Aid to Families With Dependent Children Child Care Program, Transitional Child Care and At-Risk Child Care; Child Care and Development Block Grant

SUMMARY: The Administration for Children and Families (ACF) proposes to

amend the regulations for the Child Care and Development Block Grant

(CCDBG), child care serving Aid to Families with Dependent Children

(AFDC) families, the Transitional Child Care program (TCC), and At-Risk

Child Care program.

The purpose of this proposal is to support States, Territories and

Tribes in their efforts to increase the availability and quality of

federally-subsidized child care, develop more coordinated delivery

systems, and improve child care opportunities for families, providers

and communities.

The proposed rule is presented in a single package because of our

intent to remove regulatory barriers to program coordination, to

increase flexibility across the four programs, and to promote common

goals. The proposed rule addresses certain key areas of mutual concern

for operation of these programs: Accessibility to higher quality care

through amended payment rates; adaptation of payment policies for

children with special needs as a result of the Americans with

Disabilities Act; impact of the Fair Labor Standards Act and other

Federal and State statutes on in-home care; and deletion of provisions,

known as the effects test, which may be construed as minimizing

regulatory protection for children in care concerning State

implementation of health and safety standards.

The proposed amendments to the CCDBG regulations additionally

include technical amendments required by the Juvenile Justice and

Delinquency Prevention Amendments of 1992 and the Older Americans Act

Technical Amendments. Other proposals respond to general concerns about

payment differentials for quality care, children's immunizations,

eligibility of children in foster care, availability of certificates as

a payment mechanism, and cost limitations for administration and

certain other activities.

The proposed amendments to the regulations for child care for AFDC

families, TCC, and At-Risk Child Care promote coordination among these

programs and also with CCDBG to: provide State flexibility in

determining a child's physical or mental incapacity; modify and codify

policy regarding child care during gaps in employment; require States

to define how child care is reasonably related to the parent's work or

other activity; and allow States flexibility to conform family fee

requirements. Additionally, proposed amendments to TCC would give

States the option to provide TCC to families who voluntarily terminate

their AFDC benefit, and address the process of requesting TCC.

DATES: Interested persons and agencies are invited to submit written

comments concerning these proposed regulations no later than July 11,

1994.

ADDRESSES: Comments should be mailed (facsimile transmissions will not

be accepted) to the Assistant Secretary for Children and Families,

Attention: Child Care Comments, OFA/DJP, Fifth Floor, 370 L'Enfant

Promenade, SW., Washington, DC 20447, or delivered to the

Administration for Children and Families, Office of Family Assistance,

Aerospace Building, Fifth Floor East, 901 D Street, SW., Washington, DC

between 8 a.m. and 4:30 p.m. on regular business days. Comments

received may be inspected during the same hours by making arrangements

with the contact persons shown below.

FOR FURTHER INFORMATION CONTACT: For questions concerning the title IV-

A child care programs, please contact Mary Ann Higgins, Director,

Division of JOBS Program, Fifth Floor, 370 L'Enfant Promenade SW.,

Washington, DC 20447, telephone (202) 401-9294. For questions

concerning the Child Care and Development Block Grant, please contact

Helen Morgan Smith, Acting Director, Division of Child Care, Hubert

Humphrey Building, room 352G, 200 Independence Avenue, SW., Washington,

DC 20201, telephone (202) 690-6241. 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:

Background

The Administration for Children and Families (ACF) administers a

number of programs that address the child care needs of low-income

families. In recent years, the scope of ACF-administered child care

programs was broadened to address the child care needs of increasingly

larger segments of the population. ACF's child care programs reflect a

growing awareness of the needs of the family for safe child care that

also attends to the developmental needs of children. They offer the

Nation's low income families an important support in their efforts to

achieve and maintain economic independence.

Child care needs for working families who receive Aid to Families

with Dependent Children (AFDC) benefits were first addressed through

the dependent care disregard. The family's child care expense (up to

$200 a month for a child under age 2 and up to $175 for a child who is

at least age 2) is deducted from the family's earnings when determining

the amount of the family's countable income for the purpose of the

family's eligibility for and amount of AFDC assistance. The dependent

care disregard is used by most States as one method for providing child

care to working AFDC families.

The Social Services Block Grant (title XX of the Social Security

Act) enables States to provide social services which are best suited to

the needs of its residents. These services can include child care, and

most States have used title XX funds to provide child care through

contracts with providers.

The regulatory changes proposed in this rule concern four child

care programs created through two statutes: the Family Support Act of

1988 (Pub. L. 100-485) and the Omnibus Budget Reconciliation Act of

1990 (OBRA 90). A brief description of each program and of the overall

goals of this proposed rule follows.

The Family Support Act of 1988 amended title IV-A of the Social

Security Act at section 402(g), providing a very significant extension

of ACF's ability to fund child care services. The amendment created two

new child care programs. First, it guaranteed necessary child care for

working AFDC recipients, and for AFDC recipients in approved education

or training activities (including the Job Opportunities and Basic

Skills Training (JOBS) Program). This program is often called AFDC

child care. The regulations for AFDC child care are located at 45 CFR

part 255. An amendment concerning applicable child care standards under

45 CFR 255.4 (Allowable Costs and Matching Rates) became effective on

August 4, 1992.

Second, the Family Support Act addressed the need for Transitional

Child Care (TCC) during the 12 months after a family becomes ineligible

for AFDC due to work. The regulations specific to TCC are located at 45

CFR part 256. However, many of the regulations for AFDC child care

(part 255) also apply to TCC.

With OBRA 90, Congress established two additional child care

programs that further extended child care services to the Nation's low-

income families: an optional At-Risk Child Care program (child care for

low-income working families in need of such care and otherwise at risk

of becoming eligible for AFDC) and the Child Care and Development Block

Grant (CCDBG).

Currently, 49 States and the District of Columbia have approval to

operate the At-Risk program. That program, like the other title IV-A

child care programs, requires the State to match Federal funds, but,

unlike the other programs, it is capped and the funds are distributed

according to a formula. The At-Risk Child Care program is located at

section 402(i) of title IV-A of the Social Security Act. The At-Risk

regulations are located at 45 CFR part 257.

In this preamble, we refer to AFDC child care, TCC, and At-Risk

Child Care as the title IV-A programs.

The CCDBG is intended to provide child care services for low-income

families and to increase the availability, affordability, and quality

of child care and development services. That program does not require a

State match. Regulations for the CCDBG program are located at 45 CFR

parts 98 and 99.

The Juvenile Justice and Delinquency Prevention Amendments of 1992,

Public Law 102-586, made various technical changes to the CCDBG. For

example, section 8(a)(1) and (2) of the amendments made changes to

section 658J(c) of the Block Grant Act by replacing ``obligation

period'' with ``expenditure period.'' Other minor technical corrections

to the Block Grant Act are included in the Older Americans Act

Technical Amendments, Public Law 103-171.

Purpose of Proposed Rule

This proposed rule incorporates lessons ACF has learned from our

initial experience with the title IV-A and CCDBG programs. Our purpose

is to remove barriers, promote coordination, foster higher quality

care, and champion the health of our neediest children. We have

evaluated State and Tribal child care program plans, conducted many

child care program field reviews, sponsored two national child care

conferences, held symposia for States and Tribes, and participated in

many other conferences and meetings. We have listened as State

representatives and others voiced desire for remedies of regulatory

barriers to the operation of seamless child care delivery systems and

for the ability to deliver higher quality care. This section of the

preamble gives an overview of our findings and considerations. These

ideas for change are developed in greater detail later in the preamble.

There are four main purposes of this proposed rule. First, it is a

vehicle for responding to changes needed to existing regulations to

achieve consistency with recently enacted law. We thus propose changes

to the CCDBG regulations required by the Juvenile Justice and

Delinquency Prevention Amendments of 1992 and the Older Americans Act

Technical Amendments. We also propose amendments and provide guidance

in the preamble on how payments for special needs children can be made

under both title IV-A child care and CCDBG in light of the Americans

with Disabilities Act (ADA), Public Law 101-336, enacted on July 26,

1990.

Second, these proposals reflect ACF's desire to help States

facilitate operation of the title IV-A and CCDBG programs based on the

experiences of both States and families with existing program policy.

The changes will give States some immediate relief to certain

regulatory barriers. Many of these proposals will permit States to

coordinate the four programs better, making services more seamless for

child care providers and families. Allowing for greater conformity

among the sliding fee scales for title IV-A child care and CCDBG is an

example of this kind of effort. Allowing States to determine physical

or mental incapacity of children to be served under title IV-A

consistent with CCDBG rules is another example.

Third, our objective in proposing these changes is to strengthen

States' capacity to ensure the quality of federally-subsidized child

care services by removing regulatory barriers. We believe the quality

of federally-subsidized child care is important and want to promote

safe and healthy environments for children that foster their

development and overall well-being. We wish to further foster quality

in partnership with the States. Our proposals to foster quality include

eliminating the regulation in the CCDBG that limits payment

differentials within categories of care to no more than 10 percent. We

also propose to allow States to pay the actual charge for higher

quality child care for children in title IV-A programs, without regard

to the 75th percentile of the local cost of care, for child care that

meets State-designated objective standards of quality that exceed the

normal licensing or certification requirements.

Finally, the health of children plays an overwhelmingly important

role in their well-being and their ability to grow and develop into

productive citizens. We therefore propose to amend the CCDBG health and

safety standards to require that children receiving CCDBG services

receive immunizations.

In sum, this proposed rule goes beyond adoption of technical

refinements to ACF-administered child care programs. It represents

ACF's efforts to think more broadly about helping States better serve

low-income families through subsidized child care.

Statutory Authority

Regulations for the title IV-A child care programs are published

under the general authority of 1102 of the Social Security Act which

requires the Secretary to publish regulations that may be necessary for

the efficient administration of the functions for which she is

responsible under the Act. Section 658E of the Child Care and

Development Block Grant Act requires that the Secretary shall by rule

establish the information needed in the Block Grant plan.

Regulatory Impact Analysis

This proposed rule has been reviewed by the Office of Management

and Budget (OMB) pursuant to Executive Order 12866. Executive Order

12866 requires that regulations be reviewed to ensure that they are

consistent with the priorities and principles set forth in the

Executive Order. The Department has determined that this rule is

consistent with these priorities and principles. An assessment of the

costs and benefits of available regulatory alternatives (including not

regulating) demonstrated that the approach taken in the regulation is

the most cost-effective and least burdensome while still achieving the

regulatory objectives.

It was difficult for us to determine the actual cost implications

of the regulation because most of the changes are optional with States.

We did not know how many States would adopt these options, or whether

States would make other programmatic changes which would counteract any

potential increases in costs. Therefore, we are explicitly seeking

comments on the cost implications of the proposed changes.

We are proposing a new requirement that children be immunized in

order to receive services under the Child Care and Development Block

Grant. The CCDBG health and safety regulations currently require States

and Tribes to include provisions about immunizations in their CCDBG

plans and to provide assurances that requirements with respect to

immunizations are in place. In addition, most States already include

immunizations in their child care standards. We do not anticipate that

our proposal will have a significant negative impact on either grantees

or families, since grantees will not be required to provide

immunizations directly and families who receive subsidized child care

are by law eligible for free immunizations under such federally

supported programs as Medicaid, the Early Periodic Screening Diagnosis

and Treatment (EPSDT) Program, and the new Vaccines for Children

program. The immunization provision was considered the most cost-

effective and least burdensome approach because: (1) It helps ensure

that vulnerable young children are immunized; (2) immunization of such

children is highly cost-effective; and (3) it provides flexibility to

grantees in determining how to implement the provision.

Furthermore, it directly supports the President's national

immunization initiative, Vaccines for Children, which calls for greater

mobilization and expansion of immunization resources to protect the

health of our youngest and most vulnerable children.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act (Pub. L. 96-354) requires the

Federal government to anticipate and reduce the impact of rules and

paperwork requirements on small businesses and other small entities.

The primary impact of these final rules is on State, Tribal and

Territorial governments. To a lesser extent the regulation could affect

individuals and small businesses. However, the number of small

businesses affected should be limited, and the expected economic impact

on these businesses would not be so significant that a full regulatory

flexibility analysis is indicated.

First, the regulations retain many provisions designed to

ensure broad participation by small businesses in the program. For

example, the IV-A entitlement programs provide that individuals must be

able to choose among available providers, including family day care

providers. The At-Risk program regulations still require that any

registration requirements States impose on unlicensed and unregulated

providers be simple and timely, and facilitate prompt payment. In the

CCDBG program, the regulations still require that parents have a choice

among a variety of providers including family day care providers. These

and other provisions in the current rules will help ensure that States

exercise restraint in imposing any additional requirements on small

entities providing child care.

The proposed rule contains a number of provisions which

could result in some decreases in the regulatory and economic burdens

on providers who are small businesses. Most importantly, because States

will be able to operate their programs under a more consistent set of

program rules, participating providers should face a simpler and more

streamlined set of regulatory requirements.

Many of the providers who would potentially be affected

are in-home providers. These providers are generally not operating as

small businesses, but as domestic employees; thus, any impact on them

need not be specifically addressed under this Act.

The regulation could ultimately result in some additional

regulatory requirements or health and safety standards for other

providers, such as family day care providers, who are small businesses.

However, the impacts on small businesses, if any, would not be directly

attributable to this regulation. With the possible exception of the

immunization provision, the regulation does not directly propose any

expansion of regulatory requirements or health and safety standards on

providers; thus, any impacts on providers should only arise as the

result of independent State and/or local decisions to impose additional

requirements.

The effects tests may have discouraged States from imposing

additional requirements--beyond those which were generally applicable--

on providers who specifically wanted to participate in these federally

supported child care programs. However, we do not believe States have

much interest in imposing additional requirements on these providers.

First, States and localities know that parents often have difficulty

locating child care providers which meet their needs, and that low-

income parents frequently have more serious access problems. They do

not want to make it appreciably more difficult for providers to

participate in the programs which serve low-income families. Secondly,

States have limited resources for enforcing and monitoring child care

regulations; thus, they are motivated to be selective about imposing

requirements. Thirdly, States have an interest in establishing a

consistent set of requirements for providers, regardless of their

payment sources; differential rules make it more difficult to ensure

regulatory compliance and provide a seamless system of services which

help families make the transition from welfare to self-sufficiency.

Finally, under current rules, State and local governments have full

flexibility to set general regulatory requirements and health and

safety standards for child care providers. If States (or other

grantees) have felt that there was a substantial need for additional

requirements (presumably to protect the well-being of children in

care), we would have expected them to act under this general authority.

While States generally have immunization requirements for children

in child care, the proposed immunization provision might result in some

additional children being subject to immunization requirements or

stronger requirements for some children. However, States have

flexibility in deciding how immunization requirements are to be

implemented. Requirements would not necessarily be imposed on

providers; rather, States can choose to impose them on eligible

families. Thus, the immunization provision in this proposed rule does

not directly affect small businesses. Further, where States do choose

to impose additional requirements on providers related to the

immunization provision, such requirements would be basically

administrative in nature (e.g., documentation); we expect the costs of

immunization to be covered through other funding sources. Thus, this

provision would not have a significant economic impact on affected

providers.

Thus, the number of entities affected, and the net economic impact

on them, should not be significant.

Paperwork Reduction Act

Certain sections of these proposed regulations contain information

collection requirements which are subject to review and approval by OMB

under the Paperwork Reduction Act of 1980 (44 U.S.C. chapter 35). The

proposed revisions for the title IV-A child care programs will produce

only minor changes and additions to the State Supportive Services Plan

(ACF-106).

Specifically, State plans would be required to include: (1)

Policies on ``reasonably related'' (see Sec. 255.1(e)(4) and

Sec. 257.21(a)(6)); (2) definitions of ``mentally or physically

incapable'' (see Secs. 255.1(m) and 256.1(a)(5)); and (3) decisions on

whether States have opted to provide TCC without formal requests,

during gaps, and in voluntary closure situations (Sec. 256.1(a)(6)). If

States take advantage of the other new options available to them, they

would also have to report on their criteria for determining ``higher

quality'' care (Sec. 255.1(i)(2)) and conditions and limitations for

in-home care (Sec. 255.1(n) and Sec. 257.21(o)). The proposed rule

would reduce reporting burden at Sec. 255.1(i) through its elimination

of the requirement for surveys of special needs rates.

These amendments to the IV-A State plans are being submitted to

OMB.

Similarly, the proposed revisions for the CCDBG program will

produce minor changes and additions in the CCDBG plan. Grantee plans

will have to include additional information about immunization policies

pursuant to the amendments at Sec. 98.41(a)(1) (see Sec. 98.16(a)(10)).

Depending on their response to the proposed amendments and

clarifications, Grantees may also be revising plan sections on in-home

policies (Sec. 98.16(a)(7)(ii)), the definition of protective services

(Sec. 98.16(a)(6)(vii)), and payment rate differentials

(Secs. 98.16(a)(12) and 98.43(e)).

Amendments to the CCDBG plans will also be submitted to OMB.

ACF has submitted a copy of this proposed rule to OMB for its

review of these information collection requirements. Other

organizations and individuals desiring to submit comments regarding the

information collection requirements should direct them to the

Administration for Children and Families (address above) and to the

Office of Information and Regulatory Affairs, OMB, room 3208, New

Executive Office Building, Washington, DC 20503, Attn: Laura Oliven,

Desk Officer for ACF.

Order of Preamble and Regulations

The preamble begins with a discussion of four areas where the

proposed regulations for the title IV-A child care programs and CCDBG

address similar issues--payments for higher quality child care,

payments for children with special needs, providing in-home care, and

the effects test. We first discuss these four issues from a common

perspective. But, where needed because the respective statutes for the

programs differ, the general discussion on these topics is followed by

a discussion of the proposed regulatory change in the context of the

specific program, either the Block Grant or the applicable title IV-A

program(s). It is our intent that where these proposals address a

common issue, the proposed changes result in policies that better

enable States to coordinate these programs into a more cohesive child

care system. Comments which identify the potential for conflicting

policy between programs as a result of these proposals are especially

encouraged.

Following the discussion of these four issues, we discuss

additional changes specific to the CCDBG (part 98) followed by proposed

changes specific to the title IV-A child care programs (parts 255, 256,

and 257). The proposed regulations follow the order of the Code of

Federal Regulations (CFR) and are presented after the preamble,

beginning with the CCDBG followed by the title IV-A child care

programs.

Proposed Child Care Rule Amendments, 45 CFR Parts 98, 255, 256, and 257

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

Topic 45 CFR section

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

Joint Issues

Payment Rates for Higher Quality

Care:

CCDBG............................ 98.16, 98.43

Title IV-A....................... 255.1, 255.3, 255.4

Payment Rates for Special Needs

Care:

CCDBG............................ 98.16, 98.43

Title IV-A....................... 255.4

In-Home Care:

CCDBG............................ 98.16

Title IV-A....................... 255.1, 255.3, 255.4, 257.21, 257.40

Effects Test:

CCDBG............................ 98.30, 98.40, 98.41, 98.43, 98.45

Title IV-A....................... 255.4, 257.41

Child Care and Development Block

Grant

Immunizations...................... 98.41

Foster Care........................ Preamble clarification

Certificate Availability........... 98.30

Other Authorized Activities........ 98.13, 98.50, 98.52

Availability of Funds and Reporting 98.2, 98.60, 98.63, 98.70

Title IV-A Child Care

Reasonably Related................. 255.1, 257.21

Determining Incapacity............. 255.1, 255.2, 256.1, 256.2

Gaps in Employment and Continuity 255.2, 256.1, 256.2, 257.30

of Title IV-A Child Care.

Transitional Child Care............ 256.1, 256.2, 256.3, 256.4

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

Payments for Higher Quality Child Care

Both the Federal government and the States have an interest in

assuring that the increasing number of the Nation's children who

receive child care services benefit from high quality care. This

interest applies to all children, whether or not in subsidized care.

High quality care provides parents a necessary support service to

enable them to participate in work, education, or training. High

quality care also provides sound developmental support for the children

who comprise our future work force.

Balancing the Federal government's interest in an adequate supply

of child care to meet the needs of family self-sufficiency programs

with the States' responsibility for regulating the quality of that care

is a delicate exercise. We have learned from administering the title

IV-A and CCDBG programs that States wish to have more opportunities to

recognize higher quality care by compensating providers appropriately.

As a result, ACF proposes to amend the payment regulations for both

title IV-A and CCDBG child care programs. Along with other amendments

described in this proposed rule, these payment amendments will enable

States to provide recipients of child care under these programs greater

access to higher quality care.

As described more fully below, we propose to eliminate the

regulation for the CCDBG that limits payment differentials within

categories of care to no more than 10 percent. We also propose to amend

the title IV-A child care regulations to allow States to pay the actual

cost of care, subject only to the statewide limit, for care that meets

the State's definition of higher quality care.

Payments Under CCDBG

We propose to revise Secs. 98.16(a)(12)(ii) and 98.43(e) to remove

the 10 percent cap on payment differentials within a category of care.

In addition, we propose to revise Sec. 98.43(b) (1) and (2) to clarify

that the cost of subsidized child care services must be no more than

the actual amount billed or charged for non-subsidized care.

The Block Grant Act requires that payment rates take into account

the variations in cost of providing child care in different categories,

as defined in Sec. 98.2(h), and to children of different age groups, as

well as the additional costs of providing child care for children with

special needs. Grantees have been required to differentiate among

center-based, group home, family, and in-home child care providers. The

existing regulations permit grantees to differentiate payment rates

within categories of care, if certain conditions are met.

As noted in the preamble to the existing regulations, the limit on

payment rate differentials within a category of care was one of the

more controversial issues of the regulation. That controversy continues

today. In writing the existing regulations, we were persuaded by

grantees and child care advocates that grantees should be permitted to

differentiate within categories of care to account for licensing status

and considerations of quality, as well as coordination with other child

care programs. As a consequence, grantees were permitted to set

differential payment rates, with a 10 percent cap, within categories of

care. However, in the preamble, we indicated that we would consider

amending the regulation if it became apparent that the 10 percent limit

was inappropriate or served no useful purpose.

Since publication of the existing regulations, we have conducted

program reviews in States and non-exempt Tribes, held a number of

meetings attended by States, Territories and Tribes, consulted with

many child care advocacy groups and received numerous letters from the

Congress and other interested parties. In these contacts, we were told

that child care providers meet varying licensing requirements and

provide care at varying levels of quality. Grantees have asked for the

additional flexibility to set payment rates which provide incentives

for becoming licensed and which reflect differences in program quality.

A number of grantees have stated that, in setting payment differentials

within categories of care, they want to recognize and compensate those

child care facilities which have obtained nationally recognized

accreditation along with those child care providers who have earned

Child Development Associates (CDA) credentials. Additionally, grantees

want to take into consideration the differing costs of providing care

in licensed, unlicensed, and license-exempt (e.g., relative) settings,

and of providing care during non-traditional hours (e.g., evenings and

nights).

It has also been pointed out that other child care subsidy programs

allow grantees to differentiate within categories of care without

imposing any limitation on the amount of the payment differential. As a

consequence, some grantees have experienced difficulty in creating a

seamless child care system.

Eliminating the 10 percent limitation will give grantees the

flexibility to address these areas of concern. As a consequence, we

propose to remove the reference to limits on payment differentials in

Secs. 98.16(a)(12) and 98.43(e). We propose to revise Sec. 98.43(e) and

add Sec. 98.16(a)(12)(iii) to require grantees that provide for

variations in the payment rate within a category to include a

description of how the differential rates within categories of care are

determined and to identify the distinctions within categories. Grantees

would still be required to ensure that payment rates are sufficient to

provide access to child care services comparable to those in the non-

subsidized sector.

We are clarifying the regulations at Sec. 98.43(b) (1) and (2) to

read ``amount charged'' instead of costs. We believe this terminology

more clearly reflects Federal policy which prohibit the use of Federal

dollars to pay more for a service than the provider would charge a non-

subsidized family. Oftentimes, the provider may not bill the actual

costs, believing that the parent(s) could not afford them. However,

providers may well provide those ``costs'' when responding to market

surveys or other ``payment rate'' questions concerning costs, resulting

in receipt of payments which exceed those actually charged. We believe

that this revision will eliminate such occurrences. This clarification

does not represent a change in policy.

Payments for Higher Quality Care Under Title IV-A Child Care

Programs

Currently, Federal Financial Participation (FFP) for title IV-A

child care is available for the lowest of the actual charge for care,

the local market rate for that category of care or the applicable

statewide limit. The local market rate is based on the 75th percentile

cost of care in the local area. We continue to believe that the 75th

percentile is a reasonable definition of local market rate. This level

represents a balance between concerns about fiscal accountability and

accessibility to most services. In addition, we believe that requiring

local market rates to be set at the 75th percentile has raised the

general level of reimbursement to providers. We recognize, however,

that the 75th percentile may not be sufficient to purchase some higher

quality care. Therefore, to permit States to recognize and reward

higher quality care, we propose amending Sec. 255.4(a) to define the

actual charge for care that meets the State's objective criteria for

higher quality care as the local market rate for such care. We will

provide FFP for the actual charge for such care, subject to the

statewide limit.

While we recognize that State licensing or regulatory certification

contributes to high quality care, we do not believe that licensing or

regulation is the sole criterion or indicator of a higher quality of

care. The proposed amendment to Sec. 255.4(a) requires that the State-

defined higher quality criteria will be in addition to existing State

licensing or regulatory requirements. For example, the State's

objective criteria for higher quality care might be that providers have

a Child Development Associate (CDA) credential coupled with lower than

regulatory staff/child ratios, or the State could choose the Head Start

Program Performance Standards or other nationally or State-recognized

criteria as its criteria for higher quality. We do not propose a

national standard or definition for higher quality care.

Similarly, it is not the intention that this regulation be used to

circumvent the regulation at Sec. 255.4(a)(2)(iii) which establishes

local market rates at the 75th percentile based on a survey of

providers in an area. We expect that, because the State's criteria for

higher quality care will be above the licensing and regulatory

standards generally in effect, the State will make payments at the

actual cost (subject only to the statewide limit) under this provision

less frequently than payments are made at the 75th percentile. Payments

for higher quality care would apply, then, to only a few providers in

an area, not the majority of providers. These providers still would be

included in local market rate surveys. We are also proposing to amend

Sec. 255.1(i) to require States to specify in the Supportive Services

Plan their objective criteria for higher quality care.

To be consistent in our terminology, we propose to amend

Sec. 255.4(a)(2)(iii) to replace ``type'' with ``category'' when

referring to various kinds of providers. We propose the same revision

for Secs. 255.1(i) and 255.3(c).

Payments for Child Care for Children With Special Needs

For the purposes of this section only, in discussing payments for

child care, we use the term ``special needs'' to mean children with

mental or physical impairments that substantially limit one or more of

the major life activities, i.e., ``disabilities'' as the term is used

in the Americans with Disabilities Act (ADA). Special needs in this

preamble discussion does not mean foster care, protective services,

bilingual/cultural needs or other broader considerations sometimes

attached to the term, for example, for the purpose of targeting as

required by the CCDBG regulations at Sec. 98.44(b).

Americans With Disabilities Act

The Americans with Disabilities Act, enacted on July 26, 1990,

provides comprehensive civil rights protections to individuals with

disabilities in the areas of employment, public accommodations, State

and local government services, and telecommunications. The ADA is

administered by the U.S. Department of Justice (DOJ). However, most

States have established a central contact, usually in the office of the

Governor or Attorney General, and questions about the ADA should be

referred to that contact first. In addition, DOJ has established a

technical assistance Information Line for public inquiries. The

Information Line is available 24 hours daily at (202) 514-0301 (voice)

or (202) 514-0381 (TDD). (This number will be replaced with a toll free

800 number in the future.) Lastly, written inquiries about the ADA may

be directed to: U.S. Department of Justice, Civil Rights Division,

Public Access Section, P.O. Box 66738, Washington, DC 20035-6738.

Of particular consequence in the context of paying for child care

is title III of the ADA which prohibits discrimination on the basis of

disability by private entities in places of public accommodation. The

ADA defined public accommodations as facilities whose operations affect

commerce and fall within twelve specified categories, including social

service center establishments. The implementing regulations for the

ADA, issued on July 26, 1991, specifically include ``day care centers''

as public accommodations and clarified that places of public

accommodation located in a private residence are covered by the ADA.

The ADA uses the term ``day care center'' as a generic term for all

categories of out-of-home child care providers. In contrast to many

other Federal non-discrimination laws, a public accommodation does not

have to receive Federal funding to be covered by the requirements of

the ADA. Thus, with a few very limited exceptions specified in the ADA,

all child care providers who provide services to the public are covered

by the ADA. While most provisions of the ADA have been well understood,

there has been considerable confusion about its impact on payments for

child care, particularly when such payment is subsidized. In light of

the ADA, we believe it is important to discuss the payments for child

care for children with special needs under ACF-administered child care

programs. We are therefore proposing clarifications to the regulations

which address payments for child care for children with special needs.

The ADA regulation at 28 CFR 36.301(c) states: ``A public

accommodation may not impose a surcharge on a particular individual

with a disability * * * to cover the costs of measures, such as the

provision of auxiliary aids, barrier removal, alternatives to barrier

removal, and reasonable modification in policies, practices or

procedures, that are required to provide that individual * * * with the

non-discriminatory treatment required by the Act * * *.''

In response to ``whether day care centers may charge for extra

services provided to individuals with disabilities,'' the preamble

noted that Sec. 36.301(c) ``is intended only to prohibit charges for

measures necessary to achieve compliance with the ADA.'' (56 FR 35564,

July 26, 1991.) Thus, the ADA and its implementing regulations do allow

caregivers to charge higher rates for special needs, provided those

higher charges are for services beyond those required by the ADA and

are not for the purpose of recouping the cost of measures required by

the ADA.

States need the flexibility to determine on an individual basis how

best to meet the needs of children with special needs. It is our intent

that such children receive quality child care in developmentally

appropriate settings so that they may reach their maximum potential and

grow into responsive and responsible adults. Providers should be

compensated, within the ADA regulations, for those developmentally

appropriate child care services provided to children with special needs

in order to ensure that these children do not go unserved and the

quality of care is not affected. (At the same time, such compensation

must be consistent with the cost principles applicable to expenditures

under the program.)

Payments for Child Care for Children With Special Needs Under CCDBG

The CCDBG program uses the term ``special needs'' in two different

contexts. But as stated earlier for the purpose of payment rate

discussion, the term ``children with special needs'' will be used to

refer to children with mental or physical impairments that

substantially limit one or more of the major life activities.

Because the ADA stresses the need for making decisions on

accommodations on an individual basis, it is inconsistent to require

grantees to set a single or overall payment rate for children with

special needs. We believe that grantees must have the flexibility to

set payment amounts on a case-by-case basis. As a consequence, we

propose to revise Sec. 98.16(a)(12)(ii) by removing the requirement

that grantees justify a decision not to have different rates based on

the additional amount charged for child care services provided to a

child with special needs. We also propose revising Sec. 98.43(b)(2) to

reflect that additional charges for providing child care for a child

with special needs must be for services not required as an

accommodation under the ADA.

Payments for Child Care for Children With Special Needs Under Title

IV-A

The existing regulations governing payments for title IV-A child

care require States to conduct local market surveys to establish rates

for such care, including care for children with special needs, where

applicable. Further, although the regulations for the CCDBG do not

require that grantees conduct such market surveys, many grantees have

adopted the title IV-A local market rates established by these surveys.

The ADA does not explicitly prevent States and grantees from continuing

to conduct and use such surveys as a method of establishing rates for

payment of special needs child care. However, given the emphasis of the

ADA on accommodating persons with disabilities on an individualized

basis, ACF strongly believes that local market surveys, for the purpose

of establishing rates for special needs care, are no longer useful or

accurate.

Because the ADA stresses that decisions on accommodations for a

person's disability must be made on an individual, case-by-case basis,

we propose at Sec. 255.4(a)(2) that in lieu of a local market survey to

establish rates for special needs care, States must use the following

method for determining payments to providers of care to special needs

children: when a provider charges a special needs child, on an

individual basis, a rate that exceeds the local market rate for a child

of the same age and category of care, that charge would be the local

market rate for that special needs child. The State would pay that

charge, subject to the statewide limit and applicable cost principles,

if it is for services which are not required as an accommodation under

the ADA.

Other than the statewide limit, our regulations do not provide for

or authorize additional limitations on charges for children whose needs

go beyond those accommodated under ADA. We had concerns that such

limitations could violate the ADA principle of individual

accommodation, and we did not want to entangle welfare agencies in

decisions about what are appropriate accommodations under ADA. Further,

it is our belief that the general cost principles applicable in these

programs protect both Federal and State governments against provider

charges that are unreasonable. Nevertheless, we are interested in

comments in this area.

It should be noted that States may continue to establish higher

statewide limits for children with special needs.

As discussed above, we believe that States cannot establish valid

local market rates for children with special needs because, under the

ADA, any higher charges must be based on the individual child's and

provider's circumstances; these would not be known or taken into

account by a survey. Accordingly, we also propose to remove the

reference to differentiating local market rates for children with

special needs from Sec. 255.4(a)(3)(ii).

In-Home Care

The CCDBG and title IV-A child care regulations currently mandate

that States and other grantees offer in-home care as an option to

parents whose child care is subsidized by these programs. However, the

provisions for in-home care in the two sets of regulations lack

compatibility and impede seamless program administration. CCDBG

grantees are allowed to limit the availability of in-home care to those

situations in which the payment is reasonably similar to payments for

other categories of care. The title IV-A regulations contain no such

provision for limiting the availability of in-home care and, unlike the

CCDBG, require that States establish local market rates for this

category.

To increase the compatibility between CCDBG and IV-A regulations we

are proposing to: (1) Allow States and other grantees the same degree

of flexibility under both programs; (2) give both programs greater

latitude in setting the terms and conditions under which in-home care

will be offered; and (3) allow States to establish the minimum wage as

the in-home payment rate for care subsidized under title IV-A without

conducting a market survey. We believe that these proposals will give

States and other grantees greater control and flexibility over the use

of in-home care while protecting parental choice and ensuring that

specific family needs can be met.

Because this category of care occurs in the child's own home, it

has unique characteristics. First, it is affected by the interaction

with other laws and regulations. For example, in-home providers are

classified as domestic service workers under the Fair Labor Standards

Act (FLSA) (29 U.S.C. 206(a)) and are therefore covered under minimum

wage and tax requirements. Second, child care administrators have faced

greater challenges in monitoring the quality of care and the

appropriateness of payments to in-home providers. These unique

characteristics and the experience of States, Territories and Tribes

over the past several years indicate a need for greater flexibility as

well as consistent policies across funding streams.

The mandatory inclusion of in-home care in current CCDBG and IV-A

regulations is intended to ensure a full range of options to meet

families' needs and to accurately reflect the child care market.

However, because in-home care is not required by statute and because

States and other grantees have requested greater flexibility and

consistency across policies, we considered proposing that in-home care

be made optional in both programs. However, we were concerned that,

because in-home care presents a number of administrative challenges,

some States would unduly restrict the availability of care for families

who particularly need this type of setting or who lack other options.

We therefore decided not to make in-home care optional but to give

States and other grantees greater flexibility.

We are mindful that in-home care plays a valid and important role

in the child care market place and that many participants in subsidized

care programs rely on care in their own homes to meet their family

needs. Access to care which meets the needs of individual families is

critically important to parents and children, to schools and the

workplace, and to other community institutions which interface with the

family. While in-home care represents only a small proportion of all

available care in most communities, it may be the best or only option

for some families and may prove valuable, necessary and cost-effective

when compared to other options. Despite the challenges cited above, in-

home care is being successfully offered and has proven to be an

important resource. For these reasons, we expect States and Tribes to

consider family and community circumstances carefully in establishing

any conditions which will limit the availability of in-home care. We

are thus proposing that grantees include in their CCDBG plans a

discussion of their policies for in-home care and a rationale for their

policy decisions.

There are a number of conditions under which in-home care may be

the most practical solution to a family's child care needs. For

example, the child's own home may be the only practical setting in

rural areas or in areas where transportation is particularly difficult.

Employees who work nights, swing shifts, rotating shifts, weekends or

other non-standard hours may experience considerable difficulty in

locating and maintaining satisfactory center-based or family day care

arrangements. Part-time employees often find it more difficult to make

child care arrangements than do those who work full-time. Similarly,

families with more than one child or children of very different ages

might be faced with multiple child care arrangements if in-home care

were unavailable. Many families also believe that very young children

are often best served in their own homes. Given the general paucity of

school-age child care in many communities, in-home supervision may

enable some families to avoid latchkey situations before school, after

school, and when school is not in session. For many families, in-home

care by relatives also represents an important cultural value and may

promote stability, cohesion and self-sufficiency in nuclear and

extended families.

We also urge child care administrators to consider the capacity of

local child care markets to meet existing demand and the role that in-

home care may play in the ability of parents to manage work and family

life. Although in-home care does not represent a large share of the

national supply, it plays an important role in the structure and

functioning of local child care markets by extending the ability of

parents to care for children within their own families, closing gaps in

the supply of community facilities, and creating a bridge between adult

care and self- or sibling-care as children near adolescence.

Some States may choose to limit in-home care because of cost

factors governed by minimum wage provisions of the FLSA and other

Federal and State requirements. For example, a State might determine

that minimum wage requirements result in payments for in-home care

serving only one or two children that are much higher than the local

market rate for other categories. Therefore, the State could elect to

limit in-home care to families in which three or more children require

care. The payment to the in-home provider would then be similar to the

payment for care of the three children in other settings. This ability

to limit in-home care allows States to recognize the same cost

restraints that families whose care is unsubsidized must face.

ACF recognizes that giving the States greater latitude to impose

conditions and restrictions on in-home care may affect parents' ability

to make satisfactory arrangements and thus their ability to participate

in work, education or training. We also recognize the challenges of

implementing health and safety requirements in the child's own home, of

monitoring in-home providers, and of complying with federal wage and

tax laws governing domestic workers. Therefore, we are seeking focused

comments on our regulatory proposals for in-home care and would

especially appreciate suggestions on how to balance parental choice,

cost effectiveness, and adherence to other Federal and State

provisions, such as the FLSA, that are unique to in-home settings.

In-Home Care and the CCDBG

We propose to revise Sec. 98.16(a)(7)(ii) to require that grantees

include in their CCDBG plans a specification of their policies for in-

home care and the rationale for those policies.

In-Home Care and Title IV-A Child Care

We propose to amend Secs. 255.3(c) and 257.40(b) to give States the

flexibility to specify the conditions and limitations under which the

State will make in-home care available. Therefore, we propose to add

State plan requirements at Secs. 255.1(n) and 257.21(o) to ascertain

any conditions and limitations the State has placed on in-home care.

Establishing the Local Market Rate for In-Home Providers

ACF proposes to amend Sec. 255.4(a)(3) (i) and (v) to give States

the flexibility to eliminate the local market survey, required by

Sec. 255.4(a)(2), as the basis for establishing local market rates for

in-home care providers. The proposed amendment provides that the local

market rate for in-home providers must be at a level no lower than the

level required by Federal and State provisions which govern domestic

service workers. The State may choose to establish the local market

rate at such a level without conducting the survey specified under

Sec. 255.4(a)(2). As an alternative, the State has the option to

conduct a local market rate survey for in-home care if the State

believes that the local market rate for such care is higher than that

required by the FLSA and other Federal and State statutes.

The Effects Test and CCDBG

Section 658E(c)(2)(A) of the Block Grant Act requires States to

provide assurances that parents are given the option of (1) enrolling

their children with a provider who has a grant or contract to provide

services, or (2) receiving a child care certificate with which to pay

the provider of their choice. The Act also requires that children who

are to be enrolled in contracted slots must be placed with the provider

of their parents' choice whenever possible. For the CCDBG program,

Congress clearly expected that parents would be able to choose from a

wide variety of child care arrangements, including care in private

homes by relatives or family providers; in churches, synagogues or

temples; in community centers and schools; and in employer-provided

facilities.

In addition to the expectation that parents would be offered child

care options, Congress clearly intended that CCDBG grantees ensure the

safety of children in care. Therefore, grantees are also required by

statute to promulgate health and safety regulations which adequately

protect children.

We believe that Congress intended grantees to balance these

provisions. In issuing the CCDBG regulations, ACF attempted to regulate

how grantees would implement this balance. In order to protect

children, grantees were mandated to ensure that health and safety

requirements were in effect for all providers receiving funds under the

CCDBG. Simultaneously, ACF promulgated additional provisions, known as

the ``effects test,'' which withheld CCDBG funds if the grantees

adopted requirements or procedures which had the effect of

significantly limiting parental access to a category of care or type of

provider.

Many grantees and advocates in the field of child care have pointed

out the potential tension between these regulatory provisions. In

addition, many questions have been raised regarding the practical

implementation of the effects test and the criteria by which to judge

that health and safety standards have actually limited parental choice.

Most compelling among such arguments has been the noted absence of

statutory references to the effects test.

We are now proposing to eliminate the effects test. We do not

intend and do not believe this proposal will weaken parental choice. In

subpart D of the CCDBG regulations, Secs. 98.30-98.34 delineate

parental rights and responsibilities. We are not proposing to change

anything in these sections that would in any way minimize the

importance of parental choice. Parental choice remains a requirement

for CCDBG at Sec. 98.30.

Based on two years of experience in the implementation of these

programs, we do not believe that the effects test is necessary to

protect parental choice. We have substantial evidence that grantees are

indeed offering parents a choice of eligible providers through the

design and operation of their certificate programs. In addition to

information gathered from administrative staff during 33 on-site

program reviews, we heard from parents and providers in focus group

settings. Parents as well as providers spoke favorably about the

choices that parents exercise in making arrangements for their

children. The findings of these program reviews, along with our ongoing

review of child care plans, reveal that grantees are operating

certificate programs which fulfill the statutory parental choice

directives. However, based on the experience of grantees attempting to

balance these provisions, we are seeking focused comments on the

potential impact of this proposal.

We propose that the CCDBG rule be amended by removing Sec. 98.30(g)

which sets forth the effects test and by removing related references at

Secs. 98.40(b)(2) (State and local regulatory requirements), 98.41(b)

(health and safety requirements), 98.43(c) (payment rates), and

98.45(d) (registration).

The Effects Test and Title IV-A

There is no specific statutory commitment to the principle of

parental choice of providers in the title IV-A child care programs as

there is for the CCDBG program. Parental choice, however, is addressed

in the current title IV-A regulations. If more than one category of

care is available, the regulations require the State to provide the

parent or caretaker relative with an opportunity to choose the

arrangement. Also, the State IV-A agency is required to establish at

least one method by which self-arranged care may be paid.

To be compatible with the current CCDBG regulations, the existing

title IV-A child care regulations include an effects test concerning

the regulatory provisions that allow States to adopt the health and

safety requirements of other Federal or State child care programs.

Additionally, they contain an effects test concerning the At-Risk

provider registration provisions which States must adopt. The title IV-

A child care effects test is the same as the effects test contained in

the CCDBG regulations, i.e., that a State's requirements and procedures

in those areas may not have the effect of excluding any categories of

child care providers. For the same reasons given for removing the CCDBG

effects test provisions, however, ACF proposes to remove the title IV-A

effects tests requirements at Secs. 255.4(c)(2)(iii), 257.41(a)(3), and

257.41(b)(2)(v). We do not propose to, and do not believe this action

will, delete or weaken the current title IV-A parental choice

provisions.

Part 98--Child Care and Development Block Grant

Immunizations

We are proposing to amend the CCDBG health and safety regulations

to require that grantees establish rules requiring children receiving

CCDBG services to be immunized. While this change affects only the

CCDBG regulations, grantees may apply the immunization requirement to

title IV-A child care programs for a more seamless child care system.

The CCDBG statute currently includes references to immunizations.

Section 658E(c)(2)(F) requires grantees to provide assurances that

provider requirements are in effect to protect the health and safety of

children receiving services under Secs. 98.50 and 98.51, including

``the prevention and control of infectious diseases (including

immunizations).''

Section 658E(c)(2)(G) of the Block Grant Act also requires grantees

to assure that procedures are in effect which ensure that child care

providers comply with all applicable health and safety requirements

described in paragraph (F) of section 658E. However, section 658P(5)(B)

allows grantees to exclude grandparents, aunts or uncles from provider

health and safety requirements. The current CCDBG regulations reiterate

these statutory requirements.

Surveys of licensed child care facilities indicate that the

majority of States require some proof of immunizations for children

enrolled in licensed or regulated child care centers and family day

care homes. However, individual States differ in their specific

requirements and regulatory approaches. In addition, requirements for

the immunization of children in legally unlicensed care vary widely.

Consequently, there is concern that current immunization policies and

practices may be inadequate to protect large numbers of young children.

Preventable diseases that were practically eliminated years ago are

again infecting our youngest and most vulnerable children. More than

55,000 measles cases were reported to the Centers for Disease Control

and Prevention (CDC) between 1989 and 1991. In 1990, 64 deaths from

measles were reported, the highest number in two decades. A survey

conducted by the CDC in 1991 found that only 37-56% of two-year-old

children were fully vaccinated. (``Childhood Immunizations Fact

Sheet,'' Department of Health and Human Services, Washington, DC,

February 12, 1993.) Since a large percentage of children receiving

assistance under the Block Grant program are under 5 years of age, we

believe that the proposed requirements will assist in reducing the

incidence of infectious diseases among preschool age children.

For these reasons, we propose amending Sec. 98.41(a)(1) to require

that grantees' health and safety plans include specific provisions

requiring children to be immunized in order to receive services under

the CCDBG. State and Territorial health and safety plans must

incorporate (by reference or otherwise) the latest recommendations for

childhood immunizations of the respective State or Territorial

Department of Public Health. Since there may not be a similar public

health authority for Tribes to follow regarding immunization standards,

we are proposing to allow Tribes the option to determine the

immunization standards to be followed for children to receive CCDBG

services. Tribes may choose standards set forth by the State Public

Health Department or the Indian Health Service. Tribes will be required

to identify the source of these standards in their CCDBG plans. In

addition, we propose that all grantees consider requirements which

include provisions for documenting regular updates of the child's

immunizations.

Grantees have flexibility in the method of implementing this

requirement. For example, grantees may require parents to provide proof

of immunization as part of the initial eligibility determination and

again at redetermination, or grantees may require child care providers

to maintain proof of immunization for children enrolled in their care.

However, the requirements established by the grantee must apply to all

children receiving CCDBG assistance and in all child care settings,

unless the child is in one of the exempt groups cited below.

While we propose to require children to be immunized in order to

receive services, grantees may continue to exempt:

(1) Children who are cared for by relatives (defined as

grandparents, aunts and uncles);

(2) Children who receive care in their own homes;

(3) Children whose parents object for religious reasons; and

(4) Children whose medical condition contraindicates immunization.

In proposing that children be immunized, we considered that parents

may not always have had access to immunizations. However, we believe

that the increasing national focus on immunization will ease this

difficulty. The President has made vaccine delivery a national priority

and has signed into law the Vaccine for Children program which provides

free vaccines to States for the inoculation of uninsured children,

children eligible for Medicaid, and Native American children.

Underinsured children whose health insurance does not cover

immunizations are also eligible to be served by Federally Qualified

Health Centers and Rural Health Clinics. The new program will also

allow federally purchased vaccine to be distributed to private

physicians to vaccinate eligible children.

Where grantees impose burdens on providers to check on the

immunization status of children in their care and to ensure that

necessary immunizations are received, we would expect grantees to

assist providers in meeting these requirements. At a minimum, the

assistance should include: (1) Provision of updated immunization

schedules; (2) information on the availability of free vaccines; and

(3) information on locations where parents of eligible children can be

referred for immunizations. These expectations are consistent with

section 658E(c)(2)(G) of the CCDBG statute which requires that

procedures be in place to ensure that providers comply with applicable

health and safety requirements.

We also expect that some children may not have all of the required

immunizations at the time eligibility is determined. In order to ensure

that children eligible to receive services under the Block Grant are

not denied services, we recommend that grantees establish a grace

period in which children can receive services while taking the

necessary actions to comply with the requirements. Grantees will be

required to describe the grace period allowed to these families in

their CCDBG plan.

The health of all children is important, and we therefore strongly

encourage immunizations for children receiving title IV-A child care.

However, we believe that there is no authority under the Social

Security Act to require immunizations for children receiving title IV-A

child care and therefore we cannot propose a parallel regulation for

title IV-A child care. Unlike the CCDBG statutory mandate for State

requirements for the prevention and control of infectious diseases,

including immunization, for all providers, the Social Security Act is

silent. Nevertheless, we wish to emphasize that States already have the

necessary flexibility to choose to require immunizations for children

receiving title IV-A care under the existing title IV-A applicable

standards regulations. The application to title IV-A child care of the

proposed immunization requirement would facilitate the seamless

delivery of child care services across programs.

The applicable standards regulations at Secs. 255.4 and 257.41

require title IV-A child care providers to meet any generally

applicable standard of State, local or Tribal law. Additionally, the

applicable standards regulations allow States to deny payment for care

that does not meet the additional standards used in other Federal

(e.g., CCDBG) or State child care programs in the area of prevention

and control of infectious diseases, including immunizations. Thus

additional Federal regulations are not necessary for title IV-A child

care for States to have the ability to require consistent health and

safety standards, including the proposed immunization requirement.

Foster Care

We are clarifying that CCDBG grantees have the flexibility to

include foster care in their definition of protective services. The

preamble to the existing regulations distinguishes between protective

services cases and children placed in foster care by allowing child

care subsidies for foster care cases only if the foster parent is

working, in education or in training. The distinction made in the

preamble was an interpretation of the regulatory language. The

regulation discusses child protective services only; it is silent on

foster care. This change in interpretation does not require a

regulatory change.

In many States, foster care is an integral part of the protective

services system. It is one of the many services provided to children

and families who, for a variety of reasons, may need protective

intervention. A child is placed in foster care when remaining in the

home places him or her at risk. States, acting in loco parentis, may

provide on-going supportive services to meet the developmental needs

and redress developmental delays which may exist as a result of neglect

or abuse. These services are available both for a child who remains in

his or her own home and for a child in a foster placement. For purposes

of protective services benefits, some grantees do not differentiate

between the protective services for families who remain intact and for

those children who are in a foster placement.

In the preamble to the existing regulations, a child in a family

that is receiving, or needs to receive, some type of protective,

interventive services can be eligible for child care subsidies under

CCDBG if he or she remains in his or her own home even if the parent is

not working, in education or in training. However, such therapeutic

child care outside of the home may be a necessary part of the

individual child's supportive services plan regardless of the child's

living situation. In these cases, child care is needed to carry out the

social services plan for the child and the family--not necessarily

because the parent is working, in education or in training. Therefore

we are changing our interpretation of the regulation to allow States

the option of including children in foster care in the State's

definition of protective services cases.

Allowing CCDBG grantees to include foster care in their definition

of protective services not only gives grantees the flexibility to work

within existing child protective services systems, it is also

consistent with the goals of the recently enacted Family Support and

Preservation Act. This Act promotes integrated and comprehensive

services for families already receiving supportive and/or interventive

assistance from social services agencies.

Grantees electing to include foster care in their definition of

protective services will be required to state this in their Block Grant

Plan. Those grantees choosing to exclude foster care from their

definition of protective services must define eligibility for

participation in CCDBG child care subsidies in terms of the foster

parent working, in education or in training.

Certificate Availability

Section 658E(c)(2)(A) of the CCDBG Act requires States to provide

assurances that parents are given the option of (1) Enrolling their

children with a provider who has a grant or contract to provide

services, or (2) receiving a child care certificate with which to pay

the provider of their choice. The Act also requires that children who

are to be enrolled in contracted slots must be placed with the provider

of their parents' choice whenever possible.

The CCDBG regulation elaborates on the choice between grant/

contract child care and a child care certificate by requiring that a

certificate must be offered when child care services under Sec. 98.50

are made available to a parent. We do not propose any changes to this

requirement which is stated both at Sec. 98.30(a) and Sec. 98.30(e).

However, we do propose removing Sec. 98.30(e) because it is redundant

to a clearer and more expanded presentation of parental choice set

forth in Sec. 98.30(a) (1) and (2).

We are also using the opportunity provided by this proposed rule to

clarify the certificate requirement and to offer examples of grantee

systems which have successfully met this requirement.

Our restatement of the regulatory position that certificates must

be available whenever services under Sec. 98.50 are offered does not

preclude grantees from entering into grants or contracts for child care

services. Depending upon the child care needs of the eligible

population in discrete geographic areas of service, grants and

contracts may be necessary to provide stable child care for

participating populations or specific communities. In essence, the

provision requires a good faith effort by the grantee to balance the

allocation of funds between grants/contracts and certificates to ensure

that parents have optimum choice among quality child care options as

stipulated in the legislation and reinforced in the existing

regulation.

In conducting on-site program reviews over the past two years, we

have found that grantees are operating certificate programs which offer

parental choice. Some grantees are offering only certificates. Others

are committing funds on a proportional basis between certificates and

contracts based on the particular needs of individual areas or

populations. Some grantees, however, have experienced that stable child

care is more difficult to find in rural or inner-city areas, for

infants, or for children with special needs and have therefore

contracted with competent providers to specifically address these

shortages.

In planning the distribution of funds for grants/contracts and

certificates, grantees should establish sufficient fiscal flexibility

to ensure that parents who choose certificates are not placed on a

waiting list while substantial numbers of contracted slots in the same

area remain un-utilized.

However, most grantees are reporting that the need for subsidized

low-income child care far exceeds the available funding. Thus, if

certificate funds are fully reserved for children who are already

enrolled, and no subsidized slots are available (either filled or not

part of the grantee's program), it may be necessary to begin a waiting

list for certificates. Similarly, because many grantees are allocating

funds on a locality by locality basis, waiting lists may result in some

parts of the State while services are still available in other areas.

We want to clarify that although certificates must be an option for

parents whenever Sec. 98.50 services are offered, it is not necessary

to offer certificates whenever Sec. 98.50 services are being used. For

example, if all CCDBG funds available in a community are ``reserved''

for specific children in contracted and certificate-funded slots, the

grantee is not actually offering services and need not offer additional

certificates. Thus, a local program might not offer new child care

services during some portion of the program year because all available

funds have been assigned to specific children and are being used or

``reserved'' for those specific children.

Other Authorized Activities

Currently, CCDBG grantees may spend up to 10 percent of CCDBG funds

authorized under Sec. 98.50 (the 75 percent monies) for program

administration and activities to improve the availability and quality

of child care services. If expenditures for operating the certificate

program and related consumer education equal or exceed 10 percent,

grantees may petition for an additional five percent for other

authorized activities, for a total of 15 percent.

Based on information provided by grantees in their annual reports

and during on-site program reviews, we now propose to allow grantees to

use up to 15 percent of funds authorized under Sec. 98.50 for ongoing

activities related to program administration, quality and availability

without further justification.

In proposing this change, we acknowledge the cost implications of

complex interrelationships among program administration, quality

services and availability of child care options in the context of

rapidly increasing family and community needs. Many States and

localities want to develop more cohesive, integrated and sophisticated

child care management, delivery and payment systems. Activities

undertaken under Sec. 98.50(d) can contribute to the development of

child care systems which more effectively support informed consumer

choice and the delivery of quality care through community-based

providers. This change will provide grantees with the flexibility to

balance priorities and develop more responsive child care programs.

Accordingly, we propose that the CCDBG rules be amended to specify

that the amount generally allowed for activities related to

administration, quality and availability is 15 percent at

Sec. 98.50(d)(2)(ii). Therefore, the amount specified for direct

services is at least 85 percent at Sec. 98.50(d)(2)(i). The change will

also remove Sec. 98.50(d)(3) which requires grantees to petition for

the additional five percent and remove a reference to Sec. 98.50(d)(3)

which occurs in Sec. 98.52(c). It will also remove a related reference

at Sec. 98.13(a)(6)(ii).

Availability of Funds

In the Juvenile Justice and Delinquency Prevention Amendments of

1992, section 658J(c) of the CCDBG Act was amended to eliminate the

time restrictions on obligation and to extend the length of time

grantees have to expend funds received each fiscal year.

Block Grant funds awarded to States and Territories had previously

been available for obligation by the grantee in the fiscal year in

which the grant funds were awarded and in the succeeding fiscal year

(year 2). Unliquidated obligations at the end of year 2 were to be

liquidated during the next fiscal year (year 3).

The statutory amendments eliminate the restrictions on obligation

of funds by States and Territories by providing that CCDBG funds are

expendable in the fiscal year in which they are awarded and in the

three (3) succeeding fiscal years. For Tribal grantees, the amendments

also extend the expenditure period from three (3) fiscal years to four

(4) fiscal years. Thus, the expenditure period for all grantees

(States, Territories, exempt Tribes and non-exempt Tribes) now extends

to four (4) fiscal years.

The amendments were not effective in time to remove the September

30, 1992, obligation restriction on FY 1991 grant funds awarded to

States and Territories. However, the amendments do provide an

additional year to expend funds for obligations made with FY 1991

funds, so that States and Territories now have until September 30, 1994

(rather than September 30, 1993), to expend FY 1991 funds which were

obligated by September 30, 1992.

Tribal grantees who received FY 1991 funds were required to expend

their funds by September 30, 1993. Because the amendments provide an

additional year during which FY 1991 funds may be expended, Tribal

grantees have until September 30, 1994, to expend their FY 1991 grants.

In summary, for all grantees (States, Territories and Tribes), FY

1992 and subsequent fiscal years' funds must be expended by the end of

the expenditure period (the fiscal year in which the funds are awarded

plus the three succeeding fiscal years). To reflect these changes, we

propose amending Sec. 98.2 by removing and reserving paragraph (z) and

revising paragraphs (y) and (cc) and Sec. 98.60 by revising paragraphs

(d)(1), (d)(4), (h)(1), and (h)(3) and removing paragraphs (d)(2),

(d)(3), (e), and (h)(2).

Financial Reporting

We propose revising Sec. 98.63(a)(1) and (b) to change the dates by

which States must report funds for reallotment to other State grantees.

Reallotment rules do not affect Territories or Tribal grantees since

those grantees may not receive reallotted funds.

Each fiscal year, States must specify the amount of any CCDBG funds

which will be available for reallocation or else report that all funds

will be expended. The deadline for submission of this information was

previously April 1 of the second fiscal year of the obligation period.

As a result of the extension of the expenditure deadline by section 8

of the Juvenile Justice and Delinquency Prevention Amendments of 1992,

the date by which States must report CCDBG funds for reallotment has

been extended to April 1 of the fourth (and last) fiscal year of the

expenditure period.

Since the amendments did not remove the September 30, 1992

obligation deadline for FY 1991 grant funds, this change in reporting

did not affect FY 1991 awards. For FY 1992 funds, States must report on

the availability of funds for reallotment by April 1, 1995. Funds

reallotted from one fiscal year's grant are subject to the same period

of availability as the grant year from which the funds were awarded.

Thus, FY 1992 funds, if any, reallotted in May of 1995 must be expended

by September 30, 1995.

Annual Report Requirement

In Sec. 98.70, the CCDBG rule requires grantees to submit annual

reports to the Secretary by December 31. This provision is not affected

by the extension of the expenditure period by section 8 of the Juvenile

Justice and Delinquency Prevention Amendments of 1992. Each report must

specify expenditures made by September 30 of the year in which the

report is submitted to the Secretary, with each fiscal year's funds

accounted for separately. However, we are proposing to revise

Sec. 98.70 to more clearly state the requirement and to delete those

requirements no longer applicable.

PART 255--CHILD CARE AND OTHER WORK RELATED SUPPORTIVE SERVICES

DURING PARTICIPATION IN EMPLOYMENT, EDUCATION AND TRAINING

Child Care That Is ``Reasonably Related'' To Parent's Activities

Under the regulations for title IV-A child care, a State must

assure in the State Supportive Services Plan that child care provided

or claimed for reimbursement is reasonably related to the hours of

participation in JOBS or in other State-approved education and training

(for care under part 255) or employment (for care under parts 255, 256

and 257). ACF recognized that many individuals would participate in

education, training and employment on less than a full-time basis, but

decided not to regulate a definition of what constitutes child care

that is reasonably related to the parent's hours of participation or

employment. Rather, we gave States the flexibility and, we believed,

the authority to develop their own policies.

During our discussions with States, however, we learned that there

is some misunderstanding or disagreement about who has the

responsibility for establishing policies on what constitutes an amount

of child care that is reasonably related to the parent's training or

employment. For example, internal or external reviews or audits have

questioned how a State determined that the child care under review was

reasonably related to the parent's activity.

ACF continues to maintain that State IV-A agencies should establish

their own policies for what constitutes a ``reasonably related'' amount

of child care. Therefore, we propose to have the State include in its

Supportive Services Plan a description of its policy on what

constitutes child care that is reasonably related to the parent's hours

of participation in education, training or employment by revising

Secs. 255.1(e)(4) and 257.21(a)(6).

Including the State's ``reasonably related'' child care policy in

the federally approved Supportive Services Plan will clarify the IV-A

agency's role in developing and articulating the State's policy in this

area. By having written policy on ``reasonably related,'' States should

avoid such disputes with potential reviewers.

In proposing this regulation, we wish to clarify the difference

between a policy which addresses paying for child care when a child is

absent from regularly scheduled care (e.g. due to illness) and a policy

which describes what is reasonably related child care.

A ``reasonably related'' child care policy correlates the parent's

activities with the amount of child care that the IV-A agency views as

necessary based on the parent's activities and in consideration of

other factors that the agency regards as significant. For example,

States may wish to include such factors as the individual needs of the

recipient family, the availability or lack of care alternatives in a

local market area, need for continuity of care by a specific caregiver,

or the needs of a Head Start Agency to meet operating expenses for

wrap-around child care.

In contrast to the ``reasonably related'' policy which relates the

parent's activity to an amount of child care, an absence policy

addresses the fact that children will occasionally miss child care

especially due to illness. A State's absence policy would establish

when a State would pay for child care even when the child is absent.

FFP is available for payments made in accordance with a State's absence

policy.

The ``reasonably related'' policy the State describes in its

approved Supportive Services Plan will become the standard against

which actual payments will be judged, for example, for audit purposes.

We therefore advise the State to articulate its policy clearly to all

individuals responsible for approving the payment or reimbursement of

child care services.

Determination of Physical or Mental Incapacity

Under the regulations for AFDC child care at part 255 and

Transitional Child Care (TCC) at part 256, the determination of mental

or physical incapacity for a child over age 13 can only be made by a

``physician or a licensed or certified psychologist.''

The existing policy was adopted to be consistent with the

regulations concerning exemption from participation in the Job

Opportunities and Basic Skills Training (JOBS) program found in part

250. Exemptions from participation in JOBS are available for a number

of reasons, including physical or mental incapacity. Since incapacity

would provide a long and perhaps permanent period of exemption from

activities that would prepare an individual for entry into the work

force, a high standard of professional verification by a physician or

licensed or certified psychologist was adopted. After experience with

the child care programs, we do not believe that receiving child care

services under parts 255 and 256 requires such rigorous verification.

In addition, when the CCDBG program and the At-Risk Child Care

program were implemented after JOBS, both programs, by regulation,

provided for care of a child over age 13 who is physically or mentally

incapable of caring for himself or herself. The regulations for those

programs at parts 98 and 257, respectively, permit the State to make

the determination of physical or mental incapacity. Those regulations

also require States to include a definition of the term ``physically or

mentally incapable of caring for himself or herself'' in the applicable

State Plan.

We propose to amend the child care regulations at parts 255 and 256

to be compatible with the regulations of the other child care programs.

These proposed changes will ease State administration of child care

programs while continuing to ensure that eligibility is properly

documented. We therefore propose to amend Secs. 255.2(a) and 256.2(a)

to provide State flexibility in determining physical or mental

incapacity. We also propose to add Secs. 255.1(m) and 256.1(a)(5) to

require the State to provide its definitions of physical or mental

incapacity in the applicable State Plan.

Gaps in Employment and Child Care Under Title IV-A

We propose to modify the regulatory language at Sec. 255.2(d)(2) to

allow States the additional option to continue child care for families

that lose a job but are searching for another job. Under the proposed

regulation at Sec. 255.2(d)(2)(ii) care can be continued for up to one

month of job search if the care arrangements would otherwise be lost.

This is an expansion of the existing regulation which provides for a

continuation of care for up to one month only if an activity is

scheduled to begin within that month and the arrangements would

otherwise be lost.

We believe that giving States this additional option to continue

child care for a limited period of job search is supportive of families

who may have to change employment and recognizes that it is not always

possible to secure another job immediately following a job loss. Under

the existing regulations, States have had the option to extend child

care services that would otherwise be lost for a limited period both

when another activity is already scheduled to begin within that period

and when there is a short period of absence from an on-going job. The

proposed regulation broadens the State's ability to serve families for

whom continuity of care would assist their movement towards self-

sufficiency.

We also propose to amend the At-Risk regulations at Sec. 257.30(c)

to be consistent with the proposed change at Sec. 255.2(d)(2)(ii) to

allow States the option to continue child care for up to one month for

families that lose a job but are searching for another job.

Additionally, we propose to amend Sec. 257.30(c) to delete the

requirement that child care for the two-week period prior to the start

of a job may be provided only if ``the child care arrangements would

otherwise be lost.'' We believe that the two-week period may be needed

to provide child care in order to prepare for employment. We propose

that at State option child care may be available for up to two weeks

before employment without restriction.

In making these changes to the regulations at Secs. 255.2(d) and

257.30(c), we recognized that the existing regulations for care under

part 256 (TCC) are silent on the provision of child care during gaps

between jobs. In JOBS-FSA-AT-90-8, dated June 29, 1990, we clarified

that families are eligible for TCC during gaps in employment. This

proposed rule at Sec. 256.2(f) thus codifies existing policy and

mirrors the amended policy concerning gaps in employment in parts 255

and 257. Care provided during a break in employment, that is, when the

family is not working, does not extend the family's 12-month

eligibility period.

We propose to make a corresponding amendment to the regulations at

Sec. 256.1(a) for the State Supportive Services Plan which addresses

Transitional Child Care. We propose that the plan reflect whether the

State has elected to allow child care during gaps in employment under

TCC pursuant to the proposed Sec. 256.2(f).

PART 256--TRANSITIONAL CHILD CARE

Determination of Physical or Mental Incapacity

We propose to amend the regulations of the TCC program at

Sec. 256.2(a) to allow the State to determine ``physical or mental

incapacity'' and at Sec. 256.1(a) to allow the State to define the term

in the State's Supportive Services Plan. Our reasons are further

explained in the preamble to the proposed changes for part 255.

Voluntary Cessation of AFDC and Eligibility for TCC

We propose to amend Sec. 256.2(b)(1) by adding a new subparagraph

(ii) to allow States the option of making families who voluntarily

terminate receipt of an AFDC benefit eligible for TCC. Under this

option, working families that receive AFDC could request that their

AFDC be terminated and still become eligible for TCC, provided that

they meet all other TCC eligibility requirements.

The existing regulation, which we propose to redesignate as

Sec. 256.2(b)(1)(i), requires that a family's eligibility for TCC is

based on a loss of eligibility for AFDC due to the increased hours of

employment, increased income from employment or loss of the income

disregards due to time limits. In our consultations we have heard

concerns that some working families find themselves ineligible for TCC

because they voluntarily leave AFDC when they are still entitled to a

grant. Therefore, we propose to allow the State the option to provide

TCC to those working families who voluntarily request that their AFDC

be terminated because their hours or income from employment have

increased or they have lost the income disregards due to time limits,

but are still eligible for AFDC. This policy, coupled with our proposal

to give States the option to eliminate the need for a request for TCC,

should allow States to provide TCC to more families, while easing the

administrative burden on them to provide that service.

We are not proposing to require States to provide TCC in voluntary

closure cases because we are unsure of the administrative and fiscal

impacts on States. At the same time, we want our regulations to support

families who take the initiative to get jobs and move off AFDC.

Therefore, we are interested in receiving comments as to whether it

would be more appropriate to allow or to require States to provide TCC

in voluntary closure cases.

We propose to revise the regulations concerning the State

Supportive Services Plan at Sec. 256.1(a)(6) to include information on

whether the State elects to provide TCC to working families who

voluntarily cease to receive AFDC.

Requesting TCC

The existing regulations require States to provide information to

families about their potential eligibility for TCC, the steps they need

to take to request TCC services, and their rights and responsibilities

under the program. States must provide this information during initial

application for AFDC, during orientation to the JOBS program, at

redetermination of eligibility for AFDC benefits and at termination of

AFDC benefits. ACF issued an Action Transmittal (CC-ACF-AT-92-3), dated

June 16, 1992, that reiterated the necessity for all families to be

informed about TCC ``in writing, and orally as appropriate, at the time

they become ineligible for AFDC.''

The existing regulations also require that all families request TCC

before services are provided. ACF did not regulate the nature of the

request or application process. Rather we encouraged States to make the

process simple, citing the example of a current recipient for whom the

State might approve TCC through a recertification process if the

necessary information was on file.

We have, however, heard concerns that the requirement for the

family to request services may have discouraged some families from

seeking TCC or caused disruption in child care arrangements. This

requirement is especially frustrating for families when necessary

information is already on file with the State agency.

Therefore, we propose at Sec. 256.2(b)(3) to give States the option

to provide TCC, without requiring a request, to eligible families. We

believe that such a policy would be most applicable to families who

were approved for child care services under part 255. For example, an

AFDC recipient reports her newly-begun job to her AFDC case manager. At

that time, the case manager determines that the family will remain

eligible for AFDC until the time limitations on the income disregard at

Sec. 233.20(a)(11) cause the family to lose AFDC eligibility. Because

the case manager recognizes that the family will be eligible for TCC in

four months, if circumstances remain the same, she obtains the

necessary information with which to determine eligibility and establish

the level of the family's fee for TCC, if any. Continuing child care

services in this instance would be possible because all the appropriate

information is available to determine TCC eligibility, including fees,

when the family loses eligibility for AFDC and transitions to TCC.

Adopting this option can make the delivery of title IV-A child care

services more seamless for the family. Additionally, the transition

from child care services provided under part 255 to TCC services may

well be ``transparent'' to the family if the State also adopts the

proposed option to waive TCC fees for those families who are at or

below the poverty level.

However, in adopting the option to continue child care services

without a request for TCC, the State must still provide all of the

required notifications, including appeals rights, regarding the

termination of AFDC benefits and child care services pursuant to

Secs. 205.10 or 250.36 as appropriate. The family must also be notified

of the requirements for their continued eligibility for TCC, including

the payment of fees if applicable, pursuant to the requirements at

Secs. 256.2, 256.3 and 256.4.

We propose amending Sec. 256.1(a)(6)(i) to have States specify in

their Supportive Services Plan whether they have adopted this option.

In proposing this option we recognize that, in some cases (e.g.,

where a State does not have current or complete information on a

family), a State may find it difficult to provide TCC in the absence of

a request. Therefore, the State will still need a mechanism in place to

collect the information necessary to determine eligibility and

payments. For many families, the need for child care will not arise

until they get a job which terminates their AFDC eligibility. Other

families who leave AFDC due to employment may not need child care at

that time (e.g., because their child is enrolled in Head Start), but

may need care subsequently. Whenever the need for child care arises,

the State must make a prompt determination of eligibility for TCC in

order to assist the family. ACF remains concerned that States have not

established such timely, efficient procedures. The request or

application process should be simple so as not to hinder the

applicant's ability to accept work or continue working.

Because we continue to hear concerns that the requirement for a

request for TCC is problematic and that TCC utilization is low, we are

requesting comments on whether: (1) This provision to make requests

optional is a sufficient response; (2) the request requirement

constitutes a serious barrier to the receipt of TCC; and (3) other

changes should be made to make TCC more accessible to eligible

families.

Retroactive Requests for TCC

The existing rule at Sec. 256.2(c) specifically provides for

families to receive TCC ``notwithstanding when the family requests

assistance under this Part * * *.'' States have asked whether they may

establish a cut-off date for TCC requests as they have received

requests after the family's 12-month period of TCC eligibility has

expired. There is no existing Federal policy which addresses a cut-off

date for TCC requests following the 12-month eligibility period. We

believe a cut-off date should be a State decision. We propose to revise

Sec. 256.2(c) and add a new paragraph Sec. 256.2(g) to provide States

the authority to establish a reasonable time limit for accepting TCC

requests following the close of the eligibility period.

We also propose to amend Sec. 256.4(c) to require States which have

elected to establish a time limit for accepting requests for TCC,

pursuant to Sec. 256.2(g), to notify families of the time limit.

Fee Requirement

In order to be compatible with the At-Risk Child Care Program at

Sec. 257.31(c) and CCDBG at Sec. 98.42(c), we propose to amend the TCC

regulation that requires some level of contribution to the cost of TCC

by all recipients. Section 402(g)(1)(A)(vii) of the Act requires a

family to contribute to the cost of TCC according to its ability to

pay. The existing regulations at Sec. 256.3(b) require that a sliding

fee be established that provides for some level of contribution by all

recipients.

As is the case with At-Risk families, families eligible for TCC are

only one step away from actual receipt of AFDC. We believe it is

appropriate to give States the option to treat TCC families the same as

other similarly-situated families in the State. Therefore, we propose

to revise Sec. 256.3(b) to give States the option to waive the

contribution from a family whose income is at or below the poverty

level for a family of the same size.

Gaps in Employment During TCC

As discussed in the preamble to part 255 we propose to amend

Sec. 256.1(a) and add Sec. 256.2(f) to allow States the option to

continue child care that would otherwise be lost, for a limited period

of time for families waiting to enter employment or who have a gap in

employment. Section 256.2(f) codifies into part 256 the existing and

proposed title IV-A child care gaps policy.

PART 257--AT-RISK CHILD CARE PROGRAM

Child Care That Is ``Reasonably Related'' to Parent's Employment

As discussed in the preamble at parts 255 and 256, we propose to

amend Sec. 257.21(a)(6) to have the State include in its At-Risk Child

Care plan a description of its policy on what constitutes child care

that is reasonably related to the parent's hours of employment.

Gaps in Employment During At-Risk Child Care

As discussed in the preamble at parts 255 and 256, we propose to

amend Sec. 257.30(c) to allow States the additional option to continue

child care for a limited period of time for families that lose a job

but are searching for another and whose child care arrangements would

otherwise be lost. We also propose to conform the At-Risk regulations

regarding the provision of child care during the two weeks prior to

start of employment with the corresponding regulations in part 255 and

the proposed amendment to part 256. With these proposed amendments,

States will have the flexibility to create a consistent gaps policy

across the three title IV-A child care programs.

Other Proposed At-Risk Child Care Amendments

We propose amending the At-Risk regulations concerning in-home care

and the effects test, as discussed earlier in the preamble.

List of Subjects

45 CFR Part 98

Child care, Grant program--social programs, Parental choice,

Reporting and recordkeeping requirements.

45 CFR Part 255

Aid to families with dependent children, Grant programs--social

programs, Employment, Education and training, Day care.

45 CFR Part 256

Aid to families with dependent children, Grant programs--social

programs, Employment, Education and training, Day care.

45 CFR Part 257

Day care, Grant programs--social programs, Reporting and

recordkeeping requirements.

(Catalog of Federal Domestic Assistance Programs: 93.037, Child Care

and Development Block Grant; 93.560, Aid to Families with Dependent

Children; 93.561, Job Opportunities and Basic Skills Training (JOBS)

Program; 93.574, At-Risk Child Care)

Dated: March 31, 1994.

Mary Jo Bane,

Assistant Secretary for Children and Families.

Approved: April 20, 1994.

Donna E. Shalala,

Secretary, Department of Health and Human Services.

For the reasons set forth in the preamble, parts 98, 255, 256, and

257 of title 45 of the Code of Federal Regulations are revised to read

as follows:

45 CFR Subtitle A

PART 98--CHILD CARE AND DEVELOPMENT BLOCK GRANT

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

Authority: 42 U.S.C. 9858.

Subpart A--Purposes and Definitions

2. Section 98.2 is amended by removing and reserving paragraph (z);

and revising paragraphs (y) and (cc) to read as follows:

Sec. 98.2 Definitions.

* * * * *

(y) Expenditure period is the time period during which one fiscal

year's grant funds must be expended which includes the relevant fiscal

year in which the funds were awarded and the succeeding three fiscal

years. This provision pertains to all grantees, including State,

Territorial and Tribal grantees;

* * * * *

(cc) Program period is the time period during which one fiscal

year's grant funds may be used to support program activities. The time

frame for the program period is the same as that for the expenditure

period;

* * * * *

Subpart B--General Application Procedures

Sec. 98.13 [Amended]

3. Section 98.13 is amended by removing and reserving paragraph

(a)(6)(ii).

4. Section 98.16 is amended by revising paragraphs (a)(7)(ii) and

(a)(12)(ii); and adding paragraph (a)(12)(iii) to read as follows:

Sec. 98.16 Plan provisions.

(a) * * *

(7) * * *

(ii) Specification of the grantee's policy for the availability of

in-home care and the rationale for that policy;

* * * * *

(12) * * *

(ii) Based on a methodologically sound system for determining

payment rates, a justification of the grantee's decision not to provide

for differences in payment based on the setting (categories of care),

or the age of the child; and

(iii) A description of how differential rates within categories of

care, if any, are determined and identification of within-category

distinctions;

* * * * *

Subpart D--Program Operations (Child Care Services)--Parental

Rights and Responsibilities

Sec. 98.30 [Amended]

5. In Sec. 98.30, paragraphs (e) and (g) are removed and reserved.

Subpart E--Program Operations (Child Care Services)--State and

Provider Requirements

Sec. 98.40 [Amended]

6. In Sec. 98.40, paragraph (b)(2) is removed and reserved.

7. Section 98.41 is amended by removing and reserving paragraph

(b); and revising paragraph (a)(1) to read as follows:

Sec. 98.41 Health and safety requirements.

(a) * * *

(1) The prevention and control of infectious diseases (including

immunizations):

(i) Grantees must establish immunization requirements as part of

their health and safety plans which assure that children receiving

services under the Block Grant are immunized. Immunization requirements

must be established in accordance with the following guidelines:

(A) State and Territorial health and safety plans must incorporate

(by reference or otherwise) the latest recommendation for childhood

immunizations of the respective State or Territorial Department of

Public Health;

(B) Tribes have the option to determine the immunization standards

to be incorporated in their health and safety plans, but must identify

the source of standards. Tribes may choose from:

(1) State Department of Public Health immunization standards; or

(2) Indian Health Service immunization standards.

(ii) Notwithstanding paragraph (a)(1)(i) of this section, States

may exempt:

(A) Children who are cared for by relatives (defined as

grandparents, aunts and uncles);

(B) Children who receive care in their own homes;

(C) Children whose parents object for religious reasons; and

(D) Children whose medical condition contraindicates immunization;

* * * * *

8. Section 98.43 is amended by removing and reserving paragraph

(c); and revising paragraphs (b)(1) introductory text, (b)(2) and (e)

to read as follows:

Sec. 98.43 Payment rates.

* * * * *

(b) * * *

(1) Variations in the amount charged for providing child care:

* * * * *

(2) The additional amount charged for providing child care for a

child with special needs for services which are not required as an

accommodation under the Americans with Disabilities Act.

* * * * *

(e) If a grantee sets a payment rate schedule which includes

variation in the payment rate within a category, pursuant to

Sec. 98.16(a)(12)(iii), the grantee must describe how the payment

differential was determined and what the distinctions within categories

are.

* * * * *

Sec. 98.45 [Amended]

9. In Sec. 98.45, paragraph (d) is removed and reserved.

Subpart F--Use of Block Grant Funds

10. Section 98.50 is amended by removing and reserving paragraph

(d)(3); and revising paragraph (d)(2) to read as follows:

Sec. 98.50 Child care services.

* * * * *

(d) * * *

(2) To meet the requirements of paragraph (d)(1) of this section:

(i) At least 85 percent of the funds reserved for assistance under

this section must be expended for services pursuant to paragraph (a)(1)

of this section; and

(ii) Not more than 15 percent of the funds may be expended for

activities as described in paragraphs (a)(2) and (a)(3) of this

section.

11. Section 98.52 is amended by revising paragraph (c) to read as

follows:

Sec. 98.52 Administrative activities.

* * * * *

(c) Expenditures on any administrative activities related to the

services under Sec. 98.50 are subject to the requirements and

limitation under Sec. 98.50(d), and together with expenditures for

quality and availability, must not exceed the limitation under

Sec. 98.50(d)(2).

Subpart G--Financial Management

12. Section 98.60 is amended by removing and reserving paragraphs

(d)(2), (d)(3), (e), (h)(2); revising the word ``obligation'' in

paragraph (h)(1) to read ``expenditure'' and revising the word

``obligated'' in paragraph (h)(1) to read ``expended''; and revising

paragraphs (d)(1), (d)(4), and (h)(3) to read as follows:

Sec. 98.60 Availability of funds.

* * * * *

(d)(1) State, Territorial, and Tribal Grantees must expend their

allotment in the fiscal year in which funds are awarded or in the

succeeding three fiscal years.

* * * * *

(4) Any funds not expended during the expenditure period specified

in paragraph (d)(1) of this section will revert to the Federal

government.

* * * * *

(h) * * *

(3) If received by the grantee or subgrantee after the expenditure

period specified in paragraph (d)(1) of this section, be returned to

the Federal government.

* * * * *

13. Section 98.63 is amended by revising paragraphs (a)(1) and (b)

to read as follows:

Sec. 98.63 Reallotment.

(a) * * *

(1) In the fourth (and last) fiscal year of each expenditure

period, the State shall report to the Secretary the dollar amount of

funds available for reallotment from the award given in the first

fiscal year of that expenditure period. Such report must be postmarked

by April 1st.

* * * * *

(b) States receiving reallotted funds must expend these funds in

accordance with Sec. 98.60. The reallotment of funds does not extend

the program period for expenditure of such funds.

Subpart H--Program Reporting Requirements

14. Section 98.70 is amended by removing and reserving paragraph

(b); and revising paragraph (a) to read as follows:

Sec. 98.70 Annual report requirement.

(a) Grantees that receive assistance under the Block Grant shall

prepare and submit to the Secretary an annual report. The report will

be submitted in the manner specified by the Secretary by December 31

and will cover expenditures made by September 30 of that year. Unless

otherwise specified by the Secretary, each fiscal year's grant shall be

accounted for separately.

* * * * *

45 CFR Chapter II

PART 255--CHILD CARE AND OTHER WORK-RELATED SUPPORTIVE SERVICES

DURING PARTICIPATION IN EMPLOYMENT, EDUCATION, AND TRAINING

1. The authority citation for part 255 is revised to read as

follows:

Authority: 42 U.S.C. 602, 603 and 1302.

2. Section 255.1 is amended by revising paragraphs (e)(4) and (i)

and adding paragraphs (m) and (n) to read as follows:

Sec. 255.1 State plan requirements.

* * * * *

(e) * * *

(4) Child care provided or claimed for reimbursement is reasonably

related to the hours of participation or employment as described in the

State Supportive Services plan.

* * * * *

(i)(1) A description of the methodology used for setting local

market rates pursuant to Sec. 255.4(a)(2). Such methodology must

address rates established for each category of care (i.e., center,

group family day care, and family day care) provided. The description

must address variations in the costs of care for infants, toddlers,

pre-school and school-age children, whether care is full- or part-time,

and reduction in the cost of care for additional children in the same

family if such variations exist. If the State chooses to survey in-home

care, the methodology used must be included in the description. The

rates determined by using the methodologies described must be submitted

as part of the State's Supportive Services plan and must be updated

periodically, but no less than biennially.

(2) A description of the State's criteria for higher quality care,

if any, in accordance with Sec. 255.4(a).

* * * * *

(m) The State's definition of physically or mentally incapable of

caring for himself or herself, pursuant to Sec. 255.2(a).

(n) Any conditions and limitations the State IV-A agency has

established for providing in-home care, pursuant to Sec. 255.3(c)(2).

3. Section 255.2 is amended by revising paragraphs (a) introductory

text and (d)(2) to read as follows:

Sec. 255.2 Eligibility.

(a) The State IV-A agency must guarantee child care for a dependent

child who is: under age 13; physically or mentally incapable of caring

for himself or herself, as determined by the State and defined in the

State's Supportive Services plan; or under court supervision (and for a

child who would be a dependent child except for the receipt of benefits

under Supplemental Security Income under title XVI or foster care under

title IV-E), to the extent that such child care is necessary to permit

an AFDC eligible family member to--

* * * * *

(d) * * *

(2) For a period not to exceed one month where child care (or other

services) arrangements would otherwise be lost, and:

(i) The subsequent activity is scheduled to begin within that

period; or

(ii) The eligible family member is searching for another job.

* * * * *

4. Section 255.3 is amended by revising paragraph (c) to read as

follows:

Sec. 255.3 Methods of providing child care and other supportive

services.

* * * * *

(c)(1) If more than one category of child care is available, e.g.,

center, group family care, family day care, or in-home care, the

caretaker relative must be provided an opportunity to choose the

arrangement. The State IV-A agency may select the method of payment

under paragraph (a) of this section.

(2) The State IV-A agency may establish conditions and limitations

under which it will provide in-home care in the State Supportive

Services plan.

* * * * *

5. Section 255.4 is amended by removing paragraph (c)(2)(iii);

revising paragraphs (a)(2) introductory text, (a)(2) (ii) and (iii);

adding new paragraphs (a)(2) (iv) and (v); revising paragraphs (a)(3)

(i), (ii), (iii), and (iv); and adding a new paragraph (a)(3)(v) to

read as follows:

Sec. 255.4 Allowable costs and matching rates.

(a) * * *

(2) Except as specified in paragraphs (a)(2) (iv) and (v) of this

section, the applicable local market rate must be established:

* * * * *

(ii) For all political subdivisions or for alternative areas which

represent reasonable local child care markets based upon their

geographic proximity or common characteristics;

(iii) Based on the 75th percentile cost of such categories of care

in the local areas (however, where there are only one or two providers

of a category of care in a local market area, the rate may be set at

the 100th percentile.);

(iv) At State option, at the provider's actual charge for that care

which meets the State's objective criteria for higher quality care. For

purposes of this paragraph, the States's criteria for higher quality

care must be in addition to State licensing or regulatory requirements;

and

(v) At the provider's actual charge for care for children with

special needs if that actual charge exceeds the local market rate for a

child of the same age and in the same category of care who does not

have special needs, and provided the additional charge is for services

which are not required as an accommodation under the Americans with

Disabilities Act.

(3) * * *

(i) Be established for center care, group family care, and family

day care;

(ii) Differentiate among care for infants, toddlers, pre-school and

school-age children, where applicable;

(iii) Differentiate between full-time and part-time care, if

applicable;

(iv) Consider reductions in the cost of care for additional

children in the same family; and

(v) Be established for in-home care:

(A) At the level required by Federal and State provisions that

govern domestic service employees, without reference to the

requirements in paragraph (a)(2) of this section; or

(B) In accordance with paragraph (a)(2) of this section only when

such a local market rate would exceed the level required by Federal and

State provisions that govern domestic services employees.

* * * * *

PART 256--TRANSITIONAL CHILD CARE

1. The authority citation for part 256 is revised to read as

follows:

Authority: 42 U.S.C. 602, 603 and 1302.

2. Section 256.1 is amended by revising paragraphs (a)(3) and

(a)(4) and by adding paragraphs (a)(5) and (a)(6) to read as follows:

Sec. 256.1 State plan requirements.

(a) * * *

(3) The methods and procedures the State IV-A agency shall use to

ensure tha fees are collected;

(4) The application requirements established by the State for

families requesting TCC;

(5) The State's definition of physically or mentally incapable of

caring for himself or herself, pursuant to Sec. 256.2(a); and

(6) Whether the State has elected to provide care under this part:

(i) To families without a request from the family pursuant to

Sec. 256.2(b)(3);

(ii) Before employment begins or during breaks in employment

pursuant to Sec. 256.2(f); and

(iii) To families who voluntarily cease to receive AFDC pursuant to

Sec. 256.2(b)(1)(ii).

* * * * *

3. Section 256.2 is amended by revising paragraphs (a), (b)(1),

(b)(3) and (c) and by adding paragraphs (f) and (g) to read as follows:

Sec. 256.2 Eligibility.

(a) The State IV-A agency must guarantee child care for a child who

is: Under age 13; physically or mentally incapable of caring for

himself or herself, as determined by the State and defined in the

State's Supportive Services plan; or under court supervision, and who

would be a dependent child, if needy (and for a child who would be a

dependent child except for the receipt of benefits under Supplemental

Security Income under title XVI or foster care under title IV-E), to

the extent that such care is necessary to permit a member of an AFDC

family to accept or retain employment.

(b) * * *

(1)(i) The family must have ceased to be eligible for AFDC as a

result of increased hours of, or increased income from, employment or

the loss of income disregards due to the time limitations at

Sec. 233.20(a)(11); or

(ii) At State option, the family voluntarily ceases to receive an

AFDC benefit as a result of increased hours of, or increased income

from, employment or the loss of income disregards due to the time

limitations at Sec. 233.20(a)(11);

* * * * *

(3) The family requests transitional child care benefits, if

required by the State, provides the information necessary for

determining eligibility and fees, and meets appropriate application

requirements established by the State; and

* * * * *

(c)(1) Eligibility for transitional child care begins with the

first month for which the family is ineligible for AFDC, for the

reasons included in paragraph (b)(1) of this section, and continues for

a period of 12 consecutive months.

(2) Families may begin to receive child care in any month during

the 12-month eligibility period.

* * * * *

(f) The State IV-A agency may provide child care under this part

for an eligible family member who is waiting to enter employment:

(1) For a period not to exceed two weeks; or

(2) For a period not to exceed one month where child care

arrangements would otherwise be lost, and:

(i) Employment is scheduled to begin within that period; or

(ii) The eligible family member is searching for another job.

(g) The State IV-A agency may establish a reasonable time limit for

accepting TCC requests following the close of the TCC eligibility

period.

4. Section 256.3 is amended by revising paragraph (b) to read as

follows:

Sec. 256.3 Fee requirement.

* * * * *

(b)(1) Each State IV-A agency shall establish a sliding fee formula

based on the family's ability to pay that provides for contributions

from each family toward the cost of care provided under this part.

(2) The State IV-A agency may waive the contribution from a family

whose income level is at or below the poverty level for a family of the

same size.

* * * * *

5. Section 256.4 is amended by revising paragraph (c) to read as

follows:

Sec. 256.4 Other provisions.

* * * * *

(c) The State IV-A agency must notify all families of:

(1) Their potential eligibility for transitional child care

services under this part in writing, and orally as appropriate, at the

time they become ineligible for AFDC;

(2) The time limit the State has established for requesting TCC

following the close of the TCC eligibility period; and

(3) Their rights and responsibilities under the program.

* * * * *

PART 257--AT-RISK CHILD CARE PROGRAM

1. The authority citation for part 257 continues to read as

follows:

Authority: 42 U.S.C. 602, 603, and 1302.

2. Section 257.21 is amended by revising paragraphs (a)(6), (m) and

(n) and adding paragraph (o) to read as follows:

Sec. 257.21 State plan content.

(a) * * *

(6) Child care provided or claimed for reimbursement is reasonably

related to the hours of employment as described in the State's At-Risk

Child Care plan;

* * * * *

(m) A description of the coordination of the At-Risk Child Care

program with existing IV-A child care programs, with other Federally-

funded child care programs, and with other child care provided through

other State, public, and private agencies;

(n) A description of the health and safety requirements, if any,

for the prevention and control of infectious diseases (including

immunization), building and physical premises safety, and minimum

health and safety training appropriate to the provider setting, in

accordance with Sec. 255.4(c)(2)(ii) of this chapter and

Sec. 257.41(a)(2); and

(o) Any conditions and limitations the State IV-A agency has

established for providing in-home care, pursuant to Sec. 257.40(b)(2).

3. Section 257.30 is amended by revising paragraph (c) to read as

follows:

Sec. 257.30 Eligibility.

* * * * *

(c) The State IV-A agency may provide child care under this Part

for an eligible family member who is waiting to enter employment:

(1) For a period not to exceed two weeks; or

(2) For a period not to exceed one month where child care

arrangements would otherwise be lost, and:

(i) Employment is scheduled to begin within that period; or

(ii) The eligible family member is searching for another job.

4. Section 257.40 is amended by revising paragraph (b) to read as

follows:

Sec. 257.40 Methods of providing child care.

* * * * *

(b)(1) If more than one category of child care is available, e.g.,

center, group family care, family day care, and in-home care, the

family must be provided an opportunity to choose the arrangement. The

State IV-A agency may select the method of payment under paragraph (a)

of this section.

(2) The State IV-A agency may establish the conditions and

limitations under which it will offer in-home care in the State

Supportive Services plan.

* * * * *

5. In Sec. 257.41, paragraphs (a)(3) and (b)(2)(v) are removed and

paragraphs (b)(2)(iii) and (iv) are revised to read as follows:

Sec. 257.41 Child care standards.

* * * * *

(b) * * *

(2) * * *

(iii) Allow providers to register with the State or locality after

selection by the parent(s); and

(iv) Be simple and timely.

* * * * *

[FR Doc. 94-11087 Filed 5-10-94; 8:45 am]

BILLING CODE 4184-01-P