Child Care: Additional Information Is Needed on Working Families 
Receiving Subsidies (29-JUN-05, GAO-05-667).			 
                                                                 
Since the Congress enacted welfare reform legislation in 1996,	 
child care assistance has served as a key support for work	 
efforts among low-income families. Researchers have found that	 
reliable, high-quality child care is critical to sustaining	 
parents' ability to work, while safeguarding their children's	 
health and intellectual development. States have flexibility in  
determining which low-income families are provided child care	 
subsidies funded by the Child Care and Development Fund (CCDF),  
Temporary Assistance for Needy Families (TANF), and related state
resources. States must balance the funds available for subsidies 
with the number of families who want subsidized child care. In	 
doing so, states may find it necessary to change child care	 
policies that affect program access or the amount of subsidy that
eligible families receive. As Congress considers reauthorizing	 
CCDF and TANF, we updated our previous report "Child Care: Recent
State Policy Changes Affecting the Availability of Assistance for
Low-Income Families" by providing current information on (1) the 
choices states have made for providing child care assistance to  
(a) TANF families, (b) families transitioning off TANF, and (c)  
other lowincome families; (2) the extent to which states have	 
changed policies since 2001 that could affect access to child	 
care assistance programs and the amounts of subsidies provided to
families; and (3) the number of children and families receiving  
child care assistance from CCDF and TANF funds. 		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-667 					        
    ACCNO:   A28377						        
  TITLE:     Child Care: Additional Information Is Needed on Working  
Families Receiving Subsidies					 
     DATE:   06/29/2005 
  SUBJECT:   Child care programs				 
	     Disadvantaged persons				 
	     Eligibility criteria				 
	     Families						 
	     Federal/state relations				 
	     Policy evaluation					 
	     Public assistance programs 			 
	     State-administered programs			 
	     Subsidies						 
	     HHS Child Care and Development Fund		 
	     HHS Temporary Assistance for Needy 		 
	     Families Block Grant				 
                                                                 

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GAO-05-667

United States Government Accountability Office

 GAO	Report to the Ranking Minority Member, Subcommittee on Education and Early
Childhood Development, Committee on Health, Education, Labor, and Pensions, U.S.
                                     Senate

June 2005

CHILD CARE

    Additional Information Is Needed on Working Families Receiving Subsidies

GAO-05-667

Contents

                                    Letter 1

Appendix I Briefing Slides

  Appendix II	Comments from the Department of Health and Human Services

Abbreviations

CCDF Child Care and Development Fund
HHS Department of Health and Human Services
MOE maintenance-of-effort
SMI state median income
TANF Temporary Assistance for Needy Families

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United States Government Accountability Office Washington, DC 20548

June 29, 2005

The Honorable Christopher J. Dodd
Ranking Minority Member
Subcommittee on Education and Early Childhood Development
Committee on Health, Education, Labor, and Pensions
United States Senate

Dear Senator Dodd:

Since the Congress enacted welfare reform legislation in 1996, child care
assistance has served as a key support for work efforts among low-income
families.1 Researchers have found that reliable, high-quality child care
is
critical to sustaining parents' ability to work, while safeguarding their
children's health and intellectual development. States have flexibility in
determining which low-income families are provided child care subsidies
funded by the Child Care and Development Fund (CCDF), Temporary
Assistance for Needy Families (TANF), and related state resources. States
must balance the funds available for subsidies with the number of families
who want subsidized child care. In doing so, states may find it necessary
to change child care policies that affect program access or the amount of
subsidy that eligible families receive.

As Congress considers reauthorizing CCDF and TANF, we updated our
previous report "Child Care: Recent State Policy Changes Affecting the
Availability of Assistance for Low-Income Families"2 by providing
current information on

o  	the choices states have made for providing child care assistance to
(1) TANF families, (2) families transitioning off TANF, and (3) other
lowincome families;

1We use the terms "assistance" and "subsidies" interchangeably, although
HHS in the context of child care subsidies limits the term "assistance" to
TANF benefits provided to nonworking families.

2GAO, Child Care: Recent State Policy Changes Affecting the Availability
of Assistance for Low-Income Families, GAO-03-588 (Washington: D.C.: May
5, 2003).

o  	the extent to which states have changed policies since 2001 that could
affect access to child care assistance programs and the amounts of
subsidies provided to families; and

o  	the number of children and families receiving child care assistance
from CCDF and TANF funds.

To address our first and second objectives, we surveyed child care
administrators in 50 states and the District of Columbia on their
respective state's child care assistance policies. The survey asked them
whether their states had made changes to key policies that could affect
access to child care assistance programs and subsidy amounts since March
2003. All 50 states and the District of Columbia responded to our survey
between March 11 and March 31, 2005. We compared these responses with
responses to a previous survey we conducted in March and April 2003
covering policies and practices from 2001 through 2003. We combined the
results from the two surveys to provide a 4-year assessment of changes
between January 2001 and March 2005. Our analyses of state policy changes
are limited to the information that states reported in our surveys about
the direction of change (e.g., increasing or decreasing income eligibility
and co-payments), if any. To gather information on the number of children
and families receiving child care assistance from CCDF and TANF funds, we
reviewed the Department of Health and Human Services' (HHS) data on number
of children served through CCDF and held discussions with HHS officials
about the availability of data on the number of children and families
served through TANF. In addition, we held discussions with HHS officials
on the collection and maintenance of available data and determined they
were sufficiently reliable for the purposes of this report. Furthermore,
we interviewed officials in five states-Kentucky, Maryland, Massachusetts,
Oregon and Wyoming-to gain a more in-depth perspective on child care
policy changes in their states. We conducted this review from February
2005 through May 2005 in accordance with generally accepted government
auditing standards.

On May 25, 2005, we briefed your staff on the results of our review. This
report formally conveys the information provided during that briefing.
(See app. I for the briefing slides.) In summary, we found the following:

All states make TANF, transitioning families, and other low-income
families eligible for assistance. However, some states set additional
criteria that may limit the extent of service to transitional and,
especially, to other low-income families. Thirty-one states-an increase of
six states since our previous report-reported that, using their state's
eligibility

criteria, they were able to provide child care assistance to all the
families who apply and are deemed eligible for such assistance. Most
states reported that they give higher priority to TANF families than
transitional and other low-income working families when program resources
are insufficient to serve all who apply.

Since 2001, many states have made changes in eligibility and enrollment
policies that could decrease program access while at the same time may
provide larger subsidies to families receiving assistance. Thirty-five
states made the following eligibility and enrollment changes that affect
program access since 2001:

o  19 made changes tending to decrease access to assistance.

o  8 made changes tending to increase access to assistance.

o  8 made a mix of changes.

In addition, many states have made co-payment and provider reimbursement
rate changes, but of those that made changes, more states increased
provider rates than increased co-payments, which could result in families
receiving larger subsidies. States may be providing larger subsidies in an
effort to keep pace with increasing child care fees or to provide families
with a broader array of options among providers.

According to HHS data, the number of children and families receiving child
care assistance under CCDF has remained relatively constant since 2001,
but little is known about those subsidized with TANF direct funds.
According to HHS, approximately 1.75 million children and over 1 million
families have been served through CCDF (including TANF dollars transferred
to CCDF) on an average monthly basis since fiscal year 2001. However, HHS
officials did not have information on working families receiving child
care assistance directly through TANF funds, although most ($1.4 billion
of $1.7 billion) of the federal TANF funds directly spent on child care is
directed to these families.

Because we believe that additional information on working families
assisted directly through TANF would be valuable to policy makers and
program managers in ensuring the efficiency, effective and accountability
of federal supports for child care, in our May 25, 2005, briefing, we
recommended that the Assistant Secretary for Children and Families find
cost-effective ways to collect this information. We provided a draft copy
of this report, including the briefing slides, to officials in the U.S.
Department of Health and Human Services' Administration for Children and
Families, which oversees state CCDF and TANF programs. In its

comments on the draft, ACF disagreed with our recommendation (see app.
II). ACF mentioned that states are required to report such disaggregated
case record information only for families receiving "assistance" under the
TANF program. ACF explained that during its rule-making process, a wide
range of organizations providing comments raised concerns about the
relationship between certain services, such as child care, and
"assistance" under the TANF program. Consequently, ACF does not plan to
collect this information on working families without new legislation.
Therefore, we are suggesting that Congress may wish to require that, for
child care subsidies directly funded by TANF, ACF find cost-effective ways
to collect data on the numbers of children and families receiving these
subsidies and the types of care they obtain, without regard to whether the
subsidies are defined as "assistance" under TANF regulations. We have
changed the briefing slides to reflect this matter for congressional
consideration.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its
issue date. At that time, we will send copies this report to relevant
congressional committees and other interested parties and will make
copies available to others upon request. The report will also be available
on GAO's Web site at http://www.gao.gov. If you or your staff have any
questions about this report, please contact me at (202) 512-7215. Betty
Ward-Zukerman-Assistant Director, Danielle Giese-Analyst-In-Charge,
Sonya Harmeyer, Luann Moy, Cathy Hurley and James Rebbe also made
key contributions to this report.

Sincerely yours,

Marnie S. Shaul
Director, Education, Workforce, and
Income Security Issues

Enclosure

Appendix II: Comments from the Department of Health and Human Services

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