child care provider meets and their 
record of compliance. Most States and Territories administering the 
CCDF program have already begun building QRIS, which make strategic 
investments to provide pathways for providers to reach higher quality 
standards. Our proposed rule builds on the reauthorization and Lead 
Agency efforts to inform parents about the quality of providers by 
proposing that the consumer education Web site include provider-
specific quality information, if available, such as from a QRIS, and 
that Lead Agencies provide parents receiving CCDF with information 
about the quality of their chosen provider.
    Third, parents need access to stable, high quality child care for 
low-income children and the law affirms that they should have equal 
access to settings that are comparable to those accessible to non-CCDF 
families. Through this proposed rule, we detail the law's continuity of 
care provisions, such as extending eligibility for child care for a 
minimum of 12 months regardless of a parent's temporary change in 
employment or participation in education or training. Continuity of 
services contributes to improved job stability and is important to a 
family's financial health. Family economic stability is 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. Disruptions in services can stunt or delay socio-
emotional and cognitive development. 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 demonstrated a relationship between child care stability 
and social competence, behavior outcomes, cognitive outcomes, language 
development, school adjustment, and overall child well-being. (Adams, 
Rohacek, and Danzinger, Child Care Instability, The Urban Institute, 
2010.) This area includes a number of proposed changes including 
requirements for limiting administrative burdens on parents and 
enabling families to retain their child care assistance as their income 
increases in order to move towards economic success. We also address 
the law's equal access provisions by requiring that base payment rates 
be established at least at a level that supports implementation of the 
health, safety, and quality requirements in the NPRM and ensure access 
to care that is of comparable quality as care available to families 
with incomes above 85 percent of State median income, ensuring that 
copayments are affordable for families, and establishing provider 
payment practices that support access to high quality child care.
    Finally, this proposed rule addresses improvements in the new law, 
which would enhance the quality of child care and the early childhood 
workforce. States and Territories would need to report on their 
investments in quality activities, which will now be a greater share of 
CCDF spending. They will also expand quality investments in infant-
toddler care. High quality care for children under age 3 is the most 
expensive and hardest care to find during the most formative years. The 
law requires States and Territories to have training and professional 
development standards in effect for CCDF caregivers, providers, and we 
propose building on this requirement by outlining the components of a 
professional development framework. Research shows the fundamental 
importance of the caregiver in a high quality early learning setting 
and this proposed rule would help ensure that early childhood 
professionals have access to the knowledge and skills they need to best 
support young children and their development.
    Through our proposed changes, we have strengthened program 
integrity by proposing changes that address Lead Agencies' policies for 
internal controls, fiscal management, and processes for identifying 
fraud and improper payments. We have also clarified key eligibility and 
payment policies as they relate to improper payments.
    In developing this proposed rule, we were mindful of CCDF's purpose 
to allow Lead Agencies maximum flexibility in developing child care 
policies and programs. In some areas, we have added flexibility in 
order to allow Lead Agencies 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. In many areas, we 
have proposed new requirements as dictated by the updated law or 
because they further advance the revised purposes of the CCDF program.
    Changes in the law, and in this proposed rule, would impact the 
State, Territorial, and Tribal agencies that administer the CCDF 
program. The law requires changes across many areas: Child care 
licensing, subsidy, quality, workforce, and program integrity and 
requires coordination across State agencies. Achieving the full visions 
of reauthorization will be challenging, but this effort is necessary to 
improve child care in this country for the benefit of our children. ACF 
has and will continue to consult with State, Territorial, and Tribal 
agencies and provide technical assistance throughout implementation.
    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, Aug. 4, 1992; 63 FR 39936, Jul. 24, 1998; 72 FR 27972, May 18, 
2007; 72 FR 50889, Sep. 5, 2007).

C. Effective Date

    ACF expects provisions included in the Final Rule to become 
effective 60 days from the date of publication of the Final Rule, 
except for provisions with a later effective date as defined in the law 
(discussed further below). Compliance with provisions in the Final Rule 
would be determined through ACF review and approval of CCDF Plans, 
including State Plan amendments, as well as through the use of Federal 
monitoring, including on-site monitoring visits as necessary. ACF notes 
that Lead Agencies must comply with the provisions of the Child Care 
and Development Block Grant (CCDBG) Act of 1990, as revised by the 
CCDBG Act of 2014. Compliance with key statutorily required 
implementation

[[Page 80473]]

dates outlined in Program Instruction CCDF-ACF-PI-2015-02 (http://www.acf.hhs.gov/programs/occ/resource/pi-2015-02), dated January 9, 
2015, remain in effect. In some cases, the CCDBG Act of 2014 specifies 
a particular date when a provision is effective. Where the law does not 
specify a date, the new requirements became effective upon the date of 
enactment and States and Territories have until September 30, 2016 to 
implement the new statutory requirement(s). ACF has previously stated 
that if a State or Territory cannot certify compliance with a specific 
requirement in the FY 2016-2018 CCDF Plan, the Lead Agency must provide 
a State/Territory-specific implementation plan for achieving compliance 
with such provision(s) no later than September 30, 2016.
    We recognize that, at the time of publication of this NPRM, States 
and Territories are preparing their FY 2016-2018 CCDF Plans, due March 
1, 2016. States and Territories have been asked to comply with the law 
based on their reasonable interpretation of the requirements in the 
revised CCDBG statute. Once a final rule is issued, any State or 
Territory that does not fully meet the requirements of the regulations 
would need to revise its policies and procedures to come into 
compliance, and file appropriate Plan amendments related to those 
changes.
    We recognize that some of the proposed changes in this NPRM may 
require action on the part of a State's legislature or require State-
level rulemaking in order to implement. 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.
    ACF has extended CCDF Tribal Plans for one year. Tribal Lead 
Agencies will submit new 3-year Plans for FY 2017-2019, with an 
effective date of October 1, 2016. ACF expects that all provisions 
related to Tribes included in the Final Rule would become effective 60 
days from the date of publication of the Final Rule. Tribal Lead 
Agencies may also want to consider ACF's interpretation of the CCDBG 
Act included in this NPRM as they consider policy changes and prepare 
CCDF plans.

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)
    The CCDBG Act of 2014 amended and expanded the law's previous 
``goals'' and renamed them ``purposes''. We are proposing changes to 
regulatory language at 45 CFR 98.1 to describe the revised purposes of 
the CCDF program, according to the updated law.
    The first part of the regulations at Sec.  98.1(a) mirrors the 
statutory language describing the revised purposes of CCDF. Language 
revised by the new law is indicated in italics in this paragraph. The 
purposes of CCDF are now: (1) To allow each State maximum flexibility 
in developing child care programs and policies that best suit the needs 
of children and parents within that State; (2) to promote parental 
choice to empower working parents to make their own decisions regarding 
the child care services that best suits their family's needs; (3) to 
encourage States to provide consumer education information to help 
parents make informed choices about child care services and to promote 
involvement by parents and family members in the development of their 
children in child care settings; (4) to assist States in delivering 
high quality, coordinated early childhood care and education services 
to maximize parents' options and support parents trying to achieve 
independence from public assistance; (5) to assist States in improving 
the overall quality of child care services and programs by implementing 
the health, safety, licensing, training, and oversight standards 
established in this subchapter and in State law (including State 
regulations); (6) to improve child care and development of 
participating children; and (7) to increase the number and percentage 
of low-income children in high quality child care settings.
    The second part at Sec.  98.1(b) further defines the purposes of 
this proposed rule. We no longer refer to this section as the purposes 
of CCDF, as in the current regulations, so as not to create confusion 
with the purposes now established in law. We have retained much of the 
previous language in this paragraph but have made amendments and 
additions to reflect the priorities in this proposed rule of improving 
the health, safety, and quality of child care and supporting pathways 
to family economic stability. We have removed language that was 
included in the law's new purposes so as to avoid duplication. The new 
language shown in italics: (1) Maximize parental choice of safe, 
healthy and nurturing child care settings through the use of 
certificates and through grants and contracts, and by providing parents 
with information about child care programs; (2) Include in their 
programs a broad range of child care providers, including center-based 
care, family child care, in-home care, care provided by relatives and 
sectarian child care providers; (3) Improve the quality and supply of 
child care and before- and after-school care services that meet 
applicable requirements and promotes child development and learning and 
family economic stability; (4) Coordinate planning and delivery of 
services at all levels, including Federal, State, Tribal, and local; 
(5) Design flexible programs that provide for the changing needs of 
recipient families, and engages families in their children's 
development and learning; (6) Administer the CCDF responsibly to ensure 
that statutory requirements are met and that adequate information 
regarding the use of public funds is provided; (7) Design programs that 
provide uninterrupted service to families and providers, to the extent 
statutorily possible, to support parental education, training, and 
employment and continuity of care that minimizes disruptions to 
children's learning and development; (8) Provide a progression of 
training and professional development opportunities for caregivers, 
teachers, and directors to increase their effectiveness in supporting 
children's development and learning and strengthen the child care 
workforce.
Definitions (Section 98.2)
    We are proposing technical changes to definitions at Sec.  98.2 and 
the addition of six new definitions. In this paragraph, italics 
indicate defined terms. First, we are proposing technical changes 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. Some 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. According to the National Association for Regulatory 
Administration, at least 13 States do not

[[Page 80474]]

license group homes as a separate category. Some States and Territories 
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., an individual 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 of family 
child care provider is limited to one individual who provides services 
as the sole caregiver. The proposed definition would revise family 
child care provider to include one or more individuals who provide 
child care services. The remainder of the definition stays 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.
    Lead Agencies may 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 allowing States, Territories, and Tribes to more 
easily align their practices with Federal requirements. Specifically, 
Lead Agencies would 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.  98.45(b)(1). Rather, group homes 
would now be considered family child care homes for these purposes.
    These changes were proposed in the 2013 CCDF NPRM and received 
mostly supportive comments. Several commenters did not support the 
deletion of group home child care. One commenter said legislation would 
be required to remove group home day care from their State statute and 
would result in those providers being classified as child care centers 
leading to additional costs because of higher payment rates. Another 
commenter said elimination of group home care would impact the market 
rate for this category of care since the State surveys group home and 
family child care providers separately. We are clarifying that States 
and Territories would not be required to eliminate group homes from 
their categories of care or change the way they categorize providers 
for the purposes of analyzing or setting provider payment rates.
    We are also proposing two additional changes to current definitions 
as called for by new statutory language. We are amending the definition 
of eligible child so that, in addition to being at or below 85 percent 
of the State median income for a family of the same size, a member of 
the family must certify that the ``family assets do not exceed 
$1,000,000'' as specified in Section 658P(4)(B) of the Act. We are 
amending the definition of Lead Agency so that it may refer to a State, 
Territorial or Tribal entity, or a joint interagency office, designated 
or established under Sec. Sec.  98.10 and 98.16(a) as indicated at 
Section 658P(9) of the Act.
    Finally, we are proposing to add five new terms to the definitions 
due to statutory changes and to include terms commonly used in the 
child care profession. We propose defining child with a disability as: 
A child with a disability as defined in section 602 of the Individuals 
with Disabilities Education Act (20 U.S.C. 1401); a child who is 
eligible for early intervention services under part C of the 
Individuals with Disabilities Education Act (20 U.S.C. 1431 et seq.); a 
child who is less than 13 years of age and who is eligible for services 
under section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); or 
a child with a disability, as defined by the State. This definition is 
included in the Act. We changed the language from ``and'' to ``or'' to 
clarify that a child only has to meet one of the four options in order 
to be considered a child with a disability. We are defining English 
learner as an individual who is limited English proficient, as defined 
in section 9101 of the Elementary and Secondary Education Act of 1965 
(20 U.S.C. 7801) or section 637 of the Head Start Act (42 U.S.C. 9832) 
as defined verbatim in the Act at Section 658P(5). We are defining a 
child experiencing homelessness as defined in section 725 of Subtitle 
VII-B of the McKinney-Vento Act (42 U.S.C. 11434a). While a definition 
of child experiencing homelessness was not included in the CCDBG Act, 
we understand the intent of Congress was to apply the McKinney-Vento 
definition here based on a letter sent to HHS Secretary Sylvia Burwell 
in February 2015 from Senate and House members (Senator Lamar 
Alexander, Senator Patty Murray, Senator Richard Burr, Senator Barbara 
Mikulski, Representative John Kline, Representative Robert ``Bobby'' 
Scott, Representative Todd Rokita, and Representative Marcia Fudge).
    We also propose two new terms that reflect professional recognition 
for early childhood and school-age care teachers and the terms used in 
the field. We are defining teacher as a lead teacher, teacher, teacher 
assistant or teacher aide who is employed by a child care provider for 
compensation on a regular basis and whose responsibilities and 
activities are to organize, guide and implement activities in a group 
or individual basis, or to assist a teacher or lead teacher in such 
activities, to further the cognitive, social, emotional, and physical 
development of children from birth to kindergarten entry and/or school-
age children and may be a family child care provider. We recognize that 
the responsibilities and qualifications for lead teachers, teachers, 
and teacher assistants are different as set by child care licensing, 
state early childhood professional development systems, and state 
teacher licensure policies and have proposed these definitions for 
simplification in relation to requirements in the law and this proposed 
regulation. We strongly encourage States and Territories to recognize 
differentiated roles and qualifications in their requirements and 
systems. We are defining director as a person who has primary 
responsibility for the daily operations management for a child care 
provider, which may be a family child care home, and which may serve 
children from birth to kindergarten entry and/or school-age children. 
The definition of caregiver in the Act and current regulations remains 
unchanged.
    The proposed definitions for these terms are based on a white paper

[[Page 80475]]

commissioned by ACF for the proposed revisions to the U.S. Department 
of Labor's Standard Occupational Classification. (Proposed Revisions to 
the Definitions for the Early Childhood Workforce in the Standard 
Occupational Classification. White Paper Commissioned by the 
Administration for Children and Families, U.S. Department of Health and 
Human Services, prepared by the Workgroup on the Early Childhood 
Workforce and Professional Development under contract through the Child 
Care and Early Education Policy and Research Analysis, 2005-2018. June 
18, 2014, www.acf.hhs.gov/sites/default/files/occ/soc_acf_submittal.pdf).

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 
defined in the statute. A Lead Agency serves as the single point of 
contact for all child care issues, determines the basic use of CCDF 
funds and priorities for spending CCDF funds, and promulgates the rules 
governing overall administration and oversight.
Lead Agency Responsibilities (Section 98.10)
    We are amending language at Sec.  98.10 in accordance with new 
statutory language at Section 658D(a) that a Lead Agency may be a 
collaborative agency or a joint interagency office, as designated or 
established by the Governor of the State (or by the appropriate Tribal 
leader or applicant). Paragraphs (a) through (e) remain unchanged. We 
propose to add paragraph (f) to require that, at the option of an 
Indian Tribe or Tribal organization in the State, a Lead Agency should 
consult, collaborate and coordinate in the development of the State 
Plan with Tribes or Tribal organizations in the State in a timely 
manner pursuant to Sec.  98.14. Because States also provide CCDF 
assistance to Indian children, States benefit by coordination with 
Tribes and we encourage States to be proactive in reaching out to the 
appropriate Tribal officials for collaboration. We've added ``consult'' 
to recognize the need for formal, structured consultation with Tribal 
governments, including Tribal leadership, and the fact that many States 
and Tribes have consultation policies and procedures in place.
Administration Under Contracts and Agreements (Section 98.11)
    Written Agreements. Section 98.11 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 the written agreements may vary based on the role the agency 
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 Lead Agencies operate 
primarily through a county-based system, while others devolve decision-
making and administration to local workforce boards, school readiness 
coalitions or community-based organizations such as child care resource 
and referral agencies. Through working with grantees to improve program 
integrity, ACF has learned 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.
    We included this proposed provision in our 2013 NPRM and received a 
large number of comments from labor unions regarding this change, 
specifically when a sub-recipient of the Lead Agency establishes 
affiliation agreements with family child care networks to serve CCDF 
children. Unions commented that these requirements should apply in any 
and all instances where CCDF funds are sub-granted or passed through to 
an entity, including arrangements between intermediary entities and 
individual child care providers. Commenters believed this additional 
requirement would increase transparency and promote greater 
accountability.
    We are clarifying that, as proposed, this provision applies only to 
written agreements between Lead Agencies and first-level sub-recipients 
(and not to agreements between first-level sub-recipients and their 
sub-recipients). The regulations state that the agreement ``must 
specify the mutual roles and responsibilities of the Lead Agency and 
the other agencies''--indicating that the Lead Agency is a party to the 
agreement. This language is intended to be broad as sub-entities may 
fulfill any number of different roles or projects, including 
implementing quality improvement activities, determining eligibility 
for families, or providing consumer education on behalf of the Lead 
Agency. We strongly encourage all agreements between sub-recipients to 
have similar provisions, but prefer to leave this as an area of 
flexibility to give State and local agencies discretion over such 
details, given the wide-range of conditions and circumstances involved. 
Also, we note that regulations at Sec.  98.67(c)(2) require Lead 
Agencies to have in place fiscal control and accounting procedures that 
permit the tracing of funds to a level of expenditure adequate to 
establish that such funds have not been used in violation of the CCDF 
rules. Therefore, we would expect that when Lead Agencies devolve 
program administration to first, second, and third-level entities they 
necessarily must be concerned with the integrity and transparency of 
all written agreements involving CCDF funds.
    We appreciate commenters on the 2013 NPRM bringing this issue to 
our attention. We are cognizant that some States and Territories lack 
strong requirements to ensure there is transparency in cases where a 
sub-recipient contracts with a network of family child care providers 
to serve children receiving CCDF. This proposed rule places a strong 
emphasis on implementation of provider-friendly payment practices, 
including proposing that there be a payment agreement or authorization 
of services for all payments received by child care providers. When a 
local entity is contracting with a family child care network for 
services, we agree that there should be a clear understanding from the 
outset regarding payment rates for providers, any fees the provider may 
be subject to, and payment policies.
    Finally, in Sec.  98.11(b)(5) we propose to add a reference to the 
HHS regulations requiring that Lead Agencies oversee the

[[Page 80476]]

expenditure of funds by sub-grantees and contractors, in accordance 
with 75 CFR parts 351 to 353. These regulations implement the Office of 
Management and Budget's Uniform Administrative Requirements for Federal 
awards (see ACF, Uniform Administrative Requirements, Cost Principles, 
and Audit Requirements, Program Instruction: CCDF-ACF-PI-2015-01, 
January 2015.)
Plan Process (Section 98.14)
    Coordination. Currently, Sec.  98.14(a)(1) requires Lead Agencies 
to coordinate the provision of program services with other Federal, 
State, and local early care and development programs, including the 
provision of such programs for the benefit of Indian children. Section 
658E(c)(2)(O) of the Act added language to existing requirements for 
coordination of programs that benefit Indian children requiring Lead 
Agencies to also coordinate the provision of programs that serve 
infants and toddlers with disabilities, children experiencing 
homelessness and children in foster care. We include all children with 
disabilities, not just infants and toddlers, in the regulatory 
language, given the critical importance of serving that population of 
children.
    Lead Agencies also are required to consult and coordinate services 
with agencies responsible for public health, public education, 
employment services/workforce development, and TANF. The CCDBG Act of 
2014 added a requirement for the Lead Agency to develop the Plan in 
coordination with the State Advisory Council on Early Childhood 
Education and Care authorized by the Head Start Act (42 U.S.C. 9831 et 
seq.) at Section 658E(c)(2)(R).
    We propose to amend Sec.  98.14(a)(1) to add the State Advisory 
Council on Early Childhood Education and Care or similar coordinating 
body, as well as additional new entities with which Lead Agencies would 
be 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 pre-kindergarten programs, if applicable, and 
educational services provided under Parts B and C of the Individuals 
with Disabilities Education Act (IDEA) (20 U.S.C. 1400). Other proposed 
new coordinating entities include agencies responsible for child care 
licensing; Head Start collaboration; Statewide after-school network or 
other coordinating entity for out-of-school time care; emergency 
management and response; the Child and Adult Care Food Program (CACFP); 
Medicaid; mental health services agencies; services for children 
experiencing homelessness, including State Coordinators for the 
Education of Children and Youth Experiencing Homelessness; and, to the 
extent practicable, local liaisons designated by local educational 
agencies (LEAs) in the State as required by the McKinney-Vento Act (42 
U.S.C. 11432) and the Department of Housing and Urban Development's 
Continuum of Care and Emergency Solutions Grantees.
    Over time, the CCDF program has become an essential support in 
local communities to provide access to early care and education in 
before and after-school settings and to improve the quality of care. 
Many Lead Agencies already 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, child welfare, family support, public health, and 
disability services. Local coordinating councils or advisory boards 
also often provide input and direction on CCDF-funded programs.
    This type of coordination is frequently facilitated through 
entities such as State Advisory Councils on Early Childhood Education 
and Care. 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 
education; family literacy; and employment training. These 
comprehensive services are crucial in helping families progress towards 
economic stability and in helping parents provide a better future for 
their young children.
    Implementation of the requirements of the CCDBG Act of 2014 will 
require leadership and coordination between Lead Agencies and other 
child- and family-serving agencies, services, and supports at the State 
and local levels, including those identified above. For example, in 
many States, child care licensing is administered in a different agency 
than CCDF. In those States, implementation of the inspection and 
monitoring requirements included in the CCDBG Act necessitates 
coordination across agencies.
    We proposed adding most of the above entities in the 2013 NPRM and 
received a large number of comments, nearly all supportive. Many 
commenters suggested including additional coordinating partners, such 
as child care resource and referral agencies, provider associations, 
maternal and child health home visiting programs, faith-based 
organizations, mental health services agencies, and Affordable Care Act 
health care outreach coordinators. With four exceptions, discussed 
below, we are declining to propose additional agencies as coordinating 
partners. We wanted to preserve State, Territory, and Tribal 
flexibility and keep requirements at this section manageable for Lead 
Agencies. This is not to devalue the importance of other coordinating 
partners suggested by commenters. Lead Agencies have the flexibility, 
and are encouraged, to engage a wide variety of cross-sector partners 
when developing the CCDF Plan. Some of the coordinating partners 
suggested by commenters, such as provider associations and faith-based 
organizations are already assumed to be included in existing 
regulations at Sec.  98.14(a)(1), which requires coordination with 
child care and early childhood development programs.
    In this proposed rule, we have included CACFP, which was not 
included in our list of proposed entities for coordination in the 2013 
NPRM. CACFP is a Federal program that provides assistance to child care 
providers, including centers and family child care homes, for the 
provision of nutritious meals and snacks served to participants. A 
large number of public and private nonprofit child care centers, Head 
Start programs, before- and after-school programs, and other providers 
that are licensed or approved to provide child care services, including 
license-exempt CCDF providers, participate in CACFP. More than 3.3 
million children receive nutritious meals and snacks each day as part 
of the child care they receive, and many children supported by CCDF 
subsidies attend child care programs that also participate in CACFP.
    We are proposing to add CACFP because of its nutritional 
importance. In addition, we propose to include CACFP because some of 
the training and inspection requirements for child care providers 
participating in CACFP are similar to those that are now required for 
providers receiving CCDF funds. CACFP requires periodic unannounced 
site visits to prevent and identify management deficiencies, fraud, and 
abuse under the program, as well as to improve program operations. In 
order to maximize available resources, we are proposing to require 
coordination between the State/Territory CCDF Lead Agency and CACFP 
agency, if they are

[[Page 80477]]

different. In the FY 2014-2015 CCDF Plans, 43 States and Territories 
indicated that they coordinate with CACFP agencies in administration of 
the child care program. For example, one State described sharing lists 
of child care providers receiving CCDF funds with personnel who have 
oversight of CACFP to maximize access to CACFP services. Another State 
described coordinating with CACFP in monitoring child care services and 
providing professional development to child care caregivers on 
nutrition and health.
    The second entity included above that was not included in the 2013 
NPRM is the State agency responsible for services for children 
experiencing homelessness. The CCDBG Act of 2014 added a number of 
provisions related to improving access to high quality child care for 
children experiencing homelessness and we believe that implementing 
these provisions will necessitate coordination with State agencies 
already overseeing services for this population.
    Third, we also propose to require coordination with State mental 
health services agencies, which were not proposed for coordination in 
the 2013 NPRM. We are choosing to propose these partners because of the 
desire to encourage collaboration that will make comprehensive services 
available for children who require mental health services.
    We also propose to include the State/Territory Medicaid agency, 
which was not included in our list of proposed entities for 
coordination in the 2013 NPRM. The reauthorized CCDBG requires Lead 
Agencies to provide information on resources and services for parents 
to access developmental screenings for their children, including 
through the coordinated use of the Early and Periodic Screening, 
Diagnosis, and Treatment (EPSDT) program, which would require 
coordination with the Medicaid agency.
    Finally, existing regulation at Sec.  98.14(a)(1)(B) requires Lead 
Agencies to coordinate the provision of services with employment 
services/workforce development. We propose to retain this requirement 
without change since this remains a critical area for coordination. 
Last year the President signed the Workforce Innovation and Opportunity 
Act (WIOA) into law, replacing the Workforce Investment Act of 1998. 
WIOA authorizes and provides a strategic framework for Federal 
investments in: (1) Employment and training services for adults, 
dislocated workers, and youth and Wagner-Peyser employment services 
administered by the Department of Labor (DOL) through formula grants to 
States; (2) adult education and literacy programs and Vocational 
Rehabilitation State grant programs that assist individuals with 
disabilities in obtaining employment administered by the Department of 
Education (ED); and (3) other programs administered by DOL, ED, and 
HHS, including programs for specific vulnerable populations such as the 
Job Corps, YouthBuild, Indian and Native Americans, and Migrant and 
Seasonal Farmworker programs. Because child care is an important 
support for families engaged in workforce training and development, we 
strongly encourage CCDF Lead Agencies to collaborate with WIOA 
implementation efforts as part of the requirement at Sec.  
98.14(a)(1)(B) to coordinate with employment services/workforce 
development.
    Combined Funding. In paragraph (3) of Sec.  98.14(a) we add the 
statutory requirement that any Lead Agency that combines funding for 
CCDF services with any other early childhood programs shall provide a 
description in the CCDF Plan of how the Lead Agency will combine and 
use the funding according to Section 658E(c)(2)(O). Lead Agencies have 
the option of combining funding for CCDF child care services with 
programs operating at the Federal, State, and local levels for children 
in preschool programs, Tribal early childhood programs, and other early 
childhood programs, including those serving infants and toddlers with 
disabilities, children experiencing homelessness, and children in 
foster care. Combining funds could include blending, layering, or 
pooling multiple funding streams in an effort to expand and/or enhance 
services for children and families. For example, Lead Agencies may use 
multiple funding sources to offer grants or contracts to programs to 
deliver services; a Lead Agency may allow county or local government to 
use coordinated funding streams; or policies may be in place that allow 
local programs to layer funding sources to provide full-day, full-year 
child care that meets Early Head Start, Head Start or State/Territory 
pre-kindergarten standards in addition to child care licensing 
requirements. As per the OMB Circular A-133 Compliance Supplement 2014, 
https://www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2014, CCDF funds may be used in 
collaborative efforts with Head Start programs to provide comprehensive 
child care and development services for children who are eligible for 
both programs. In fact, the coordination and collaboration between Head 
Start and CCDF is strongly encouraged by sections 640(g)(1)(D) and (E), 
640(h), 641(d)(2)(H)(v), and 642(e)(3) of the Head Start Act in the 
provision of full working day, full calendar year comprehensive 
services. In order to implement such collaborative programs, which 
share, for example, space, equipment or materials, grantees may blend 
several funding streams so that seamless services are provided. Lead 
Agencies can layer Early Head Start and CCDF funds for the same child 
as long as there is no duplication in payments for the exact same part 
of the service. This is an option that some Lead Agencies are already 
implementing. Early Head Start-Child Care Partnerships grants, which 
allow Early Head Start programs to partner with local child care 
centers and family child care providers serving infants and toddlers 
from low-income families, offer a new important opportunity for further 
utilization of this funding strategy. We do note that, when CCDF funds 
are combined with other funds, Sec.  98.67 continues to require Lead 
Agencies to have in place fiscal control and accounting procedures 
sufficient to prepare required reports and trace funds to a level of 
expenditure adequate to establish that such funds have been used on 
allowable activities.
    Public-Private Partnerships. We propose to add paragraph (a)(4) to 
Sec.  98.14 in accordance with Section 658E(c)(2)(P), which requires 
Lead Agencies to demonstrate in their Plan how they encourage public-
private partnerships to leverage existing child care and early 
education service delivery systems and to increase the supply and 
quality of child care services for children under age 13, such as by 
implementing voluntary shared services alliance models (i.e., 
cooperative agreement among providers to pool resources to pay for 
shared fixed costs and operation). Public-private partnerships may 
include partnerships among State/Territory and public agencies, Tribal 
organizations, private entities, faith based organizations and/or 
community-based organizations.
    Paragraphs (b) and (c) of this section would remain unchanged.
    Public availability of Plans. We propose to add a new 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/
Territory Web sites (such as the consumer education Web site required 
at Sec.  98.33(a)) to ensure that there is transparency for the public, 
and particularly for parents seeking

[[Page 80478]]

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 Plan period (now three years) through submission of Plan 
amendments (subject to ACF approval), but are not currently required to 
proactively make those amendments available to the public.
    We proposed this provision in the 2013 NPRM and received several 
comments requesting that Lead Agencies be required to make Plans and 
Plan amendments publicly available in multiple languages. We strongly 
encourage Lead Agencies to be mindful of the needs of families, 
caregivers, and providers with limited English proficiency and persons 
with disabilities. States should continue to work with families and 
community groups to give them a voice in program planning and 
policymaking, for example, by organizing outreach meetings with 
competent interpreters, recruiting qualified sign language and 
multilingual eligibility staff, and providing accessible vital 
documents. Lead Agencies should provide notice of where persons with 
limited English proficiency and persons with disabilities can obtain an 
interpretation or translation of key documents that are integral to 
service delivery, which may include CCDF Plans.
Assurances and Certifications (Section 98.15)
    The Act requires Lead Agencies to provide assurances and 
certifications in its Plan. We are proposing to add new assurances 
based on new statutory language.
    Lead Agencies are required to provide assurance that training and 
professional development requirements comply with Sec.  98.44 and are 
applicable to caregivers, teachers, and directors working for child 
care providers receiving CCDF funds. They are also required to provide 
assurance that, to the extent practicable, enrollment and eligibility 
policies support the fixed costs of providing child care services by 
delinking provider payment rates from an eligible child's occasional 
absences in accordance with Sec.  98.45(m). Both of these requirements 
are discussed in detail in later sections of this proposed rule.
    Section 98.15(a)(9) adopts the statutory requirement for Lead 
Agencies to provide assurance that they will maintain or implement 
early learning and developmental guidelines that are developmentally 
appropriate for all children from birth to kindergarten entry, 
describing what children should know and be able to do, and covering 
the essential domains of early childhood development (cognition, 
including language arts and mathematics; social, emotional and physical 
development; and approaches toward learning) for use statewide by child 
care providers and caregivers. Guidelines should be research-based and 
developmentally, culturally, and linguistically appropriate, building 
in a forward progression, and aligned with entry to kindergarten. 
Guidelines should be implemented in consultation with the State 
educational agency and the State Advisory Council on Early Childhood 
Education and Care or similar coordinating body, and in consultation 
with child development and content experts.
    Paragraph (a)(10) of Sec.  98.15 details the new requirement that 
Lead Agencies provide assurance that funds received to carry out this 
subchapter will not be used to develop or implement an assessment for 
children that will be the primary or sole basis for a child care 
provider being determined to be ineligible to participate in the 
program carried out under this subchapter; will be used as the primary 
or sole basis to provide a reward or sanction for an individual 
provider; will be used as the primary or sole method for assessing 
program effectiveness; or will be used to deny children eligibility to 
participate in the program carried out under this subchapter. The 
Consolidated and Further Continuing Appropriations Act of 2015, Public 
Law 113-235, made a correction to the CCDBG statute, adding that the 
assessments will not be the ``primary or'' sole basis for a child care 
provider being determined to be ineligible to participate in CCDF. The 
statute lays out the acceptable ways of using child assessments, 
including to support learning or improve a classroom environment; 
target professional development; determine the need for health, mental 
health, disability, developmental delay, or family support services; 
obtain information for the quality improvement process at the State/
Territory level; or conduct a program evaluation for the purposes of 
providing program improvement and parent information.
    Finally, Sec.  98.15(a)(11) requires an assurance that any code or 
software for child care information systems or information technology 
that a Lead Agency, or other agency, expends CCDF funds to develop must 
be made available to other public agencies for their use in 
administering child care or related programs upon request. This 
provision is intended to prevent CCDF funds from being spent multiple 
times on the same, or similar, technology in order to provide 
accountability for public dollars.
    Section 98.15(b) requires Lead Agencies to include certifications 
in its CCDF Plan. We are adding new requirements to reflect the 
following new statutory requirements:
     To develop the CCDF plan in consultation with the State 
Advisory Council on Early Childhood Education and Care (or similar 
coordinating body);
     to collect and disseminate to parents of eligible 
children, the general public, and, where applicable, child care 
providers, consumer education information that will promote informed 
child care choices and information on developmental screenings, as 
required by Sec.  98.33;
     to make public the result of monitoring and inspections 
reports, as well as the number of deaths, serious injuries, and 
instances of substantiated child abuse that occurred in child care 
settings as required by Sec.  98.33(a);
     to require caregivers, teachers, and directors of child 
care providers to comply with the State's, Territory's or Tribe's 
procedures for reporting child abuse and neglect as required by section 
106(b)(2)(B)(i) of the Child Abuse Prevention and Treatment Act (42 
U.S.C. 5106a(b)(2)(B)(i)), or other child abuse reporting procedures 
and laws in the service area, as required by Sec.  98.41(e);
     to have in effect monitoring policies and practices 
pursuant to Sec.  98.42; and
     to ensure payment practices of child care providers 
receiving CCDF funds reflect generally accepted payment practices of 
child care providers that serve children who do not receive CCDF 
assistance, pursuant to Sec.  98.45(m).
    These requirements are discussed later in this proposed rule. We 
are also removing ``or area served by Tribal Lead Agency'' from Sec.  
98.15(b)(6), as redesignated, because we are proposing distinct 
requirements for Tribes to enforce health and safety standards for 
child care providers. At Sec.  98.15(b)(12), as redesignated, we are 
updating the reference to Sec.  98.43, which is now Sec.  98.45. All 
other paragraphs in this section remain unchanged.
    Confidentiality Policies. We propose adding a new paragraph (b)(13) 
requiring Lead Agencies to certify in the CCDF Plan that they have in 
place policies to govern the use and disclosure of confidential and 
personally-identifiable information about children and families 
receiving CCDF-funded assistance and child care

[[Page 80479]]

providers receiving CCDF funds. Currently there are no Federal 
requirements either in statute or regulation governing confidentiality 
in CCDF, although there are Federal requirements governing information 
that the CCDF agency may have in its files, such as child abuse and 
neglect information. The Federal Privacy Act is the primary source of 
Federal requirements related to client confidentiality (5 U.S.C. 552a 
note); however the Privacy Act generally applies to Federal agencies, 
and is not applicable to State and local government agencies, with some 
exceptions, such as computer matching issues and requirements related 
to the disclosure and protection of Social Security numbers. (ACF has 
previously issued guidance: Clarifying policy regarding limits on the 
use of Social Security Numbers under the CCDF and the Privacy Act of 
1974, Program Instruction: ACYF-PI-CC-00-04, 2000, which remains in 
effect.)
    Through proposed regulatory language, we would require that Lead 
Agencies have in place policies to govern the use and disclosure of 
confidential and personally-identifiable information (PII) about 
children and families receiving CCDF-funded assistance and child care 
providers, which should include their staff, receiving CCDF funds. We 
propose to offer Lead Agencies discretion to determine the specifics of 
such privacy policies because we recognize many Lead Agencies already 
have policies in place and it is not our intention to make them revise 
such policies, as long as the policy is in accordance with existing 
Federal confidentiality requirements. Further, many Lead Agencies are 
working on data sharing across Federal and State programs and it is not 
our intention to make these efforts more challenging by introducing a 
new set of confidentiality requirements. This regulatory addition is 
not intended to preclude the sharing of individual, case-level data 
among Federal and State programs that can improve the delivery of 
services. The ACF Confidentiality Toolkit may be a useful resource for 
States in addressing privacy and security in the context of information 
sharing (https://www.acf.hhs.gov/sites/default/files/assets/acf_confidentiality_toolkit_final_08_12_2014.pdf).
    It is important that personal information not be used for purposes 
outside of the administration or enforcement of CCDF, or other Federal, 
State or local programs, and that when information is shared with 
outside entities (such as academic institutions for the purpose of 
research) there are safeguards in place to ensure for the non-
disclosure of Personally-Identifiable Information, which is information 
that can be used to link to, or identify, a specific individual. It is 
at the Lead Agency's discretion whether they choose to comply with this 
proposed provision by writing and implementing CCDF-specific 
confidentiality rules or by ensuring that CCDF data is subject to 
existing Federal or State confidentiality rules. Further, nothing in 
this provision should preclude a Lead Agency from making publicly 
available provider-specific information on the level of quality of a 
provider or the results of monitoring or inspections as described in 
Sec.  98.33.
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 required 
to be included in the CCDF Plan are outlined in Sec.  98.16. Many of 
the additions to this section correspond to proposed changes throughout 
the regulations, which we provide explanation for later in this 
proposed rule. Paragraph (a) of Sec.  98.16 would continue to require 
that the Plan specify the Lead Agency.
    Written agreements. A new 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 Lead Agency 
practices that devolve significant authority for administering the 
program to sub-recipients. Current paragraphs (b) through (f) would be 
redesignated as paragraphs (c) through (g). All paragraphs remain 
unchanged with the exception of paragraph (e), as redesignated, which 
has been revised by adding ``and the provision of services'' to clarify 
that the Plan's description of coordination and consultation processes 
should address the provision of services in addition to the development 
of the Plan.
    Continuity of Care. A new Sec.  98.16(h) is proposed to correspond 
with statutory changes in subpart C discussed later to describe and 
demonstrate that eligibility determination and redetermination 
processes promote continuity of care for children and stability for 
families receiving CCDF services, including a minimum 12-month 
eligibility redetermination period in accordance with Sec.  98.21(a); a 
graduated phaseout for families whose income exceeds the Lead Agency's 
threshold to initially qualify for CCDF assistance, but does not exceed 
85 percent of State median income, pursuant to Sec.  98.21(b); 
processes that take into account irregular fluctuation in earnings, 
pursuant to Sec.  98.21(c); procedures and policies to ensure that 
parents are not required to unduly disrupt their employment, training, 
or education to complete eligibility redetermination, pursuant to Sec.  
98.21(d); limiting any requirements to report changes in circumstances 
in accordance with Sec.  98.21(e); policies that take into account 
children's development and learning when authorizing child care 
services pursuant to Sec.  98.21(f); and other policies and practices 
such as timely eligibility determination and processing of 
applications.
    Grants or contracts. We propose to add language at Sec.  
98.16(i)(1), as redesignated, 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(a)(3) describing funding methods for child care services, 
discussed later in this proposed rule.
    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 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 rate surveys, child care 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

[[Page 80480]]

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). At Sec.  
98.16(i)(2), as redesignated, is amended to reference Sec.  
98.30(e)(1)(iii). The remaining subparagraphs remain unchanged.
    Consumer education. We add language at Sec.  98.16(j), as 
redesignated, to reference statutory changes to provide comprehensive 
consumer and provider education, including the posting of monitoring 
and inspection reports, pursuant to Sec.  98.33, changes which are 
discussed later in this proposed rule.
    Co-payments. We propose to revise language at Sec.  98.16(k), as 
redesignated, requiring Lead Agencies to include a description of how 
co-payments are affordable for families, pursuant to Sec.  98.45(k), 
including a description of any criteria established by the Lead Agency 
for waiving contributions for families. This proposed change is 
discussed later.
    Health and safety standards and monitoring. We add a provision at 
Sec.  98.16(l), as redesignated, requiring Lead Agencies to provide a 
description of any exemptions to health and safety requirements for 
relative providers made in accordance with Sec.  98.41(a)(2), which is 
discussed later in this proposed rule.
    We propose adding three new paragraphs, (m) through (o), requiring 
Lead Agencies to describe the child care standards for child care 
providers receiving CCDF funds, that includes group size limits, child-
staff ratios, and required qualifications for caregivers, teachers, and 
directors, in accordance with Sec.  98.41(d); monitoring and other 
enforcement procedures to ensure that child care providers comply with 
applicable health and safety requirements pursuant to Sec.  98.42; and 
criminal background check requirements, policies, and procedures, 
including the process in place to respond to other States', 
Territories', and Tribes' requests for background check results in 
order to accommodate the 45 day timeframe, in accordance with Sec.  
98.43.
    Training and Professional Development. We propose to add Sec.  
98.16(p) requiring Lead Agencies to describe training and professional 
development requirements for caregivers, teachers, and directors of 
child care providers who receive CCDF funds in accordance with Sec.  
98.44. Paragraph (q), as redesignated, remains unchanged.
    Payment rates. We revise Sec.  98.16(r), as redesignated, to 
include the option of using an alternative methodology to set provider 
payment rates. This provision is described later in this proposed rule.
    We revise paragraph (s), as redesignated, to include a detailed 
description of the State's hotline for complaints. This provision is 
described later in the proposed rule. Paragraph (t), as redesignated 
(previously paragraph (n)), remains unchanged.
    We revise Sec.  98.16(u), as redesignated (previously paragraph 
(o)), to include in the description of the licensing requirements, any 
exemption to licensing requirements that is applicable to child care 
providers receiving CCDF funds; a demonstration of why this exemption 
does not endanger the health, safety, or development of children; and a 
description of how the licensing requirements are effectively enforced, 
pursuant to Sec.  98.42.
    Building supply and quality. We also propose a new Sec.  98.16(x) 
based on statutory language at Section 658E(c)(2)(M) requiring the Lead 
Agency to describe strategies to increase the supply and improve the 
quality of child care services for children in underserved areas, 
infants and toddlers, children with disabilities, and children who 
receive care during nontraditional hours. As described in the statute, 
strategies may include alternative payment rates to child care 
providers, the provision of direct contracts or grants to community-
based organizations, offering child care certificates to parents, or 
other means determined by the Lead Agency.
    Pursuant to Sec.  98.50 as proposed, Lead Agencies would be 
required to use CCDF funds for some direct contracts or grants for 
child care services. For contracts to be effective at increasing the 
supply of high quality care, contracts should be funded at levels that 
are sufficient to meet any higher quality standards associated with 
that care. Along with increased rates and contracts, we encourage Lead 
Agencies to consider other strategies, including training and technical 
assistance to child care providers to increase quality for these types 
of care.
    We add Sec.  98.16(y) requiring Lead Agencies to describe how they 
prioritize increasing access to high quality child care and development 
services for children of families in areas that have significant 
concentrations of poverty and unemployment and that do not have 
sufficient numbers of such programs, pursuant to Sec.  98.46(b). This 
provision is discussed later in this proposed rule.
    Finally, we propose to add Sec.  98.16(z) reiterating the statutory 
requirement for Lead Agencies to describe how they develop and 
implement strategies to strengthen the business practices of child care 
providers to expand the supply, and improve the quality of, child care 
services. Some child care providers need support on business and 
management practices in order to run their child care businesses more 
effectively and devote more time and attention to quality improvements. 
Improved business practices can benefit caregivers and children. An 
example of a key business practice is providing paid sick leave for 
caregivers to keep children healthy. Without paid time off, caregivers 
may come to work sick and risk spreading illnesses to children in care. 
We also encourage child care providers to provide paid sick leave 
because it promotes better health for child care employees, which is 
important to maintaining a stable workforce as well as consistency of 
care for children. According to The Council of Economic Advisors, 
``[Pa]id sick leave also induces a healthier work environment by 
encouraging workers to stay home when they are sick.'' (The Economics 
of Paid and Unpaid Leave, The Council of Economic Advisors, June 2014.)
    Emergency preparedness. We propose to add Sec.  98.16(aa) to the 
regulation, based on Section 658E(c)(2)(U) of the Act, to require the 
Lead Agency to demonstrate how the Lead Agency will address the needs 
of children, including the need for safe child care, before, during and 
after a state of emergency declared by the Governor or a major disaster 
or emergency (as defined by section 102 of the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5122) through a 
Statewide Child Care Disaster Plan (or Disaster Plan for a Tribe's 
service area). The Disaster Plan must be developed in collaboration 
with the State/Territory human services agency, the State/Territory 
emergency management agency, the State/Territory licensing agency, 
local and State/Territory child care resource and referral agencies, 
and the State/Territory Advisory Council on Early Childhood Education 
and Care, or similar coordinating body. Tribes must have similar 
Disaster Plans, for their Tribal service area, developed in 
consultation with relevant agencies and partners. The Disaster Plan 
must include guidelines for continuation of child care subsidies and 
child care services, which may include the provision of emergency and 
temporary

[[Page 80481]]

child care services and temporary operating standards for child care 
during and after a disaster; coordination of post-disaster recovery of 
child care services; and requirements that providers receiving CCDF 
funds and other child care providers, as determined appropriate by the 
Lead Agency, have in place procedures for evacuation, relocation, 
shelter-in-place, lock-down, communication and reunification with 
families, continuity of operations, accommodations of infants and 
toddlers, children with disabilities, and children with chronic medical 
conditions; and procedures for staff and volunteer emergency 
preparedness training and practice drills, including training 
requirements for caregivers of providers receiving CCDF.
    This provision largely reflects statutory language of Section 
658E(c)(2)(U), but we have clarified that the Plan must apply, at a 
minimum, to CCDF providers and may apply to other providers (such as 
all licensed providers) at the Lead Agency option. We also added 
language on post-disaster recovery.
    In past disasters, the provision of emergency child care services 
and rebuilding and restoring of child care facilities and 
infrastructure emerged as an essential service. 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. The Commission's report included 
two primary sets of 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 has also been recognized by the Federal Emergency Management 
Agency (FEMA) as an essential service and an important part of disaster 
response and recovery. (FEMA Disaster Assistance Fact Sheet 9580.107, 
Public Assistance for Child Care Services Fact Sheet, 2013).
    Maintaining the safety of children in child care programs during 
and after disaster or emergency situations necessitates planning in 
advance by State/Territory agencies and child care providers. The 
reauthorization of the CCDBG Act, and this proposed rule, implement the 
key recommendation of the National Commission on Children and Disasters 
by requiring a child care-specific Statewide Disaster Plan. ACF has 
previously issued guidance (CCDF-ACF-IM-2011-01) recommending that 
Disaster Plans include five key components: (1) Planning for 
continuation of services to CCDF families; (2) coordinating with 
emergency management agencies and key partners; (3) regulatory 
requirements and technical assistance for child care providers; (4) 
provision of temporary child care services after a disaster, and (5) 
rebuilding child care after a disaster. The guidance recommends that 
disaster plans for child care incorporate capabilities for shelter-in-
place, evacuation and relocation, communication and reunification with 
families, staff training, continuity of operations, accommodation of 
children with disabilities and chronic health needs, and practice 
drills. ACF intends to provide updated guidance and TA to States, 
Territories, and Tribes as they move forward with implementing Disaster 
Plans as required by the reauthorization.
    Payment practices. We propose new Sec.  98.16(bb), requiring Lead 
Agencies to describe payment practices applicable to child care 
providers receiving CCDF, pursuant to Sec.  98.45(m), including 
practices to ensure timely payment for services, to delink provider 
payments from children's occasional absences to the extent practicable, 
and to reflect generally-accepted payment practices. This is discussed 
later in this proposed rule.
    Program integrity. We propose new Sec.  98.16(cc), requiring Lead 
Agencies to describe processes in place to describe internal controls 
to ensure integrity and accountability; processes in place to 
investigate and recover fraudulent payments and to impose sanctions on 
clients or providers in response to fraud; and procedures in place to 
document and verify eligibility, pursuant to Sec.  98.68. This change 
corresponds to a new program integrity section included in subpart G of 
the regulations, which is discussed later in the NPRM.
    Outreach and services for families and providers with limited 
English proficiency and persons with disabilities. We propose to add a 
new Sec.  98.16(dd) to require that the Lead Agency describe how it 
would provide outreach and services to eligible families with limited 
English proficiency and persons with disabilities, and facilitate 
participation of child care providers with limited English proficiency 
and disabilities in CCDF. Currently, the Plan requires Lead Agencies to 
describe how they provide outreach and services to eligible limited 
English proficient families and providers. In the FY 2014-2015 CCDF 
Plans, States and Territories reported a number of strategies to 
overcome language barriers. Forty-nine States and Territories have 
bilingual caseworkers or translators, 44 have applications in multiple 
languages, and 18 offer provider contracts or agreements in multiple 
languages. We are proposing to require that Lead Agencies develop 
policies and procedures to clearly communicate program information such 
as requirements, consumer education information, and eligibility 
information, to families and child care providers of all backgrounds.
    Suspension and expulsion policies. We propose to add a new Sec.  
98.16(ee) to require that the Lead Agency describe its policies on 
suspension and expulsion of children from birth to age five in child 
care and other early childhood programs receiving CCDF funds, which 
must be disseminated as part of consumer and provider education efforts 
in accordance with Sec.  98.33(b)(1)(v). This requirement is detailed 
later in this proposed rule.
    Reports of serious injuries or death in child care. We propose to 
add new Sec.  98.16(ff) to require the Lead Agency to designate a 
State, Territorial, or Tribal entity to which child care providers must 
submit reports of any serious injuries or deaths of children occurring 
in child care, regardless of whether or not they receive CCDF 
assistance.
    Family Engagement. We propose to add new Sec.  98.16(gg) to require 
the Lead Agency to describe how it would support child care providers 
in the successful engagement of families in children's learning and 
development.
    Complaints received through the national hotline and Web site. We 
propose to add new Sec.  98.16(hh) to require the Lead Agency to 
describe how it will respond to complaints received through the 
national hotline and Web site, required in the reauthorized CCDBG Act 
(Section 658L(b)(2)). The description must include the designee 
responsible for receiving and responding to those complaints for both 
licensed and license-exempt child care providers. Clear channels of 
communication are crucial to ensure that complaints submitted through 
the national hotline or Web site are responded to quickly, especially 
when a child's health or safety is at risk. This proposed plan 
provision is aimed at building those connections and ensuring that a 
process is in place for addressing complaints regarding both licensed 
and license-exempt child care providers.

[[Page 80482]]

    Finally, we have redesignated paragraph (v) as paragraph (ii) 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 triennially 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.
    Advance written notice. In conjunction with the change discussed 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, and/or sliding fee scales so as to 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. 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. We are providing Lead Agencies with flexibility 
to determine an appropriate time period for advance notice, since this 
may vary, such as depending on the type of policy change being 
implemented or the effective date of that policy change. Advance notice 
would 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. We note that 
while we encourage Lead Agencies to provide written notice of any 
changes that affect income eligibility, payment rates, and/or sliding 
fee scales, we would only require written notice of those that 
adversely impact parents or providers.
    We would not require the Lead Agency to hold a formal public 
hearing or solicit comments on each Plan amendment, as is required by 
current regulations at Sec.  98.14(c) for the submission of the CCDF 
Plan. However, we encourage solicitation of public input whenever 
possible and consider this proposed regulatory change to be consistent 
with the spirit and intent of the CCDF Plan public hearing provision. 
Paragraph (c) of Sec.  98.18 describing appeal and disapproval of a 
Plan or Plan amendment would remain unchanged.
Requests for Temporary Relief From Requirements (Section 98.19)
    Section 658I(c) of the CCDBG Act indicates that Lead Agencies are 
allowed to submit a request to the Secretary to waive one or more 
requirements contained in the CCDBG Act to ensure that effective 
delivery of services are not interrupted by conflicting or duplicative 
requirements, to allow for a period of time for a State legislature to 
enact legislation to implement the provisions of the Act or this part, 
or in response to extraordinary circumstances, such as a natural 
disaster or financial crisis. We are proposing to extend the waiver 
option to rules under this part as well. Prior to the enactment of the 
CCDBG Act in 2014, there was no waiver authority within the CCDF 
program.
    We propose new Sec.  98.19, Requests for Temporary Relief from 
Requirements, to provide guidance and clarity on: The eligibility of 
States, Territories, and Tribes to request a waiver; what provisions 
would not be eligible for waivers; and how the waiver request and 
approval (or disapproval) process would work. In addition to outlining 
the requirements detailed in the CCDBG Act of 2014, Sec.  98.19 
includes clarifying provisions to provide greater understanding of the 
intent and implementation of the waiver process.
    This section details the process by which the Secretary may waive 
one or more of the requirements contained in the Act or this part, with 
the exception of State Match and Maintenance of Effort requirements, 
consistent with the requirements described in section 658I(c)(1) of the 
Act. In order for a waiver application to be considered, the waiver 
request must: Describe circumstances that prevent the State, Territory, 
or Tribe from complying with any statutory or regulatory requirements 
of this part; demonstrate that the waiver, by itself, contributes to or 
enhances the State's, Territory's, or Tribe's ability to carry out the 
purposes of this part; show that the waiver will not contribute to 
inconsistency with the objectives of this law; and meet the additional 
requirements in this section as described.
    We propose to include a delineation of the types of waivers that 
States, Territories, and Tribes can request into two distinct types: 
(1) Transitional and legislative waivers and (2) waivers for 
extraordinary circumstances. States, Territories, and Tribes may apply 
for temporary transitional and legislative waivers meeting the 
requirements described in this section that would provide temporary 
relief from conflicting or duplicative requirements preventing 
implementation, or for a temporary extension in order for a State, 
Territorial, or Tribal legislature to enact legislation to implement 
the provisions of this subchapter.
    Transitional and legislative waivers are designed to provide 
States, Territories, and Tribes at most one full legislative session to 
enact legislation to implement the provisions of the Act or this part, 
and are limited to a one-year initial period and at most, an additional 
one-time, one-year renewal from the date of approval of the extension 
(which may be appropriate for a State with a two-year legislative 
cycle, for example).
    Waivers for extraordinary circumstances would address temporary 
circumstances or situations, such as a natural disaster or financial 
crisis. Extraordinary circumstance waivers are limited to an initial 
period of no more than two years from the date of approval, and at 
most, an additional one-year renewal from the date of approval of the 
extension.
    Both types of waivers are probationary, subject to the decision of 
the Secretary to terminate a waiver at any time if the Secretary 
determines, after notice and opportunity for a hearing, that the 
performance of a State, Territory, or Tribe granted relief under this 
subsection has been inadequate, or if such relief is no longer 
necessary to achieve its original purposes.
    In order to request a waiver, the Lead Agency must submit a written 
request, indicating which type of waiver the State, Territory, or Tribe 
is requesting and why. The request must also provide detail on which 
provision(s) the State, Territory, or Tribe is seeking relief from and 
how relief from that sanction or provision, by itself, will improve 
delivery of child care services for children and families. If a 
transitional waiver, the Lead Agency should describe the steps being 
taken to address the barrier to implementation (i.e., a timeline for 
legislative action). Furthermore, and importantly, in the written 
request, the State, Territory, or Tribe must certify and demonstrate 
that the health, safety, and well-being of children served through 
assistance received under this part will not be compromised as a result 
of the waiver.
    Within 90 days of submission of the request, the Secretary would 
notify the State, Territory, or Tribe of the approval or disapproval. 
If rejected, the Secretary

[[Page 80483]]

would provide the State, Territory, or Tribe, the Committee on 
Education and the Workforce of the House of Representatives, and the 
Committee on Health, Education, Labor, and Pensions of the Senate of 
the reasons for the disapproval and give the State, Territory, or Tribe 
the opportunity to amend the request. If approved, the Secretary would 
notify and submit a report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate on the circumstances of 
the waiver including each specific sanction or provision waived, the 
reason as given by the State, Territory, or Tribe of the need for a 
waiver, and the expected impact of the waiver on children served under 
this program.
    No later than 30 days prior to the expiration date of the waiver, a 
State, Territory, or Tribe, at its option, may make a formal written 
request to re-certify the provisions described in this section, which 
must explain the necessity of additional time for relief from such 
sanction(s) or provisions. The Secretary may approve or disapprove a 
request from a State, Territory, or Tribe for a one-time renewal of an 
existing waiver under this part for a period no longer than one year. 
The Secretary would adhere to the same approval or disapproval process 
for the renewal request as the initial request.
    The goal of all the proposed inclusions at Sec.  98.19 is to make 
continuity of the effective delivery of child care services a priority 
throughout the implementation process or in times of extraordinary 
circumstances. We are seeking comment on ways to ensure efficient and 
timely relief, when appropriate, for States, Territories, and Tribes 
impacted by extraordinary circumstances, such as natural disasters. 
Therefore, we ask for feedback about making the application process for 
waivers for extraordinary circumstances straightforward to provide 
States, Territories, and Tribes with minimal obstacles while they are 
likely in the preparedness, response, and recovery stages of handling 
the circumstances that prompted the initial request.

Subpart C--Eligibility for Services

    This subpart establishes parameters for a child's eligibility for 
CCDF assistance and for Lead Agencies' eligibility and redetermination 
procedures. Congress made significant changes to CCDBG that emphasize 
stable financial assistance and continuity of care through CCDF 
eligibility policies, including establishing minimum 12-month 
eligibility for all children. In this subpart, we propose to restate 
these changes in regulation and provide additional clarification where 
appropriate.
A Child's Eligibility for Child Care Services (Section 98.20)
    A child's eligibility for child care services: This proposed rule 
clarifies at Sec.  98.20(a) that eligibility criteria apply only at the 
time of eligibility determination or redetermination based on statutory 
language at Section 658E(c)(2)(N)(i) of the Act, which establishes a 
minimum 12-month eligibility period by affirmatively stating that the 
child ``will be considered to meet all eligibility requirements for 
such assistance and will receive such assistance, for not less than 12 
months before the State or local entity re-determines the eligibility 
of the child.'' (We discuss minimum 12-month eligibility at greater 
length below.)
    Income eligibility. We propose revising Sec.  98.20(a)(2) by adding 
a sentence to clarify that the State median income (SMI) used to 
determine the eligibility threshold level must be based on the most 
recent SMI data that is published by the U.S. Census Bureau. This 
clarification would provide for use of the most current and valid data. 
It is important for Lead Agencies to use current data as, once 
determined eligible, children may continue to receive CCDF assistance 
until their household income exceeds 85 percent of SMI for a family of 
the same size, pursuant to Sec.  98.21(a)(1) discussed further below, 
or at Lead Agency option, the family experiences a non-temporary 
cessation of work, training, or education. Using the most recent SMI 
data also allows for consistency for cross-State comparisons and a 
better understanding of income eligibility thresholds nationally. SMI 
data may not be available from the Census Bureau for some Territories, 
in which case an alternative source (subject to ACF approval through 
the CCDF State/Territory Plan process) may be used. The Act does not 
specify whether States should use the SMI with a single year estimate, 
a two-year average, or a three-year average (which is used by the Low 
Income Home Energy Assistance Program (LIHEAP)). We are requesting 
comment on whether ACF should provide additional guidance and 
specificity on the SMI used to determine eligibility.
    Tribes are already allowed to use Tribal median income (TMI) 
(pursuant to Sec.  98.81(b)(1)) and this would continue to be allowable 
under this proposed rule. ACF also recognizes that some Lead Agencies 
establish eligibility thresholds that vary by geographic area and that 
some Lead Agencies use Area median income (AMI) to calculate income 
eligibility for different regions in order to account for cost of 
living variations across geographic areas. Lead Agencies may use AMI in 
their calculations, but must also report the threshold in terms of SMI 
in their Plan, and ensure that thresholds based on AMI are at or below 
85 percent of SMI.
    Asset limit. The Act revised the definition of eligible child at 
Section 658P(4)(B) so that in addition to being at or below 85 percent 
of SMI for a family of the same size, a member of the family must 
certify that the ``family assets do not exceed $1,000,000 (as certified 
by a member of such family),'' which we include in the proposed rule at 
Sec.  98.20(a)(2)(ii). We interpret this language to mean that this 
requirement can be met solely through self-certification by a family 
member, with no further need for additional documentation. This new 
requirement provides assurance that CCDF funds are being used for 
families with the greatest need, but is not intended to impose an 
additional burden on families. In this proposed rule, we are not 
defining ``family assets,'' but instead would allow the Lead Agency 
flexibility to determine what assets to count toward the asset limit.
    Protective Services. Section 658P(4) of the CCDBG Act indicates 
that, for CCDF purposes, an eligible child includes a child who is 
receiving or needs to receive protective services. We are proposing to 
add language at Sec.  98.20(a)(3)(ii) to clarify that the protective 
services category may include specific populations of vulnerable 
children as identified by the Lead Agency. Children do not need to be 
formally involved with child protective services or the child welfare 
system in order to be considered eligible for CCDF assistance under 
this category. 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. It is important to note that including additional categories of 
vulnerable children in the definition of protective services is only 
relevant for the purposes of CCDF eligibility and does not mean that 
those children should automatically be considered to be in official 
protective service situations for other programs or purposes. It is 
critical that policies be structured and implemented so these children 
are not

[[Page 80484]]

identified as needing formal intervention by the CPS agency, except in 
cases where that is appropriate for reasons other than the inclusion of 
the child in the new categories of vulnerable child for purposes of 
CCDF eligibility.
    Similarly, we propose to remove the requirement that case-by-case 
determinations of income and co-payment fees for this eligibility 
category must be made by, or in consultation with, a child protective 
services (CPS) worker. While consulting with a CPS worker would no 
longer be a requirement, it would not be prohibited; a Lead Agency may 
consult with or involve a CPS caseworker as appropriate. We encourage 
collaboration with the agency responsible for children in protective 
services, especially when a child also is receiving CCDF assistance.
    These changes would provide Lead Agencies with additional 
flexibility to offer services to those who have the greatest need, 
including high-risk populations, and reduce the burden associated with 
eligibility determination for vulnerable families.
    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 existing 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. This proposed change would clarify, for example, that a 
family living in a homeless shelter may not meet certain eligibility 
requirements (e.g., work or income requirements), but, because the 
child is in a vulnerable situation, could be considered eligible and 
benefit from access to high quality child care services.
    This change was also included in the 2013 NPRM and received broad 
support in public comments. One commenter wrote this change 
``recognizes the particular challenges and barriers to assistance that 
these children [from other vulnerable populations] face and the 
importance of stable, supportive child care.'' Several commenters 
requested that the term ``vulnerable populations'' be defined at the 
Federal level and suggested several specific populations to be included 
in the definition--such as teen parents, the children of parents or 
guardians with disabilities who are unable to work, children with 
disabilities who have Individual Family Service Plans (IFSPs) or 
Individual Education Plans (IEPs), and children who are experiencing 
homelessness. While we encourage Lead Agencies to consider these 
vulnerable populations in their definitions and policies, we are 
declining to specifically define ``vulnerable populations'' in this 
proposed rule in order to allow Lead Agencies the flexibility to define 
the term in a way that is most responsive to the particular needs of 
their communities.
    We note that this new provision would not require Lead Agencies to 
expand their definition of protective services. It merely provides the 
option to include other high-needs populations in the protective 
services category solely for purposes of CCDF, as many Lead Agencies 
already choose to do.
    Additional eligibility criteria. Under existing regulations, Lead 
Agencies are allowed to establish eligibility conditions or priority 
rules in addition to those specified through Federal regulation so long 
as they do not discriminate, limit parental rights, or violate priority 
requirements (these are described in full at Sec.  98.20(b)). This 
proposed rule revises this section to add that any additional 
eligibility conditions or priority rules established by the Lead Agency 
cannot ``impact eligibility other than at the time of eligibility 
determination or redetermination.'' This revision was made to be 
consistent with the aforementioned change to Sec.  98.20(a) which says 
that eligibility criteria apply only at the time of determination or 
redetermination. It follows that the same would be true of additional 
criteria established at the Lead Agency's option.
    We propose to add paragraph (c) clarifying that only the 
citizenship and immigration status of the child, the primary 
beneficiary of CCDF, is relevant for the purposes of determining 
eligibility under PRWORA and that a Lead Agency, or other administering 
agency, may not condition eligibility based upon the citizenship or 
immigration status of the child's parent. Under title IV of PRWORA, 
CCDF is considered a program providing Federal public benefits and thus 
is subject to requirements to verify citizenship and immigration status 
of beneficiaries. In 1998, ACF issued a Program Instruction (ACYF-PI-
CC-98-08) which established that ``only the citizenship status of the 
child, who is the primary beneficiary of the child care benefit, is 
relevant for eligibility purposes.'' This proposal codifies this policy 
in regulation and clarifies that Lead Agencies are prohibited from 
considering the parent's citizenship and immigration status.
    ACF has previously clarified that when a child receives Early Head 
Start or Head Start services that are supported by CCDF funds and 
subject to the Head Start Performance Standards, the PRWORA 
verification requirements do not apply. Verification requirements also 
do not apply to child care settings that are subject to public 
educational standards. These policies remain in effect. (ACYF-PI-CC-98-
09)
Eligibility Determination Processes (Section 98.21)
    We propose to add a new section at Sec.  98.21 to address the 
processes by which Lead Agencies determine and redetermine a child's 
eligibility for services.
    Minimum 12-month eligibility. At Sec.  98.21, we reiterate the 
statutory change made in Sec. 658E(c)(2)(N)(i) of the Act, which 
establishes minimum 12-month eligibility periods for all CCDF families, 
regardless of changes in income (as long as income does not exceed the 
Federal threshold of 85 percent of SMI) or temporary changes in 
participation in work, training, or education activities. Under the 
law, Lead Agencies may not terminate CCDF assistance during the 12-
month period if a family has an increase in income that exceeds the 
Lead Agency's income eligibility threshold but not the Federal 
threshold, or if a parent has a temporary change in work, education or 
training. We note that during the minimum 12-month eligibility period 
Lead Agencies also may not end or suspend child care authorizations or 
provider payments due to a temporary change in a parent's work, 
training, or education status. In other words, once determined 
eligible, children are expected to receive a minimum of 12 months of 
child care services, unless family income rises above 85% SMI or, at 
Lead Agency option, the family experiences a non-temporary cessation of 
work, education, or training.
    These requirements apply to both the initial eligibility period and 
any subsequent eligibility periods. Under the law, other than income 
exceeding 85 percent of SMI (unless the increase in income is 
considered temporary, pursuant with the irregular fluctuations in 
earning requirement discussed below), a family is considered to meet 
eligibility criteria for the entire 12-month period, though the Lead 
Agency has the option of also considering a status change due to non-
temporary

[[Page 80485]]

changes in employment, education, or training status (discussed below.)
    As the statutory language states that a child determined eligible 
will not only be considered to meet all eligibility requirements, but 
also ``will receive such assistance,'' Lead Agencies may not offer 
authorization periods shorter than 12 months as that would functionally 
undermine the statutory intent that, barring limited circumstances, 
eligible children shall receive a minimum of 12 months of CCDF 
assistance. We note that, despite the language that the child ``will 
receive such assistance,'' the receipt of such services remains at the 
option of the family. The law does not require the family to continue 
receiving services nor would it force the family to remain with a 
provider if the family no longer chooses to receive such services.
    We propose to define ``temporary change'' in the rule at Sec.  
98.21(a)(1)(ii) to include, at a minimum: (1) Any time-limited absence 
from work for employed parents for periods of family leave (including 
parental leave) or sick leave; (2) any interruption in work for a 
seasonal worker who is not working between regular industry work 
seasons; (3) any student holiday or break for a parent participating in 
training or education; (4) any reduction in work, training or education 
hours, as long as the parent is still working or attending training or 
education; and (5) any cessation of work or attendance at a training or 
education program that does not exceed three months or a longer period 
of time established by the Lead Agency.
    The above circumstances represent temporary changes to the parents' 
schedule or conditions of employment, but do not constitute permanent 
changes to the parents' status as being employed or attending a job 
training or educational program. This definition is in line with 
Congressional intent to stabilize assistance for working families. Lead 
Agencies must consider all changes on this list to be temporary, but 
should not be limited by this definition and may consider additional 
changes to be temporary.
    At Sec.  98.21(a)(1)(ii)(F), we clarify that a child should retain 
eligibility despite any change in age, including turning 13 years old 
during the eligibility period. This is consistent with the statutory 
requirement that a child shall be ``considered to meet all eligibility 
requirements'' until the next redetermination. This allows Lead 
Agencies to avoid terminating access to CCDF assistance immediately 
upon a child's 13th birthday in a manner that may be detrimental to 
positive youth development and academic success or that might abruptly 
put the child at-risk if a parent cannot be with the child before or 
after school.
    At Sec.  98.21(a)(1)(ii)(G), we propose that a child retain 
eligibility despite ``any change in residency within the State, 
Territory, or Tribal service area.'' This would provide stability for 
families who, under current practice, may lose child care assistance 
despite maintaining their State, Territory or Tribal residency. This 
may require coordination between localities within States, Territories, 
or Tribes or necessitate some Lead Agencies to change practices for 
allocating funding. We believe this level of coordination is essential, 
as the State, Territory, or Tribe is the entity responsible for CCDF 
assistance.
    Nothing in this rule prohibits Lead Agencies from establishing 
eligibility periods longer than 12 months or lengthening eligibility 
periods prior to a redetermination. We encourage (but do not require) 
Lead Agencies to consider how they can use this flexibility to align 
CCDF eligibility policies with other programs serving low-income 
families, including Head Start, Early Head Start, Medicaid, or SNAP. 
For example, once determined eligible, children in Head Start remain 
eligible until the end of the succeeding program year. Children in 
Early Head Start are considered eligible throughout the course of the 
program. Consistent with existing ACF guidance (ACYF-PIQ-CC-99-02) a 
Lead Agency could establish eligibility periods longer than 12 months 
for children enrolled in Head Start and receiving CCDF in order to 
align eligibility periods between programs. Similarly, a Lead Agency 
could establish longer eligibility periods during an infant or 
toddler's enrollment in Early Head Start or in other collaborative 
models, such as Early Head Start-Child Care Partnerships.
    Operationalizing alignment across programs can be challenging, 
particularly if families enroll in programs at different times. While 
the Lead Agency must ensure that eligibility is not redetermined prior 
to 12 months, it could align with other benefit programs by ``resetting 
the clock'' on the eligibility period to extend the child's CCDF 
eligibility by starting a new 12-month period if the Lead Agency 
receives information, such as information pursuant to eligibility 
determinations or recertifications in other programs, that confirms the 
child's eligibility and current co-payment rate. Alignment promotes 
conformity across Federal programs, such as SNAP, and can simplify 
eligibility and reporting processes for families and administering 
agencies. However, it should be noted that a Lead Agency cannot 
terminate assistance for a child prior to the end of the minimum 12-
month period if the recertification process of another program reveals 
a change in the family's circumstances, unless those changes impact 
CCDF eligibility (e.g., a change in income over 85 percent of SMI or, 
at the option of the Lead Agency, a non-temporary change in the work, 
job training, or educational status of the parent).
    Continued Assistance. If a parent experiences a non-temporary job 
loss or cessation of education or training, Lead Agencies have the 
option--but are not required--to terminate assistance prior to 12 
months. Per the Act, prior to terminating assistance, the Lead Agency 
must provide a period of continued assistance of at least three months 
to allow parents to engage in job search activities. At the end of the 
minimum three-month period of continued assistance, if the parent is 
engaged in an eligible work, education, or training activity, 
assistance should not be terminated and the child should either 
continue receiving assistance until the next scheduled redetermination 
or be redetermined eligible for an additional 12-month period. In this 
proposed rule, we clarify that assistance must be provided ``at the 
same level'' during the period. This clarification is important because 
reducing levels of assistance during this period would undermine the 
statutory intent to provide stability for families during times of 
increased need or transition.
    It is important to note that the Act allows Lead Agencies to 
continue child care assistance for the full 12-month eligibility period 
even if the parent experiences a non-temporary job loss or cessation of 
education or training. The default policy is that a child remains 
eligible for the full minimum 12-month eligibility period, but the Lead 
Agency has the option to terminate assistance under these particular 
conditions. A Lead Agency may choose not to terminate assistance for 
any families prior to a redetermination at 12 months. If a Lead Agency 
chooses to terminate assistance under these conditions, it has the 
option of doing so for all CCDF families or for only a subset of CCDF 
families. For example, a Lead Agency could choose to allow priority 
families (e.g., children with special needs, children experiencing 
homelessness) to remain eligible through their eligibility period 
despite a parent's loss of work or cessation of attendance at a job 
training or educational program, but terminate assistance (with a 
period of continued assistance) for families who do not fall

[[Page 80486]]

in a priority category. Or, a Lead Agency may choose to allow families 
in certain types of care, such as high quality care, to remain eligible 
regardless of a parent's work or education activity.
    While the Lead Agency must provide continued assistance for at 
least three months, there is no requirement to document that the parent 
is engaged in a job search or other activity related to resuming 
attendance in an education or training program during that time. In 
fact, we strongly discourage such policies as they would be an 
additional burden on families and be inconsistent with the purposes of 
CCDF and this proposed rule.
    If a Lead Agency does choose to terminate assistance under these 
circumstances, it should allow families that have been terminated to 
reapply as soon as they are eligible again instead of making the family 
wait until their original eligibility period would have ended in order 
to reapply.
    A policy that provides continuous eligibility, regardless of non-
temporary changes, would reduce the burden on families and the 
administrative burden on Lead Agencies by minimizing reporting and the 
frequency of eligibility adjustments. Retention of eligibility during 
periods of family instability (such as losing a job) can alleviate some 
of the stress on families, facilitate a smoother transition back into 
the workforce, and support children's development by maintaining 
continuity in their child care. Moreover, studies show that the same 
families that leave CCDF often return to the program after short 
periods of ineligibility. A report published by the Assistant Secretary 
for Planning and Evaluation (ASPE) at HHS, Child Care Subsidy Duration 
and Caseload Dynamics: A Multi-State Examination, found that ``many 
families receive subsidies sporadically over time and frequently return 
to the subsidy programs after they exit.'' Short periods of subsidy 
receipt can be the result of a variety of factors, including 
eligibility policies and procedures. The ``churning'' present in CCDF 
demonstrates that families often lose their child care assistance for 
conditions that are temporary, which is detrimental for the family and 
child and inefficient for the Lead Agency.
    Lead Agencies considering the option to terminate assistance in 
response to ``non-temporary'' changes are encouraged to use 
administrative data to understand the extent to which CCDF families 
currently cycle on and off the program, to make a determination as to 
whether it is in the interest of anyone (child, parent, or agency) to 
terminate assistance for families who may ultimately return to the 
program.
    We understand that some Lead Agencies include in their definition 
of allowable work activities a period of job search and allow children 
to qualify for CCDF assistance based on their parent(s) seeking 
employment. It is not our intention to discourage Lead Agencies from 
allowing job search activities as qualifying work. We believe that it 
is in line with the intent of the statute to allow Lead Agencies the 
option to end assistance prior to a redetermination if the parent(s) 
has not secured employment or educational or job training activities, 
as long as assistance has been provided for no less than three months. 
In other words, if a child qualifies for child care assistance based on 
a parent's job search, the Lead Agency has the option to end assistance 
after a minimum of three months if the parent has still has not found 
employment. Lead Agencies could choose, however, to provide additional 
months of job search to families as well or to continue assistance for 
the full minimum 12-month eligibility period.
    We are soliciting comment on whether there are any additional 
circumstances other than those discussed above under which a Lead 
Agency should be allowed to end a child's assistance (after providing 
three months of continued assistance) prior to the minimum 12-month 
period. Commenters should remember that since these regulations must 
comply with statutory requirements, any suggestions must remain within 
the bounds of the CCDBG Act in order to be considered.
    Based on feedback from States and various stakeholders, ACF has 
already considered possible exceptions to the minimum 12-month 
eligibility period for certain populations, such as children in 
families receiving TANF and children in protective services, but has 
decided that such special considerations would be in conflict with the 
CCDBG Act, which clearly provides 12-month eligibility for all 
children.
    Co-payments. At Sec.  98.21(a)(3) we clarify that a Lead Agency 
cannot increase family co-payment amounts within the minimum 12-month 
eligibility period as raising co-payments within the eligibility period 
would not be consistent with the statutory requirement that the child 
``receive such assistance'' for not less than 12 months. Protecting co-
payments levels within the eligibility period provides stability for 
families and reduces administrative burden for Lead Agencies. We 
propose an exception to this rule for families that are eligible as 
part of the graduated phaseout provision discussed below.
    In addition, we propose requiring the Lead Agency to allow families 
the option to report changes, particularly because we want to permit 
families to report those changes that could be beneficial to the 
family's co-payment or subsidy level. The Lead Agency must act upon 
such reported changes if doing so would reduce the family's co-payment 
or increase the subsidy. The Lead Agency would be prohibited from 
acting on the family's self-reported changes if it would reduce the 
family's benefit, such as increasing the co-payment or decreasing the 
subsidy.
    We believe that the limitation on raising copayments, by protecting 
the child's benefit level for the minimum 12 month eligibility period, 
is consistent with the statutory requirement at 658E(c)(2)(N) that once 
deemed eligible, a child shall ``receive such assistance, for not less 
than 12 months.'' Raising co-payments earlier that the 12 month period 
could potentially destabilize the child's access to assistance and has 
the unintended consequence of forcing working parents to choose between 
advancing in the workplace and child care assistance. This is discussed 
further below in the section on reporting changes in circumstances.
    Graduated phaseout. New statutory language at Section 
658E(c)(2)(N)(iv) requires Lead Agencies to have policies and 
procedures in place to continue child care assistance at the time of 
redetermination for children of parents who are working or attending a 
job training or educational program and whose income has risen above 
the Lead Agency's initial income eligibility threshold to qualify for 
assistance but remains at or below 85 percent of State median income. 
We are interpreting this provision to mean that children receiving CCDF 
assistance would remain income-eligible for CCDF until their family 
income exceeds 85 percent of SMI. Section 98.21(b)(1), as proposed, 
requires Lead Agencies that set their initial income eligibility level 
below 85 percent of SMI for a family of the same size to provide for a 
graduated phaseout of assistance by implementing one of two approaches: 
(1) Two-tiered eligibility (an initial, entry-level income threshold 
and a higher exit-level income threshold for families already receiving 
assistance) with the exit threshold set at 85 percent of SMI. If a Lead 
Agency's initial eligibility threshold is set at 85 percent of SMI, it 
would be exempt from this requirement; or (2) using the tiered 
eligibility approach in (1) but for a limited period of not less than 
an additional 12 months.

[[Page 80487]]

    Lead Agencies retain the authority to establish their initial 
income eligibility threshold at or below 85 percent of SMI. This rule 
proposes to give Lead Agencies the option to decide between allowing 
children, who are otherwise eligible, to stay on CCDF until their 
income exceeds 85 percent of SMI for a family of the same size or to 
adopt this approach for at least one additional year. This provision 
promotes continuity of care and is consistent with the statutory 
requirement that families retain child care assistance during an 
eligibility period as their income increases as long as it remains at 
or below 85 percent of SMI. We are seeking comments on the anticipated 
impacts of the proposed graduated phaseout provision, including 
suggestions for possible alternative approaches to consider that would 
also promote continuity of care for children and family financial 
stability.
    Pursuant to Sec.  98.21(a)(3) as proposed, Lead Agencies are 
prohibited from increasing family copayments within the minimum 12-
month eligibility period. We propose, in paragraph (b)(2), that Lead 
Agencies be permitted to adjust family co-payment amounts during the 
proposed graduated phaseout period to help families transition off of 
child care assistance. ACF encourages Lead Agencies to ensure that 
copayment increases are gradual in proportion to a family's income 
growth and do not constitute too high a cost burden for families so as 
to ensure stability as family income increases.
    Income eligibility policies play an important role in promoting 
pathways to financial stability for families. Currently, 16 Lead 
Agencies use two-tiered income eligibility. However, even with higher 
exit-level eligibility thresholds in these States/Territories, a small 
increase in earnings may result in families becoming ineligible for 
assistance before they are able to afford the full cost of care. An 
unintended consequence of low eligibility thresholds is that low income 
parents may pass up raises or job advancement in order to retain their 
subsidy, which undermines a key goal of CCDF to help parents achieve 
independence from public assistance. As proposed, this rule would allow 
low-income families to continue child care assistance as their income 
grows to 85 percent of State median income in order to support 
financial stability.
    Irregular fluctuations in earnings. In Sec.  98.21(c), we propose 
to reiterate statutory language at Sec. 658E(c)(2)(N)(i)(II) that Lead 
Agencies establish processes for initial determination and 
redetermination of eligibility that take into account parents' 
irregular fluctuations in earnings. We clarify that temporary increases 
in income should not affect eligibility or family copayments, including 
monthly income fluctuations that show temporary increases, which when 
taken in isolation, may incorrectly indicate that a family is above the 
federal threshold of 85 percent of SMI, when in actuality their annual 
income remains at or below 85% SMI.
    Lead Agencies retain broad flexibility to set their policies and 
procedures for income calculation and verification. We propose, as 
examples, several approaches Lead Agencies may take to account for 
irregular fluctuations in earnings. Lead Agencies may average family 
earnings over a period of time (e.g., 12 months) to better reflect a 
family's financial situation; Lead Agencies may adjust documentation 
requirements to better account for average earnings, for example, by 
requesting the earnings statement that is most representative of the 
family's income, rather than the most recent statement; or Lead 
Agencies may choose to discount temporary increases in income provided 
that a family demonstrates that an isolated increase in pay (e.g., 
short-term overtime pay, lump sum payments such as tax credits, etc.) 
is not indicative of a permanent increase in income.
    Undue disruption. Pursuant to section 658E(c)(2)(N)(i)(II) of the 
CCDBG Act, we are adding Sec.  98.21(d), which requires the Lead Agency 
to establish procedures and policies to ensure that parents, especially 
parents receiving TANF assistance, are not required to unduly disrupt 
their education, training, or employment in order to complete the 
eligibility redetermination process. This provision of the law seeks to 
protect parents from losing assistance for failure to meet renewal 
requirements that place unnecessary barriers or burdens on families, 
such as requiring parents to take leave from work in order to submit 
documentation in person or requiring parents to resubmit documents that 
have not changed (e.g., children's birth certificates).
    To meet this provision, Lead Agencies could offer a variety of 
family-friendly mechanisms through which parents could submit required 
documentation (e.g., phone, email, online forms, extended submission 
hours, etc.). Lead Agencies could also consider strategies that inform 
families, and their providers, of an upcoming redetermination and what 
is required of the family. Lead Agencies could consider only asking for 
information necessary to make an eligibility determination or only 
asking for information that has changed and not asking for 
documentation to be re-submitted if it has been collected in the past 
(e.g., children's birth certificates; parents' identification, etc.) or 
is available from other electronic data sources. Lead Agencies can pre-
populate renewal forms and have parents confirm that information is 
accurate.
    In general, ACF strongly encourages Lead Agencies to adopt 
reasonable policies for establishing a family's eligibility that 
minimize burdens on families. Given the new eligibility provisions 
established by reauthorization, Lead Agencies are encouraged to re-
evaluate processes for verifying and tracking eligibility to simplify 
eligibility procedures and reduce duplicative requirements across 
programs. Simplifying and streamlining eligibility processes along with 
other proposed changes in the subpart may require significant change 
within the CCDF program. Lead Agencies should provide appropriate 
training and guidance to ensure that caseworkers and other relevant 
child care staff (including those working for designated entities) 
clearly understand new policies and are implementing them correctly.
    Reporting changes in circumstance. Currently, many Lead Agencies 
have policies in place to monitor eligibility on an ongoing basis to 
ensure that at any given point in time a family is eligible for 
services, often called change-reporting or interim-reporting. As the 
revised statute provides that children may retain eligibility through 
changes in circumstance, it is our belief that comprehensive reporting 
of changes in circumstance is not only unnecessary but runs counter to 
CCDF's goals of promoting continuity of care and supporting families' 
financial stability.
    Additionally, there are challenges associated with interim 
monitoring and reporting, including costs to families trying to balance 
work or education and family obligations and costs to Lead Agencies 
administering the program. Overly burdensome reporting requirements can 
also result in increased procedural errors, as even parents who remain 
eligible may face difficulties complying with onerous reporting rules.
    Lead Agencies should significantly reduce change reporting 
requirements for families within the eligibility period, and limit the 
reporting requirements to changes that impact CCDF eligibility. Under 
this proposed rule, a Lead Agency would be required to specify in its 
Plan any requirements for families to notify the Lead Agency (or its 
designee)

[[Page 80488]]

of changes in circumstances between eligibility periods, and describe 
efforts to ensure such requirements do not impact continuity for 
eligible families between redeterminations (Sec.  98.21(e)).
    Under paragraph (e)(1), the Lead Agency must require families to 
report a change at any point during the minimum 12-month period only in 
circumstances where the family's income exceeds 85% of SMI, taking into 
account irregular income fluctuations. At the option of the Lead 
Agency, the Lead Agency may require families to report changes where 
the family has experienced a non-temporary cessation of work, training, 
or education.
    In paragraph (e)(2), we specify that any notification requirements 
shall not constitute an undue burden on families and propose that 
compliance with requirements must include a range of notification 
options (e.g., phone, email, online forms, extended submission hours) 
and not require an in-person office visit to accommodate the needs of 
parents.
    We also propose limiting notification requirements only to items 
that impact a family's eligibility (e.g., income changes over 85 
percent of SMI, and at Lead Agency option, the status of the child's 
parent as working or attending a job training or educational program) 
or those that are necessary for the Lead Agency to contact the family 
or pay providers (e.g., a family's change of address or a change in the 
parent's choice of provider). Nothing in this rule or the law precludes 
Lead Agencies from examining additional eligibility criteria at the 
time of the next redetermination.
    In paragraph (e)(4), we propose requiring Lead Agencies to allow 
families the option of reporting of information on an ongoing basis, 
particularly to allow families to report information that would be 
beneficial to their assistance (such as an increase in work hours that 
necessitates additional child care hours or a loss of earnings that 
could result in a reduction of the family copayment). While we 
encourage limiting reporting requirements for families, it was not our 
intent to limit the family's ability to report changes in 
circumstances, particularly in cases where they may have entered into 
more stressful or vulnerable situations or would be eligible for 
additional child care assistance.
    Moreover, as proposed in Sec.  98.21(e)(4), if a family reports 
changes on an ongoing basis to the Lead Agency that do not make the 
family ineligible, the Lead Agency must act on these provisions if it 
would increase the family's benefit, but cannot act on any information 
that would reduce the family's benefit. All of the above provisions 
would apply to any entities that perform eligibility functions in the 
CCDF program on the Lead Agency's behalf.
    Finally, some Lead Agencies currently use electronic data from 
other State/Territory and Federal databases to verify or monitor CCDF 
eligibility. Lead Agencies may continue this practice, which is 
particularly useful in reducing the burden on families at the time of 
initial determination or redetermination. However, Lead Agencies should 
ensure any such data that is acted upon during the minimum 12-month 
eligibility period conform to the above requirements for change 
reporting and all CCDF rules.
    We recognize that some States currently send interim reporting 
forms to families during the eligibility period to request that 
families verify or update information. Some States use such interim 
reporting to align with processes in other programs, such as semi-
annual SNAP simplified change reporting. We believe that such periodic 
reporting forms are contrary to the spirit of the law, which provides 
for minimum 12-month eligibility between redeterminations. We ask for 
comments on whether States should have the option for 6-month interim 
reporting forms for CCDF, and if such reports are allowed, the best way 
to structure them so as to promote continuity of services for the 
minimum 12-month eligibility period for eligible families, consistent 
with the law. We also ask for comment on whether States should be able 
to adjust co-payments or otherwise act on verified information (e.g., 
updated income information) received from other programs or sources. As 
discussed earlier, acting on information received pursuant to 
eligibility determinations or recertifications in other programs allows 
CCDF Lead Agencies to extend a child's eligibility by ``resetting the 
clock'' and starting a new 12-month period. We ask for comments on 
whether the benefits of this approach outweigh the impact of any co-
payment increases, if allowed, during the minimum 12-month period, and 
whether those benefits would be a reason to allow Lead Agencies to act 
on verified information from other programs.
    Program integrity. It is important to ensure that 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 
redetermination periods, are consistent with and support 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 remain consistent with the requirements in this 
subpart, we are proposing to add Sec.  98.21(a)(4) to affirmatively 
state that because a child meeting eligibility requirements at the most 
recent eligibility determination or redetermination is considered 
eligible between redeterminations as described in paragraph (a)(1), any 
payment for such a child shall not be considered an error or improper 
payment under subpart K due to the family's circumstances. This 
clarifies that compliance with the policies in this Subpart do not 
constitute an error and Lead Agencies will not be held accountable for 
payments within these parameters.
    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. These proposed changes are intended to remove 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.
    Some Lead Agencies currently use ``look back'' and recoupment 
policies as part of eligibility redeterminations. These review a 
family's eligibility for the prior eligibility period to see if the 
family was ineligible during any portion of that time and recoup 
benefits for any period where the family had been ineligible. ACF would 
like to clarify that there is no Federal requirement for Lead Agencies 
to recoup CCDF overpayments, except in instances of fraud. We also 
strongly discourage such policies as they may impose a financial burden 
on low-income families that is counter to CCDF's long-term goal of 
promoting family economic stability. The Act affirmatively states an 
eligible child ``will be considered to meet all eligibility 
requirements'' for a minimum of 12 months regardless of increases in 
income (as long as income remains at or below 85 percent of SMI) or 
temporary changes in parental employment or participation in education 
and training. Therefore, there are very limited circumstances in which 
a child would

[[Page 80489]]

not be considered eligible after an initial eligibility determination. 
We encourage Lead Agencies instead to focus program integrity efforts 
on the largest areas of risk to the program, which tend to be 
intentional violations and fraud involving multiple parties.
    Existing regulations at Sec.  98.60 indicate that Lead Agencies 
shall recover child care payments that are the result of fraud from the 
responsible party. While ACF does not define the term fraud and leaves 
flexibility to Lead Agencies, fraud in this context typically involves 
knowing and willful misrepresentation of information to receive a 
benefit. We urge Lead Agencies to carefully consider what constitutes 
fraud, particularly in the case of individual families.
    Taking into consideration children's development and learning. The 
proposed rule affirms that both the child's development and the 
parent's need to work or attend school or training are factors in the 
child care needs of each family. This proposed rule would amend Sec.  
98.21 to add paragraph (f) to require that ``Lead Agencies must take 
into consideration children's development and learning and promote 
continuity of care when authorizing child care services.'' There are 
myriad ways in which this provision could be incorporated into Lead 
Agencies' eligibility, intake, authorization, and CCDF policies and 
practices. ACF intends to work with Lead Agencies to provide technical 
assistance and identify a variety of strategies to fit different 
eligibility processes. As an example, in serving a preschool-aged child 
(e.g., age 3 or 4), the Lead Agency may consider whether or not the 
child has access to a high quality preschool setting and how CCDF can 
make enrollment in a high quality preschool more likely. Lead Agencies 
could partner with Head Start, pre-kindergarten, or other high quality 
programs to build an intentional package of arrangements for the child 
that allows for attendance at preschool and a second arrangement that 
accommodates the parent's work schedule. For infants and toddlers, a 
Lead Agency may want to coordinate services with Early Head Start, 
while also maintaining a secondary child care arrangement to preserve 
the relationship with a familiar caregiver, as it is particularly 
important for infants and toddlers to build and maintain secure 
relationships with caregivers. A Lead Agency could also offer parents 
the choice to select high quality infant slots that are funded through 
contracts or grants. For children of all ages, providing more intensive 
case management for families with children with multiple risk factors 
can increase the likelihood that the family will find a stable, quality 
child care provider that is willing to work with other service 
providers in assisting the child and family.
    The intent of this provision is that the Lead Agency has some 
mechanism in place to consider the child's development and learning, 
but a Lead Agency has broad flexibility to determine how this is done. 
At a minimum, we would expect Lead Agencies to collect sufficient 
information during the CCDF intake process in order to make necessary 
referrals for services. For example, a Lead Agency could make sure 
there is an automatic referral of eligible children to Early Head Start 
or Head Start. A Lead Agency could include in their eligibility 
determination process a question about whether or not the child has an 
Individualized Education Program (IEP) or Individual Family Service 
Plan (IFSP), so that the parent could be provided with information on 
providers that are equipped to provide services that meet the child's 
individual needs.
    ACF encourages Lead Agencies to engage in public-private 
partnerships so that responsibility for implementing this provision 
does not fall solely on CCDF eligibility workers. Partnerships with 
child care resource and referral agencies, early intervention agencies, 
and others may mean that a few well-chosen questions during the intake 
process can prompt the eligibility worker (or automated system if the 
process is online) to direct the family to appropriate resources. This 
proposed requirement does not require a developmental screening of 
every child as part of the eligibility process; however, child care 
agencies should partner to ensure that children in the CCDF subsidy 
system can access appropriate screening and follow-up.
    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 best meet the developmental and 
learning needs of children in their policies and practices and to 
encourage partnerships among high quality providers, child care 
resource and referral agencies, and case management partners to 
strengthen CCDF's capacity to fulfill its child development mission for 
families.
    No requirement to limit authorized care to parent schedule. The 
proposed rule would clarify at Sec.  98.21(g) that ``Lead Agencies are 
not required to limit authorized child care services strictly based on 
the work, training, or educational schedule of the parent(s) or the 
number of hours the parent(s) spend in work, training, or educational 
activities.'' Tying child care subsidy authorizations closely to 
parental work hours may limit access to high quality settings and does 
not support the fixed costs of providing care. In particular, it 
creates challenges for parents with variable schedules and inhibits 
their children from accessing a consistent child care arrangement. This 
provision clarifies that ``matching'' the hours of child care to a 
parent's hours of work is not required. ACF believes that, in some 
cases, such ``matching'' works against the interests of the parent or 
child.
    Lead Agencies are encouraged to authorize adequate hours to allow 
children to participate in a high quality program, which may be more 
hours than the parent is working or in education or training. For 
example, if most local high quality early learning programs offer only 
full-time slots, a child whose parent is working part-time may need 
authorization for full-time care.

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

    Two of the Act's purposes are ``to promote parental choice to 
empower working parents to make their own decisions regarding the child 
care services that best suits their family's needs'' and ``to encourage 
States to provide consumer education information to help parents make 
informed choices about child care services and to promote involvement 
by parents and family members in the development of their children in 
child care settings.'' Subpart D of the regulations describes parental 
rights and responsibilities and provisions related to parental choice, 
including 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.
Parental Choice (Section 98.30)
    Group home child care. As discussed earlier, we are proposing a 
technical change to delete group home child care from the variety of 
child care categories at Sec.  98.30(e) from which parents receiving a 
certificate for child care service must be able to choose.
    In-home care. We propose to revise Sec.  98.30(f)(2) to explicitly 
allow for Lead Agencies to adopt policies that may

[[Page 80490]]

limit parental access to in-home care. This change aligns with current 
policy as discussed in the preamble to the 1998 Final Rule. 
Specifically, the preamble documented Lead Agencies' ``complete 
latitude to impose conditions and restrictions on in-home care.'' (63 
FR 39950) As discussed in the 1998 preamble, monitoring the quality of 
care and the appropriateness of payments to in-home providers poses 
special challenges for Lead Agencies. We continue to urge Lead Agencies 
to consider the factors that may lead parents to choose in-home care, 
including the need for care at non-traditional hours or care for 
children with special needs, when deciding whether to put limitations 
on in-home care. It is crucial that parents have access to the types of 
care necessary for them to work and for their children to be in a safe 
and enriching environment. While this proposed change codifies Lead 
Agencies' ability to impose limits on the use of in-home care, it does 
not allow for Lead Agencies to flatly prohibit the use of in-home care. 
As this is longstanding policy, we do not expect the proposed change to 
have a significant impact on families or Lead Agencies.
    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 a range of child care 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 
child care and education programs, and some have expressed concerns 
that the current regulatory language related to parental choice 
inhibits their ability to link the child care subsidy program to these 
systems. ACF published a Policy Interpretation Question (CCDF-ACF-PIQ-
2011-01) clarifying that parental choice provisions do not preclude a 
Lead Agency from implementing policies that require child care 
providers serving children receiving CCDF funds to meet certain quality 
requirements, including those specified within a quality improvement 
system. As long as parental choice conditions are met, a Lead Agency 
could require that, in order to provide care to children receiving 
CCDF, 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 clarifying 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 QRIS or other transparent system 
of quality indicators.
    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, such as in-home care, 
and types of child care providers, such as relative providers, that may 
not be eligible to participate in the quality improvement system. This 
is particularly important for geographic areas lacking an adequate 
supply of child care or when a parent has scheduling, transportation, 
or other issues that prevent the use of a preferred provider within the 
system.
    Lead Agencies should ensure adequate time and support for providers 
before implementing a policy that requires providers to meet a certain 
level of quality in order to be eligible to serve CCDF children. While 
most States and Territories have implemented a QRIS, the number of 
providers participating varies significantly. In order to implement the 
policy at Sec.  98.30(g), Lead Agencies should ensure that an adequate 
number of child care providers are included in the QRIS to provide 
parents with a variety of settings and high quality child care options 
from which to choose. Furthermore, it is important to ensure that 
providers have been given the financial, technical, and professional 
development supports necessary to meet high quality standards.
    Similarly, 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. For example, Lead 
Agencies may provide brochures or other products that encourage parents 
to select a high quality provider without violating parental choice 
provisions. This provision would allow, but not require, Lead Agencies 
to adopt policies that incentivize parents to choose high quality 
providers as determined by a system of quality indicators and we 
strongly encourage that they do so. We believe this policy change would 
help Lead Agencies leverage the CCDF quality funds that have been 
invested in QRIS and ensure that more children receiving CCDF are in 
high quality child care, which is in line with the new purposes and 
provisions in the statute.
    Lead Agencies would have the flexibility to determine what types of 
information and incentives to use to encourage parents to choose high 
quality providers. One option is to lower parental copayments for 
parents that choose a high quality provider. We encourage Lead 
Agencies, or their partners such as child care resource and referral 
agencies, to use information from a QRIS or other system of quality 
indicators to make recommendations and help parents make informed child 
care decisions, for example, by listing the highest rated providers at 
the top of a referral list and providing information about the 
importance of high quality child care. Lead Agencies are not limited to 
these examples and should design information sharing and incentives in 
a way that best fits the families they serve with CCDF.
Parental Access (Section 98.31)
    We propose a technical change at Sec.  98.31 to specify that Lead 
Agencies shall provide a detailed description ``in the Plan'' of how 
they ensure that providers allow parents to have unlimited access to 
their children while the children are in care. This corresponds to the 
provision at Sec.  98.16(t).
Parental Complaints (Section 98.32)
    Hotline for parental complaints. Section 658E(c)(2)(C) of the CCDBG 
Act requires Lead Agencies to maintain a record of substantiated 
parental complaints, make information regarding such parental 
complaints available to the public on request, and provide a

[[Page 80491]]

detailed description of how such record is maintained and is made 
available. Current language at Sec.  98.32 mirrors the statutory 
requirement. We elaborate on the statutory requirement by proposing 
Sec.  98.32(a), which would require Lead Agencies to ``establish or 
designate a hotline or similar reporting process for parents to submit 
complaints about child care providers.'' In connection with this change 
we have added a provision at Sec.  98.33(d), to require Lead Agencies 
to include in the consumer statement for CCDF parents disclosure of the 
hotline number or other reporting process pursuant to this requirement. 
Lead Agencies should identify the capability for the parental complaint 
hotline to be accessible to persons with limited English proficiency 
and persons with disabilities, such as through the provision of 
interpretation services and auxiliary aids.
    The purpose of the proposed parental complaint hotline is to 
provide parents with an easy way to submit complaints about a child 
care provider or their staff. The current process for complaint 
submission varies widely across Lead Agencies, with some lacking any 
system at all. According to an analysis of FY 2014-2015 CCDF Plans, as 
well as State/Territory child care and licensing Web sites, 18 States/
Territories have a parental complaint hotline that covers all CCDF 
providers, 22 States/Territories have a parental complaint hotline that 
covers some child care providers, and 16 States/Territories do not have 
a parental complaint hotline. Maintaining and sharing substantiated 
complaints is a statutory requirement and establishing a clear, easily-
accessible way for parents to file complaints is an important part of 
meeting that requirement.
    The value of parental complaint hotlines is illustrated by the 
longstanding national hotline established for the Department of Defense 
(DOD) military child care program. The Military Child Care Act of 1989 
(Pub. 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 an 
important tool in engaging parents in child care. In addition, 
complaints received through the hotline have helped DOD identify 
problematic child care programs. (Campbell, N., Appelbaum, J., 
Martinson, K., Be All That We Can Be: Lessons from the Military for 
Improving Our Nation's Child Care System, National Women's Law Center, 
2000).
    Lead Agencies can meet the proposed requirement at Sec.  98.32(a) 
by establishing a telephone hotline or other type of system, such as a 
web-based system for accepting parental complaints about child care 
providers. However, we discourage reliance on only a web-based system 
as some families may have limited access to the Internet. We strongly 
encourage a parental complaint system that includes multiple submission 
platforms such as both telephonic and web-based submission. Regardless 
of the type of system utilized, Lead Agencies are encouraged to 
establish multilingual options and to ensure access for those with 
hearing and vision impairments.
    The Lead Agency may choose a different agency at the State, 
Territory, Tribal, or local level to manage the parental complaint 
system or find ways to combine the process for collecting parental 
complaints with already existing hotlines. For example, in some States/
Territories the licensing agency handles complaints of licensed 
providers and a different agency handles license-exempt providers. Lead 
Agencies may choose to devolve management of a complaint system to the 
local level in order to facilitate more prompt and timely follow-up. We 
leave it to the discretion of the Lead Agency to determine the best way 
to manage the hotline.
    We also strongly encourage Lead Agencies to implement a single 
point of entry (e.g., one toll-free hotline number) as the most 
straightforward way for parents to file a complaint. There should not 
be a burden for the parent in finding the correct hotline number or Web 
page address. Many parents may not know whether the provider is 
licensed or license-exempt, for example, and therefore will not know 
which hotline to call if there are separate contact points for 
providers. Lead Agencies that choose to combine existing lines or 
devolve responsibility to local agencies should set-up a single point 
of entry with a process to immediately refer the call to the 
appropriate agency.
    Lead Agencies should widely publicize the process for submitting a 
complaint about a provider and consider requiring child care providers 
to publicly post the process, including the hotline number and/or URL 
for the web-based complaint system, in their center or family child 
care home. Other areas for posting may be on the Web site required by 
Sec.  98.33(a), through a child care resource and referral network, at 
local agencies where parents apply for benefits, or other consumer 
education materials distributed by the Lead Agency. In addition to 
making sure this information is made widely available to the public, 
the hotline or other reporting process must be disclosed to parents 
receiving CCDF as part of their consumer statement at Sec.  98.33(d). 
To be most useful, parents should be able to file a complaint at any 
time. We strongly recommend that a telephonic hotline be operational 24 
hours a day, or at minimum include a voicemail system that allows 
parents to leave complaints when an operator is not available. We 
encourage Lead Agencies to have a complaint response plan in place that 
includes appropriate time frames for following up on a complaint 
depending on the urgency or severity of the parent's concern and other 
relevant factors. We are not requiring Lead Agencies to do a monitoring 
visit in response to a complaint. However, inspections and monitoring 
visits may be necessary in order to substantiate the complaints 
received through the proposed hotline. Therefore, Lead Agencies should 
have a process for substantiating those complaints. We strongly 
recommend this process include unannounced visits in response to a 
complaint pertaining to the health and safety of children in the care 
of child care providers receiving CCDF. As discussed in Subpart E of 
this preamble, we are seeking comment on whether the final rule should 
include a requirement that Lead Agencies conduct an unannounced 
monitoring visit in response to a complaint, and whether this 
requirement should apply to providers receiving CCDF funds or 
additional providers.
    We propose a technical change at Sec.  98.32(c), which we propose 
to redesignate as Sec.  98.32(d), to specify that Lead Agencies shall 
provide a detailed description ``in the Plan'' of how they will 
maintain and make available to the public a record of substantiated 
parental complaints. This corresponds to the provision at Sec.  
98.16(s).
Consumer and Provider Education (Section 98.33)
    In the 2014 reauthorization, Congress expanded the requirements 
related to consumer and provider education. Section 658E(c)(2)(E) of 
the CCDBG Act requires Lead Agencies to collect and disseminate, 
through child care resource and referral organizations or other means 
as determined by the Lead Agency, to parents of eligible children, the 
general public, and, where applicable, providers, consumer education 
information that will promote informed child care services. In 
addition, Section 658E(c)(2)(D) requires monitoring and inspection 
reports of child care providers to be made available electronically. 
This focus on consumer education as a crucial part of

[[Page 80492]]

parental choice has laid the foundation for a more transparent system, 
helping parents to better understand their child care options and 
encouraging providers to improve the quality of their services.
    Every interaction parents have with the subsidy system is an 
opportunity to engage them in consumer education to help them make 
informed decisions about their child care providers, as well as provide 
resources that promote child development. We propose that consumer 
education services be directly included as part of the intake and 
eligibility process for families applying for child care assistance. 
Parents of eligible children often lack the information necessary to 
make informed decisions about their child care arrangement. 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, limited English proficiency, or 
disabilities. Lead Agencies can play an important role in bridging the 
gap created by these barriers by providing information directly to 
families receiving CCDF subsidies to ensure they fully understand their 
child care options and are able to assess the quality of providers.
    When implementing proposed consumer and provider education 
provisions, we recommend Lead Agencies consider three target audiences: 
Parents, the general public, and child care providers. While some 
components are aimed at ensuring parents have the information they need 
to choose a child care provider, others are equally important for 
caregivers who interact with parents on a regular basis and can serve 
as trusted sources of information.
    Lead Agencies should ensure that all materials are consumer-
friendly and easily accessible; this includes using plain language and 
considering the abilities, languages, and literacy levels of the 
targeted audiences. Lead Agencies should consider translation of 
materials into multiple languages, as well as the use of ``taglines'' 
on consumer education materials for frequently encountered non-English 
languages and to inform persons with disabilities how they can access 
auxiliary aids or services and receive information in alternate formats 
at no cost.
    Consumer education Web site. We propose amending paragraph (a) of 
Sec.  98.33 to require Lead Agencies ``to collect and disseminate 
consumer education information to parents of eligible children, the 
general public, and providers through a consumer-friendly and easily 
accessible Web site.'' The Web site must, at a minimum, include five 
components: (1) Lead Agency policies and procedures, (2) provider-
specific information, (3) aggregate number of deaths, serious injuries, 
and instances of substantiated child abuse in child care settings each 
year (4) referral to local child care resource and referral 
organizations, and (5) directions on how parents can contact the Lead 
Agency, or its designee, and other programs to better understand 
information on the Web site. The specifics of each component are 
discussed in detail below.
    The statute requires the Web site to be consumer-friendly and 
easily accessible. To ensure that the Web site is accessible for all 
families, we propose to require that it provide for the widest possible 
access to services for families who speak languages other than English 
and persons with disabilities. Lead Agencies should make sure the Web 
site meets all Federal and State laws regarding accessibility, 
including the Americans with Disabilities Act (ADA) of 1990 (42 U.S.C. 
12101, et seq.), to ensure that individuals with disabilities are not 
excluded, denied services, segregated or otherwise treated differently 
because of the absence of auxiliary aids and services. We recommend 
Lead Agencies follow the guidelines laid out by section 508 of the 
Rehabilitation Act of 1973, as amended (29 U.S.C. 794d), when designing 
their Web sites. Section 508 requires that individuals with 
disabilities, who are members of the public seeking information or 
services from a Federal agency, have access to and use of information 
and data that is comparable to that provided to the public who are not 
individuals with disabilities. The US Department of Justice has 
provided guidance and resources on how to create an accessible site at 
http://www.ada.gov/Websites2.htm.
    Parents should be able to access all consumer information they need 
to make an informed choice through a simple, single online source. We 
encourage Lead Agencies to review current systems and redesign if 
needed to allow for a single point of entry, especially if the systems 
are funded with CCDF funds. However, we recognize that Lead Agencies 
have made significant investments in databases and other web-based 
applications. For many States/Territories, the CCDF Lead Agency and the 
licensing agency may not be the same, leading to multiple data systems 
with different ownership. We do not intend to require completely new 
systems be built. Rather, the Web site would be a single starting point 
for parents to access the various sources of public information 
required by the statute, including health and safety information, 
licensing history, and other related provider information. In the case 
where this information is already available on multiple Web sites, such 
as in a locally-administered State where each county has its own Web 
site, the Lead Agency could choose to create a single Web page that 
includes links to each of these Web sites, provided that each of the 
Web sites meets all the criteria at Sec.  98.33(a). Similarly, if there 
are two Web sites, one that includes licensed providers and another 
that includes CCDF providers, we strongly encourage Lead Agencies to 
create a single Web site through which parents can access information.
    The first statutorily required component of the consumer education 
Web site is a description of Lead Agency policies and procedures 
relating to child care. This includes explaining how the Lead Agency 
licenses child care providers including the rationale for exempting 
providers from licensing requirements, as described at Sec.  98.40; the 
procedure for conducting monitoring and inspections of child care 
providers, as described at Sec.  98.42; policies and procedures related 
to criminal background checks for staff members of child care 
providers, as described at Sec.  98.43; and the offenses that prevent 
individuals from being employed by a child care provider or receiving 
CCDF funds. The information about Lead Agency policies and procedures 
included on the consumer education Web site should be in plain 
language.
    The second proposed component is provider-specific information in 
several categories for all eligible and licensed child care providers, 
excluding those related to all children in their care. These categories 
include a localized list of all providers that is searchable by zip 
code and differentiates whether they are licensed or license-exempt 
providers; information about the quality of a provider as determined by 
the Lead Agency, if the information is available for that provider; and 
the results of monitoring and inspection reports, including those due 
to major substantiated complaints about failure to comply with health 
and safety provisions and Lead Agency policies, if available; and the 
number of serious injuries and deaths of children occurring in that 
child care setting. When making information public, Lead Agencies 
should ensure that the privacy of individual caregivers and children is 
maintained, consistent with State and, local, and tribal laws.

[[Page 80493]]

    While not required, we recommend that Lead Agencies include 
additional information with provider profiles, beyond what is required 
by statute, including contact information, enrollment capacity, years 
in operation, education and training of caregivers, and languages 
spoken by caregivers. We also suggest that the quality information and 
monitoring reports be included in the initial search results.
    The Act requires the Secretary to operate a national Web site for 
consumer education and submission of complaints. (Section 658L(b)(2)). 
The statute requires several components be included in the Web site, 
including many of the same requirements of the Lead Agency consumer 
education Web sites. We are proposing to incorporate all requirements 
of the national Web site into the requirements of the Lead Agency 
consumer education Web site, including the localized list of child care 
providers searchable by zip code proposed at Sec.  98.33(a)(2)(i). The 
statute allows for the national Web site to provide the information 
either ``directly or through linkages to State databases.'' It is not 
feasible or sensible for HHS to recreate databases many States have 
already created. Therefore, we are proposing to require Lead Agencies 
to include these components in their databases and Web sites to which 
we plan to link the national Web site. We welcome comments regarding 
this proposed provision and suggestions for having the national Web 
site link to State/Territory-level databases and Web sites.
    The Web site must include provider-specific quality information as 
determined by the Lead Agency, in accordance with Section 
658E(c)(2)(E)(i)(II) of the Act. Lead Agencies may choose the best 
method for differentiating the quality levels of child care providers. 
In this proposed rule, we are not requiring that Lead Agencies have a 
QRIS. However, we strongly encourage Lead Agencies to use a QRIS, or 
other transparent system of quality indicators, to collect the quality 
information proposed at Sec.  98.33(a)(2)(ii). Lead Agencies that have 
a QRIS should use information from the QRIS to provide parents with 
provider-specific quality information. By transparent system of quality 
indicators we mean a method of clear, research-based indicators that 
are appropriate for different types of providers, including child care 
centers and family child care homes, and appropriate for providers 
serving different age groups of children, including infants, toddlers, 
preschool, and school-age children. The system should help families 
easily understand whether a provider offers services meeting Lead 
Agency-determined best practices and standards to promote children's 
development, or is meeting a nationally recognized, research-based set 
of criteria, such as Head Start or national accreditation. We encourage 
Lead Agencies to incorporate mandatory licensing requirements as the 
foundation of any system of quality indicators, as a baseline of 
information for parents. By building on licensing structures, Lead 
Agencies may have an easier transition to a more sophisticated system 
that differentiates between indicators of quality.
    Because not all eligible and licensed non-relative child care 
providers may be included in a transparent system of quality 
indicators, the proposed regulation clarifies that provider-specific 
quality information must only be posted on the consumer Web site if it 
is available for the individual provider, which is a caveat included in 
statute. 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 the quality information provided 
on the Web site to be meaningful and useful for parents it should 
include as many providers as possible. We are not proposing a specific 
participation rate, but the public should have contextual information 
regarding the extent of participation by providers in a system of 
quality indicators.
    In designing a mechanism for differentiating child care quality, 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; 
ensure assessments of quality include program standards that are 
developmentally appropriate for different age groups; incorporate 
feedback from child care providers 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 child care resource and 
referral programs and other public agencies that serve low-income 
parents.
    The majority of States/Territories reported in their FY 2014-2015 
CCDF Plans that they have at least started to implement a QRIS. HHS has 
established a Priority Performance Goal to track the number of States 
that implement a QRIS meeting recommended benchmarks, and, as of FY 
2014, 29 States/Territories met the benchmark, and 27 States/
Territories have made progress on implementing a high quality QRIS that 
meets HHS benchmarks since the goal was establish in FY 2011.
    While ACF encourages Lead Agencies to implement a systemic 
framework for evaluating, improving, and communicating the level of 
quality in child care programs, we are not limiting Lead Agencies to a 
QRIS as the only mechanism for collecting the required quality 
information. Lead Agencies have the flexibility to implement more 
limited, alternative systems of quality indicators. For example, Lead 
Agencies could choose to use a profile or report card of information 
about a child care provider that could include compliance with State/
Territory 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 caregivers to work with young English learners or children with 
special needs. Lead Agencies could also build on existing professional 
development registries or other training systems to provide parents 
with information about caregiver training.
    Section 658E(c)(2)(D) of the Act requires Lead Agencies to also 
include provider-specific results of monitoring and inspection reports, 
including those reports that are due to major substantiated complaints 
(as defined by the Lead Agency) about a provider's failure to comply 
with health and safety requirements and other Lead Agency policies. The 
definition of ``major substantiated complaint'' varies across the 
country. Therefore, we are not proposing a standard definition. 
However, the proposed rule would require Lead Agencies to explain how 
they define it on their consumer education Web sites. This proposed 
requirement ensures that the results of proposed monitoring and 
inspection requirements at Sec.  98.42 are available to parents when 
they are deciding on a child care provider.
    We propose requiring Lead Agencies to post full monitoring and 
inspection reports. In order for inspection results to be consumer-
friendly and easily accessible, Lead Agencies would be required to use 
plain language for parents and child care providers and caregivers to 
understand. Often monitoring and inspection reports are long and 
include jargon and references to codes or regulations without any 
explanation. Reports that include complicated references and lack 
explanation are not consumer-friendly, limiting a parent's ability to 
make an informed decision about a child care

[[Page 80494]]

provider. In the case that full reports are not in plain language, Lead 
Agencies must post a plain language summary or interpretation in 
addition to the full monitoring and inspection report. We encourage 
Lead Agencies to consider simplifying and translating their monitoring 
and inspection reports in order to create more consumer-friendly 
documents.
    We propose to require that results be posted in a timely manner and 
include information about the date of inspection, information about any 
corrective actions taken by the Lead Agency and child care provider, 
where applicable, and include at least five years of results, where 
available going forward. A single year of results could mask patterns 
of infractions and is insufficient for a parent to judge the safety of 
the environment. We do not expect Lead Agencies to post reports 
retrospectively or prior to the effective date of this provision 
(November 17, 2017). We expect Lead Agencies to keep five years of 
results posted once they are available, beginning with the November 17, 
2017 effective date (unless a provider has been providing services for 
less time). We believe five years is a reasonable amount of time to 
include on the Web site. As adding new results to the completed Web 
site should not be a burden for the Lead Agency, we expect all reports 
to remain on the Web site. Finally, while not required, if earlier 
reports are available, we encourage Lead Agencies to post them on the 
Web site in order to provide more information for parents.
    Posting results and corrective actions in a timely manner is 
crucial to ensuring parents have updated information when making their 
provider decisions. We recommend Lead Agencies update results as soon 
as possible and no later than 90 days after an inspection or corrective 
action is taken. We are interested in comments on whether this is an 
appropriate amount of time. However, we are not in the proposed rule 
defining timely in the regulatory language. Rather, the proposed rule 
would leave it to the discretion of the Lead Agency to determine a 
reasonable amount of time based on the needs of its families and its 
capacity for updating.
    In following the statutory language at Section 658E(c)(2)(D), Lead 
Agencies must post the monitoring and inspections results for child 
care providers, as defined at Sec.  98.2. This means that the Web site 
must include any provider subject to the monitoring requirements at 
Sec.  98.42, as well as all licensed child care providers and all child 
care providers eligible to deliver CCDF services. Lead Agencies would 
be required to post inspection reports for child care providers that do 
not receive CCDF, if available. However, if information is not 
available, such as if a provider is not being inspected and there is no 
inspection report, the requirement does not apply.
    Lead Agencies with concerns regarding providers' privacy could use 
a unique identifier, such as a licensing number, to include on the 
profile. Parents interested in a certain provider can ask the provider 
or the Lead Agency for the identifier in order to look up more 
information about health and safety requirements met by a certain 
provider on the Web site. Lead Agencies also may choose to provide only 
limited information about a provider, such as provider name and zip 
code to make it easier for parents to identify their chosen provider.
    We strongly support Lead Agencies implementing policies that are 
fair to providers, including protections related to the consumer 
education Web site. Lead Agencies should establish an appeals process 
for providers that receive violations. This appeals process should 
include timeframes for filing the appeal, for the investigation, and 
for removal of any violations from the Web site determined on appeal to 
be unfounded. Lead Agencies also must ensure that the consumer 
education Web site is updated regularly. Some Lead Agencies currently 
allow providers to review monitoring and inspection results prior to 
posting on a public Web site. Nothing in this proposed rule should be 
taken as prohibiting that practice moving forward. However, the 
proposed requirement that information be posted in a timely manner 
means that Lead Agencies may need to limit the amount of time providers 
have to review the results prior to posting.
    Finally, we propose to require that Lead Agencies post provider-
specific information about the number of serious injuries (as defined 
by the State) and deaths that occurred in child care for all eligible 
child care providers on the consumer education Web site. This 
information should be included as part of the child care provider's 
profile discussed earlier. This proposed requirement works in 
conjunction with the proposed provision at Sec.  98.42(b)(4), which 
would require child care providers to report serious injuries or deaths 
occurring in child care. Because Lead Agencies have different 
definitions, we are not proposing to define serious injury in this 
proposed rule.
    Whether a provider has a history of serious injuries or deaths of 
children while in their care is a crucial piece of information that 
parents must have access to in order to make an informed decision about 
a provider. In addition, learning that a provider does not have a 
history of violations may provide parents additional peace of mind when 
leaving their children with a provider.
    We recognize that not all serious injuries or deaths of children 
that occur in child care are the fault of the child care provider. We 
recommend that Lead Agencies include additional information about the 
context of the serious injuries and deaths to ensure that parents have 
the full picture when looking at these numbers on the consumer 
education Web site.
    We are not proposing to require provider-specific information on 
substantiated cases of child abuse and neglect that occurred while a 
child was in the care of the provider. The Child Abuse Prevention and 
Treatment Act (CAPTA) (42 U.S.C. 5106a(b)(2)(B)(viii)-(ix)) requires 
States to preserve the confidentiality of all child abuse and neglect 
reports and records to protect the privacy of the child and the child's 
parent or guardian. We believe that requiring provider-specific 
information on occurrences of child abuse and neglect may violate some 
of those privacy requirements. However, we think it is important for 
parents to have access to this information as well. We request comment 
on whether this information should be included and suggestions for 
ensuring the information does not violate privacy rules.
    The third statutorily required component of the consumer education 
Web site is posting of the aggregate number of deaths, serious 
injuries, and instances of substantiated child abuse that occurred in 
child care settings each year, for eligible child care providers. This 
proposed requirement is associated with the provider setting and 
therefore it should include information about any child in the care of 
a provider eligible to receive CCDF, not just children receiving 
subsidies. As with serious injuries, we are choosing not to define 
substantiated child abuse in this proposed rule. We encourage Lead 
Agencies to use their State or Territory child welfare agency's 
definition of substantiated child abuse for consistent reporting across 
programs. Because of the wide variation in how child abuse in child 
care settings is reported and counted, we are requesting comments and 
examples about best practices for ensuring accurate data is collected 
and posted on the consumer education Web site. Lead Agencies may choose 
how the data are presented on the Web site. We encourage them to 
include the data with

[[Page 80495]]

the results of an annual review of all serious injuries and deaths 
occurring in child care, as proposed at Sec.  98.53(f)(4).
    The fourth proposed component of the consumer education Web site is 
the ability to refer to local child care resource and referral 
organizations, which is also a requirement of the national Web site 
discussed earlier. The Web site should include contact information, as 
well as any links to Web sites for any local child care resource and 
referral organizations.
    The final component of the consumer education Web site is 
information on how parents can contact the Lead Agency, or its 
designee, or other programs that can help the parent understand 
information included on the consumer education Web site. The proposed 
consumer education Web site at Sec.  98.33(a) represents a significant 
step in making it easier for parents to access information about the 
child care system and potential child care providers. However, the 
amount of information may be difficult to understand or find. In 
addition, parents searching for child care may prefer to speak with a 
person directly as they make decisions about their child's care. 
Therefore, we propose that the Web site include information about how 
to contact the Lead Agency, or its designee such as a child care 
resource and referral agency, to answer any questions parents might 
have after reviewing the Web site.
    Additional consumer education. We propose to incorporate statutory 
requirements at Section 658E(c)(E)(i) by adding new paragraph (b) at 
Sec.  98.33, which requires Lead Agencies to provide additional 
consumer education to eligible parents, the general public, and, where 
applicable, child care providers. The consumer education may be done 
through child care resource and referral organizations or other means 
as determined by the Lead Agency, and can be delivered through the 
consumer education Web site at Sec.  98.33(a). We strongly encourage 
Lead Agencies to use additional means to provide this information 
including through direct conversations with case workers and 
information sessions for parents and child care providers, outreach and 
counseling available at intake from eligibility workers, and to and 
through child care providers to parents.
    The statute requires consumer education to include: Information 
about the availability of child care services through CCDF, other 
programs for which families might be eligible, and the availability of 
financial assistance to obtain child care services; other programs for 
which families receiving CCDF may be eligible; programs carried out 
under Section 619 and Part C of the Individuals with Disabilities 
Education Act (IDEA) (20 U.S.C. 1419, 1431 et seq.); research and best 
practices concerning children's development, including meaningful 
parent and family engagement and physical health and development; and 
policies regarding the social-emotional behavioral health of children, 
which are described below and included in the proposed rule at Sec.  
98.33(b)(1).
    The first required piece of information is about the availability 
of child care services through CCDF and other programs that parents may 
be eligible for, as well as any other financial assistance that may be 
available to help parents obtain child care services. Lead Agencies 
should provide information about any other Federal, State/Territory/
Tribal, or local programs that may pay for child care or other early 
childhood education programs, such as Head Start, Early Head Start and 
state-funded pre-kindergarten that would meet the needs of parents and 
children. It should also explain how other forms of child care 
assistance, including CCDF, are available to cover additional hours the 
parent might need due to their work schedule.
    The second statutory requirement is for consumer education to 
include information about other assistance programs for which families 
receiving child care assistance may be eligible. These programs 
include: Temporary Assistance for Needy Families (TANF) (42 U.S.C. 601 
et seq.); Head Start and Early Head Start (42 U.S.C. 9831 et seq.); 
Low-Income Home Energy Assistance Program (LIHEAP) (42 U.S.C. 8621 et 
seq.); Supplemental Nutrition Assistance Program (SNAP) (7 U.S.C. 2011 
et seq.); Special Supplemental Nutrition Program for Women, Infants, 
and Children (WIC) (42 U.S.C. 1786); Child and Adult Care Food Program 
(CACFP) (42 U.S.C. 1766); and Medicaid and the State Children's Health 
Insurance Programs (CHIP) (42 U.S.C. 1396 et seq., 1397aa et seq.).
    In providing consumer education, Lead Agencies may consider the 
most appropriate and effective ways to reach families, which may 
include information in multiple languages and partnerships with other 
agencies and organizations, including child care resource and referral. 
Lead Agencies should also coordinate with workforce development 
entities that have direct contacts with parents in need of child care. 
Some Lead Agencies co-locate services for families in order to assist 
with referrals or enrollment in other programs.
    Families eligible for child care assistance are often eligible for 
other programs and benefits but many parents lack information on 
accessing the full range of programs available to support their 
children. More than half of infants and toddlers in CCDF have incomes 
below the federal poverty level, making them eligible for Early Head 
Start. Lead Agencies can work with Early Head Start programs, including 
those participating in Early Head Start-Child Care Partnerships, to 
direct children who are eligible for Early Head Start to available 
programs.
    Despite considerable overlap in eligibility among the major work 
support programs, historically, many eligible working families have not 
received all public benefits for which they qualify. For example, more 
than 40 percent of children who are likely to be eligible for both SNAP 
and Medicaid or CHIP fail to participate in both programs (Rosenbaum, 
D. and Dean, S. Improving the Delivery of Key Work Supports: Policy & 
Practice Opportunities at A Critical Moment, Center on Budget and 
Policy Priorities, 2011). A study using 2001 data found that only 5 
percent of low-income working families obtained Medicaid or CHIP, SNAP, 
and child care assistance (Mills, G., Compton, J. and Golden, O., 
Assessing the Evidence about Work Support Benefits and Low-Income 
Families, Urban Institute, 2011).
    In addition to informing families about the availability of these 
programs, some Lead Agencies have streamlined parents' access to other 
benefits and services by coordinating and aligning eligibility criteria 
or processes and/or documentation or verification requirements across 
programs. This benefits both families and administering agencies by 
reducing administrative burden and inefficiencies. Lead Agencies also 
coordinate to share data across programs so families do not have to 
submit the same information to multiple programs. Finally, Lead 
Agencies have created online Web sites or portals to allow families to 
screen for eligibility and potentially apply for multiple programs. We 
recommend Lead Agencies consider alignment strategies that help 
families get improved access to all benefits for which they are 
eligible.
    Thirdly, consumer education must also include information about 
programs for children with disabilities carried out under Part B 
Section 619 and Part C of the Individuals with Disabilities Education 
Act (IDEA) (20 U.S.C. 1419, 1431 et seq.).
    The fourth piece of required consumer education is information 
about research and best practices

[[Page 80496]]

concerning children's development, and meaningful parent and family 
engagement. It must also include information about physical health and 
development, particularly healthy eating and physical activity. This 
information may be included on the consumer education Web site, as well 
as be provided through brochures, in person meetings, and other 
trainings.
    While this information is important for parents and the general 
public, we encourage Lead Agencies to target this information to child 
care providers as well. Each of these components is crucial for 
caregivers to understand in order to provide an enriching learning 
environment and build strong relationships with parents. Lead Agencies 
may choose to include information about family engagement frameworks in 
their provider education. Many States and communities have employed 
these frameworks to promote caregiver skills and knowledge through 
their QRIS, professional development programs, or efforts to build 
comprehensive early childhood systems. States have used publicly-
available tools, including from the Office of Head Start. The Head 
Start Parent, Family, and Community Engagement framework is a research-
based approach to program change that shows how different programs can 
work together as a whole--across systems and service areas--to support 
parent and family engagement and children's learning and development.
    Understanding research and best practices concerning children's 
development is an essential component for the health and safety of 
children, both in and outside of child care settings. Caregivers should 
be knowledgeable of important developmental milestones not only 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. Knowledge of developmental stages and milestones also 
reduces the odds of child abuse and neglect by establishing more 
reasonable expectations about normative development and child behavior. 
This requirement is associated with the proposed requirement at Sec.  
98.44(b)(1) that orientation or pre-service for child care caregivers, 
teachers and directors include training on child development.
    Lastly, consumer education must include provision of information 
about policies regarding social-emotional behavioral health of 
children, which may include positive behavioral health intervention and 
support models for birth to school-age or as age- appropriate, and 
policies on suspension and expulsion of children birth to age five in 
child care and other early childhood programs as described in the Plan 
at Sec.  98.16(ee).
    Social-emotional development is fostered through securely attached 
relationships; and learning, by extension, is fostered through frequent 
cognitively enriching social interactions within those securely 
attached relationships. Studies indicate that securely attached 
children are more advanced in their cognitive and language development, 
and show greater achievement in school. In 2015, ACF issued an 
information memorandum detailing research and policy options related to 
children's social-emotional development. (CCDF-ACF-IM-2015-01, http://www.acf.hhs.gov/sites/default/files/occ/ccdf_acf_im_2015_01.pdf). By 
providing consumer education on social-emotional behavioral health 
policies, Lead Agencies are helping parents, the general public, and 
caregivers understand the importance of social-emotional and behavioral 
health and how the Lead Agency is encouraging the support of children's 
ability to build healthy and strong relationships.
    In conjunction with this consumer education requirement, we are 
proposing to add Sec.  98.16(ee) to require Lead Agencies to provide a 
description of their policies on suspension and expulsion of children 
birth to age five in child care and other early childhood programs 
receiving CCDF assistance. Ensuring that parents and providers 
understand suspension and expulsion policies for children birth to age 
five is particularly important. In 2014, the U.S. Departments of Health 
and Human Services and Education jointly released a policy statement 
addressing expulsion and suspension in early learning settings and 
highlighting the importance of social-emotional and behavioral health 
(https://www.acf.hhs.gov/sites/default/files/ecd/expulsion_suspension_final.pdf). The policy statement affirms the 
Departments' attention to social-emotional and behavioral health and 
includes several recommendations to States and early childhood 
programs, including child care programs, to assist in their efforts. It 
strongly encourages States to establish statewide policies, applicable 
across settings, including publicly and privately funded early 
childhood programs, to promote children's social-emotional and 
behavioral health and to eliminate or severely limit the use of 
expulsion, suspension, and other exclusionary discipline practices. 
These policies may be included in State child care licensing 
regulations, as some States have done.
    Information about developmental screenings. The reauthorized CCDBG 
Act requires at Section 658E(c)(2)(E)(ii) that consumer education about 
developmental screenings be provided to parents, the general public, 
and, when applicable, child care providers. Specifically, it should 
include (1) information on existing resources and services the Lead 
Agency can use in conducting developmental screenings and providing 
referrals to services for children who receive child care assistance; 
and (2) a description of how a family or eligible child care provider 
may use those resources and services to obtain developmental screenings 
for children who receive child care assistance and may be at risk for 
cognitive or other developmental delays, including social, emotional, 
physical, or linguistic delays. The information about the resources may 
include the State or Territory's coordinated use of the Early and 
Periodic Screening, Diagnosis, and Treatment program under the Medicaid 
program carried out under title XIX of the Social Security Act (42 
U.S.C. 1396 et seq.) and developmental screening services available 
under section 619 and part C of the IDEA (20 U.S.C. 1419, 1431 et 
seq.). We propose to reiterate the statutory requirements and add new 
paragraph (c) at Sec.  98.33 to require Lead Agencies to provide 
information on developmental screenings as part of their consumer 
education efforts during the intake process for families receiving CCDF 
assistance and to caregivers, teachers, and directors through training 
and education. Information on developmental screenings, as other 
consumer education information, should be accessible for individuals 
with limited English proficiency and individuals with disabilities.
    Educating parents and caregivers on what resources are available 
for developmental screenings, as well as how to access these 
screenings, is crucial to ensuring that developmental delays or 
disabilities are identified early. Some children may require a more 
thorough evaluation by specialists and additional services and 
supports. Lead Agencies should ensure that all providers are 
knowledgeable on how to access resources to support developmental and 
behavioral screening, and make appropriate referrals to specialists, as 
needed, to ensure that children receive the services and supports they 
need as early as possible.
    While we are not proposing that all children be required to receive 
a

[[Page 80497]]

developmental screening, we strongly recommend that Lead Agencies 
develop strategies to ensure all children receive a developmental and 
behavioral screening within 45 days of enrollment in CCDF, which aligns 
with Head Start standards. With regular screenings, families, teachers, 
and other professionals can assure that young children get the services 
and supports they need, as early as possible to help them thrive 
alongside their peers. Birth to 5: Watch Me Thrive, a coordinated 
Federal effort to encourage universal developmental and behavioral 
screening for children and to support their families and caregivers, 
has information and resources at www.acf.hhs.gov/programs/ecd/watch-me-thrive. In addition to research-based developmental and behavioral 
screenings, Lead Agencies should encourage parents and child care 
providers to use the tools and resources developed by the Centers for 
Disease Control and Prevention as part of their ``Learn the Signs. Act 
Early.'' campaign. These resources help parents and child care 
providers to become familiar with and keep track of the developmental 
milestones of children. These resources are available at http://www.cdc.gov/ncbddd/actearly/. The resources provided through this 
campaign are not a substitute for regular developmental screenings, but 
help to improve early identification of children with autism and other 
developmental disabilities so children and families can get the 
services and support they need as early as possible.
    Consumer statement for families. In addition to consumer education 
for parents, the general public, and where applicable, child care 
providers, we have a special interest in helping parents receiving CCDF 
select high quality child care because we know from research that low-
income children have the most to gain from such settings and because 
the care is publicly subsidized. We propose adding a new paragraph (d) 
to Sec.  98.33 to require Lead Agencies to provide families receiving 
CCDF assistance with easily understandable information on the child 
care provider they choose, including health and safety requirements met 
by the provider, any licensing or regulatory requirements met by the 
provider, date the provider was last inspected, any history of 
violations of these requirements, and any quality standards met by the 
provider. Lead Agencies also should provide information necessary for 
parents and providers to understand the components of a comprehensive 
background check, and whether the child care staff members of their 
provider have received such a check. We also propose to require this 
consumer statement to include information about the hotline for 
parental complaints about possible health and safety violations and 
information describing how CCDF assistance is designed to promote equal 
access to comparable child care in accordance with Sec.  98.45.
    If a parent chooses a provider that is legally-exempt from 
regulatory requirements or exempt from CCDF health and safety 
requirements (e.g., relatives at the Lead Agency option), the Lead 
Agency or its designee should explain the exemption to the parent. Lead 
Agencies that choose to use an alternative monitoring system for in-
home providers, as proposed at Sec.  98.42(b)(2)(v)(B), should describe 
this process for parents that choose in-home care. When a parent 
chooses a relative or in-home child care provider, the Lead Agency 
should explain to the parent the health and safety policies associated 
with relative or in-home care. The Lead Agency should provide the 
parents with resources about health and safety trainings should the 
parent wish for the relative to obtain training regardless of the 
exemption.
    There is a great deal of variation in how Lead Agencies handle 
intake for parents receiving child care subsidies. Therefore, we 
propose flexibility for Lead Agencies to implement the proposed 
consumer statement in the way that best fits both their administrative 
needs and the needs of the parents. This means that the consumer 
statement may be presented as a hard copy or electronically. When 
providing this information, a Lead Agency may provide it by referring 
to the Web site required by Sec.  98.33(a). In such cases, the Lead 
Agency should ensure that parents have access to the Internet or 
provide access on-site in the subsidy office. While we recognize the 
need for Lead Agency flexibility in this area, we have concerns about 
relying solely on electronic consumer statements. Parents may not have 
access to the Internet or may have questions about the consumer 
statement that need to be answered by a person. If a parent is filing 
an application online, we encourage the inclusion of a phone number, 
directed to either the Lead Agency or another organization such as a 
child care resource and referral agency, to ensure parents can have 
their questions answered. We also recommend that intake done over the 
phone should include the offer to either email or mail the consumer 
statement to the parent; and, that information on consumer statements 
should be accessible by individuals with limited English proficiency 
and individuals with disabilities.
    We realize, in some cases, a parent has chosen their provider prior 
to the intake process. If the parent comes in with a provider already 
chosen, the parent should be given the consumer statement on that 
provider. When a parent has not chosen a child care provider prior to 
intake, Lead Agencies should ensure that the parent receives 
information about available child care providers and general consumer 
education information proposed at Sec.  98.33(a), (b), and (c). This 
information should include a description of health and safety 
requirements and licensing or regulatory requirements for child care 
providers, processes for ensuring requirements are met, as well as 
information about the background check process for child care staff 
members of providers, and what offenses may preclude a provider from 
serving children. Once the parent selects a provider, this proposed 
provision would require the Lead Agency to provide a consumer statement 
to the parent with information about the provider they have selected, 
such as by mail or email.
    Finally, we encourage Lead Agencies to provide parents receiving 
CCDF assistance with updated information on their child care provider 
on a periodic basis, such as by providing an updated consumer statement 
at the time of the family's next eligibility redetermination. Ties 
between the CCDF Lead Agency and the licensing agency can help to 
ensure that families are notified when providers are seriously out-of-
compliance with health and safety requirements, and that placement of 
children and payment of CCDF funds do not continue where children's 
health and safety may be at-risk.
    An area we want to highlight is child care consumer education for 
families receiving TANF. Commenters on our 2013 NPRM expressed concern 
that families receiving TANF are not given the support needed to 
identify high quality child care and that there should be a more 
coordinated, seamless process for TANF families to access consumer 
information on the availability of high quality providers. We strongly 
recommend that Lead Agencies provide parents receiving TANF and child 
care assistance, whether through CCDF or TANF, with the necessary 
support and consumer education in choosing child care. We strongly 
encourage social service agencies, child care licensing agencies, child 
care resource and referral agencies, and other related programs to work 
closely to ensure that

[[Page 80498]]

parents receiving TANF are provided with the information and support 
necessary for them to make informed child care decisions.
    CCDF plan. We propose a technical change at Sec.  98.33(f) to 
change the reference to a biennial Plan to a triennial Plan as 
established in the statute at Section 658E(b).

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

    Subpart E of the regulations describes Lead Agency and provider 
requirements related to applicable State/Territory and local regulatory 
and health and safety requirements, monitoring and inspections, and 
criminal background checks. It addresses training and professional 
development requirements for caregivers, teachers, and directors 
working for CCDF providers. It also includes provisions requiring the 
Lead Agency to ensure that payment rates to providers serving children 
receiving subsidies ensure equal access to the child care market, to 
establish a sliding fee scale that provides for affordable cost-sharing 
for families receiving assistance, and to establish priorities for who 
receives child care services.
Compliance With Applicable State/Territory and Local Regulatory 
Requirements (Section 98.40)
    Section 658E(c)(2)(F) of the Act maintains the requirement that 
every Lead Agency has in effect licensing requirements applicable to 
child care services within its jurisdiction. The Act now requires Lead 
Agencies, if they exempt any CCDF providers from licensing 
requirements, to describe ``why such licensing exemption does not 
endanger the health, safety, or development of children who receive 
services from child care providers who are exempt from such 
requirements.'' We include a corresponding change in the proposed rule 
at Sec.  98.40(a)(2), and we provide clarification that the Lead 
Agency's description must include a demonstration of how such 
exemptions do not endanger children and that such descriptions and 
demonstrations must include any exemptions based on provider category, 
type, or setting; length of day; providers not subject to licensing 
because the number of children served falls below a Lead Agency-defined 
threshold; and any other exemption to licensing requirements. This 
relates to the corresponding CCDF Plan provision proposed at Sec.  
98.16(u).
    To clarify, this requirement does not compel the Lead Agency to 
offer exemptions from licensing requirements to providers. Rather, it 
requires that, if the Lead Agency chooses to do so, it must provide a 
rationale for that decision. We also note that these exemptions refer 
to exemptions from licensing requirements, but that license-exempt CCDF 
providers continue to be subject to the health and safety requirements 
applicable to all CCDF providers in the Act. The only allowable 
exception to CCDF health and safety requirements is for providers who 
care only for their own relatives, which we discuss further below.
Health and Safety Requirements (Section 98.41)
    The Act requires Lead Agencies to have in effect health and safety 
requirements for providers and caregivers caring for children receiving 
CCDF assistance that relate to ten health and safety topics: (i) 
Prevention and control of infectious diseases (including immunization); 
(ii) prevention of sudden infant death syndrome and use of safe 
sleeping practices; (iii) administration of medication, consistent with 
standards for parental consent; (iv) prevention and response to 
emergencies due to food and allergic reactions; (v) building and 
physical premises safety, including identification of and protection 
from hazards that can cause bodily injury such as electrical hazards, 
bodies of water, and vehicular traffic; (vi) prevention of shaken baby 
syndrome and abusive head trauma; (vii) emergency preparedness and 
response planning for emergencies resulting from a natural disaster, or 
a man-caused event (such as violence at a child care facility); (viii) 
handling and storage of hazardous materials and the appropriate 
disposal of bio contaminants; (ix) appropriate precautions in 
transporting children, if applicable; and (x) first aid and 
cardiopulmonary resuscitation.
    The Act says that health and safety topics ``may include 
requirements relating to nutrition, access to physical activity, or any 
other subject area determined by the State to be necessary to promote 
child development or to protect children's health and safety'' (Section 
658E(c)(2)(I)(ii)), which we restate at Sec.  98.41(a)(1)(xii). While 
these topics are optional in this proposed rule, we strongly encourage 
Lead Agencies to include them in basic health and safety requirements. 
Educating caregivers on appropriate nutrition, including age-
appropriate feeding, and physical activity for young children is 
essential to prevent long-term negative health implications and assist 
children in reaching developmental milestones. We also propose to add 
``caring for children with special needs'' as an optional topic on this 
list.
    Lead Agencies are responsible for establishing standards in the 
above areas for CCDF providers and should require providers to develop 
policies and procedures that comply with these standards. We encourage 
Lead Agencies to adopt these standards for all caregivers and providers 
regardless of whether they currently receive CCDF funds. The Act 
requires health and safety training on the above topics to be completed 
pre-service or during an orientation period and on an ongoing basis. 
This training requirement is discussed in greater detail below in Sec.  
98.44 on training and professional development.
    ACF recently released Caring for Our Children Basics (CfoC) Basics, 
http://www.acf.hhs.gov/programs/ecd/caring-for-our-children-basics). 
CfoC Basics is a set of recommendations, which is intended to create a 
common framework to align basic health and safety efforts across all 
early childhood settings. CfoC Basics, represent minimum, baseline 
standards for health and safety. CfoC Basics is based on Caring for Our 
Children: National Health and Safety Performance Standards; Guidelines 
for Early Care and Education Programs, 3rd Edition, produced with the 
expertise of researchers, physicians, and practitioners. (American 
Academy of Pediatrics, American Public Health Association, National 
Resource Center for Health and Safety in Child Care and Early 
Education. (2011). Caring for our children: National health and safety 
performance standards; Guidelines for early care and education 
programs. 3rd edition, American Academy of Pediatrics; Washington, DC: 
American Public Health Association.)
    Lead Agencies looking for guidance on establishing health and 
safety standards should consult ACF's CfoC Basics. The list of health 
and safety topics required by the Act is aligned with, but not fully 
reflective of, health and safety recommendations from both CfoC Basics 
as well as Caring for Our Children: National Health and Safety 
Performance Standards. Lead Agencies can be confident that if their 
standards are aligned with CfoC Basics, they would be considered to 
have adequate minimum standards. Lead Agencies are encouraged, however, 
to go beyond these baseline standards to develop a comprehensive and 
robust set of health and safety standards that cover additional areas 
related to program design, caregiver safety, and child developmental 
needs, using the full Caring for Our Children: National

[[Page 80499]]

Health and Safety Performance Standards guidelines.
    We propose reiterating these new health and safety requirements at 
Sec.  98.41(a) and propose some clarifications. These include 
specifying that the health and safety requirements be appropriate to 
the age of the children served in addition to the provider setting. 
Lead Agency requirements should reflect necessary content variation, 
within the required topic areas, depending on the provider's particular 
circumstances. For example, prevention of sudden infant death syndrome 
and safe sleep training would only be necessary if a caregiver cares 
for infants. Similarly, if an individual is caring for children of 
different ages, training in first-aid and CPR should include elements 
that take into account that practices differ for infants and older 
children. We also clarify that, in addition to having these 
requirements in effect, they must be ``implemented and enforced,'' and 
that these requirements are subject to monitoring pursuant to Sec.  
98.42. This is intended to help ensure that requirements are put into 
practice and that providers are held accountable for meeting them. The 
required health and safety topics are included at Sec.  98.41(1).
    Immunizations and Tribal programs. This proposed rule amends the 
regulatory language at Sec.  98.41(a)(1)(i)(A) by replacing ``States 
and Territories'' with ``Lead Agencies'' to be inclusive of Tribes. 
Minimum Tribal health and safety standards under effect currently 
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 requirement. 
We have made a corresponding change to the regulations at Sec.  
98.83(d) in subpart I and further discus this and other changes 
regarding health and safety requirements as they pertain to Tribes.
    Immunization and in-home care. We also propose to add ``provided 
there are no other unrelated children who are cared for in the home'' 
to the existing exemption to the immunization requirement for children 
who receive care in their own homes at Sec.  98.41(a)(1)(i)(B)(2). Such 
children may continue to be exempt from requirements, provided that 
they are not in care with other unrelated children, which could 
endanger the health of those children.
    Children experiencing homelessness and children in foster care. In 
Sec.  98.41(a)(1)(i)(C), we restate the new statutory requirement that 
Lead Agencies establish a grace period for children experiencing 
homelessness and children in foster care to allow such children to 
receive CCDF services while their families (including foster families) 
are given a reasonable time to take any necessary action to comply with 
immunization and other health and safety requirements. We clarify that 
any payment for such child during the grace period shall not be 
considered an error or improper payment under 45 CFR part 98, subpart 
K. We propose adding Sec.  98.41(a)(1)(i)(C)(2) to allow Lead Agencies 
the option of establishing grace periods for other children who are not 
homeless or in foster care consistent with current regulations, which 
allow the establishment of grace periods more broadly. This was 
included in the last CCDF regulation due to significant feedback that 
requiring immunizations to be completely up-to-date prior to receiving 
services could constitute a barrier to working. This provision was 
added to offer additional State flexibility and we believe that adding 
the a specific grace period provision in the statute was not intended 
to limit State's abilities to establish these policies, but rather to 
ensure that at a minimum this policy existed for children experiencing 
homelessness and children in foster care.
    The intent of this provision was to reduce barriers to enrollment 
given the uniquely challenging circumstances of homeless and foster 
children, not to undermine children's health and safety. Therefore, we 
do not believe that the intent was for those children to be permanently 
exempt from immunization and other health and safety requirements. For 
that reason, we propose adding at Sec.  98.41(a)(1)(i)(C)(3), which 
would require the Lead Agency to coordinate with licensing agencies and 
other relevant State/Territory and local agencies to provide referrals 
and support to help families experiencing homelessness and foster 
children comply with immunization and other health and safety 
requirements. This would help children, once enrolled and receiving 
CCDF services, to obtain necessary services and the proper 
documentation in a timely fashion.
    Emergency preparedness and response. Section 658E(c)(2)(I)(i)(VII) 
of the Act indicates that CCDF health and safety requirements should 
include emergency preparedness and response planning for emergencies 
resulting from a natural disaster, or a man-caused event (such as 
violence at a child care facility) as defined under section 602(a)(1) 
of the Robert T. Stafford Disaster Relief and Emergency Assistance Act 
(42 U.S.C. 5195a(a)(1)). We propose to include this provision at Sec.  
98.41(a)(1)(vii) and to include additional language drawn from Section 
658E(c)(2)(U) of the Act regarding Statewide Disaster Plans. According 
to the Act, Statewide Disaster Plans should address: Evacuation, 
relocation, shelter-in-place, and lock-down procedures; procedures for 
staff and volunteer emergency preparedness training and practice 
drills; procedures for communication and reunification with families; 
continuity of operations; and accommodation of infants and toddlers, 
children with disabilities, and children with chronic medical 
conditions. Communication and reunification with families should 
include procedures that identify entities with responsibility for 
temporary care of children in instances where the child care provider 
is unable to contact the parent or legal guardian in the aftermath of a 
disaster. Accommodation of infants and toddlers, children with 
disabilities, and children with chronic medical conditions should 
include plans that address multiple facets, including ensuring adequate 
supplies (e.g., formula, food, diapers, other essential items) in the 
event that sheltering-in-place is necessary. In addition to being 
addressed in the Statewide Disaster Plan, we would require that health 
and safety requirements for CCDF providers include these topics so that 
child care providers and staff would be adequately prepared in the 
event of a disaster.
    Guidance in Caring for Our Children: National Health and Safety 
Performance Standards, includes recommended standards for written 
evacuation plans and drills, planning for care for children with 
medical conditions, and emergency procedures related to transportation 
and emergency contact information for parents. The former National 
Association of Child Care Resource and Referral Agencies (now Child 
Care Aware of America) and Save the Children published 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 standards related to 
emergency preparedness for family child care homes and child care 
centers.
    Group Size Limits and Child-Staff Ratios. Section 658E(c)(2)(H) of 
the Act requires Lead Agencies to establish group size limits for 
specific age populations and appropriate child-staff ratios that will 
provide healthy and safe conditions for children receiving CCDF 
assistance and meet children's developmental needs. It also requires 
Lead Agencies to address required qualifications for caregivers, 
teachers,

[[Page 80500]]

and directors, which is discussed at Sec.  98.44. Consistent with these 
requirements, Sec.  98.41(d) of the proposed rule would require the 
Lead Agency to establish standards for CCDF child care services that 
promote the caregiver and child relationship in the type of child care 
setting involved and provide for the safety and developmental needs of 
the children served.
    Ratio and group size standards are necessary to ensure that the 
environment is conducive to safety and learning. Child-staff ratios 
should be set such that caregivers can demonstrate the capacity to meet 
health and safety requirements and to evacuate all of the children in 
their care in a timely manner. A low child-staff ratio allows for 
stronger relationships between a child and their caregiver, which is a 
key component of quality child care. Studies of high quality early 
childhood programs found that group size and ratios mattered to the 
safety and the quality of children's experiences, as well as to 
children's health. (13 Indicators of Quality Child Care: Research 
Update, presented to Office of the Assistant Secretary for Planning and 
Evaluation and Health Resources and Services Administration/Maternal 
and Child Health Bureau U.S. Department of Health and Human Services, 
2002 and National Institute of Child Health and Human Development 
(NICHD). 2006. The NICHD study of early child care and youth 
development: Findings for children up to age 4\1/2\ years. Rockville, 
MD: NICHD.).

Caring for Our Children Basics Maximum Child:Staff Ratios for Child Care
                       Centers by Age of Children
------------------------------------------------------------------------
                                                              Maximum
                           Age                              child:staff
                                                               ratio
------------------------------------------------------------------------
<=12 months.............................................             4:1
13-23 months............................................             4:1
24-35 months............................................         4:1-6:1
3-year-olds.............................................             9:1
4- to 5-year-olds.......................................            10:1
------------------------------------------------------------------------

    While we are not establishing a Federal requirement for group size 
and child-staff ratios, there are resources that Lead Agencies can use 
when developing their standards. CfoC Basics recommends:

    Appropriate ratios should be kept during all hours of program 
operation. Children with special health care needs or who require 
more attention due to certain disabilities may require additional 
staff on-site, depending on their special needs and the extent of 
their disabilities. In center-based care, child-staff ratios should 
be determined by the age of the majority of children and the needs 
of children present. In family child care homes, the caregivers' 
children as well as any other children in the home temporarily 
requiring supervision should be included in the child-staff ratio. 
In family child care settings where there are mixed age groups that 
include infants and toddlers, a maximum ratio of 6:1 should be 
maintained and no more than two of these children should be 24 
months or younger. If all children in care are under 36 months, a 
maximum ratio of 4:1 should be maintained and no more than two of 
these children should be 18 months or younger. If all children in 
care are 3 years old, a maximum ratio of 7:1 should be preserved. If 
all children in care are 4 to 5 years of age, a maximum ratio of 8:1 
should be maintained.

    As stated earlier, these represent baseline recommendations and 
Lead Agencies should not feel limited by them. ACF encourages Lead 
Agencies to consider the group size and child-staff ratios outlined in 
Caring for Our Children: National Health and Safety Performance 
Standards and the Head Start and Early Head Start standards for child-
staff ratios, especially in light of partnerships between Head Start 
and child care. The Head Start program performance standards set forth 
ratios and group size requirements for the center-based, combination 
program, and family child care options for Head Start and Early Head 
Start providers. Early Head Start requires a ratio of one staff person 
for every four infants and toddlers in center based programs with a 
maximum group size of eight. The requirement for family child care 
homes when an adult is working alone is two children under two years 
old in a maximum group of 6. When there is a teacher and an assistant, 
the maximum group size is 12 children, with no more than four of the 12 
children under two years old. Head Start requires a ratio of one staff 
person for every eight children in center-based programs with a maximum 
group size of 17 children for 3 year olds and 20 children for 4 year 
olds.
    Another resource for determining 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 caregiver 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 2 years of age 
be cared for where two caregivers are caring for up to 12 children. 
(National Fire Protection Association, NFPA 101: Life Safety Code, 
2009)
    Compliance with Child Abuse Reporting Requirements. Section 
658E(c)(2)(L) of the Act requires Lead Agencies to certify in its plan 
that child care providers comply with procedures for reporting child 
abuse and neglect as required by section 106(b)(2)(B)(i) of the Child 
Abuse Prevention and Treatment Act (CAPTA) (42 U.S.C. 
5106a(b)(2)(B)(i)). That provision of CAPTA requires that ``the State 
has in effect and is enforcing a State law, or has in effect and is 
operating a statewide program, relating to child abuse and neglect that 
includes . . . provisions or procedures for an individual to report 
known and suspected instances of child abuse and neglect, including a 
State law for mandatory reporting by individuals required to report 
such instances.'' Thus, Lead Agencies must certify that caregivers, 
teachers, and directors of child care providers will be required to 
report child abuse and neglect as individuals or mandatory reporters, 
whether or not the State explicitly identifies these persons as 
mandatory reporters.
    Because the CAPTA requirement above is not applicable to Tribes or, 
in some circumstances, to Territories, we propose to expand upon this 
provision at Sec.  98.41(e) by requiring Lead Agencies to certify that 
caregivers, teachers, and directors of child care providers within the 
State (or service area) will comply with the State's, Territory's or 
Tribe's child abuse reporting requirements as required by section 
106(b)(2)(B)(i) of CAPTA or other child abuse reporting procedures and 
laws in the service area. We propose adding this last phrase to be 
consistent with any other child abuse reporting procedures and laws 
that may apply in the service area. Territories and Tribes may have 
their own reporting procedures and mandated reporter laws. Also, some 
Tribes may work with States to use the State's reporting procedures. 
Further, the Federal Indian Child Protection and Family Violence 
Prevention Act requires mandated reporters to report child abuse 
occurring in Indian country to local child protective services agency 
or a local law enforcement agency (18 U.S.C. 1169). While State, 
Territory, and Tribal laws about when and to whom to report vary, child 
care providers and staff are often considered mandatory reporters of 
child abuse and neglect and responsible for notifying the proper 
authorities in accordance with applicable laws and procedures. 
Regardless, the provision is intended for the Lead Agency to ensure 
that caregivers, teachers, and directors follow all relevant child 
abuse and neglect reporting procedures and laws, regardless of whether 
a child care caregiver or provider is considered a

[[Page 80501]]

mandatory reporter under existing child abuse and neglect laws. We note 
that this requirement applies to caregivers, teachers, and directors of 
all child care providers, regardless of whether they receive CCDF 
funds.
    To support this statutory requirement, we propose adding 
``recognition and reporting of child abuse and neglect'' to the list of 
health and safety topics at Sec.  98.41(a)(1)(xi) to ensure that 
caregivers, teachers, and directors are properly trained to be able to 
recognize the manifestations of child maltreatment. Child abuse and 
neglect training can be used to educate and establish child abuse and 
neglect prevention and recognition measures for children, parents, and 
caregivers. While caregivers, teaches, and directors are not expected 
to investigate child abuse and neglect, it is important that all of 
these individuals be aware of common physical and emotional signs and 
symptoms of child maltreatment. According to the FY 2014-2015 CCDF 
Plans, 31 States and Territories have a pre-service training 
requirement on mandatory reporting of suspected abuse or neglect for 
staff in child care centers and 25 States and Territories require pre-
service training in this area for family child care.
Enforcement of Licensing and Health and Safety Requirements (Section 
98.42)
    The majority of Sec.  98.42 is new, based on requirements added in 
the reauthorized statute. Lead Agencies 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.
    Procedures to ensure compliance with health and safety 
requirements. Current regulations, formerly at Sec.  98.41(d), require 
that the Lead Agency must have procedures in effect to ensure that 
child care providers of services for which assistance is made available 
in accordance with this part, within the service area served by the 
Lead Agency, comply with all applicable State, local, or Tribal 
requirements. Through this proposed rule, we clarify at Sec.  98.42(a) 
that these requirements must include the health and safety requirements 
described in Sec.  98.41.
    Monitoring requirements. Section 658E(c)(2)(K) of the Act requires 
that Lead Agencies conduct monitoring visits for all child care 
providers receiving CCDF funds, including license-exempt providers 
(except, at Lead Agency option, those that serve relatives). The Act 
requires Lead Agencies to certify that licensed child care providers 
receive one pre-licensure inspection for compliance with health, 
safety, and fire standards and at least one, annual, unannounced 
licensing inspection for compliance with licensing standards, including 
health, safety, and fire standards. License-exempt CCDF providers 
(except at Lead Agency option, those serving relatives) must receive at 
least one annual inspection for compliance with health, safety, and 
fire standards at a time determined by the Lead Agency. We propose to 
restate these requirements at Sec.  98.42(b). For existing licensed 
providers already serving CCDF children, we will consider the Lead 
Agency to have met the pre-licensure requirement through completion of 
the first, annual on-site inspection.
    We propose to add clarification at Sec.  98.42(b)(2) that would 
require annual inspections for both licensed and license-exempt CCDF 
providers to include, but not be limited to, those health and safety 
requirements described in Sec.  98.41. We also clarify that Tribes 
would be subject to the monitoring requirements, unless a Tribal Lead 
Agency requests an alternative monitoring methodology in its Plan and 
provides adequate justification, subject to ACF approval, pursuant to 
Sec.  98.83(d)(2).
    Pre-licensure inspections. The vast majority of States and 
Territories already require inspections for all child care providers 
prior to licensure, which we strongly encourage. Only one State does 
not require pre-licensure inspections for child care centers and seven 
States do not require pre-licensure inspections for family child care. 
In States/Territories without pre-licensure inspections, it is unclear 
how to apply this statutory requirement specifically to CCDF providers 
as it may be unknown whether a child care provider will be a CCDF 
provider at some time in the future at the time of seeking licensure. 
In this NPRM, we are interpreting the pre-licensure inspection 
requirement as an indication that an on-site inspection is necessary 
for licensed child care providers prior to providing CCDF-funded child 
care. Therefore, any licensed provider that did not previously receive 
a pre-licensure inspection must be inspected prior to caring for a 
child receiving CCDF. We are interested in comments on whether there 
should be a specified time period for the inspection (i.e. within the 
previous 12 months).
    Annual Inspections of Licensed Providers. The Act and this NPRM 
would require annual inspections of licensed child care providers 
receiving CCDF funds; however, we strongly encourage Lead Agencies to 
conduct annual, unannounced visits of all licensed child care 
providers, including those not receiving CCDF funds. Research supports 
the use of regular, unannounced inspections for monitoring compliance 
with health and safety standards and protecting children. A recent 
series of Department of Health and Human Services' (HHS) Office of 
Inspector General (OIG) audits identified deficiencies with health and 
safety protections for children in child care in several states, 
including in Arizona, Connecticut, Louisiana, Maine, Michigan, 
Minnesota, Nebraska, and Pennsylvania. For example, an OIG audit in one 
State examined the monitoring of 20 family child care home providers 
and found 17 in violation of at least one licensing requirement, 
including four providers who did not comply with background check 
requirements. Another found 19 out of 20 licensed family child care 
home providers in violation of at least one State licensing requirement 
related to the health and safety of children. (HHS Office of the 
Inspector General, Some Minnesota Childcare Home Providers Did Not 
Always Comply With State Health and Safety Licensing Requirements (A-
05-14-00021), 2015; HHS Office of the Inspector General, Some 
Pennsylvania Family Child Day Care Home Providers Did Not Always Comply 
With State Health and Safety Requirements, A-03-14-00250, 2015).
    In addition to concerns about safeguarding children's well-being, 
ACF is very concerned that if all licensed child care providers are not 
subject to at least annual inspections, CCDF families would be 
restricted from accessing a portion of the provider population (those 
that have not been inspected annually), effectively denying children 
access to some providers, limiting parental choice, and resulting in a 
bifurcated system. We are soliciting comments on this concern and 
suggestions for addressing it to ensure equal access to child care for 
CCDF families.
    Annual Inspections of License-Exempt Providers. The law does not 
require that inspections for license-exempt providers be unannounced, 
but ACF strongly encourages some use of unannounced visits, as they 
have been found effective in promoting compliance with health and 
safety requirements. (R. Fiene, Unannounced vs. announced licensing 
inspections in monitoring child care programs, Pennsylvania Office of 
Children, Youth and Families, 1996; American Academy of Pediatrics, 
American Public Health Association, National Resource Center

[[Page 80502]]

for Health and Safety in Child Care and Early Education; Caring for our 
children: National health and safety performance standards; Guidelines 
for early care and education programs. 3rd edition.) However, there may 
be situations in which a Lead Agency cannot be sure that a provider and 
children will be present (e.g., when a provider is caring for a child 
whose parent has a variable work schedule). In such situations, advance 
notification of a visit may be necessary. The Lead Agency may also 
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. Lead Agencies are encouraged to make reasonable efforts to 
conduct visits during the hours providers are caring for children and 
ensure that providers who care for children on the evenings and 
weekends are monitored so that the supply of non-traditional hour care 
is not reduced. ACF intends to provide technical assistance to CCDF 
Lead Agencies on best practices for monitoring license-exempt 
providers, including the use of unannounced inspections.
    Monitoring in response to complaints. Section 658E(c)(2)(C) of the 
Act requires Lead Agencies to maintain a record of substantiated 
parental complaints and we have proposed at Sec.  98.32 that Lead 
Agencies establish a reporting process for parental complaints. We 
believe a logical extension of these requirements would be for Lead 
Agencies to monitor in response to complaints, in particular those of 
greatest concern to children's health and safety. Unannounced 
inspections allow for an investigation of the situation and, if the 
threat is substantiated, may prevent future incidences. A majority of 
States already conduct inspections in response to complaints for 
licensed child care providers. We believe that threats to any child's 
health and safety in child care warrant investigation, regardless of 
whether the provider is licensed, regulated, or receiving CCDF funds. 
We have not proposed a requirement for monitoring in response to 
complaints but are seeking comments on whether the final rule should 
include a requirement for Lead Agencies to conduct unannounced 
inspections in response to complaints and whether this requirement 
should apply to providers receiving CCDF funds or additional providers.
    Coordination of Monitoring. We propose at Sec.  98.42(b)(2)(iii) to 
require Lead Agencies to coordinate, to the extent practicable, with 
other Federal, State/Territory, and local entities that conduct similar 
on-site monitoring. Possible partners include licensing, QRIS, Head 
Start, and the CACFP.
    Coordinating with other monitoring agencies can be beneficial to 
both agencies as they prevent duplication of services. As an example of 
current interagency coordination, one State holds monthly meetings with 
representation from its licensing division, 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. It is important that any shared costs be 
properly allocated between the organizations participating and 
benefiting from the partnership.
    To the extent that other agencies provide an on-site monitoring 
component that may satisfy or partially satisfy the new monitoring 
requirement under the statute and this proposed rule, the Lead Agency 
is encouraged to pursue collaboration, which may include sharing 
information and data as well as coordinating resources. However, the 
Lead Agency is ultimately responsible for meeting these requirements 
and ensuring that any collaborative monitoring efforts satisfy all CCDF 
requirements.
    Differential monitoring. At Sec.  98.42(b)(2)(iv)(A), we propose 
giving Lead Agencies the option of using differential monitoring, or a 
risk-based monitoring approach, provided that the monitoring visit is 
representative of the full complement of health and safety standards 
and is conducted for all applicable providers annually, as required in 
statute.
    A white paper developed by HHS's Office of the Assistant Secretary 
for Planning and Evaluation (ASPE), found the following:

    Many states are using differential monitoring to make monitoring 
more efficient. As opposed to `one size fits all' systems of 
monitoring, differential monitoring determines the frequency and 
depth of needed monitoring from an assessment of the provider's 
history of compliance with standards and regulations. Providers who 
maintain strong records of compliance are inspected less frequently, 
while providers with a history of non-compliance may be subject to 
more announced and unannounced inspections. In some states, more 
frequent inspections are conducted for providers who are on a 
corrective action plan, or after a particularly egregious violation. 
(Trivedi, P. A. (2015). Innovation in monitoring in early care and 
education: Options for states. Washington, DC: Office of the 
Assistant Secretary for Planning and Evaluation, U.S. Department of 
Health and Human Services).

    Differential monitoring often involves monitoring programs using a 
subset of requirements to determine compliance. There are two methods 
used to identify rules for differential monitoring:
     Key Indicators: An approach that focuses on identifying 
and monitoring those rules that statistically predict compliance with 
all the rules; and
     Risk Assessment: An approach that focuses on identifying 
and monitoring those rules that place children at greater risk of 
mortality or morbidity if violations or citations occur.

The key indicators approach is often used to determine the rules to 
include in an abbreviated inspection. A risk assessment approach is 
often used to classify or categorize rule violations and can be used to 
identify rules where violations pose a greater risk to children, 
distinguish levels of regulatory compliance, or determine enforcement 
actions based on categories of violations. Note that monitoring 
strategies that rely on sampling of providers or allow for a monitoring 
frequency of less than once per year for providers are not allowable as 
every child care provider must receive at least one inspection 
annually, in accordance with the Act.
    ACF encourages Lead Agencies to consider the use of differential 
monitoring as a method for determining the scheduling and priority for 
unannounced monitoring visits. This may be based on an assessment of 
the child care provider's past level of compliance with health and 
safety requirements, information received that could indicate 
violations, or the occurrence of a monitoring visit from another 
program. Differential monitoring allows Lead Agencies to prioritize 
monitoring of providers that have previously been found out of 
compliance or the subject of parental complaints or that have not been 
monitored through other programs.
    Lead Agencies should use data to make necessary adjustments to 
differential monitoring or the frequency of monitoring visits over 
time. For example, if widespread or significant compliance issues are 
found under existing monitoring protocol, the Lead Agency could 
consider increasing the frequency of monitoring visits. As discussed in 
Innovations in Monitoring, Lead Agencies should be intentional and 
cautious in their use of differential monitoring and not replace 
routine inspection of all licensed providers, including those with good 
compliance records.

[[Page 80503]]

    Monitoring in-home care. At Sec.  98.42(b)(2)(iv) we propose that 
Lead Agencies have the option to ``develop alternate monitoring 
requirements for care provided in the child's home that are appropriate 
to the setting.'' A child's home may not meet the same standards as 
other child care facilities and this provision gives Lead Agencies 
flexibility in conducting a more streamlined and targeted inspection. 
This flexibility cannot be used to bypass the monitoring requirement 
altogether. We are actively soliciting comments on this proposal.
    Licensing inspector qualifications. Section 658E(c)(2)(K)(i)(I) of 
the Act requires Lead Agencies to ``ensure that individuals who are 
hired as licensing inspectors in the State are qualified to inspect 
those child care providers and facilities and have received training in 
related health and safety requirements, and are trained in all aspects 
of the State's licensure requirements.'' We propose restating this 
statutory requirement at Sec.  98.42(b)(1) and clarify that such 
training should include, at a minimum, the areas listed in Sec.  98.41 
as well as all aspects of State, Territory, or Tribal licensure 
requirements. As inspectors must monitor the health and safety 
requirements in Sec.  98.41, it follows that the training of inspectors 
should include these standards.
    We also propose to clarify that inspectors be trained in health and 
safety requirements ``appropriate to provider setting and age of 
children served.'' Inspecting care for children of different ages, and 
in different settings, may require specialized training in order to 
understand differences in care. We also encourage Lead Agencies to 
consider the cultural and linguistic diversity of caregivers when 
addressing inspector competencies and training. Caring for Our 
Children: National Health and Safety Performance Standards recommends 
that licensing inspectors have ``pre-qualified'' education and 
experience about the types of child care they will be assigned to 
inspect and in the concepts and principles of licensing and 
inspections. When hired, the standards recommend at least 50 clock 
hours of competency-based orientation training and 24 annual clock 
hours of competency-based continuing education.
    Licensing Inspector-Provider Ratios. Section 658E(c)(2)(K)(i)(III) 
of the Act requires Lead Agencies to have policies in place to ensure 
the ratio of inspectors to providers is sufficient to ensure visits 
occur in accordance with Federal, State, and local law. We expand on 
this requirement at Sec.  98.42(b)(3) to ensure applicability with 
Federal, State, Territory, Tribal, and local law. Large caseloads make 
it difficult for inspectors to conduct valid and reliable inspections. 
While the Act does not require a specific ratio, Lead Agencies can 
refer to the National Association of Regulatory Agencies recommendation 
of a maximum workload for inspectors of 50-60 facilities. (NARA and 
Amie Lapp-Payne. (May 2011). Strong Licensing: The Foundation for a 
Quality Early Care and Education System: Preliminary Principles and 
Suggestions to Strengthen Requirements and Enforcement for Licensed 
Child Care.)
    Reporting of serious injuries and deaths. At Sec.  98.42(b)(4), we 
propose requiring Lead Agencies to require child care providers to 
``report to a designated State, Territorial, or Tribal entity any 
serious injuries or deaths of children occurring in child care.'' This 
complements Sec.  98.53(f)(4)), which requires States and Territories 
to submit a report describing any changes to regulations, enforcement 
mechanisms, or other policies addressing health and safety based on an 
annual review and assessment of serious child injuries and any deaths 
occurring in child care programs serving CCDF children and, to the 
extent possible, other regulated and unregulated child care settings. 
States, Territories, and Tribes would be required to apply this 
reporting requirement to all child care providers, regardless of 
subsidy receipt, to report incidents of serious child injuries or death 
to a designated agency. This is also consistent with the statutory 
requirement at Section 658E(c)(2)(D), which requires Lead Agencies to 
collect and disseminate aggregate number of deaths, serious injuries, 
and instances of substantiated child abuse that occurred in child care 
settings each year, for eligible providers.
    The Lead Agency may, at their option, have providers report to a 
``designated entity'' as proposed at Sec.  98.16(ff), which offers some 
flexibility on the implementation of the requirement. If there are 
existing structures in place that look at child morbidity, the Lead 
Agency would be able to work within that structure to establish a 
designated entity. The reporting mechanism can be tailored to fit with 
existing policies and procedures. Our purpose is the reporting of 
incidents so that the Lead Agency and other responsible entities can 
make the appropriate response.
    Exemption for relative providers. Current regulations at Sec.  
98.41(e) 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. This relative 
exemption remains at Sec.  98.42(c). We propose adding language that 
would require Lead Agencies, if they choose to exclude such providers 
from any of these requirements, to ``provide a description and 
justification in the CCDF Plan, pursuant to Sec.  98.16(l), of 
requirements, if any, that apply to these providers.'' Asking Lead 
Agencies to describe and justify relative exemptions from health and 
safety requirements and monitoring would provide accountability that 
any exemptions are issued in a thoughtful manner that does not endanger 
children.
Criminal Background Checks (Section 98.43)
    The reauthorization added Section 658H on requirements for 
comprehensive, criminal background checks, which are a basic safeguard 
essential to protect the safety of children in child care and reduce 
children's risk of harm. Parents have the right to be confident that 
their children's caregivers, and others who come into contact with 
their children, do not have a record of violent offenses, sex offenses, 
child abuse or neglect, or other behaviors that would disqualify them 
from caring for children. A GAO report 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, Overview of Relevant 
Employment Laws and Cases of Sex Offenders at Child Care Facilities, 
GAO-11-757, 2011).
    Comprehensive background checks have been a long-standing ACF 
policy priority. According to an analysis of the FY 2014-2015 CCDF 
Plans, all States and Territories require that child care center staff 
undergo at least one type of criminal background check, and 
approximately 44 require a FBI fingerprint check for centers. Fifty-
four States and Territories require family child care providers to have 
a criminal background check, and approximately 42 require an FBI 
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.
    Background check implementation. The statute requires that States 
``shall have in effect requirements, policies, and procedures to 
require and conduct criminal background checks for child care staff 
members (including prospective child care staff members) of

[[Page 80504]]

child care providers. . . .'' Having procedures in place to conduct 
background checks on child care staff members will require coordination 
across public agencies. The CCDF Lead Agency must work with other 
agencies, such as the Child Welfare office and the State Identification 
Bureau, to ensure the checks are conducted in accordance with the law. 
In recognition of this effort, we propose to add to the law's language 
at Sec.  98.43(a)(1) to clarify that these requirements involve 
multiple State, Territorial, or Tribal agencies.
    Tribes and background checks. ACF is proposing that Tribal Lead 
Agencies be subject to the background check requirements described in 
this section, with some flexibility as discussed later in subpart I.
    Applicability of background checks requirements. The statutory 
language identifying which providers must conduct background checks on 
child care staff members is unclear. It is our interpretation of the 
statute that all licensed, regulated, and registered child care 
providers and all child care providers eligible to deliver CCDF 
services (with the exception of those individuals who are related to 
all children for whom child care services are provided) are subject to 
the Act's background check requirements. At Sec.  98.43(a)(1)(i), we 
propose to apply this requirement to all licensed, regulated, or 
registered providers, regardless of whether they receive CCDF funds and 
all license-exempt CCDF providers (with the exception of individuals 
who are related to all children for whom child care services are 
provided).
    We acknowledge that the statutory language is not clear about the 
universe of staff and providers subject to the background check 
requirement; however, we believe that our interpretation aligns with 
the general intent of the statute to improve the overall safety of 
child care services and programs. Furthermore, there is justification 
for applying this requirement in the broadest terms for two important 
reasons. First, all parents using child care deserve this basic 
protection of having confidence that those who are trusted with the 
care of their children do not have criminal backgrounds that may 
endanger the well-being of their children. Second, limiting those child 
care providers who are subject to background checks has the potential 
to severely restrict parental choice and equal access for CCDF 
children, two fundamental tenets of CCDF. If not all child care 
providers are subject to comprehensive background checks, providers 
could opt to not serve CCDF children, thereby restricting access. 
Creating a bifurcated system in which CCDF children have access to only 
a portion of child care providers who meet applicable standards would 
be incongruous with the purposes of the CCDBG Act and would not serve 
to advance the important goal of serving more low-income children in 
high quality care. We would like to invite comment on the anticipated 
impacts of requiring background checks for child care staff members of 
all licensed, regulated, and registered child care providers and all 
child care providers eligible to deliver CCDF services (other than an 
individual who is related to all children for whom child care services 
are provided) based on current State practices and policies.
    The law defines a child care staff member as someone (other than an 
individual who is related to all children for whom child care services 
are provided) who is employed by the child care provider for 
compensation or whose activities involve unsupervised access to 
children who are cared for by the child care provider. We are proposing 
at Sec.  98.43(a)(2)(ii) to include contract and self-employed 
individuals in the definition of child care staff members as they may 
have direct contact with children. We propose to require individuals, 
age 18 or older, residing in a family child care home be subject to 
background checks, as well as the disqualifying crimes and appeals 
processes. We asked for comment on individuals 18 or older in family 
child care homes receiving background checks in the 2013 NPRM and 
received support from commenters who agreed this was important for 
ensuring the safety of children in child care. 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).
    We are asking for comment on whether additional individuals in the 
family child care home should be subject to the background check 
requirements. Volunteers who have not had background checks should not 
be left with children unsupervised. We encourage Lead Agencies to 
require that volunteers who have not had background checks be easily 
identified by children and parents, for example through visible name 
tags or clothing.
    Components of a criminal background check. The CCDBG Act outlines 
five components of a criminal background check: (1) A search of the 
State criminal and sex offender registry in the State where the staff 
member resides and each State where the staff member has resided for 
the past five years; (2) a search of the State child abuse and neglect 
registry in the State where the staff member resides and each State 
where the staff member has resided for the past five years; (3) a 
search of the National Crime Information Center; (4) a Federal Bureau 
of Investigation (FBI) fingerprint check using the Integrated Automated 
Fingerprint Identification System; and (5) a search of the National Sex 
Offender Registry.
    After extensive consultation with the FBI and other subject-matter 
experts, we propose technical changes to address duplication among 
these components. We propose to consolidate the list of required 
components in the regulations at Sec.  98.43(b) to:
     A search of the National Crime Information Center's 
National Sex Offender Registry;
     A Federal Bureau of Investigation fingerprint check using 
Next Generation Identification; and
     A search of the following registries, repositories, or 
databases in the State where the child care staff member resides and 
each State where such staff member resided during the preceding 5 
years:
    [cir] State criminal registry or repository using fingerprints;
    [cir] State sex offender registry or repository; and
    [cir] State-based child abuse and neglect registry and database.
    The National Crime Information Center (NCIC) is a law enforcement 
tool consisting of 21 files, including the National Sex Offender 
Registry (NSOR). The 21 files contain seven property files that help 
track missing property and 14 person files with information relevant to 
law enforcement (e.g., missing persons or wanted persons). State 
criminal records are not stored in the NCIC. We believe that the only 
file with information that would aid in determining whether an 
individual could be hired as a child care employee is the NSOR. The 
other files do not appear to contain information on the disqualifying 
crimes listed in the statute. Further, the FBI has advised that a 
general search of the NCIC database will return records that cannot be 
made privy to individuals outside of law enforcement (i.e. the Known or 
Appropriately Suspected Terrorist File). Therefore, we are clarifying 
that a check of the NCIC will only need to search the NSOR file.
    ACF has identified a number of potential challenges in requiring an 
NCIC check. It is our understanding that

[[Page 80505]]

an NCIC check has not been included in any other non-criminal 
background check law applicable to States to date and so resolving 
these challenges is in many ways unchartered territory. First, access 
to the NCIC, including, in some cases, physical access to computers 
capable of searching the NCIC, is limited, and it is primarily 
available to law enforcement agencies. Therefore, to conduct this 
check, Lead Agencies will have to partner with a State, Tribal, or 
local law enforcement agency. Because the NCIC has not been used this 
way, we do not know of examples of other State agencies partnering in 
this way or what such partnerships would entail. We also do not know 
the implications for Lead Agencies that use third-party vendors to 
conduct background checks. Third-party vendors do not have authorized 
access to conduct name-based checks for noncriminal justice purposes. 
Secondly, the NCIC is a name-based check, rather than finger-print 
based. Hit verification of name-based checks may be labor intensive, 
especially when searching for individuals with common names. While we 
are concerned about the burden on Lead Agencies to conduct this check, 
we recognize that the NCIC was included in the statute, and we are 
concerned about the potential for missing sex offenders by not 
conducting a comprehensive search. We are very interested in comments 
on the feasibility of a search of the NCIC as proposed and the level of 
burden required by Lead Agencies.
    The FBI fingerprint check using Next Generation Identification 
(NGI) (formerly the Integrated Automated Fingerprint Identification 
System- IAFIS) will provide a person's criminal history record 
information and will search ten of the NCIC person files, including the 
NSOR, providing certain identifying information has been entered into 
the NSOR record. The change in the language from IAFIS to NGI is a 
technical change and should not impact Lead Agency background check 
processes. The NGI is the biometric identification system that has now 
replaced the older IAFIS.
    Based on consultation with the FBI, we understand there is 
significant overlap between the FBI fingerprint check and the NSOR 
check (via the NCIC), yet there are a number of individuals in the NSOR 
who are not identified by solely conducting an FBI fingerprint search. 
The FBI links fingerprint records to the NSOR records via a Universal 
Control Number, but a small percentage of cases are missing the 
fingerprints. In some cases, individuals were not fingerprinted at the 
time of arrest, or the prints were rejected by the FBI for poor 
quality. This small percentage of records can be accessed through a 
name-based search of the NCIC, and a number of those individuals may 
also be identified by a search of the State sex offender registries.
    Although we do not believe it is required, we also encourage an 
additional search of the National Sex Offender Public Web site (NSOPW) 
at www.nsopw.gov. The NSOPW acts as a pointer for each State, 
Territory, and Tribally run sex offender registry. The registries are 
updated and kept in real time and may be searched by name, but other 
identifying information may be limited in these records.
    It is our understanding that there is some duplication between the 
NCIC, FBI fingerprint searches, and searches of State criminal, sex 
offender, and child abuse and neglect registries. An FBI fingerprint 
check provides access to national criminal history record information 
across State lines on people arrested for felonies and some 
misdemeanors under State, Federal, or Tribal law. However, there are 
instances where information is contained in State databases, but not in 
the FBI database. A search of the State criminal records and a FBI 
fingerprint check returns the most complete record and better addresses 
instances where individuals are not forthcoming regarding their past 
residences or committed crimes in a State in which they did not reside.
    We are also proposing to require that the search of the State 
criminal records include a fingerprint check. The 2013 NPRM also 
proposed to require States to use a fingerprint check when checking the 
State's criminal history records. Fingerprint searches reduce instances 
of false positives and also help capture records filed under aliases. 
We do not believe that a fingerprint search of the State repository 
would be an additional burden. States can use the same set of 
fingerprints to check both the State criminal history check and the FBI 
fingerprint check.
    In addition to gaps in the State criminal records, there are a 
number of instances in which an individual may be listed in the State 
sex offender registry and not in NSOR, and vice versa. For example, 
some States have statutes that disallow the removal of offenders, 
regardless of offender status, while in the NSOR the agency owning the 
record is required to remove the offender from active status once his/
her sentencing is completed. In addition, federal, juvenile, and 
international sex offender records may be included in the NSOR; 
whereas, State laws may prohibit the use of this information in the 
State sex offender registry. Because of these discrepancies, we believe 
that it is important to check the State sex offender registries in 
addition to an FBI fingerprint check and a check of the NCIC NSOR.
    The final component of a comprehensive background check included in 
the new law is the search of the State child abuse and neglect 
registries. We recognize that implementation of this critically 
important component of protecting children will vary across States. 
Every State has procedures for maintaining records of child abuse and 
neglect, but only 41 States, the District of Columbia, American Samoa, 
Guam, and Puerto Rico require central registries by statute. The type 
of information contained in central registries and department records 
differ from State to State. Some States maintain all investigated 
reports of abuse and neglect, while others maintain only substantiated 
reports. The length of time the information is held and the conditions 
for expunction also vary. Access to information maintained in 
registries and departments also varies by State and some States may 
need to make internal changes to meet the requirement to search the 
State's own child abuse and neglect registry. Approximately 31 States 
and the District of Columbia allow or require a check of the central 
registry or department records for individuals applying to be child or 
youth care providers. (Establishment and Maintenance of Central Child 
Abuse Registries, Children's Bureau, July 2014).
    The law requires States to check the State criminal registry or 
repository; sex offender registry or repository; and child abuse and 
neglect registry and database for every State that a child care staff 
member has lived in for the past five years. Based on our preliminary 
conversations with States, the requirement to conduct cross-state 
background checks of the three different repositories is another 
unexplored area for Lead Agencies. We have heard concerns about how to 
obtain and interpret the results and protect the privacy of 
individuals. We are asking for comments on whether States have any best 
practices or strategies to share and how ACF can support Lead Agencies 
in meeting the cross-State background check requirements.
    In particular, we have heard concern about cross-State checks of 
the child abuse and neglect registries. We understand that States have 
developed their own requirements for submitting requests, and there is 
not a uniform method of responding. In addition,

[[Page 80506]]

some States prohibit the use of child abuse and neglect registries for 
employment purposes. As the statute requires cross-state checks, we are 
soliciting comments on how States will meet this requirement and 
respond to other State requests.
    The cross-State background check requirement has similarities to 
language at Section 152(a)(1)(C) of the Adam Walsh Child Protection and 
Safety Act of 2006 (42 U.S.C. 671(a)(1)(C)) for foster or adoptive 
parents: ``the State shall check any child abuse and neglect registry 
maintained by the State for information on any prospective foster or 
adoptive parent and on any other adult living in the home of such a 
prospective parent, and request any other State in which any such 
prospective parent or other adult has resided in the preceding five 
years, to enable the State to check any child abuse and neglect 
registry maintained by such State for such information, before the 
prospective foster or adoptive parent may be finally approved for 
placement of a child . . .'' We are requesting comment from States 
about whether these systems for foster or adoptive parents could be 
used to support cross-State background checks for prospective child 
care staff members as well. It is impossible to know exactly how many 
individuals will require a check from another State. As discussed later 
in the Regulatory Impact Analysis, Census data on geographic mobility 
shows an out of state mobility rate of approximately 2 percent for 
employed adults.
    While ACF is still working to understand how we can support cross-
State background checks, this rule proposes a couple of provisions to 
help create transparency around the process. At Sec.  98.43(a)(1)(iii), 
we propose that Lead Agencies must have ``requirements, policies, and 
procedures in place to respond as expeditiously as possible to other 
States', Territories', and Tribes' requests for background check 
results in order to accommodate the 45 day timeframe.'' We also propose 
that Lead Agencies include the process by which another Lead Agency may 
submit a background check request on the Lead Agency's consumer 
education Web site, along with all of the other background check 
policies and procedures. In addition, this proposed rule would require 
at Sec.  98.16(o) that Lead Agencies describe in their Plans the 
procedures in place to respond to other State, Territory, or Tribal 
requests for background check results within the 45 day timeframe. ACF 
will use this question in the Plan to help ensure compliance with the 
background check requirements in the law. These proposals are intended 
to minimize confusion about the correct contact information for 
background check requests and ensure that there are processes in place 
for timely responses.
    Disqualifications. The law specifies a list of disqualifications 
for child care providers and staff members who are serving children 
receiving CCDF assistance. Unlike the other requirements in the 
background check section of the statute, the restriction against 
employing ineligible child care staff members would only apply to child 
care providers receiving CCDF assistance. These employment 
disqualifications specifically do not apply to child care staff members 
of licensed providers who do not serve children receiving CCDF 
subsidies. We believe this gives Lead Agencies the flexibility to 
impose similar restrictions upon child care providers who are licensed, 
regulated, or registered and do not receive CCDF funds. These proposed 
disqualification requirements appear at Sec. Sec.  98.43(a)(1)(ii) and 
98.43(c). We are not proposing any additional disqualifications.
    The Act did not include child abuse and neglect findings in the 
list of disqualifying crimes. Because there is so much variation in the 
information maintained in each registry, we are allowing Lead Agency 
flexibility in how to handle findings on the child abuse and neglect 
registries. We believe that the value of findings in these registries 
is in the identification of patterns of negative behavior.
    Even though the law includes a specific list of disqualifications, 
it also allows Lead Agencies to prohibit individuals' employment as 
child care staff members based on their convictions for other crimes 
that may impact their ability to care for children. If a Lead Agency 
does disqualify an individual's employment, they must, at a minimum, 
give the individual the same rights and remedies described in Sec.  
98.43(e). This language from Section 658H(h) of the Act is restated in 
the proposed rule at Sec.  98.43(h), and we have not proposed any 
changes. We strongly encourage Lead Agencies that chose to consider 
other crimes as disqualifying crimes for employment to ensure that a 
robust waiver and appeals process is in place. A waiver and appeals 
process should conform to the recommendations of the U.S. Equal 
Employment Opportunity Commission, including the ability to waive 
findings based on factors as inaccurate information, certificate of 
rehabilitation, age when offense was committed, time since offense, and 
whether the nature of offense is a threat to children. (U.S. Equal 
Employment Opportunity Commission, Enforcement Guidance on the 
Consideration of Arrest and Conviction Records in Employment Decisions 
under Title VII of the Civil Rights Act of 1964, http://www.eeoc.gov/laws/guidance/upload/arrest_conviction.pdf). Moreover, we strongly 
discourage Lead Agencies from considering additional disqualifying 
crimes for other household members in family child care homes.
    Lead Agencies may also consider requiring applicant self-disclosure 
for child care staff in order to avoid unnecessary checks on 
individuals who disclose information that would preclude them from 
passing a background check.
    Frequency of Background Checks. Section 658H(d) of the Act requires 
child care providers to submit requests for background checks for each 
staff member. The requests must be submitted prior to when the 
individual becomes a staff member and must be completed at least once 
every five years. These requirements are included in the regulations at 
Sec.  98.43(d)(1) and (2). For staff members employed prior to the 
enactment of the CCDBG Act, the provider must request a background 
check prior to September 30, 2017 (the last day of the second full 
fiscal year after the date of enactment) and at least once every five 
years.
    Although not a requirement, we encourage Lead Agencies to enroll 
child care staff members in rap back programs. A rap back program works 
as a subscription notification service. An individual is enrolled in 
the program, and the State Identification Bureau receives a 
notification if that individual is arrested or convicted of a crime. 
States can specify which events trigger a notification. Rap back 
programs provide authorizing agencies with notification of subsequent 
criminal and, in limited cases, civil activity of enrolled child care 
staff members so that background check information is not out of date. 
However, unless the rap back program includes all the components of a 
comprehensive background check under the law, the Lead Agency is 
responsible for ensuring that child care staff members complete all 
other components at least once every five years.
    Section 658H(d)(4) of the Act specifies instances in which a child 
care provider does not need to submit a background check for a staff 
member. Staff members do not need background check requests if they 
satisfy three requirements: (1) The staff member received a background 
check that included the five required parts within

[[Page 80507]]

the past five years while employed by, or seeking employment by, 
another child care provider in the State; (2) the State gave a 
qualifying result to the first provider for the staff member; and (3) 
the staff member is employed by a child care provider within the State 
or has been separated from employment from a child care provider for 
less than 180 days. These requirements are included in the proposed 
rule at Sec.  98.43(d)(3). Lead Agencies should consider how to 
facilitate tracking this type of information and maintaining records of 
individual providers so that unnecessary checks are not repeated.
    Provisional Employment. The law requires child care providers to 
submit a request for background check results prior to a staff member's 
employment but does not describe instances of provisional employment 
while waiting for the results of the background check. We received many 
comments on this issue in the 2013 NPRM, with commenters expressing 
concern that the background check requirements could prevent parents 
from accessing the provider of their choice, if the provider's staff 
has not already received a background check. Parents often need to 
access child care immediately, for example, as they start new jobs, and 
commenters were worried that this could lead to delays in accessing 
care.
    In recognition of the possible logistical constraints and barriers 
to parents accessing the care they need, ACF proposes to allow 
prospective staff members to provide services to children on a 
provisional basis, while the background checks are being processed. We 
are proposing at Sec.  98.43(d)(4) that a prospective staff member may 
begin work for a child care employer after a background check request 
has been submitted as long as: The staff member is continually 
supervised by an individual who has already completed the background 
check requirements. Prospective staff members in family child care 
homes may work under the continual supervision of a family child care 
provider, or other caregiver, who has completed the required checks. We 
encourage Lead Agencies to require child care providers to inform 
parents about background check policies and any provisional hires they 
may have. Allowing provisional hiring does offer more flexibility, but 
it is also important that Lead Agencies ensure that any provisional 
status is limited in scope and implemented with transparency.
    Completion of Background Checks. Once a child care provider submits 
a background check request, Section 658H(e)(1) of the law requires the 
Lead Agency to carry out the request as quickly as possible. The 
process must not take more than 45 days after the request was 
submitted. These requirements are included in the proposed rule at 
Sec.  98.43(e)(1). While we expect checks to be completed in the 
timeframe established by the law, we propose allowing Lead Agencies 
discretion on procedures in the event that all of the components of a 
background check are not complete within 45 days.
    We have heard from Lead Agencies that are concerned about not being 
able to meet the 45 day timeframe. Lead Agencies must work together 
with the relevant State/Territory entities to minimize delays. After 
the FBI receives electronic copies of fingerprints, they typically turn 
around background check results within 24 hours. There can be delays 
when the submitted fingerprint image quality is poor. Some States use 
hard copy fingerprints that need to be made electronic for submission 
to the FBI, which can lead to delays. We encourage Lead Agencies to 
adopt electronic fingerprinting, which allows for background check 
results to be processed more quickly.
    We encourage Lead Agencies to leverage existing resources to build 
and automate their background check systems. One potential resource for 
States is the National Background Check Program (NBCP), as established 
by the Patient Protection and Affordable Care Act, which aims to create 
a nationwide system for conducting comprehensive background checks on 
applicants for employment in the long-term care (LTC) industry. The 
NBCP is an open-ended funding opportunity that can award up to $3 
million dollars (with a $1 million dollar State match) to each State to 
support building State background check infrastructure. The Centers for 
Medicare & Medicaid Services (CMS) administers the NBCP and since 2010, 
has awarded nearly $57 million in grant funds to participating States 
to design, implement, and operate background check programs that meet 
CMS's criteria.
    Privacy of Results. Section 658H(e)(2) of the Act requires the Lead 
Agency to make determinations regarding a child care staff member's 
eligibility for employment. The Lead Agency must provide the results of 
the background check to the child care provider in a statement that 
indicates only whether the staff member is eligible or ineligible, 
without revealing specific disqualifying information. If the staff 
member is ineligible, the Lead Agency must provide information about 
each disqualifying crime specific to the staff member, as well as 
information on how to appeal the results of the background check to 
challenge the accuracy and completeness. We have not proposed any 
additions to the statutory language, and this requirement is found at 
Sec.  98.43(e)(2) of the proposed regulations.
    In order for a Lead Agency to conduct FBI fingerprint checks, there 
must be statutory authority to authorize the checks. The CCDBG law may 
be used an authority to conduct FBI background checks, but Lead 
Agencies may continue to use other statutes as authorities to conduct 
FBI background checks on child care staff as well. Most Lead Agencies 
currently use Public Law 92-544 or the National Child Protection Act/
Volunteers for Children Act (NCPA/VCA) (42 U.S.C. 5119a) as the 
authority to conduct FBI background checks. Public Law 92-544, enacted 
in 1972, gave the FBI authority to conduct background checks for 
employment and licensing purposes. The majority of States are using 
Public Law 92-544 as authority to conduct background checks, but a few 
States use the NCPA/VCA.
    Public Law 92-544 is similar to the CCDBG statute and only allows 
the State to notify the provider whether an individual is eligible or 
ineligible for employment. Similarly, the NCPA/VCA requires 
dissemination of the results to a governmental agency, unless the State 
has implemented a Volunteer and Employee Criminal History System 
(VECHS) program. Thus, a major difference between the CCDBG statute and 
the NCPA/VCA with a VECHS program is in the protection of privacy of 
results. Through the NCPA/VCA VECHS program, Lead Agencies may share an 
individual's specific background check results with the child care 
provider, providing the individual has given consent. Lead Agencies 
have the flexibility to continue to use these statutes as authority to 
complete the FBI fingerprint check, as long as the employment 
determination process required by the CCDBG statute is followed. That 
is, Lead Agencies must make employment eligibility determinations in 
accordance with the requirements in the CCDBG Act, but they also may 
exercise the flexibility allowed through the NCPA/VCA VECHS program to 
share results of background checks with child care providers.
    Appeal and Review Process. Section 658H(e)(3) of the Act requires 
Lead Agencies to have a process for child care staff members (including 
prospective staff members) to appeal the results of a background check 
by challenging the accuracy or completeness of the information 
contained in their criminal

[[Page 80508]]

background report. An appeals process is an important aspect of 
ensuring due process for providers. According to statute, each child 
care staff member should be given notice of the opportunity to appeal 
and receive instructions about how to complete the appeals process if 
the child care staff member wishes to challenge the accuracy or 
completeness of their background report. The appeals process must be 
completed in a timely manner. The statute's appeal requirements appear 
at Sec.  98.43(e)(3) of the proposed rule. We are not proposing any 
additional requirements here.
    Section 658H(e)(4) of the Act, which is reiterated at Sec.  
98.43(e)(4) of the proposed rule, allows Lead Agencies to allow for a 
review process through which the Lead Agency may determine that a child 
care staff member (including a prospective child care staff member) 
convicted of a disqualifying drug-related offense, committed during the 
preceding five years, may be eligible for employment by a provider 
receiving CCDF funds. The review process must be consistent with Title 
VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.), which 
prohibits employment discrimination based on race, color, religion, sex 
and national origin. Lead Agencies may consider in their review process 
the nature of the conviction, age at the time of the conviction, length 
of time since the conviction, and relationship of the conviction to the 
ability to care for children, or other extenuating circumstances. Lead 
Agencies can consult the U.S. Equal Employment Opportunity Commission's 
guidance on the consideration of criminal records in employment 
decisions to ensure compliance with Title VII's prohibition against 
employment discrimination (U.S. Equal Employment Opportunity 
Commission, Enforcement Guidance on the Consideration of Arrest and 
Conviction Records in Employment Decisions under Title VII of the Civil 
Rights Act of 1964, http://www.eeoc.gov/laws/guidance/upload/arrest_conviction.pdf). Finally, Section 658H(e)(5) of the Act notes 
that ``nothing in this section shall be construed to create a private 
right of action if a provider has acted in accordance with this 
section.''
    Background Check Fees. Lead Agencies have the flexibility to 
determine who pays for background checks (e.g., the provider, the 
applicant, or the Lead Agency) but Section 658H(f) of the Act requires 
that the fees charged for completing a background check may not exceed 
the actual cost of processing and administration. The cost of 
conducting background checks varies across States and Territories. The 
FBI fee is $14.75 to conduct a national fingerprint check, and, 
according to CCDF State Plan data, most Lead Agencies report low costs 
to check State registries.
    ACF recognizes the important role that fees play in sustaining a 
background check system. While States and Territories cannot profit 
from background check fees, we do not want to prevent fees that support 
the necessary infrastructure. Fees cannot exceed costs and result in 
return to State general funds, but they can be used to build and 
maintain background check infrastructure. Further, we expect that Lead 
Agencies using third party contractors to conduct background checks 
will ensure that these contractors are not charging excessive fees that 
would result in huge profits. ACF does not want background check fees 
to be a barrier or burden for entry into the child care workforce. At 
Lead Agency discretion, CCDF funds may be used to pay the costs of 
background checks.
    Consumer education Web site. The statute requires States and 
Territories to ensure that their background check policies and 
procedures are published on their Web sites. These policies and 
procedures should be included on the consumer education Web site 
discussed in detail in subpart D at Sec.  98.33(a). We propose that 
States and Territories also include information on the process by which 
a child care provider or other State or Territory may submit a 
background check request in order to increase transparency about the 
process.
Training and Professional Development (Section 98.44)
    Section 658E(c)(2)(G) of the Act requires Lead Agencies to describe 
in their CCDF Plan their training and professional development 
requirements designed to enable child care providers to promote the 
social, emotional, physical and cognitive development of children and 
to improve the knowledge and skills of caregivers, teachers, and 
directors in working with children and their families, which are 
applicable to child care providers receiving CCDF assistance.
    At Sec.  98.44 we elaborate on the statute's provisions for 
professional development at Section 658E(c)(2)(G), provider training on 
health and safety at Section 658E(c)(2)(I)(i)(XI), and provider 
qualifications at Section 658E(c)(2)(H)(i)(III), as a cohesive approach 
to training and professional development. Our proposed regulations 
build on the pioneering work of States on professional development and 
reflect current State policies.
    Caregiver, Teacher and Director. As discussed earlier, we have 
added definitions for ``teacher'' and ``director'' to Sec.  98.2. We 
believe adding these terms promotes professional recognition for early 
childhood and school-age care teachers and directors and aligns with 
terms used in the field. The Act uses the terms ``caregiver'' and 
``provider'' and we maintain the use of those terms throughout this 
section as appropriate. We also use the terms ``teacher'' and 
``director'' to recognize the different professional roles and their 
differentiated needs for training and professional development. For 
example, teachers provide direct services to children and need 
knowledge of curricula and health, safety, and developmentally 
appropriate practices. In addition, directors need skills to manage and 
support staff and perform other administrative duties.
    Framework and progression of professional development. At Sec.  
98.44(a), we propose that Lead Agencies describe in their CCDF Plan the 
State or Territory framework for training, professional development and 
postsecondary education based on statutory language at Section 
658E(c)(2)(G)(i). The statute requires the framework to be developed in 
consultation with the State Advisory Council on Early Childhood 
Education and Care (SAC). We propose at Sec.  98.44(a)(1) that 
frameworks be developed in consultation with SACs or similar 
coordinating body. SAC grants, funded by the American Recovery and 
Reinvestment Act, along with Race to the Top-Early Learning Challenge 
grants, leveraged CCDF funds to develop and implement comprehensive 
professional development systems. An inclusive process for the design 
of a professional development system with a range of stakeholders 
(child care resource and referral agencies, State/Territory and local 
professional associations, entities that grant credentials and 
certificates, higher education institutions, workforce registries, QRIS 
administrators, for example) will result in a more effective and 
credible framework.
    Section 658E(c)(2)(G)(ii)(II) allows the Lead Agency to ``engage 
training providers in aligning training opportunities with the State's 
training framework,'' which we restate in the proposed rule at Sec.  
98.44(a)(2). We encourage the participation of the full range of 
training and professional development providers, including higher 
education and entities that grant certificates and credentials in early 
childhood education, to align with the framework. Training and 
professional development may be provided through

[[Page 80509]]

institutions of higher education, child care resource and referral 
agencies, worker organizations, early childhood professional 
associations, and other entities. This alignment may lead to a more 
coherent and accessible sequence of professional development for 
individuals to meet Lead Agency requirements and progress in their 
professional development and to maximize the use of professional 
development resources.
    Proposed Sec.  98.44(a)(3) describes the components of a 
professional development framework. We propose that Lead Agencies 
address six components (described below) in their professional 
development framework based on recommendations by the National Child 
Care Information Center and the National Center on Child Care 
Professional Development Systems and Workforce Initiatives (former 
technical assistance projects of the Office of Child Care), and 
national early childhood professional associations, including the 
National Association for the Education of Young Children. The recent 
report of the National Academies of Sciences' expert panel on the early 
childhood workforce speaks to the intentional and multifaceted system 
of supports that will be needed to ensure that every caregiver, 
teacher, and director can provide high quality development and learning 
to the diversity of children in child care and early childhood 
programs. (Institute of Medicine and National Research Council, 2015. 
Transforming the workforce for children birth through age 8: A unifying 
foundation. Washington, DC: The National Academies Press). The six 
proposed components are: Professional standards and competencies, 
career pathways, advisory structures, articulation, workforce 
information, and financing. These components are discussed below. In 
the FY 2014-2015 CCDF Plans, the majority of States and Territories 
indicated that they have implemented the same components of a 
professional development framework system. We provide for flexibility 
on the strategies, breadth and depth with which States and Territories 
will develop and implement a framework that includes these components.
    1. Core knowledge and competencies. Caregivers, teachers, and 
directors need a set of knowledge and skills to be able to provide high 
quality child care and school-age care. The foundational core 
knowledge--what all early childhood professionals should know and be 
able to do--should be supplemented with specialized competencies and 
professional development that recognizes different professional roles, 
ages of children being served, and special needs of children. According 
to the FY 2014-2015 CCDF Plans, 49 States and all but one Territory 
have developed core knowledge and competencies aligned to professional 
standards.
    2. Career pathways. Section 658E(c)(2)(G)(ii)(I) of the Act 
requires Lead Agencies to create a progression of professional 
development, which may include encouraging postsecondary education. 
This progression is in essence a career pathway, also known as a career 
lattice or career ladder. The National Academies of Sciences' report, 
Transforming the Early Childhood Workforce: A Unifying Framework, calls 
for States to implement ``phased, multiyear pathways to transition to a 
minimum bachelor's degree requirement with specialized knowledge and 
competencies'' for all early childhood teachers working with children 
from birth through age eight. (Institute of Medicine (IOM) and National 
Research Council (NRC). 2015. Transforming the workforce for children 
birth through age 8: A unifying foundation. Washington, DC: The 
National Academies Press). According to the FY 2014-2015 CCDF Plans, 
nearly all States and Territories have developed a career pathway that 
includes qualifications, specializations, and credentials by 
professional role. Although we do not propose that States set any 
particular credential as a licensing qualification or a point on the 
career pathway, the pathway should form a transparent, efficient 
sequence of stackable credentials from entry level that can build to 
more advanced professional competency recognition. One model of 
professional development is the Registered Apprenticeship, providing 
job-embedded professional development and coursework that leads to a 
Child Development Associate (CDA) credential. In many apprenticeships, 
this is done through an agreement with the community college to carry 
credit toward an Associate degree. The costs of tuition, books, and the 
CDA evaluation fee is covered by the apprenticeship. The CDA is often a 
first professional step on an early childhood education career ladder 
that can lead to better compensation and a pathway to higher levels of 
education.
    3. Advisory structures. Because professional development and 
training opportunities and advancement may cut across multiple 
agencies, it is important to have a formal communication and 
coordination effort. For example, professional development resources 
for individuals providing special education services for preschools and 
infants and toddlers may not be administered by the CCDF Lead Agency. 
Policies for higher education institutions are generally made by the 
State higher education board or board of education. Many States use the 
SACs as an advisory body for professional development systems policy 
and coordination. (Administration for Children and Families, U.S. 
Department of Health and Human Services, Early Childhood State Advisory 
Councils Final Report, 2015) We encourage the advisory body to include 
representatives of different types of professional development 
providers (such as higher education, child care resource and referral, 
QRIS coaches and technical assistance providers) as well as CCDF 
providers through membership on the advisory or participation in 
subcommittees or advisory groups.
    4. Articulation. Articulation of coursework, when one higher 
education institution matches its courses or coursework requirements 
with other institutions, prevents students from repeating coursework 
when changing institutions or advancing toward a higher degree. 
Transfer agreements, another type of articulation, allow the credit 
earned for an associate degree to count toward credits for a 
baccalaureate degree. States and Territories can encourage articulation 
and transfer agreements between two- and four-year higher education 
degree programs, as well as articulation with other credentials and 
demonstrated competencies. In their FY 2014-2015 Plans, 45 States and 
Territories reported having articulation agreements in place across and 
within institutions of higher education and 39 States and Territories 
reported having articulation agreements that translate training and/or 
technical assistance into higher education credit.
    5. Workforce information. It is important to collect and evaluate 
data to identify gaps in professional development accessibility, 
affordability, and quality. Information may be gathered from different 
sources, such as child care resource and referral agencies, scholarship 
granting entities, higher education institutions, Head Start Program 
Information Report data, and early childhood workforce registries. 
Information about the characteristics of the workforce, access to and 
availability of different types of training and professional 
development, compensation, and turnover can help the advisory body and 
other stakeholders make policy and financing decisions.
    6. Financing. Financing of the framework and of individuals to 
access training and professional development, including postsecondary 
education, is

[[Page 80510]]

critical. Many Lead Agencies use CCDF funds to finance the professional 
development infrastructure and the costs of training and professional 
development, including postsecondary education, for caregivers, 
teachers, and directors. States and Territories report using their SAC 
grants and Race to the Top-Early Learning Challenge grants to leverage 
and expand CCDF funds for workforce improvement and retention. Twenty-
eight States/Territories reported that they used SAC grants to complete 
a workforce study; 29 States/Territories used SAC grants to create or 
enhance their Core Knowledge and Competencies framework; and 18 States/
Territories used SAC grants to develop or enhance their workforce 
registries. We encourage Lead Agencies to leverage CCDF funds with 
other public and private resources to accelerate professional 
development efforts.
    Qualifications. Section 658E(c)(2)(H)(i)(III) of the Act requires 
Lead Agencies to set qualifications for CCDF providers. We propose to 
include that requirement at Sec.  98.44(a)(4) and clarify that such 
qualifications should be designed to enable caregivers, teachers, and 
directors to promote the full range of children's development: Social, 
emotional, physical, and cognitive development. States and Territories 
currently set minimum qualifications for teacher assistants, teachers, 
directors, and other roles in centers, family child care, and school-
age care settings in their licensing standards. We encourage Lead 
Agencies to consider the linkage between these minimum qualifications 
and higher qualifications in the progression of professional 
development or career pathways. According to Section 
658E(c)(2)(G)(ii)(I) of the Act, professional development should be 
conducted on an ongoing basis, provide for a progression of 
professional development (which may include encouraging the pursuit of 
postsecondary education), and reflect current research and best 
practices relating to the skills necessary for the caregivers, 
teachers, and directors to meet the developmental needs of 
participating children and engage families. These requirements are 
proposed in paragraphs (5) and (6) of Sec.  98.44(a).
    Quality, Diversity, Stability and Retention of the Workforce. 
Section 658E(c)(2)(G)(ii)(I) of the Act also requires assurances in the 
Plan that training and professional development will improve the 
quality of, and stability within, the child care workforce. At Sec.  
98.44(a)(7) we propose adding that the training and professional 
development requirements must also improve the quality and diversity of 
caregivers, teachers, and directors. Maintaining diverse and qualified 
caregivers, teachers, and directors is a benefit to serving children of 
all backgrounds. We also propose to add that such requirements improve 
the retention (including financial incentives) of caregivers, teachers, 
and directors within the child care workforce, based on the high 
turnover rate in child care that can disrupt continuity of care for 
children. In order for children to benefit from high quality child 
care, it is important to retain caregivers, teachers, and directors who 
have the knowledge and skills to provide high quality experiences. In 
2012, the average annual turnover rate of classroom staff was 13 
percent, and the turnover rate among centers (child care, Head Start 
and schools) that experienced any turnover was 25 percent. (Whitebook, 
M., Phillips, D. & Howes, C. (2014.)) Worthy work, STILL unlivable 
wages: The early childhood workforce 25 years after the National Child 
Care Staffing Study. Berkeley, CA: Center for the Study of Child Care 
Employment, University of California, Berkeley)
    Aligning training and professional development with the 
professional development framework. We propose at Sec.  98.44(b) to 
require each Lead Agency to describe in the Plan its requirements for 
training and professional development for caregivers, teachers, and 
directors of CCDF providers that, to the extent practicable, align with 
the State or Territory's training and professional development 
framework required by Sec.  98.44(a).
    Pre-service or orientation health and safety training. Section 
658E(c)(2)(I)(i)(XI) of the Act requires Lead Agencies to set ``minimum 
health and safety training, to be completed pre-service or during an 
orientation period in addition to ongoing training, appropriate to the 
provider setting involved'' that addresses the specific topic areas 
listed in the proposed rule at Sec.  98.41(a)(1). All caregivers, 
teachers, and directors in programs receiving CCDF funds must receive 
this training. Many States and Territories already have pre-service and 
orientation training requirements for licensed providers. We have 
placed this requirement in the professional development section of the 
proposed rule because we see preliminary health and safety training 
requirements as a part of a continuum of professional development. We 
propose that pre-service or orientation training include the major 
domains of child development in addition to the Act's requirement for 
health and safety training. Understanding child development is integral 
to providing high quality child care.
    The Act allows an orientation period during which staff can fulfill 
the training requirement. Lead Agencies will have broad flexibility to 
determine what training is required ``pre-service'' and what training 
may be completed during an ``orientation'' period. We propose that all 
orientation training be completed within three months of caring for 
children as recommended by CfoC Basics. We encourage providers to 
document completion of the pre-service or orientation training so that 
caregivers, teachers, and directors do not need to repeat foundational 
training when they change employment. This documentation can be useful 
for the State's or Territory's licensing agency and career pathway.
    We expect variability in how Lead Agencies will implement this 
provision. There are a number of low or no cost resources available, 
including online resources, which cover many of these trainings. We do 
not advocate the exclusive use of online trainings, but believe that a 
mixed delivery training system that includes both online and in-person 
trainings can meet the varied needs of child care caregivers, teachers, 
and directors. We encourage Lead Agencies to permit individuals to use 
certificates and credentials that include a demonstration of competence 
in any or all of the health, safety, and child development topics to 
fulfill, partially or in full, the training requirements.
    Ongoing Professional Development: Section 658E(c)(2)(G)(ii)(I) of 
the Act requires the Plan to include assurances that training and 
professional development will be conducted on an ongoing basis, which 
we restate at Sec.  98.44(b)(2) with a number of parameters. At Sec.  
98.44(b)(2)(i), we propose that ongoing training maintain and update 
the health and safety training standards described at Sec.  
98.41(a)(1).
    Section 658E(c)(2)(G)(iii) of the Act requires each Lead Agency's 
Plan to include the number of hours of training for eligible providers 
and caregivers to engage in annually, as determined by the Lead Agency. 
We propose to reiterate this requirement at Sec.  98.44(b)(2) by 
requiring Lead Agencies to establish the minimum annual requirement for 
hours of training and professional development for caregivers, teachers 
and directors of CCDF providers. While Lead Agencies have flexibility 
to set the number of hours, Caring for Our Children: National

[[Page 80511]]

Health and Safety Performance Standards, Guidelines for Early Care and 
Education Programs, 3rd Edition, recommends that teachers and 
caregivers receive between 24 and 30 hours of ongoing training 
annually.
    The Act also specifies that the ongoing professional development 
must: Incorporate knowledge and application of the Lead Agency's early 
learning and developmental guidelines (where applicable) and the Lead 
Agency's health and safety standards; incorporate social-emotional 
behavior intervention models, which may include positive behavior 
intervention and support models; be accessible to providers supported 
by Tribal organizations or Indian Tribes that receive CCDF assistance; 
and be appropriate for different populations of children, to the extent 
practicable, including different ages of children, English learners, 
children with disabilities, Native Americans and Native Hawaiians. We 
have re-stated these areas within Sec.  98.44(b)(2)(iii) through (v) 
and (vii) with some elaboration. We propose at Sec.  98.44(b)(2)(v) 
that the Plan promote, to the extent practicable, ongoing professional 
development opportunities that earn Continuing Education Units (CEUs) 
or are credit-bearing. Too often, early childhood educators participate 
in professional development that is not accepted by a credential or 
degree program or does not link to the career pathway. In some 
instances, this type of training is necessary, but often it results in 
an inefficient use of resources that does not help individuals advance 
professionally. CEUs and college credits are quality accountability 
mechanisms because they require some form of assessment of adult 
learning. CEUs may be accepted in some articulation agreements, 
particularly if granted by a higher education institution or accredited 
by the International Association for Continuing Education and Training 
(IACET). They also can facilitate articulation with degree programs, 
preventing individuals from repeating coursework for which they have 
already expended private funds or taken out loans. We encourage, as 
part of the State or Territory framework, a process for individuals to 
receive career and professional development advisement so that they can 
make informed choices about ongoing professional development 
opportunities.
Equal Access (Section 98.45)
    Section 658E(c)(4) of the Act requires the Lead Agency to certify 
in its CCDF Plan that payment rates for CCDF subsidies are sufficient 
to ensure equal access for eligible children to child care services 
that are comparable to child care services provided to children whose 
parents are not eligible to receive child care assistance. In this 
NPRM, we are interpreting the comparison group as families whose 
incomes exceed 85 percent of SMI. Many families with income above 85 
percent of SMI have higher quality child care options available to them 
and we propose that families receiving CCDF should have access to child 
care of comparable quality. The statute requires the CCDF Plan to 
provide a summary of the facts the Lead Agency used to determine that 
payment rates are sufficient to ensure equal access. This proposed rule 
modifies three key elements in the current regulation, now at Sec.  
98.45(b), used to determine that a CCDF program provides equal access 
for eligible families and proposes five additional elements consistent 
with statutory provisions on equal access and rate setting at Section 
658E(c)(4) and payment practices at Section 658E(c)(2)(S) of the Act. 
As proposed, the summary of data and facts would include: (1) Choice of 
the full range of providers; (2) adequate payment rates, based on the 
most recent market rate survey or alternative methodology; (3) base 
payment rates established at least at a level sufficient to support 
implementation of the health, safety and quality requirements in the 
NPRM; (4) payment rates that are sufficient to provide parental choice 
for families receiving CCDF subsidies to access care that is of 
comparable quality to care that is available to families with incomes 
above 85 percent of State Median Income; (5) the cost of higher quality 
child care; (6) payment practices that support equal access to a range 
of providers; (7) affordable copayments; and (8) any additional facts 
considered by the Lead Agency. All of these proposed changes are 
discussed further below.
    Market Rate Survey or Alternative Methodology. We propose adding 
paragraph (c) based on new statutory language at Section 658E(c)(4)(B) 
of the Act requiring Lead Agencies to conduct, no earlier than two 
years before the submission of their CCDF Plan, a statistically valid 
and reliable market rate survey or an alternative methodology, such as 
a cost estimation model. Previously, the conducting of a market rate 
survey was a regulatory requirement, not statutory. ACF is not defining 
valid and reliable within this proposed rule but is proposing a set of 
benchmarks, largely based on CCDF-funded research to identify the 
components of a valid and reliable market rate survey. (Grobe, D., 
Weber, R., Davis, E., Kreader, L., and Pratt, C., Study of Market 
Prices: Validating Child Care Market Rate Surveys, Oregon Child Care 
Research Partnership, 2008)
    ACF will consider a market rate survey valid if it meets the 
following benchmarks:
     Includes the priced child care market. The survey 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 rate survey. 
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 license-
exempt providers since individuals 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 rate survey, 
Lead Agencies often use other facts to establish payment rates for 
providers outside of the priced market (e.g., license-exempt 
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 survey uses data 
sources (or combinations of sources) that fully capture the universe of 
providers in the priced child care market. The survey should use lists 
or databases from multiple sources, including licensing, resource and 
referral, and the subsidy program, if necessary, for completeness. In 
addition, the survey should reflect up-to-date information for a 
specific time period (e.g., all of the prices in the survey are 
collected within a three- month time period).
     Represents geographic variation. The survey includes 
providers from all geographic parts of the State, Territory, or Tribal 
service area. It also should collect and analyze data in a manner that 
links prices to local geographic areas.
     Uses rigorous data collection procedures. The survey uses 
good data collection procedures, regardless of the

[[Page 80512]]

method (mail, telephone, or web-based survey; administrative data). 
This includes a response from a high percentage of providers 
(generally, 65 percent or higher is desirable and below 50 percent is 
suspect). Some research suggests that relatively low response rates in 
certain circumstances may be as valid as higher response rates. (Curtin 
R., Presser S., Singer E., The Effects of Response Rate Changes on the 
Index of Consumer Sentiment, Public Opinion Quarterly, 2000; Keeter S., 
Kennedy C., Dimock M., Best J., Craighill P., Gauging the Impact of 
Growing Nonresponse on Estimates from a National RDD Telephone Survey, 
Public Opinion Quarterly, 2006) Therefore, in addition to looking at 
the response rate, it is necessary to implement strong sample designs 
and conduct analyses of potential response bias to ensure that the full 
universe of providers in the child care market is adequately 
represented in the data and findings. Lead Agencies should consider 
surveying in languages in addition to English based on the languages 
used by child care providers, and other strategies to ensure adequate 
responses from key populations.
     Analyzes data in a manner that captures market 
differences. The survey 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 survey should collect and analyze price data separately for 
each age group and category of care to reflect market differences.
    The purpose of the market rate survey is to guide Lead Agencies in 
setting payment rates within the context of market conditions so that 
rates are sufficient to provide equal access to the full range of child 
care services, including high quality child care. However, the child 
care market itself often does not reflect the actual costs of providing 
child care and especially of providing high quality child care designed 
to promote healthy child development. Financial constraints of parents 
prevent child care providers from setting their prices to cover the 
full cost of high quality care, which is unaffordable for many 
families. As a result, a market rate survey may not provide sufficient 
information to assess the actual cost of quality care. Therefore, it's 
often important to consider a range of data, including, but not limited 
to, market rates, to understand prices in the child care market. In 
this proposed rule, we clarify that the market rate survey is intended 
to be an examination of prices and that Lead Agencies have flexibility 
to use data collection methodologies other than a survey so long as the 
data are reflective of the current child care market. For example, Lead 
Agencies may use administrative data from resource and referral 
agencies or other sources, which may be used to determine payment 
rates.
    We propose that the market rate survey also include information on 
the extent to which child care providers are participating in CCDF and 
any barriers to participation, including barriers related to CCDF 
payment rates and practices. We expect that Lead Agencies would include 
questions related to identifying such barriers in their survey. 
Previous surveys and focus groups with child care providers have found 
that low payment rates as well late or delayed payments and other 
hassles may force some providers to stop serving or limit the number of 
children receiving subsidies in their care. Other providers may choose 
to not serve CCDF children at all. (Adams, G., Rohacek, M., and Snyder, 
K., Child Care Voucher Programs: Provider Experiences in Five Counties, 
2008) We think it is important to publicize information from child care 
providers on the extent to which barriers related to payment rates and 
practices deter providers from participating in CCDF and therefore 
limit equal access for children receiving CCDF. While we propose this 
requirement as part of the market rate survey, we encourage Lead 
Agencies that choose to use an alternative rate-setting methodology in 
lieu of a market rate study, discussed below, to find ways of 
collecting and publicizing information on barriers to CCDF 
participation from child care providers through survey or other means.
    The revised law allows a Lead Agency to base payment rates on an 
alternative methodology, such as a cost estimation model, in lieu of a 
market rate survey. A cost estimation model is one such alternative 
approach in which a Lead Agency can estimate the cost of providing care 
at varying levels of quality based on resources a provider needs to 
remain financially solvent. The Provider Cost of Quality Calculator is 
a publicly available Web-based tool that calculates the cost of 
quality-based on site-level provider data for any jurisdiction. Many 
States, working with the Alliance for Early Childhood Finance and 
Augenblick, Palaich and Associates (APA), contributed to the 
development of the cost calculator methodology that preceded the online 
tool, and was funded by the Office of Child Care through the support of 
the Child Care Technical Assistance Network. The tool helps 
policymakers understand the costs associated with delivering high 
quality child care and can inform payment rate setting.
    In our 2013 NPRM, ACF proposed allowing Lead Agencies to use an 
alternative rate-setting methodology in lieu of a market rate study. We 
received many comments opposed to the proposal, including those 
expressing concern that alternative methodologies were an unproven 
approach that may be used to justify existing low payment rates. Due to 
concern about alternative methodologies and because they are new (in 
comparison to the long-standing use of market rate surveys), we propose 
that any alternative methodology used by a Lead Agency must receive 
advance approval by ACF. 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 that promote equal 
access and support a basic level of health, safety and quality, as 
discussed below. ACF approval will only be necessary if the Lead Agency 
plans to replace the market rate survey with an alternative 
methodology. Approval will not be required if the Lead Agency plans to 
implement both a market rate survey and an alternative methodology. 
After enactment of a final rule, ACF will provide guidance to Lead 
Agencies regarding the process for proposing an alternative 
methodology, including criteria and a timeline for approval. We will 
also consider whether to provide a list of recommended methodologies.
    We propose adding paragraph (d) based on the updated law, which 
requires that the market rate survey reflect variations by geographic 
location, provider, and child's age. We propose applying the same 
requirement to any alternative methodology used by a Lead Agency. Lead 
Agencies must include in their Plan how and why they differentiate 
their rates based on these factors.
    We propose adding paragraph (e) that reflects new statutory 
language requiring the Lead Agency to consult with the State's Early 
Childhood Advisory Council or similar coordinating body, child care 
directors, local child care resource and referral agencies, and other 
appropriate entities prior to conducting a market rate survey

[[Page 80513]]

or alternative methodology. Lead Agencies should consult with members 
of the public in the development of their survey or methodology, 
including worker organizations representing child care caregivers, 
teachers, and directors.
    In accordance with Sec. Sec.  98.81(b)(5) and 98.83(d)(1)(v), we 
propose to exempt Tribal grantees from the requirement to conduct a 
market rate survey or alternative methodology. However, in their CCDF 
Plans, Tribes must still describe their payment rates; how they are 
established; and how they support quality and, where applicable, 
cultural and linguistic appropriateness. Tribes, at their option, may 
still conduct a market rate survey or alternative methodology or use 
the State's market rate survey or alternative methodology when setting 
payment rates.
    Setting Payment Rates. We propose adding Sec.  98.45(f)(1) 
reflecting the statutory requirement for a Lead Agency to prepare and 
make widely available a detailed report containing results of its 
survey or alternative methodology. Section 658E(c)(4)(B)(ii) of the Act 
requires this report be available 30 days after completion of the 
survey or alternative methodology. Because we consider analysis and 
preparation of the report to be part of completing a survey, we are 
clarifying that Lead Agencies have 30 days from completion of the 
report to make the information available.
    We propose adding language that would require Lead Agencies to 
indicate in their report the estimated price or cost of care necessary 
to support child care providers' implementation of the health, safety, 
and quality requirements at Sec. Sec.  98.41, 98.42, 98.43, and 98.44, 
including any relevant variation by geographic location, category of 
provider, or age of child. We expect that payment rates, at a minimum, 
should be sufficient to ensure compliance with applicable licensing and 
regulatory requirements, health and safety standards, training and 
professional development standards, and appropriate child to staff 
ratio and group size limits (that Lead Agencies define) as required by 
the Act. We intend to ask Lead Agencies in their Plans to indicate the 
estimated price or cost of care necessary to support child care 
providers' implementation of these health, safety, and quality 
requirements, as well as how that baseline corresponds with licensing 
requirements and levels of a quality rating and improvement system or 
other transparent system of quality indicators. We also strongly 
encourage Lead Agencies to consider the costs associated with 
implementation of higher quality standards, such as those in Caring for 
Our Children Basics, the Head Start program performance standards, or 
various levels of QRIS, when establishing base payment rates.
    Section 658E(c)(4)(B)(iii) of the Act requires Lead Agencies to set 
payment rates in accordance with the result of the market rate survey 
or alternative methodology, taking into consideration the cost of 
providing higher quality care. We interpret this statutory provision to 
mean that Lead Agencies must use results of the most recent market rate 
survey or alternative methodology to set payment rates and propose 
language in Sec.  98.45(f)(2)(i) to clarify this. Payment rates should 
reflect the current child care market. Setting payment rates based on 
older market rate surveys that reflect outdated prices, results in 
insufficient payment rates that do not reflect current market 
conditions and undermine the statutory requirement of equal access. 
This proposal would effectively require Lead Agencies to reevaluate 
their payment rates at least every three years. Where updated data from 
a market rate survey or alternative methodology indicate that prices or 
costs have increased, Lead Agencies must update their rates as a 
result. Moreover, we encourage Lead Agencies to consider annual 
increases in rates that keep pace with regular increases in the costs 
of providing child care. While we anticipate that payment rates will 
differ by types of care, ages of children and geographic location, 
among other factors, we expect that Lead Agencies will ensure that 
rates for all provider categories and age groups similarly provide 
equal access for children served by CCDF.
    The preamble to the 1998 Final Rule reminds 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). While this principle remains in effect, we are 
clarifying that Lead Agencies may pay amounts above the provider's 
private pay rate to support quality. A Lead Agency also may peg a 
higher payment rate to the provider's cost of doing business at a given 
level of quality. For example, an analysis of the cost of providing 
high quality care (i.e., at the top levels of a QRIS) using a cost 
estimation model or other method could show the cost of providing the 
service is greater than the price charged in the market. Recognizing 
that private pay rates are often not sufficient to support high 
quality, many Lead Agencies have already implemented tiered subsidy 
payments that support quality. Payments may exceed private pay rates if 
they are designed to pay 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 disabilities or special health care needs, etc.).
    In paragraphs (f)(2)(ii) and (iii), we propose new parameters for 
determining whether payment rates are set at levels that allow eligible 
families equal access to child care that is comparable to child care 
access by families who are not eligible for CCDF. We propose, as 
mentioned above, that Lead Agencies set payment rates, at a minimum, at 
levels sufficient to support implementation of health, safety, and 
quality requirements as described in this NPRM. We also propose that 
Lead Agencies set payment rates at levels that provide parental choice 
to families receiving CCDF subsidies to access care that is of 
comparable quality to care that is available to families with incomes 
above 85 percent of State Median Income. The preamble to the 1998 Final 
Rule indicated that payments established at least at the 75th 
percentile of prices charged in the private-pay child care market would 
be regarded as providing equal access (63 FR 39959). We believe the 
75th percentile remains an important benchmark for gauging equal access 
and recognize that Lead Agencies and other stakeholders are familiar 
with this rate as a proxy for equal access. To establish payments at 
the 75th percentile, rates within categories from the market rate 
survey are arranged from lowest to highest. The 75th percentile is the 
number separating the 75 percent of lowest rates from the 25 percent 
that are highest. Setting rates at the 75th percentile demonstrates 
that CCDF families have access to at least three-quarters of all 
available child care, including care available to families with incomes 
above 85 percent of State median income. While it is true that the 
price of child care does not always correlate with the quality of child 
care, we believe it is essential that CCDF families have access to a 
majority of the care available to families with incomes above 85 
percent of income, which would be accomplished with rates established 
at the 75th percentile. Retaining this benchmark also allows for 
accountability and comparability across States using a market rate 
survey approach, which can be useful in gauging equal access and 
monitoring trends in rates and access to quality care over time. We 
recognize that this benchmark is an imperfect proxy for the 
affordability of higher quality care. In order for providers to offer 
high quality

[[Page 80514]]

care that meets the needs of children from low-income families, they 
need sufficient funds to be able to recruit and retain qualified staff, 
use intentional approaches to promoting learning and development using 
curriculum and engaging families, and provide safe and enriching 
physical environments. ACF plans to continue monitoring rates and equal 
access, which may lead to improved rate setting approaches and 
benchmarks in future years.
    Currently, nearly all Lead Agencies set rate ceilings that are 
below the 75th percentile and in many cases significantly below that 
benchmark. This is of great concern to ACF both because inadequate 
rates may violate the statutory requirement for equal access and 
because CCDF is serving a large number of vulnerable children who would 
benefit from access to high quality care and for whom payment rates 
even higher than the 75th percentile may be necessary to afford access 
to such care. Low rates simply do not provide sufficient resources to 
cover costs associated with the provision of high quality care or to 
attract and retain qualified caregivers, teachers, and directors. Low 
rates may also impact the willingness of child care providers to serve 
CCDF children thereby restricting access. Currently, even in States and 
Territories that pay higher rates for higher quality care, base rates 
are so inadequate that even the highest payment levels are often below 
the 75th percentile. While rates vary by category of care, locality, 
and other factors, 22 States/Territories reported in their FY 2014-2015 
CCDF Plans they had at least some base rates below the 10th percentile 
of a market rate survey. This means that CCDF families are unable to 
access a significant portion of the child care market, including higher 
quality care accessed by families with incomes over 85 percent of SMI.
    While we are not requiring that Lead Agencies pay providers at the 
75th percentile, we strongly discourage Lead Agencies from paying 
providers less than the 75th percentile. Further, Lead Agencies that 
set rates below the 75th percentile would be required to demonstrate 
that their payment rates allow CCDF families to purchase care that is 
of comparable quality to care that is available to families with 
incomes above 85 percent of SMI. This should include data about the 
quality of care that CCDF families can purchase and that is available 
to families above 85 percent of SMI. For example, a State could provide 
data on the share of licensed providers in the State or service area 
that meet established quality benchmarks, as well as the share of CCDF 
providers meeting those standards and the share of children receiving 
CCDF in care that meets an established quality level. States could use 
information on QRIS participation and ratings, national accreditation 
or other quality benchmarks for providers.
    ACF intends to enhance its monitoring of rates through the CCDF 
Plan approval process. ACF may deny Plans or take penalties under the 
equal access provision of this law if base rates do not give access to 
a minimum level of quality. Lead Agencies that set their rates at the 
75th percentile of the most recent market rate survey will be assured 
approval by ACF that rates provide equal access. ACF will apply 
scrutiny in its review to rates set below that threshold, as well as to 
rates that appear to be below a level to meet minimum quality standards 
based on alternate methodologies.
    We recognize that at the present time in many States and 
Territories the available quality data on child care providers is 
limited and we are requesting comments on how to best assess the 
comparability of child care quality between that accessed by families 
receiving CCDF and that available to families above 85 percent of SMI, 
including parameters and requirements for any data collection. ACF 
intends to examine the integrity of reported data and provide 
assistance to Lead Agencies in assessing comparability. We are also 
seeking comments on a possible benchmark or metric for measuring the 
adequacy of rates set by alternative methodologies, as comparable to 
the 75th percentile. Finally, any alternative methodology or market 
rate survey that results in stagnant or reduced payment rates will 
result in further increased scrutiny by ACF in its review, and the Lead 
Agency will need to provide a justification for how such rates result 
in improving access to higher quality child care.
    We propose adding paragraph (f)(2)(iii) in accordance with the new 
statutory requirement for Lead Agencies to take into consideration the 
cost of providing higher quality care than was provided prior to the 
reauthorization when setting payment rates. Lead Agencies may take 
different approaches to meeting this provision, including increasing 
base payment rates, using pay differentials or higher rates for higher 
quality care, or other strategies, such as direct grants or contracts 
that pay higher rates for child care services that meet higher quality 
standards. As stated, ACF acknowledges that rates above the benchmark 
of 75th percentile may be required to support the costs associated with 
high quality care.
    We propose adding paragraph (f)(2)(iv) reflecting new language in 
the law that requires Lead Agencies set payment rates without reducing 
the number of families receiving assistance, to the extent practicable. 
ACF recognizes the limitations of Lead Agencies' abilities to increase 
rates under resource constraints and that Lead Agencies must balance 
competing priorities. We recognize that greater budgetary resources are 
needed to serve all children eligible for CCDF. While we do not want to 
see a reduction in children served, it is our belief that current 
payment rates for CCDF-funded care in many cases do not support equal 
access to a minimum level of quality for CCDF children and should be 
increased.
    Current regulations prohibit Lead Agencies from differentiating 
payment rates based on a ``family's eligibility status or 
circumstance''. This provision is intended to prevent Lead Agencies 
from establishing different payment rates for child care for low-income 
working families as payments for children from TANF families or 
families in education or training. We believe that such a prohibition 
remains relevant and that differentiating payment rates, based on an 
eligibility status (such as receiving TANF or participation in 
education or training), would violate the equal access provision. In 
order to clarify that this prohibition does not conflict with the 
ability of Lead Agencies to differentiate payments based on the needs 
of particular children, for example paying higher rates for higher 
quality care for children experiencing homelessness, we have removed 
the word ``circumstance'' in paragraph (g) so that this provision only 
refers to the conditions of eligibility and not the needs or 
circumstance of children. We do not believe that setting lower payment 
rates based on the eligibility status of the child is consistent with 
Congress' intent to allow for differentiation of rates or that 
establishing different payment rates for low-income families and TANF 
families furthers the goals of the Act or support access to high 
quality care for low-income children.
    Finally, we propose, in paragraph (i), to add, ``if the Lead Agency 
acted in accordance with'' this regulation, to the existing language 
that nothing in this section shall be construed to create a private 
right of action in accordance with statutory language.
    Section 658E(c)(4)(C) of the Act states that Lead Agencies may not 
be prevented from differentiating payment rates based on geographic 
location of child care providers, age or particular needs of children 
(such as children with

[[Page 80515]]

disabilities and children served by child protective services), whether 
child care providers provide services during weekend or other non-
traditional hours; or a Lead Agency's determination that differential 
payment rates may enable a parent to choose high quality child care. 
Section 98.45(j)(2) proposes to add children experiencing homelessness 
to this list of children with particular needs. Paying higher rates for 
higher quality care is an important strategy as it provides resources 
necessary to cover the costs of quality improvements in child care 
programs. Lead Agencies should also consider differentiating rates for 
care that is in low supply, such as infant-toddler care and care during 
nontraditional hours, as an incentive for providers.
    Parent Fees. Section 658E(c)(5) requires Lead Agencies to establish 
and periodically revise a sliding fee scale that provides for cost-
sharing for families receiving CCDF funds. The reauthorization added 
language that cost-sharing should not be a barrier to families 
receiving CCDF assistance. In this proposed rule, we have moved the 
regulatory language on sliding fee scales (previously Sec.  98.42) 
under this section, recognizing affordable copayments as an important 
aspect of equal access.
    We propose amending the previous regulatory language, now Sec.  
98.45(k) by adding language that the cost-sharing should not be a 
barrier to families receiving assistance. Lead Agencies have 
flexibility in establishing their sliding fee scales and determining 
what constitutes a cost barrier for families. The preamble to the 1998 
Final Rule established the Federal benchmark of 10 percent of family 
income as an affordable copayment. As in the past, we are declining 
from defining affordable in regulation but we are revising this 
established benchmark through this preamble. It is our view that a fee 
that is no more than 7 percent of a family's income is a better measure 
of affordability. According to the U.S. Census Bureau, the percent of 
monthly income families spend on child care on average has stayed 
constant between 1997 and 2011, at around 7 percent. Poor families on 
average spend approximately four times the share of their income on 
child care compared to higher income families. Who's Minding the Kids? 
Child Care Arrangements: Spring 2011, U.S. Census Bureau, 2013.) As 
CCDF assistance is intended to offset the disproportionately high share 
of income that low-income families spend on child care in order to 
support parents in achieving economic stability, it is our belief that 
CCDF families should not be expected to pay a greater share of their 
income on child care than reflects the national average. For the 
majority of CCDF families receiving assistance, this new Federal 
benchmark would not result in a change in the amount of copay charged. 
The average percentage of family income spent on CCDF copayments, among 
families with a copayment, is 6.2 percent.
    According to Sec.  98.21(a)(3), as proposed, Lead Agencies would be 
unable to increase family copayments within the minimum 12-month 
eligibility period unless the family's income is in a graduated 
phaseout of care as described at Sec.  98.21(b)(2). When designing fee 
scales, we encourage Lead Agencies to consider how their fee scales 
address affordability for families at all income levels. Lead Agencies 
should ensure that small increases in earnings, during the graduated 
phaseout period, do not trigger large increases in copayments, in order 
to ensure stability for families as they improve their economic 
circumstance and transition off child care assistance.
    In addition, we propose to add language to provide that Lead 
Agencies may not use the cost, price of care, or subsidy payment rate 
as a factor in setting co-payment amounts. 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 would correct 
this discrepancy by stating that Lead Agencies may not use the cost or 
price of care when setting their co-pay amounts, which could violate 
the statutory requirements to preserve equal access and parental choice 
by incentivizing families to use lower cost care.
    Finally, current CCDF regulations at Sec.  98.42(c) 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.'' This 
provision would remain in effect and we encourage Lead Agencies to 
implement it. We propose amending this section so that Lead Agencies 
can waive contributions from families ``that meet other criteria 
established by the Lead Agency.'' Lead Agencies have often requested 
more flexibility to waive copayments beyond just those families at or 
below the poverty level. This change would increase flexibility to 
determine waiver criteria that the Lead Agency believes would best 
serve subsidy families. For example, a Lead Agency could use this 
flexibility to target particularly vulnerable populations, such as 
homeless families, migrant workers, or families receiving TANF. Lead 
Agencies may choose to waive copayments for children in Head Start and 
Early Head Start, which is an important alignment strategy. Head Start 
and Early Head Start are provided at no cost to eligible families, who 
cannot be required to pay any fees for Head Start services. Waiving 
CCDF fees for families served by both Head Start/Early Head Start and 
CCDF can support continuity for families. While we are allowing Lead 
Agencies to define criteria for waiving co-payments, the criteria must 
be described and approved in the CCDF Plan. 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 would have co-payment requirements for a substantial 
number of families receiving CCDF subsidies. We included this proposal 
on increasing Lead Agency flexibility on waiving co-payments in our 
2013 NPRM and many commenters supported this policy revision.
    We propose adding paragraph (l) that requires Lead Agencies to 
prohibit child care providers receiving CCDF funds from charging 
parents additional mandatory fees above the family co-payment based on 
the Lead Agencies' sliding fee scale. According to the 2015-2016 CCDF 
Plans, 41 Lead Agencies have policies allowing providers to charge 
families the difference between the maximum payment rate and their 
private pay rate. In some States/Territories, parents may be asked to 
pay the difference only in certain circumstances or for certain types 
of providers. For example, Lead Agencies that allow providers to charge 
parents may prohibit providers from charging families who are exempt 
from copayments, or may only allow providers who have met an 
established quality level to charge families the difference in rates. 
(Minton, S., Durham, C., and Giannarelli, L., The CCDF Policies 
Database Book of Tables: Key Cross-State Variations in CCDF Policies as 
of October 1, 2013, OPRE Report 2014-72, U.S. Department of Health and 
Human Services, 2014). We believe that requiring families to pay above 
the established copayment may make care unaffordable for families and 
may be a barrier to families receiving assistance. We are also 
concerned that such policies require families to make up the difference 
for Lead Agencies' low payment rates. To ensure that providers

[[Page 80516]]

are informed about this provision, Lead Agencies should include this 
prohibition in any written information given to providers and/or 
written provider agreements. Lead Agencies may want to consider what 
methods they would use to monitor compliance with this prohibition. 
This policy does not preclude providers from charging families optional 
fees, such as those to participate in field trips or other non-
mandatory activities. We anticipate that any fiscal impact on providers 
from this policy change would be reduced or eliminated by the 
expectation that Lead Agencies increase and regularly update their 
payment rates and improve their payment policies pursuant to Sec.  
98.45(f)(2) and (m). We solicit comments on the impact of this proposal 
for both parents and providers, including whether ACF should provide a 
phase-in period for implementation.
    Provider Payment Practices. Section 658E(c)(2)(S) of the Act 
requires Lead Agencies to certify that payment practices for child care 
providers receiving CCDF funds reflect generally accepted payment 
practices of child care providers in the State/Territory that serve 
children who do not receive CCDF-funded assistance in order to support 
stability of funding and encourage more child care providers to serve 
children receiving CCDF funds. It also requires the Lead Agency, to the 
extent practicable, to implement enrollment and eligibility policies 
that support the fixed costs of providing child care services by 
delinking provider payment rates from an eligible child's occasional 
absences due to holidays or unforeseen circumstances, such as illness. 
Section 658E(c)(4)(iv) requires Lead Agencies to describe how they will 
provide for the timely payment for child care services provided by CCDF 
funds.
    In addition to payment rates, policies governing provider payments 
are an important aspect of equal access and supporting the ability of 
providers to provide high quality care. Currently, many States closely 
link provider payments to the hours a child attends care. A child care 
provider may not be paid for days or hours when a child is absent, 
resulting in a loss of income. Moreover, the instability that results 
from such payment practices makes it difficult for providers to meet 
fixed costs of providing child care (such as rent, utilities and 
salaries) and to plan for investments in quality. 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.
    Generally accepted payment practices typically require parents who 
pay privately for child care to pay their provider a set fee based on 
their child's enrollment, often in advance of when services are 
provided. Payments are not altered due to child absences. While Lead 
Agencies have flexibility to determine payment processes for subsidies, 
we believe that it is appropriate to set some Federal benchmarks for 
what constitutes timely payments, delinking of payments and absent 
days, and generally accepted payment practices. We are interested in 
receiving comments on whether these or other benchmarks should be 
included in a final rule.
    At Sec.  98.45(m)(1), we propose that Lead Agencies ensure timely 
provider payments by either paying prospectively prior to the delivery 
of services or paying providers retrospectively within no more than 21 
days of the receipt of invoice for services. We strongly encourage Lead 
Agencies to pay prospectively where possible. For Lead Agencies that 
choose to reimburse providers for services, we provide 21 days as a 
maximum period of time but encourage Lead Agencies to provide payment 
sooner if possible. We do not expect this requirement to be burdensome 
for Lead Agencies. According to their FY 2014-2015 CCDF Plans, 37 
States/Territories had an established timeframe for provider payments 
ranging from 3 to 35 days, the majority of which were shorter than 21 
days. Administrative improvements such as automated billing and payment 
mechanisms, including direct deposit and web-based electronic 
attendance and billing systems can help facilitate timely payments to 
providers.
    At Sec.  98.45(m)(2), we propose three examples for how Lead 
Agencies could meet the statutory requirement to support the fixed 
costs of providing child care services by delinking provider payment 
rates from an eligible child's occasional absences due to holidays or 
unforeseen circumstances such as illness, to the extent practicable. 
This may include: (1) By paying providers based on a child's 
enrollment, rather than attendance; (2) by providing a full payment to 
providers as long as a child attends for 85 percent of the authorized 
time; or (3) by providing full payment to providers as long as a child 
is absent for five or fewer days in a four week period. We recognize 
that these three examples represent different levels of stringency; 
however, we have provided flexibility in acknowledgement of the ways 
that States structure their policies. Lead Agencies that do not choose 
one of these three approaches must describe their approach in the State 
Plan, including how the approach is not weaker than one of the three 
listed above.
    We are establishing 85 percent, or five or fewer days, as a 
benchmark for when providers should receive a full payment, regardless 
of the reason for the absence (e.g., whether it is approved or 
unapproved). We selected 85 percent (or five or fewer days) as a 
threshold based in part on Head Start policy, which currently requires 
center-based programs to maintain a monthly 85 percent attendance rate 
and to analyze absenteeism if monthly average daily attendance falls 
below that threshold. New proposed Head Start Performance Standards, 
issued in June 2015, would require programs to take actions (which 
could include additional home visits or the provision of support 
services) to increase child attendance when children have four or more 
consecutive unexcused absences or are frequently absent. While Head 
Start policy informed the development of this proposal, our proposed 
provisions differ in several ways. We are not requiring CCDF child care 
providers to take action to address individual or systemic absenteeism, 
although Lead Agencies may encourage CCDF providers to take this 
approach and consider how child care providers may be supported in 
addressing high rates of absenteeism among families. Chronic 
absenteeism from high quality programs is a concern because it may 
lessen the impact on children's school readiness and may signal that a 
family is in need of additional supports.
    We are proposing using a common threshold to encourage alignment 
and because it seems to reasonably allow for routine absences, such as 
due to illness, that occur among children. Lead Agencies retain 
discretion to allow for additional excused and/or unexcused absences 
and to provide for the full payment for services in those 
circumstances. Many Lead Agencies have invested in electronic time and 
attendance systems linked to provider payments. These systems may be 
used to track whether a child is enrolled and attending care; however, 
Lead Agencies should ensure that such systems do not

[[Page 80517]]

link attendance and payment so tightly as to violate this provision.
    The law requires Lead Agencies to implement this provision ``to the 
extent practicable.'' We interpret this language as setting a limit on 
the extent to which Lead Agencies must act, rather than providing a 
justification for not acting at all. We are not requiring Lead Agencies 
to pay for all days when children are absent, although that would most 
closely mirror private pay practices, but each Lead Agency is expected 
to implement a policy that accomplishes the goals of the statute. A 
refusal to implement any such policies as being ``impracticable'' will 
not be accepted. We are asking for comment on alternatives to the three 
identified approaches that States may want to use to meet this 
requirement.
    At Sec.  98.45(m)(3), we propose minimum requirements for complying 
with the provision of ``generally-accepted payment practices.'' Unless 
a Lead Agency is able to prove that the following policies are not 
generally-accepted in its particular State, Territory, or service area, 
or among particular types of providers, we propose requiring Lead 
Agencies to pay providers based on established part-time or full-time 
rates, rather than paying for hours of service or smaller increments of 
time. We also propose that Lead Agencies pay for mandatory fees that 
the provider charges to private-paying parents. This would include 
initial or annual registration fees. It is not meant to include 
optional fees charged to families, such as those to participate in 
optional field trips or program activities.
    In addition, there are certain generally-accepted payment practices 
that we propose to require of all Lead Agencies. In paragraphs (m)(4) 
through (6) we propose requiring Lead Agencies to ensure that child 
care providers receive payment for any services in accordance with a 
payment agreement or authorization for services, receive prompt notice 
of changes to a family's eligibility status that may impact payment, 
and establish timely appeal and resolution processes for any payment 
inaccuracies and disputes. While these practices are unique to the 
subsidy system, they are analogous to generally-accepted payment 
practices in the private pay market, such as establishing contracts 
between providers and parents and providing adequate advance notice of 
changes that impact payments. We believe the appeals and resolution 
process is important in fairness to providers.
    Finally, Lead Agencies should ensure that payment practices for 
each type of provider reflect generally accepted payment practices for 
such providers in order to ensure that families have access to a range 
of child care options. We note that these benchmarks represent minimum 
generally accepted practices. Lead Agencies may consider additional 
policies that are fair to providers, promote the financial stability of 
providers and encourage more providers to serve CCDF eligible children. 
Such policies may include paying providers based on the provider's 
established procedures for private-pay families (i.e., a flat monthly 
rate rather than paying by the day or week), providing information on 
payment practices in multiple languages to promote the participation of 
diverse child care providers; implementing dedicated phone lines, web 
portals, or other access points for providers to easily reach the 
subsidy agency for questions and assistance regarding payments; and 
periodically surveying child care providers to determine their 
satisfaction with payment practices and timeliness, and to identify 
potential improvements.
Priority for Services (Section 98.46)
    The reauthorization included several provisions to increase access 
to CCDF services for children and families experiencing homelessness. 
Consistent with the spirit of these additions, we are proposing to add 
``children experiencing homelessness'' to the Priority for Services 
section at Sec.  98.46.
    Lead Agencies have flexibility as to how they offer priority to 
these populations, including by prioritizing enrollment, waiving 
copayments, paying higher rates for access to higher quality care, or 
using grants or contracts to reserve slots for priority populations. 
Section 658E(c)(3)(B)(ii) of the Act requires ACF to report to Congress 
on whether Lead Agencies are prioritizing services to children 
experiencing homelessness, children with special needs, and families 
with very low incomes.
    The Section 658E(c)(2)(Q) of the Act also requires Lead Agencies to 
describe the process by which they propose to prioritize investments 
for increasing access to high quality child care for children of 
families in areas that have significant concentrations of poverty and 
unemployment and lack such programs. We propose reiterating this 
requirement in the proposed rule in Sec.  98.46(b). It is our 
interpretation that the investments referred to in the statute may 
include direct child care services provided under Sec.  98.50(a) and 
activities to improve the quality of child care services under Sec.  
98.50(c).
    While Lead Agencies have flexibility in implementing this new 
statutory language, ACF encourages Lead Agencies to target investments 
based on analysis of data showing poverty, unemployment and supply 
gaps. Lead Agencies may also consider how to best support parent's 
access to workforce development and employment opportunities (such as 
allowing job search as a qualifying activity for assistance and 
allowing broader access to assistance for education and training by 
reducing eligibility restrictions), which would support the child care 
needs of families in areas with high poverty and unemployment.

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)
    This proposed rule includes a technical change to Sec.  98.50(a) 
which we propose to redesignate as new paragraph (g) at Sec.  98.50. 
The proposed change requires Lead Agencies to spend a substantial 
portion of the funds remaining after applying provisions at paragraphs 
(a) through (f) of this section to provide direct child care services 
to low-income working families.
    We also make a clarifying change at current paragraph (b) in this 
section, which we propose to redesignate as paragraph (a). We propose 
to specify that proposed paragraph (a) is describing use of funds for 
direct child care services. These proposed changes work in conjunction 
to clarify that the reference to ``a substantial portion of funds'' 
applies to direct services, as opposed to other types of activities.
    Section 658G(a)(2) of the CCDBG Act increases the percentage of 
total CCDF funds (including mandatory funding) that Lead Agencies must 
spend on activities to improve the quality of child care services. 
Paragraphs (b), (d), (e), and (f), respectively, require Lead Agencies 
to spend a minimum of nine percent of funds (phased in over five years) 
on activities to improve the quality of care and three percent 
(beginning in FY 2017) to improve the quality of care for infants and 
toddlers; not more than five percent for administrative activities; not 
less than 70 percent of the Mandatory and Matching funds to meet the 
needs of families receiving TANF, families transitioning from TANF, and 
families at-risk of becoming dependent on

[[Page 80518]]

TANF; and, after setting aside funds for quality and administrative 
activities, at least 70 percent of remaining Discretionary funds on 
direct services. These provisions are all based on statute.
    Grants and contracts. We propose to add language at Sec.  
98.50(a)(3) which would require that funding methods used by States and 
Territories include some use of grants or contracts for direct services 
based on an assessment of shortages in the supply of high quality care. 
The statute references the use of grants or contracts in multiple 
places and we believe they are a critical aspect of an effective CCDF 
system and promote the fundamental principles of equal access and 
parental choice. Note that this proposal would not impact the 
requirement that the Lead Agency operate a certificate (or voucher) 
program and that eligible families be offered a certificate. Rather, 
the proposed change would require Lead Agencies to incorporate grants 
or contracts into their CCDF program, with specific consideration for 
how they can be used to address shortages in the supply of high quality 
child care.
    According to preliminary FY 2013 CCDF administrative data, 
approximately 90 percent of children receiving CCDF-funded child care 
were served through certificates. According to analysis of the FY 2014-
2015 CCDF Plans, only 20 States and Territories provide services 
through grants or contracts for child care slots, meaning parents in 
the majority of States/Territories do not have a choice other than 
certificates.
    While child care certificates may also support parental choice, 
demand-side mechanisms like certificates are only fully effective when 
there is an adequate supply of child care. Grants or contracts can play 
a role in building the supply and availability of child care, 
particularly high quality care, in underserved areas and for special 
populations in order to expand parental choice. For example, Lead 
Agencies may use grants or contracts to incentivize providers to open 
in an area they might not otherwise consider, or to serve children for 
whom care is more costly. Grants and contracts are paid directly to the 
provider so long as slots are adequately filled, which is a more 
predictable funding source than vouchers or certificates. Stable 
funding can incent providers to pay the fixed costs associated with 
providing high quality child care, such as adequate salaries to attract 
qualified staff, or to provide higher cost care, such as for infants 
and toddlers or children with special needs, or to locate in low-income 
or rural communities.
    We want to emphasize that this proposed addition is not meant to 
limit or discourage the use of certificates to provide assistance to 
families. As noted in the Senate Committee report, certificates ``offer 
eligible parents the broadest array of options and afford parents 
maximum choice.'' (S. Rept. No. 113-138, at 12). We expect a 
substantial number of CCDF children would continue to be served through 
certificates or vouchers. However, we believe a mixed funding system 
that includes certificates, grants or contracts, and private pay 
families is the most sustainable option for the CCDF program and for 
child care providers. Further, a mixed funding system is a 
straightforward interpretation of language in the CCDBG statute, which 
clearly states that parents are to be given the option of child care 
funded by grants and contracts, as well as certificates. While Section 
658Q(b) of the Act provides that ``Nothing in this subchapter shall be 
construed in a manner (1) to favor or promote the use of grants and 
contracts for the receipt of child care services under this subchapter 
over the use of child care certificates,'' Congress chose not to change 
the language at Section 658E(c)(2)(A) of the Act, requiring Lead 
Agencies to, ``provide assurances that (i) the parent or parents of 
each eligible child within the State who receives or is offered child 
care service for which assistance is provided under this subchapter, 
are given the option either--(I) to enroll such child with a child care 
provider that has a grant or contract for the provision of such 
services; or (II) to receive a child care certificate.''
    Lead Agencies are strongly encouraged to contract with multiple 
types of settings, including child care centers and family child care 
networks or systems, to maximize parental choice. Family child care 
networks or systems are groups of associated family child care 
providers who pool funds to share some costs of operating and staff who 
provide supports to providers often to manage their businesses and 
enhance quality. Contracting directly with family child care networks 
allows for more targeted use of funds with providers that benefit from 
additional supports that can improve quality. Research shows 
affiliation with a staffed family child care network is a strong 
predictor of quality in family child care homes, when providers receive 
visits, training, materials, and other supports from the network 
through a specially trained coordinator. (Bromer, J., et al., Staffed 
Support Networks and Quality in Family Child Care: Findings from the 
Family Child Care Network Impact Study, Erikson Institute, 2008)
    Faith-based or religious organizations may be funded through a 
grant or contract, although they may not use the funding for religious 
purposes. Pursuant to existing regulations at Sec.  98.54(d), which we 
propose to redesignate as Sec.  98.56(d), funds provided through grants 
or contracts to providers may not be expended for any sectarian purpose 
or activity, including sectarian worship or instruction. These 
provisions are designed to promote the participation of faith-based 
organizations in the CCDF program in a manner consistent with 
applicable Federal statutes. In many States, faith-based organizations 
play a key role in the delivery of child care services, and this 
proposed rule fully supports their continued participation.
    We do not expect Lead Agencies currently using direct grants or 
contracts to necessarily make changes to current grants or contracts. 
However, we strongly encourage these Lead Agencies to examine their 
current approach to ensure grants and contracts are focused on 
increasing the supply of high quality care, especially for underserved 
populations and communities.
    Expenditures on activities to improve the quality of child care. 
Both the quality activity set-aside and the set-aside for infants and 
toddlers codified in Sec.  98.50(b) apply to the Lead Agency's full 
CCDF award, which includes Discretionary, Mandatory, and Federal and 
State shares of Matching Funds. Non-Federal maintenance-of-effort funds 
are not subject to the quality and infant and toddler set-asides. These 
amounts are minimum requirements. Lead Agencies may reserve a larger 
amount of funding than is required at paragraphs (b)(1) and (2) for 
these activities.
    We also propose to revise paragraph (c), which relates to the 
quality activity funds. First, the proposed rule would require use of 
the quality funds to align with an assessment of the Lead Agency's need 
to carry out such services. As part of this assessment, we expect Lead 
Agencies to review current expenditures on quality, assess the need for 
quality investment in comparison with revised purposes of the law, 
including the placement of more low-income children in high quality 
child care, and determine the most effective and efficient distribution 
of funding among and across the categories authorized by the statute. 
Second, the activities must include measurable indicators of progress 
in accordance with the required measures proposed at

[[Page 80519]]

Sec.  98.53(f). We recognize that some activities may have the same 
indicators of progress. However, each activity must be reported on and 
linked to some indicator(s). Finally, the proposed rule allows for 
quality activities to be carried out by the Lead Agency or through 
grants and contracts with local child care resources and referral 
organizations or other appropriate entities.
    Funding for Direct Services. The proposed rule includes a technical 
change at paragraph (e) to clarify that the provision applies to the 
Mandatory and Federal and State share of Matching Funds. This proposed 
change simply formalizes current policy. We propose to redesignate 
current paragraph (f) as paragraph (h) without changes.
    We propose to replace current paragraph (f) with new regulatory 
language to restate requirements included in the Act. The proposed 
regulatory language would require at least 70 percent of any 
Discretionary funds left after the Lead Agency sets aside funding for 
quality and administrative activities to be used to fund direct 
services.
Services for Children Experiencing Homelessness (Section 98.51)
    We propose a new section at Sec.  98.51 that codifies new statutory 
language at 658E(c)(3)(B)(i) of the Act, which requires Lead Agencies 
to spend at least some CCDF funds on activities that improve access to 
quality child care services for children experiencing homelessness. The 
proposed regulatory language would require Lead Agencies to have 
procedures for allowing children experiencing homelessness to be 
determined eligible and enroll prior to completion of all required 
documentation. The proposed regulation also clarifies that if a child 
experiencing homelessness is found ineligible, after full 
documentation, any CCDF payments made prior to the final eligibility 
determination should not be considered errors or improper payments and 
any payments owed to a child care provider for services should be paid. 
Lead Agencies would also be expected to provide training and technical 
assistance on identifying and serving children and families 
experiencing homelessness and outreach strategies.
Child Care Resource and Referral System (Section 98.52)
    The law authorizes use of CCDF funds for child care resource and 
referral services to assist with consumer education and specifies 
functions of such entities. Consistent with this provision, this 
proposed rule would revise Sec.  98.52 to include statutory language 
that allows Lead Agencies to spend funds to establish or support a 
system of local or regional child care resource and referral 
organizations that is coordinated, to the extent determined by the Lead 
Agency, by a statewide public or private nonprofit, community-based or 
regionally based, local child care resource and referral organization. 
The statute permits, but does not require, Lead Agencies to fund a 
child care resource and referral system. We recommend Lead Agencies 
give consideration to the expanded requirements for consumer education 
at Sec.  98.33 and how best to meet those requirements, including 
whether existing child care resource and referral agencies and/or 
additional partners can assist in reaching low-income parents of 
children receiving subsidies, providers, and the general public.
    Proposed paragraph (b) specifies a list of resource and referral 
activities that the statute says should be at the direction of the Lead 
Agency. Therefore, if the Lead Agency does not need the child care 
resource and referral organization to carry out a certain activity, the 
organization does not have to carry out that activity.
Activities To Improve the Quality of Child Care (Section 98.53)
    As noted above, reauthorization increased the percent of 
expenditures Lead Agencies must spend on quality activities. We 
strongly encourage Lead Agencies to develop a carefully considered 
framework for quality expenditures that takes into account the 
activities specified by the law, and uses data on gaps in quality of 
care and the workforce, as well as effectiveness of existing quality 
enhancement efforts, to target these resources. Lead Agencies should 
also coordinate quality activities with the statutory requirement to 
spend at least three percent of expenditures on improving quality and 
access for infants and toddlers, beginning in FY 2017.
    Section 658G(b) of the Act includes a new list of 10 allowable 
quality activities and requires that Lead Agencies spend their quality 
funds on at least one of the 10 activities. This proposed rule 
incorporates and expands on the list of allowable activities at Sec.  
98.53(a) with details described below.
    1. Supporting the training, professional development, and 
postsecondary education of the child care workforce as part of a 
progression of professional development. We propose restating the 
statutory language specifying training and professional development as 
an allowable quality improvement expenditure at Sec.  98.53(a)(1). The 
Act references the section of the Plan requiring assurances related to 
training and professional development, which is elaborated in the 
proposed rule at Sec.  98.44. We encourage Lead Agencies to align the 
uses of funds for training, professional development, and postsecondary 
education with the State or Territory's framework and progression of 
professional development to maximize resources. Training and 
professional development may be provided through institutions of higher 
education, child care resource and referral agencies, worker 
organizations, early childhood professional associations, and other 
entities. The Act also lists additional areas for investments in 
training and professional development, which we include with additional 
detail at Sec.  98.53(a)(1)(i) through (vii) as follows:
    (a) Offering training, professional development and post-secondary 
education that relate to the use of scientifically based, 
developmentally, culturally, and age appropriate strategies to promote 
all of the major domains of child development and learning, including 
those related to nutritional nutrition and physical activity and 
specialized training for working with populations of children, 
including different age groups, English learners, children with 
disabilities, and Native Americans and Native Hawaiians, to the extent 
practicable, in accordance with the Act.
    (b) Incorporating the effective use of data to guide program 
improvement and improve opportunities for caregivers, teachers and 
directors to advance on their progression of training, professional 
development, and postsecondary education. We expanded upon the 
statutory language to include opportunities for caregivers, teachers 
and directors to advance professionally as there are a variety of data 
collected (such as information from licensing inspectors, quality 
rating and improvement systems, or accreditation assessments) that can 
guide program improvement by helping providers make adjustments in the 
physical environment and teaching practices.
    (c) Including effective behavior management strategies and 
training, including positive behavior interventions and support models 
for birth to school-age or age-appropriate, that promote positive 
social and emotional development and reduce challenging behaviors, 
including reducing suspensions and expulsions of children under age 
five for such behaviors.
    (d) Providing training and outreach on engaging parents and 
families in culturally and linguistically appropriate

[[Page 80520]]

ways to expand their knowledge, skills, and capacity to become 
meaningful partners in supporting their children's positive 
development.
    (e) Providing training in nutrition and physical activity needs of 
young children.
    (f) Providing training or professional development for caregivers, 
teachers and directors regarding the early neurological development of 
children; and
    (g) Connecting caregivers, teachers and directors of child care 
providers with resources to assist them in pursuing relevant 
postsecondary education.
    2. Improving upon the development or implementation of the early 
learning and development guidelines. We restate at Sec.  98.53(a)(2) 
statutory language to allow the use of CCDF quality funds to provide 
technical assistance to eligible child care providers on the 
development or implementation of early learning and development 
guidelines. Early learning and development guidelines should be 
developmentally appropriate for all children from birth to kindergarten 
entry, describing what such children should know and be able to do, and 
cover the essential domains of early childhood development. Most States 
and Territories already have such guidelines, but may need to update 
them or better integrate them into their professional development 
system proposed at Sec.  98.44. Section 658E(c)(G) of the Act requires 
Lead Agencies to describe training and professional development, 
including the ongoing professional development on early learning 
guidelines. In June 2015, ACF released the newly revised Head Start 
Early Learning Outcomes Framework: Ages Birth to Five (HSELOF, 2015. 
The HSELOF provides research-based expectations for children's learning 
and development across five domains from birth to age 5. As States and 
Territories undertake revisions to their early learning guidelines, we 
encourage them to crosswalk their guidelines with the HSELOF to ensure 
they are comprehensive and aligned. Coordinating between State/
Territory early learning and development guidelines and the HSELOF can 
help build connections between child care programs and Early Head 
Start/Head Start programs. We also encourage Lead Agencies to consider 
expanding learning and development guidelines for school-age children, 
either through linkages to programs already in place through the State 
department of education or local educational agencies (LEAs), or by 
adapting current early learning and development guidelines to be age-
appropriate for school-age children.
    3. Developing, implementing, or enhancing a tiered quality rating 
and improvement system (QRIS). We propose to incorporate this allowable 
activity at Sec.  98.53(a)(3). The statute lists seven activities that 
Lead Agencies may choose to include when funding a QRIS with quality 
funds, which we expand upon:
    (a) Support and assess the quality of child care providers in the 
State, Territory, or Tribe. QRIS should include training and technical 
assistance to child care providers to help them improve the quality of 
care and on-site quality assessments appropriate to the setting;
    (b) Build on licensing standards and other regulatory standards for 
such providers. We encourage Lead Agencies to incorporate their 
licensing standards and other regulatory standards as the first level 
or tier in their QRIS. Making licensing the first tier facilitates 
incorporating all licensed providers into the QRIS;
    (c) Be designed to improve the quality of different types of child 
care providers and services. We encourage 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. One way to 
provide support for different types of care is providing quality funds 
to established family child care networks that can work with individual 
family child care providers to improve the quality in those settings.
    (d) Describe the safety of child care facilities. Health and safety 
are the foundation of quality, and should not be treated as wholly 
separate requirements. Including the safety of child care facilities as 
part of a QRIS helps to reinforce this connection.
    (e) Build the capacity of early childhood programs and communities 
to support parents' and families' understanding of the early childhood 
system and the ratings of the programs in which the child is enrolled. 
This capacity may be built through a robust consumer and provider 
education system, as described at Sec.  98.33. Lead Agencies should 
provide clear explanations of quality ratings to parents. In addition 
to the Web site, Lead Agencies may have providers post their quality 
rating or have information explaining the rating system available at 
child care centers and family child care homes. This information should 
also be accessible to parents with low literacy or limited English 
proficiency;
    (f) Provide to the maximum extent practicable, financial incentives 
and other supports designed to expand the full diversity of child care 
options and help child care providers improve the quality of services. 
Research has found that significant financial incentives are needed to 
make the quality improvements necessary for providers to move up levels 
in the QRIS. In order to ensure that providers continue to improve 
their quality and help move more low-income children into high quality 
child care, we recommend Lead Agencies to make these incentives a focus 
of investment; and
    (g) Accommodate a variety of distinctive approaches to early 
childhood education and care, including but not limited to, those 
practices in faith-based settings, community based settings, child-
centered settings, or similar settings that offer a distinctive 
approach to early childhood development. Parental choice is a very 
important part of the CCDF program, and parents often consider a 
variety of factors, including religious affiliation, when choosing a 
child care provider. Lead Agencies should take these factors into 
account when setting quality standards and levels in their QRIS, as 
well as designing how the information will be made available to the 
public.
    4. Improving the supply and quality of child care programs and 
services for infants and toddlers. The statute includes improving the 
supply and quality of child care programs and services for infants and 
toddlers as an allowable quality activity, which we propose to 
reiterate at Sec.  98.53(a)(4). Lead Agencies may use any quality funds 
for infant and toddler quality activities, in addition to the required 
three percent infant and toddler quality set-aside. Lead Agencies are 
encouraged to pay special attention to what is needed to enhance the 
supply of high quality care for infants and toddlers in developing 
their quality investment framework and coordinate activities from the 
main and targeted set asides to use resources most effectively. The 
statute and proposed rule state that allowable activities may include:
    (a) Establishing or expanding high quality community or 
neighborhood-based family and child development centers, which may 
serve as resources to child care providers in order to improve the 
quality of early childhood services provided to infants and toddlers 
from low-income families and to help eligible child care providers 
improve their capacity to offer high quality, age-appropriate care to 
infants and toddlers from low-income families. We interpret

[[Page 80521]]

this provision to encourage the provision of resources to high quality 
child care providers or other qualified community-based organizations 
that serve as hubs of support to providers in the community (by 
providing coaching or mentoring opportunities, lending libraries, 
etc.);
    (b) Establishing or expanding the operation of community or 
neighborhood-based family child care networks. As discussed earlier, 
established family child care networks can help improve the quality of 
family child care providers. Lead Agencies may choose to use the 
quality funds to help networks cover overheard and quality enhancement 
costs, such as providing access to coaches or health consultants;
    (c) Promoting and expanding child care providers' ability to 
provide developmentally appropriate services for infants and toddlers;
    (d) If applicable, developing infant and toddler components within 
the Lead Agency's QRIS for child care providers for infants and 
toddlers, or the development of infant and toddler components in the 
child care licensing regulations or early learning and development 
guidelines;
    (e) Improving the ability of parents to access transparent and easy 
to understand consumer education about high quality infant and toddler 
care as described at Sec.  98.33; and
    (f) Carrying out other activities determined by the Lead Agency to 
improve the quality of infant and toddler care provided, and for which 
there is evidence that the activities will lead to improved infant and 
toddler health and safety, infant and toddler cognitive and physical 
development, or infant and toddler well-being, including providing 
health and safety training (including training in safe sleep practices, 
first aid, and cardiopulmonary resuscitation for providers and 
caregivers).
    5. Establishing or expanding a statewide system of child care 
resource and referral services. We propose to reiterate the statutory 
language by adding Sec.  98.53(a)(5) to include establishing or 
expanding a statewide system of child care resource and referral 
services as an allowable quality activity. Activities that may be done 
by child care resource and referral organizations are included at Sec.  
98.52.
    6. Facilitating compliance with health and safety. We restate the 
statutory language at Sec.  98.53(a)(6) that includes facilitating 
compliance with Lead Agency requirements for inspection, monitoring, 
training, and health and safety, and with licensing standards. While it 
is likely Lead Agencies will need to use quality funding for 
implementation and enforcement of the new minimum health and safety 
requirements for child care providers in the law, we urge them to 
consider expenditures on this purpose foundational to enhancing 
quality, but not sufficient to meet the purposes of this 
reauthorization. For example, Lead Agencies should consider linking 
quality expenditures for health and safety to the quality framework 
discussed earlier in this preamble, such that a Lead Agency may 
establish a QRIS that ties eligibility for providers to participate 
directly to licensing as the base level.
    7. Evaluating and assessing the quality and effectiveness of child 
care programs and services offered, including evaluating how such 
programs positively impact children. The statutorily allowable list of 
quality activities includes at Sec.  98.53(a)(7) evaluating and 
assessing the quality and effectiveness of child care programs and 
services offered, including evaluating how such programs positively 
impact children. We propose at Sec.  98.53(f)(3) to require Lead 
Agencies to report on the measures they will use to evaluate progress 
in improving the quality of child care programs and services. Including 
evaluation as an allowable quality activity recognizes that evaluating 
progress may take additional investments, for which Lead Agencies may 
use quality funds. 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. (Government 
Accountability Office, Child Care: States Have Undertaken a Variety of 
Quality Improvement Initiatives, but More Evaluations of Effectiveness 
Are Needed, GAO-02-897)
    8. Supporting child care providers in the voluntary pursuit of 
accreditation by a national accrediting body with demonstrated, valid, 
and reliable program standards of high quality. We propose to restate 
statutory language at Sec.  98.53(a)(8) supporting child care providers 
in the voluntary pursuit of accreditation by a national accrediting 
body with demonstrated, valid and reliable program standards of high 
quality as an allowable quality activity. Accreditation is one way to 
differentiate the quality of child care providers. In order to gain 
accredited, child care centers and family child care homes must meet 
certain quality standards outlined by accrediting organizations.
    9. Supporting efforts to develop or adopt high quality program 
standards relating to health, mental health, nutrition, physical 
activity, and physical development. We restate statutory language at 
Sec.  98.53(a)(9) supporting Lead Agency or local efforts to develop or 
adopt high quality program standards relating to health, mental health, 
nutrition, physical activity, and physical development for children as 
an allowable quality activity. We recommend Lead Agencies look to Head 
Start for strong program standards in comprehensive services and 
consider how these standards may be translated into child care program 
standards. This could include adding the standards to licensing, 
encouraging standards through QRIS, or embedding them in the 
requirements of grants or contracts for direct services. We encourage 
Lead Agencies that choose to use their quality funds for this activity 
to focus on research-based standards and work with specialists to 
develop age appropriate standards in these areas.
    10. Carrying out other activities, including implementing consumer 
education provisions, determined by the Lead Agency. We propose to 
restate statutory language at Sec.  98.53(a)(10) that carrying out 
other activities, including implementing consumer education provisions 
at Sec.  98.33, determined by the Lead Agency to improve the quality of 
child care services provided and for which measurement of outcomes 
relating to improvement of provider preparedness, child safety, child 
well-being, or entry to kindergarten is possible, are considered 
allowable quality activities This tenth allowable activity provides 
Lead Agencies the flexibility they need to invest in quality activities 
that best suit the needs of parents, children, and providers in their 
area. Over the years, Lead Agencies have been innovative in how they 
spent their quality funds, creating novel ways for improving quality of 
care, such as QRIS, that are now widely used tools for quality 
improvement. Therefore, we encourage Lead Agencies to experiment with 
the types of quality activities in which they invest. However, it is 
critical that Lead Agencies ensure that these new quality activities 
are focused and represent a smart investment of limited resources, 
which is why any activity that falls in the ``other'' category must 
have measurable outcomes that relate to provider preparedness, child 
safety, child well-being, or entry to kindergarten. Lead Agencies are 
encouraged to establish research-based measures for evaluating the 
outcomes of these quality activities. Lead Agencies will report on 
these measures and activities on an annual basis through the

[[Page 80522]]

proposed Quality Progress Report at Sec.  98.53(f).
    Quality activities not restricted to CCDF children. This proposed 
rule adds new paragraph (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. 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. This proposed provision clarifies existing policy regarding 
CCDF quality expenditures.
    Targeted funds and quality minimum. The proposed rule adds 
paragraph (e) at Sec.  98.53 to codify longstanding ACF policy that 
targeted funds for quality improvement and other activities included in 
appropriations law may not count towards meeting the minimum quality 
spending requirement, unless otherwise specified by Congress. Beginning 
in FY 2000, Congress included in annual appropriations legislation for 
CCDF discretionary funds a requirement for Lead Agencies to spend 
portions of such funds on specified quality activities. Changes to the 
minimum quality spending requirement and the addition of a set-aside 
for infant and toddler care included in reauthorization may lead to 
changes or removal of targeted funds from annual appropriations 
legislation. However, we have chosen to propose this provision, as we 
did in the 2013 NPRM, to formalize the policy, in the event that 
targeted funds are included in future appropriations.
    Reporting on quality activities. Sections 658G(c) and (d) of the 
Act require Lead Agencies to report total expenditures on quality 
activities, certify that those expenditures met the minimum quality 
expenditure requirement, and describe the quality activities funded. We 
propose to incorporate these reporting requirements into the regulation 
Sec.  98.53(f), which would require Lead Agencies to prepare and submit 
annual reports, including a quality progress report and expenditure 
report, to the Secretary, which must be made publicly available. We 
also propose to require that Lead Agencies detail the measures used to 
evaluate progress in improving the quality of child care programs and 
services, and data on the extent to which the Lead Agency has met these 
measures. Additionally, Lead Agencies would describe any changes to 
regulations, enforcement mechanisms, or other policies addressing 
health and safety based on an annual review and assessment of serious 
child injuries and any deaths occurring in child care programs serving 
children. While Lead Agencies are required to include child care 
programs serving children receiving CCDF, we encourage the inclusion of 
other regulated and unregulated child cares and family child care 
homes, to the extent possible.
    Currently, States and Territories report their categorical 
expenditures through the ACF 696 reporting form. This form is used to 
determine if the Lead Agency has met the minimum quality expenditure 
amount and is referenced at Sec.  98.65(g) in this proposed rule. We 
expect to continue to use the ACF 696 form to determine whether a Lead 
Agency has met expenditure requirements at Sec.  98.50(b), including 
both the quality set-aside and the set-aside to improve quality for 
infants and toddlers.
    We propose to capture information on the quality activities and the 
measures and data used to determine progress in improving the quality 
of child care services through a Quality Progress Report. This report 
would replace the Quality Performance Report that was an appendix to 
the Plan. The Quality Performance Report has played an important role 
in increasing transparency on quality spending. The new Quality 
Progress Report would continue to gather detailed information about 
quality activities, but include more specific data points to reflect 
the new quality activities required by the statute. The Quality 
Progress Report would be a new annual data collection and would require 
a public comment and response period as part of the Paperwork Reduction 
Act process, which will give Lead Agencies and others the opportunity 
to comment on the specifics of the report.
    As part of the Quality Progress Report, we propose to include a 
requirement that States and Territories describe any changes to 
regulations, enforcement mechanisms, or other policies addressing 
health and safety based on an annual review and assessment of serious 
injuries and any deaths occurring in child care programs serving 
children receiving child care assistance, and in other regulated and 
unregulated child cares and family child care homes, to the extent 
possible. This proposed provision complements Sec.  98.41(d)(4), 
discussed earlier in the preamble, which requires child care providers 
to report to a designated State, Territorial, or Tribal entity any 
serious injuries or deaths of children occurring in child care. States 
and Territories would consider any serious injuries and deaths reported 
by providers and other information as part of their annual review and 
assessment. This report also works in conjunction with the proposed 
requirements at Sec.  98.33(a)(1)(iv) that Lead Agencies post provider-
specific information about the number of serious injuries and deaths of 
children that occurred while in the care of that provider and at Sec.  
98.33(a)(3) that Lead Agencies post the aggregate number of deaths and 
serious injuries to their consumer education Web sites.
    This proposed provision would require Lead Agencies to list and 
describe the annual number of child injuries and fatalities in child 
care and to describe the results of an annual review of all serious 
child injuries and deaths occurring in child care. The primary purpose 
of this change is the prevention of future tragedies. Sometimes, 
incidents of child injury or death in child care are preventable. 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 appropriate responses, 
such as training needs.
    The utility of this assessment is reliant upon the Lead Agency 
obtaining accurate, detailed information about any child injuries and 
deaths that occur in child care. Therefore, ACF strongly encourages 
Lead Agencies to work with the State or Territory entity responsible 
for child care licensing in conducting the review and also with their 
established Child Death Review systems and with the National Center for 
the Review and Prevention of Child Death Review 
(www.childdeathreview.org). The National Center for the Review and 
Prevention of Child Death Review, 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 United States, 2011) 
The Child

[[Page 80523]]

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 that are usually submitted to 
the State governor and are publicly available. The National Center for 
the Review and Prevention of Child Death Review 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 also may work in conjunction with the National 
Commission to Eliminate Child Abuse and Neglect Fatalities, established 
in 2013 by the Protect Our Kids Act. (Pub. L. 112-275) 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. Although this 
Commission will only be studying a subsection of child injuries and 
deaths, it is important that the commissioners examine the issue of 
child abuse and neglect in child care settings.
Administrative Costs (Section 98.54)
    Section 658E(c)(3)(C) of the Act and regulations proposed at 
redesignated Sec.  98.54(a) prohibit Lead Agencies from spending more 
than five percent of CCDF funds for administrative activities, such as 
salaries and related costs of administrative staff and travel costs. 
Section 98.54(b) provides that this limitation applies only to States 
and Territories. (Note that a 15 percent limitation applies to Tribes 
under Sec.  98.83(g)). At Sec.  98.54(b) we propose a list of 
activities that should not be counted towards the limitation on 
administrative expenditures. As stated in the preamble to the 1998 CCDF 
Final Rule, the Conference Agreement (H.R. Rep. 104-725 at 411) that 
accompanied the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 indicated that these activities should not 
be considered administrative costs. We propose to incorporate this list 
into the regulation itself for clarity and easy reference.
    Administrative costs and sub-recipients. We propose to add new 
paragraph (e) at Sec.  98.54 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.  98.54(a) (or Sec.  98.83(g) for 
Tribes) shall be counted towards the administrative cost limit. Current 
CCDF regulations at Sec.  98.52(a), which we propose to redesignate as 
Sec.  98.54(a), provide 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.
    We have received questions from Lead Agencies to clarify whether 
activities performed through sub-recipients or contractors are subject 
to the five 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. While we do not, 
as a technical matter, separately apply the administrative cap to funds 
provided to each sub-recipient, the Lead Agency must ensure 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 limit.
    To clarify, the administrative costs cap only applies to activities 
related to administering the CCDF program in a State, Territory, or 
Tribe. It does not apply to administration of child care services in an 
individual child care center or family child care home. Any costs 
related to administration of services by a provider, even if that 
provider is being paid through a contract, are considered direct 
services. However, if a sub-recipient provides services that are part 
of administering the CCDF program, as defined at Sec.  98.54(a) as 
redesignated, then those administrative costs would count toward 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 five percent 
administrative cost limitation depends on the function or nature of the 
contract, sub-grant, or other 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 provided services to administer the CCDF program 
(e.g., for payroll services for Lead Agency 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 must develop a method for 
attributing an appropriate share of the sub-grant/contract costs to 
administrative costs. Lead Agencies should refer to the list of 
activities that are exempt from the administrative cost cap proposed at 
Sec.  98.54(b) when determining what components must be included in the 
administrative cost limit.
Restrictions on the Use of Funds (Section 98.56)
    Current CCDF regulations at Sec.  98.54(b)(1), which we propose to 
redesignate as Sec.  98.56(b)(1), indicate that States and local 
agencies, may not spend CCDF funds 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. Tribal Lead Agencies may 
request approval to use CCDF funds for construction and major 
renovation of child care facilities (Sec.  98.84).
    We propose to modify Sec.  98.54(b)(1), redesignated as Sec.  
98.56(b)(1), to indicate that 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, not prohibited. This proposed addition would formally 
incorporate ACF's long-standing interpretation into regulatory 
language.
    When we proposed this addition in the 2013 NPRM, several commenters 
requested the regulation clarify that funds may be used to ensure 
facilities comply with the on-going requirements of the Americans with 
Disabilities Act (ADA) of 1990 (42 U.S.C. 12101, et seq.) In response, 
we want to note that current CCDF regulations at Sec.  98.54(b) allow 
for funds to be expended for upgrading child care facilities to assure

[[Page 80524]]

that providers meet State and local health and safety standards, which 
may include assisting providers in meeting requirements of the ADA. 
States and Territories may use CCDF funds for minor renovations related 
to meeting the requirements of the ADA. However, funds may not be used 
for major renovation or construction for purposes of meeting the 
requirements of the ADA.
    We propose making a technical change at Sec.  96.54(e) by adding 
that CCDF may not be used as the non-Federal share for other Federal 
grant programs, unless explicitly authorized by statute.

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: Addressing the 
amount of CCDF funds the Secretary may set-aside for technical 
assistance, research and evaluation, a national toll-free hotline and 
Web site; incorporating targeted funds that have been included in 
appropriations language (but are not in the current regulations); 
inclusion of the details of required financial reporting by Lead 
Agencies; and clarifying requirements related to obligations. Lastly, 
we propose a new section on program integrity.
Availability of Funds (Section 98.60)
    Technical Assistance; Research and Evaluation; National Toll-free 
Hotline and Web site. Prior to reauthorization, the CCDBG Act allowed 
the Secretary to provide technical assistance to help Lead Agencies 
carry out the CCDF requirements. Under current regulations at Sec.  
98.60(b)(1), the Secretary may withhold one quarter of one percent of a 
fiscal year's appropriation for technical assistance.
    Reauthorization added greater specificity to the Act regarding the 
provision of technical assistance. Specifically, Section 658I(a)(3) of 
the Act requires the Secretary to provide technical assistance, such as 
technical assistance to improve the business practices of child care 
providers, (which may include providing technical assistance on a 
reimbursable basis) which shall be provided by qualified experts on 
practices grounded in scientifically valid research, where appropriate. 
Section 658I(a)(4) requires the Secretary to disseminate, for voluntary 
informational purposes, information on practices that scientifically 
valid research indicates are most successful in improving the quality 
of programs that receive CCDF assistance. Section 658G requires the 
Secretary to offer technical assistance which may include technical 
assistance through the use of grants or cooperative agreements, on 
activities funded by quality improvement expenditures. Section 
658O(a)(4) indicates that the Secretary shall reserve up to \1/2\ of 1 
percent of the amount appropriated for the CCDBG Act to support these 
technical assistance and dissemination activities.
    Section 658O(a)(5) of the Act also provides that the Secretary may 
reserve up to \1/2\ of 1 percent of the amount appropriated for the Act 
to conduct research and demonstration activities, as well as periodic 
external, independent evaluations of the impact of the CCDF program on 
increasing access to child care services and improving the safety and 
quality of child care services, using scientifically valid research 
methodologies, and to disseminate the key findings of those evaluations 
widely and on a timely basis. For over a decade, annual appropriations 
law has included a set-aside of approximately $10 million a year for 
research. The reauthorization for the first time includes research 
funding in the CCDBG Act itself.
    Over the years, this research funding has increased our knowledge 
of what child care services work best, has disseminated that knowledge 
throughout the country, and has been integral to improving the quality 
of care provided to children. It has funded numerous research projects, 
including the recent implementation of the National Survey of Early 
Care and Education to provide national estimates of utilization of 
child care and early education, parental preferences and choices of 
care, and characteristics of programs and of the teaching and care-
giving staff. This research funding will be critical in informing and 
evaluating the implementation of the reauthorized statute and these 
implementing regulations.
    In addition, section 658O(a)(3) of the Act indicates that the 
Secretary may reserve up to $1.5 million for the operation of a 
national toll-free hotline and Web site. Annual appropriations law has 
provided funding for a national hotline and Web site in prior years, 
but this funding is now authorized through the Act with an expanded 
scope and requirements. As authorized by section 658L(b), this national 
hotline and Web site will develop and disseminate publicly available 
child care consumer education information for parents, and help parents 
access safe and quality child care services in their community. The 
hotline and Web site will also allow persons to report suspected child 
abuse or neglect, or violations of health and safety requirements, 
occurring in child care settings.
    In this proposed rule at Sec.  98.60(b), we do not specify a 
particular funding amount for technical assistance, research and 
evaluation, or the national hotline and Web site. Rather, we say that 
``a portion'' of CCDF funds will be made available for these purposes. 
Because appropriations law has addressed the amount of funding for some 
of these activities in the past, we want to leave flexibility to 
accommodate any future decisions by Congress. As we indicate in the 
proposed regulatory language, funding for these activities is subject 
to the availability of appropriations, and will be made in accordance 
with relevant statutory provisions and the apportionment of funds from 
the Office of Management and Budget.
    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 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, 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 
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 third party because the funds used to issue

[[Page 80525]]

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. A third party must be a 
wholly separate organization with and cannot be subordinate or superior 
offices of the Lead Agency, or under the same governmental organization 
as the Lead Agency.
    Finally, we propose a number of technical changes. At Sec.  
98.60(d)(4)(ii), we update a reference to HHS regulations on 
expenditures and obligations to reflect new rules issued by HHS that 
implement the Office of Management and Budget's Uniform Administrative 
Requirements for Federal awards. At Sec.  98.60(d)(6), we clarify that 
the provision regarding the obligation of funds used for certificates 
applies specifically ``in instances where the Lead Agency issues child 
care certificates.'' We also 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 become 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)
    Tribal funds. To address amended section 658O(a)(2) of the Act, we 
propose to revise Sec.  98.61(c) to indicate that Indian Tribes and 
Tribal organizations will receive an amount ``not less than'' two 
percent of the amount appropriated for the Child Care and Development 
Block Grant (i.e., CCDF Tribal Discretionary Funds). Under prior law 
and regulation, Tribes received ``up to'' two percent. Under the new 
law, the Secretary may only reserve an amount greater than 2 percent 
for Tribes if two conditions are met: (1) The amount appropriated is 
greater than the amount appropriated in FY 2014, and (2) the amount 
allotted to States is not less than the amount allotted in FY 2014. It 
is important to note that reauthorization of the Act allows for a 
potential increase in the Tribal Discretionary funds, but it does not 
affect the Tribal Mandatory funds. Tribes may only be awarded up to 2 
percent of the Mandatory Funds, per Section 418(a)(4) of the Social 
Security Act (42 U.S.C. 618(a)(4)). Recognizing the needs of Tribal 
communities, ACF increased the Tribal CCDF Discretionary set-aside from 
2 percent to 2.5 percent for FY 2015, and we encourage Tribes to use 
any increased funds for activities included in reauthorization, such as 
health and safety, continuity of care, and consumer education. ACF has 
consulted with Tribes regarding future funding levels and plans to make 
that determination, taking into consideration unique Tribal needs and 
circumstances, including the need for sufficient funding to provide 
care that address culture and language in Tribal communities. We 
welcome comments on the specific, appropriate funding level for Tribes, 
but we do not intend to include that decision in the regulatory 
language in order to allow for adjustments over time as conditions 
warrant.
    Targeted funds. We propose to add Sec.  98.61(f) to reference funds 
targeted through annual appropriations law. Since FY 2000, annual 
appropriations law has required the use of specified amounts of CCDF 
funds for targeted purposes (i.e., quality, infant and toddler quality, 
school-age care and resource and referral). The reauthorized CCDBG Act 
includes increased quality spending requirements; however, we propose 
this regulatory addition in the event that Congress provide for 
additional targeted funds in the future. This proposed addition is for 
clarification so that the regulations 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 a technical change at Sec.  98.65(a) regarding the 
requirement for the Lead Agency to have an audit conducted in 
accordance with the Single Audit Act Amendments of 1996. In this 
paragraph, we propose to replace a reference to OMB Circular A-133 with 
a reference to 45 CFR part 75, subpart F, which is the new HHS 
regulation implementing the audit provisions in the Office of 
Management and Budget's Uniform Administrative Requirements for Federal 
awards.
    We propose revising Sec.  98.65(g), which currently provides that 
the Secretary shall require financial reports as necessary, to specify 
that States and Territories 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 reallocated 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, including any sub-categories of quality activities 
as required by ACF; (3) Direct services; (4) Non-direct services 
including: (i) Computerized information systems, (ii) Certificate 
program cost/eligibility determination, (iii) 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 quality expenditure requirements 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 that would require 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 quality expenditure requirement at Sec.  98.51(a). 
This reporting requirement is current practice.
    Program Integrity. We propose to add a new section Sec.  98.68 
Program Integrity, which would include requirements that Lead Agencies 
have effective procedures and practices that ensure integrity and 
accountability in the CCDF program.

[[Page 80526]]

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)(1) we propose to require Lead Agencies to 
describe in their Plan the processes that are 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. Lead Agencies should also provide training to caseworkers 
responsible for eligibility determination and redetermination and make 
efforts to simplify forms.
    We also propose regulatory language at Sec.  98.68(b)(2) that would 
require Lead Agencies to describe in their Plans the processes that are 
in place to investigate and recover fraudulent payments and to impose 
sanctions on clients or providers in response to fraud. This 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 provision 
ensures 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. We 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.
    We urge Lead Agencies to carefully consider what constitutes fraud, 
particularly in the case of individual families. In cases not involving 
fraud, recouping overpayments from low-income families is often 
administratively inefficient, and contrary to the goal of promoting 
economic stability, particularly for families already living in 
vulnerable conditions. The parents typically did not receive a cash 
benefit, but rather the child care provider received reimbursement for 
the delivery of services. We are concerned about the ramifications for 
families if Lead Agencies try to recoup overpayments that resulted from 
small changes in family circumstances, such as modest changes in hours 
worked or income. The goals of CCDF--putting families on a pathway to 
financial stability and creating better developmental opportunities for 
children--are undermined by recoupment policies that burden low-income 
families with large debts. Given limited administrative resources, Lead 
Agencies should focus program integrity efforts on the largest areas of 
risk to the program, which tend to be intentional violations and fraud 
involving multiple parties.
    At Sec.  98.68(c) we propose to require Lead Agencies to describe 
in their Plans the procedures that are in place for documenting and 
verifying that children meet eligibility criteria at the time of 
eligibility determination and redetermination. Lead Agencies are 
responsible for ensuring that all children served in CCDF are eligible 
at the time of eligibility determination or redetermination. Lead 
Agencies should, at a minimum, verify or maintain documentation of the 
child's age, family income, and require proof that parents are engaged 
in eligible activities. Income documentation may include, but is not 
limited to, 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 children receiving 
child care subsidies are eligible pursuant to requirements found at 
Sec.  98.20. While documentation and verification of eligibility is 
generally required, Section 658P(4)(b) of the Act indicates that 
compliance with the $1,000,000 limit on family assets included as part 
of eligibility requirements at Sec.  98.20(a)(2)(ii) shall be 
``certified by a member of such family.'' Therefore, the Lead Agency 
should not seek documentation or conduct verification of the amount of 
family assets beyond the family member's certification.
    Proposed Sec.  98.68(c) would clarify that because a child meeting 
eligibility requirements at the most recent eligibility determination 
or redetermination is considered eligible during the period between 
redeterminations as described in Sec.  98.21(a)(1), the Lead Agency 
shall pay any amount owed to a child care provider for services 
provided to such a child during this period in accordance with a 
payment agreement or

[[Page 80527]]

authorization. Under this provision, the Lead Agency should not attempt 
to recoup payments for such services provided during this period for a 
child's whose eligibility was correctly determined at the most recent 
determination or redetermination. Further, the regulation provides that 
any CCDF payment made during this period to such child shall not be 
considered an error or improper payment under 45 CFR part 98, subpart 
K, due to a change in the family's circumstances, as set forth at Sec.  
98.21(a).
    The program integrity efforts required by proposed Sec.  98.68 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 reduce 
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 that 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

    Section 658K of the Act requires that Lead Agencies submit 
specified monthly case-level data (submitted on a quarterly basis) and 
annual aggregate data on the children and families receiving CCDF 
services. The Act included a number of changes to the administrative 
data reporting requirements for CCDF. To address these changes and to 
improve data collection and reporting, ACF has separately proposed 
changes to the CCDF quarterly family case-level administrative data 
report (ACF-801) and the CCDF annual aggregate data report (ACF-800). 
The proposed revisions were available for two rounds of public comment 
under the Paperwork Reduction Act. Proposed revisions in this Subpart 
reflect changes made to the ACF-801 and ACF-800 forms.
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. The ACF-801 report includes a data element on the 
total monthly family income and family size used for determining 
eligibility. Current regulations as Sec.  98.71(a)(1) do not include 
family size so we propose to amend this paragraph to align the 
regulations with the reporting requirements in effect. This does not 
represent any change in how Lead Agencies currently report family 
income.
    At Sec.  98.71(a)(2) we propose to add zip code data to both the 
family and the child care provider records. These new elements will 
allow States and Territories and ACF to identify the communities where 
CCDF families and providers are located, including the type and quality 
level of providers. Sections 658E(a)(2)(M) and 658E(a)(2)(Q) of the 
CCDBG Act require States and Territories to address the needs of 
certain populations regarding supply and access to high quality child 
care services in underserved areas including areas that have 
significant concentrations of poverty and unemployment.
    Section 658K(a)(1)(E) of the Act prohibits the monthly case-level 
report from containing personally identifiable information. As a 
result, we are proposing to amend Sec.  98.71(a)(13) by deleting Social 
Security Numbers (SSNs) and instead requiring a unique identifying 
number from the head of the family unit receiving assistance and from 
the child care provider. It is imperative that the unique identifier 
assigned to each head of household be used consistently over time--
regardless of whether the family transitions on and off subsidy, or 
moves within the State or Territory. This will allow Lead Agencies and 
ACF to identify unique families over time in the absence of the Social 
Security Number (SSN). A Lead Agency may still use personally 
identifiable information, such as SSNs, for its own purposes, but this 
information cannot be reported on the ACF-801. We also remind CCDF Lead 
Agencies that, under the Privacy Act (5 U.S.C. 552a note), Lead 
Agencies cannot require families to disclose SSNs as a condition of 
receiving CCDF.
    We propose a new Sec.  98.71(a)(15) to indicate whether a family is 
experiencing homelessness based on statutory language at Section 
658K(a)(1)(B)(xi) that requires Lead Agencies to report whether 
children receiving CCDF assistance are experiencing homelessness.
    We propose a new Sec.  98.71(a)(16) to indicate whether the 
parent(s) are in the military service. The Administration has taken a 
number of actions to increase services and supports for members of the 
military and their families. This element will identify if the parent 
is currently active duty (i.e., serving full-time) in the U.S. Military 
or a member of either a National Guard unit or a Military Reserve unit. 
This data will allow Lead Agencies and ACF to determine the extent to 
which military families are accessing the CCDF program.
    We propose a new Sec.  98.71(a)(17) to indicate whether a child is 
a child with a disability. Section 658E(c)(3)(B) requires a Lead 
Agency's priority for services to include children with special needs. 
ACF is required to determine annually whether Lead Agencies use CCDF 
funds in accordance with priority for services requirements, including 
the priority for children with special needs. While Lead Agencies have 
flexibility to define ``children with special needs'' in their CCDF 
Plans, many include children with disabilities in their definitions. 
This data will help ACF determine, as required by law, whether Lead 
Agencies are in compliance with priority for service requirements. 
Additionally, the reauthorization added several other provisions 
related to ensuring children with disabilities have access to 
subsidies, and that the child care available meets the needs of these 
children and this proposed data element

[[Page 80528]]

will provide information about the extent to which the CCDF program is 
serving children with disabilities.
    We propose a new Sec.  98.71(a)(18) to add a new data element on 
the primary language spoken in the child's home, using responses that 
are consistent with data reporting requirements for the Head Start 
program. The reauthorized Act includes provisions that support services 
to English learners. Specifically, Section 658E(c)(2)(G) of the Act 
requires Lead Agencies to assure that training and professional 
development of child care providers address needs of certain 
populations to the extent practicable, including English learners. 
Under Section 658G, allowable quality activities include providing 
training and outreach on engaging parents and families in culturally 
and linguistically appropriate ways to expand their knowledge, skills, 
and capacity to become meaningful partners in supporting their 
children's positive development. Furthermore, Title VI of the Civil 
Rights Act of 1964 requires federally assisted programs to take 
reasonable steps to provide meaningful access for persons who have 
limited English proficiency. The new data element on the ACF-801 will 
allow CCDF Lead Agencies to track provision of CCDF services to 
families who speak languages other than English. By collecting 
information on the language spoken at home by families, the CCDF Lead 
Agency will be able to design outreach and consumer education materials 
that meet the needs of populations in their service areas.
    We propose a new Sec.  98.71(a)(19) to indicate for each child care 
provider currently providing services to a CCDF child, the date of the 
most recent inspection for compliance with health, safety, and fire 
standards (including licensing standards for licensed providers) as 
described in Sec.  98.42(b). Lead Agencies will need to track 
inspection dates to ensure that CCDF providers are monitored at least 
annually. If the Lead Agency uses more than one visit to check for 
compliance with these standards, the Lead Agency should report the most 
recent date on which all inspections were completed.
    Finally, we propose to add new Sec.  98.71(a)(20) to require 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 change will allow ACF and Lead Agencies to capture child-
level data on provider quality for each child receiving a child care 
subsidy. This addition is in line with one of the Act's new purposes, 
which is to increase the number and percentage of low-income children 
in high quality child care. States and Territories currently report on 
the quality of child care provider(s) based on several indicators--
including: QRIS participation and rating, accreditation status, 
compliance with State pre-kindergarten standards or Head Start 
performance standards, and other State-defined quality measure. 
However, previously, States and Territories were required to report on 
at least one of the quality elements for a portion of the provider 
population. This resulted in limited quality data, often for only a 
small portion of child care providers in a State or Territory. This 
change would require quality information for every child care provider. 
Working with States and Territories to track this data will give us a 
key indicator on the progress we are making toward the goal of 
increasing the number of low-income children in high quality care. Lead 
Agencies must also take into consideration the cost of providing higher 
quality care when setting payment rates pursuant to Sec.  
98.44(f)(iii). To ensure that the CCDF program is providing meaningful 
access to high quality care, it is essential for Lead Agencies to have 
data on the quality of CCDF providers. Current paragraph (a)(15) would 
be redesignated as paragraph (a)(21) but otherwise is unchanged.
    We propose a new Sec.  98.71(b)(5) to report the number of child 
fatalities by type of care as required by section 658K(a)(2)(F) of the 
CCDBG Act. This should include the number of fatalities occurring among 
children while in the care and facility of child care providers serving 
CCDF children (regardless of whether the child who dies was receiving 
CCDF). Current paragraph (b)(5) would be redesignated as paragraph 
(b)(6) but otherwise is unchanged.
    We are revising paragraph (c), regarding reporting requirements for 
Tribal Lead Agencies, to specify that the Tribal Lead Agency's annual 
report shall include such information as the Secretary shall require. 
We intend to revisit requirements for all Tribal Lead Agencies, 
pursuant to proposed changes in Subpart I, at a later date. Proposed 
reporting requirements will be subject to public comment under the 
Paperwork Reduction Act.

Subpart I--Indian Tribes

    This subpart addresses requirements and procedures for Indian 
Tribes and Tribal organizations applying for or receiving CCDF funds. 
This section describes provisions of Subpart I and serves as the Tribal 
summary impact statement as required by Executive Order 13175. CCDF 
currently provides funding to approximately 260 Tribes and Tribal 
organizations that, either directly or through consortia arrangements, 
administer child care programs for approximately 520 federally-
recognized Indian Tribes. Tribal CCDF programs are intended for the 
benefit of Indian children, and these programs serve only Indian 
children. 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 stability, and in promoting learning and 
development for children. In many cases, Tribal child care programs 
also emphasize traditional culture and language. Below we discuss the 
proposed Tribal CCDF framework and proposed regulatory changes.
    The CCDBG Act is not explicit in how its provisions apply to 
Tribes. ACF traditionally issues regulations to define how the law 
applies to Tribes. These proposed regulations are the result of several 
months of consultation on the new law with Tribes, as well as past 
consultations and Tribal comments on our 2013 NPRM. We heard from many 
Tribal leaders and CCDF Administrators asking for flexibility to 
implement child care programs that meet the needs of individual 
communities. The proposals included in this NPRM are designed to 
increase Lead Agency flexibility, while balancing the CCDF dual goals 
of promoting families' financial stability and fostering healthy child 
development.
    Funding. Tribal CCDF funding is comprised of two funding sources: 
(1) Discretionary Funds, authorized by the Act and annually 
appropriated by Congress; and (2) Tribal Mandatory Funds, provided 
under Section 418(a)(4) of the Social Security Act (42 U.S.C. 
618(a)(4)). Reauthorization of the Act allows for a potential increase 
in the Tribal Discretionary funds, but does not affect the Tribal 
Mandatory funds. Tribes may only be awarded up to two percent of the 
Mandatory Funds, per the Social Security Act.
    According to Section 658O(a)(2) of the Act, Tribes will receive not 
less than two percent of the Discretionary CCDF funding. The Secretary 
may reserve an amount greater than two percent for Tribes if two 
conditions are met: 1) The amount appropriated is greater than the 
amount appropriated in FY 2014, and 2) the amount allotted to States is 
not less than the amount allotted in FY 2014.
    Recognizing the needs of Tribal communities, ACF increased the 
Tribal

[[Page 80529]]

CCDF Discretionary set-aside from two percent to 2.5 percent for FY 
2015, which increased total Tribal CCDF Funding from $107 million to 
$119 million. As part of the consultations on the law (see below), ACF 
asked for Tribal input on the funding level for future years. We 
encouraged Tribes to use the increased funding on activities included 
in reauthorization, such as health and safety, continuity of care, and 
consumer education. In light of the proposals in this NPRM for how the 
law will apply to Tribes, ACF continues to ask for comment on the 
Tribal CCDF Discretionary set-aside, including the process to be used 
to determine the amount of the discretionary set-aside if the above-
listed conditions are met to reserve a greater set-aside.
    Tribal consultation. ACF is committed to consulting with Tribes and 
Tribal leadership to the extent practicable and permitted by law, prior 
to promulgating any regulation that has Tribal implications. As this 
proposed rule has been developed, ACF has engaged with Tribes through 
multiples means. The requirements in this proposed rule were informed 
by past consultations, listening sessions, and meetings with Tribal 
representatives on related topics. Starting in early 2015, we began a 
series of formal consultations, conducted in accordance with the ACF 
Tribal Consultation Policy (76 FR 55678) with Tribal leaders to 
determine how the provisions in the Act apply to Tribes and Tribal 
organizations. Tribal CCDF administrators and staff were also invited 
to attend. In addition to an informal listening session in February, 
from March to May, OCC held three formal conference calls and an in-
person consultation session with Tribal leaders and Tribal CCDF 
administrators to discuss the impact of reauthorization on Tribes. 
Tribes and Tribal organizations were informed of these consultations 
and conference calls through letters to Tribal leaders. Much of the 
testimony and dialogue focused on the vast differences among Tribes and 
Tribal organizations. This proposed rule was informed by these 
conversations and continues to balance flexibility for Tribes with the 
need to ensure accountability and quality child care for children.
    102-477 Programs. We 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 
publishes 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 Pub. L. 102-477 programs.
    Dual Eligibility of Indian Children. Census data indicates over 60 
percent of American Indian and Alaskan Native families do not reside on 
reservations or other Native lands; therefore, significant numbers of 
eligible Indian children and families are served by State Lead 
Agencies. Eligible Indian children who reside in Tribal service areas 
continue to have dual eligibility to receive child care services from 
either the State or Tribal CCDF program in accordance with existing 
regulation at Sec.  98.80(d). Section 658O(c)(5) of the Act mandates 
that, for child care services funded by CCDF, the eligibility of Indian 
children for a Tribal program does not affect their eligibility for a 
State program.
    Tribal CCDF Framework. We propose that Tribes shall be subject to 
the CCDF requirements in Part 98 and 99 based on the size of their CCDF 
allocation. CCDF Tribal allocations vary from less than $25,000 to over 
$12 million. We recognize that Tribes receiving smaller CCDF grants may 
not have sufficient resources or infrastructure to effectively operate 
a program that complies with all CCDF requirements. Therefore, we are 
proposing three categories of CCDF Tribal grants, with thresholds 
established by the Secretary: Large allocations, medium allocations, 
and small allocations. Each category is paired with different levels of 
CCDF requirements, with those Tribes receiving the largest allocations 
expected to meet most CCDF requirements. Tribes receiving smaller 
allocations are exempt from specific provisions in order to account for 
the size of the grant awards (see table below).

------------------------------------------------------------------------
        Large allocations         Medium allocations   Small allocations
------------------------------------------------------------------------
 Subject to the majority   Allowed     Exempt
 of CCDF requirements.             the same            from the majority
 Exempt from some          exemptions as the   of CCDF
 requirements, including:          large allocation    requirements,
 Consumer education Web site,      category.           including those
 use of grants or contracts, the   Exempt      exemptions for
 requirement to have licensing     from operating a    large and medium
 for child care services, and      certificate         allocation
 market rate survey or             program..           categories.
 alternative methodology (but                          Must
 still required to have rates                          spend their funds
 that support quality)..                               in alignment with
 Subject to the                                CCDF goals and
 monitoring requirements, but                          purposes.
 allowed the flexibility to                            Only
 propose an alternative                                subject to:
 monitoring methodology in their                       If
 Plan..                                                providing direct
 Subject to the                                services: The
 background check requirement to                       health and safety
 check other adults in a family                        requirements, the
 child care home, but allowed to                       monitoring
 request an exemption in their                         requirements, and
 Plan..                                                the background
                                                       check
                                                       requirements;
                                                       Quality
                                                       spending
                                                       requirements;
                                                       The 15%
                                                       admin cap;
                                                       Fiscal,
                                                       audit, and
                                                       reporting
                                                       requirements; and
                                                       Any other
                                                       requirement
                                                       defined by the
                                                       Secretary.
                                                       Submit an
                                                       abbreviated Plan.
------------------------------------------------------------------------

    ACF proposes that grants over $ 1 million would be considered large 
allocations. In FY 2015, this category would include 18 Tribes. Grants 
between $1 million and $250,000 would be considered medium allocations. 
For FY 2015, this category would include 79 Tribes. Grants of less than 
$250,000 would be considered small allocations. In FY 2015, this 
category would include 162 Tribes. We are not proposing to set the 
allocation thresholds through regulation so that they may be updated or 
revised at a later date through consultation and notice. We discuss the 
exemptions further below.
    In keeping with the goals of this NPRM and the intent of the law, 
ACF believes that ensuring the health and safety of children in child 
care and promoting quality to support child

[[Page 80530]]

development are of the utmost importance. As such, we are proposing 
that all Tribes providing direct services be subject to the health and 
safety requirements at Sec.  98.41 (as well as the monitoring and 
background check requirements, discussed later in this preamble) and 
that all Tribes be required to meet the quality spending requirements 
at Sec. Sec.  98.50(b) and 98.53.
    Health and Safety. We propose that all Tribes providing direct 
services are required to meet the requirements at Sec.  98.41(a), which 
include requirements around a list of health and safety topics; health 
and safety training; setting group size limits and ratios; and 
compliance with child abuse reporting requirements. These health and 
safety requirements create a baseline essential to protecting children 
in child care. (In addition, as discussed below, we propose that Tribes 
be subject to the immunization requirements that previously only 
applied to States and Territories.)
    The Act, at Section 658O(c)(2)(D), continues to require HHS to 
develop minimum child care standards for Indian Tribes and Tribal 
organizations receiving funds under CCDF. After three years of 
consultation with Tribes, Tribal organizations, and Tribal child care 
programs, health and safety standards were first published in 2000. 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 met. Many 
Tribes already exceed the minimum Tribal standards issued by HHS, and 
some have used the minimum standards as the starting point for 
developing their own more specific standards.
    These minimum standards will need to be revised and updated to 
align with new requirements of the law and this proposed rule. In the 
preamble to Subpart E, ACF recommends that Lead Agencies consult the 
recently published Caring for Our Children Basics (CfoC Basics) for 
guidance on establishing health and safety standards. CfoC Basics 
represents a baseline for health and safety standards and would fulfill 
the need for updated HHS minimum standards for Tribes. However, before 
updating or replacing the HHS minimum standards, ACF is committed to 
consulting with Tribes. We welcome comments on whether the CfoC Basics 
should replace the current HHS minimum standards as the new health and 
safety guidelines for Tribes.
    Quality improvement activities. We propose that all Tribes and 
Tribal organizations be subject to the quality spending and quality 
improvement activities requirements described at Sec. Sec.  98.50(b) 
and 98.53. Current regulations at Sec.  98.83(f) exempt Tribes and 
Tribal organizations with smaller allocations (total CCDF allocations 
less than $500,000) from the requirement to spend four percent on 
quality activities. We propose to amend Sec.  98.83(f) by deleting 
paragraph (f)(3) so that all Tribes, regardless of their allocation 
size, are now required to meet quality spending requirements included 
at Sec.  98.50(b). The law requires Lead Agencies to spend increasing 
minimum amounts on quality activities, reaching nine percent in 2020. 
In addition, Lead Agencies must spend at least three percent on quality 
activities to support infants and toddlers.
    In the 2013 NPRM, we also proposed a similar change to make Tribal 
grantees, regardless of size, meet the quality spending requirements 
and we received a positive response from commenters. A primary goal of 
this proposed rule is to promote high quality child care to support 
children's learning and development. We want to ensure that Indian 
children and Tribes benefit from the increased recognition of the 
importance of high quality child care.
    Because the quality requirement is applied as a percentage of the 
Tribe's CCDF expenditures, the amount required will be relatively 
small. However, we are requesting comments on this provision, in 
particular as it relates to Tribes that receive small allocations.
    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. Most Tribal Lead Agencies are likely already engaged in 
activities that would count as quality improvement. We will provide 
technical assistance to help Tribes identify current activities that 
may count towards meeting the quality spending requirement, as well as 
appropriate new opportunities for quality spending.
    The revisions to Sec.  98.53 (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, given the unique 
circumstances of Tribal communities. However, Tribes may implement 
selected components of the quality framework at Sec.  98.53, such as 
training for caregivers, teachers, and directors or grants to improve 
health and safety.
    The revisions to Sec.  98.53 in no way restrict Tribes' ability to 
spend CCDF quality dollars on a wide range of quality improvement 
activities. Under existing Sec.  98.53(a), 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: Child care resource and referral activities, consumer 
education, grants or loans to assist providers, training and technical 
assistance for providers and caregivers, improving salaries of 
caregivers, teachers and directors, monitoring or enforcement of health 
and safety standards, and other activities to improve the quality of 
child care, including native language lesson and cultural curriculum 
development. 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.
    We also are working with Tribes on creating a culturally 
appropriate quality vision and framework specifically for Tribes. The 
framework will include a range of quality improvement activities, 
including activities that integrate native culture and language into 
child care, in order to encompass both large and small Tribes. We look 
forward to working with Tribes on this quality framework, and we will 
provide opportunities for Tribes to give feedback.
    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.
General Procedures and Requirements (Section 98.80)
    Section 98.80 provides an introduction to the general procedures 
and requirements for CCDF Tribal grantees. As discussed above, ACF 
proposes to modify Sec.  98.80(a) so that

[[Page 80531]]

Tribes are subject to CCDF requirements based on the size of their CCDF 
allocation.
Application and Plan Procedures (Section 98.81)
    Section 98.81 addresses the application and Plan procedures for 
Tribal CCDF grantees, and much of the new proposed regulatory language 
in this section, particularly the Plan exemptions listed at Sec. Sec.  
98.81(b)(6) and (9), reflects the changes made in Sec.  98.80 (General 
procedures and requirements) and Sec.  98.83 (Requirements for Tribal 
programs). These exemptions will be discussed in greater detail later 
in the preamble. Tribes receiving large or medium allocations will 
continue to fill out a traditional Tribal CCDF Plan, proposed at Sec.  
98.81(b), and Tribes receiving small allocations will fill out an 
abbreviated Plan, proposed at Sec.  98.81(c). The Plan periods will now 
be three years, as required by the new statute.
    Tribal Median Income. At Sec.  98.81(b)(1), the regulations require 
that the Plan must include the basis for determining family 
eligibility. ACF proposes at Sec.  98.81(b)(1)(i) to allow a Tribe, 
whose Tribal Median Income (TMI) is below a level established by the 
Secretary, the option of considering any Indian child in the Tribe's 
service area to be eligible to receive CCDF funds, regardless of the 
family's income, work, or training status. We believe that this 
flexibility allows Tribes to create opportunities to align CCDF 
programs with other Tribal early childhood programs, including Tribal 
home visiting, Early Head Start, and Head Start. We are considering 
setting the threshold at 85 percent of State median income (SMI) and 
would welcome comment on whether this is an appropriate threshold. 
Using 85 percent of SMI mirrors other thresholds set by the CCDBG law 
and would allow the majority of CCDF Tribes to exercise this option, if 
they choose. We are choosing not to set this threshold through 
regulation to allow the level to be updated in the future though 
consultation and notice.
    We also propose to move the requirement at Sec.  98.80(f) to Sec.  
98.81(b)(1)(ii). Under this revised provision, if a Tribe chooses not 
to exercise the option at Sec.  98.81(b)(1)(i) or has a higher TMI, the 
Tribe would need to determine eligibility for services in accordance 
with Sec.  98.20(a)(2). Tribes will continue to have the option of 
using either 85 percent of SMI or 85 percent of TMI.
    Payment Rates. ACF proposes to exempt all Tribes from the 
requirement to use a market rate survey or alternative methodology to 
set provider payment rates (discussed later in this preamble). However, 
at Sec.  98.81(b)(5), we propose that Plans submitted by Tribes 
receiving large or medium allocations include a description of the 
Tribe's payment rates; how they are established; and how they support 
quality, and where applicable, cultural and linguistic appropriateness. 
While market rate surveys or alternative methodologies do not 
necessarily make sense for Tribal communities, it is important for 
Tribal Lead Agencies to have rates sufficient to provide equal access 
to the full range of child care services, including high quality child 
care.
    Plan Exemptions. At Sec.  98.81(b)(6), ACF proposes three new Plan 
exemptions for Tribes receiving large or medium allocations. Such 
Tribal Lead Agencies would be exempt from including in their Plans 
descriptions of the market rate survey or alternative methodology; the 
licensing requirements applicable to child care services; and the early 
learning guidelines. These requirements should not apply to Tribal 
communities.
    At Sec.  98.81(b)(9), ACF proposes that Plans for Tribes receiving 
medium allocations would be exempt from the requirement to include a 
description of the child care certificate program, unless the Tribe 
choses to include those services. This exemption corresponds with the 
exemption in Sec.  98.83 discussed later in the preamble.
    Plans for Tribes Receiving Small Allocations. ACF proposes to 
exempt Tribes receiving small allocations (less than $250,000) from the 
majority of CCDF requirements. These Tribes would only be subject to 
core CCDF requirements. As such, we propose at Sec.  98.81(c) that 
these Tribes fill out an abbreviated CCDF Plan, tailored to these core 
requirements. A shorter Plan application is more aligned with the level 
of funding that these Tribes receive. All of the Plan exemptions 
described in Sec.  98.81(b) for Tribes receiving large or medium 
allocations will also apply to Tribes receiving small allocations. ACF 
will release a Program Instruction defining the elements that will be 
included in the abbreviated Plan for Tribes receiving small 
allocations.
Coordination (Section 98.82)
    Section 98.82 currently requires Tribal Lead Agencies to coordinate 
with State CCDF programs and with other Federal, State, local, and 
Tribal child care and child development programs. Tribal Lead Agencies 
must also coordinate with the entities listed at Sec. Sec.  98.12 and 
98.14. We propose to add language at Sec.  98.82(a) that would require 
Tribal Lead Agencies to coordinate the development of the Plan and the 
provision of services with the entities listed at Sec. Sec.  98.12 and 
98.14. This addition does not change existing policy; it serves as a 
clarification of the regulatory language.
    The regulations at Sec.  98.82(a) currently require Tribal Lead 
Agencies to coordinate with the entities described at Sec.  98.14 in 
the development of their Plans. This list includes newly added child 
care licensing, Head Start collaboration, State Advisory Councils on 
Early Childhood Education and Care or similar coordinating bodies, 
statewide afterschool networks, emergency management and response, 
CACFP, services for children experiencing homelessness, Medicaid, and 
mental health services. While we are not making any Tribally-specific 
changes to Sec. Sec.  98.14 or 98.82, we do recognize that Tribes may 
not always have access or connections with these entities. Many of 
these agencies, especially the State Advisory Councils and the 
statewide afterschool networks, interact primarily on the State level. 
Others, including child care licensing and Head Start, may not exist in 
the Tribe's service area.
    Tribes should coordinate with these agencies to the extent 
possible. The Tribal Plan pre-print will ask Tribes to describe their 
efforts to coordinate with all the entities listed at Sec.  98.14, but 
if coordination is not applicable, then the Tribes may simply say so in 
their Plans. We will support Tribal Lead Agency efforts to coordinate 
with these entities and plan to provide technical assistance to both 
Tribes and States to promote Tribal access and participation.
    Tribes should also take note of two new provisions in the CCDBG 
law, included in this NPRM, which require State coordination with 
Tribes. First, at Sec.  98.10(f), State Lead Agencies must collaborate 
and coordinate with the Tribes, at the Tribes' option, in a timely 
manner in the development of the State Plan. We encourage States to be 
proactive in reaching out to the Tribal officials for collaboration.
    Second, State Lead Agencies must have training and professional 
development in place designed to enable child care providers to promote 
the social, emotional, physical, and cognitive development of children 
and to improve the knowledge and skills of child care caregivers, 
teachers, and directors in working with children and their parents. 
Section 98.44(b)(2)(vi) would require this training and professional 
development be accessible to caregivers, teachers, and directors of

[[Page 80532]]

CCDF child care providers supported through Indian Tribes or Tribal 
organizations. Section 98.44(b)(2)(iv) would provide that the training 
and professional development should also, to the extent practicable, be 
appropriate for Native American children. Tribes should work with 
States to help ensure that these statutory requirements are met. Tribal 
CCDF programs should also coordinate with other childhood development 
programs located in the Tribal service area, including any programs 
that support the preservation and maintenance of Native languages.
Requirements for Tribal Programs (Section 98.83)
    Section 98.83 addresses specific requirements for Tribal CCDF 
programs. In recognition of the unique social and economic 
circumstances in many Tribal communities, Tribal Lead Agencies are 
exempt from a number of CCDF requirements. At paragraph (d)(1), we 
propose to exempt all Tribes, regardless of allocation size, from the 
requirements for licensing applicable to child care services at Sec.  
98.40; a consumer education Web site at Sec.  98.33(a); the market rate 
survey or alternative methodology and the related requirements at Sec.  
98.45(b)(2); the use of some grants or contracts at Sec.  98.50(a)(3); 
the professional development framework at Sec.  98.44(a); and the 
quality progress report at Sec.  98.53(f). Tribes that receive medium 
or small CCDF allocations are also exempt from the requirements of 
operating a certificate program at Sec.  98.30(a) and (d). Tribes that 
receive small allocations would be exempt from the majority of the new 
CCDF requirements to give these Tribes more flexibility in how they 
spend their CCDF funds. Finally, several provisions would apply to all 
Tribes providing direct services, unless the Tribe describes an 
alternative in its Plan: monitoring of child care providers and 
facilities at Sec.  98.42(b)(2) and conducting background checks on 
other individuals residing in family child care homes at Sec.  
98.43(a)(2)(ii)(C).
    We propose to remove previously-existing language on immunizations 
so that Tribes must now assure that children receiving CCDF services 
are age-appropriately immunized. We also propose to add regulatory 
language to add clarity to the previously-existing exemptions; this 
language does not change the previous policy. ACF also proposes two new 
paragraphs at (d)(2) and (d)(3) giving Tribes more flexibility around 
the monitoring inspections requirements and the requirement for 
comprehensive background checks on other individuals in family child 
care homes. At paragraph (e), ACF proposes to exempt Tribes receiving 
medium or small CCDF allocations from the requirement to operate a 
certificate program. At paragraph (f), ACF proposes more flexibility 
for Tribes receiving small allocations by only subjecting them to core 
CCDF requirements.
    Service Area. We propose a technical addition at Sec.  98.83(b) to 
clarify that Tribes (with the exception of Tribes located in Alaska, 
California, or Oklahoma) must operate their CCDF programs on or near 
Indian reservations. ACF has long-standing policy guidance that 
clarifies that a Tribe's service area must be ``on or near the 
reservation,'' and therefore must be within a reasonably close 
geographic proximity to the delineated borders of a Tribe's 
reservation. Tribes that do not have reservations must establish 
service areas within reasonably close geographic proximity to the area 
where the Tribe's population resides. ACF will not approve an entire 
State as a Tribe's service area. This policy clarification does not 
impact States' jurisdiction over child care licensing. Tribal service 
areas are also addressed in the regulations at Sec.  98.81(b)(2)(ii), 
and the same policy guidance applies.
    Licensing for Child Care Services. ACF proposes to exempt all 
Tribes from the requirement to have in effect licensing requirements 
applicable to child care services at Sec.  98.40. This is a pre-
existing statutory and regulatory requirement that was re-affirmed by 
the reauthorized CCDBG law. The majority of CCDF Tribal grantees do not 
have their own licensing requirements. Many Tribes certify in their 
Plans that they have adopted their State's licensing standards, but 
these requirements may not be appropriate for Tribal communities. In 
addition, we believe that requiring Tribes to have licensing 
requirements is counter to t Section 658O(c)(2)(D) of the Act, which 
states, ``In lieu of any licensing and regulatory requirements under 
State or local law, the Secretary, in consultation with Indian Tribes 
and Tribal organizations, shall develop minimum child care standards 
that shall be applicable to Indian Tribes and Tribal organization 
receiving assistance under this subchapter.'' Tribes may instead use 
the voluntary guidelines issued by HHS, described earlier in the 
preamble.
    Consumer Education Web site. We propose to exempt all Tribes from 
the requirement for a consumer education Web site at Sec.  98.33(a). We 
propose this exemption due to the administrative cost of building a Web 
site, as well as the lack of reliable high-speed internet in some 
Tribal areas. 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. However, where appropriate, 
we encourage Tribes to implement Web sites for consumer education and 
to work with entities, such as States or child care resource and 
referral agencies that maintain provider-specific information on a Web 
site. For example, in cases where Tribal child care providers are 
licensed by the State, information about compliance with health and 
safety requirements should be available on the State's Web site.
    Market Rate Survey or Alternative Methodology. At Sec.  
98.83(d)(1)(iv), we propose to exempt all Tribes from conducting a 
market rate survey or alternative methodology and all of the related 
requirements. In many Tribal communities, the child care market is 
extremely limited. Also, many Tribes are located in rural, isolated 
areas and conducting a market rate survey or alternative methodology 
would be difficult. Furthermore, we have proposed at Sec.  98.83(f) 
that Tribes receiving CCDF allocations of $1 million or less (medium 
and small allocations) be exempt from operating a certificate program, 
and therefore, these Tribes are not required to offer the full range of 
child care services. For these Tribes especially, market rate surveys 
are not relevant. Despite exempting Tribes from these requirements, we 
believe that setting payment rates to support quality is essential to 
providing equal access to child care services. Tribes receiving large 
or medium allocations, will be asked in their Plans how rates were set 
and how these rates support quality.
    Grants or Contracts. We propose to exempt all Tribes from the 
requirement at Sec.  98.50(a)(3), which 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 shortages in the supply of high 
quality care. We recognize that some Tribes, particularly those 
receiving smaller CCDF grant allocations, may lack the resources 
necessary to provide services through grants or contracts. 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 (e.g., building 
supply, strengthening quality). The provision of

[[Page 80533]]

services by Tribal Lead Agencies through certificates is already 
separately addressed at Sec.  98.83(f) and is discussed in this 
preamble further below.
    Training and Professional Development Framework. We propose to 
exempt Tribes from the requirement at Sec.  98.44(a) to describe in 
their CCDF Plan the State framework for professional development. This 
requirement is State-specific and not relevant for Tribes. We note, 
however, as required by the law at Section 658E(c)(2)(G)(ii)(IV), 
ongoing State professional development must be accessible to caregivers 
supported through Indian Tribes and Tribal organizations. The trainings 
must also be, to the extent practicable, appropriate for populations of 
Native American and Native Hawaiian children. Tribes are encouraged to 
work with States to help States meet these statutory requirements.
    Quality Progress Report. We propose that Tribal Lead Agencies be 
exempt from completing the Quality Progress Report (QPR) at Sec.  
98.53(f), which is a revised version of the former Plan appendix, the 
Quality Performance Report. In the future, we may consider adding 
additional questions on quality improvement activities to the Tribal 
Plan, ACF-700 or ACF-696T, but we will discuss these changes with 
Tribes and provide opportunity for public comment.
    The QPR includes a report describing any changes to State 
regulations, enforcement mechanisms, or other policies addressing 
health and safety based on an annual review and assessment of serious 
child injuries and any deaths occurring in child care programs. Under 
this provision, Tribes are exempt from completing the QPR, including 
the review and assessment of serious injuries and deaths. 
Notwithstanding, we encourage Tribal Lead Agencies to complete a 
similar process to the one described in the QPR and to review the 
reported serious injuries or deaths and make policy or programmatic 
changes that could potentially save a child's life.
    Immunization requirement. Consistent with the proposed rule's 
overall focus on promoting high quality care that supports children's 
learning and development, we propose to revise Sec.  98.83(d) to extend 
coverage of CCDF health and safety requirements related to immunization 
so that the requirements would apply to Tribes, whereas previously 
Tribes were exempt. At the time the current regulations were issued in 
1998, minimum Tribal health and safety standards had not yet been 
developed and released by HHS. 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, Tribes would 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, a Tribal Lead Agency 
has 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.
    Monitoring Inspections. We propose that all Tribes providing direct 
services, regardless of allocation size, be subject to the monitoring 
requirements at Sec.  98.42(b)(2), which reflect the requirements in 
the law. However, a Tribal Lead Agency may describe an alternative 
monitoring approach in its Plan, subject to ACF approval, and must 
provide adequate justification for the approach. Section 658E(c)(2)(K) 
of the Act requires at least one pre-licensure inspection and annual 
unannounced monitoring for licensed child care providers. License-
exempt providers are subject to annual monitoring on health, safety, 
and fire standards. The proposed rule would also allow Lead Agencies to 
use differential monitoring strategies and to develop alternate 
monitoring requirements for care provided in the child's home.
    In our 2013 NPRM, we also proposed that Tribal Lead Agencies would 
be subject to monitoring requirements, and we received many comments 
asking for more flexibility for Tribes. As with the 2013 NPRM, we 
believe that the monitoring requirements in the law and the additional 
requirements proposed in this NPRM may not be culturally appropriate 
for some Tribal communities. By allowing Tribes to describe alternative 
monitoring strategies in their Plans, we wanted to give Tribal Lead 
Agencies some flexibility in determining which monitoring requirements 
should apply to child care providers. Tribes cannot use this 
flexibility to bypass the monitoring requirement altogether, but may 
introduce a monitoring strategy that is culturally appropriate for 
their communities. Tribes may also use this flexibility to partner with 
other agencies that may already be conducting monitoring visits, such 
as State Lead Agencies, the Indian Health Service, or the Child and 
Adult Care Food Program. Coordinating and partnering with existing 
agencies can help lessen the financial and administrative burden.
    Comprehensive Background Checks. We propose that Tribal Lead 
Agencies be subject to the background check requirements at Sec.  
98.43, including the requirement for comprehensive background checks on 
other individuals residing in family child care homes. A comprehensive 
background check includes an FBI fingerprint check; a search of the 
National Crime Information Center; and a search of the following 
registries in the State where the child care staff member lives and 
each State where the staff member has lived for the past five years: 
State criminal registry using fingerprints, state sex offender 
registry, and the state child abuse and neglect registry, as described 
at Sec.  98.43(b).
    We note that in order to conduct an FBI fingerprint check using 
Next Generation Identification, Lead Agencies must act under an 
authority granted by a Federal statute. States, as described in subpart 
E, may choose among three federal laws that grant authority for FBI 
background checks for child care staff. These three statutes are: the 
CCDBG Act, Public Law 92-544, and the National Child Protection Act/
Volunteers for Children Act. These three laws give States the authority 
to conduct FBI fingerprint checks, but none of them specifically grant 
that same authority to Tribes. In order for Tribes to conduct FBI 
background checks, they may use the Indian Child Protection and Family 
Violence Prevention Act, which to date only covers those individuals 
who are being considered for employment by the Tribe in positions that 
have regular contact with, or control over, Indian

[[Page 80534]]

children. Otherwise, Tribes will need to work with States to complete 
the FBI background check using a State's authority under an approved 
Public Law 92-544 statute or under procedures established pursuant to 
the National Child Protection Act/Volunteers for Children Act (NCPA/
VCA). We understand that this may present difficulties for Tribes, 
especially for those that do not currently have a partnership with the 
State. We believe that comprehensive background checks are important 
for ensuring children's health and safety in child care. We are asking 
for comments on Tribes' experiences obtaining FBI fingerprint checks.
    ACF does want to offer some flexibility for Tribes around the 
background check requirements. We are proposing at Sec.  98.83(d)(3) to 
allow Tribes to use an alternative approach to conducting full 
background checks on other individuals residing in a family child care 
home if the Tribal Lead Agency provides an adequate justification in 
its Plan, subject to ACF approval. We have heard through our 
consultation sessions that many Tribal families reside in households 
with several generations. Requiring all members of the household to 
complete all five components of a comprehensive background check could 
be burdensome for the family and for the Tribal Lead Agency. Therefore, 
we are proposing to allow a Tribal Lead Agency to use an alternative 
strategy to conduct background checks on other individuals in a family 
child care home. ACF expects that Tribal Lead Agencies will conduct 
some components of a background check for these individuals. In its 
justification, a Tribe must describe how the alternative background 
check strategy is appropriately comprehensive and protects the health 
and safety of children in care.
    Certificate Program. We propose at Sec.  98.83(e) that Tribes that 
receive medium or small allocations 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 certificate program. Tribes that receive large allocations will 
still be required to offer all categories of care through a certificate 
program.
    Under current regulations, Tribes receiving smaller CCDF grants are 
exempt from operating a certificate program. The dollar threshold for 
determining which Tribes are exempt from operating a certificate 
program is established by the Secretary. It was set at $500,000 in 1998 
and has not changed. By proposing to exempt Tribes receiving medium or 
small allocations from operating a certificate program, we are 
effectively proposing to raise the dollar threshold to $1 million. As 
discussed earlier, we are proposing to consider medium allocations to 
be grants between $250,000 and $1 million and small allocations to be 
grants of less than $250,000. These proposals would expand the number 
of Tribes that are exempt from operating a certificate program. We 
believe that this higher threshold will allow Tribes with smaller CCDF 
allocations to focus on implementing the new requirements proposed in 
this NPRM, specifically concentrating on the health and safety and 
quality requirements.
    Small Allocations Requirements. ACF believes that the Tribes 
receiving the smallest CCDF allocations should not be subject to the 
same requirements as the Tribes receiving larger grant awards. ACF is 
proposing to exempt Tribes receiving small allocations (less than 
$250,000) from the majority of the CCDF requirements to give these 
Tribes more flexibility in how they spend their CCDF funds and to focus 
these funds on health and safety and quality spending. At Sec.  
98.83(f), we propose that Tribal Lead Agencies receiving small 
allocations spend their CCDF funds in alignment with the goals and 
purposes of CCDF as described in Sec.  98.1. We propose that Tribes 
that provide direct services comply with the health and safety 
requirements, monitoring requirements; background checks requirements, 
and quality spending requirements. The proposed language at Sec.  
98.83(f) defines the only CCDF provisions that would apply to Tribes 
with small allocations.
    We believe that this proposal allows Tribes with small allocations 
the flexibility to spend their CCDF funds in ways that would most 
benefit their communities. Tribes could choose to spend all of their 
CCDF funds on quality activities, or they could invest all of their 
funds into a Tribally-operated center. If a Tribe that receives a small 
allocation chooses to spend funds on direct services, then the Tribe 
would be required to meet the health and safety requirements, including 
the monitoring and background check requirements, as discussed earlier. 
Tribes that receive small allocations would also continue to be 
required to meet the fiscal, audit, and reporting requirements in the 
rule. To align with these limited CCDF requirements, Tribes with small 
allocations will complete an abbreviated Plan, as discussed earlier. 
This proposal balances increased flexibility with accountability, and 
ACF encourages these Tribes to focus their CCDF spending on ensuring 
health and safety and quality for children in child care.
    Base amount. Beginning with FY 2017, OCC is proposing to increase 
the base amount from $20,000 to $30,000 to account for inflation that 
has eroded the value of the base amount since it was originally 
established in 1998. Each year, Tribal CCDF grantees' CCDF allocations 
are based on a Discretionary base amount, as well as a Discretionary 
and Mandatory amount based on the number of children submitted in the 
child count.
    OCC first notified Tribes of our proposal to increase the base 
amount through our 2013 NPRM. The base amount is not included in 
regulation, and does not require regulatory change. However, OCC wanted 
to give Tribes the opportunity to comment on this change through the 
public comment period associated with the proposed rule, and the 
comments received were largely supportive.
    The increase in the Discretionary base amount will result in a 
lower Discretionary per child amount than would occur without the 
change in base amount. An increase in the base amount benefits smaller 
Tribes and consortia, and OCC hopes it will encourage capacity 
building, especially in Tribal consortia. Larger Tribes will receive 
less funding then they would have in the absence of this change; 
however, this impact could largely be offset by the overall increase in 
CCDF funding for Tribes and by an increase in the Tribal Discretionary 
set-aside, described above. Therefore, OCC anticipates stable or 
increased funding for most Tribal Lead Agencies.
Construction and Renovation of Child Care Facilities (Section 98.84)
    Section 98.84 currently describes the procedures and requirements 
around Tribal construction or renovation of child care facilities. The 
CCDBG Act reaffirmed Tribes' ability to request to use CCDF funds for 
construction or renovation purposes. Section 658O(c)(6)(C) of the Act 
continues to disallow the use of CCDF funds for construction or 
renovation if it will result in a decrease in the level of child care 
services. However, the law now allows for a waiver for this clause if 
the decrease in the level of child care services is temporary. A Tribe 
will also need to submit a plan to ACF that demonstrates that after the 
construction or renovation is completed the level of

[[Page 80535]]

child care services will increase or the quality of child care services 
will improve. In order for a Tribe to use CCDF funds on construction or 
renovation while decreasing the level of direct services, the Tribe 
must certify that, after the construction is completed, the number of 
children served will increase or the quality of care will increase. ACF 
added this language from the law to the regulations at Sec.  
98.84(b)(3).
    ACF also issued a Program Instruction to describe the application 
process for using CCDF funds on construction or renovation. This 
Program Instruction will also be updated to reflect the new 
requirements in the law. The Program Instruction expands upon and 
describes the statutory and regulatory requirements. In the event that 
the CCDF regulations do not address a specific issue, then we will look 
to Head Start and HHS's generally-accepted construction and renovation 
guidelines.

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

    Subpart J contains provisions regarding HHS monitoring of Lead 
Agencies to ensure compliance with CCDF requirements, processes for 
examining complaints and for determining non-compliance, and penalties 
and sanctions for non-compliance.
Penalties and Sanctions (Section 98.92)
    Current regulations allow HHS to impose penalties and other 
appropriate sanctions for a Lead Agency's failure to substantially 
comply with the Act, the implementing regulations, or the Plan. Such 
penalties and sanctions may include the disallowance or withholding of 
CCDF funds in accordance with Sec.  98.92. These regulations remain in 
effect.
    In addition, we propose to add new provisions at Sec.  98.92(b) in 
accordance with two penalties added by the reauthorization of the Act. 
New section 658E(c)(3)(B)(ii) requires HHS to annually prepare a report 
that contains a determination about whether each Lead Agency uses CCDF 
funding in accordance with priority for services provisions. These 
priority provisions are reiterated at Sec.  98.44(a) of these proposed 
regulations, and require Lead Agencies to give priority to children 
with special needs, children from families with very low incomes, and 
children experiencing homelessness. The Act requires HHS to impose a 
penalty on any Lead Agency failing to meet the priority for services 
requirements. We propose to implement this new penalty through a new 
regulatory provision at Sec.  98.92(b)(3). In accordance with the 
statute, the proposed rule provides that a penalty of not more than 
five percent of the CCDF Discretionary Funds shall be withheld if the 
Secretary determines that the Lead Agency has failed to give priority 
for service in accordance with Sec.  98.44. This penalty will be 
withheld no earlier than the first full Fiscal Year following the 
determination to apply the penalty, and the penalty will not be applied 
if the Lead Agency corrects its failure to comply and amends its CCDF 
Plan within six months of being notified of the failure. The Secretary 
may waive a penalty for one year in the event of extraordinary 
circumstances, such as a natural disaster.
    The second new penalty was added by section 658H(j)(3) of the Act 
and is related to the new criminal background check requirements. We 
propose to implement this penalty through new regulatory language at 
Sec.  98.92(b)(4). In accordance with the statute, the proposed rule 
provides that a penalty of not more than five percent of the CCDF 
Discretionary Funds for a Fiscal Year shall be withheld if the 
Secretary determines that the State, Territory, or Tribe has failed to 
comply substantially with the criminal background check requirements at 
Sec.  98.43. We propose to add that this penalty will be withheld no 
earlier than the first full Fiscal Year following the determination to 
apply the penalty, and this penalty will not be applied if the State, 
Territory or Tribe corrects the failure before the penalty is to be 
applied or if it submits a plan for corrective action that is 
acceptable to the Secretary.

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 changes which are discussed below. In addition 
to the 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.
Error Rate Reports and Content of Error Rate Reports (Sections 98.100 
and 98.102)
    Interaction with eligibility requirements. We propose to add 
language at Sec.  98.100(d), which defines an improper payment, to 
clarify that because a child meeting eligibility requirements at the 
most recent eligibility determination or redetermination is considered 
eligible between redeterminations as described in Sec.  98.20(a)(1), 
any payment for such a child shall not be considered an error or 
improper payment due to a change in the family's circumstances, as set 
forth at Sec.  98.21(a).
    Corrective action plan. We propose to add 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(b). 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 requirement will strengthen CCDF program integrity and 
accountability. Existing CCDF regulations at Sec.  98.102(a)(6) and (8)

[[Page 80536]]

currently require all 50 States, the District of Columbia, 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, any Lead Agency exceeding a threshold of improper payments 
will 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) 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 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 would 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 would 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 et seq.). In some instances 
(listed in the table below), the collections of information for the 
relevant sections of this proposed rule have been previously approved 
under a series of OMB control numbers, or are currently in the OMB 
approval process.

----------------------------------------------------------------------------------------------------------------
                                 Relevant section in the    OMB control     Expiration
        CCDF title/code               proposed rule           number           date             Description
----------------------------------------------------------------------------------------------------------------
ACF-118 (CCDF State and          Sec.  Sec.   98.14,           0970-0114      05/13/2016  The Act and this
 Territory Plan).                 98.15, and 98.16 (and                                    proposed rule add new
                                  related provisions).                                     requirements which
                                                                                           States and
                                                                                           Territories will be
                                                                                           required to report in
                                                                                           the CCDF Plans,
                                                                                           including provisions
                                                                                           related to health and
                                                                                           safety requirements,
                                                                                           consumer education,
                                                                                           and eligibility
                                                                                           policies. State and
                                                                                           Territorial
                                                                                           compliance with the
                                                                                           final rule will be
                                                                                           determined in part
                                                                                           through the review of
                                                                                           CCDF Plans and Plan
                                                                                           amendments. ACF has
                                                                                           published Federal
                                                                                           Register notices
                                                                                           seeking public
                                                                                           comment on this
                                                                                           proposed information
                                                                                           collection and the
                                                                                           annual burden
                                                                                           estimate.
ACF-800 (Annual Aggregate Data   Sec.   98.71...........       0970-0150      06/30/2015  The Act and this
 Reporting--States and                                                                     proposed rule adds
 Territories).                                                                             new data reporting
                                                                                           requirements which
                                                                                           States and
                                                                                           Territories will be
                                                                                           required to on the
                                                                                           ACF-800. ACF has
                                                                                           published Federal
                                                                                           Register notices
                                                                                           seeking public
                                                                                           comment on this
                                                                                           proposed information
                                                                                           collection and the
                                                                                           annual burden
                                                                                           estimate.
ACF-801 (Monthly Case-Level      Sec.   98.71...........       0970-0167      04/30/2015  The Act and this
 Data Reporting--States and                                                                proposed rule adds
 Territories).                                                                             new data reporting
                                                                                           requirements which
                                                                                           States and
                                                                                           Territories will be
                                                                                           required to on the
                                                                                           ACF-800. ACF has
                                                                                           published Federal
                                                                                           Register notices
                                                                                           seeking public
                                                                                           comment on this
                                                                                           proposed information
                                                                                           collection and the
                                                                                           annual burden
                                                                                           estimate.
ACF-403, ACF-404, ACF-405        Sec.  Sec.   98.100 and       0970-0323      09/30/2015  The proposed rule does
 (Error Rate Reporting).          98.102.                                                  not make changes to
                                                                                           this information
                                                                                           collection.

[[Page 80537]]

 
ACF-700 (Administrative Data     Sec.   98.71...........       0980-0241      10/31/2016  The proposed rule does
 Report--Tribes).                                                                          not make changes to
                                                                                           this information
                                                                                           collection. If ACF
                                                                                           proposes changes in
                                                                                           the future, it will
                                                                                           publish Federal
                                                                                           Register notices
                                                                                           seeking public
                                                                                           comment.
ACF-696-T (Financial Reporting-  Sec.   98.65...........       0970-0195      05/31/2016  The proposed rule does
 Tribes).                                                                                  not make changes to
                                                                                           this information
                                                                                           collection.
----------------------------------------------------------------------------------------------------------------

    In other instances, which are listed below, the proposed rule 
modifies several previously-approved information collections, but ACF 
has not yet initiated the OMB approval process to implement these 
changes. ACF will publish Federal Register notices soliciting public 
comment on specific revisions to those information collections and the 
associated burden estimates, and will make available the proposed forms 
and instructions for review.

----------------------------------------------------------------------------------------------------------------
                                 Relevant section in the    OMB control     Expiration
        CCDF title/code               proposed rule           number           date             Description
----------------------------------------------------------------------------------------------------------------
Quality Progress Report (QPR)--  Sec.   98.53...........       0970-0114      05/13/2016  The Act and the
 States and Territories.                                                                   proposed rule require
                                                                                           States and
                                                                                           Territories to submit
                                                                                           reports on quality
                                                                                           improvement, and
                                                                                           measures to evaluate
                                                                                           progress. The QPR is
                                                                                           currently approved as
                                                                                           an appendix to the
                                                                                           CCDF State Plan. ACF
                                                                                           intends to propose a
                                                                                           revised QPR through a
                                                                                           separate information
                                                                                           collection.
ACF-696 (Financial Reporting-    Sec.   98.65...........       0970-0163      05/31/2016  The proposed rule
 States).                                                                                  would modify this
                                                                                           information
                                                                                           collection to require
                                                                                           any sub-categories of
                                                                                           quality activities as
                                                                                           required by ACF.
ACF-118-A (CCDF Tribal Plan)...  Sec.  Sec.   98.14,           0970-0198      05/31/2016  The rule changes
                                  98.16, 98.18, 98.81,                                     requirements that
                                  and 98.83 (and related                                   Tribes and Tribal
                                  sections).                                               organizations will be
                                                                                           required to report in
                                                                                           the CCDF Plans, and
                                                                                           indicates that Plan
                                                                                           and application
                                                                                           requirements will
                                                                                           vary based on the
                                                                                           size of a Tribe's
                                                                                           allocation. Tribal
                                                                                           compliance with the
                                                                                           final rule will be
                                                                                           determined in part
                                                                                           through the review of
                                                                                           Tribal CCDF Plans and
                                                                                           Plan amendments.
CCDF-ACF-PI-2013-01 (Tribal      Sec.   98.84...........       0970-0160      03/31/2016  The Act and the
 Application for Construction                                                              proposed rule change
 Funds).                                                                                   requirements related
                                                                                           to maintaining the
                                                                                           level of child care
                                                                                           services as a
                                                                                           condition of using
                                                                                           funds for
                                                                                           construction and
                                                                                           renovation.
----------------------------------------------------------------------------------------------------------------

    The table below provides annual burden estimates for these 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
                                                     Number of        annual      Average burden   Total burden
                   Instrument                       respondents    responses per     hours per         hours
                                                                    respondent       response
----------------------------------------------------------------------------------------------------------------
Quality Progress Report (QPR)--States and                     56               1              50           2,800
 Territories....................................
ACF-696 (Financial Reporting-States)............              56               4             5.5           1,232
ACF-118-A (CCDF Tribal Plan)....................             257            0.33             120          10,177
CCDF-ACF-PI-2013-01 (Tribal Application for                    5               1              20             100
 Construction Funds)............................
----------------------------------------------------------------------------------------------------------------


[[Page 80538]]

    Finally, this proposed rule contains 2 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 collect and disseminate consumer education information to 
parents of eligible children, the general public, and providers through 
a consumer-friendly and easily accessible Web site. This Web site will 
include information about State or Territory policies (related to 
licensing, monitoring, and background checks) as well as provider-
specific information, including results of monitoring and inspection 
reports and, if available, information about quality. This requirement 
applies to the 50 States, the District of Columbia, and 5 Territories 
that receive CCDF grants. 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 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.
    Second, Sec.  98.42 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 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 nearly 
390,000 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 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 burden
              Instrument                  Number of respondents    responses per     hours per     Total burden
                                                                    respondent       response          hours
----------------------------------------------------------------------------------------------------------------
Consumer Education Website............  56 States/Territories...               1             300          16,800
Reporting of Serious Injuries and       10,000 child care                      1               1          10,000
 Death.                                  providers.
----------------------------------------------------------------------------------------------------------------

    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 Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act, (5 U.S.C. 605(b)) 
requires federal agencies to determine, to the extent feasible, a 
rule's economic impact on small entities, explore regulatory options 
for reducing any significant economic impact on a substantial number of 
such entities, and explain their regulatory approach.
    This NPRM will not result in a significant economic impact on a 
substantial number of small entities. This rule is intended to 
implement provisions of the Act, and is not duplicative of other 
requirements. The reauthorization of the Act and these implementing 
regulations are intended to better balance the dual purposes of the 
CCDF program by adding provisions that ensure that healthy, successful 
child development is a consideration for the CCDF program (e.g., 
preserving continuity in child care arrangements; ensuring that child 
care providers meet basic standards for ensuring the safety of 
children, etc.).
    The primary impact of the Act and this proposed rule is on State, 
Territory, and Tribal CCDF grantees because the rule articulates a set 
of expectations for how grantees are to satisfy certain requirements in 
the Act. To a lesser extent the rule would indirectly affect small 
businesses and organizations, particularly family child care providers, 
as discussed in more detail in the Regulatory Impact Analysis below. In 
particular, requirements for comprehensive criminal background checks 
and health and safety training in areas such as first-aid and CPR may 
impact child care providers caring for children receiving CCDF 
subsidies. However, the rule will not have a significant economic 
impact on a substantial number of child care providers. The estimated 
cost of a comprehensive criminal background check is $55 per check. For 
the required health and safety training, a number of low-cost or free 
training options are available. Many States use CCDF quality dollars or 
other funding to fully or partially cover the costs of background 
checks and trainings. The health and safety provisions in the rule will 
primarily impact those CCDF providers currently exempt from State 
licensing that are not relatives--which account for only about 22 
percent of CCDF providers nationally. Finally, we note that the 
proposed rule contains many provisions that will benefit child care 
providers by providing more stable funding through the subsidy program 
(e.g., eligibility provisions that promote continuity and improved 
payment practices).

[[Page 80539]]

VII. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct federal 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). The 
Orders require federal agencies to submit significant regulatory 
actions to the Office of Management and Budget (OMB) for approval. 
Section 3(f)(1) of Executive Order 12866 defines ``significant 
regulatory actions,'' generally as any regulatory action that is likely 
to result in a rule that may (1) have an annual effect on the economy 
of $100 million or more or adversely affect in a material way the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or Tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    We estimate that the reauthorized CCDBG Act and this NPRM will have 
an annual effect on the economy of more than $100 million. Therefore, 
this NPRM represents a significant regulatory action within the meaning 
of section 3(f)(1) of Executive Order 12866. Given both the directives 
of Executive Orders 12866 and 13563 and the importance of understanding 
the benefits, costs, and savings associated with these proposed 
changes, we describe the costs and benefits associated with the 
proposed changes and available regulatory alternatives below in the 
Regulatory Impact Analysis.

VIII. Regulatory Impact Analysis

    We have conducted a Regulatory Impact Analysis (RIA) to estimate 
and describe expected costs and benefits resulting from the 
reauthorized CCDBG Act and this NPRM. This included evaluating State-
by-State policies in major areas of policy change, including monitoring 
and inspections (including a hotline for parental complaints), 
background checks, training and professional development, consumer 
education (including Web site and consumer statement), quality 
spending, minimum 12-month eligibility and related provisions, 
increased subsidies, and supply building (see Table 1).
    The State policies described in this RIA, including information 
from the FY2014-2015 CCDF Plans, represent policies that were in place 
prior to the reauthorization of the CCDBG Act. This is consistent with 
Office of Management and Budget (OMB) Circular A-4 which indicates that 
in cases where substantial portions of a rule simply restate statutory 
requirements that would be self-implementing, even in the absence of 
the regulatory action, the RIA should use a pre-statute baseline (i.e., 
comparison point for determining impacts). In conducting the analysis, 
we also took into account the statutory effective dates for various 
provisions. A number of States have already begun changing their 
policies toward compliance with the CCDBG Act, which passed in November 
of 2014, but data on those changes is not yet available and are not 
factored into this analysis.

                  Table 1--Overview of Major Provisions
------------------------------------------------------------------------
                                       Relevant
                                     provisions of       Provisions of
                                       CCDBG Act         proposed rule
------------------------------------------------------------------------
                            Health and Safety
------------------------------------------------------------------------
Background checks...............  658H..............  Sec.   98.43.
Monitoring and inspections        658E(c)(2)(J),      Sec.   98.42, Sec.
 (including a hotline for          658E(c)(2)(C).        98.32.
 parental complaints).
Training and Professional         658E(c)(2)(G),      Sec.   98.44.
 Development (Pre-service,         658E(c)(2)(I).
 orientation, and ongoing
 training).
------------------------------------------------------------------------
                           Consumer Education
------------------------------------------------------------------------
Consumer education website......  658E(c)(2)(D),      Sec.   98.33.
                                   658E(c)(2)(E).
Consumer statement..............  658E(c)(2)(D),      Sec.   98.33.
                                   658E(c)(2)(E).
------------------------------------------------------------------------
                            Quality Spending
------------------------------------------------------------------------
Quality, infant and toddler       658G..............  Sec.  Sec.
 spending.                                             98.53, 98.50(b).
------------------------------------------------------------------------
                           Continuity of Care
------------------------------------------------------------------------
Minimum 12-month eligibility and  658E(c)(2)(N).....  Sec.  Sec.
 related provisions.                                   98.20, 98.21.
------------------------------------------------------------------------
                  Increased subsidy and supply building
------------------------------------------------------------------------
Increased subsidy...............  658E(c)(4),         Sec.   98.45.
                                   658(c)(2)(S).
Supply building.................  658E(c)(2)(A),      Sec.
                                   658E(c)(2)(M).      98.50(a)(3).
------------------------------------------------------------------------

    Need for regulatory action. CCDF has far reaching implications for 
America's low-income children, and the reauthorized CCDBG Act and these 
proposed regulations shine a new light on the role that child care 
plays in child development and making sure children are ready for 
school. The law and this proposed rule takes important steps toward 
ensuring that children's health and safety is being protected in child 
care settings. Both the Department of Health and Human Services' (HHS) 
Office of Inspector General (OIG) and the Government Accountability 
Office (GAO) have identified serious deficiencies with health and 
safety protections for children in child care. Prior to reauthorization 
of the CCDBG Act, there was a wide range of health and safety standards 
across States. For

[[Page 80540]]

example, ten States lacked even the most basic first aid and CPR 
requirements, and many did not have requirements in other vital areas 
such as safe sleep practices and recognition and reporting of suspected 
child abuse and neglect. In addition, without any monitoring 
requirement prior to CCDBG reauthorization, 24 States allowed license-
exempt family child care providers to self-certify that they met health 
and safety requirements without any documentation or other 
verification. As discussed throughout this proposed rule, minimum 
health and safety standards included in the new law and this proposed 
rule are essential to help prevent children from being exposed to child 
care settings that put their health and safety at risk. The importance 
of such standards and the inherent risks are discussed at length in 
Caring for Our Children (Caring for Our Children: National Health and 
Safety Performance Standards; Guidelines for Early Care and Education 
Programs, 3rd Edition, which was produced with the expertise of 
researchers, physicians, and practitioners. (American Academy of 
Pediatrics, American Public Health Association, National Resource 
Center for Health and Safety in Child Care and Early Education. (2011).
    Parental choice is a foundational tenet of the CCDF program--to 
ensure parents are empowered to make their own decisions regarding the 
child care that best meets their family's needs. Prior to 
reauthorization, CCDF rules required Lead Agencies to promote informed 
child care choices by collecting and disseminating consumer education 
information to parents and the general public. Over the years, 
economists have researched and written about the problem of information 
asymmetry in the child care market and the resulting impact both on the 
supply of high quality care and a parent's ability to access high 
quality care. (Blau, D., The Child Care Problem: An Economic Analysis, 
2001; Mocan, N., The Market for Child Care, National Bureau of Economic 
Research, 2002) In order for parental choice to be meaningful, parents 
need to have access to information about the choices available to them 
in the child care market and have some way to gauge the level of 
quality of providers. The CCDBG Act and this proposed rule strengthen 
consumer education requirements to make information about child care 
providers more accessible and transparent for parents and the general 
public.
    Stable relationships between a child and their caregiver are an 
essential aspect of quality. Yet, under current policies, clients 
``churn'' on and off of CCDF assistance every few months, even when 
they remain eligible. Some studies show that many families appear to 
remain eligible for the subsidies after they leave the program, 
suggesting that child care subsidy durations also are likely influenced 
by factors unrelated to employment (Grobe, D., R. B. Weber and E. E. 
Davis (2006). Why do they leave?: Child care subsidy use in Oregon.).
    Many State subsidy policies make it overly burdensome for parents 
to keep their subsidy, or are not flexible enough to allow for 
temporary or minor changes in a family's circumstances. This is 
supported by a study that featured a series of interviews with state 
and local child care administrators and identified a number of 
administrative practices that appear to reduce the duration of child 
care subsidy usage (Adams, G., K. Snyder and J. R. Sandfort (2002) 
Navigating the child care subsidy system: Policies and practices that 
affect access and retention.) The study found that families often faced 
considerable administrative burden when trying to apply for or 
recertify their eligibility status. For example, families sometimes had 
to interact with more than one agency during the application process, 
had to make more than one trip to an administrative office, and 
sometimes had to wait for weeks or months to get an appointment with a 
social worker. In addition, families receiving Temporary Assistance for 
Needy Families (TANF) sometimes had additional difficulties with 
redetermination because of the temporary nature of their employment or 
training activities. The study also found that agencies had different 
policies regarding the ways in which families could recertify their 
eligibility status including mail, phone, or fax. Parents often find it 
difficult to navigate administrative processes and paperwork required 
to maintain their eligibility when policies are inflexible to changes 
in a family's circumstances. Policies that make it difficult for 
parents to keep their subsidy threaten the employment stability of 
parents and can disrupt children's continuity of care. This proposed 
rule establishes a number of family-friendly policies that benefit CCDF 
families by promoting continuity in subsidy receipt and child care 
arrangements.
    Changes made by the CCDBG Act and this proposed rule, consistent 
with the revised purposes of the Act, are needed to: Protect the health 
and safety of children in child care; help parents make informed 
consumer choices and access information to support child development; 
provide equal access to stable, high quality child care for low-income 
children; and enhance the quality of child care and the early childhood 
workforce. For the purposes of estimating the costs of these new 
requirements, the analysis makes a number of assumptions. We welcome 
comment on all aspects of the analysis, but throughout the narrative, 
we specifically request comment in areas where there is uncertainty.
    One overarching assumption that is consistent across all the 
estimates is that we are assuming that the current caseload of children 
in the CCDF program (approximately 1.4 million children) remains 
constant. Due to inflation and the potential for erosion in the value 
of the subsidy over time, funding increases will likely be necessary to 
maintain the caseload; however, those changes are not reflected in this 
RIA since they are not directly associated with this proposed rule.
    While the estimate cannot fully predict how States and Territories 
will design policies in response to these new requirements or who would 
be responsible for paying certain costs, we do recognize that absent 
additional funding, these costs could impact the CCDF caseload. This 
point is discussed in greater detail below.

A. Analysis of Costs

    In our analysis of costs, we considered any claims on resources 
that would be made as a result of the proposed rule that would not have 
occurred absent the rule. This includes new requirements that are 
merely reiterating changes made in the reauthorized CCDBG Act of 2014, 
which were effective upon the date of enactment of November 19, 2014. 
This RIA discusses the potential impact of the following major 
provisions in the statute and in the proposed rule:
     Monitoring and inspections (including State hotlines for 
parental complaints);
     background checks;
     health and safety training;
     consumer education (Web site and consumer statement);
     minimum 12-month eligibility periods;
     administrative and IT/infrastructure costs;
     increased subsidy rates per child associated with 
increasing continuity and equal access; and
     supply building.
    We conducted a State-by-State analysis of these major provisions. 
It should be noted that due to insufficient data, the health and safety 
portions of this cost estimate do not include Territories and Tribes. 
This omission should not minimize the fact that

[[Page 80541]]

requirements of the CCDBG Act and the proposed rule would still have a 
significant programmatic and financial impact on Territories and 
Tribes. For the purposes of a national cost estimate, however, 
Territories and Tribes comprise a relatively small percentage of the 
CCDF population and therefore excluding the Territories and Tribes from 
analysis should not significantly impact the overall cost of the 
proposal. This is particularly the case since Tribes are exempt from, 
or subject to a modified version of, a number of these new 
requirements. However, we welcome public comment on the anticipated 
financial impact of the CCDBG Act and this proposed rule on Territories 
and Tribes.
    In order to determine State practices, we relied on information 
from state-submitted FY 2014-2015 CCDF Plans, as well as the 2011-13 
Child Care Licensing Study (prepared by the National Association for 
Regulatory Administration). If a State already met or exceeded an 
individual requirement, we assumed no additional cost associated with 
the proposed rule. For example, a State that has an annual monitoring 
requirement for its licensed centers would be assigned no additional 
cost to implement that part of the proposed regulatory requirement.
    We used data on requirements within a State by child care setting 
type (center, family home, group home, child's home) and licensing 
status, to project costs based on specific features of a State's 
existing requirements. When possible, if a State partially met the 
requirement we applied a partial implementation cost. For example, some 
States already conduct comprehensive background checks that include all 
components of a comprehensive background check except an FBI 
fingerprint check. Costs were assigned accordingly (assumptions about 
partial costs are explained in greater detail in the discussions 
below). The proposed rule offers significant flexibility in 
implementing various provisions, therefore in the RIA we identified a 
range of implementation options to establish lower and upper bound 
estimates and chose a middle-of-the-road approach in assessing costs.
    This RIA takes statutory effective dates into account within a 10-
year window. The analysis and accounting statements distinguish between 
average annual costs in years 1-5 during which some of the provisions 
will be in varying stages of implementation and the average annual 
ongoing costs in years 6-10 when all the requirements would be fully 
implemented. Some costs will be higher during the initial period due to 
start-up costs, such as building a consumer Web site, and costs 
associated with bringing current child care providers into compliance 
with health and safety requirements. However, significant costs, such 
as the requirement to renew background checks every five years, would 
not be realized until later. These compounding requirements account for 
the escalation in costs in the out years of the analysis.
    Throughout this RIA, we calculate two kinds of costs: Money costs 
and opportunity costs. Any new requirements that have budgetary impacts 
on States or involve an actual financial transaction are referred to as 
money costs. For example, there is a fee associated with conducting a 
background check, which is a money cost regardless of who pays for the 
fee. For purposes of this analysis, we examined what additional 
resource claims would be made as a result of the reauthorized Act and 
proposed rule regardless of who incurs the cost or from what source it 
is paid (which varies widely by State). In some instances, money costs 
will be incurred by the State and may require States to redistribute 
how they use CCDF funds in a way that has a budgetary impact. In other 
cases, money costs will be incurred by child care providers or parents.
    Alternatively, claims that are made for resources where no exchange 
of money occurs are identified as opportunity costs. Opportunity costs 
are monetized based on foregone earnings and would include, for 
example, a caregiver's time to attend health and safety trainings when 
they might otherwise be working.
    Each year, more than $5 billion in federal funding is allocated to 
State, Territory, and Tribal CCDF grantees. Activities in the proposed 
rule are all allowable costs within the CCDF program and we expect many 
activities to be paid for using CCDF funds. For example, although some 
States may supplement funding, others may choose to redistribute 
funding from a current use to address start-up costs or new priorities. 
We received a number of comments from States in response to the 2013 
NPRM that, in the absence of additional funding, meeting requirements 
in the proposed rule would result in a reduction in the CCDF caseload. 
Therefore, we anticipate some money costs will result in this type of 
re-distributive budgetary impact within the CCDF program.
    However, to make the costs of the rule concrete, we provide 
analysis on the economic impact of the rule if the child care caseload 
were to remain constant. While we recognize that there may be a 
decrease in caseload due to the financial realities of the new 
requirements, applying that decrease in caseload to this analysis would 
only lessen the estimated cost, which would result in a probable 
underestimate. While the costs estimated in this analysis represent the 
costs required, (regardless of who pays for the requirement) to meet 
the new requirements for the current caseload of 1.4 million children, 
it is not, and should not be interpreted as, our projection of future 
caseload.
    Overall, based on our analysis, annualized costs associated with 
these provisions, averaged over a ten year window, are $256 million and 
the annualized amount of transfers is approximately $840 million (both 
estimated using a 3 percent discount rate), which amounts to a total 
annualized impact of $1.10 billion. Of that amount, $1.09 billion is 
directly attributable to the statute, with only an annualized cost of 
$1.6 million (or less than 1% of the total estimated impact) 
attributable to discretionary provisions of this proposed regulation. 
While this analysis does not attempt to fully quantify the many 
benefits of the reauthorization and this NPRM, we do conduct a 
breakeven analysis to compare requirements clarified through this 
regulation against a potential reduction in child fatalities and 
injuries. Further detail and explanation on the impact of each of the 
provisions is available below.
1. Health and Safety Provisions
    Per the new requirements in the CCDBG Act, this proposed rule 
includes several provisions focused on improving the health and safety 
of child care. We estimated costs associated with the following three 
requirements: Monitoring and inspections at Sec.  98.42; comprehensive 
background checks at Sec.  98.43; and health and safety training at 
Sec.  98.41(a)(2).
    Implementation costs of health and safety provisions, specifically 
the start-up costs, in the proposed rule will depend primarily on the 
number of child care providers in a State and current State practice in 
areas covered by the proposed rule. We used data from the FY 2014 ACF-
800 administrative data report to estimate that approximately 269,000 
providers caring for children receiving CCDF subsidies would be subject 
to CCDF health and safety requirements. In addition to these CCDF 
providers, this analysis also includes approximately 110,000 licensed 
providers who are not currently receiving CCDF subsidies but would be 
subject to the background check and certain reporting requirements.

[[Page 80542]]

    These figures exclude relative care providers since States may 
exempt these providers from CCDF health and safety requirements. 
According to OCC's 2014 administrative data, there are approximately 
115,000 relative care providers receiving CCDF assistance. States vary 
widely on what they require of relatives, with 18 States/Territories 
requiring that relative providers meet all health and safety 
requirements, 4 exempting relatives for all requirements, and 34 
indicating that relative providers were exempt from some but not all 
requirements.
    It is difficult to forecast State behavior in response to new 
requirements since Lead Agencies have the option to exempt relatives 
from these requirements. Even those States that currently apply 
requirements to relatives may keep those requirements at current levels 
rather than expanding to meet new requirements. To provide a general 
estimate of potential costs, if States were to apply half of all the 
new health and safety requirements to half of the current number of 
relative providers, the annualized cost (using a 3% discount rate) 
would be approximately $30 million (averaged over a 10 year window). 
However, since applying the new requirements to relatives is not a 
legal requirement, we are not including costs associated with relative 
providers in the accounting statement for this regulatory impact 
analysis. We do request comment on the extent to which Lead Agencies 
anticipate applying new requirements to relative providers.
    It should be noted that, based on a longitudinal analysis of OCC's 
administrative data, the number of child care providers serving CCDF 
children has declined by nearly 50 percent between 2004 and 2014, an 
average decrease of 4 percent per year. The greatest decline occurred 
in settings legally operating without regulation, specifically family 
child care; however, both regulated and license-exempt child care 
centers also saw declines. This analysis is based on current provider 
counts, but assuming that the number of CCDF providers will continue to 
steadily decrease, this estimate of the number of providers, and 
resulting costs associated with implementing health and safety 
provisions, may be an overestimate.
    Many States' licensing requirements for child care providers 
already meet or exceed components of the minimal health and safety 
requirements for CCDF providers in this proposed rule. For example, 
training in first-aid and CPR and background checks are commonly 
included as part of State licensing, with approximately 40 States 
already meeting this requirement for licensed providers (centers, group 
home, and family child care).
    Many licensed CCDF providers already meet many of the other health 
and safety requirements as well. For example, more than 40 States 
already require annual monitoring of all their licensed providers, with 
even more already requiring pre-inspections of their licensed 
providers. In the case of licensed centers, more than 45 States already 
require pre-inspections. For those States whose licensing requirements 
do not meet CCDF health and safety requirements, there will be costs 
incurred. However, the largest cost will be incurred for those CCDF 
providers that are currently exempt from State licensing that are not 
relatives--approximately 85,000 providers nationally. (Table 2 below 
provides a national picture of the types of CCDF providers.) We used an 
expanded State-by-State version of this table to estimate costs for 
meeting health and safety requirements. As stated above, the proposed 
rule allows States to exempt relatives from health and safety 
requirements, including background checks, health and safety training, 
and monitoring. Therefore, ACF did not attribute any cost associated 
with these requirements to relative CCDF providers, though we welcome 
comment on predicted State policies in this area.

                                                      Table 2--Summary of CCDF Providers (FY2014) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Licensed CCDF providers                          CCDF providers legally operating without regulation (license-exempt)
----------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Child's home (in-home)           Family and group home                   Total
                   Centers                      Family     Group   ----------------------------------------------------------------  Centers
                                                 home       home       Relative      Non-relative      Relative      Non-relative
--------------------------------------------------------------------------------------------------------------------------------------------------------
81,352......................................     70,165     32,130          38,670          27,739          77,958          50,330      7,355    385,699
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Source: ACF-800, Report 13.

    It should be noted that we include group home providers in this 
analysis because our current data includes a separate category for 
group homes. However, the proposed rule would remove ``group home child 
care provider'' from our definitions and data reporting, so group homes 
would no longer be included in the data going forward. In the future, 
according to the proposed rule, those providers currently designated as 
group home providers would now fall into the category of ``family child 
care providers''
    Monitoring and pre-inspections. The CCDBG Act requires that States 
conduct monitoring visits for all CCDF providers including all license 
exempt providers (except, at Lead Agency option, those that serve 
relatives). While States must begin monitoring no later than November 
19, 2016, the full cost of this requirement will not be in effect until 
2017. Therefore, we are projecting some period of phase-in, with 25% of 
providers subject to monitoring in 2015 and an additional 50% (a total 
of 75%) subject to monitoring requirements in 2016. The costs of these 
requirements will be fully realized from 2017 on.
    The CCDBG Act specified different monitoring requirements for 
providers who are licensed and providers who are license-exempt.
     For Licensed Child Care Providers--States must conduct one 
pre-licensure inspection for health, safety, and fire standards and at 
least annual, unannounced inspections.
     For License-Exempt Providers (except, at Lead Agency 
option, those serving relatives)--States must conduct at least annual 
inspections for compliance with health, safety, and fire standards at a 
time determined by the State.
    For this estimate, if a State reported that they conduct at least 
one annual monitoring visit for licensed child care providers (pre-
licensure inspections are discussed separately below), we assumed no 
additional cost for those providers because it met or exceeded the 
frequency required by the statute and proposed rule. The majority of 
States already monitor licensed CCDF

[[Page 80543]]

providers annually (more than 40 across all settings--centers, family 
child care, and group homes). A subset of States that currently have 
annual monitoring requirements do not conduct unannounced visits. 
However, we did not assign a cost for States changing their policy from 
announced to unannounced monitoring. We acknowledge that there may be 
an administrative cost to such a change, but for the purposes of this 
estimate, we consider that to be included in the overall administrative 
cost allocation discussed below. However, we welcome public comment on 
specific costs associated with moving from announced to unannounced 
inspections.
    This cost estimate takes into account three major components of the 
new monitoring requirements: (1) Annual monitoring, (2) Pre-
inspections, and (3) a Hotline for parental complaints.
    The annual monitoring estimate includes the following variables 
analyzed on a State-by-State basis:
     Current State Practice: We collected State-level data from 
the 2014-15 CCDF State plans and the NARA 2011-13 Child Care Licensing 
Study to determine which States already met annual inspection 
requirements. Data was collected for the following settings: Licensed 
CCDF providers (family, group home, and centers) and license-exempt 
CCDF providers (non-relative).
     Current Provider Counts: Using 2014 CCDF administrative 
data, we collected the number of providers within each setting for each 
State.
    Using these data we arrived at an estimate of the number of 
providers within each State that would newly require an annual 
monitoring visit. We then estimated the number of new licensing 
inspectors and supervisors that would be required to monitor the 
projected number of providers newly subject to monitoring, based on a 
projected caseload of child care providers for each licensing staff. To 
estimate the actual cost, we calculated the cost of employing (salary 
and overhead) the estimated number of necessary new licensing staff 
(inspectors and supervisors).
    The CCDBG Act requires States to have a ratio of licensing 
inspectors to child care providers and facilities that is sufficient to 
conduct effective inspections on a timely basis, but there is no 
federally required ratio. The current range of annual caseloads per 
licensing inspector is large, from 1:33 to 1:231. We used the following 
range to estimate the impact:
     Lower bound: 50th percentile of current licensing 
caseloads (weighted by the number of providers in each State), which 
produced an adjusted caseload of 1:126 providers per monitoring staff.
     Upper bound: A 1:50 ratio of providers to monitoring 
staff, as recommended by the National Association of Regulatory 
Administration.
    Our final cost estimate represents the midpoint between the lower 
and upper bound estimate. To calculate the number of required 
supervisory staff, we assumed a ratio of one supervisor per seven 
monitoring staff, which is the current average across States as 
reported in the NARA 2011-13 Child Care Licensing Study.
    To generate the actual cost associated with this staffing increase, 
we multiplied the number of new staff by salary and overhead costs for 
full-time equivalent (FTE) staff based on Bureau of Labor Statistics 
(BLS) data from the National Occupation and Wage Estimates from May 
2013. The same FTE costs were applied to all States. The salary applied 
was $42,690 for each monitoring line staff (see Community and Social 
Service Specialists, All Other: Code 21-1099) and $65,750 for each 
supervisor (see Social and Community Service Managers: Code 11-9151), 
which was then multiplied by 2 to account for benefits and overhead. 
(Data from the Bureau of Economic Analysis's National Income and 
Product Accounts shows that in 2013, wages and salaries are 
approximately 50 percent of total compensation.). Using this 
methodology, the estimated present value cost of meeting this annual 
monitoring requirement over the 10 year period examined in this rule, 
using a 3% discount rate, is approximately $1.2 billion. The annualized 
money cost of meeting the monitoring requirements is $137 million, also 
estimated using a 3 percent discount rate.
    We anticipate that annual monitoring in States could result in 
additional follow-up visits, which can be expected if problems were 
identified in the initial visit. Because we do not have data on this 
with which to estimate potential impacts, we welcome comment on the 
percentage of providers that would require a follow-up visit as a 
result of new annual monitoring visits.
    Opportunity costs for the monitoring requirements account for the 
fact that to successfully pass a monitoring visit, there would 
presumably be a number of administrative costs (in terms of time; an 
opportunity cost) for providers and caregivers. For example, providers 
must read the new rules, change their current practices to comply, and 
obtain and track paperwork to make sure they are in compliance. For the 
purposes of this following analysis, we made several assumptions about 
the amount of time required to prepare for and comply with the 
monitoring requirement, but we welcome comment on these assumptions. To 
calculate the opportunity cost of these visits, we assumed that time 
spent doing administrative tasks equals the length of the monitoring 
visit plus an additional 1.5 and 2.0 hours of preparation per hour of 
the visit, for family child care and center providers respectively.
    Based on one State reporting that their monitoring visits for 
licensure took between 2.5 and 5 hours, we used 2.5 hours as the basis 
for our lower bound and 4 hours as the basis for our upper bound. We 
used 4 hours instead of 5 for our upper bound estimate because 5 hours 
is the amount reported for a licensing visit, but what is required in 
the proposed rule is generally much less extensive than what is 
generally required for licensure. As such, our lower bound estimate 
uses 6.25 and 7.5 hours of preparation for family child care and center 
providers, respectively, and our upper bound uses 10 and 12 hours of 
preparation for family child care and center providers, respectively. 
According to BLS, for child care workers, one hour equals $18.80 after 
accounting for benefits and overhead (we include overhead because 
administrative preparation time occurs during work hours). We estimated 
the opportunity cost of preparation time for monitoring to be an 
average of $5.2 million annually (estimated using a 3% discount rate) 
during the two-year phase-in period (assumes States begin to ramp-up 
monitoring, but not fully implemented) and an annualized opportunity 
cost of $9.5 million (estimated using a 3% discount rate) over the 
entire 10 year window. Note that the phase-in period discussed here 
covers a two year period and is different from the phase in period in 
the table below, which shows a phase-in period of 5 years (after which 
all requirements would be fully implemented).
    Some proportion of providers will require remedial work to meet 
CCDF health and safety requirements after an annual visit. For example, 
a provider may be out of compliance with building safety or not have 
up-to-date immunization records, and costs in terms of time as well as 
material resources would be necessary to come into compliance. However, 
it is difficult to quantify these effects because the specific 
remediation required will vary by provider and other circumstances. 
Therefore, we did not attempt to monetize the cost of providers' 
remediation efforts. In addition, there are also benefits to be reaped 
(in terms

[[Page 80544]]

of child health and safety) as providers makes changes to come into 
compliance with health and safety requirements as a result of this 
rule, but that are not quantified in this analysis.
    Next we estimate cost of pre-licensure inspections required by the 
CCDBG Act. This requirement, as proposed, applies only to licensed CCDF 
providers. Using the same methodology that we used for annual 
monitoring, we determined how many States already met this requirement 
and used CCDF administrative data to determine the number of licensed 
CCDF providers (by setting type) that did not previously but would now 
require pre-licensure visits. The proposed rule allows States to 
grandfather all existing providers--thus there is no start-up cost or 
backlog of providers that need a pre-inspection. There are not good 
data to estimate how many new providers a State would need to pre-
inspect on an annual basis, but anecdotal evidence suggests the number 
is relatively small. Of the States that do not currently require pre-
inspections (1 for centers, 6 for group homes, and 7 for family child 
care), we estimated (based on information shared by a few States) that 
a lower bound of five percent of family child care and four percent of 
center care would be new each year (lower bound). For the upper bound, 
we estimate that 12 percent of family child care and 7 percent of child 
care centers would be new each year.
    Using a caseload of 88 providers per monitoring staff (the midpoint 
of the 50th percentile of current caseload data and the recommended 
caseload of 50:1), and using the same salary and benefits data as the 
monitoring estimates, the estimated present value cost of meeting this 
requirement over the 10 year period examined in this rule, using a 3% 
discount rate, is approximately $6 million. Ongoing average annual pre-
inspection costs are estimated to be approximately $1 million 
(estimated using a 3% discount rate), but would not begin until 2017.
    Monetized caregiver time to prepare for pre-inspections is 
considered an opportunity cost and is estimated to be approximately 
$200,000 annually, a relatively small amount because this only applies 
to new licensed providers in the few States that don't already require 
pre-licensure inspections. Though some of the opportunity cost would be 
incurred prior to the actual inspection visit, for the purposes of this 
estimate, we considered all costs for pre-inspections as beginning 
after the end of the phase-in period. We used the same methodology used 
to calculate annual inspections to determine the opportunity cost of 
pre-inspections.
    However, recognizing that preparing for an initial licensing 
inspection may require additional time, we used the midpoint of the 
estimate time for an annual visit and doubled it for an estimated 16.25 
hours for family child care and group homes and 19.5 hours for centers. 
Again, we welcome comment on these assumptions if there is additional 
data on the amount of time required to prepare for and participate in 
an inspection.
    This cost analysis also includes the ``parental complaint hotline'' 
as part of the monitoring requirements. Per the CCDBG Act, the proposed 
rule would require at Sec.  98.32(a) Lead Agencies to establish or 
designate a hotline or similar reporting method for parents to submit 
complaints about child care providers. Lead Agencies have flexibility 
in how they implement this requirement, including whether the system is 
telephonic or through a similar reporting process, whether the hotline 
is toll-free, and whether the hotline is managed at the State or local 
level. Based on an examination of several States that already have 
comparable hotlines in place, this estimate for the parental complaint 
hotline includes multiple components that might be associated with the 
implementation and maintenance of a telephonic hotline.
    These components include the one-time purchase of an automatic call 
distribution (ACD) system at $45,000; the use of a digital channel on a 
T1 line ranging from $204 to $756 per year; 2,000 minutes of incoming 
call time at $0.06 per minute; and salary and benefits for one FTE to 
manage the hotline at $67,000. States vary in how they collect parental 
complaints. According to an analysis of the FY 2014-2015 CCDF Plans and 
review of State child care and licensing Web sites, 18 States/
Territories have a parental complaint hotline that covers all CCDF 
providers, 22 States/Territories have a parental complaint hotline that 
covers some child care providers, and 16 States/Territories do not have 
a parental complaint hotline. (Note that unlike the other health and 
safety provisions, this estimate does include Territories).
    States that had hotlines for both licensing and CCDF were 
considered as meeting the full requirement for a parental complaint 
hotline and had no additional costs. States that only had one hotline 
(e.g., only for licensed providers) were considered as partially 
meeting the requirement for the hotline and had 0.5 FTEs applied. The 
full amount was applied to States that did not have anything in place 
that met the requirements of the hotline.
    We used a range of options to estimate the impact of the parental 
complaint hotline requirement based on the cost of the TI line and 
whether the hotline is toll-free and chose the mid-point as the primary 
estimate. Using this methodology, the estimated present value cost of 
meeting this requirement over the 10 year period examined in this rule, 
using a 3% discount rate, is approximately $16.6 million. Average 
annual costs during the phase-in period are estimated to be 
approximately $2.6 million during the first year (different than the 
phase-in figure in Table 3 below) and an average of $1.8 million for 
each year after. The estimate assumed slightly higher startup costs 
during the first year because States and Territories may need to 
purchase and install an ACD system.

                                                   Table 3--Estimated Impacts of Monitoring Provisions
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Annualized cost (over 10 years)              Total (over 10 years)
                                                Phase-in       Ongoing   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual monitoring...........................         123.4         154.3         138.9        136.9        134.1       1,388.7      1,202.5      1,007.8
Preinspection new facilities................           0.5           0.9           0.7          0.7          0.7           7.3          6.2          5.1
Hotline.....................................           2.0           1.8           1.9          1.9          1.9          18.8         16.6         14.3
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................         125.9         157.0         141.5        139.5        136.7       1,414.7      1,225.3      1,027.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 80545]]

 
                                                            Opportunity Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual monitoring...........................           8.5          10.7           9.6          9.5          9.3          95.9         83.0         69.6
Preinspection new facilities................           0.1           0.2           0.2          0.2          0.2           1.9          1.6          1.3
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................           8.7          10.9           9.8          9.6          9.4          97.7         84.6         70.9
                                             -----------------------------------------------------------------------------------------------------------
        Total...............................         134.6         167.9         151.2        149.1        146.1       1,512.5      1,309.9      1,098.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comprehensive background checks. The CCDBG Act added a new section 
at 658H on requirements for comprehensive, criminal background checks 
that draw on federal and State information sources. The CCDBG Act 
outlines five components of a criminal background check, which we 
restate in Sec.  98.43 of the proposed rule. There are several aspects 
of the background check requirements that must be taken into account in 
a cost estimate. This includes the background checks for existing child 
care staff members (who do not already have them), the new federal 
requirement that child care staff members receive a background check 
every five years, background checks for family members living in family 
child care homes, and checks with other States if a child care staff 
member has lived in another State. This cost estimate does not take 
into account the cost of the requirement at Sec.  98.43(b)(2) for a 
search of the National Crime Information Center. ACF is currently in 
discussions with the FBI to determine the logistics behind States 
meeting this requirement. We welcome comment on the cost of meeting 
this requirement.
    Similar to the methodology used for monitoring, the first step of 
the cost estimate was to determine current State practice. We used CCDF 
2014-15 State Plan data (which included State-by-State data on four 
distinct background check components organized by provider type) to 
determine which States already met certain components of the background 
check requirement. After identifying the areas where States would need 
to implement new requirements we applied the provider counts to 
determine the number of child care staff members that would need to 
meet these new background check requirements.
    Because our administrative data on the number of CCDF providers 
represent the number of child care programs serving CCDF children, not 
the individual child care staff members in these settings that would 
need to receive a background check, we estimate the number of 
individual child care staff members that would be affected by this 
provision by applying a multiplier to each provider type (centers, 
family home, and group home).
    We propose to require individuals, age 18 or older, residing in a 
family child care home be subject to background checks. It is 
reasonable to assume that these individuals may have unsupervised 
access to children. Because we are including these individuals in the 
definition of child care staff members, they will be subject to the 
same requirements and will be allowed the same appeals process as 
employees.
    To generate an estimated number of staff per child care center, we 
used data from the National Survey of Early Care and Education (NSECE), 
which indicated that the median number of children per center 
nationally is approximately 50. We then used the following data 
sources: (1) ACF-801 CCDF administrative data, which provides a 
detailed breakdown of the number of CCDF children by age group; and (2) 
Caring for our Children, which has a recommended staff-child ratio for 
centers by age group. (Caring for Our Children's recommended staff-
child ratios are an overestimate because not all States have adopted 
the standard.) Using these figures, a weighted average was generated 
that takes into account the national age-distribution of CCDF children 
served and recommended child-staff ratios for an average center. This 
resulted in a baseline multiplier of 11 staff members per child care 
center receiving CCDF-funded subsidies, 8 of whom are caregivers and 3 
are additional staff members or individuals who may have unsupervised 
contact with children.
    We estimated the number of other adult household members residing 
in family child care homes (persons other than the caregiver) and 
relevant staff members and added this to our cost estimate. We assumed 
each family child care and group home provider had an average of 1 
additional household member. (This assumption is informed by 
consultation with State administrators, who stated that most frequently 
there is 1 other adult over the age of 18 in a family child care home 
that must undergo a background check).
    Using these multipliers, we estimated the cost for background 
checks for staff members newly subject to the requirements. This 
includes both the cost of obtaining the background check and the 
opportunity cost for child care staff members to meet the required 
components. The opportunity cost represents the value of time (measured 
as foregone earnings) of child care staff members during the time, they 
spend to complete a background check.
    Many States already require some, if not most, of the background 
check components. To determine the existing need, we compared the 
requirements described in this proposed rule against current background 
check requirements, as reported in the CCDF 2014-2015 Plans. According 
to the FY 2014-2015 CCDF Plans, nearly 30 States require that licensed 
child care center staff undergo a State criminal background check that 
includes a fingerprint. More States already have requirements for a 
State criminal background check without a fingerprint, but for this 
estimate, we only counted States that required a fingerprint as meeting 
the requirement. For licensed centers, more than 40 already require an 
FBI fingerprint check, nearly all already require a check with a child 
abuse and neglect registry, and more than 35 require a check with a sex 
offender registry. Nearly 30 States require licensed family child 
providers to have a State criminal background check that includes a 
fingerprint, more than 40 already require an FBI fingerprint check, 
more than 30 require a check with the child abuse and neglect registry, 
and

[[Page 80546]]

more than 35 require a check against a sex offender registry.
    Fewer States meet the background check requirements for unlicensed 
CCDF providers. According to our State Plan data, only fewer than 25 
States already have FBI fingerprint check requirements in place for its 
unlicensed providers and only six require those providers to have a 
State background check that includes a fingerprint.
    Using this data, we identified gaps in existing State policies as 
compared to the newly-required background check components. These gaps 
were matched with CCDF ACF-800 administrative data showing the number 
of providers per setting type by State, and then using the methodology 
above calculated the number of child care staff members requiring 
background checks.
    As mentioned above, there are two costs of a background check: the 
fee to conduct the check and the time it takes for individuals to get 
the check. With regard to the fee, Lead Agencies have flexibility to 
determine who pays for background checks. According to the FY 2014-2015 
CCDF Plans, more than States require the child care provider to pay for 
the background check, approximately 10 States indicated the cost was 
split, and fewer than 10 States indicated they pay the fees associated 
with the cost of conducting a background check. However, regardless of 
how costs are assigned, an impact analysis must include the overall 
monetary and opportunity cost impacts.
    In their CCDF Plans, Lead Agencies described their costs associated 
with conducting background checks, including cost information on 
individual components of the background check. This information, 
combined with information we received from the FBI regarding costs of 
FBI fingerprint checks, was used to derive an estimated average cost of 
each background check component for a total of $55 for each set of four 
background checks. We applied this cost (or a partial cost) to the 
number of individuals in need of some or all of the background check 
components, determined after identifying State-by-State practices for 
different types of providers.
    Next, we estimated the average annual ongoing cost of administering 
background checks to new child care staff members (as opposed to start-
up costs associated with bringing existing staff members into 
compliance). Child care provider departure rates cited in the 
literature vary widely from as low as 10 percent to 20 percent (The 
Early Childhood Care and Education Workforce: Challenges and 
Opportunities, Institute of Medicine and the National Research Council, 
2012). We used these as the lower and upper bounds, respectively for 
our estimated turnover rate. We then reduced this estimate by another 
10 percent to account for the fact that the law requires some 
portability of background checks for certain staff members in a State, 
meaning that if a staff member has already passed a background check 
within the past five years, then that individual is not required to get 
another background check when changing employment from one child care 
provider to another.
    Based on this approach, the estimated present value cost of meeting 
these background check requirements (for existing and new providers) 
over the 10 year period examined in this rule, using a 3% discount 
rate, is approximately $58.6 million. ACF estimated that during the 
three year phase-in period background check fees would have an average 
annual money cost of $10.8 million (also estimated using a 3% discount 
rate), as States bring existing providers into compliance. (Note again 
that this phase-in period is different than the five year period 
indicated in the table below). We estimate the average annual ongoing 
money costs associated with background checks for new staff members of 
approximately $4 million (estimated using a 3% discount rate).
    The CCDBG Act requires that all child care staff members receive a 
background check every five years. Through the 2014-15 CCDF State 
Plans, States report on how frequently licensed providers are required 
to receive each component of the background check. This data was 
available both by individual background check component and by provider 
type. If a State already required that a particular background check be 
renewed every five years (or more frequently), we did not include it in 
this cost estimate. While we know that States have similar policies in 
place for unlicensed providers, we do not have data for this subset of 
the provider population. Therefore, we considered the renewal of 
background checks for unlicensed providers to be a fully new cost to 
all States, understanding that this is more likely than not an 
overestimate.
    Since not all background checks will be conducted in the same year, 
we spread these costs evenly over a five year period to show that the 
costs would not be incurred all at once. We recognize that in practice 
these costs may not be evenly distributed over the five year period, 
depending on how States choose to conduct background checks during the 
initial implementation period. However, any uneven distribution of 
costs over time only negligibly affects the total dollar amount. The 
estimated present value cost of renewing background checks for all 
individuals over the 10 year period examined in this rule, using a 3% 
discount rate, is approximately $55.4 million, with the average annual 
ongoing money costs of this five year renewal requirement (once it 
begins in year six of the ten year window) to be $13.6 million. 
However, since provider counts have been in steady decline (as 
discussed earlier), this may be an over-estimate.
    Another feature of the background check requirement is that States 
are required to check the State-based criminal, sex offender, and child 
abuse and neglect registries for any States where an individual resided 
during the preceding five years. To estimate how many individuals would 
require an additional State background check, we used data from the 
U.S. Census Bureau, which conducts a Current Population Survey that 
includes data on Migration and Geographic Mobility (Current Population 
Survey Data on Migration/Geographic Mobility, U.S. Census Bureau). 
Mobility data on employed individuals (inclusive of all races and 
genders) ages 25 to 64 show an out of State mobility rate of 
approximately two percent. Given that this data measures mobility in a 
given year and our requirement is for a five year window, we use a 10% 
mobility rate for this calculation. We assume that 10% of all child 
care staff members will require a check with another State and assign a 
prorated cost of the background checks minus the FBI check accordingly. 
We estimate the average annual ongoing money costs of this requirement 
to check other States to be less than a million dollars.
    Next, we monetized child care staff member time spent obtaining a 
comprehensive background check such as completing paperwork or other 
activities necessary to complete the check. We assumed that a check of 
the child abuse neglect registry takes 30 minutes, and that the other 
three components of a comprehensive background check take 1 hour 
combined (or 20 minutes each) for a total of 1.5 hours. We also assumed 
that each hour is worth $12.80, assuming $10 per hour for a child care 
staff member multiplied by 1.28 to account for benefits. (Employer Cost 
for Employee Compensation database, Bureau of Labor Statistics, 
adjusted to reflect the number of child care providers that are self-
employed) ACF estimated average annual opportunity costs (using a 3% 
discount rate) for all the background

[[Page 80547]]

check components of $6.3 million during the 3 year phase in period and 
an annualized cost of $7.1 million over the 10 year window.
    More extensive background checks will lead to greater numbers of 
job applicants and other associated people being flagged as risky, thus 
leading to additional types of cost. For example, a hiring search would 
need to be extended if the otherwise top candidate is revealed by a 
background check to be unsuitable to work with children. These costs 
that result from background checks are correlated with benefits; 
indeed, if this category of costs is zero, then the background check 
provisions of this proposed rule would have no benefits. However, due 
to lack of data, we have not attempted to quantify either this type of 
costs or the associated benefits and request comments that could inform 
such quantification.

                                                Table 4--Estimated Impacts of Background Check Provisions
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized (over 10 years)                 Total (over 10 years)
                                                Phase-in       Ongoing   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Background Checks...........................           8.4           4.5           6.5          6.7          6.9          64.6         58.6         52.2
Background Check Renewals...................           0.0          13.6           6.8          6.3          5.7          68.1         55.4         42.6
Background Checks with Other States.........           0.5           0.8           0.7          0.6          0.6           6.5          5.7          4.8
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................           8.9          18.9          14.0         13.6         13.2         139.2        119.7         99.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Opportunity Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Background Checks...........................           5.8           3.1           4.4          4.6          4.8          44.0         40.3         35.9
Background Check Renewals...................           0.0           4.4           2.2          2.0          1.8          22.1         18.0         13.8
Background Checks with Other States.........           0.5           0.4           0.5          0.5          0.5           4.7          4.1          3.6
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................           6.3           7.9           7.1          7.1          7.1          71.2         62.4         53.3
                                             -----------------------------------------------------------------------------------------------------------
        Total...............................          15.2          26.8          21.1         20.7         20.3         210.4        182.1        152.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Caregiver, teacher and director training. The CCDBG Act and this 
proposed rule require Lead Agencies to establish training requirements 
for caregivers, teachers, and directors of CCDF providers. The Act 
(section 658E(c)(2)(I)) and the proposed rule (Sec.  98.41(a)(1)) 
require pre-service or orientation training and on-going training in 
health and safety topics, including first aid and CPR, safe sleep 
practices, and other specified areas. In addition, the law (section 
658E(c)(2)(G)) and proposed rule (Sec.  98.44) require training and 
professional development, including training on child development.
    For this analysis, we estimated costs in the following areas: 
current number of CCDF caregivers, teachers, and directors (using FY 
2014 data) to meet new pre-service or orientation training 
requirements; on-going training for caregivers, teachers, and directors 
(which includes new incoming caregivers); and pre-service or 
orientation training for new caregivers, teachers, and directors.
    To establish a baseline, ACF used information reported by States in 
their FY 2014-2015 CCDF Plans and information from the 2011-13 Child 
Care Licensing Study to determine--for each of the training areas--
which trainings were already required by State policy for the following 
providers: centers, family homes, and group homes. The available data 
allowed us to distinguish between requirements for licensed providers 
and unlicensed providers, allowing us to further refine the cost 
estimate. Once current requirements for each State were identified, we 
were able to determine which new trainings would be required, and then 
apply the cost of receiving the balance of trainings.
    We reviewed the health and safety training delivery models in 
multiple States with a range of available training requirements to get 
a better sense of the range of costs for training. We found a wide 
range, from training provided at no-cost, to training packages that 
cost up to $170. Using these figures as a basis, a lower bound of $60 
and an upper bound of $140 was established for the total training 
package per caregiver. This range is informed by the fact that many no-
cost online training courses have already been developed, and thus are 
truly no cost, but even States taking advantage of no-cost online 
trainings would most likely have to use additional trainings with costs 
associated in order to meet all the requirements.
    Training costs were broken into three components: first-aid & CPR 
training, child development training, and then a package of all other 
basic health and safety requirements. For the purposes of this 
estimate, we created these groupings to better reflect the available 
cost information that we gathered through our research. First-aid and 
CPR are the most commonly offered trainings, so their costs were easier 
to identify. We separated child development training from the rest of 
the package to reflect the fact that the delivery of trainings in this 
area are more likely to be tied to broader on-going professional 
development curricula or programs, and may have a higher cost. Breaking 
the trainings down in this way allowed us to apply a pro-rated amount, 
based on what was currently required by States.
    This training requirement only applies to child care providers 
receiving CCDF subsidies. However, as with the background check 
estimate, another factor in the calculation was the number of 
caregivers, teachers and directors per provider that would need to 
receive the training, since the ACF-800 data captures the number of 
child care providers serving CCDF children not individual caregivers, 
teachers, or directors in these settings that would need to receive 
training. To compensate we applied a multiplier to each setting type 
(centers, family home, and group home). We used the same methodology 
described in the background check section above (based on data from the 
NSECE, ACF-801, and Caring for our

[[Page 80548]]

Children child-staff ratios), to create a weighted average of nine 
caregivers/teachers/directors per child care center. Unlike the 
background check requirement, the training would only apply to those 
providing care for children. For family child care homes, we estimate 
that one caregiver per site would be required to receive training, and 
two caregivers per group home.
    Next, we assumed that some caregivers, teachers, and directors may 
already have training in some of the topics, though they were not 
previously required, and reduced the total estimate by 10 percent. 
After applying these assumptions, to gaps in current State practice, we 
were able to estimate the present value cost of compliance with the new 
pre-service and orientation training requirement. A basic explanation 
of the calculation is ``the number of trainings required for compliance 
(by State and by provider type) multiplied by number of individuals 
trained multiplied by the cost per training (up to $140 per 
individual). We also assumed that some portion of individuals will have 
already received trainings that could apply to the new requirements, so 
we reduced the final estimate by ten percent. Using a 3% discount rate, 
the estimated cost is approximately $61 million over the 10 year period 
examined in this rule, or an annualized value of $7 million. We 
estimated that during the phase-in period, the required pre-service or 
orientation health and safety training has an average annual money cost 
of $18.8 million for the initial two year phase-in period and $3.0 
million in subsequent years. The increased cost in the initial years is 
due to the high cost of bringing current providers into compliance 
during the phase-in period while in subsequent years, the pre-service 
and orientation trainings would only apply to new providers. To 
estimate the ongoing cost of providing health and safety training in 
the required topic areas pursuant to the CCDBG Act to newly entering 
caregivers, teachers, and directors of CCDF providers who would not 
otherwise have been required to receive training, we had to predict 
turnover within the provider population. We took the midpoint of the 
turnover number we used for background checks--15 percent. Since, 
according to the NSECE, many caregivers new to a care setting are not 
new to the profession, we further reduced that estimate by 20 percent 
to account for the fact that some new caregivers, teachers, and 
directors will be coming from other CCDF care settings, and thus bring 
their training credentials with them. (Number and Characteristics of 
Early Care and Education (ECE) Teachers and Caregivers: Initial 
Findings from the National Survey of Early Care and Education (NSECE), 
OPRE Report #2013-38)
    To generate a cost of ongoing training, based on anecdotal evidence 
from State administrators, we assumed that ongoing trainings (e.g., 
maintaining competencies and certificates) would be the equivalent of 
approximately 20% of the total cost of pre-service and orientation 
training to the entire CCDF provider population and used that as our 
annual estimate. The estimated present value cost of renewing 
background checks for all individuals of ongoing training for existing 
providers over the 10 year period examined in this rule, using a 3% 
discount rate, is approximately $54 million. We estimated that on an 
ongoing basis, average annualized money costs for training would be 
$6.2 million (estimated using a 3% discount rate).
    Next we monetized caregiver/teacher/director time spent completing 
the requisite health and safety trainings. The National Center on Child 
Care Professional Development Systems and Workforce Initiatives funded 
by ACF reported that the training topics together would require a 
minimum of 20 hours. However, most caregivers will require only a 
subset of the training topics (e.g., SIDS training is only for 
caregivers that serve infants; transportation and child passenger 
safety is only as applicable). Using that as a baseline, for the 
purposes of this calculation we used a lower bound estimate of 15 hours 
and an upper bound of 30 hours to complete the required trainings. We 
used the midpoint of these two estimates for the final estimate. We 
assumed that each hour of staff time equals $12.80, the same as we did 
for background checks ($10 for child care caregivers multiplied by 1.28 
to account for benefits, but not overhead). (Employer Cost for Employee 
Compensation database, Bureau of Labor Statistics, adjusted to reflect 
the number of child care providers that are self-employed) We then 
applied a 10 percent reduction to account for caregivers who have 
fulfilled some training requirements that were not previously required. 
Using these assumptions, during the initial two year phase-in period 
(different than the 5 year phase-in period indicated in the table 
below) the average annual opportunity cost of monetized caregiver time 
on trainings is estimated to be approximately $63.2 million. The 
average annual opportunity cost after full implementation (years 3 and 
on) is estimated to be $25.4 million.

                                                    Table 5--Estimated Impacts of Training Provisions
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized (over 10 years)                 Total (over 10 years)
                                                Phase-in       Ongoing   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pre-Service & Orientation...................           9.8           3.5           6.6          7.0          7.5          66.4         61.4         56.0
On-going (existing providers)...............           5.6           7.0           6.3          6.2          6.1          62.9         54.4         45.5
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................          15.4          10.5          12.9         13.2         13.6         129.3        115.8        101.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Opportunity Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pre-Service & Orientation...................          27.8          10.0          18.9         19.9         21.2         189.2        174.9        159.5
On-going (existing providers)...............          15.9          19.9          17.9         17.6         17.3         179.2        155.0        129.7
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................          43.8          29.9          36.8         37.6         38.5         368.4        329.9        289.2
                                             -----------------------------------------------------------------------------------------------------------
        Total...............................          59.2          40.4          49.7         50.7         52.1         497.7        445.7        390.7
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 80549]]

    Administrative and information technology (IT) startup. Compliance 
with these health and safety provisions will require States to incur 
administrative costs and develop or expand their information technology 
systems and capacity. Given that there will be significant variation at 
the State level on these costs, rather than attempt to quantify the 
related costs for each provision, we applied a percentage of the total 
health and safety money costs (minus the hotline for parental 
complaints) to estimate the costs of both administrative and IT/
infrastructure costs. This analysis assumes 5 percent for 
administrative costs and an additional 5 percent for IT/Infrastructure 
costs. Since the annualized amount of all total health and safety money 
costs (minus the hotline for parental complaint) is approximately $165 
million, five percent of that would be approximately $8.3 million per 
year (using a 3% discount rate).
    Our 5 percent estimate for Administrative costs is based on Sec. 
658E(c)(3)(C) of the Act, which places a 5 percent limit on 
administrative costs, ``Not more than 5 percent of the aggregate amount 
of funds available to the State to carry out this subchapter by a State 
in each fiscal year may be expended for administrative costs incurred 
by such State to carry out all of its functions and duties under this 
subchapter.''
    The 5 percent estimate for IT/Infrastructure costs is based on 
OCC's expenditure data (ACF-696), which shows that Lead Agencies 
reported using a total of $68 million or approximately 1 percent of 
expenditures on computer information systems. Given the expected 
increase in IT costs associated with implementing the new rule, 
including possible costs associated with consultation, we increased 
that to 5 percent, which we considered a reasonable estimate given 
current expenditure levels.
    The estimated present value cost of both administrative costs and 
IT/Infrastructure costs over the 10 year period examined in this rule, 
using a 3% discount rate, is $72.4 million for each. This amounts to an 
annualized cost of approximately $8.3 million each for administrative 
and IT/Infrastructure costs.

                                               Table 6--Estimated Impacts of Health and Safety Provisions
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized (over 10 years)                 Total (over 10 years)
                                                Phase-in       Ongoing   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Monitoring..................................         125.9         157.0         141.5        139.5        136.7       1,414.7      1,225.3      1,027.2
Background Checks...........................           9.0          18.9          13.9         13.6         13.3         139.2        119.7         99.6
Training....................................          15.4          10.5          12.9         13.2         13.5         129.3        115.8        101.5
Admin.......................................           7.5           9.2           8.3          8.2          8.1          83.4         72.4         60.9
IT & Infrastructure.........................           7.5           9.2           8.3          8.2          8.1          83.4         72.4         60.9
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................         165.3         205.0         185.1        182.9        179.9       1,851.6      1,606.8      1,351.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Opportunity Cost ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Monitoring..................................           8.7          10.9           9.8          9.6          9.4          97.7         84.6         70.9
Background Checks...........................           6.3           7.9           7.1          7.1          7.1          71.1         62.4         53.3
Training....................................          43.8          29.9          36.8         37.6         38.5         368.4        330.0        289.3
                                             -----------------------------------------------------------------------------------------------------------
    Subtotal................................          58.8          48.7          53.7         54.3         55.0         537.2        477.0        413.5
                                             -----------------------------------------------------------------------------------------------------------
        Total...............................         224.1         253.7         238.8        237.2        234.9       2,388.8      2,083.8      1,764.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Consumer Education Provisions
    The CCDBG Act and the proposed rule includes several provisions 
related to improving transparency for parents and helping them to make 
better informed child care choices. Some of these provisions may 
require new investments by the States, Territories, and Tribes, 
including a consumer education Web site at Sec.  98.33(a) and a 
consumer statement at Sec.  98.33(d). Greater discussion of each of the 
provisions can be found at Subpart D. All costs associated with 
implementation of consumer education requirements are considered money 
costs (as opposed to opportunity costs) since they would involve an 
actual money transaction.
    Consumer education Web site. The proposed rule, per the CCDBG Act, 
would amend paragraph (a) of Sec.  98.33 to require Lead Agencies to 
create a consumer-friendly and easily accessible Web site as part of 
their consumer education activities. The Web site must at a minimum 
include five main components: (1) Lead Agency policies and procedures, 
(2) provider-specific information for all eligible and licensed child 
care providers (other than an individual who is related to all children 
for whom child care services are provided), (3) aggregate number of 
deaths, serious injuries, and instances of substantiated child abuse in 
child care settings each year for eligible providers, (4) referral to 
local child care resource and referral organizations, and (5) 
directions on how parents can contact the Lead Agency, or its designee, 
and other programs to help the parent understand information included 
on the Web site. We established our estimate based on current State 
practice and the market price of building a Web site that fulfills the 
requirements in this proposed rule.
    ACF conducted a comprehensive review of State Web sites and found 
35 States and Territories already have Web sites that meet at least 
some of the new requirements. Based on an analysis of current State 
consumer education Web sites, we assumed that any of the States that 
did not meet any of the new requirements would have all new costs. For 
States that met some of the requirements, we determined the percentage 
of work needed for the Web site to meet the requirements and multiplied 
the percentage of work needed by the cost estimate for building

[[Page 80550]]

and implementing a consumer education Web site. Components of a Web 
site that we looked for and included in our estimate were: The scope of 
the Web site in terms of which providers were included (e.g., whether 
it included licensed providers and unlicensed CCDF providers); health 
and safety requirements; posting the date of last inspection, including 
any history of violations or compliance actions taken against a 
provider; posting provider-specific information about the number of 
serious injuries and fatalities that occurred while in their care; 
information on the quality of the provider; and aggregate data on 
number of fatalities, serious injuries, and substantiated cases of 
child abuse that occurred in child care. From this review, we 
determined the amount of work needed for all States and Territories to 
build and implement the requirements of the consumer education Web 
site. We also consulted several organizations familiar with building 
Web sites to establish an upper and lower bounds for the estimate based 
on the proposed rule that covered the full range of implementation, 
from planning and initial set-up to beta testing. The upper and lower 
bound estimates include features that would make the Web site more 
user-friendly but may not be included in the proposed rule, including 
advanced search functions, such as a map feature, to make it easier for 
parents to find care.
    Building and implementing a new Web site would require some start-
up costs, so the cumulative estimated costs are higher during the 
initial five-year phase-in period. We established a lower bound 
estimate to include the web developer costs of planning, creating 
supporting documentation, site and infrastructure set-up, static page 
creation, initial data imports, the creation of basic and advanced 
search functions and data management systems, and testing. The upper 
bound adds development and improvement activities to modernize the Web 
site as technologies change. Ongoing annual costs include quality 
control and maintenance, providing customer support, and monthly data 
updates to the Web site. All of these estimates include salaries and 
overhead for the Web site developers and staff, weighted by the number 
of CCDF providers in each State.
    Based on our research, we used the same salary and overhead 
information ($67,000 for line staff) for all States. However, we 
believe that there will be different levels of effort depending on the 
number of providers in a State, so we assumed different FTEs based on 
the total number of child care providers in a State: States with more 
than 8,000 providers (3.0 FTE), states with between 3,000 and 8,000 
providers (2.50 FTE), and States with less than 3,000 providers (2.0 
FTE). 11 States had over 8,000 providers; 16 States and Territories had 
between 3,000 and 8,000 providers; and 29 States and Territories had 
fewer than 3,000 providers.
    Over the five-year phase-in period, we estimated an average annual 
money cost (estimated using a 3% discount rate) for just the building 
and maintenance of Web sites of $12.8 million and ongoing money costs 
of $11.8 million annually.
    The proposed consumer education Web site would require a list of 
available providers and provider-specific monitoring reports, including 
any corrective actions taken. The costs associated with collecting the 
information necessary to provide this information on the Web site is 
included in other parts of this RIA. For example, this RIA includes an 
estimate for the cost of implementing proposed monitoring and 
inspection requirements. There may also be effort associated with 
translating information from monitoring and inspection reports for an 
online format. However, since the monitoring cost assumes the full 
salary for monitoring staff and supervisors, we believe that it is 
reasonable to assume that the duties of these employees would include 
processing licensing information/findings.
    However, one of the proposed components of the consumer education 
Web site at Sec.  98.33(a)(2)(ii) is information about the quality of 
the provider as determined by the State through a quality rating and 
improvement system (QRIS) or other transparent system of quality 
indicators, if the information is available for the provider. For Lead 
Agencies that do not currently have a means for differentiating quality 
of care, there may be new money costs associated with creating the 
system of quality indicators necessary to obtain quality information on 
providers. Therefore, we are incorporating the cost of implementing a 
system of quality indicators into the cost estimate for the consumer 
education Web site.
    In order to estimate the costs of implementing the transparent 
system of quality indicators for the consumer education Web site, we 
modeled a sample system of quality indicators using the QRIS Cost 
Estimation Model (developed by the National Center on Child Care 
Quality Improvement funded by ACF). Costs were associated with the 
following components included in the cost estimation model: Quality 
assessment, monitoring and administration, and data and other systems 
administration. For each State, we identified the components of the 
sample system of quality indicators that each individual State or 
territory was missing. Costs were applied only in the areas that were 
lacking for States and territories with partial compliance. States and 
territories not meeting any of the components of the model had all new 
costs associated with each component. Using information from the CCDF 
FY 2014-2015 State Plans and the National Center on Child Care Quality 
Improvement, ACF determined which States had a system for 
differentiating the quality of care available in the state, which 
States could then use to provide information on the consumer education 
Web site. In order for States to be considered as already meeting this 
requirement, the State needed to have reported having a means for 
measuring and differentiating quality between child care providers. ACF 
recommends this system be a QRIS that meets high quality benchmarks, 
but as this NPRM does not propose requiring a QRIS, we counted other 
systems of quality indicators, such as tiered reimbursement based on 
quality, as meeting the proposed components of the consumer Web site. 
More than 45 States have sufficient means for differentiating quality 
and therefore we assumed no cost for those States.
    ACF estimates that during the five-year phase-in period the total 
national cost associated with implementing transparent systems of 
quality indicators has an average annual cost of $2.2 million. This 
estimate has been added to the cost of designing and implementing the 
consumer education Web site, with an estimated present value cost over 
the 10 year period examined in this rule, using a 3% discount rate, of 
$116.4 million, with an annualized cost of $13.3 million.
    Consumer statement. The proposed rule at Sec.  98.33(d) would 
require Lead Agencies to provide parents receiving CCDF subsidies with 
a consumer statement that includes information specific to the child 
care provider they select. The consumer statement must include health 
and safety, licensing or regulatory requirements met by the provider, 
the date the provider was last inspected, any history of violations, 
and any voluntary quality standards met by the provider. It also must 
disclose the number for the hotline for parents to submit complaints 
about child care providers, as well as contact information for local 
resource and referral agencies or other community-based supports that 
can assist parents in

[[Page 80551]]

finding and enrolling in quality child care.
    The information included in the consumer statement overlaps with 
much of the information required on the consumer education Web site. In 
their FY 2014-2015 CCDF Plans, 42 States and Territories report using 
their Web sites to convey consumer education information to parents 
about how their child care certificate permits them to choose from a 
variety of child care categories. Since many States and Territories are 
already using their Web sites to make available provider-specific 
information, we assume they would use their Web sites to begin building 
consumer statements. We assumed the consumer education Web site already 
includes the majority of information required in the consumer 
statement, including, if available, information about provider quality. 
However, Lead Agencies may have costs to pay for updates to their Web 
sites, including compiling information on the hotline and creating 
printable forms for hard copies of the consumer statement, if desired. 
This estimate also takes into account the number of providers in each 
State or Territory. During the five-year phase-in period, we estimated 
an average annual cost of the consumer statement provisions to be 
approximately $1 million and an average ongoing cost of $775,000 
annually.

                                               Table 7--Estimated Impacts of Consumer Education Provisions
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized (over 10 years)                 Total (over 10 years)
                                                Phase-in       Ongoing   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer education website..................          12.8          11.8          12.3         12.4         12.5         123.0        108.6         93.6
Consumer statement..........................           1.0           0.8           0.9          0.9          0.9           8.8          7.8          6.8
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................          13.8          12.6          13.2         13.3         13.4         131.8        116.4        100.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

3. Increased Average Subsidy per Child
    The reauthorized statute and this proposed rule include several 
policies aimed at increasing access to quality care for low-income 
children, as well as creating a fairer system for child care providers. 
As Lead Agencies implement these new policies, we expect that there 
will be an increase in the amount paid to child care providers, 
representing a budget impact on Lead Agencies. While we expect these 
changes to cause an increase in payments, we lack data on the amounts 
associated with each of these policies, and request comments about 
whether Lead Agencies expect these policies to cause an increase in the 
subsidy payment rates.
    We expect the following policies and practices to impose budget 
impacts on Lead Agencies:
     Setting payment rates based on the most recent market rate 
survey and at least at a level to cover health, safety, and quality 
requirements in the NPRM, and that provide families receiving CCDF 
subsidies access to care of comparable quality to care available to 
families with incomes above 85 percent State Median Income. Lead 
Agencies must also take into consideration the cost of providing higher 
quality child care services (Sec.  98.45(f));
     Delinking provider payments from a child's occasional 
absences by either paying based on a child's enrollment, providing full 
payment if a child attends at least 85 percent of authorized time, or 
providing full payment if a child is absent for five or fewer days in a 
month (Sec.  98.45(m)(2)); and,
     Adopting the generally-accepted payment practices of child 
care providers who do not receive CCDF subsidies, including paying on a 
part-time or full-time basis (rather than paying for hours of service 
or smaller increments of time) and paying for mandatory fees that the 
provider charges to private-paying parents (Sec.  98.45(m)(3)).
    Lead Agencies are required to implement each of these policies; 
however, several of them have a few options from which Lead Agencies 
may choose. We do not know which options Lead Agencies will choose, and 
therefore are not certain of which policies will impose budget impacts 
on which Lead Agencies. These impacts will also vary by Lead Agency 
depending on how many of the policies the Lead Agency adopted prior to 
this NPRM. We request comment on how Lead Agencies may choose to 
implement these different payment policies and practices.
    Because of the multiple policy options available to Lead Agencies 
and limited data on the effects of individual policies, it is difficult 
to estimate new impacts associated with each policy listed. However, we 
recognize that implementing these new policies will impact Lead Agency 
budgets and contribute to an increase in the amount of cost per child 
of child care assistance per child. Therefore, despite our uncertainty 
regarding specific effects, we would be overlooking a potentially 
significant new impact if we did not include an analysis of payment 
policies and practices in this RIA.
    These payment policies and practices will each have varying 
effects, but once they are put together, one likely outcome is an 
increase in the average annual subsidy amount per child. Therefore, in 
order to estimate the possible payment effects associated with these 
policies, we are bundling them together and estimating their total 
impact on the average annual subsidy per child. The actual impact will 
depend on how many of the policies the Lead Agency currently has in 
place and how the Lead Agency chooses to implement these new policies.
    The average annual subsidy rate per child in FY 2013 was $4,735. 
This amount is the starting point for our estimate. The average annual 
subsidy rate per child has historically increased each year. Therefore, 
we have built in a 2.59% increase for each of the ten years included in 
this cost estimate. This increase represents the historical increases 
in the average annual subsidy per child that were used to estimate the 
rate at which the subsidy would increase without this NPRM.
    This subsidy amount, including the increase that would be expected 
to happen regardless of reauthorization and this NPRM, provides the 
baseline for our ten year estimate. This average represents all 
settings, all types of care, all ages, and all localities, which masks 
great variation across the States/

[[Page 80552]]

Territories based on different costs of living or the higher costs 
associated with providing care to infants and toddlers. For example, 
the highest average annual subsidy per child paid by a State/Territory 
was $8,244 in FY 2013, while the lowest average annual subsidy per 
child paid by a State/Territory was $2,100. States/Territories with 
subsidy payments substantially lower than the average subsidy payment 
are likely to see higher increases in the subsidy rate than States/
Territories with subsidy payments closer to the average.
    To calculate the impacts, we estimated a phased-in increase in the 
average annual subsidy per child above the baseline, which includes the 
expected increase in the average annual subsidy per child regardless of 
this proposed rule. We expect that there will be a phase-in of the 
subsidy increase as Lead Agencies phase-in the new policies in 
reauthorization and this NPRM. The phase-in is expected from FY 2016 to 
FY 2018, with the increase in the subsidy being $165 in FY 2016, $265 
in FY 2017, and $515 in FY 2018. This represents the increase on top of 
the regular annual average subsidy per child, and not the estimated 
subsidy itself. Following the new market rate survey or alternative 
methodology that may lead to setting higher payment rates, we estimate 
the subsidy would increase by $765 in FY 2019, and stay steady in FY 
2020 and FY 2021. With the new market rate survey or alternative 
methodology in FY 2022, we expect an additional increase in the subsidy 
of $1,015, and estimate the subsidy will stay steady in FY 2023 and FY 
2024.
    These estimated increases to average annual subsidy are based on 
our assumptions about how quickly Lead Agencies may implement the 
policies, and the reality that the average annual subsidy will likely 
grow incrementally. Because of limited data, we chose to estimate a 
modest increase to the average annual subsidy per child. However, given 
the uncertainty regarding exactly how much the average annual subsidy 
per child may increase each year, we request comments and estimates 
regarding these new costs and how they may impact the subsidy rate in 
each State/Territory.
    The estimated increases included in this RIA are not 
recommendations for what ACF believes to be appropriate levels to set 
rates in States/Territories and should not be considered as the amount 
needed to provide an acceptable level of health and safety, or to 
provide high quality care. As mentioned earlier in this NPRM, ACF is 
very concerned about States'/Territories' current low payment rates. As 
stated earlier in this NPRM, ACF continues to stand behind the 75th 
percentile of current market rates, which remains an important 
benchmark for gauging equal access for children receiving CCDF-funded 
child care.
    The per child calculations used here are not recommendations for a 
per child subsidy, but rather represent an estimated cost of increasing 
the current national average annual subsidy per child as a result of 
these new policies. This is likely an underestimate of the payment 
amounts necessary to raise provider payment rates to a level that 
supports access to high quality child care for low-income children. We 
welcome comments on what provider payment rates may be necessary to 
support high quality child care.
    To calculate the estimated total increase in the average annual 
subsidy per child and the impacts associated with the new payment 
policies in this NPRM, we multiplied the estimated increase in the 
average annual subsidy per child (described above) by the FY 2013 CCDF 
caseload of 1.4 million children. Based on this formula, we estimate 
the average annual impact to be $437 million during the initial five 
year period, with the estimated present value over the full ten year 
period of $844.9 million (estimated using a 3% discount rate).
    As discussed above, there is a high level of uncertainty associated 
with this estimate. However, not including an estimate of the Lead 
Agency budget impacts associated with these policies would overlook 
significant policies in the legislation and this NPRM and fail to give 
an accurate picture of the costs associated with them. We appreciate 
any comments that provide additional information about State/Territory 
practice and costs associated with the proposed policies that could 
help to refine this analysis.
    OMB Circular A-4 notes the importance of distinguishing between 
costs to society as a whole and transfers of value between entities in 
society. The increases in subsidy payments just described impose budget 
impacts on Lead Agencies, but from a society-wide perspective, they 
only generate costs to the extent that they lead to new resources being 
devoted to quantity or quality of child care. Although we acknowledge 
this potential increase in resource use, for the technical purposes of 
this regulatory impact analysis, we will refer to the estimated subsidy 
payment impacts as transfers from Lead Agencies to entities bearing the 
existing cost burden (mostly child care providers who typically have 
low earnings), rather than societal costs.
    Supply building. This estimate takes into account costs associated 
with developing the supply of child care, which may include financial 
incentives and the use of grants and contracts to stabilize and/or 
target the supply of child care. For the purposes of this analysis, we 
are estimating the cost of grants and contracts, because the proposed 
rule at Sec.  98.16(i)(1) requires Lead Agencies to describe how they 
will address supply shortages through the use of grants or contracts in 
their CCDF Plans. The proposed rule at Sec.  98.50(b)(3) requires 
States and Territories to use some grants or contracts to provide 
direct services based on consideration of supply shortages of high 
quality care. Based on the FY 2014-2015 CCDF Plans, we identified 
States and Territories that currently make some use of grants and 
contracts, and those that do not. If a State currently uses grants or 
contracts, the State is already in compliance, and there is no cost 
associated with implementing this provision. Seventeen States, two 
Territories, and the District of Columbia currently use grants or 
contracts for direct services. For States without grants or contracts, 
there are two administrative costs: (1) The cost of identifying or 
analyzing supply shortages; and (2) the cost of awarding, overseeing 
and monitoring the grants or contracts. The value of the subsidy is not 
included as a cost since, in the absence of grants or contracts, the 
services would have been delivered through an alternate mechanism 
(e.g., certificates or vouchers). This value is more appropriately 
considered as a potential transfer. ACF has no information with which 
to calculate the value of potential transfers associated with the 
legislation and regulations. Building the supply of high quality care 
will require paying increased subsidy amounts, but this is addressed 
separately in the section above on Increased Average Subsidy per Child.
    ACF estimated that money costs associated with implementing the 
provisions at Sec. Sec.  98.16(i)(1) and 98.50(b)(3) are approximately 
$4.0 million on average over the phase-in period (which for this 
particular provision is three years, which is different than the phase-
in period in the table below) and $7.0 million on average thereafter. 
During the phase-in period, we expect the costs of these provisions to 
depend on State assessment of supply gaps and costs associated with 
implementing the infrastructure necessary to manage the grants and 
contracts. As an ongoing cost, we

[[Page 80553]]

assumed that small States would have 50 contracted sites, medium States 
would have 100 contracted sites, and large States would have 150 
contracted sites. The estimate also assumes identification or analysis 
of supply shortages is ongoing and occurs every two years. States have 
readily-available supply data from market rate surveys, child care 
resource and referral agencies, and other sources, so the cost of 
analysis is relatively low if done in-house using existing data.
    While using grants and contracts can build supply by providing 
stable payment and practices, there are other methods for building the 
supply quality child care. These include funding for start-up costs and 
financial incentives via attractive subsidy rates and Lead Agencies 
will be encouraged to consider a range of options for addressing supply 
shortages in their State.

                                           Table 8--Estimated Impacts of Increased Subsidy and Supply Building
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized (over 10 years)                 Total (over 10 years)
                                                Phase-in       Ongoing   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          Transfers from Lead Agencies to Child Care Providers ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased Subsidy...........................         478.8       1,281.0         880.0        839.1        786.1       8,799.0      7,372.4      5,907.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Supply Building.............................           5.1           6.8           6.0          5.8          5.7          59.5         51.3         42.9
                                             -----------------------------------------------------------------------------------------------------------
    Total (Transfers and Costs).............         483.9       1,287.8         885.9        844.9        791.8       8,858.5      7,423.7      5,950.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Analysis of Benefits

    The changes made by the CCDBG Act and the proposed rule have three 
primary beneficiaries: Children in care funded by CCDF (currently 1.4 
million), their families who need the assistance to work, pursue 
education or to go to school/training, and the roughly 415,000 child 
care providers that care for and educate these children. But the effect 
of these changes will go far beyond those children who directly 
participate in CCDF and will accrue benefits to children, families, and 
society at large. Many providers who serve children receiving CCDF 
subsidies also serve private-paying families, and all children in the 
care of these providers will be safer because of the new CCDF health 
and safety requirements. Further, the requirements for background 
checks and monitoring extend beyond just CCDF providers. The public at 
large also benefits when there is stable, high quality child care in 
cost savings due to greater family work stability; lower rates of child 
morbidity and injury; fewer special education placements and less need 
for remedial education; reduced juvenile delinquency; and higher school 
completion rates.
    In 2012, approximately 60 percent of children age 5 and younger not 
enrolled in kindergarten were in at least one weekly non-parental care 
arrangement. (U.S. Department of Education, Early Childhood Program 
Participation, from the National Household Education Surveys Program of 
2012, August 2013). We know that many child care arrangements are low 
quality and lack basic safeguards. A 2006 study conducted by the 
National Institute of Child Health and Development (NICHD) found that, 
``most child care settings in the United States provide care that is 
``fair'' (between ``poor'' and ``good'') and fewer than 10 percent of 
arrangements were rated as providing very high quality child care.'' 
(U.S. Department of Health and Human Services, National Institutes of 
Health, Study of Early Child Care and Youth Development, 2006) More 
recently, both the Department of Health and Human Services' (HHS) 
Office of Inspector General (OIG) and the Government Accountability 
Office (GAO) have identified serious deficiencies with health and 
safety protections for children in child care settings. (HHS Office of 
the Inspector General, Child Care and Development Fund: Monitoring of 
Licensed Child Care Providers, OEI-07-10-00230, November 2013) (Early 
Alert Memorandum Report: License-Exempt Child Care Providers in the 
Child Care and Development Fund Program, HHS OIG, 2013). (Government 
Accountability Office, Overview of Relevant Employment Laws and Cases 
of Sex Offenders at Child Care Facilities, GAO-11-757, 2011) We also 
know from a growing body of research that in addition to the importance 
of quality to health and safety on a child's immediate and long term 
future health, quality is important for children's long term success in 
school and in life (as described elsewhere in this section).
    While there are many benefits to children, families, providers and 
society from affordable, higher quality child care, there are 
challenges to quantifying their impact. CCDF provides flexibility to 
States, Territories, and Tribes in setting health and safety standards, 
eligibility, payment rates, and quality improvements. As a result, 
there is much variation in CCDF programs across States. Therefore, we 
do not have a strong basis for estimating the magnitude of the benefits 
of the CCDBG Act and the proposed rule in dollar amounts. While we are 
not quantifying benefits in this analysis, we welcome comment on ways 
to measure the benefit that the Act and the proposed rule will have on 
children, families, child care providers, and the public.
    As shown in the discussion below, there is evidence that the CCDBG 
Act and proposed rule's improvements to health and safety, quality of 
children's experiences, and stability of assistance for parents and 
providers will have a significant positive return on the public's 
investment in child care. We discuss these benefits as ``packages'' of 
improvements: (1) Health and safety; (2) consumer information and 
education; (3) family work stability; (4) child outcomes; and (5) 
provider stability.
1. Health and Safety
    One of the most substantial changes made by this proposed rule is a 
package of health and safety improvements, including health and safety 
requirements in specific topic areas, health and safety training, 
background checks, and monitoring and pre-inspections.
    Health and Safety Requirements. The CCDBG Act requires Lead 
Agencies to set requirements in baseline areas of

[[Page 80554]]

health and safety, such as CPR and first aid, and safe sleeping 
practices for infants. At their core, health and safety standards in 
this proposed rule are intended to make child care safer and thus lower 
the risk of harm to children.
    The CCDBG Act and the proposed rule are expected to lead to a 
reduction in the risk of child morbidity and injuries in child care. 
The most recent study on fatalities occurring in child care found 1,326 
child deaths from 1985 through 2003. The study also showed variation in 
fatality rates based on 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 risk to child safety. (Dreby, J., Wrigley, J., 
Fatalities and the Organization of Child Care in the United States, 
1985-2003, American Sociological Review, 2005) ACF collects data about 
the number of child care injuries and fatalities through the Quality 
Performance Report (QPR) in the CCDF Plan (ACF-118). In 2014, there 
were 93 child deaths in child care based on data reported by 50 States 
and Territories. The number of serious injuries to children in child 
care in 2014 was 11,047, with 35 States and Territories reporting.
    Various media outlets have also conducted investigations of unsafe 
child care and deaths of children. In Minnesota, the Star Tribune in 
Minneapolis reported in a series of articles in 2012 that the number of 
children dying in child care facilities ``had risen sharply in the past 
five years, from incidents that include asphyxia, sudden infant death 
syndrome (SIDS) and unexplained causes.'' The report found 51 children 
died in Minnesota over the five-year period. (Star Tribune, The Day 
Care Threat, 2012) In Indiana, an investigation by the Indianapolis 
Star found, ``21 deaths at Indiana day cares from 2009 to June 2013, 
and 10 more child deaths have since been reported.'' (Indianapolis 
Star, How Safe are Indiana Day Cares, 2013) Indiana recently passed 
legislation that raises standards for child care programs. In Kansas, 
the high incidence of fatalities prompted the Kansas legislature to 
implement new procedures to guide investigations of serious injury or 
sudden, possibly unexplained deaths in child care, particularly 
infants. (Kansas Blue Ribbon Panel on Infant Mortality, Road Map for 
Preventing Infant Mortality in Kansas, 2011) The case of Lexie Engelman 
was a rally cry of advocates for better health and safety requirements. 
The 13-month old child suffered fatal injuries in a registered family 
child care home in 2004 due to lack of supervision. As a result, Kansas 
enacted new protections such as requiring all providers to be licensed 
and regularly inspected, training for providers, and new rules of 
supervision. Since implementing ``Lexie's Law,'' Kansas jumped from 
46th to 3rd in the Child Care Aware of America annual ranking of State 
policies, and State officials have been able to use data to target 
regulatory action and provide information to the public in a much more 
timely way. State officials report that more stringent regulations have 
greatly enhanced State capacity to protect children.
    With respect to morbidity, 20 percent of SIDS deaths occur while 
children are in child care. (Moon, R.Y., Sprague, B.M., and Patel, 
K.M., Stable Prevalence but Changing Risk Factors for Sudden Infant 
Death Syndrome in Child Care Settings in 2001, 2005) Many of these 
deaths are preventable by safe sleep practices. Local review teams in 
one State found that 83 percent of SIDS deaths could have been 
prevented. (Arizona Child Fatality Review Program, Twentieth Annual 
Report, November 2013) As part of health and safety training 
requirements, the CCDBG Act and proposed rule require that caregivers, 
teachers, and directors serving CCDF children receive training in safe 
sleep practices. According to the FY 2014-2015 CCDF Plans, 
approximately 27 States and Territories already have safe sleep and 
SIDS prevention pre-service training requirements for child care 
centers, and 26 States and Territories have SIDS prevention pre-service 
training requirements for family child care homes. Requiring the 
remaining States and Territories to have safe sleep training for child 
care providers will likely help change provider practice and lower the 
risk of SIDS-related deaths for infants.
    Health and Safety Training. The proposed rule codifies the 
requirement of the CCDBG Act that CCDF caregivers, teachers, and 
directors undergo a pre-service or orientation training, as well as 
receive ongoing training, in the health and safety standards. The 
proposed rule also adds child development as a required topic for 
required training, consistent with the professional development and 
training provisions of the law. Knowledge of child development is 
important to understanding and implementing safety and health practices 
and conditions. Training in health and safety standards, particularly 
prevention of SIDS, should reduce child fatalities and injuries in 
child care. For example, the rate of SIDS in the U.S. has been reduced 
by more than 50 percent since the campaign in the early 1990s by the 
American Academy of Pediatrics on safe sleep practices with infants. 
(National Institutes of Health, Eunice Kennedy Shriver National 
Institute of Child Health and Human Development. Back to Sleep Public 
Education Campaign) Only 24 States currently require pre-service or 
orientation training to include SIDS prevention.
    Background Checks. The new background check requirements are 
expected to prevent individuals with criminal records from working for 
child care providers. Data from two States show that 5 to 10 percent 
and 3 to 4 percent, respectively, of background checks result in 
criminal record ``hits'' that disqualify the provider. To the extent 
that these individuals would have otherwise worked in child care 
settings, thereby increasing the risk of maltreatment or injury to a 
child, we assume that background checks yield a positive benefit for 
child health and safety. That is, background checks serve a real 
purpose in preventing a small proportion of potentially dangerous 
individuals from providing care to children.
    Monitoring. The CCDBG Act and this proposed rule require States to 
conduct monitoring visits for all child care providers, including 
license-exempt providers (except, at the Lead Agency option, those that 
serve relatives). Licensed providers must receive a pre-licensure 
inspection and annual, unannounced inspections. License-exempt CCDF 
providers (except at the Lead Agency option those that serve relatives) 
must have annual inspections for health, safety and fire standards. 
Currently, 15 States do not conduct a licensing pre-inspection visit of 
family child care; 12 States do not conduct pre-inspections on group 
homes; and one State does not pre-inspect child care centers. Nineteen 
States do not inspect family child care providers each year, 22 States 
do not conduct annual visits for group homes, and 10 States do not 
visit child care centers on an annual basis. It is reasonable to expect 
that more stringent health and safety standards and their enforcement 
through pre-inspections and annual licensing inspections will result in 
fewer serious injuries and child fatalities in child care.
    Child Abuse Reporting and Training. Nationally, there are 
approximately 12.5 million children in child care settings. With a rate 
of over 10 children per thousand being victims of substantiated abuse 
or neglect, there are over 100,000 children estimated to be victims of

[[Page 80555]]

abuse in child care settings. This proposed rule contains a number of 
provisions designed to prevent child abuse and neglect. Under the CCDBG 
Act and this proposed rule, Lead Agencies must certify that child care 
caregivers, teachers, and directors comply with child abuse reporting 
requirements of the Child Abuse Prevention and Treatment Act. The 
proposed rule also requires training on ``recognition and reporting of 
suspected child abuse and neglect'', which would equip caregivers, 
teachers, and directors with training necessary to report potential 
abuse and neglect. The rule also requires training in child development 
for CCDF caregivers, teachers, and directors. 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, Child Welfare, 1997) To the extent that this 
training would have a similar effect on caregivers, teachers, and 
directors of CCDF providers, we expect there to be some decrease in 
child abuse within child care settings.
    In addition to the tragedy of injuries and fatalities in child 
care, there are tangible costs such as medical care, a parent's absence 
from work to tend to an injured child, the loss for the family, and 
loss of lifetime potential earnings for society. According to the 2014 
Quality Performance Report, there were 11,407 injuries (defined as 
needing professional medical attention) and 93 fatalities reported in 
child care. We believe these numbers are lower than the actual 
incidences because some Lead Agencies have difficulty accessing this 
information collected by other agencies.
2. Consumer Information and Education
    As one research study said, ``Child care markets would work more 
effectively if parents had access to more information about program 
quality and help finding a suitable situation. This would cut the cost 
of searching for care and increase the likelihood of more comparison 
shopping by parents.'' (Helburn, S. and Bergmann, B., America's Child 
Care Problem: The Way Out, 2002) The CCDBG Act and proposed rule 
require the Lead Agency to provide consumer education to parents of 
eligible children, the general public, and child care providers. This 
includes a consumer-friendly and easily accessible Web site about 
relevant Lead Agency processes and provider-specific information. The 
CCDBG Act and the proposed rule also require a range of information for 
parents, including the availability of child care services and other 
assistance for which they might be eligible, best practices relating to 
child development, how to access developmental screening, and policies 
on social-emotional behavioral health and expulsion. The proposed rule 
also requires a consumer statement for families receiving subsidies. 
Taken together, these provisions should improve parents' ability to 
make fully informed choices about child care arrangements.
    The consumer education package also provides benefits to parents in 
regards to the value of their time. Most parents want to know about 
health and safety records, licensing compliance, and quality ratings 
when deciding on a child care provider. However, this research can be 
very time consuming because of barriers to accessing the information 
needed to make a fully informed decision. For example, while all Lead 
Agencies must make substantiated complaints available to the public, 
some States previously required that people go to a government office 
during regular business hours to access these records. It is not 
reasonable to expect a parent who is working to take that time to 
navigate these bureaucratic requirements.
    The proposed rule's package of consumer education provisions, 
including the consumer-friendly Web site, addresses the aforementioned 
information barrier by helping to provide parents with important 
resources in a manner that fits their needs.
3. Family Work Stability/Improved Labor Force Productivity
    The CCDBG Act and the proposed rule promote continuity of care in 
the CCDF program through family-friendly policies--it requires Lead 
Agencies to implement minimum 12-month eligibility redetermination 
periods, ensures that parents who lose their jobs do not immediately 
lose their subsidy, minimizes requirements for families to report 
changes in circumstances, and provides more flexibility to serve 
vulnerable populations, such as children experiencing homelessness, 
without regard to income or work requirements.
    Benefits to employers. There is a strong relationship between the 
stability of child care and the stability of the workforce for 
employers. The cost to businesses of employee absenteeism due to 
disruptions in child care is estimated to be $3 billion annually. 
(Shellenback, K., Child Care & Parent Productivity: Making the Business 
Case, Cornell University: Ithaca, NY. 2004) The eligibility provisions 
of the CCDBG Act and this proposed rule will allow parents to work for 
longer stretches without interruptions to their child care subsidy, and 
will benefit parents by limiting disruptions to their child care 
arrangements. These policies in turn also provide benefits to employers 
seeking to maintain a stable workforce.
    Studies show a relationship between child care instability and 
employers' dependability of a stable workforce. In one study, 54 
percent of employers reported that child care services had a positive 
impact on employee absenteeism, reducing missed workdays by as much as 
20 to 30 percent. (Friedman, D.E., Child Care for Employees' Kids, 
Harvard Business Review, 1986) In addition, 63 percent of employees 
surveyed at American Business Collaboration (ABC) companies in 10 
communities across the country reported improved productivity when a 
parent was using high quality dependent care, and 40 percent of 
employees reporting spending less time worrying about their families, 
35 percent were better able to concentrate on work, and 30 percent had 
to leave work less often to deal with family situations. (Abt 
Associates, National Report on Work and Family, 2000) A 2010 study 
examined the impact of child care subsidy receipt by New York City 
employees and employees of subcontracted agencies in the health care 
sector. The study looked at the variables of attendance, work 
performance, productivity, and retention of employees. Results showed 
that subsidy receipt had a positive impact on work performance; 
whereas, the loss of the subsidy had a negative effect. After the 
subsidy period ended and parents were faced with less stable child care 
arrangements, participants self-reported a decrease in their work 
performance and in their work productivity coupled with an increase in 
tardiness and work/family conflict. (Wagner, K.C., Working Parents for 
a Working New York Study, Cornell and New York Child Care Coalition, 
2010)
    Benefits to parents. The lack of reliable and dependable child care 
arrangements negatively affects parents' income, hours worked, work 
performance, and advancement opportunities. To the extent that these 
new requirements will reduce barriers to retaining child care 
assistance for CCDF families, the new rule will

[[Page 80556]]

mitigate some of the disruption currently experienced by low-income 
families. Studies have shown that many parents face child care issues 
that can disrupt work, impacting both the parent and their employers. 
One researcher, using data from the Survey of Income and Program 
Participation (SIPP), found that 9-12 percent of families reported 
losing work hours as a result of child care disruptions. (Boushey, H., 
Who Cares? The Child Care Choices of Working Mothers, Center for 
Economic and Policy Research Data, 2003) Another study showed that 29 
percent of parents experienced a breakdown in their child care 
arrangement in the last 3 months. (Bond, J., Galinsky, E., and 
Swanberg, J., The 1997 National Study of the Changing Workforce, 1998)
    These child care disruptions can negatively impact parental 
employment. For example, a survey of over 200 mothers working in the 
restaurant industry in five cities: Chicago, Washington, DC, Detroit, 
Los Angeles, and New York found that instability in child care 
arrangements negatively affected their ability to work desirable shifts 
or to move into better paying positions at the restaurant. More than 
half of the mothers surveyed lacked alternative child care options, 
which could lead to being late or having to leave early from work if 
there was a problem with their child care. (Restaurant Opportunities 
Centers United, et al., The Third Shift: Child Care Needs And Access 
For Working Mothers In Restaurants, Restaurant Opportunities Centers 
United, 2013)
4. Child Outcomes and Human Capital Development
    Beyond implementing health and safety standards, the CCDBG Act 
states that two of the purposes of the grants are improving child 
development of participating children and increasing the number and 
percentage of low-income children in high-quality child care settings. 
This proposed rule places significant emphasis on policies that support 
those goals.
    Child care continuity. The eligibility and redetermination 
provisions benefit children as well as parents and employers. 
Continuity in child care arrangements can have a positive impact on a 
child's cognitive and socio-emotional development. (Raikes, H. Secure 
Base for Babies: Applying Attachment Theory Concepts to the Infant Care 
Setting, Young Children 51, no. 5, 1996) Young children need to have 
secure relationships with their caregivers in order to thrive. 
(Schumacher, R. and Hoffmann, E., Continuity of Care: Charting Progress 
for Babies in Child Care Research-Based Rationale, 2008) Children with 
fewer changes in child care arrangements are less likely to exhibit 
behavior problems. (de Schipper, J.C., Van Ijzendoorn, M. & Tavecchio, 
L., Stability in Center Day Care: Relations with Children's Well-being 
and Problem Behavior in Day Care, Social Development, 2004) Conversely, 
larger numbers of changes have been linked to less outgoing and more 
aggressive behaviors among four- and five-year-old children. (Howes, C. 
& Hamilton, C.E., Children's Relationships with Caregivers: Mothers and 
Child Care Teachers, Child Development, 1992) Continuity of care 
policies support children's ability to develop nurturing, responsive, 
and continuous relationships with their caregivers. For school-age 
children, continuity of care is important because it provides 
additional exposure to programming that can lead to improved school 
attendance and academic outcomes. (Welsh, M. Russell, C., Willimans, 
I., Promoting Learning and School Attendance through After-School 
Programs, Policy Studies Associates, 2002.)
    Child care quality beyond health and safety. Health and safety form 
the foundation of quality but are not sufficient for high quality 
development and learning experiences. When children have high quality 
early care and education, there are benefits to the child and to 
society. (Yoshikawa, H., et al., Investing in Our Future: The Evidence 
Base on Preschool Education, 2013) The North Carolina Abecedarian 
Project demonstrated both categories of benefits. The Project enrolled 
very low-income children from infancy to kindergarten in full day, full 
year child care with high quality staff, environments, and curricula. A 
longitudinal study following them through age 21 found significant 
returns on the investment in terms, such as greater school readiness 
that led to fewer special education and remedial education placements, 
higher rates of high school completion and jobs, fewer teen 
pregnancies, and lower rates of juvenile delinquency. (Masse, Leonard 
N. and Barnett, Steven W., A Benefit Cost Analysis of the Abecedarian 
Early Childhood Intervention, National Institute for Early Education 
Research; New Brunswick, NJ). Other cost-benefit analyses of other 
publicly funded preschool programs with similarly high quality 
standards, such as the Chicago Child Parent Centers, demonstrated a 
high return to society on the public investment. (``Age 21 Cost-Benefit 
Analysis of the Title I Chicago Child-Parent Centers.'' Educational 
Evaluation and Policy Analysis, 24(4): 267-303.)
    Recognizing the importance of quality as well as access, the CCDBG 
Act and this proposed rule promote efforts to improve the quality of 
child care. Chief among these changes is the increased portion of the 
grant that a Lead Agency must use, at a minimum, for quality 
improvements. The reauthorized Act increases the prior minimum four 
percent quality spending requirement to nine percent over time. It also 
requires States to invest in quality by spending an additional 3 
percent for infant and toddler quality. States use the quality dollars 
for a range of activities that benefit children and providers assisted 
with CCDF funds and for early childhood systems as a whole, such as 
State early learning guidelines, professional development, technical 
assistance such as coaching and mentoring as part of the quality rating 
and improvement system, scholarships for postsecondary education, and 
upgrades to materials and equipment.
    A critical element in the quality of child care is the knowledge 
and skill of the child care workforce. The CCDBG Act and the proposed 
rule emphasize the importance of States creating and supporting a 
progression of professional development, starting with pre-service, and 
which may include postsecondary education. Quality professional 
development is critical to creating a workforce that can support 
children's readiness for success in school and in later years.
    States have a variety of ways to build the supply of high quality 
care including financial incentives and the use of grants and 
contracts. The CCDBG Act requires the Plan to provide assurances that 
parents of eligible children who receive or are offered child care 
assistance are given the option of enrolling with a provider that has a 
grant or contract or a child care certificate. Without limiting or 
discouraging the use of certificates to provide assistance to families, 
the proposed rule does note the role that grants or contracts can play 
in building the supply and quality of child care, particularly in 
underserved areas and for special populations. Currently 20 States are 
using grants or contracts along with certificates as part of a mixed 
funding system. Some provide grants or contracts to increase the supply 
of providers serving children with special needs, infants and toddlers, 
school-age children, or underserved geographic areas. Other States are 
providing grants or contracts to providers that meet and sustain higher 
standards of quality.

[[Page 80557]]

    As detailed above, there is a growing amount of evidence and 
recognition that children who experience high quality early childhood 
programs are more likely to be better prepared in language, literacy, 
math and social skills when they enter school, and that these may have 
lasting positive impacts through adulthood. Because of the strong 
relationship between early experiences and later success, investments 
in improving the quality of early childhood and before- and after-
school programs can pay large dividends.
5. Provider Stability
    The CCDBG Act and proposed rule include provisions to strengthen 
the stability of providers serving CCDF-assisted children. Studies that 
have interviewed child care providers participating in the subsidy 
system have shown the importance of policies that improve and stabilize 
payments to the providers. (Sandstrom, H, Grazi, J., and Henly, J.R., 
Clients' Recommendations for Improving the Child Care Subsidy Program, 
Urban Institute: Washington, DC, 2015; Adams, G., Snyder, Katherine, 
and Tout, Kathryn, Essential But Often Ignored: Child care providers in 
the subsidy system, Urban Institute: Washington, DC 2003; Oliveira, 
Peg, The Child Care Subsidy Program Policy and Practice: Connecticut 
Child Care Providers Identify the Problems, Connecticut Voices for 
Children, 2006)
    In addition to rates that reflect the cost of providing quality 
services, the manner in which providers are paid is important to the 
stability of the child care industry. Provider instability has a domino 
effect that can lead to parent employment instability, an outcome that 
undercuts the CCDBG Act's core principle of ensuring that CCDF children 
have equal access to child care that is comparable to non-CCDF 
families.
    The CCDBG Act and the proposed rule require Lead Agencies to pay 
providers in a timely manner based on generally accepted payment 
practices for non-CCDF providers. Lead Agencies also must de-link 
provider payments from children's absences to the extent practicable. 
Child care providers have many fixed costs, such as salaries, 
utilities, rent or mortgage.
    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 has 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. Thus, lack of timely payments and rules on 
payments that lead to disincentives to taking children with chronic 
illnesses or other reasons for absences undercut the equal access 
provision. By addressing these issues, these provisions of the law and 
proposed rule will provide increased stability and benefits for CCDF 
providers and the families they serve.
    Market Rate or Alternative Methodology. The child care market often 
does not reflect the actual costs of providing child care, let alone 
the higher costs of quality child care. Financial constraints of low-
income parents prevent child care providers from setting their prices 
to fully cover the cost of care (National Women's Law Center, Building 
Blocks: State Child Care Assistance Policies, 2015; Child Care Aware, 
Parents and the High Cost of Child Care, 2014. Currently, relative to 
the cost of providing quality care, CCDF subsidy payment rates are low 
in many States.
    A report from the National Women's Law Center on State subsidy 
policies states that, ``only one state had reimbursement rates at the 
federally recommended level in 2014, a slight decrease from the three 
states with rates at the recommended level in 2013, and a significant 
decrease from the twenty-two states with rates at the recommended level 
in 2001. Thirty-seven States had higher reimbursement rates for higher-
quality providers in 2014--an increase from thirty-three states in 
2013. However, in more than three-quarters of these states, even the 
higher rates were below the federally recommended level in 2014.'' 
(Turning the Corner: State Child Care Policies 2014. Schulman, K. and 
Blank, H. National Women's Law Center, Washington, DC 2014) The CCDBG 
Act and the proposed rule require Lead Agencies to set provider payment 
rates based on the current, valid market rate survey or alternative 
methodology. To allow for equal access, the rule proposes that Lead 
Agencies set base payment rates sufficient to support implementation of 
the health, safety and quality requirements in the NPRM. Establishing 
base rates at these levels is important to ensure that providers have 
the resources they need to meet minimum requirements and that providers 
are not discouraged from serving CCDF children. With subsidy payments 
higher than the aforementioned base rate, providers can exceed the 
minimum requirements of health and safety and quality. In doing so, 
more providers will be able to serve CCDF-assisted children and more 
quality providers may decide to participate in the subsidy system--
giving parents more choices for their children's care. Currently there 
has been a downward trend in the number of CCDF providers, and 
providing for a stronger base rate will help mitigate this effect.

C. Distributional Effects

    As part of our regulatory analysis, we considered whether changes 
would disproportionately benefit or harm a particular subpopulation. As 
discussed above, benefits accrue both directly and indirectly to 
society. In order to implement the requirements of the CCDBG Act and 
the NPRM, States may have to make key decisions about the allocation of 
resources, and some may shift priorities during the start-up phase and 
possibly continuing in later years once the State is fully implementing 
these requirements. The true impact partially depends on the overall 
funding level. The President's FY2016 Budget request includes 
additional funding to help States implement the policies required by 
the reauthorized CCDBG Act and this proposed rule, as well as 
significant new resources across a ten year period to expand access to 
child care assistance for all eligible families with children under age 
four years of age. If funding increases sufficiently, both quality and 
access could be improved.
    While, depending on State behavior, there may be some 
distributional effect related to any cost, below is a discussion of two 
policy areas that represent specific distributional effects. The 
first--changes to subsidy policy required by the CCDBG Act--may result 
(depending on how the State chooses to implement the policy) in 
families receiving subsidies for a longer period of time, while other 
families may not be able to access subsidies (absent an increase in 
funding for the CCDF program). The second area--increased statutory 
quality spending requirements--may result in a change in which families 
receive benefits, or how they receive them, by shifting resources away 
from direct services to quality spending.
    Minimum 12-month eligibility and related provisions. In order to 
reduce administrative burden and to improve the stability and 
continuity of care in the CCDF program, the CCDBG Act and this proposed 
rule at Sec. Sec.  98.20 and 98.21 require Lead Agencies to adopt a 
number of eligibility policies, including

[[Page 80558]]

a 12-month minimum period for families to recertify their eligibility. 
This package of eligibility policies will allow families to maintain 
their eligibility regardless of temporary changes in work or training/
education status or income changes (as long as income remains below 85% 
of State Median Income). Subsidy receipt is also predictive of more 
stable child care arrangements. (Brooks, et. al., Impacts of child care 
subsidies on family and child well-being, Early Childhood Research 
Quarterly, 2002) Stability of child care arrangements can affect 
children's healthy development, especially for vulnerable children who 
may be at special risk of poor developmental outcomes. (Adams, G., and 
Rohacek, M., Child Care Instability: Definitions, Context and Policy 
Implications, Urban Institute, 2010) Prior to reauthorization, about 
half the States had eligibility periods less than 12 months--typically 
providing only six months of eligibility--and families churned on and 
off the caseload.
    Based on qualitative research and discussions with CCDF 
participants, we expect that longer eligibility periods, and the 
related policies in the Act and this rule, will increase the average 
length of time that participating families receive child care 
subsidies. As part of this RIA, we used CCDF administrative data to 
model the policy change in the Act and proposed rule wherein all States 
would have a minimum of 12-month eligibility periods, to predict 
whether CCDF families would have longer participation durations and 
whether there would be any impact on the unduplicated number of 
families receiving CCDF assistance. The calculations in this estimate 
are informed by a demonstration project that randomly assigned working 
Illinois families with moderate incomes (i.e., above the normal 
eligibility thresholds) to one of three groups. (Michalopoulos, C., 
Lundquist, E., and Castells, N., The Effects of Child Care Subsidies 
for Moderate Income Families in Cook County, Illinois, MDRC, 2010) 
Although two of the three groups were both eligible for child care 
subsidies, one of the groups required recertification every six-months 
and the other required recertification every 12-months. Over a 24-month 
follow-up period, the families assigned to 12-month recertification 
periods received child care subsidies an average of 2.5 months more 
than families assigned to 6-month recertification periods.
    We also examined a ``natural experiment'' in Georgia, which changed 
its recertification period from six months to 12 months in April 2009. 
A preliminary analysis found that families had longer spell lengths 
after the policy change than families that entered care before the 
policy change. Although it is uncertain what the driving factor for 
this was, these findings from Georgia support the hypothesis that 
longer recertification periods increase the number of months that 
recipient families participate in the program.
    Assuming that States will maintain their average monthly caseloads 
once they implement the 12-month recertification periods, but will 
serve fewer unique children over that time period because of longer 
subsidy participation durations, we estimated the number of families 
that could be impacted at current funding levels. Decreased churn would 
not decrease the amount of assistance given, but may result in a 
decrease in the total number of families served over the course of a 
given year. We used disaggregated CCDF administrative data from FY 2010 
(to determine the ratio between unique annual counts and average 
monthly caseloads) and average monthly caseload totals from FY 2012 
(which showed 609,800 children being served in an annual month in the 
25 States with eligibility periods less than 12 months). With this 
data, we estimated the unique caseload size of each State in FY 2012, 
which is the last year for which we have caseload estimates and 
documentation of policies (which showed 1,053,773 unique children 
received services at some point during the year in the 25 States). 
Based on these assumptions and using the results from the Illinois 
study to estimate the impact on length of subsidy receipt, we estimate 
that the reduction in unique children served in a given year after the 
policy change will be approximately 162,000 children.
    Increase in Quality Set-aside. As discussed above in the analysis 
of benefits, the increased quality set-aside and the new infant and 
toddler set-aside required in reauthorization will benefit children 
and, when coupled with training and higher rates, child care providers. 
Lead Agencies are not required to use quality funds to support the 
quality of care for only CCDF children. Thus, quality investments often 
support the entire child care system in the State, especially because 
of the high investments in licensing, training, and quality rating and 
improvement systems. Therefore, these increased investments will have 
an impact broader than families receiving CCDF assistance, and will 
continue to improve the quality of care available to all children, 
regardless of subsidy receipt.
    We do not expect the increase the quality set-aside to have a 
significant impact on caseload, particularly since the majority of 
states are already spending more than the new 9% quality set-aside 
requirement (see Table 9 below). Others will have time to phase-in the 
increases and will likely use these additional increases to cover 
several of the new health and safety and professional development 
requirements. Therefore, any caseload impact would have already been 
included in the costs associated with those provisions. However, we 
recognize some Lead Agencies will have to reallocate funds currently 
being used for other activities, including direct services, so we are 
discussing possible distributional effects here. Currently, about 12 
percent of CCDF expenditures are spent on quality improvement 
activities, including targeted funds included in appropriations. This 
amount is equivalent to the full percentage to be set aside for the 
quality and infant and toddler set-asides in FY 2020, once fully 
phased-in. Therefore, we do not expect a significant change in the 
national percentage of funds spent on quality activities, including 
those targeted at infants and toddlers. However, this is a national 
figure and may not provide a complete picture of how many States and 
Territories might have to adjust their quality expenditures to meet new 
requirements.
    Using FY 2011 CCDF expenditure data, we did an analysis of the 
number of States and Territories that will have to increase their 
quality expenditures in order to meet the requirements in the CCDBG Act 
and incorporated into this proposed rule at Sec.  98.50(b)(1). (Note: 
Compliance with spending requirements is determined after a full grant 
award is complete. States and Territories have three years to complete 
their grant awards. Therefore, the most recent award year for which we 
have data is FY 2011.) We included regular quality expenditures as well 
as the amount of funds spent for the ``quality expansion'' and 
``school-age/resource and referral'' targeted funds. The infant and 
toddler targeted funds were not included in this analysis because they 
have now been incorporated into the statute. Instead, we have a 
separate analysis of the new infant and toddler set-aside below. Below 
is a summary of the number of States and Territories at different 
amounts of quality expenditures:

[[Page 80559]]



                      Table 9--Quality Expenditures
------------------------------------------------------------------------
                                                             Number of
            % Quality expenditures (FY 2013)                states and
                                                            territories
------------------------------------------------------------------------
<7%.....................................................               5
7% (effective FY 2016 and FY 2017)......................               5
8% (effective FY 2018 and FY 2019)......................               7
9% (effective FY 2020 and succeeding years).............               4
>9%.....................................................              35
------------------------------------------------------------------------

    Based on this data, 39 States will not have to adjust the percent 
of funds they expend on quality activities, while five States and 
Territories will have to increase the percent of funds they spend on 
quality activities by FY 2016. For the other States and Territories, it 
varies when each will need to change the amount they spend on quality 
activities--10 States will have to adjust by FY 2018 to meet the eight 
percent requirement; and 17 States will have to adjust by FY 2020 to 
meet the nine percent requirement.
    In addition to the primary set-aside for quality activities, this 
NPRM incorporates at Sec.  98.50(b)(2) a new requirement of the CCDBG 
Act that, beginning in FY 2017 and each succeeding fiscal year, Lead 
Agencies must expend at least three percent of their full awards 
(including discretionary, mandatory, and federal and State matching 
funds) on activities that relates to the care of infants and toddlers. 
Since FY 2001, federal appropriations law has included a requirement 
for Lead Agencies to spend a certain amount of discretionary funds on 
activities to improve the quality of care for infants and toddlers. In 
FY 2015, this set-aside was $102 million. The new three percent 
reservation represents an increase to about $237 million based on FY 
2011 State and Territory expenditures.
    Lead Agencies do not currently report how much of their general 
quality funds are spent on activities targeted to improving care for 
infants and toddlers. Therefore, we only have the amount of targeted 
funds they spent on infant and toddler activities, which for all but 
five States and Territories is below the new three percent requirement. 
The increase necessary ranges from State to State, from $38,000 for 
Idaho to $21 million for New York. The average increase will be $2.5 
million per State. However, as these estimates do not include any 
regular quality funds currently used to improve the quality of care for 
infants and toddlers, they are likely overestimating the required 
increases for the majority of States and Territories.

D. Analysis of Regulatory Alternatives

    In developing this proposed rule, we considered alternative ways to 
meet the purposes of the reauthorized CCDBG Act. There are areas of the 
CCDBG Act that we are interpreting and proposing to clarify through 
this rule. Our interpretation of the law remains within the legal 
parameters of the statute and is consistent with the goals and purposes 
of the law. Below we include a discussion of areas that we clarified 
through the proposed rule: Background checks for regulated and 
registered providers and background checks for non-caregivers.
    For the purposes of this analysis, we are discussing the costs, 
benefits, and potential caseload impacts related to meeting these new 
requirements. However, it is particularly difficult to predict caseload 
impact due to a variety of unknown factors, including future federal 
funding levels. Even if we were to assume level federal funding, States 
could allocate new funds, redirect current quality spending (e.g., by 
changing quality activities to focus on health & safety), shift costs 
to parents or providers, or use a combination of these approaches to 
pay for new requirements. The caseload estimates in the following 
discussion are based on the assumption that the entire cost of meeting 
this requirement are covered by redistributing funds that would 
otherwise be used for direct services. Therefore, these caseload impact 
figures should be considered upper bound estimates and are mostly 
likely significant overestimates.
    Background Checks for Regulated and Registered Providers: At Sec.  
98.43(a)(1)(i), we propose to apply the requirements to all child care 
staff members (including prospective child care staff members) of all 
licensed, regulated, or registered child care providers and all child 
care providers eligible to deliver CCDF services. This language 
includes all licensed, regulated, or registered providers, regardless 
of whether they receive CCDF funds and all license-exempt CCDF 
providers (with the exception of those related to all children in their 
care).
    The alternative to this policy would be to limit background checks 
to only providers receiving CCDF assistance. While we acknowledge that 
others may interpret the statute differently; however, we firmly 
believe that there is justification for applying this requirement in 
the broadest terms for two important reasons. First, it is our strong 
belief that all parents using child care deserve this basic protection 
of knowing that those who are trusted with the care of their children 
do not have criminal backgrounds that may endanger the well-being of 
their children.
    Second, limiting those child care providers who are subject to 
background checks, has the potential to severely restrict parental 
choice and equal access for CCDF children. If all child care providers 
are not subject to comprehensive background checks, providers could opt 
to not serve CCDF children thereby restricting access. Creating a 
bifurcated system in which CCDF children have access to only a portion 
of child care providers who meet applicable standards would be 
incongruous with the purposes of the CCDBG Act and would not serve to 
advance the important goal of serving more low-income children in high 
quality care.
    Choosing this would present additional costs to the alternative of 
limiting background checks to only CCDF providers. The cost of the 
background check requirement for only CCDF providers would be 
approximately $11.9 million per year (estimated using a 3% discount 
rate). Using the methodology discussed in detail in the background 
check section of the preamble, we estimate the additional cost of 
requiring background checks of all licensed and regulated providers, 
rather than just those who are eligible to deliver CCDF services, to be 
approximately $1.7 million annually (estimated using a 3% discount 
rate), which would amount to an upper bound caseload impact of about 
300 fewer children served per year.
    Background Checks for Non-Caregivers: The law defines a child care 
staff member as someone (unless they are related to all children in 
care) who is employed by the child care provider for compensation or 
whose activities involve unsupervised access to children who are cared 
for by the child care provider. We propose to require individuals, age 
18 or older, residing in a family child care home be subject to 
background checks. The alternative to this would be to not require 
background checks of other individuals living in the family child care 
home. However, we chose this policy because it is reasonable to assume 
that these individuals may have unsupervised access to children. 
Because we are including these individuals in the definition of child 
care staff members, they will be subject to the same requirements and 
will be allowed the same appeals process as employees.
    More than forty States require some type of background check of 
family members 18 years of age or older that

[[Page 80560]]

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).
    While the total cost of the background check requirement is 
approximately $13.6 million, we can isolate the costs of applying the 
background checks to non-caregiver individuals, we estimate the cost to 
be approximately $3 million annually (estimated using a 3% discount 
rate), which would amount to a upper bound caseload impact of 
approximately 550 fewer children served per year.

E. Break Even Analysis for Reductions in Injuries and Deaths

    This section estimates the potential benefits associated with the 
elimination of injuries and deaths in child care settings in the United 
States, and the proportion of fatalities and injuries, which, if 
eliminated by the provisions discussed here, would justify their costs 
on their own. Standard methods are used to monetize the value of these 
potential benefits. Although children receiving subsidies through the 
Child Care and Development Fund (CCDF) are the individuals that will 
likely benefit most from the rule's overall health and safety 
provisions, we conduct this break even analysis using data on children 
in all child care settings since children in non-CCDF arrangements will 
directly benefit from the extension of background check requirements 
and may see additional benefits as a result of other health and safety 
and quality provisions in the proposed rule. As described above, the 
primary regulatory alternative in implementing health and safety 
provisions would be to restrict background checks provisions. 
Therefore, this analysis discusses the costs and benefits of the 
proposed rule relative to that alternative.
    The benefits estimated for this analysis are derived from voluntary 
data reporting on fatalities and injuries in the child care setting to 
ACF in a Quality Performance Report (QPR). These figures are 
supplemented by data from several other sources. Although many States 
contribute data to the QPR report, data on fatalities and injuries is 
not available for all States. To estimate fatalities and injuries in 
the child care setting at the national level in 2014 using the QPR 
data, we impute estimated fatalities and injuries for States with 
incomplete reports. For States with no reported data for 2014, we 
assume that the injury or fatality rate per provider is equal to the 
average injury or fatality rate per provider across States with 
available 2014 data.
    To monetize benefits from reductions in injury rates, we rely on 
data on the cost of injury from the Centers for Disease Control (CDC). 
In particular, we use CDC data to calculate the cost of non-fatal 
injuries resulting in emergency room treatment and/or hospitalization 
for children age 12 and under, which includes medical costs as well as 
lost productivity costs for caretakers, based on 2012 data.\1\ After 
adjusting for inflation using the Gross Domestic Product (GDP) deflator 
from the Bureau of Economic Analysis (BEA), the cost per injury for 
children age 12 and under is $8,095 in 2014 dollars. The benefit of a 
reduction in the injury rate, then, is the reduction in the medical 
costs and productivity losses associated with the reduction in 
injuries. Note that this does not include the dollar value of any 
changes in health status for the injured individuals, which implies 
that these estimates understate the value of reductions in injuries in 
the child care setting. Based on QPR data, we estimate that there were 
18,209 injuries in child care settings in 2014. To calculate the 
monetary value of a reduction in the injury rate in child care settings 
due to this rule, we multiplied the expected number of avoided injuries 
in each year by the value of eliminating each injury. For simplicity, 
we assume that the number of prevented injuries is the same in each 
year after implementation of the requirements, and that the cost of 
injury, in 2014 dollars, is constant over time. This method implies 
that the present value of eliminating all injuries in the child care 
setting over the period examined in this rule, using a 3% discount 
rate, is approximately $1.30 billion.
---------------------------------------------------------------------------

    \1\ CDC provided updated estimates of the cost of injury based 
on Cost of Injury Reports 2005 and 2012 data on non-fatal injuries. 
For more information, see http://www.cdc.gov/injury/wisqars/cost/cost-learn-more.html.
---------------------------------------------------------------------------

    To monetize the value of reductions in mortality rates, we use 
estimates of the number of child fatalities in child care settings and 
information on the value of a statistical life for children. The number 
of child fatalities in the child care setting is estimated by combining 
two numbers: (1) The number of fatalities due to Sudden Infant Death 
Syndrome (SIDS), and (2) the number of fatalities due to causes other 
than SIDS. These two numbers are estimated separately because SIDS is 
one type of fatality that is likely to be impacted by the health and 
safety provisions in the law and because the Centers for Disease 
Control (CDC) \2\ publishes accurate estimates for this type of 
death.\3\ According to CDC, there were 1,563 deaths due to SIDS in 
2011. Research from a study in 2000 estimated that 14.8 percent \4\ of 
SIDS fatalities took place in a family child care or a child care 
center. After applying the 14.8 percent to the 1,563 SIDS deaths, we 
estimate that the number of SIDS deaths in child care settings were 231 
in 2014.
---------------------------------------------------------------------------

    \2\ For more information, see http://wonder.cdc.gov.
    \3\ Our review of the QPR data conclude that the number of 
deaths and injuries reported are likely to be undercounts because 
some states do not collect data from some types of child care 
providers.
    \4\ Moon, Rachel Y., Kantilal M. Patel, and Sarah J. McDermott 
Shaefer. ``Sudden infant death syndrome in child care settings.'' 
Pediatrics 106.2 (2000): 295-300.
---------------------------------------------------------------------------

    The number of non-SIDS deaths in 2014 is estimated based on QPR 
data. Information on cause of death were reported for 18 deaths in the 
2014 QPR data, of which 5 were due to SIDS and 13 were due to other 
causes. Based on this information, we estimate that 72 percent of 
deaths in child care settings reported in QPR data were due to causes 
other than SIDS. After adding the 82 fatalities from non-SIDS as 
reported in the QPR data to the 231 fatalities from SIDS, we arrive at 
a sum of 313 fatalities in child care settings.
    A 2010 study estimates that the value of a statistical life for 
children to be $12-15 million.\5\ After taking the mean of this range 
and adjusting it for inflation using the GDP deflator, we arrive at 
$14.5 million in 2014 dollars per fatality. For simplicity, we assume 
that the potential number of lives saved is the same in each year after 
implementation of the requirements. We follow Department of 
Transportation (DOT) guidance \6\ to adjust the value of a statistical 
life for real income growth, increasing it by 1.07 percent each year. 
To calculate the dollar value of reductions in mortality, we calculate 
the number of statistical lives saved, and multiply that number by the 
relevant value of a statistical life. This method implies that the 
present value of eliminating all deaths in the child care setting over 
the period examined in this rule, using a 3 percent discount rate, is 
approximately $44.4 billion.
---------------------------------------------------------------------------

    \5\ Hammitt, James K., and Kevin Haninger. ``Valuing fatal risks 
to children and adults: Effects of disease, latency, and risk 
aversion.'' Journal of Risk and Uncertainty 40.1 (2010): 57-83 
(estimate derived using stated-preference surveys inquiring about 
willingness to pay to reduce risks to one's child).
    \6\ For more information, see http://www.dot.gov/sites/dot.dev/files/docs/VSL%20Guidance.doc.
---------------------------------------------------------------------------

    Next, we estimate the proportion of fatalities and injuries which, 
if

[[Page 80561]]

eliminated by these provisions that extend background checks would 
justify their costs on their own. Based on the assumptions and 
methodologies described above, the present value of the injury and 
mortality rate reduction benefits of the rule, using a 3% discount 
rate, would equal the costs of these provisions if fatalities and 
injuries were reduced by less than 1 percent over the period examined 
in this rule. Note that this does not include other benefits associated 
with this rule.

F. Accounting Statement--Table of Quantified Money Costs and 
Opportunity Costs

    As required by OMB Circular A-4, we have prepared an accounting 
statement table showing the classification of the impacts associated 
with implementation of this proposed rule.

                                           Table 10--Quantified Money Costs, Opportunity Costs, and Transfers
                                                                     [$ in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized (over 10 years)                 Total (over 10 years)
                                                Phase-in      On-going   -------------------------------------------------------------------------------
                                                 annual        annual                          Discounted                              Discounted
                                                 average       average    Undiscounted -------------------------- Undiscounted -------------------------
                                               (years 1-5)  (years 6-10)                     3%           7%                         3%           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Money Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Health and Safety:
    Monitoring..............................         125.9         157.0         141.5        139.5        136.7       1,414.7      1,225.3      1,027.2
    Bkgd Checks.............................           9.0          18.9          13.9         13.6         13.3         139.2        119.7         99.6
    Training................................          15.4          10.5          12.9         13.2         13.5         129.3        115.8        101.5
    Admin*..................................           7.5           9.2           8.3          8.2          8.1          83.4         72.4         60.9
    IT and Infra-structure*.................           7.5           9.2           8.3          8.2          8.1          83.4         72.4         60.9
Consumer Education:
    Website.................................          12.8          11.8          12.3         12.4         12.5         123.0        108.6         93.6
    Statement...............................           1.0           0.8           0.9          0.9          0.9           8.8          7.8          6.8
Supply Building.............................           5.1           6.8           6.0          5.8          5.7          59.5         51.3         42.9
                                             -----------------------------------------------------------------------------------------------------------
    Money Costs Total.......................         184.2         224.2         204.1        201.8        198.8       2,041.3      1,773.3      1,493.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Opportunity Costs ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Health and Safety:
    Monitoring..............................           8.7          10.9           9.8          9.6          9.4          97.7         84.6         70.9
    Bkgd Checks.............................           6.3           7.9           7.1          7.1          7.1          71.1         62.4         53.3
    Training................................          43.8          29.9          36.8         37.6         38.5         368.4        330.0        289.3
                                             -----------------------------------------------------------------------------------------------------------
    Opportunity Costs Total.................          58.8          48.7          53.7         54.3         55.0         537.2        477.0        413.5
                                             -----------------------------------------------------------------------------------------------------------
        Cost Total..........................         243.0         272.9         257.8        256.1        253.8       2,578.5      2,250.3      1,906.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Transfers ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased Subsidy...........................         478.8       1,281.0         879.9        839.1        786.1       8,799.0      7,372.4      5,907.7
                                             -----------------------------------------------------------------------------------------------------------
    Transfers Total.........................         478.8       1,281.0         879.9        839.1        786.1       8,799.0      7,372.4      5,907.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Grand Total ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs and Transfers.........................         721.8       1,553.9       1,137.7      1,095.2      1,039.9      11,377.5      9,622.7      7,814.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Administrative and IT/Infrastructure costs are only applied to Health and Safety requirements. Other costs have administrative costs already built
  into their cost estimates.

XII. Executive Order 13132; Federalism Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations.
    Consultations with State and local officials. After passage of the 
CCDBG Act of 2014, the Office of Child Care (OCC) in the Office of the 
Deputy Assistant Secretary for Early Childhood Development in ACF 
conducted outreach to engage with a variety of stakeholders to better 
understand the implications of its provisions. OCC created a 
reauthorization page on its Web site to provide public information and 
a specific email address to submit general questions. OCC received 
approximately 650 questions and comments through this email address, 
webinars, inquiries to regional offices, and meetings with grantees. 
OCC leadership and staff participated in more than 21 listening 
sessions with approximately 675 people representing diverse national, 
State, and local stakeholders regarding the law, held webinars and gave 
presentations at national conferences. Participants included State 
human services agencies, child care providers, parents with children in 
child care, child care resource and referral agencies, national and 
State advocacy groups, national stakeholders including faith-based 
communities, after-school and school-age child care providers, child 
care researchers, State and local early childhood organizations, 
provider associations, labor unions, and National Head Start 
Association members. In addition, OCC held five meetings with State and 
Territory CCDF administrators and a series of consultations with Tribal 
leaders to describe the law and to gather input from federal grantees 
with responsibility for operating the CCDF program. In addition, ACF 
reviewed the records of comments received after issuing a now withdrawn 
NPRM for CCDF in May 2013 prior to passage of the CCDBG Act of 2014 by 
Congress. Many, but not all, of the key

[[Page 80562]]

components of the Act are in alignment with provisions included in that 
NPRM.
    Nature of concerns and the need to issue this proposed rule. State, 
Territorial and Tribal CCDF Lead Agencies want to provide family-
friendly child care assistance and support increased quality of child 
care services, but are concerned about the cost of the proposed rule 
and need for grantee flexibility. While noting that this proposed rule 
implements a law that was enacted by Congress and signed by the 
President, we seriously considered these views in developing the 
proposed rule. We also completed a Regulatory Impact Analysis to fully 
assess costs and benefits of the new requirements. We recognize that a 
number of the new regulatory provisions will require some State, 
territory, and Tribal child care agencies to re-direct CCDF funds to 
implement specific provisions.
    Extent to which we meet those concerns. The federal government 
provides annually to States, Territories, and Tribes $5.3 billion in 
annual funding to implement the CCDF program. Further, in large part, 
the changes included in the Act and this proposed rule are based upon 
practices already implemented by many States. Finally, in several 
areas, the proposed rule increases the flexibility available to States, 
Territories, and Tribes in administering the program (e.g., waiving 
family copayments, defining protective services).

XIII. 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 determine 
whether a regulation may negatively impact family well-being. If the 
agency determines a policy or regulation negatively affects family 
well-being, then the agency must prepare an impact assessment 
addressing seven criteria specified in the law. This rule will not have 
a negative impact on the autonomy or integrity of the family as an 
institution. Accordingly, we conclude that it is not necessary to 
prepare a family policymaking assessment. In fact, the proposed rule 
will have positive benefits by improving health and safety protections 
and the quality of care that children receive, as well as improving 
transparency for parents about the child care options available to the 
so they can make more informed child care decisions. This rule also 
increases continuity of care and stability through family-friendly 
practices.

XIV. Executive Order 13175 on Consultation with Indian Tribes

    Executive Order 13175 requires agencies to consult with Tribal 
leaders and Tribal officials early in the process of developing 
regulations and prior to the formal promulgation of the regulations. 
Agencies also must include a Tribal impact statement, which includes a 
description of the agency's prior consultation with Tribal officials, a 
summary of the nature of their concerns and the agency's position 
supporting the need to issue the regulation, and a statement of the 
extent to which the concerns of Tribal officials have been met. ACF is 
committed to continued consultation and collaboration with Tribes, and 
this proposed rule meets the requirements of Executive Order 13175. The 
discussion of subpart I in section IV of the preamble serves as the 
Tribal impact statement and contains a detailed description of the 
consultation and outreach on this proposed rule.

List of Subjects in 45 CFR Part 98

    Child care, Grant programs-social programs.

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


Mark H. Greenberg,
Acting Assistant Secretary for Children and Families.
    Approved: October 28, 2015.
Sylvia M. Burwell,
Secretary.
    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 as follows:

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

0
2. Revise Sec.  98.1 to read as follows:


Sec.  98.1  Purposes.

    (a) The purposes of the CCDF are:
    (1) To allow each State maximum flexibility in developing child 
care programs and policies that best suit the needs of children and 
parents within that State;
    (2) To promote parental choice to empower working parents to make 
their own decisions regarding the child care services that best suits 
their family's needs;
    (3) To encourage States to provide consumer education information 
to help parents make informed choices about child care services and to 
promote involvement by parents and family members in the development of 
their children in child care settings;
    (4) To assist States in delivering high-quality, coordinated early 
childhood care and education services to maximize parents' options and 
support parents trying to achieve independence from public assistance;
    (5) To assist States in improving the overall quality of child care 
services and programs by implementing the health, safety, licensing, 
training, and oversight standards established in this subchapter and in 
State law (including State regulations);
    (6) To improve child care and development of participating 
children; and
    (7) To increase the number and percentage of low-income children in 
high-quality child care settings.
    (b) The purpose of these regulations is to provide the basis for 
administration of the Fund. These regulations provide that State, 
Territorial, and Tribal Lead Agencies:
    (1) Maximize parental choice of safe, healthy and nurturing child 
care settings through the use of certificates and through grants and 
contracts, and by providing parents with information about child care 
programs;
    (2) Include in their programs a broad range of child care 
providers, including center-based care, family child care, in-home 
care, care provided by relatives and sectarian child care providers;
    (3) Improve the quality and supply of child care and before- and 
after-school care services that meet applicable requirements and 
promote child development and learning and family economic stability;
    (4) Coordinate planning and delivery of services at all levels, 
including Federal, State, Tribal, and local;
    (5) Design flexible programs that provide for the changing needs of 
recipient families and engage families in their children's development 
and learning;
    (6) Administer the CCDF responsibly to ensure that statutory 
requirements are met and that adequate information regarding the use of 
public funds is provided;
    (7) Design programs that provide uninterrupted service to families 
and providers, to the extent statutorily possible, to support parental 
education, training, and employment and continuity of care that 
minimizes disruptions to children's learning and development;
    (8) Provide a progression of training and professional development 
opportunities for caregivers, teachers,

[[Page 80563]]

and directors to increase their effectiveness in supporting children's 
development and learning and strengthen the child care workforce.
0
3. Amend Sec.  98.2 by:
0
a. Revising the definitions of Categories of care, Eligible child, 
Eligible child care provider, Family child care provider, Lead Agency, 
Programs, and Sliding fee scale;
0
b. Removing the definition of Group home child care provider; and
0
c. Adding in alphabetical order the definitions of Child experiencing 
homelessness, Child with a disability, Director, English learner, and 
Teacher.
    The revisions and additions read as follows:


Sec.  98.2  Definitions.

* * * * *
    Categories of care means center-based child care, family child 
care, and in-home care;
* * * * *
    Child experiencing homelessness means a child who is homeless as 
defined in section 725 of Subtitle VII-B of the McKinney-Vento Act (42 
U.S.C. 11434a);
    Child with a disability means:
    (1) A child with a disability, as defined in section 602 of the 
Individuals with Disabilities Education Act (20 U.S.C. 1401);
    (2) A child who is eligible for early intervention services under 
part C of the Individuals with Disabilities Education Act (20 U.S.C. 
1431 et seq.);
    (3) A child who is less than 13 years of age and who is eligible 
for services under section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794); or
    (4) A child with a disability, as defined by the State, Territory 
or Tribe involved;
* * * * *
    Director means a person who has primary responsibility for the 
daily operations management for a child care provider, which may be a 
family child care home, and which may serve children from birth to 
kindergarten entry and children in school-age child care;
* * * * *
    Eligible child means an individual:
    (1) Who is less than 13 years of age;
    (2) Whose family income does not exceed 85 percent of the State 
median income for a family of the same size, and whose family assets do 
not exceed $1,000,000 (as certified by a member of such family); and
    (3) Who--
    (i) Resides with a parent or parents who are working or attending a 
job training or educational program; or
    (ii) Is receiving, or needs to receive, protective services and 
resides with a parent or parents not described in paragraph (3)(i) of 
this definition;
    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--
    (i) Is licensed, regulated, or registered under applicable State or 
local law as described in Sec.  98.40; and
    (ii) Satisfies State and local requirements, including those 
referred to in Sec.  98.41 applicable to the child care services it 
provides; or
    (2) A child care provider who is 18 years of age or older who 
provides child care services only to eligible children who are, by 
marriage, blood relationship, or court decree, the grandchild, great 
grandchild, siblings (if such provider lives in separate residence), 
niece, or nephew of such provider, and complies with any applicable 
requirements that govern child care provided by the relative involved;
    English learner means an individual who is limited English 
proficient, as defined in section 9101 of the Elementary and Secondary 
Education Act of 1965 (20 U.S.C. 7801) or section 637 of the Head Start 
Act (42 U.S.C. 9832);
* * * * *
    Family child care provider means one or more individual(s) 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;
* * * * *
    Lead Agency means the State, territorial or tribal entity, or joint 
interagency office, designated or established under Sec. Sec.  98.10 
and 98.16(a) to which a grant is awarded and that is accountable for 
the use of the funds provided. The Lead Agency is the entire legal 
entity even if only a particular component of the entity is designated 
in the grant award document;
* * * * *
    Programs refers generically to all activities under the CCDF, 
including child care services and other activities pursuant to Sec.  
98.50 as well as quality activities pursuant to Sec.  98.51;
* * * * *
    Sliding fee scale means a system of cost-sharing by a family based 
on income and size of the family, in accordance with Sec.  98.45(k);
* * * * *
    Teacher means a lead teacher, teacher, teacher assistant, or 
teacher aide who is employed by a child care provider for compensation 
on a regular basis and whose responsibilities and activities are to 
organize, guide, and implement activities in a group or individual 
basis, or to assist a teacher or lead teacher in such activities, to 
further the cognitive, social, emotional, and physical development of 
children from birth to kindergarten entry and children in school-age 
child care and may be a family child care provider;
* * * * *
0
4. Amend Sec.  98.10 by revising the introductory text and paragraphs 
(d) and (e) and adding paragraph (f) to read as follows:


Sec.  98.10  Lead Agency responsibilities.

    The Lead Agency (which may be an appropriate collaborative agency), 
or a joint interagency office, as designated or established by the 
Governor of the State (or by the appropriate Tribal leader or 
applicant), shall:
* * * * *
    (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) Consult, collaborate, and coordinate in the development of the 
State Plan in a timely manner with Indian Tribes or tribal 
organizations in the State (at the option of the Tribe or tribal 
organization).
0
5. Amend Sec.  98.11 by adding a sentence to the end of paragraph 
(a)(3) and revising paragraph (b)(5) 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 agency 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.
    (b) * * *
    (5) Oversee the expenditure of funds by subgrantees and 
contractors, in accordance with 75 CFR parts 351 through 353;
* * * * *
0
6. Amend Sec.  98.12 by revising paragraph (c) to read as follows:


Sec.  98.12  Coordination and consultation.

* * * * *

[[Page 80564]]

    (c) Coordinate, to the maximum extent feasible, per Sec.  98.10(f) 
with any Indian Tribes in the State receiving CCDF funds in accordance 
with subpart I of this part.
0
7. Amend Sec.  98.14 by revising paragraphs (a)(1) introductory text, 
(a)(1)(C), and (a)(1)(D) and adding paragraphs (a)(1)(E), (F), (G), 
(H), (I), (J), (K), (L), and (M), (a)(3) and (4), and (d) to read as 
follows:


Sec.  98.14  Plan process.

* * * * *
    (a)(1) Coordinate the provision of services funded under this part 
with other Federal, State, and local child care and early childhood 
development programs (including such programs for the benefit of Indian 
children, infants and toddlers, children with disabilities, children 
experiencing homelessness, and children in foster care) to expand 
accessibility and continuity of care as well as full-day services. The 
Lead Agency shall also coordinate the provision of services with the 
State, and if applicable, tribal agencies responsible for:
* * * * *
    (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));
    (D) Providing Temporary Assistance for Needy Families;
    (E) Child care licensing;
    (F) Head Start collaboration, as authorized by the Head Start Act 
(42 U.S.C. 9831 et seq.);
    (G) State Advisory Council on Early Childhood Education and Care 
(designated or established pursuant to the Head Start Act (42 U.S.C. 
9831 et seq.)) or similar coordinating body;
    (H) Statewide after-school network or other coordinating entity for 
out-of-school time care (if applicable);
    (I) Emergency management and response;
    (J) Child and Adult Care Food Program (CACFP) authorized by the 
National School Lunch Act (42 U.S.C. 1766);
    (K) Services for children experiencing homelessness, including 
State Coordinators of Education for Homeless Children and Youth (EHCY 
State Coordinators) and, to the extent practicable, local liaisons 
designated by Local Educational Agencies (LEAs) in the State as 
required by the McKinney-Vento Act (42 U.S.C. 11432) and Continuum of 
Care grantees;
    (L) Medicaid authorized by title XIX of the Social Security Act; 
and
    (M) Mental health services.
* * * * *
    (3) If the Lead Agency elects to combine funding for CCDF services 
with any other early childhood program, provide a description in the 
CCDF Plan of how the Lead Agency will combine and use the funding.
    (4) Demonstrate in the CCDF Plan how the State, Territory, or Tribe 
encourages partnerships among its agencies, other public agencies, 
Indian Tribes and Tribal organizations, and private entities, including 
faith-based and community-based organizations, to leverage existing 
service delivery systems for child care and development services and to 
increase the supply and quality of child care and development services 
and to increase the supply and quality of child care services for 
children who are less than 13 years of age, such as by implementing 
voluntary shared service alliance models.
* * * * *
    (d) Make the Plan and any Plan amendments publicly available.
0
8. Amend Sec.  98.15 by:
0
a. Revising paragraph (a)(6);
0
b. Adding paragraphs (a)(7), (8), (9), (10), and (11); and
0
c. Revising paragraph (b).
    The revisions and additions read as follows:


Sec.  98.15  Assurances and certifications.

    (a) * * *
    (6) That if expenditures for pre-Kindergarten services are used to 
meet the maintenance-of-effort requirement, the State has not reduced 
its level of effort in full-day/full-year child care services, pursuant 
to Sec.  98.55(h)(1).
    (7) Training and professional development requirements comply with 
Sec.  98.44 and are applicable to caregivers, teaching staff, and 
directors working for child care providers of services for which 
assistance is provided under the CCDF.
    (8) To the extent practicable, enrollment and eligibility policies 
support the fixed costs of providing child care services by delinking 
provider payment rates from an eligible child's occasional absences in 
accordance with Sec.  98.45(m).
    (9) The State will maintain or implement early learning and 
developmental guidelines that are developmentally appropriate for all 
children from birth to kindergarten entry, describing what such 
children should know and be able to do, and covering the essential 
domains of early childhood development (cognition, including language 
arts and mathematics; social, emotional and physical development; and 
approaches toward learning) for use statewide by child care providers 
and caregivers. Such guidelines shall--
    (i) Be research-based and developmentally, culturally, and 
linguistically appropriate, building in a forward progression, and 
aligned with entry to kindergarten;
    (ii) Be implemented in consultation with the State educational 
agency and the State Advisory Council on Early Childhood Education and 
Care (designated or established pursuant to section 642B(b)(I)(A)(i) of 
the Head Start Act (42 U.S.C. 9837b(b)(1)(A)(i)) or similar 
coordinating body, and in consultation with child development and 
content experts; and
    (iii) Be updated as determined by the State.
    (10) Funds received by the State to carry out this subchapter will 
not be used to develop or implement an assessment for children that--
    (i) Will be the primary or sole basis for a child care provider 
being determined to be ineligible to participate in the program carried 
out under this subchapter;
    (ii) Will be used as the primary or sole basis to provide a reward 
or sanction for an individual provider;
    (iii) Will be used as the primary or sole method for assessing 
program effectiveness; or
    (iv) Will be used to deny children eligibility to participate in 
the program carried out under this subchapter.
    (11) Any code or software for child care information systems or 
information technology that a Lead Agency or other agency expends CCDF 
funds to develop must be made available upon request to other public 
agencies for their use in administering child care or related programs.
    (b) The Lead Agency shall include the following certifications in 
its CCDF Plan:
    (1) The State has developed the CCDF Plan in consultation with the 
State Advisory Council on Early Childhood Education and Care 
(designated or established pursuant to section 642B(b)(I)(A)(i) of the 
Head Start Act (42 U.S.C. 9837b(b)(1)(A)(i))) or similar coordinating 
body, pursuant to Sec.  98.14(a)(1)(G);
    (2) In accordance with Sec.  98.31, it has procedures in place to 
ensure that providers of child care services for which assistance is 
provided under the CCDF, afford parents unlimited access to their 
children and to the providers caring for their children, during the 
normal hours of operations and whenever such children are in the care 
of such providers;

[[Page 80565]]

    (3) As required by Sec.  98.32, the State maintains a record of 
substantiated parental complaints and makes information regarding such 
complaints available to the public on request;
    (4) It will collect and disseminate to parents of eligible 
children, the general public and, where applicable, child care 
providers, consumer education information that will promote informed 
child care choices, information on access to other programs for which 
families may be eligible, and information on developmental screenings, 
as required by Sec.  98.33;
    (5) In accordance with Sec.  98.33(a), that the State makes public 
through a consumer-friendly and easily accessible Web site the results 
of monitoring and inspection reports, as well as the number of deaths, 
serious injuries, and instances of substantiated child abuse that 
occurred in child care settings;
    (6) There are in effect licensing requirements applicable to child 
care services provided within the State, pursuant to Sec.  98.40;
    (7) There are in effect within the State (or other area served by 
the Lead Agency), under State or local (or tribal) law, requirements 
designed to protect the health and safety of children that are 
applicable to child care providers that provide services for which 
assistance is made available under the CCDF, pursuant to Sec.  98.41;
    (8) In accordance with Sec.  98.42(a), procedures are in effect to 
ensure that child care providers of services for which assistance is 
provided under the CCDF comply with all applicable State or local (or 
tribal) health and safety requirements;
    (9) Caregivers, teachers, and directors of child care providers 
comply with the State's, Territory's, or Tribe's procedures for 
reporting child abuse and neglect as required by section 
106(b)(2)(B)(i) of the Child Abuse Prevention and Treatment Act (42 
U.S.C. 5106a(b)(2)(B)(i)) or other child abuse reporting procedures and 
laws in the service area, as required by Sec.  98.41(e);
    (10) There are in effect monitoring policies and practices pursuant 
to Sec.  98.42;
    (11) Payment rates for the provision of child care services, in 
accordance with Sec.  98.45, are sufficient to ensure equal access for 
eligible children to comparable child care services in the State or 
sub-State area that are provided to children whose parents are not 
eligible to receive assistance under this program or under any other 
Federal or State child care assistance programs;
    (12) Payment practices of child care providers of services for 
which assistance is provided under the CCDF reflect generally accepted 
payment practices of child care providers that serve children who do 
not receive CCDF assistance, pursuant to Sec.  98.45(m); and
    (13) There are in effect policies to govern the use and disclosure 
of confidential and personally-identifiable information about children 
and families receiving CCDF assistance and child care providers 
receiving CCDF funds.
0
9. Revise Sec.  98.16 to read as follows:


Sec.  98.16  Plan provisions.

    A CCDF Plan shall contain the following:
    (a) Specification of the Lead Agency whose duties and 
responsibilities are delineated in Sec.  98.10;
    (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 descriptions of written 
agreements, monitoring and auditing procedures, and indicators or 
measures to assess performance pursuant to Sec.  98.11(a)(3);
    (c) The assurances and certifications listed under Sec.  98.15;
    (d)(1) A description of how the CCDF program will be administered 
and implemented, if the Lead Agency does not directly administer and 
implement the program;
    (2) Identification of the public or private entities designated to 
receive private donated funds and the purposes for which such funds 
will be expended, pursuant to Sec.  98.55(f);
    (e) A description of the coordination and consultation processes 
involved in the development of the Plan and the provision of services, 
including a description of public-private partnership activities that 
promote business involvement in meeting child care needs pursuant to 
Sec.  98.14;
    (f) A description of the public hearing process, pursuant to Sec.  
98.14(c);
    (g) Definitions of the following terms for purposes of determining 
eligibility, pursuant to Sec. Sec.  98.20(a) and 98.46:
    (1) Special needs child;
    (2) Physical or mental incapacity (if applicable);
    (3) Attending (a job training or educational program);
    (4) Job training and educational program;
    (5) Residing with;
    (6) Working;
    (7) Protective services (if applicable), including whether children 
in foster care are considered in protective services for purposes of 
child care eligibility; and whether respite care is provided to 
custodial parents of children in protective services.
    (8) Very low income; and
    (9) In loco parentis;
    (h) A description and demonstration of eligibility determination 
and redetermination processes to promote continuity of care for 
children and stability for families receiving CCDF services, including:
    (1) An eligibility redetermination period of no less than 12 months 
in accordance with Sec.  98.21(a);
    (2) A graduated phaseout for families whose income exceeds the Lead 
Agency's threshold to initially qualify for CCDF assistance, but does 
not exceed 85 percent of State median income, pursuant to Sec.  
98.21(b);
    (3) Processes that take into account irregular fluctuation in 
earnings, pursuant to Sec.  98.21(c);
    (4) Procedures and policies to ensure that parents are not required 
to unduly disrupt their education, training, or employment to complete 
eligibility redetermination, pursuant to Sec.  98.21(d);
    (5) Limiting any requirements to report changes in circumstances in 
accordance with Sec.  98.21(e);
    (6) Policies that take into account children's development and 
learning when authorizing child care services pursuant to Sec.  
98.21(f); and
    (7) Other policies and practices such as timely eligibility 
determination and processing of applications;
    (i) For child care services pursuant to Sec.  98.50:
    (1) A description of such services and activities, including how 
the Lead Agency will address supply shortages through the use of grants 
and contracts. The description should identify 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;
    (2) Any limits established for the provision of in-home care and 
the reasons for such limits pursuant to Sec.  98.30(e)(1)(iii);
    (3) A list of political subdivisions in which such services and 
activities are offered, if such services and activities are not 
available throughout the entire service area;
    (4) A description of how the Lead Agency will meet the needs of 
certain families specified at Sec.  98.50(e);
    (5) Any additional eligibility criteria, priority rules, and 
definitions established pursuant to Sec.  98.20(b);
    (j) A description of the activities to provide comprehensive 
consumer and provider education, including the posting of monitoring 
and inspection reports, pursuant to Sec.  98.33, to increase

[[Page 80566]]

parental choice, and to improve the quality of child care, pursuant to 
Sec.  98.53;
    (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.  
98.45(k). This shall 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, and any 
exemptions to those requirements for relative providers made in 
accordance with Sec.  98.42(c);
    (m) A description of child care standards for child care providers 
of services for which assistance is provided under the CCDF, in 
accordance with Sec.  98.41(d), that includes group size limits, child-
staff ratios, and required qualifications for caregivers, teachers, and 
directors;
    (n) A description of monitoring and other enforcement procedures in 
effect to ensure that child care providers comply with applicable 
health and safety requirements pursuant to Sec.  98.42;
    (o) A description of criminal background check requirements, 
policies, and procedures in accordance with Sec.  98.43, including of 
description of the requirements, policies, and procedures in place to 
respond to other States', Territories', and Tribes' requests for 
background check results in order to accommodate the 45 day timeframe;
    (p) A description of training and professional development 
requirements for caregivers, teaching staff, and directors of providers 
of services for which assistance is provided in accordance with Sec.  
98.44;
    (q) A description of the child care certificate payment system(s), 
including the form or forms of the child care certificate, pursuant to 
Sec.  98.30(c);
    (r) Payment rates and a summary of the facts, including a biennial 
local market rate survey or alternative methodology relied upon to 
determine that the rates provided are sufficient to ensure equal access 
pursuant to Sec.  98.45;
    (s) A detailed description of the State's hotline for complaints, 
its process for responding to complaints, 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;
    (t) A detailed description of the procedures in effect for 
affording parents unlimited access to their children whenever their 
children are in the care of the provider, pursuant to Sec.  98.31;
    (u) A detailed description of the licensing requirements applicable 
to child care services provided, any exemption to licensing 
requirements that is applicable to child care providers of services for 
which assistance is provided under the CCDF and a demonstration why 
such exemption does not endanger the health, safety, or development of 
children, and a description of how such licensing requirements are 
effectively enforced, pursuant to Sec.  98.40;
    (v) Pursuant to Sec.  98.33(e), the definitions or criteria used to 
implement the exception, provided in section 407(e)(2) of the Social 
Security Act, to individual penalties in the TANF work requirement 
applicable to a single custodial parent caring for a child under age 
six;
    (w)(1) When any Matching funds under Sec.  98.55(b) are claimed, a 
description of the efforts to ensure that pre-Kindergarten programs 
meet the needs of working parents;
    (2) When State pre-Kindergarten expenditures are used to meet more 
than 10% of the amount required at Sec.  98.55(c)(1), or for more than 
10% of the funds available at Sec.  98.55(b), or both, a description of 
how the State will coordinate its pre-Kindergarten and child care 
services to expand the availability of child care;
    (x) A description of the Lead Agency's strategies (which may 
include alternative payment rates to child care providers, the 
provision of direct grants or contracts, offering child care 
certificates, or other means) to increase the supply and improve the 
quality of child care services for children in underserved areas, 
infants and toddlers, children with disabilities as defined by the Lead 
Agency, and children who receive care during nontraditional hours;
    (y) A description of how the Lead Agency prioritizes increasing 
access to high quality child care and development services for children 
of families in areas that have significant concentrations of poverty 
and unemployment and that do not have sufficient numbers of such 
programs, pursuant to Sec.  98.46;
    (z) A description of how the Lead Agency develops and implements 
strategies to strengthen the business practices of child care providers 
to expand the supply, and improve the quality of, child care services;
    (aa) A demonstration of how the State, Territory or Tribe will 
address the needs of children, including the need for safe child care, 
before, during and after a state of emergency declared by the Governor 
or a major disaster or emergency (as defined by section 102 of the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 
U.S.C. 5122) through a Statewide Disaster Plan (or Disaster Plan for a 
Tribe's service area) that:
    (1) For a State, is developed in collaboration with the State human 
services agency, the State emergency management agency, the State 
licensing agency, the State health department or public health 
department, local and State child care resource and referral agencies, 
and the State Advisory Council on Early Childhood Education and Care 
(designated or established pursuant to section 642B(b)(I)(A)(i) of the 
Head Start Act (42 U.S.C. 9837b(b)(1)(A)(i))) or similar coordinating 
body; and
    (2) Includes the following components:
    (i) Guidelines for continuation of child care subsidies and child 
care services, which may include the provision of emergency and 
temporary child care services during a disaster, and temporary 
operating standards for child care after a disaster;
    (ii) Coordination of post-disaster recovery of child care services; 
and
    (iii) Requirements that child care providers of services for which 
assistance is provided under the CCDF, as well as other child care 
providers as determined appropriate by the State, Territory or Tribe, 
have in place:
    (A) Procedures for evacuation, relocation, shelter-in-place, lock-
down, communication and reunification with families, continuity of 
operations, accommodations of infants and toddlers, children with 
disabilities, and children with chronic medical conditions; and
    (B) Procedures for staff and volunteer emergency preparedness 
training and practice drills, including training requirements for child 
care providers of services for which assistance is provided under CCDF 
at Sec.  98.41(a)(1)(vii);
    (bb) A description of payment practices applicable to providers of 
child care services for which assistance is provided under this part, 
pursuant to Sec.  98.45(m), including practices to ensure timely 
payment for services, to delink provider payments from children's 
occasional absences to the extent

[[Page 80567]]

practicable, and to reflect generally-accepted payment practices;
    (cc) A description of internal controls to ensure integrity and 
accountability, processes in place to investigate and recover 
fraudulent payments and to impose sanctions on clients or providers in 
response to fraud, and procedures in place to document and verity 
eligibility, pursuant to Sec.  98.68;
    (dd) A description of how the Lead Agency will provide outreach and 
services to eligible families with limited English proficiency and 
persons with disabilities and facilitate participation of child care 
providers with limited English proficiency and disabilities in the 
subsidy system;
    (ee) A description of policies on suspension and expulsion of 
children birth to age five in child care and other early childhood 
programs receiving assistance under this part, which must be 
disseminated as part of consumer and provider education efforts in 
accordance with Sec.  98.33(b)(1)(v);
    (ff) Designation of a State, territorial, or tribal entity to which 
child care providers must submit reports of any serious injuries or 
deaths of children occurring in child care, in accordance with Sec.  
98.42(b)(4);
    (gg) A description of how the Lead Agency will support child care 
providers in the successful engagement of families in children's 
learning and development;
    (hh) A description of how the Lead Agency will respond to 
complaints submitted through the national hotline and Web site, 
required in the CCDBG Act of 2014 (Section 658L(b)(2)), including the 
designee responsible for receiving and responding to such complaints 
regarding both licensed and license-exempt child care providers; and
    (ii) Such other information as specified by the Secretary.
0
10. Amend Sec.  98.17 by revising paragraph (a) to read as follows:


Sec.  98.17  Period covered by Plan.

    (a) For States, Territories, and Indian Tribes the Plan shall cover 
a period of three years.
* * * * *
0
11. Amend Sec.  98.18 by revising paragraph (b) to read as follows:


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

* * * * *
    (b) Plan amendments. (1) Approved Plans shall be amended whenever a 
substantial change in the program occurs. A Plan amendment shall be 
submitted within 60 days of the effective date of the change. Plan 
amendments will be approved not later than the 90th day following the 
date on which the amendment is received, unless a written agreement to 
extend that period has been secured.
    (2) Lead Agencies must ensure advanced written notice is provided 
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
12. Add Sec.  98.19 to subpart B to read as follows:


Sec.  98.19  Requests for temporary relief from requirements.

    (a) The Secretary may waive one or more of the requirements 
contained in the Act or this part, with the exception of State Match 
and Maintenance of Effort requirements for a State, consistent with the 
conditions described in section 658I(c)(1) of the Act, provided that 
the waiver request:
    (1) Describes circumstances that prevent the State, Territory, or 
Tribe from complying with any statutory or regulatory requirements of 
this part;
    (2) By itself, contributes to or enhances the State's, Territory's, 
or Tribe's ability to carry out the purposes of the Act and this part;
    (3) Will not contribute to inconsistency with the purposes of the 
Act or this part, and;
    (4) Meets the requirements set forth in paragraphs (b) through (g) 
of this section.
    (b) Types of waivers include:
    (1) Transitional and legislative waivers. Lead Agencies may apply 
for temporary waivers meeting the requirements described in paragraph 
(a) of this section that would provide transitional relief from 
conflicting or duplicative requirements preventing implementation, or 
an extended period of time in order for a State, territorial, or tribal 
legislature to enact legislation to implement the provisions of this 
subchapter. Such waivers are:
    (i) Limited to a one-year initial period;
    (iii) May be extended, in accordance with paragraph (f) of this 
section, for at most one additional year from the date of approval of 
the extension,
    (iii) Are designed to provide States, Territories and Tribes at 
most one full legislative session to enact legislation to implement the 
provisions of the Act or this part, and;
    (iv) May be terminated by the Secretary at any time in accordance 
with paragraph (e) of this section.
    (2) Waivers for extraordinary circumstances. States, Territories 
and Tribes may apply for waivers meeting the requirements described in 
paragraph (a) of this section, in cases of extraordinary circumstances, 
which are defined as temporary circumstances or situations, such as a 
natural disaster or financial crisis. Such waivers are:
    (i) Limited to an initial period of no more than 2 years from the 
date of approval;
    (ii) May be extended, in accordance with paragraph (f) of this 
section, for at most one additional year from the date of approval of 
the extension, and;
    (iii) May be terminated by the Secretary at any time in accordance 
with paragraph (e) of this section.
    (c) Waiver requests must be submitted to the Secretary in writing 
and:
    (1) Indicate which type of waiver, as detailed in paragraph (b) of 
this section, the State, Territory or Tribe is requesting;
    (2) Detail each sanction or provision of the Act or regulations 
that the State, Territory or Tribe seeks relief from;
    (3) Describe how a waiver from that sanction or provision will, by 
itself, improve delivery of child care services for children; and
    (4) Certify and describe how the health, safety, and well-being of 
children served through assistance received under this part will not be 
compromised as a result of the waiver.
    (d) Within 90 days after receipt of the waiver request or, if 
additional follow-up information has been requested, the receipt of 
such information, the Secretary will notify the Lead Agency of the 
approval or disapproval of the request.
    (e) Termination. The Secretary shall terminate approval of a 
request for a waiver authorized under the Act or this section if the 
Secretary determines, after notice and opportunity for a hearing, that 
the performance of a State, Territory or Tribe granted relief under 
this section has been inadequate, or if such relief is no longer 
necessary to achieve its original purposes.
    (f) Renewal. The Secretary may approve or disapprove a request from 
a State, Territory or Tribe for renewal of an existing waiver under the 
Act or this section for a period no longer than one year. A State, 
Territory or Tribe seeking to renew their waiver approval must inform 
the Secretary of this intent no later than 30 days prior to the 
expiration date of the waiver. The State, Territory or Tribe shall re-
certify in its extension request the provisions in paragraph (a) of 
this section, and shall also explain the need for additional time of 
relief from such sanction(s) or provisions.
    (g) Restrictions. The Secretary may not:

[[Page 80568]]

    (1) Permit Lead Agencies to alter the eligibility requirements for 
eligible children, including work requirements, job training, or 
educational program participation, that apply to the parents of 
eligible children under this part;
    (2) Waive anything related to the Secretary's authority under this 
part; or
    (3) Require or impose any new or additional requirements in 
exchange for receipt of a waiver if such requirements are not specified 
in the Act.
0
13. Amend Sec.  98.20 by:
0
a. Revising paragraphs (a) and (b) introductory text; and
0
b. In paragraph (b)(2), removing ``Subpart D; or'' and adding in its 
place ``subpart D of this part;'';
0
c. In paragraph (b)(3):
0
i. Removing ``Sec.  98.44'' and adding ``Sec.  98.46'' in its place; 
and
0
ii. Removing the period at the end of the paragraph and adding ``; or'' 
in its place; and
0
d. Adding paragraphs (b)(4) and (c).
    The revisions and additions read as follows:


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

    (a) In order to be eligible for services under Sec.  98.50, a child 
shall, at the time of eligibility determination or redetermination:
    (1)(i) Be under 13 years of age; or,
    (ii) 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;
    (2)(i) Reside with a family whose income does not exceed 85 percent 
of the State's median income (SMI), which must be based on the most 
recent SMI data that is published by the Bureau of the Census, for a 
family of the same size; and
    (ii) Whose family assets do not exceed $1,000,000 (as certified by 
such family member); and
    (3)(i) Reside with a parent or parents who are working or attending 
a job training or educational program; or
    (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 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 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) At grantee option, the waiver provisions in paragraph 
(a)(3)(ii)(A) of this section apply to children in foster care when 
defined in the Plan, pursuant to Sec.  98.16(g)(7).
    (b) A grantee or other administering agency may establish 
eligibility conditions or priority rules in addition to those specified 
in this section and Sec.  98.46, which shall be described in the Plan 
pursuant to Sec.  98.16(i)(5), so long as they do not:
* * * * *
    (4) Impact eligibility other than at the time of eligibility 
determination or redetermination.
    (c) For purposes of implementing the citizenship eligibility 
verification requirements mandated by title IV of the Personal 
Responsibility and Work Opportunity Reconciliation Act, 8 U.S.C. 1601 
et seq., only the citizenship and immigration status of the child, who 
is the primary beneficiary of the CCDF benefit, is relevant. Therefore, 
a Lead Agency or other administering agency may not condition a child's 
eligibility for services under Sec.  98.50 based upon the citizenship 
or immigration status of their parent or the provision of any 
information about the citizenship or immigration status of their 
parent.
0
14. Add Sec.  98.21 to subpart C to read as follows:


Sec.  98.21  Eligibility determination processes.

    (a) A Lead Agency shall redetermine a child's eligibility for child 
care services no sooner than 12 months following the initial 
determination or most recent redetermination, subject to the following:
    (1) During the period of time between redeterminations, if the 
child met all of the requirements in Sec.  98.20(a) on the date of the 
most recent eligibility determination or redetermination, the child 
shall be considered to be eligible and will receive services, 
regardless of:
    (i) A change in family income, if that family income does not 
exceed 85 percent of SMI for a family of the same size; or
    (ii) A temporary change in the ongoing status of the child's parent 
as working or attending a job training or educational program. A 
temporary change shall include, at a minimum:
    (A) Any time-limited absence from work for an employed parent for 
periods of family leave (including parental leave) or sick leave;
    (B) Any interruption in work for a seasonal worker who is not 
working between regular industry work seasons;
    (C) Any student holiday or break for a parent participating in 
training or education;
    (D) Any reduction in work, training or education hours, as long as 
the parent is still working or attending training or education;
    (E) Any other cessation of work or attendance at a training or 
education program that does not exceed three months or a longer period 
of time established by the Lead Agency;
    (F) Any change in age, including turning 13 years old during the 
eligibility period; and
    (G) Any change in residency within the State, Territory, or Tribal 
service area.
    (2) Lead Agencies have the option, but are not required, to 
discontinue assistance due to a parent's loss of work or cessation of 
attendance at a job training or educational program that does not 
constitute a temporary change in accordance with paragraph (a)(1)(ii) 
of this section. However, if the Lead Agency exercises this option, it 
must continue assistance at the same level for a period of not less 
than three months after such loss or cessation in order for the parent 
to engage in job search and resume work, or resume attendance at a job 
training or educational activity.
    (3) Lead Agencies cannot increase family co-payment amounts, 
established in accordance with Sec.  98.45(k), within the minimum 12-
month eligibility period except as described in paragraph (b)(2) of 
this section.
    (4) Because a child meeting eligibility requirements at the most 
recent eligibility determination or redetermination is considered 
eligible between redeterminations as described in paragraph (a)(1) of 
this section, any payment for such a child shall not be considered an 
error or improper payment under subpart K of this part due to a change 
in the family's circumstances.
    (b) Lead Agencies that establish family income eligibility at a 
level less than 85 percent of SMI for a family of the same size (in 
order for a child to initially qualify for assistance) must provide a 
graduated phaseout by implementing two-tiered eligibility thresholds.
    (1) This can be accomplished either by:
    (i) Establishing the second tier of eligibility at 85 percent of 
SMI for a family of the same size and considering children to be 
eligible (pursuant to paragraph (a) of this section) if their parents, 
at the time of redetermination, are working or attending a job training 
or educational program even if their income exceeds the Lead Agency's 
income limit to initially quality for assistance, but does not exceed 
the second eligibility threshold; or
    (ii) Using the approach specified in paragraph (b)(1)(i) of this 
section but

[[Page 80569]]

only for a limited period of not less than an additional 12 months.
    (2) Lead Agencies may gradually adjust co-pay amounts for families 
that are determined eligible under the conditions described in 
paragraph (b) of this section to help families transition off of child 
care assistance.
    (c) The Lead Agency shall establish processes for initial 
determination and redetermination of eligibility that take into account 
irregular fluctuation in earnings, including policies that ensure 
temporary increases in income, including temporary increases that 
result in monthly income exceeding 85 percent of SMI (calculated on a 
monthly basis), do not affect eligibility or family co-payments.
    (d) The Lead Agency shall establish procedures and policies to 
ensure parents, especially parents receiving assistance through the 
Temporary Assistance for Needy Families (TANF) program, are not 
required to unduly disrupt their education, training, or employment in 
order to complete the eligibility redetermination process.
    (e) The Lead Agency shall specify in the Plan any requirements for 
parents to notify the Lead Agency of changes in circumstances during 
the minimum 12-month period, and describe efforts to ensure such 
requirements do not impact continuity for eligible families between 
redeterminations.
    (1) The Lead Agency must require families to report a change at any 
point during the minimum 12-month period, limited to:
    (i) If the family's income exceeds 85% of SMI, taking into account 
irregular income fluctuations; or
    (ii) At the option of the Lead Agency, the family has experienced a 
non-temporary cessation of work, training, or education.
    (2) Any requirement for parents to provide notification of changes 
in circumstances to the Lead Agency or entities designated to perform 
eligibility functions shall not constitute an undue burden on families. 
Any such requirements shall:
    (i) Limit notification requirements to items that impact a family's 
eligibility (e.g., only if income exceeds 85 percent of SMI, or there 
is a non-temporary change in the status of the child's parent as 
working or attending a job training or educational program) or those 
that enable the Lead Agency to contact the family or pay providers;
    (ii) Not require an office visit in order to fulfill notification 
requirements; and
    (iii) Offer a range of notification options (e.g., phone, email, 
online forms, extended submission hours) to accommodate the needs of 
working parents;
    (3) During a period of graduated phase-out, the Lead Agency may 
require additional reporting on changes in family income in order to 
gradually adjust family co-payments, if desired, as described in 
paragraph (b)(2) of this section.
    (4) Lead Agencies must allow families the option to voluntarily 
report changes on an ongoing basis.
    (i) Lead Agencies are required to act on this information provided 
by the family if it would reduce the family's co-payment or increase 
the family's subsidy.
    (ii) Lead Agencies are prohibited from acting on information that 
would reduce the family's subsidy unless the information provided 
indicates the family's income exceeds 85 percent of SMI for a family of 
the same size, taking into account irregular income fluctuations, or, 
at the option of the Lead Agency, the family has experienced a non-
temporary change in the work, training, or educational status.
    (f) Lead Agencies must take into consideration children's 
development and learning and promote continuity of care when 
authorizing child care services.
    (g) Lead Agencies are not required to limit authorized child care 
services strictly based on the work, training, or educational schedule 
of the parent(s) or the number of hours the parent(s) spend in work, 
training, or educational activities.
0
15. Amend Sec.  98.30 by revising paragraphs (e)(1), (f) introductory 
text, and (f)(2) and adding paragraphs (g) and (h) to read as follows:


Sec.  98.30  Parental choice.

* * * * *
    (e)(1) For child care services, certificates under paragraph (a)(2) 
of this section shall permit parents to choose from a variety of child 
care categories, including:
    (i) Center-based child care;
    (ii) Family child care; and
    (iii) In-home child care, with limitations, if any, imposed by the 
Lead Agency and described in its Plan at Sec.  98.16(i)(2). Under each 
of the above categories, care by a sectarian provider may not be 
limited or excluded.
* * * * *
    (f) With respect to State and local regulatory requirements under 
Sec.  98.40, health and safety requirements under Sec.  98.41, and 
payment rates under Sec.  98.45, CCDF funds will not be available to a 
Lead Agency if State or local rules, procedures or other requirements 
promulgated for purposes of the CCDF significantly restrict parental 
choice by:
* * * * *
    (2) Having the effect of limiting parental access to or choice from 
among such categories of care or types of providers, as defined in 
Sec.  98.2, with the exception of in-home care; 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, such as those identified in a quality 
improvement system or other transparent system of quality indicators.
    (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
16. Revise Sec.  98.31 to read as follows:


Sec.  98.31  Parental access.

    The Lead Agency shall have in effect procedures to ensure that 
providers of child care services for which assistance is provided 
afford parents unlimited access to their children, and to the providers 
caring for their children, during normal hours of provider operation 
and whenever the children are in the care of the provider. The Lead 
Agency shall provide a detailed description in the Plan of such 
procedures.
0
17. Revise Sec.  98.32 to read as follows:


Sec.  98.32  Parental complaints.

    The State shall:
    (a) Establish or designate a hotline or similar reporting process 
for parents to submit complaints about child care providers;
    (b) Maintain a record of substantiated parent complains;
    (c) Make information regarding such parental complaints available 
to the public on request; and
    (d) The Lead Agency shall provide a detailed description in the 
Plan of how such record is maintained and is made available.
0
18. Revise Sec.  98.33 to read as follows:


Sec.  98.33  Consumer and provider education.

    The Lead Agency shall:
    (a) Certify that it will collect and disseminate consumer education 
information to parents of eligible children, the general public, and 
providers through a consumer-friendly and easily accessible Web site 
that ensures the widest possible access to

[[Page 80570]]

services for families who speak languages other than English and 
persons with disabilities, including:
    (1) Lead Agency processes, including:
    (i) The process for licensing child care providers pursuant to 
Sec.  98.40;
    (ii) The process for conducting monitoring and inspections of child 
care providers pursuant to Sec.  98.42:
    (iii) Policies and procedures related to criminal background checks 
for child care providers pursuant to Sec.  98.43; and
    (iv) The offenses that prevent individuals from serving as child 
care providers.
    (2) Provider-specific information for all eligible and licensed 
child care providers (other than an individual who is related to all 
children for whom child care services are provided), including:
    (i) A localized list of child care providers, differentiating 
between licensed and license-exempt providers, searchable by zip code;
    (ii) The quality of a provider as determined by the Lead Agency 
through a quality rating and improvement system or other transparent 
system of quality indicators, if such information is available for the 
provider;
    (iii) Results of monitoring and inspection reports for child care 
providers, including those required at Sec.  98.42 and those due to 
major substantiated complaints about failure to comply with provisions 
at Sec.  98.41 and Lead Agency child care policies. Lead Agencies shall 
post in a timely manner full monitoring and inspection reports, either 
in plain language or with a plain language summary, for parents and 
child care providers to understand. Such results shall include:
    (A) Information on the date of such inspection;
    (B) Information on corrective action taken by the State and child 
care provider, where applicable; and
    (C) A minimum of 5 years of results, where available.
    (iv) The number of serious injuries and deaths of children that 
occurred while in the care of the provider.
    (3) Aggregate number of deaths, serious injuries, and instances of 
substantiated child abuse that occurred in child care settings each 
year, for eligible providers.
    (4) Referrals to local child care resource and referral 
organizations.
    (5) Directions on how parents can contact the Lead Agency or its 
designee and other programs to help them understand information 
included on the Web site.
    (b) Certify that it will collect and disseminate, through resource 
and referral organizations or other means as determined by the State, 
including, but not limited to, through the Web site at Sec.  98.33(a), 
to parents of eligible children and the general public, and where 
applicable providers, information about:
    (1) The availability of the full diversity of child care services 
to promote informed parental choice, including information about:
    (i) the availability of child care services under this part and 
other programs for which families may be eligible, as well as the 
availability of financial assistance to obtain child care services;
    (ii) Other programs for which families that receive assistance 
under this part may be eligible, including:
    (A) Temporary Assistance for Needy Families (TANF) (42 U.S.C. 601 
et seq.);
    (B) Head Start and Early Head Start (42 U.S.C. 9831 et seq.);
    (C) Low-Income Home Energy Assistance Program (LIHEAP) (42 U.S.C. 
8621 et seq.);
    (D) Supplemental Nutrition Assistance Program (SNAP) (7 U.S.C. 2011 
et seq.);
    (E) Special supplemental nutrition program for women, infants, and 
children (42 U.S.C. 1786);
    (F) Child and Adult Care Food Program (CACFP) (42 U.S.C. 1766);
    (G) Medicaid and the State children's health insurance programs (42 
U.S.C. 1396 et seq., 1397aa et seq.);
    (iii) Programs carried out under section 619 and part C of the 
Individuals with Disabilities Education Act (IDEA) (20 U.S.C. 1419, 
1431 et seq.)
    (iv) Research and best practices concerning children's development, 
and meaningful parent and family engagement, and physical health and 
development, particularly healthy eating and physical activity; and
    (v) State policies regarding social-emotional behavioral health of 
children which may include positive behavioral health intervention and 
support models for birth to school-age or age- appropriate, and 
policies on suspension and expulsion of children birth to age five in 
child care and other early childhood programs, as described in the Plan 
pursuant to Sec.  98.16(ee), receiving assistance under this part.
    (2) [Reserved]
    (c) Provide information on developmental screenings to parents as 
part of the intake process for families receiving assistance under this 
part, and to providers through training and education, including:
    (1) Information on existing resources and services the State can 
make available in conducting developmental screenings and providing 
referrals to services when appropriate for children who receive 
assistance under this part, including the coordinated use of the Early 
and Periodic Screening, Diagnosis, and Treatment program (42 U.S.C. 
1396 et seq.) and developmental screening services available under 
section 619 and part C of the Individuals with Disabilities Education 
Act (20 U.S.C. 1419, 1431 et seq.); and
    (2) A description of how a family or eligible child care provider 
may utilize the resources and services described in paragraph (c)(1) of 
this section to obtain developmental screenings for children who 
receive assistance under this part who may be at risk for cognitive or 
other developmental delays, which may include social, emotional, 
physical, or linguistic delays.
    (d) For families that receive assistance under this part, provide 
specific information about the child care provider selected by the 
parent, including health and safety requirements met by the provider 
pursuant to Sec.  98.41, any licensing or regulatory requirements met 
by the provider, date the provider was last inspected, any history of 
violations of these requirements, and any voluntary quality standards 
met by the provider. Information must also describe how CCDF subsidies 
are designed to promote equal access in accordance with Sec.  98.45, 
how to submit a complaint through the hotline at Sec.  98.32(a), and 
how to contact local resource and referral agencies or other community-
based supports that assist parents in finding and enrolling in quality 
child care.
    (e) Inform parents who receive TANF benefits about the requirement 
at section 407(e)(2) of the Social Security Act that the TANF agency 
make an exception to the individual penalties associated with the work 
requirement for any single custodial parent who has a demonstrated 
inability to obtain needed child care for a child under six years of 
age. The information may be provided directly by the Lead Agency, or, 
pursuant to Sec.  98.11, other entities, and shall include:
    (1) The procedures the TANF agency uses to determine if the parent 
has a demonstrated inability to obtain needed child care;
    (2) The criteria or definitions applied by the TANF agency to 
determine whether the parent has a demonstrated inability to obtain 
needed child care, including:
    (i) ``Appropriate child care'';
    (ii) ``Reasonable distance'';
    (iii) ``Unsuitability of informal child care'';
    (iv) ``Affordable child care arrangements'';
    (3) The clarification that assistance received during the time an 
eligible

[[Page 80571]]

parent receives the exception referred to in paragraph (e) of this 
section will count toward the time limit on Federal benefits required 
at section 408(a)(7) of the Social Security Act.
    (f) Include in the triennial Plan the definitions or criteria the 
TANF agency uses in implementing the exception to the work requirement 
specified in paragraph (e) of this section.
0
19. Sec.  Amend 98.40 by redesignating paragraph (a)(2) as (a)(3), 
revising newly redesignated paragraph (a)(3), and adding paragraph 
(a)(2) to read as follows:


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

    (a) * * *
    (2) Describe in the Plan exemption(s) to licensing requirements, if 
any, for child care services for which assistance is provided, and a 
demonstration for how such exemption(s) do not endanger the health, 
safety, or development of children who receive services from such 
providers. Lead Agencies must provide the required description and 
demonstration for any exemptions based on:
    (i) Provider category, type, or setting;
    (ii) Length of day;
    (iii) Providers not subject to licensing because the number of 
children served falls below a State-defined threshold; and
    (iv) Any other exemption to licensing requirements; and
    (3) Provide a detailed description in the Plan of the requirements 
under paragraph (a)(1) of this section and of how they are effectively 
enforced.
* * * * *
0
20. Revise Sec.  98.41to read as follows:


Sec.  98.41  Health and safety requirements.

    (a) Each Lead Agency shall certify that there are in effect, within 
the State (or other area served by the Lead Agency), under State, local 
or tribal law, requirements (appropriate to provider setting and age of 
children served) that are designed, implemented, and enforced to 
protect the health and safety of children. Such requirements must be 
applicable to child care providers of services, for which assistance is 
provided under this part. Such requirements, which are subject to 
monitoring pursuant to Sec.  98.42, shall:
    (1) Include health and safety topics consisting of:
    (i) The prevention and control of infectious diseases (including 
immunizations); with respect to immunizations, the following provisions 
apply:
    (A) 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, 
territorial, or tribal public health agency.
    (B) Notwithstanding paragraph (a)(1)(i) of this section, Lead 
Agencies may exempt:
    (1) Children who are cared for by relatives (defined as 
grandparents, great grandparents, siblings (if living in a separate 
residence), aunts, and uncles).
    (2) Children who receive care in their own homes, provided there 
are no other unrelated children who are cared for in the home.
    (3) Children whose parents object to immunization on religious 
grounds.
    (4) Children whose medical condition contraindicates immunization.
    (C) Lead Agencies shall establish a grace period that allows 
children experiencing homelessness and children in foster care to 
receive services under this part while providing their families 
(including foster families) a reasonable time to take any necessary 
action to comply with immunization and other health and safety 
requirements.
    (1) Any payment for such child during the grace period shall not be 
considered an error or improper payment under subpart K of this part.
    (2) The Lead Agency may also, at its option, establish grace 
periods for other children who are not experiencing homelessness or in 
foster care.
    (3) Lead Agencies must coordinate with licensing agencies and other 
relevant State and local agencies to provide referrals and support to 
help families of children receiving services during a grace period 
comply with immunization and other health and safety requirements;
    (ii) Prevention of sudden infant death syndrome and use of safe 
sleeping practices;
    (iii) Administration of medication, consistent with standards for 
parental consent;
    (iv) Prevention and response to emergencies due to food and 
allergic reactions;
    (v) Building and physical premises safety, including identification 
of and protection from hazards, bodies of water, and vehicular traffic;
    (vi) Prevention of shaken baby syndrome and abusive head trauma;
    (vii) Emergency preparedness and response planning for emergencies 
resulting from a natural disaster, or a man-caused event (such as 
violence at a child care facility), within the meaning of those terms 
under section 602(a)(1) of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5195a(a)(1)) that shall include 
procedures for evacuation, relocation, shelter-in-place and lock down, 
staff and volunteer emergency preparedness training and practice 
drills, communication and reunification with families, continuity of 
operations, and accommodation of infants and toddlers, children with 
disabilities, and children with chronic medical conditions;
    (viii) Handling and storage of hazardous materials and the 
appropriate disposal of biocontaminants;
    (ix) Appropriate precautions in transporting children, if 
applicable;
    (x) First aid and cardiopulmonary resuscitation;
    (xi) Recognition and reporting of child abuse and neglect, in 
accordance with the requirement in paragraph (e) of this section; and
    (xii) May include requirements relating to:
    (A) Nutrition (including age-appropriate feeding);
    (B) Access to physical activity;
    (C) Caring for children with special needs; or
    (D) Any other subject area determined by the Lead Agency to be 
necessary to promote child development or to protect children's health 
and safety.
    (2) Include minimum health and safety training on the topics above, 
as described in Sec.  98.44.
    (b) Lead Agencies may not set health and safety standards and 
requirements other than those required in paragraph (a) of this section 
that are inconsistent with the parental choice safeguards in Sec.  
98.30(f).
    (c) The requirements in paragraph (a) of this section shall apply 
to all providers of child care services for which assistance is 
provided under this part, within the area served by the Lead Agency, 
except the relatives specified at Sec.  98.42(c).
    (d) Lead Agencies shall describe in the Plan standards for child 
care services for which assistance is provided under this part, 
appropriate to promoting the adult and child relationship in the type 
of child care setting involved, to provide for the safety and 
developmental needs of the children served, that address:
    (1) Group size limits for specific age populations;
    (2) The appropriate ratio between the number of children and the 
number of caregivers, in terms of age of children in child care; and
    (3) Required qualifications for caregivers in child care settings 
as described at Sec.  98.44(a)(4).

[[Page 80572]]

    (e) Lead Agencies shall certify that caregivers, teachers, and 
directors of child care providers within the State or service area will 
comply with the State's, Territory's, or Tribe's child abuse reporting 
requirements as required by section 106(b)(2)(B)(i) of the Child Abuse 
and Prevention and Treatment Act (42 U.S.C. 5106a(b)(2)(B)(i)) or other 
child abuse reporting procedures and laws in the service area.
0
21. Revise Sec.  98.42 to read as follows:


Sec.  98.42  Enforcement of licensing and health and safety 
requirements.

    (a) Each Lead Agency shall certify in the Plan that procedures are 
in effect to ensure that child care providers of services for which 
assistance is made available in accordance with 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 Sec.  98.41.
    (b) Each Lead Agency shall certify in the Plan it has monitoring 
policies and practices applicable to all child care providers and 
facilities eligible to deliver services for which assistance is 
provided under this part. The Lead Agency shall:
    (1) Ensure individuals who are hired as licensing inspectors are 
qualified to inspect those child care providers and facilities and have 
received training in related health and safety requirements appropriate 
to provider setting and age of children served. Training shall include, 
but is not limited to, those requirements described in Sec.  98.41, and 
all aspects of the State, Territory, or Tribe's licensure requirements;
    (2) Require inspections of child care providers and facilities, 
performed by licensing inspectors (or qualified inspectors designated 
by the Lead Agency), as specified below:
    (i) For licensed child care providers and facilities:
    (A) Not less than one pre-licensure inspection for compliance with 
health, safety, and fire standards, and
    (B) Not less than annually an unannounced inspection for compliance 
with all child care licensing standards, which shall include an 
inspection for compliance with health and safety, (including, but not 
limited to, those requirements described in Sec.  98.41) and fire 
standards (inspectors may inspect for compliance with all three 
standards at the same time); and
    (ii) For license-exempt child care providers and facilities, an 
annual inspection for compliance with health and safety (including, but 
not limited to, those requirements described in Sec.  98.41), and fire 
standards;
    (iii) Coordinate, to the extent practicable, monitoring efforts 
with other Federal, State, and local agencies that conduct similar 
inspections.
    (iv) The Lead Agency may, at its option:
    (A) Use differential monitoring or a risk-based approach to design 
annual inspections, provided that the contents covered during each 
monitoring visit is representative of the full complement of health and 
safety requirements;
    (B) Develop alternate monitoring requirements for care provided in 
the child's home that are appropriate to the setting; and
    (3) Ensure the ratio of licensing inspectors to such child care 
providers and facilities is maintained at a level sufficient to enable 
the State, Territory, or Tribe to conduct effective inspections on a 
timely basis in accordance with the applicable Federal, State, 
Territory, Tribal, and local law;
    (4) Require child care providers to report to a designated State, 
Territorial, or Tribal entity any serious injuries or deaths of 
children occurring in child care.
    (c) For the purposes of this section and Sec.  98.41, Lead Agencies 
may exclude grandparents, great grandparents, siblings (if such 
providers live in a separate residence), aunts, or uncles, from the 
term ``child care providers.'' If the Lead Agency chooses to exclude 
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.
    Sec. Sec.  98.43 through 98.47 [Redesignated as Sec. Sec.  98.45 
through 98.49]
0
22. Redesignate Sec. Sec.  98.43 through 98.47 of subpart E as 
Sec. Sec.  98.45 through 98.49.
0
23. Add Sec.  98.43 to subpart E to read as follows:


Sec.  98.43  Criminal background checks

    (a)(1) States, Territories, and Tribes, through coordination of the 
Lead agency with other State, territorial, and tribal agencies, shall 
have in effect:
    (i) Requirements, policies, and procedures to require and conduct 
criminal background checks for child care staff members (including 
prospective child care staff members) of all licensed, regulated, or 
registered child care providers and all child care providers eligible 
to deliver services for which assistance is provided under this part as 
described in paragraph (a)(2) of this section;
    (ii) Licensing, regulation, and registration requirements, as 
applicable, that prohibit the employment of child care staff members as 
described in paragraph (c) of this section; and
    (iii) Requirements, policies, and procedures in place to respond as 
expeditiously as possible to other States', Territories', and Tribes' 
requests for background check results in order to accommodate the 45 
day timeframe required in paragraph (e)(1) of this section.
    (2) In this section:
    (i) Child care provider means a center-based child care provider, a 
family child care provider, or another provider of child care services 
for compensation and on a regular basis that:
    (A) Is not an individual who is related to all children for whom 
child care services are provided; and
    (B) Is licensed, regulated, or registered under State law or 
eligible to receive assistance provided under this subchapter; and
    (ii) Child care staff member means an individual age 18 and older 
(other than an individual who is related to all children for whom child 
care services are provided):
    (A) Who is employed by a child care provider for compensation, 
including contract employees or self-employed individuals;
    (B) Whose activities involve the care or supervision of children 
for a child care provider or unsupervised access to children who are 
cared for or supervised by a child care provider; or
    (C) Any individual residing in a family child care home who is age 
18 and older.
    (b) A criminal background check for a child care staff member under 
paragraph (a) of this section shall include:
    (1) A Federal Bureau of Investigation fingerprint check using Next 
Generation Identification;
    (2) A search of the National Crime Information Center's National 
Sex Offender Registry; and
    (3) A search of the following registries, repositories, or 
databases in the State where the child care staff member resides and 
each State where such staff member resided during the preceding five 
years:
    (i) State criminal registry or repository using fingerprints;
    (ii) State sex offender registry or repository; and
    (iii) State-based child abuse and neglect registry and database.
    (c)(1) A child care staff member shall be ineligible for employment 
by child care providers of services for which assistance is made 
available in accordance with this part, if such individual:

[[Page 80573]]

    (i) Refuses to consent to the criminal background check described 
in paragraph (b) of this section;
    (ii) Knowingly makes a materially false statement in connection 
with such criminal background check;
    (iii) Is registered, or is required to be registered, on a State 
sex offender registry or repository or the National Sex Offender 
Registry; or
    (iv) Has been convicted of a felony consisting of:
    (A) Murder, as described in section 1111 of title 18, United States 
Code;
    (B) Child abuse or neglect;
    (C) A crime against children, including child pornography;
    (D) Spousal abuse;
    (E) A crime involving rape or sexual assault;
    (F) Kidnapping;
    (G) Arson;
    (H) Physical assault or battery; or
    (I) Subject to paragraph (e)(4) of this section, a drug-related 
offense committed during the preceding 5 years; or
    (v) Has been convicted of a violent misdemeanor committed as an 
adult against a child, including the following crimes: child abuse, 
child endangerment, sexual assault, or of a misdemeanor involving child 
pornography.
    (2) A child care provider described in paragraph (a)(2)(i) of this 
section shall be ineligible for assistance provided in accordance with 
this subchapter if the provider employs a staff member who is 
ineligible for employment under paragraph (c)(1) of this section.
    (d)(1) A child care provider covered by paragraph (a)(2)(i) of this 
section shall submit a request, to the appropriate State, Territorial, 
or Tribal agency, defined clearly on the State or Territory Web site 
described in paragraph (g) of this section, for a criminal background 
check described in paragraph (b) of this section, for each child care 
staff member (including prospective child care staff members) of the 
provider.
    (2) Subject to paragraph (d)(3) of this section, the provider shall 
submit such a request:
    (i) Prior to the date an individual becomes a child care staff 
member of the provider; and
    (ii) Not less than once during each 5-year period for any existing 
staff member.
    (3) A child care provider shall not be required to submit a request 
under paragraph (d)(2) of this section for a child care staff member 
if:
    (i) The staff member received a background check described in 
paragraph (b) of this section:
    (A) Within 5 years before the latest date on which such a 
submission may be made; and
    (B) While employed by or seeking employment by another child care 
provider within the State;
    (ii) The State provided to the first provider a qualifying 
background check result, consistent with this subchapter, for the staff 
member; and
    (iii) The staff member is employed by a child care provider within 
the State, or has been separated from employment from a child care 
provider within the State for a period of not more than 180 consecutive 
days.
    (4) A prospective staff member may begin work for a child care 
provider described in paragraph (a)(2)(i) of this section after the 
provider has submitted such a request if the staff member is supervised 
at all times by an individual who received a qualifying result on a 
background check described in paragraph (b) of this section within 5 
years of the request.
    (e)(1) Background check results. The State, Territory, or Tribe 
shall carry out the request of a child care provider for a criminal 
background check as expeditiously as possible, but not to exceed 45 
days after the date on which the provider submitted the request, and 
shall provide the results of the criminal background check to such 
provider and to the current or prospective staff member.
    (2) States, Territories, and Tribes shall ensure the privacy of 
background check results by:
    (i) Providing the results of the criminal background check to the 
provider in a statement that indicates whether a child care staff 
member (including a prospective child care staff member) is eligible or 
ineligible for employment described in paragraph (c)(1) of this 
section, without revealing any disqualifying crime or other related 
information regarding the individual.
    (ii) If the child care staff member is ineligible for such 
employment due to the background check, the State, Territory, or Tribe 
will, when providing the results of the background check, include 
information related to each disqualifying crime, in a report to the 
staff member or prospective staff member.
    (iii) No State, Territory, or Tribe shall publicly release or share 
the results of individual background checks, except States and Tribes 
may release aggregated data by crime as listed under paragraph 
(c)(1)(iv) of this section from background check results, as long as 
such data is not personally identifiable information.
    (3) States, Territories, and Tribes shall provide for a process by 
which a child care staff member (including a prospective child care 
staff member) may appeal the results of a criminal background check 
conducted under this section to challenge the accuracy or completeness 
of the information contained in such member's criminal background 
report. The State, Territory, and Tribe shall ensure that:
    (i) Each child care staff member is given notice of the opportunity 
to appeal;
    (ii) A child care staff member will receive instructions about how 
to complete the appeals process if the child care staff member wishes 
to challenge the accuracy or completeness of the information contained 
in such member's criminal background report; and
    (iii) The appeals process is completed in a timely manner for each 
child care staff member.
    (4) States, Territories, and Tribes may allow for a review process 
through which the State, Territory, or Tribe may determine that a child 
care staff member (including a prospective child care staff member) 
disqualified for a crime specified in paragraph (c)(1)(iv)(I) of this 
section is eligible for employment described in paragraph (c)(1) of 
this section, notwithstanding paragraph (c)(2) of this section. The 
review process shall be consistent with title VII of the Civil Rights 
Act of 1964 (42 U.S.C. 2000e et seq.);
    (5) Nothing in this section shall be construed to create a private 
right of action if a provider has acted in accordance with this 
section.
    (f) Fees that a State, Territory, or Tribe may charge for the costs 
of processing applications and administering a criminal background 
check as required by this section shall not exceed the actual costs for 
the processing and administration.
    (g) The State or Territory must ensure that its policies and 
procedures under Sec.  98.43, including the process by which a child 
care provider or other State may submit a background check request, are 
published in the Web site of the State or Territory as described in 
Sec.  98.33(a) and the Web site of local lead agencies.
    (h)(1) Nothing in this section shall be construed to prevent a 
State, Territory, or Tribe from disqualifying individuals as child care 
staff members based on their conviction for crimes not specifically 
listed in this section that bear upon the fitness of an individual to 
provide care for and have responsibility for the safety and well-being 
of children.
    (2) Nothing in this section shall be construed to alter or 
otherwise affect the

[[Page 80574]]

rights and remedies provided for child care staff members residing in a 
State that disqualifies individuals as child care staff members for 
crimes not specifically provided for under this section.
0
24. Add Sec.  98.44 to subpart E to read as follows:


Sec.  98.44  Training and professional development.

    (a) The Lead Agency must describe in the Plan the State or 
Territory framework for training, professional development, and 
postsecondary education for caregivers, teachers, and directors that:
    (1) Is developed in consultation with the State Advisory Council on 
Early Childhood Education and Care (designated or established pursuant 
to section 642B(b)(1)(A)(i) of the Head Start Act (42 U.S.C. 
9837b(b)(1)(A)(i))) or similar coordinating body;
    (2) May engage training providers in aligning training 
opportunities with the State's framework;
    (3) To the extent practicable, addresses professional standards and 
competencies, career pathways, advisory structure, articulation, and 
workforce information and financing;
    (4) Establishes qualifications in accordance with Sec.  98.41(d)(3) 
designed to enable child care providers that provide services for which 
assistance is provided in accordance with this part to promote the 
social, emotional, physical, and cognitive development of children and 
improve the knowledge and skills of caregivers, teachers and directors 
in working with children and their families;
    (5) Is conducted on an ongoing basis, providing a progression of 
professional development (which may include encouraging the pursuit of 
postsecondary education);
    (6) Reflects current research and best practices relating to the 
skills necessary for caregivers, teachers, and directors to meet the 
developmental needs of participating children and engage families; and
    (7) Improves the quality, diversity, stability, and retention 
(including financial incentives) of caregivers, teachers, and 
directors.
    (b) The Lead Agency must describe in the Plan its established 
requirements for pre-service or orientation (i.e., to be completed 
within three months) and ongoing professional development for 
caregivers, teachers, and directors of child care providers of services 
for which assistance is provided under the CCDF that, to the extent 
practicable, align with the State framework:
    (1) Accessible pre-service or orientation, training in health and 
safety standards, addressing each of the requirements relating to 
matters described in Sec.  98.41(a)(1)(i) through (xi) and, at the Lead 
Agency option, in Sec.  98.41(a)(1)(xii), and child development, 
including the major domains (cognitive, social, emotional, physical 
development and approaches to learning) appropriate to the age of 
children served;
    (2) Ongoing, accessible professional development, aligned to a 
progression of professional development, including the minimum annual 
requirement for hours of training and professional development for 
eligible caregivers, teachers and directors that:
    (i) Maintains and updates health and safety training standards 
described in Sec. 98.41(a)(1)(i) through (xi), and at the Lead Agency 
option, in Sec.  98.41(a)(1)(xii);
    (ii) Incorporates knowledge and application of the State's early 
learning and developmental guidelines for children birth to 
kindergarten (where applicable);
    (iii) Incorporates social-emotional behavior intervention models 
for children birth through school-age, which may include positive 
behavior intervention and support models including preventing and 
reducing expulsions and suspensions of preschool-aged and school-aged 
children;
    (iv) To the extent practicable, are appropriate for a population of 
children that includes:
    (A) Different age groups;
    (B) English learners;
    (C) Children with developmental delays and disabilities; and
    (D) Native Americans, including Indians, as the term is defined in 
section 4 of the Indian Self-Determination and Education Assistance Act 
(25 U.S.C. 450b) (including Alaska Natives within the meaning of that 
term), and Native Hawaiians (as defined in section 7207 of the 
Elementary and Secondary Education Act of 1965 (20 U.S.C. 7517));
    (v) To the extent practicable, awards continuing education units or 
is credit-bearing; and
    (vi) Shall be accessible to caregivers, teachers, and directors 
supported through Indian tribes or tribal organizations that receive 
assistance under this subchapter.
0
25. Amend newly redesignated Sec.  98.45 by:
0
a. Revising paragraph (b);
0
b. Redesignating paragraphs (c) through (e) as (g) through (i);
0
c. Revising newly redesignated paragraphs (g) and (i); and
0
d. Adding paragraphs (c), (d), (e), (f), (j), (k), (l), and (m).
    The revisions and additions read as follows:


Sec.  98.45  Equal access.

* * * * *
    (b) The Lead Agency shall provide in the Plan a summary of the data 
and facts relied on to determine that its payment rates ensure equal 
access. At a minimum, the summary shall include facts showing:
    (1) How a choice of the full range of providers is made available;
    (2) How payment rates are adequate and have been established based 
on the most recent market rate survey or alternative methodology 
conducted in accordance with paragraph (c) of this section;
    (3) How base payment rates support health, safety, and quality in 
accordance with paragraphs (f)(1)(i) and (f)(2)(ii) of this section;
    (4) How payment rates provide parental choice for families 
receiving CCDF subsidies to access care that is of comparable quality 
to care that is available to families with incomes above 85 percent of 
State Median Income;
    (5) How the Lead Agency took the cost of higher quality into 
account in accordance with paragraph (f)(2)(iii) of this section;
    (6) How copayments based on a sliding fee scale are affordable, as 
stipulated at paragraph (k) of this section;
    (7) How the Lead Agency's payment practices support equal access to 
a range of providers by providing stability of funding and encouraging 
more child care providers to serve children receiving CCDF subsidies, 
in accordance with paragraph (m) of this section;
    (8) How and on what factors the Lead Agency differentiates payment 
rates; and
    (9) Any additional facts the Lead Agency considered in determining 
that its payment rates ensure equal access.
    (c) The Lead Agency shall demonstrate in the Plan that it has 
developed and conducted, not earlier than two years before the date of 
the submission of the Plan, either:
    (1) A statistically valid and reliable survey of the market rates 
for child care services (that also includes information on the extent 
to which child care providers are participating in the CCDF subsidy 
program and any barriers to participation, including barriers related 
to payment rates and practices); or
    (2) An alternative methodology, such as a cost estimation model, 
that has been:

[[Page 80575]]

    (i) Proposed by the Lead Agency in accordance with uniform 
procedures and timeframes established by ACF; and
    (ii) Approved in advance by ACF.
    (d) The market rate survey or alternative methodology must reflect 
variations by geographic location, category of provider, and age of 
child.
    (e) Prior to conducting the market rate survey or alternative 
methodology, the Lead Agency must consult with:
    (1) The State Advisory Council on Early Childhood Education and 
Care (designated or established pursuant to section 642B(b)(1)(A)(i) of 
the Head Start Act (42 U.S.C. 9837b(b)(1)(A)(i)) or similar 
coordinating body, local child care program administrators, local child 
care resource and referral agencies, and other appropriate entities; 
and
    (2) Organizations representing child care caregivers, teachers, and 
directors.
    (f) After conducting the market rate survey or alternative 
methodology, the Lead Agency must:
    (1) Prepare a detailed report containing the results, and make the 
report widely available, including by posting it on the Internet, not 
later than 30 days after the completion of the report.
    (i) The report must indicate the estimated price or cost of care 
necessary to support child care providers' implementation of the 
health, safety, and quality requirements at Sec. Sec.  98.41 through 
98.44, including any relevant variation by geographic location, 
category of provider, or age of child.
    (ii) [Reserved]
    (2) Set payment rates for CCDF assistance:
    (i) In accordance with the results of the most recent market rate 
survey or alternative methodology conducted pursuant to paragraph (c) 
of this section;
    (ii) With base payment rates established at least at a level 
sufficient to support implementation of health, safety and quality 
requirements in accordance with paragraph (f)(1)(i) of this section;
    (iii) That provides parental choice to families receiving CCDF 
subsidies to access care that is of comparable quality to care that is 
available to families with incomes above 85 percent of State Median 
Income;
    (iv) Taking into consideration the cost of providing higher quality 
child care services; and
    (v) Without, to the extent practicable, reducing the number of 
families receiving CCDF assistance.
    (g) A Lead Agency may not establish different payment rates based 
on a family's eligibility status, such as TANF status.
* * * * *
    (i) Nothing in this section shall be construed to create a private 
right of action if the Lead Agency acted in accordance with the Act and 
this part.
    (j) Nothing in this part shall be construed to prevent a Lead 
Agency from differentiating payment rates on the basis of such factors 
as:
    (1) Geographic location of child care providers (such as location 
in an urban or rural area);
    (2) Age or particular needs of children (such as the needs of 
children with disabilities, children served by child protective 
services, and children experiencing homelessness);
    (3) Whether child care providers provide services during the 
weekend or other non-traditional hours; or
    (4) The Lead Agency's determination that such differential payment 
rates may enable a parent to choose high-quality child care that best 
fits the parents' needs.
    (k) Lead Agencies shall establish, and periodically revise, by 
rule, a sliding fee scale(s) for families that receive CCDF child care 
services that:
    (1) Helps families afford child care and enables choice of a range 
of child care options;
    (2) Is based on income and the size of the family and may be based 
on other factors as appropriate, but may not be based on the cost of 
care or amount of subsidy payment;
    (3) Provides for affordable family co-payments that are not a 
barrier to families receiving assistance under this part;
    (4) Allows for co-payments to be waived for families whose incomes 
are at or below the poverty level for a family of the same size, that 
have children who receive or need to receive protective services, or 
that meet other criteria established by the Lead Agency.
    (l) Lead Agencies must have a policy that prohibits child care 
providers of services for which assistance is provided under the CCDF 
from charging parents additional mandatory fees above the family co-
payment determined in accordance with the sliding fee scale.
    (m) The Lead Agency shall demonstrate in the Plan that it has 
established payment practices for CCDF child care providers that:
    (1) Ensure timeliness of payment by either:
    (i) Paying prospectively prior to the delivery of services; or
    (ii) Paying within no more than 21 days of the receipt of invoice 
for services.
    (2) To the extent practicable, support the fixed costs of providing 
child care services by delinking provider payments from a child's 
occasional absences. A Lead Agency must describe its approach in the 
State Plan, including justification for an alternative approach that is 
not one of the following:
    (i) Paying based on a child's enrollment rather than attendance;
    (ii) Providing full payment if a child attends at least 85 percent 
of the authorized time; or
    (iii) Providing full payment if a child is absent for five or fewer 
days in a month.
    (3) Reflect generally accepted payment practices of child care 
providers that serve children who do not receive CCDF subsidies, which 
must include (unless the Lead Agency provides evidence in the Plan that 
such practices are not generally-accepted in the State or service 
area):
    (i) Paying on a part-time or full-time basis (rather than paying 
for hours of service or smaller increments of time); and
    (ii) Paying for mandatory fees that the provider charges to 
private-paying parents, such as fees for registration:
    (4) Ensure child care providers receive payment for any services in 
accordance with a payment agreement or authorization for services;
    (5) Ensure child care providers receive prompt notice of changes to 
a family's eligibility status that may impact payment;
    (6) Include timely appeal and resolution processes for any payment 
inaccuracies and disputes.
0
26. Revise newly redesignated Sec.  98.46 to read as follows:


Sec.  98.46  Priority for child care services.

    (a) Lead Agencies shall give priority for services provided under 
Sec.  98.50(a) to:
    (1) Children of families with very low family income (considering 
family size);
    (2) Children with special needs, which may include any vulnerable 
populations as defined by the Lead Agency; and
    (3) Children experiencing homelessness.
    (b) Lead Agencies shall prioritize increasing access to high 
quality child care and development services for children of families in 
areas that have significant concentrations of poverty and unemployment 
and that do not have a sufficient number of such programs.
0
27. Revise Sec.  98.50 to read as follows:


Sec.  98.50  Child care services.

    (a) Direct child care services shall be provided:
    (1) To eligible children, as described in Sec.  98.20;
    (2) Using a sliding fee scale, as described in Sec.  98.45(k);

[[Page 80576]]

    (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 shortages in the supply of high quality 
care described in the Plan pursuant to Sec.  98.16(i)(1) and other 
factors as determined by the Lead Agency; and
    (4) Based on the priorities in Sec.  98.46.
    (b) Of the aggregate amount of funds expended (i.e., Discretionary, 
Mandatory, and Federal and State share of Matching Funds):
    (1) No less than seven percent in fiscal years 2016 and 2017, eight 
percent in fiscal years 2018 and 2019, and nine percent in fiscal year 
2020 and each succeeding fiscal year shall be used for activities 
designed to improve the quality of child care services and increase 
parental options for, and access to, high-quality child care as 
described at Sec.  98.53; and
    (2) No less than three percent in fiscal year 2017 and each 
succeeding fiscal year shall be used to carry out activities at Sec.  
98.53(a)(4) as such activities relate to the quality of care for 
infants and toddlers.
    (3) Nothing in this section shall preclude the Lead Agency from 
reserving a larger percentage of funds to carry out activities 
described in paragraphs (b)(1) and (2) of this section.
    (c) Funds expended from each fiscal year's allotment on quality 
activities pursuant to paragraph (b) of this section:
    (1) Must be in alignment with an assessment of the Lead Agency's 
need to carry out such services and care as required at Sec.  98.53(a);
    (2) Must include measurable indicators of progress in accordance 
with Sec.  98.53(f); and
    (3) May be provided directly by the Lead Agency or through grants 
or contracts with local child care resource and referral organizations 
or other appropriate entities.
    (d) Of the aggregate amount of funds expended (i.e., Discretionary, 
Mandatory, and Federal and State share of Matching Funds), no more than 
five percent may be used for administrative activities as described at 
Sec.  98.54.
    (e) Not less than 70 percent of the Mandatory and Federal and State 
share of Matching Funds shall be used to meet the child care needs of 
families who:
    (1) Are receiving assistance under a State program under Part A of 
title IV of the Social Security Act;
    (2) Are attempting through work activities to transition off such 
assistance program; and
    (3) Are at risk of becoming dependent on such assistance program.
    (f) From Discretionary amounts provided for a fiscal year, the Lead 
Agency shall:
    (1) Reserve the minimum amount required under paragraph (b) of this 
section for quality activities, and the funds for administrative costs 
described at paragraph (d) of this section; and
    (2) From the remainder, use not less than 70 percent to fund direct 
services (provided by the Lead Agency).
    (g) Of the funds remaining after applying the provisions of 
paragraphs (a) through (f) of this section the Lead Agency shall spend 
a substantial portion funds to provide direct child care services to 
low-income families who are working or attending training or education.
    (h) Pursuant to Sec.  98.16(i)(4), the Plan shall specify how the 
State will meet the child care needs of families described in paragraph 
(e) of this section.
    Sec. Sec.  98.51 through 98.55 [Redesignated as Sec. Sec.  98.53 
through 98.57]
0
28. Redesignating Sec. Sec.  98.51 through 98.55 of subpart F as 
Sec. Sec.  98.53 through 98.57.
0
29. Add Sec.  98.51 to subpart F to read as follows:


Sec.  98.51  Services for children experiencing homelessness.

    Lead Agencies shall expend funds on activities that improve access 
to quality child care services for children experiencing homelessness, 
including:
    (a) The use of procedures to permit enrollment (after an initial 
eligibility determination) of children experiencing homelessness while 
required documentation is obtained;
    (1) If, after full documentation is provided, a family experiencing 
homelessness is found ineligible:
    (i) The Lead Agency shall pay any amount owed to a child care 
provider for services provided as a result of the initial eligibility 
determination.
    (ii) Any CCDF payment made prior to the final eligibility 
determination shall not be considered an error or improper payment 
under subpart K of this part; and
    (2) [Reserved]
    (b) Training and technical assistance for providers and appropriate 
Lead Agency (or designated entity) staff on identifying and serving 
children experiencing homelessness and their families; and
    (c) Specific outreach to families experiencing homelessness.
0
30. Add Sec.  98.52 to subpart F to read as follows:


Sec.  98.52  Child care resource and referral system.

    (a) A Lead Agency may expend funds to establish or support a system 
of local or regional child care resource and referral organizations 
that is coordinated, to the extent determined appropriate by the Lead 
Agency, by a statewide public or private nonprofit, community-based or 
regionally based, lead child care resource and referral organization.
    (b) If a Lead Agency uses funds as described in paragraph (a) of 
this section, the local or regional child care resource and referral 
organizations supported shall, at the direction of the Lead Agency:
    (1) Provide parents in the State with consumer education 
information referred to in Sec.  98.33 (except as otherwise provided in 
that paragraph), concerning the full range of child care options 
(including faith-based and community-based child care providers), 
analyzed by provider, including child care provided during 
nontraditional hours and through emergency child care centers, in their 
political subdivisions or regions;
    (2) To the extent practicable, work directly with families who 
receive assistance under this subchapter to offer the families support 
and assistance, using information described in paragraph (b)(1) of this 
section, to make an informed decision about which child care providers 
they will use, in an effort to ensure that the families are enrolling 
their children in the most appropriate child care setting to suit their 
needs and one that is of high quality (as determined by the Lead 
Agency);
    (3) Collect data and provide information on the coordination of 
services and supports, including services under section 619 and part C 
of the Individuals with Disabilities Education Act (20 U.S.C. 1431, et 
seq.), for children with disabilities (as defined in section 602 of 
such Act (20 U.S.C. 1401));
    (4) Collect data and provide information on the supply of and 
demand for child care services in political subdivisions or regions 
within the State and submit such information to the State;
    (5) Work to establish partnerships with public agencies and private 
entities, including faith-based and community-based child care 
providers, to increase the supply and quality of child care services in 
the State; and
    (6) As appropriate, coordinate their activities with the activities 
of the State Lead Agency and local agencies that administer funds made 
available in accordance with this part.

[[Page 80577]]

0
31. Revise newly redesignated Sec.  98.53 to read as follows:


Sec.  98.53  Activities to improve the quality of child care.

    (a) The Lead Agency must expend funds from each fiscal year's 
allotment on quality activities pursuant to Sec.  98.50(b) in 
accordance with an assessment of need by the Lead Agency. Such funds 
must be used to carry out at least one of the following quality 
activities to increase the number of low-income children in high-
quality child care:
    (1) Supporting the training, professional development, and 
postsecondary education of the child care workforce as part of a 
progression of professional development through activities such as 
those included at Sec.  98.44, in addition to:
    (i) Offering training, professional development, and postsecondary 
education opportunities for child care caregivers, teachers and 
directors that:
    (A) Relate to the use of scientifically-based, developmentally-
appropriate, culturally-appropriate, and age-appropriate strategies to 
promote the social, emotional, physical, and cognitive development of 
children, including those related to nutrition and physical activity; 
and
    (B) Offer specialized training, professional development, and 
postsecondary education for caregivers, teachers and directors caring 
for those populations prioritized at Sec.  98.44(b)(2)(iv), and 
children with disabilities;
    (ii) Incorporating the effective use of data to guide program 
improvement and improve opportunities for caregivers, teachers and 
directors to advance on their progression of training, professional 
development, and postsecondary education;
    (iii) Including effective behavior management strategies and 
training, including positive behavior interventions and support models 
for birth to school-age or age-appropriate, that promote positive 
social and emotional development and reduce challenging behaviors, 
including reducing suspensions and expulsions of children under age 
five for such behaviors;
    (iv) Providing training and outreach on engaging parents and 
families in culturally and linguistically appropriate ways to expand 
their knowledge, skills, and capacity to become meaningful partners in 
supporting their children's positive development;
    (v) Providing training corresponding to the nutritional and 
physical activity needs of children to promote healthy development;
    (vi) Providing training or professional development for caregivers, 
teachers and directors regarding the early neurological development of 
children; and
    (vii) Connecting child care caregivers, teachers, and directors 
with available Federal and State financial aid, or other resources, 
that would assist these individuals in pursuing relevant postsecondary 
education, such as programs providing scholarships and compensation 
improvements for education attainment and retention.
    (2) Improving upon the development or implementation of the early 
learning and development guidelines at Sec.  98.15(a)(9) by providing 
technical assistance to eligible child care providers in order to 
enhance the cognitive, physical, social, and emotional development and 
overall well-being of participating children.
    (3) Developing, implementing, or enhancing a tiered quality rating 
and improvement system for child care providers and services to meet 
consumer education requirements at Sec.  98.33, which may:
    (i) Support and assess the quality of child care providers in the 
State, Territory, or Tribe;
    (ii) Build on licensing standards and other regulatory standards 
for such providers;
    (iii) Be designed to improve the quality of different types of 
child care providers and services;
    (iv) Describe the safety of child care facilities;
    (v) Build the capacity of early childhood programs and communities 
to promote parents' and families' understanding of the early childhood 
system and the rating of the program in which the child is enrolled;
    (vi) Provide, to the maximum extent practicable, financial 
incentives and other supports designed to expand the full diversity of 
child care options and help child care providers improve the quality of 
services; and
    (vii) Accommodate a variety of distinctive approaches to early 
childhood education and care, including but not limited to, those 
practiced in faith-based settings, community-based settings, child-
centered settings, or similar settings that offer a distinctive 
approach to early childhood development.
    (4) Improving the supply and quality of child care programs and 
services for infants and toddlers through activities, which may 
include:
    (i) Establishing or expanding high-quality community or 
neighborhood-based family and child development centers, which may 
serve as resources to child care providers in order to improve the 
quality of early childhood services provided to infants and toddlers 
from low-income families and to help eligible child care providers 
improve their capacity to offer high-quality, age-appropriate care to 
infants and toddlers from low-income families;
    (ii) Establishing or expanding the operation of community or 
neighborhood-based family child care networks;
    (iii) Promoting and expanding child care providers' ability to 
provide developmentally appropriate services for infants and toddlers 
through, but not limited to:
    (A) Training and professional development for caregivers, teachers 
and directors, including coaching and technical assistance on this age 
group's unique needs from statewide networks of qualified infant-
toddler specialists; and
    (B) Improved coordination with early intervention specialists who 
provide services for infants and toddlers with disabilities under part 
C of the Individuals with Disabilities Education Act (20 U.S.C. 1431. 
et seq.);
    (iv) If applicable, developing infant and toddler components within 
the Lead Agency's quality rating and improvement system described in 
paragraph (a)(3) of this section for child care providers for infants 
and toddlers, or the development of infant and toddler components in 
the child care licensing regulations or early learning and development 
guidelines;
    (v) Improving the ability of parents to access transparent and easy 
to understand consumer information about high-quality infant and 
toddler care as described at Sec.  98.33; and
    (vi) Carrying out other activities determined by the Lead Agency to 
improve the quality of infant and toddler care provided, and for which 
there is evidence that the activities will lead to improved infant and 
toddler health and safety, infant and toddler cognitive and physical 
development, or infant and toddler well-being, including providing 
health and safety training (including training in safe sleep practices, 
first aid, and cardiopulmonary resuscitation for providers and 
caregivers.
    (5) Establishing or expanding a statewide system of child care 
resource and referral services.
    (6) Facilitating compliance with Lead Agency requirements for 
inspection, monitoring, training, and health and safety, and with 
licensing standards.

[[Page 80578]]

    (7) Evaluating and assessing the quality and effectiveness of child 
care programs and services offered, including evaluating how such 
programs positively impact children.
    (8) Supporting child care providers in the voluntary pursuit of 
accreditation by a national accrediting body with demonstrated, valid, 
and reliable program standards of high-quality.
    (9) Supporting Lead Agency or local efforts to develop or adopt 
high-quality program standards relating to health, mental health, 
nutrition, physical activity, and physical development.
    (10) Carrying out other activities, including implementing consumer 
education provisions at Sec.  98.33, determined by the Lead Agency to 
improve the quality of child care services provided, and for which 
measurement of outcomes relating to improvement of provider 
preparedness, child safety, child well-being, or entry to kindergarten 
is possible.
    (b) Pursuant to Sec.  98.16(j), the Lead Agency shall describe in 
its Plan the activities it will fund under this section.
    (c) Non-Federal expenditures required by Sec.  98.55(c) (i.e., the 
maintenance-of-effort amount) are not subject to the requirement at 
paragraph (a) 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 set-asides that may be included in appropriations 
law may not be used towards meeting the quality expenditure minimum 
requirement at Sec.  98.50(b).
    (f) States shall annually prepare and submit reports, including a 
quality progress report and expenditure report, to the Secretary, which 
must be made publicly available and shall include:
    (1) An assurance that the State was in compliance with requirements 
at Sec.  98.50(b) in the preceding fiscal year and information about 
the amount of funds reserved for that purpose;
    (2) A description of the activities carried out under this section 
to comply with Sec.  98.50(b);
    (3) The measures the State will use to evaluate its progress in 
improving the quality of child care programs and services in the State, 
and data on the extent to which the State had met these measures; and
    (4) 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 child 
injuries and any deaths occurring in child care programs serving 
children receiving assistance under this part, and in other regulated 
and unregulated child care centers and family child care homes, to the 
extent possible.
0
32. Amend newly redesignated Sec.  98.54 by:
0
a. Revising paragraphs (a) introductory text and (a)(6);
0
b. Redesignating paragraphs (b) and (c) as (c) and (d);
0
c. Revising newly redesignated paragraph (d); and
0
d. Adding paragraphs (b) and (e).
    The revisions and additions read as follows:


Sec.  98.54  Administrative costs.

    (a) Not more than five percent of the aggregate funds expended by 
the Lead Agency from each fiscal year's allotment, including the 
amounts expended in the State pursuant to Sec.  98.55(b), shall be 
expended for administrative activities. These activities may include 
but are not limited to:
* * * * *
    (6) Indirect costs as determined by an indirect cost agreement or 
cost allocation plan pursuant to Sec.  98.57.
    (b) 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 and redetermination;
    (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.
* * * * *
    (d) Non-Federal expenditures required by Sec.  98.55(c) (i.e., the 
maintenance-of-effort amount) are not subject to the five percent 
limitation at paragraph (a) of this section.
    (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 in this section 
shall be counted towards the five percent limit.
0
33. Amend newly redesignated Sec.  98.55 by revising paragraphs 
(e)(2)(iv), (f), (g)(2), and (h)(2) to read as follows:


Sec.  98.55  Matching fund requirements.

* * * * *
    (e) * * *
    (2) * * *
    (iv) Shall be certified both by the Lead Agency and by the donor 
(if funds are donated directly to the Lead Agency) or the Lead Agency 
and the entity designated by the State to receive donated funds 
pursuant to Sec.  98.55(f) (if funds are donated directly to the 
designated entity) as available and representing funds eligible for 
Federal match; and
* * * * *
    (f) Donated funds need not be transferred to or under the 
administrative control of the Lead Agency in order to qualify as an 
expenditure eligible to receive Federal match under this section. They 
may be given to the public or private entities designated by the State 
to implement the child care program in accordance with Sec.  98.11 
provided that such entities are identified and designated in the State 
Plan to receive donated funds in accordance with Sec.  98.16(d)(2).
    (g) * * *
    (2) Family contributions to the cost of care as required by Sec.  
98.45(k).
    (h) * * *
    (2) May be eligible for Federal match if the State includes in its 
Plan, as provided in Sec.  98.16(w), a description of the efforts it 
will undertake to ensure that pre-K programs meet the needs of working 
parents.
* * * * *
0
34. Amend newly redesignated Sec.  98.56 by adding a sentence to the 
end of paragraph (b)(1) and revising paragraphs (d) and (e) to read as 
follows:


Sec.  98.56  Restrictions on the use of funds.

* * * * *
    (b) * * * (1) * * * 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, not prohibited.
* * * * *
    (d) Sectarian purposes and activities. Funds provided under grants 
or contracts to providers may not be

[[Page 80579]]

expended for any sectarian purpose or activity, including sectarian 
worship or instruction. Assistance provided to parents through 
certificates is not a grant or contract. Funds provided through child 
care certificates may be expended for sectarian purposes or activities, 
including sectarian worship or instruction when provided as part of the 
child care services.
    (e) The CCDF may not be used as the non-Federal share for other 
Federal grant programs, unless explicitly authorized by statute.
0
35. Amend Sec.  98.60 by:
0
a. Revising paragraphs (b) introductory text, (b)(1), (d)(2)(i), 
(d)(4)(ii), (d)(6) introductory text, and (h);
0
b. Redesignating paragraph (d)(7) as (d)(8); and
0
c. Adding paragraph (d)(7).
    The revisions and addition read as follows:


Sec.  98.60  Availability of funds.

* * * * *
    (b) Subject to the availability of appropriations, in accordance 
with relevant statutory provisions and the apportionment of funds from 
the Office of Management and Budget, the Secretary:
    (1) May withhold a portion of the CCDF funds made available for a 
fiscal year for the provision of technical assistance, for research, 
evaluation, and demonstration, and for a national toll-free hotline and 
Web site;
* * * * *
    (d) * * *
    (2)(i) Mandatory Funds for States requesting Matching Funds per 
Sec.  98.55 shall be obligated in the fiscal year in which the funds 
are granted and are available until expended.
* * * * *
    (4) * * *
    (ii) If there is no applicable State or local law, the regulation 
at 45 CFR 75.2, Expenditures and Obligations.
* * * * *
    (6) In instances where the Lead Agency issues child care 
certificates, funds for child care services provided through a child 
care certificate will be considered obligated when a child care 
certificate is issued to a family in writing that indicates:
* * * * *
    (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 a 
quality improvement activity pursuant to Sec.  98.53, 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
36. Amend Sec.  98.61 by revising paragraph (c) introductory text and 
adding paragraph (f) to read as follows:


Sec.  98.61  Allotments from the Discretionary Fund.

* * * * *
    (c) For Indian Tribes and tribal organizations, including any 
Alaskan Native Village or regional or village corporation as defined in 
or established pursuant to the Alaska Native Claims Settlement Act (43 
U.S.C. 1601 et seq.) not less than two percent of the amount 
appropriated for the Child Care and Development Block Grant shall be 
reserved.
* * * * *
    (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
37. Amend Sec.  98.63 by revising paragraphs (b) and (c) to read as 
follows:


Sec.  98.63  Allotments from the Matching Fund.

* * * * *
    (b) For purposes of this section, the amounts available under 
section 418(a)(3) of the Social Security Act excludes the amounts 
reserved and allocated under Sec.  98.60(b)(1) for technical 
assistance, research and evaluation, and the national toll-free hotline 
and Web site and under Sec.  98.62(a) and (b) for the Mandatory Fund.
    (c) Amounts under this section are available pursuant to the 
requirements at Sec.  98.55(c).
0
38. Amend Sec.  98.64 by revising paragraph (c)(1) to read as follows:


Sec.  98.64  Reallotment and redistribution of funds.

* * * * *
    (c)(1) Any portion of the Matching Fund granted to a State that is 
not obligated in the period for which the grant is made shall be 
redistributed. Funds, if any, will be redistributed on the request of, 
and only to, those other States that have met the requirements of Sec.  
98.55(c) in the period for which the grant was first made. For purposes 
of this paragraph (c)(1), the term ``State'' means the 50 States and 
the District of Columbia. Territorial and tribal grantees may not 
receive redistributed Matching Funds.
* * * * *
0
39. Amend Sec.  98.65 by revising paragraphs (a) and (g) and adding 
paragraphs (h) and (i) to read as follows:


Sec.  98.65  Audits and financial reporting.

    (a) Each Lead Agency shall have an audit conducted after the close 
of each program period in accordance with 45 CFR part 75, subpart F, 
and the Single Audit Act Amendments of 1996.
* * * * *
    (g) Lead Agencies shall submit financial reports, in a manner 
specified by ACF, 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, including any sub-categories of quality 
activities as required by ACF;
    (3) Direct services;
    (4) Non-direct services, including:
    (i) Establishment and maintenance of computerized child care 
information systems;
    (ii) Certificate program cost/eligibility determination;
    (iii) All other non-direct services; and
    (5) Such other information as specified by the Secretary.
    (i) Tribal Lead Agencies shall submit financial reports annually in 
a manner specified by ACF.
0
40. Add Sec.  98.68 to subpart G to read as follows:


Sec.  98.68  Program integrity.

    (a) Lead Agencies are required to describe in their Plan effective 
internal controls that are 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 describe in their Plan the 
processes that are in place to:
    (1) Identify fraud or other program violations, which may include, 
but are not limited to the following:
    (i) Record matching and database linkages;

[[Page 80580]]

    (ii) Review of attendance and billing records;
    (iii) Quality control or quality assurance reviews; and
    (iv) Staff training on monitoring and audit processes.
    (2) Investigate and recover fraudulent payments and to impose 
sanctions on clients or providers in response to fraud.
    (c) Lead Agencies must describe in their Plan the procedures that 
are in place for documenting and verifying that children receiving 
assistance under this part meet eligibility criteria at the time of 
eligibility determination and redetermination. Because a child meeting 
eligibility requirements at the most recent eligibility determination 
or redetermination is considered eligible during the period between 
redeterminations as described in Sec.  98.21(a)(1):
    (1) The Lead Agency shall pay any amount owed to a child care 
provider for services provided for such a child during this period 
under a payment agreement or authorization for services; and
    (2) Any CCDF payment made for such a child during this period shall 
not be considered an error or improper payment under subpart K of this 
part due to a change in the family's circumstances, as set forth at 
Sec.  98.21(a).
0
41. Amend Sec.  98.71 by:
0
a. Revising paragraphs (a)(1), (2), and (13) and (c);
0
b. Redesignating paragraphs (a)(15) and (b)(5) as (a)(21) and (b)(6);
0
c. Removing the word ``and'' from the end of paragraphs (a)(14) and 
(b)(4); and
0
d. Adding paragraphs (a)(15), (16), (17), (18), (19), and (20) and 
(b)(5).
    The revisions and additions read as follows:


Sec.  98.71  Content of reports.

    (a) * * *
    (1) The total monthly family income and family size used for 
determining eligibility;
    (2) Zip code of residence of the family and zip code of the 
location of the child care provider;
* * * * *
    (13) Unique identifier of the head of the family unit receiving 
child care assistance, and of the child care provider;
* * * * *
    (15) Whether the family is homeless;
    (16) Whether the parent(s) are in the military service;
    (17) Whether the child has a disability;
    (18) Primary language spoken at home;
    (19) Date of the child care provider's most recent health, safety 
and fire inspection meeting the requirements of Sec.  98.42(b)(2);
    (20) Indicator of the quality of the child care provider; and
* * * * *
    (b) * * *
    (5) The number of child fatalities by type of care; and
* * * * *
    (c) A Tribal Lead Agency's annual report, as required in Sec.  
98.70(c), shall include such information as the Secretary shall 
require.
0
42. Amend Sec.  98.80 by revising paragraphs (a) and (c)(1) and (2) and 
removing paragraph (f) to read as follows:


Sec.  98.80  General procedures and requirements.

* * * * *
    (a) An Indian Tribe applying for or receiving CCDF funds shall be 
subject to the requirements under this part as specified in this 
section based on the size of the awarded funds. The Secretary shall 
establish thresholds for Tribes' total CCDF allotments pursuant to 
Sec. Sec.  98.61(c) and 98.62(b) to be divided into three categories:
    (1) Large allocations;
    (2) Medium allocations; and
    (3) Small allocations.
* * * * *
    (c) * * *
    (1) The consortium adequately demonstrates that each participating 
Tribe authorizes the consortium to receive CCDF funds on behalf of each 
Tribe or tribal organization in the consortium;
    (2) The consortium consists of Tribes that each meet the 
eligibility requirements for the CCDF program as defined in this part, 
or that would otherwise meet the eligibility requirements if the Tribe 
or tribal organization had at least 50 children under 13 years of age;
* * * * *
0
43. Amend Sec.  98.81 by revising paragraphs (b) introductory text, 
(b)(1), (5), and (6), and (c) and adding paragraph (b)(9) to read as 
follows:


Sec.  98.81  Application and Plan procedures.

* * * * *
    (b) Tribal Lead Agencies with large and medium allocations shall 
submit a CCDF Plan, as described at Sec.  98.16, with the following 
additions and exceptions:
    (1) The Plan shall include the basis for determining family 
eligibility.
    (i) If the Tribe's median income is below a certain level 
established by the Secretary, then, at the Tribe's option, any Indian 
child in the Tribe's service area shall be considered eligible to 
receive CCDF funds, regardless of the family's income, work, or 
training status.
    (ii) If the Tribe's median income is above the level established by 
the Secretary, then a tribal program must determine eligibility for 
services pursuant to Sec.  98.20(a)(2). A tribal program, as specified 
in its Plan, may use either:
    (A) 85 percent of the State median income for a family of the same 
size; or
    (B) 85 percent of the median income for a family of the same size 
residing in the area served by the Tribal Lead Agency.
* * * * *
    (5) The Plan shall include a description of the Tribe's payment 
rates, how they are established, and how they support quality 
including, where applicable, cultural and linguistic appropriateness.
    (6) The Plan is not subject to the following requirements:
    (i) A definition of very low income at Sec.  98.16(g)(8);
    (ii) A description at Sec.  98.16(i)(4) of how the Lead Agency will 
meet the needs of certain families specified at Sec.  98.50(e);
    (iii) The description of the market rate survey or alternative 
methodology at Sec.  98.16(r);
    (iv) The licensing requirements applicable to child care services 
at Sec.  98.15(b)(6); and
    (v) The early learning and developmental guidelines requirement at 
Sec.  98.15(a)(9).
* * * * *
    (9) Plans for Tribal Lead Agencies with medium allocations are not 
subject to the following requirements unless the Tribe chooses to 
include such services, and, therefore, the associated requirements, in 
its program:
    (i) The assurance at Sec.  98.15(a)(2) regarding options for 
services;
    (ii) A description of any limits established for the provision of 
in-home care at Sec.  98.16(i)(2); or
    (iii) A description of the child care certificate payment system(s) 
at Sec.  98.16(q).
    (c) Tribal Lead Agencies with small allocations shall submit an 
abbreviated CCDF Plan, as described by the Secretary.
0
44. Revise Sec.  98.82 to read as follows:


Sec.  98.82  Coordination.

    (a) Tribal applicants shall coordinate the development of the Plan 
and the provision of services as required by Sec. Sec.  98.12 and 98.14 
and:
    (1) To the maximum extent feasible, with the Lead Agency in the 
State or

[[Page 80581]]

States in which the applicant will carry out the CCDF program; and
    (2) With other Federal, State, local, and tribal child care and 
childhood development programs.
    (b) [Reserved]
0
45. Amend Sec.  98.83 by:
0
a. Revising paragraphs (b), (c)(1), and (d);
0
b. Redesignating paragraphs (g) and (h) as (h) and (i), paragraph (e) 
as (g), and paragraph (f) as (e);
0
c. Revising newly redesignated paragraphs (e), (g), (h), and (i); and
0
d. Adding paragraph (f).
    The revisions and additions read as follows:


Sec.  98.83  Requirements for tribal programs.

* * * * *
    (b) With the exception of Alaska, California, and Oklahoma, 
programs and activities for the benefit of Indian children shall be 
carried out on or near an Indian reservation.
    (c) * * *
    (1) A brief description of the direct child care services funded by 
CCDF for each of their participating Tribes shall be provided by the 
consortium in their three-year CCDF Plan; and
* * * * *
    (d)(1) Tribal Lead Agencies shall not be subject to:
    (i) The requirement to have licensing applicable to child care 
services at Sec.  98.40;
    (ii) The requirement to produce a consumer education Web site at 
Sec.  98.33(a). Tribal Lead Agencies still must collect and disseminate 
the provider-specific consumer education information described at Sec.  
98.33(a) through (e), but may do so using methods other than a Web 
site;
    (iii) The requirement that Lead Agencies shall give priority for 
services to children of families with very low family income at Sec.  
98.46(a);
    (iv) The market rate survey or alternative methodology described at 
Sec.  98.45(b)(2) and the related requirements at Sec.  98.45(c), (d), 
(e), and (f);
    (v) The requirement to use some grants or contracts for the 
provision of direct services at Sec.  98.50(a)(3);
    (vi) The requirement for a training and professional development 
framework at Sec.  98.44(a);
    (vii) The requirements about Mandatory and Matching Funds at Sec.  
98.50(e);
    (viii) The requirement to complete the quality progress report at 
Sec.  98.53(f);
    (ix) The requirement that Lead Agencies shall expend no more than 
five percent from each year's allotment on administrative costs at 
Sec.  98.54(a); and
    (x) The Matching fund requirements at Sec. Sec.  98.55 and 98.63.
    (2) Tribal Lead Agencies with large, medium, and small allocations 
shall be subject to the provision at Sec.  98.42(b)(2) to require 
inspections of child care providers and facilities, unless a Tribal 
Lead Agency describes an alternative monitoring approach in its Plan 
and provides adequate justification for the approach.
    (3) Tribal Lead Agencies with large, medium, and small allocations 
shall be subject to the requirement at Sec.  98.43(a)(2)(ii)(C) to 
conduct comprehensive criminal background checks on other individuals 
residing in a family child care home, unless the Tribal Lead Agency 
describes an alternative background check approach for such individuals 
in its Plan and provides adequate justification for the approach.
    (e) Tribal Lead Agencies with medium and small allocations shall 
not be subject to the requirement for certificates at Sec.  98.30(a) 
and (d).
    (f) Tribal Lead Agencies with small allocations must spend their 
CCDF funds in alignment with the goals and purposes described in Sec.  
98.1. These Tribes shall have flexibility in how they spend their CCDF 
funds and shall be subject to the following requirements:
    (1) If providing direct services:
    (i) The health and safety requirements described in Sec.  98.41;
    (ii) The monitoring requirements at Sec. Sec.  98.42 and 
98.83(d)(2); and
    (iii) The background checks requirements described in Sec. Sec.  
98.43 and 98.83(d)(3);
    (2) The requirements to spend funds on activities to improve the 
quality of child care described in Sec. Sec.  98.50(b) and 98.53;
    (3) The use of funds requirements at Sec.  98.56 and cost 
allocation requirement at Sec.  98.57;
    (4) The financial management requirements at subpart G of this part 
that are applicable to Tribes;
    (5) The reporting requirements at subpart H of this part that are 
applicable to Tribes;
    (6) The 15 percent limitation on administrative activities at Sec.  
98.83(h);
    (7) The monitoring, non-compliance, and complaint provisions at 
subpart J of this part; and
    (8) Any other requirement established by the Secretary.
    (g) The base amount of any tribal grant is not subject to the 
administrative cost limitation at paragraph (h) of this section or the 
quality expenditure requirement at Sec.  98.53(a). The base amount may 
be expended for any costs consistent with the purposes and requirements 
of the CCDF.
    (h) Not more than 15 percent of the aggregate CCDF funds expended 
by the Tribal Lead Agency from each fiscal year's (including amounts 
used for construction and renovation in accordance with Sec.  98.84, 
but not including the base amount provided under paragraph (g) of this 
section) shall be expended for administrative activities. Amounts used 
for construction and major renovation in accordance with Sec.  98.84 
are not considered administrative costs.
    (i)(1) CCDF funds are available for costs incurred by the Tribal 
Lead Agency only after the funds are made available by Congress for 
Federal obligation unless costs are incurred for planning activities 
related to the submission of an initial CCDF Plan.
    (2) Federal obligation of funds for planning costs, pursuant to 
paragraph (i)(1) of this section is subject to the actual availability 
of the appropriation.
0
46. Amend Sec.  98.84 by adding a sentence at the end of paragraph 
(b)(3) and paragraphs (b)(3)(i) and (ii) and revising paragraphs 
(d)(1), (2), (3), (4), (5), and (6) to read as follows:


Sec.  98.84  Construction and renovation of child care facilities.

* * * * *
    (b) * * *
    (3) * * * The Secretary shall waive this requirement if:
    (i) The Secretary determines that the decrease in the level of 
child care services provided by the Indian tribe or tribal organization 
is temporary; and
    (ii) The Indian tribe or tribal organization submits to the 
Secretary a plan that demonstrates that after the date on which the 
construction or renovation is completed:
    (A) The level of direct child care services will increase; or
    (B) The quality of child care services will improve.
* * * * *
    (d) * * *
    (1) Federal share requirements and use of property requirements at 
45 CFR75.318;
    (2) Transfer and disposition of property requirements at 45 CFR 
75.318(c);
    (3) Title requirements at 45 CFR 75.318(a);
    (4) Cost principles and allowable cost requirements at subpart E of 
this part;
    (5) Program income requirements at 45 CFR 75.307;
    (6) Procurement procedures at 45 CFR 75.326 through 75.335; and
* * * * *
0
47. Amend Sec.  98.92 by revising paragraph (a)(1) and adding 
paragraphs (b)(3) and (4) to read as follows:

[[Page 80582]]

Sec.  98.92  Penalties and sanctions.

    (a) * * *
    (1) The Secretary will disallow any improperly expended funds;
* * * * *
    (b) * * *
    (3)(i) A penalty of not more than five percent of the funds 
allotted under Sec.  98.61 (i.e., the Discretionary Funds) for a Fiscal 
Year shall be withheld if the Secretary determines that the Lead Agency 
has failed to give priority for service in accordance with Sec.  
98.46(a);
    (ii) This penalty will be withheld no earlier than the first full 
Fiscal Year following the determination to apply the penalty;
    (iii) This penalty will not be applied if the Lead Agency corrects 
its failure to comply and amends its CCDF Plan within six months of 
being notified of the failure; and
    (iv) The Secretary may waive a penalty for one year in the event of 
extraordinary circumstances, such as a natural disaster.
    (4)(i) A penalty of not more than five percent of the funds 
allotted under Sec.  98.61 (i.e., the Discretionary Funds) for a Fiscal 
Year shall be withheld if the Secretary determines that the State, 
Territory, or Tribe has failed to comply substantially with the 
criminal background check requirements at Sec.  98.43;
    (ii) This penalty will be withheld no earlier than the first full 
Fiscal Year following the determination to apply the penalty; and
    (iii) This penalty will not be applied if the State, Territory, or 
Tribe corrects the failure before the penalty is to be applied or if it 
submits a plan for corrective action that is acceptable to the 
Secretary.
* * * * *


Sec.  98.93  [Amended]

0
48. Amend Sec.  98.93, in paragraph (b), by removing ``, 370 L'Enfant 
Promenade, SW., Washington, DC 20447''.
0
49. Amend Sec.  98.100 by adding a sentence at the end of paragraph 
(d)(2) and revising paragraph (e) to read as follows:


Sec.  98.100  Error Rate Report.

* * * * *
    (d) * * *
    (2) * * * Because a child meeting eligibility requirements at the 
most recent eligibility determination or redetermination is considered 
eligible between redeterminations as described in Sec.  98.21(a)(1), 
any payment for such a child shall not be considered an error or 
improper payment due to a change in the family's circumstances, as set 
forth at Sec.  98.21(a).
    (e) Costs of Preparing the Error Rate Report--Provided the error 
rate calculations and reports focus on client eligibility, expenses 
incurred by the States, the District of Columbia and Puerto Rico in 
complying with this rule, including preparation of required reports, 
shall be considered a cost of direct service related to eligibility 
determination and therefore is not subject to the five percent 
limitation on CCDF administrative costs pursuant to Sec.  98.54(a).
0
50. Amend Sec.  98.102 by revising paragraph (a)(5) and adding 
paragraph (c) to read as follows:


Sec.  98.102  Content of Error Rate Reports.

    (a) * * *
    (5) Estimated annual amount of improper payments (which is a 
projection of the results from the sample to the universe of cases 
statewide during the 12-month review period) calculated by multiplying 
the percentage of improper payments by the total dollar amount of child 
care payments that the State, the District of Columbia or Puerto Rico 
paid during the 12-month review period;
* * * * *
    (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 paragraph (b) of this section.
    (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.

[FR Doc. 2015-31883 Filed 12-18-15; 8:45 am]
 BILLING CODE 4150-28-P