# Child Care and Development Fund

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A97-19062

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** July 23, 1997
- **Citation:** 62 FR 39610

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 98 and 99

RIN 0970-AB74

Child Care and Development Fund

AGENCY: Administration for Children and Families (ACF), HHS.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Administration for Children and Families (ACF) proposes to
amend the Child Care and Development Block Grant (CCDBG) regulations at
45 CFR Part 98. In large part, the proposed amendments respond to the
amendments made to the CCDBG Act and the Social Security Act by the
Personal Responsibility and Work Opportunity Reconciliation Act
(PRWORA) of 1996 (Pub. L. 104-193). This proposed rule additionally
includes certain selected amendments and preamble clarifications
originally proposed for the CCDBG regulations on May 11, 1994 (59 FR
24510-24527) but never issued as a final rule due to the welfare reform
initiative that resulted in PRWORA.

DATES: Interested persons and agencies are invited to submit written
comments concerning these proposed regulations no later than September
22, 1997.

ADDRESSES: An electronic version of this proposed rule can be found at
http://www.acf.dhhs.gov/programs/ccb/policy/nprm.htm for your review.
Comments on the regulation can be submitted electronically following
the directions at the site, and will be posted according to those
directions. Comments received from State Lead Agencies for child care
will also be posted on the web site as a service to the public,
regardless of the method of submission. Printed copies of the
electronic comments will be added to the file of written comments and
be available for public review during the hours described below.
Comments may also be mailed (facsimile transmissions will not be
accepted) to the Assistant Secretary for Children and Families,
Attention: Child Care Bureau, Hubert Humphrey Building, Room 320F, 200
Independence Avenue, SW, Washington, DC 20201 or delivered to that
address 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 person shown below.

FOR FURTHER INFORMATION CONTACT: Barbara Binker, Director, Policy
Division, Child Care Bureau, Hubert Humphrey Building, Room 320F, 200
Independence Avenue, SW, Washington, DC 20201, telephone (202) 401-
5145. 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

Section 103(c) of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) repealed the child care programs
authorized under title IV-A of the Social Security Act--AFDC Child
Care, Transitional Child Care and At-Risk Child Care. In addition,
PRWORA amended section 418 of the Social Security Act to provide new
Federal child care funds and transfer them to the Lead Agency under the
amended Child Care and Development Block Grant Act. The funding under
section 418 is now subject to the CCDBG Act. PRWORA also amended the
CCDBG Act.
PRWORA also reformed the Federal welfare program, replacing the Aid
to Families with Dependent Children (AFDC) program with the Temporary
Assistance for Needy Families (TANF) program. Under TANF, States have
great flexibility to design programs that promote work, responsibility
and self-sufficiency, and strengthen families.
In preparing to draft this proposed rule, ACF consulted extensively
with grantees and with organizations interested in child care. In these
early, pre-drafting consultations we met with representatives of State-
level organizations, such as the National Governors' Association and
the American Public Welfare Association. We also met with
representatives of national organizations of local governments such as
the National Association of Counties, and with national organizations
such as the Children's Defense Fund and the National Association of
Child Care Resource and Referral Agencies. We held a national
teleconference with State child care administrators, and held extensive
discussions regarding the new statute at ACF's national child care
conference held in September 1996. We consulted with two on-going Child
Care Bureau work groups composed of State and tribal child care
administrators, held 10 regional conference calls with our tribal
grantees, and conducted two workshops on tribal child care issues at
ACF's Tribal Welfare Reform Conference, held in Seattle, Washington, in
October 1996. We also received a number of letters touching on possible
regulatory approaches to implementing the child care provisions of
PRWORA.
The PRWORA provides several child care funds to support low-income
families, transfers these funds to the CCDBG Lead Agency, and amended
the CCDBG Act to ensure the consistent quality of child care services
provided with these Federal funds. Therefore, consistent with the
intent of the statute, we have named the combined funds the Child Care
and Development Fund (CCDF). In this proposed rule, references to the
CCDBG have been revised to refer to the CCDF.

Goals and Purpose of the Proposed Rule

In developing this proposed rule, our primary goals were to:

--amend the CCDBG regulations in light of the child care amendments
under title VI of PRWORA,
--achieve a balance between program flexibility and accountability,
--assure the health and safety of children in child care,
--recognize that child care is a key support for work, as envisioned in
TANF, and
--clarify, streamline, simplify, and unify the Federal child care
program.

Our specific efforts toward achieving these primary goals include:
assuring that States have adequate information upon which to base their
child care payments; promoting public involvement in the Plan process;
strengthening health and safety in child care by requiring children
receiving CCDF subsidies to be age-appropriately immunized; requiring
coordination between child care Lead Agencies and agencies
administering TANF, health, education and employment programs;
streamlining the CCDF application and Plan; and providing
clarifications based on experience operating both the CCDBG program and
the now-repealed title IV-A programs.
We believe that our proposed regulatory changes respond to the
statutory changes and also represent a balancing of viewpoints in cases
where there were multiple views on a single issue. For example, in our
consultations we asked for information on how the statutory amendments
around payment rates and the concept of ``equal access'' should be
implemented. In the responses we received, there was a central tension
between the desire for complete flexibility by States to establish
child care subsidy payment

[[Page 39611]]

rates and the need to assure that the established rates promoted both
work and parental choice. To achieve balance on the issue, we propose
to give Lead Agencies the flexibility to set payments, but to require
that the rates be based on a market survey conducted no earlier than
two years prior to the effective date of the currently approved CCDF
Plan. Using this approach, we assure that Lead Agencies have an
appropriate frame of reference for establishing payments that meet the
needs of work and family.
Another issue on which we heard opposing views was the amended
public hearing requirements concerning the CCDF Plan. States and their
organizations desired complete flexibility, i.e., no further regulation
beyond the requirements that the hearing be announced with sufficient
time and statewide notice. Others with whom we consulted wanted
regulations that specified both the timing and the manner of the
notice, as well as details on the locations of the hearing. Our
proposed rule contains basic requirements on the timing of the notice
and the hearing, but we provided flexibility regarding the number,
location(s), and other details of the hearings. Here we believe we have
established a balance between the flexibility of Lead Agencies to take
into account such considerations as variations in geography and the
calendars of State legislatures, and the statute's strengthening of the
basic accountability of Lead Agencies to the public during the child
care planning process.
We continue to believe in the need for immunization of children in
child care as an essential part of health and safety. Immunization is a
critical part of what we consider to be a natural connection between
child care and healthy children, and we again propose, as we did in
1994, that children in subsidized care be age-appropriately immunized.
Since there is a natural connection between child care and healthy
children, we also are proposing a specific requirement that Lead
Agencies for child care coordinate with public health agencies,
including those responsible for immunization.
We also propose specifically to require coordination between child
care Lead Agencies and other entities that we believe are crucial to
supporting a strong child care program. Since the relationship between
the CCDF and the TANF program is especially important, we would be
requiring coordination between the CCDF agency and the TANF agency. We
also propose to require that child care consumer information provided
by the CCDF Lead Agency include information regarding the TANF agency's
implementation of the TANF exception to sanctioning a single custodial
parent with a child under age six who refuses to work due to lack of
appropriate, accessible, or affordable child care.
In addition to our proposed requirements regarding coordination
with TANF, our proposed rules include specific requirements relating to
coordination between CCDF Lead Agencies and public education,
employment, and public health agencies, including those agencies
responsible for immunizations. There are numerous opportunities for
linkages between child care and these agencies. We believe that the
connections between child care programs and these agencies are pivotal
in promoting family self-sufficiency and general well-being. It is
important, for example, that such coordination support the linkage of
families to a system of continuous, accessible health care.
Our goals in developing these proposed amendments included
clarification, simplification, and streamlining to support the strong,
unified child care system that PRWORA provides. Further, since the
changes under PRWORA necessitated Plan revisions, we chose to use this
as an additional opportunity to reorganize and simplify the application
and CCDF Plan document, and to create a separate Plan document
specifically for Tribes. We have aimed for clarity in this regulation
on a number of points. In the regulations at subparts F, Use of Child
Care and Development Funds, and G, Financial Management, we clarified
new statutory provisions regarding such areas as administrative costs,
quality, matching (including the use of pre-kindergarten funds as
match), maintenance-of-effort, and reallotment.
Finally, we are again proposing certain changes and clarifications
that were contained in an earlier proposed rule (59 FR 24510-24527, May
11, 1994). The 1994 proposed rule was published in response to requests
from States, child care providers, and organizations for certain
amendments to promote the health and safety of children receiving
subsidized care and to enable the improved coordination between the now
repealed title IV-A child care programs and the Child Care and
Development Block Grant. The enactment of the child care provisions of
PRWORA provided even greater opportunities for unifying the Federal
child care programs and made many of those proposed child care
amendments unnecessary. However, we are carrying over into this
proposed rule the changes to the CCDBG health and safety standards
included in the earlier proposed rule, and we also include the
clarification contained in the preamble to the 1994 proposed rule
regarding the availability of child care certificates. We have again
offered the clarification contained in the 1994 proposed rule regarding
inclusion of foster care in the definition of protective services and
have added clarifications regarding respite care and parental choice in
protective services cases, which we felt were necessary based on our
experience with the CCDBG program. Also, as we did in 1994, we propose
to give Lead Agencies additional flexibility in offering in-home child
care.
The rules and clarifications that we proposed in 1994 and repeated
in this proposed rule received public support at the time they were
originally proposed. In view of this support, the changes had been
planned for publication as final rule. However, our plans for
publication were overtaken by the welfare reform legislative agenda
that culminated in the passage of PRWORA. Since over two years have
passed from the date of these original proposals, however, ACF is again
soliciting comments on the amendments and clarifications that we
carried over from our 1994 proposed rule.

Statutory Authority

Section 658E of the Child Care and Development Block Grant Act of
1990 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 is the most cost-
effective and least burdensome while still achieving the regulatory
objectives.
For the most part, the proposed regulations are required by PRWORA
and represent changes to the existing regulations or deletions from the
existing regulations.
As in 1994, we are again proposing a requirement that children be
immunized in order to receive services under the Child Care and
Development

[[Page 39612]]

Fund and clarifying that such immunizations be age-appropriate. The
CCDBG health and safety regulations currently require grantees 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. The Vaccines for
Children Program, an important component of the Childhood Immunization
Initiative (CII), provides immunizations to eligible children,
including those without insurance coverage, those eligible for
Medicaid, and American Indians and Alaskan Natives. In addition, every
State receives grant funds for immunization activities, including
hiring nurses, expanding clinic hours, assessing coverage levels, and
conducting outreach. Immunization levels of children 19-35 months of
age are measured by the National Immunization Survey, the first ever
survey conducted throughout the U.S. that provides comparable State
vaccination coverage estimates.
The immunization provision was considered the most cost-effective
and least burdensome approach because: (1) it helps ensure that
vulnerable young children are age-appropriately immunized; (2)
immunization of such children is highly cost-effective; and (3) it
provides flexibility to grantees in determining how to implement the
provision.

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 proposed 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. 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 that
could result in some decrease in the regulatory and economic burdens on
providers that are small businesses. Most importantly, because States
will be required to operate their programs under a more consistent set
of program rules, participating providers will face a simpler and more
streamlined set of Federal regulatory requirements.
The providers who would potentially be most affected by
this rule 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
State or tribal regulatory requirements or health and safety standards
for other providers, such as family day care providers that 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 direct
any expansion of Federal, State or tribal regulatory requirements or
health and safety standards for providers; thus, any impacts on
providers should arise only as the result of independent State and/or
local decisions to impose additional requirements.
State, local and tribal governments already have authority to set
general regulatory requirements and health and safety standards for
child care providers. If States (or other grantees) believe that there
was a substantial need for additional requirements (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. Our proposal does not dictate that States impose
requirements on providers; rather, States can choose to impose them on
eligible families. Thus, the immunization provision in this proposed
rule does not necessarily 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 providers.
Thus, the number of entities affected, and the net economic impact
on them, should not be significant.

Paperwork Reduction Act

Sections 98.16 and 98.81 contain the Lead Agency Plan information
requirements of the ACF-118 and ACF-118-A respectively. Sections 98.70
and 98.71 contain the information required by both the ACF-800 and ACF-
801 child care data collections. As required by the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507 (d)), the Administration for Children and
Families has submitted a copy of these sections to the Office of
Management and Budget (OMB) for its review.
Title: State/Territorial Plan Pre-Print (ACF-118) and Tribal Plan
Pre-print (ACF-118-A) for the Child Care and Development Fund (Child
Care and Development Block Grant).
Description: These legislatively-mandated plans serve as the
agreement between the Lead Agency and the Federal Government as to how
CCDF programs will be administered in conformance with legislative
requirements, pertinent Federal regulations, and other applicable
instructions and guidelines issued by ACF. This information will be
used for Federal oversight of the Child Care and Development Fund.
Respondents: State governments and territories, Tribal
organizations

[[Page 39613]]

Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
Number of
Number of responses Average Total burden
Instrument respondents per burden hours hours
respondent per response
----------------------------------------------------------------------------------------------------------------
ACF-118................................................. 56 .5 30 840
ACF-118................................................. 240 .5 30 3,600
Estimated Total Annual Burden Hours................. ............ ............ ............ 4,440
----------------------------------------------------------------------------------------------------------------

Title: Child Care Biannual Aggregate Report--ACF-800.
Description: This legislatively mandated report collects program
and participant data on all children and families receiving direct CCDF
services. Aggregate data will be collected and will be used to
determine the scope, type, and methods of child care delivery, and to
provide a report to Congress.
Respondents: State governments, Guam, Virgin Islands, Puerto Rico
and the District of Columbia.

Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
Number of
Number of responses Average Total burden
Instrument respondents per burden hours hours
respondent per response
----------------------------------------------------------------------------------------------------------------
ACF-800................................................. 54 2 40 4,320
Estimated Total Annual Burden Hours................. ............ ............ ............ 4,320
----------------------------------------------------------------------------------------------------------------

Title: Child Care Quarterly Unit Report, ACF-801
Description: This legislatively-mandated report collects program
and participant data on children and families receiving direct CCDF
services. Disaggregate data will be collected and will be used to
determine the participant and program characteristics as well as cost
and level of child care services. The data will be used to provide a
report to Congress. Form ACF 801 represents the data elements to be
collected and reported to ACF.
Respondents will be asked to sample the population of families
receiving benefits on a monthly basis and submit the three most current
monthly samples to ACF quarterly. Each monthly sample is drawn
independent of the other samples and retained for submission within a
quarterly report. ACF is not issuing specifications on how respondents
compile overall database(s) from which samples are drawn. ACF will
provide to the respondents a sampling plan which will specify minimum
sample size. It is expected to be a monthly sample of approximately 150
cases for large States with smaller samples based on population size
adjustments for smaller respondents.
Respondents: States, D.C., Guam, Virgin Islands and Puerto Rico

Annual Burden Estimates
----------------------------------------------------------------------------------------------------------------
Number of
Number of responses Average Total
Instrument respondents per burden hours burden
respondent per response hours
----------------------------------------------------------------------------------------------------------------
ACF-801................................................. 54 4 20 4,320
Estimated Total Annual Burden Hours:................ ............ ............ ............ 4,320
----------------------------------------------------------------------------------------------------------------

The Administration for Children and Families will consider comments
by the public on these proposed collections of information in:

--Evaluating whether the proposed collections are necessary for the
proper performance of the functions of ACF, including whether the
information will have practical utility;
--Evaluating the accuracy of the ACF's estimate of the burden of the
proposed collections of information, including the validity of the
methodology and assumptions used;
--Enhancing the quality, usefulness, and clarity of the information to
be collected; and
--Minimizing the burden of the collection of information on those who
are to respond, including through the use of appropriate automated,
electronic, mechanical, or other technology, e.g., permitting
electronic submission of response.
OMB is required to make a decision concerning the collections of
information in these proposed regulations between 30 and 60 days after
publication of this document in the Federal Register. Therefore, a
comment is best assured of having its full effect if OMB receives it
within 30 days of publication. This does not affect the deadline for
the public to comment to the Department on the proposed regulations.
Written comments to OMB for the proposed information collection should
be sent directly to the following: Office of Management and Budget,
Paperwork Reduction Project, 725 17th Street, N.W., Washington, D.C.
20503, Attn: Laura Oliven.

Proposed Amended Regulations, 45 CFR Part 98

We have chosen to present the proposed amendments by publishing a
proposal to completely revise 45 CFR Part 98. We believe that the
publication of the whole text of Part 98 will facilitate understanding
of the impact of the amendments on the regulations that are retained.
The preamble discussion

[[Page 39614]]

in this proposed rule primarily discusses the changed regulations. It
also contains certain clarifications based on ACF's experience in
implementing the prior final rule. Where regulations are retained, the
preamble explanation and interpretation of those regulations published
with the prior final rule (57 FR 34352-413, August 4, 1992) is also
retained unless specifically modified in the preamble to this proposed
rule. The following table describes in detail the substantive changes
to the amended sections. In addition, we made a number of other minor
editorial changes throughout the regulations to enhance clarity, to
reflect the change of program name from the Child Care and Development
Block Grant (CCDBG) to the Child Care and Development Fund (CCDF), and
to reflect the change from ``Grantee'' to ``Lead Agency'' for reasons
explained in this preamble at Sec. 98.2.
We have made the following changes to the regulations.
Title/heading: Part 98; Subparts--A, E and F; Sections--98.1,
98.13, 98.15, 98.43, 98.45, 98.51, 98.52, 98.53, 98.61, 98.62, 98.63,
98.64, 98.65, 98.70, 98.71, and 98.81.
Definitions: Sec. 98.2 is now an alphabetical listing.
Removed: (e), (f), (n), (o), (s), (gg), (nn) and (oo).
Added: Child Care and Development Fund (CCDF), Construction,
Discretionary Fund, Facility, Major Renovation, Mandatory Funds,
Matching Funds, Modular unit, Real property, and Tribal Mandatory
Funds.
Assurances and Certifications: Sec. 98.15 has been reorganized to
reflect the statute intent that states ``assure'' they meet certain
requirements and ``certify'' that they meet others.
Tribes: We have consolidated tribal regulations from
Secs. 98.16(b), 98.17(b) and 98.60(g) into Subpart I.
The following distribution table summarizes what has been added,
removed, revised and redesignated in 45 CFR Part 98.

------------------------------------------------------------------------
Existing section Action New section
------------------------------------------------------------------------
Added............ 98.1(a)
98.1 (a) and (b).............. Redesignated..... 98.1 (b) and (c)
98.1(b)(7).................... Removed.......... .....................
98.1(b)(8).................... Redesignated..... 98.1(c)(7)
98.2(a), (j), (q), (mm)....... Revised.......... 98.2--Alphabetical
98.10 (b) and (e)............. Revised.......... 98.10 (b) and (e)
98.11(a) and (b)(8)........... Revised.......... 98.11 (a) and (b)(8)
98.12 (a) and (c)............. Revised.......... 98.12 (a) and (c)
Added............ 98.12 Introductory
text
98.13(a)...................... Revised.......... 98.13 (a) and (b)
98.13 (b) and (c)............. Removed
98.13(a)(10).................. Redesignated..... 98.13(c)
98.13(a)(11).................. Redesignated..... 98.13(d)
98.14 (a)-(c)................. Revised.......... 98.14(a)-(c)
98.15......................... See note above
98.16(a)...................... Redesignated..... 98.16 Introductory
text
98.16(a) (1)-(12)............. Revised.......... 98.16 (a)-(l)
98.16(a) (13)-(16)............ Removed
Added............ 98.16 (m)-(q)
98.16(a)(17).................. Redesignated..... 98.16(r)
98.17(a)...................... Revised.......... 98.17(a)
98.17(c)...................... Redesignated..... 98.17(b)
98.20(a)...................... Revised.......... 98.20(a)
98.21......................... Removed
Added............ 98.30(c)(3)
98.30(c) (3)-(5).............. Redesignated..... 98.30(c) (4)-(6)
98.30(d)...................... Removed
98.30 (e)-(g)................. Redesignated..... 98.30 (d)-(f)
98.31......................... Revised.......... 98.31
Added............ 98.32(c)
98.33......................... Revised.......... 98.33
98.40(a)...................... Revised.......... 98.40(a)
98.41(a)(1)................... Revised.......... 98.41(a)(1)
98.41 (c) and (d)............. Removed
98.41 (e)-(g)................. Redesignated..... 98.41 (c)-(e)
98.42(d)...................... Removed
98.43 (a) and (b)............. Revised.......... 98.43 (a) and (b)
Added............ 98.43(c)
98.43 (c) and (d)............. Redesignated..... 98.43 (d) and (e)
98.43 (e) and (f)............. Removed
98.45......................... Revised.......... 98.45
98.50 (a) and (c)............. Revised.......... 98.50 (a) and (c)
98.50(d)...................... Removed
Added............ 98.50 (d)-(f)
98.51 (a) and (b)............. Revised.......... 98.51(a)
98.51 (c)-(f)................. Removed
98.51(g)...................... Redesignated..... 98.51(b)
Added............ 98.51(c)
98.52 (a) and (b)............. Revised.......... 98.52(a)
98.52(c)...................... Revised.......... 98.52(c)
98.53......................... Revised.......... 98.53
98.54(a)...................... Revised.......... 98.54(a)
Added............ 98.54(b)(3)

[[Page 39615]]

98.60 (a), (d) and (f)........ Revised.......... 98.60 (a), (c) and
(e)
98.60(b)...................... Removed
98.60 (c)-(f)................. Redesignated..... 98.60 (b)-(e)
98.60 (h)-(j)................. Redesignated..... 98.60 (g)-(i)
98.61 (a) and (b)............. Revised.......... 98.61(a)
98.62(a)-(c).................. Redesignated..... 98.61 (b)-(d)
Added............ 98.61(e)
Added............ 98.62 (a) and (b)
98.63 (a) and (b)............. Redesignated..... 98.64(b)
Added............ 98.63 (a)-(c)
98.64 (a)-(d)................. Removed
Added............ 98.64 (a), (c) and
(d)
Added............ 98.65 (f) and (g)
98.67(c)...................... Revised.......... 98.67(c)
98.70......................... Revised.......... 98.70
98.71......................... Revised.......... 98.71
98.80 Introductory text....... Revised.......... 98.80 Introductory
text
98.80 (b) and (f)............. Revised.......... 98.80 (b) and (f)
98.81(a)...................... Revised.......... 98.81(a)
Added............ 98.81(b)
98.81(b)...................... Redesignated..... 98.81(c)
98.82 Introductory text....... Revised.......... 98.82 Introductory
text
98.83 (c)-(f)................. Revised.......... 98.83 (c)-(f)
98.83 (g) and (h)............. Removed
98.83(i)...................... Redesignated..... 98.83(g)
Added............ 98.84
98.90(e)...................... Revised.......... 98.90(e)
98.92(a)...................... Revised.......... 98.92(a)
98.92(b)...................... Removed
98.92(c)...................... Revised.......... 98.92(b)
98.92 (d) and (e)............. Redesignated..... 98.92 (c) and (d)
Added............ 98.92(e)
------------------------------------------------------------------------

Subpart A--Goals, Purposes and Definitions

Goals and Purposes (Section 98.1)
This section of the regulations has been modified to incorporate
the goals for the Child Care and Development Fund (CCDF) contained in
section 658A of the amended CCDBG Act. We incorporated the goals as
Sec. 98.1(a), and we retained but moved the subparagraphs on the
purpose of the CCDF program and the regulations to Sec. 98.1 (b) and
(c), respectively.
In subparagraph (c), we eliminated the items relating to non-
supplantation and administrative costs. The PRWORA amendments
eliminated the non-supplantation requirement and, for the first time,
placed statutory limits on administrative costs. The new regulations
relating to the statutory limits on administrative costs are proposed
at Sec. 98.52.
Definitions (Section 98.2)
The amendments proposed for this section are related to changes
necessitated by the new statute, including additions and deletions. We
have made the following changes: updated the definition of the Child
Care and Development Block Grant Act to reflect it as amended; amended
the definition of a child care certificate to reflect the new statutory
language allowing the use of a certificate as a required deposit for
child care services; and amended the definition of relative child care
provider to reflect the statutory addition of great grandparents and
siblings (if living in a separate residence) as relative providers.
Since the new statute created a multi-part child care fund subject
to the provisions of the Act, we have substituted the term ``Child Care
and Development Fund (CCDF)'' for ``Block Grant.'' Use of the term
``CCDF'' reflects the multiple sources of monies with a shared purpose.
We have also defined the constituent parts of the CCDF: Mandatory
Funds, Matching Funds, Discretionary Funds, and Tribal Mandatory Funds.
The new section 658O(c)(6) of the Act provides for Tribes to use
CCDF funds for construction and renovation of child care facilities,
with the Secretary's approval. Therefore, we have proposed definition
of several new terms related to this provision: construction, facility,
major renovation, modular unit, and real property. ACF especially seeks
comments on this proposed terminology, which is a first step towards
developing program instructions on tribal applications for use of CCDF
funds for construction and renovation.
The amended Act deleted the terms ``elementary school'' and
``secondary school'' formerly found at sections 658P(3) and (10).
Therefore, we have also deleted these terms from our regulatory
definitions. In so doing, we want to emphasize that child care services
to school-aged children are still allowable under the CCDF, and we
strongly encourage Lead Agencies to continue providing such services.
Although the definitions of these terms have been removed as
unnecessary, the Lead Agency has the flexibility to retain these very
necessary services.
We have replaced separate terms for ``Grantee'' and ``Lead Agency''
with the single term ``Lead Agency.'' We did this for a number of
reasons. First, there was not a meaningful difference between those
terms. Second, we wished to remove any ambiguity that could result from
the use of two different terms. Third, we wanted to emphasize the
streamlined administration of all child care programs in a State that
resulted from PRWORA. We believe that use of the term ``Lead Agency''
conveyed that sense of unified and expanded responsibility better than
the term ``Grantee.'' Lastly, we wanted to avoid any confusion that
could arise when the State uses subgrantees in implementing the CCDF.
We have replaced the specific term ``Grantee,'' as formerly defined,

[[Page 39616]]

with ``Lead Agency'' throughout these regulations, although there
remain some instances where the word ``grantee'' appears in its common
usage.
Finally, we have eliminated the numbering to conform with Federal
Register style which requires only alphabetical order for definitions.
This will simplify any future additions or deletions to this section.

Subpart B--General Application Procedures

Lead Agency Responsibilities (Section 98.10)
The new statute did not change the responsibilities of the Lead
Agency. The amended statute at section 658D(b)(1)(A), however, expands
the CCDF Lead Agency's ability to administer the CCDF program through
other agencies. This change broadens the ability of the Lead Agency to
administer the CCDF program through governmental or non-governmental
entities, not just ``other State agencies'' as provided in the original
CCDBG Act. These entities could include local governmental agencies and
private organizations. The new statute and the Conference Agreement
report (H.R. Rep. No. 725, 104th Cong., 2d Sess. (1996)) are silent
regarding whether the non-governmental agencies cited in this statutory
change must be non-profit organizations, so ACF has not regulated on
the characteristics of the agencies through which the Lead Agency may
administer the program.
Administration Under Contracts and Agreements (Section 98.11)
Under the latest statutory amendments, the Lead Agency remains the
single point of contact and retains overall responsibility for the
administration of the CCDF program. We have amended this section,
however, to reflect the statutory change discussed at Sec. 98.10
regarding the Lead Agency's additional flexibility to administer the
program through other governmental or non-governmental agencies.
Further, since we made revisions corresponding to the added
administrative flexibility granted to the Lead Agency, we also wanted
to align the wording of this section more closely with the statute
concerning the overall, lead responsibility of the Lead Agency. Thus,
we have re-worded the paragraphs in this section that suggested that
the Lead Agency ``shares'' administration of the program with other
entities, because the relationship between the Lead Agency and other
entities through which it administers the CCDF is not co-equal.
Coordination and Consultation (Section 98.12)
Section 658D(b)(1)(D) of the Act requires the Lead Agency to
coordinate the provision of CCDF child care services with other
Federal, State, and local child care and early childhood development
programs. Coordination is crucial to the successful implementation of
child care programs and quality improvement activities. Therefore, we
propose at Sec. 98.12(a) to require the Lead Agency to coordinate its
child care services with the specific entities required at
Sec. 98.14(a) to be involved in the CCDF Plan development process:
Temporary Assistance for Needy Families (TANF), public health,
employment services, and public education.
The statutory changes under PRWORA significantly heighten the need
for enhanced coordination between TANF and child care. The new
temporary assistance program, TANF, imposes increased work requirements
both regarding the number of TANF families participating in work and
the number of hours they must work. At the same time, the guarantee of
child care for families who are in work or approved education and
training and the guarantee of Transitional Child Care program
assistance were eliminated when PRWORA repealed the title IV-A child
care programs.
Moreover, the new statute provides new child care funding and gives
the CCDF Lead Agency administrative oversight over the new funds in
addition to the funds authorized under the amended Child Care and
Development Block Grant Act. The law requires that States dedicate 70
percent of these new funds to the child care needs of families who are
receiving assistance under a State program under Part A of title IV of
the Social Security Act, families who are attempting through work
activities to transition from such assistance, and families who are at
risk of becoming eligible for such assistance. Under the new law,
Tribes also receive additional child care funding and have the option
to operate TANF programs. Tribes that operated tribal programs under
the now-repealed Job Opportunities and Basic Skills Training (JOBS)
program, may continue to operate work programs. Considered together,
these changes present both an opportunity and a challenge for Lead
Agencies to serve the child care needs of TANF families.
It is extremely important that children and their families be
linked to a system of continuous and accessible health care services,
and there are numerous opportunities for linkages between health and
child care programs. Overall coordination between child care programs
and agencies responsible for children's health is key to supporting the
healthy development of children. An ongoing Departmental initiative
encourages the linkage between child care and health care. In May 1995,
Secretary Shalala initiated the Healthy Child Care America Campaign,
which encourages States and localities to forge linkages between the
health and child care communities. Recognizing their mutually
beneficial roles, we propose to require that the Lead Agency, as part
of its health and safety provisions, assure that children in subsidized
care be age-appropriately immunized. We believe that children will
benefit substantially from this enhanced linkage we are making between
child care and health services.
Employment is the goal of most TANF families and employment
services are critical to the low-income working families served by the
CCDF. Therefore, we believe that it is only prudent that the Lead
Agency coordinate with those State agencies that are responsible for
providing employment and employment-related services. But child care is
also emerging as an important workforce development issue for the
entire population. As such, we believe that Lead Agencies should also
undertake policies that support and encourage public-private
partnerships that promote high quality child care.
Linkages with education agencies are crucial for leveraging
additional services and enhancing child development. One important
aspect of this linkage is the role played by public schools as a
critical on-site resource for child care. Although PRWORA repealed
section 658H of the Child Care and Development Block Grant Act, which
directly addressed before- and after-school child care, in the fiscal
year 1997 budget Congress nevertheless set aside $19 million
specifically to use for before- and after-school child care activities
and child care resource and referral. We, therefore, believe that the
repeal of section 658H should not result in a lessening of coordination
with before- and after-school programs. We have included requirements
to coordinate with public education agencies, both for the purpose of
child care planning and development, as well as for more general
coordination initiatives.
Aside from proposing to require Lead Agency coordination with
specific entities discussed above, we also

[[Page 39617]]

strongly encourage coordination with other agencies with potential
impact on child care, including: Head Start collaborative offices,
child support, child protective services (especially when the Lead
Agency chooses to include children receiving protective services among
the families eligible for CCDF subsidies), transportation, National
Service, and housing.
The Head Start comprehensive model of health, parent involvement,
family support and education, when linked with child care, can provide
parents and children with quality comprehensive full day/full year
services. Promising models that fund Head Start-eligible children in
community-based child care provided in child care centers and homes are
emerging across the country, and we encourage Lead Agencies to explore
and support such efforts.
Partnerships with National Service programs present promising
opportunities for collaborations that can expand and enhance child care
for both young children and school-aged children. National Service
programs have developed several effective and replicable models for
providing the tools and skills necessary to build the capacity and
sustainability of local child care programs, involving parents and
community volunteers in child care activities, and enlisting private
sector participation in meeting community needs, including child care.
The availability of transportation is key to enabling families to
access child care services and, ultimately, work. Coordination with
transportation agencies and planning groups can ensure that child care
facilities are located near major transportation modes for easier
access and that systems of public transportation support travel
patterns of low-income workers. Alleviating transportation difficulties
for child care cuts down on travel time and stress, and allows parents
to focus on achieving self-sufficiency through work and education.
Child care and child support enforcement programs serve many of the
same families and have a shared mission--to promote self-sufficiency of
families and the well-being of children. As a result, we encourage
collaborative outreach initiatives between these programs. For example,
child care programs can disseminate information to parents about
paternity establishment and child support enforcement. We also
encourage the two programs to coordinate on policy issues. For example,
the programs have a common interest in assuring that the State
guidelines used to calculate child support awards adequately consider
the cost of child care.
Coordinating with housing agencies is crucial for the millions of
TANF recipients and low-income workers who receive child care subsidies
and reside in public housing. Locating child care facilities in or near
public housing makes services more accessible, and can provide parents
with a more stable and familiar environment for their children's care.
Lead Agencies can work with public housing authorities to identify
opportunities where co-located housing and child care can serve as an
employment or entrepreneurial strategy, and a support service for
residents.
We also wish to highlight that the regulation at Sec. 98.12(c),
which requires States to coordinate, to the maximum extent feasible,
with any Indian Tribes that receive CCDF funds has new meaning in the
context of the changes made by PRWORA. As we have noted above, Tribes
are eligible to directly receive additional child care funding, and to
operate TANF as well as continue to operate work programs if they
operated a JOBS program. Nonetheless, the new law did not amend section
6580(c)(5), which specifically provides tribal children with dual
eligibility for both tribal and State child care programs funded under
CCDF. A broad range of options for implementing and designing programs
is available to both States and Tribes. States and Tribes, therefore,
have a mutual responsibility to undertake meaningful coordination in
designing child care services for Indian families.
Applying for Funds (Section 98.13)
We are proposing to simplify the application process in order to
reduce the administrative burdens of duplicative information requests
and to provide budget information in the CCDF Plan, which is a public
document. The current regulations require an annual ``application,''
separate from the Plan. This separate application must indicate the
amount of funds requested, broken down by proposed use (e.g., direct
services, administration, quality activities, etc.). A Plan that
describes the entire child care program in detail is also required, but
only once every two years. The Plan currently does not provide a
``fiscal context'' for the program, since it does not include budgetary
information.
In the past, the separate application requested extensive budget
information, largely due to the requirements related to the now-
discontinued 25 percent setaside of funds for quality and supply
building. Because we knew that the budget data was preliminary, we had
not required its inclusion in the Plan or made it subject to the
compliance process. More importantly, the budget information was not
subject to the public hearing process.
We believe that the Lead Agency, in setting the goals and
objectives of the program and in determining how to achieve them, must
consider the allocation of funds, as well as the program and
administrative activities that will be undertaken. We also believe that
public knowledge of how funds might be allocated among activities and
eligible populations is critical to the planning process. Therefore, we
are requiring the Lead Agency to include in its Plan an estimate of the
percent or amount of funds that it will allocate to direct services,
quality activities, and administration. These estimates are for the
public's consideration in the hearing process; they will not be used to
award funds. The ACF 696, when approved by OMB, will be the formal
vehicle for providing estimates to ACF for the purpose of awarding
funds.
These Plan estimates will be macro-level estimates. That is, the
Plan will reflect an estimated amount (or percentage) of funds that the
Lead Agency proposes to use for: all direct services, for all quality
activities and for administration. We will not ask that these estimates
be broken down into subcategories as we had in the separate
application. We wish to reiterate that we recognize that these are
estimates and, as such, will not be subject to compliance actions. Nor
will approval of a Plan be withheld based on the Lead Agency's
allocation of funds among activities, unless the Plan indicates that
the requirements for administrative cost or quality expenditures will
be violated.
It is because of our strong belief in full public participation in
the planning process for CCDF-funded child care services that we make
this requirement. We remind Lead Agencies that, pursuant to section
658K of the Act, they must provide information on the actual use and
distribution of funds at the end of the program period to ACF.
At Sec. 98.13(a) we have retained the requirement that the Lead
Agency apply for funds. We intend to use the financial form ACF-696 to
fulfill this requirement, so that the need for a separate application
is obviated.
We continue to request the various certifications and assurances
that are required by other statutes or regulations and that apply to
all applicants for Federal financial assistance, specifically:
Pursuant to 45 CFR part 93, Standard Form LLL (SF-LLL),
which assures that the funds will not be used

[[Page 39618]]

for lobbying purposes. (Tribal applicants are not required to submit
this form.)
Pursuant to 45 CFR 76.600, an assurance (including any
required forms) that the grantee provides a drug-free workplace.
Pursuant to 45 CFR 76.500, certification that no
principals have been debarred.
Assurances that the grantee will comply with the
applicable provisions regarding nondiscrimination at 45 CFR part 80
(implementing title VI of the Civil Rights Act of 1964, as amended), 45
CFR part 84 (implementing section 504 of the Rehabilitation Act of
1973, as amended), 45 CFR part 86 (implementing title IX of the
Education Amendments of 1972, as amended) and 45 CFR part 91
(implementing the Age Discrimination Act of 1975, as amended).
We have retained but sightly modified the requirement at Sec. 98.13
to provide that the Lead Agency, not the Chief Executive Officer, must
supply the requested information. While the Chief Executive Officer
designates the Lead Agency, we feel that it is unnecessary for the
Chief Executive Officer to thereafter apply for funding each year. This
proposed change gives grantees the flexibility to simplify the
application process further.
In summary, the proposed CCDF application process for States and
Territories consists of the two-year CCDF Plan as required in
Sec. 98.17 and such other information as may be specified by the
Secretary. For the second year of the Plan, the Lead Agency will use
financial reporting forms to provide ACF with its estimates of funds
needed quarterly--there is no longer a separate ``application'' needed
from States and Territories in the second year of the Plan period.
Accordingly, we have changed the title of this section from
``Application Content and Procedures'' to ``Applying for Funds.''
The requirements for Tribes have been moved to Subpart I and are
discussed there. We have separated the tribal requirements in order
that the discussion of tribal requirements may be more focused and
coherent.
Plan Process (Section 98.14)
Section 658D(b) of the Act requires the Lead Agency in developing
the Plan to: (1) coordinate the provision of services with Federal,
State and local child care and early childhood development programs;
(2) consult with appropriate representatives of local governments; and
(3) hold at least one hearing in the State with sufficient time and
statewide notification to provide an opportunity for the public to
comment on the provision of child care services.
In amending the CCDBG Act to require that the Lead Agency provide
``sufficient time and Statewide distribution'' of the notice of
hearing, Congress established a higher standard for public comment than
previously existed in the Act. Affording the public a meaningful
opportunity to comment on the provision of child care services advances
public participation, Lead Agency accountability and the overall goals
of welfare reform. Accordingly, we have established a minimum 20-day
notice-of-hearing requirement at Sec. 98.14(c). That is, the Lead
Agency must allow a minimum of 20 days from the date of the statewide
distribution of the notice of the hearing before holding the hearing.
Many Lead Agencies have ongoing planning processes with broad community
involvement that convene regularly during the year. We applaud such
broad participatory approaches as they are especially responsive to
changing needs and these approaches may fulfil the requirements of
Sec. 98.16.
In the interest of State flexibility, we have established only a
minimum amount of time that the public should be notified of the
hearing. However, we encourage Lead Agencies to consider providing
longer lead times that would allow the public more time to prepare for
hearings, especially when only a single hearing is held in the State.
Although the Act requires the Lead Agency to hold only one public
hearing, the Lead Agency may, of course, hold additional public
hearings.
We considered establishing regulations around the newly added
statutory language that requires ``statewide distribution of the notice
of hearing.'' Clearly, the expanded Child Care and Development Fund
potentially impacts a much wider segment of the population than may
have been the case under the CCDBG. In light of the stronger statutory
language about public hearings, we considered, for example, a
regulation to require the Lead Agency to employ specific media in
publicizing its hearing or to ensure that specific portions of the
population be potentially exposed to the hearing notice.
We rejected these and other alternatives as restricting State
flexibility. Nevertheless, we remain concerned that some Lead Agencies
may not respond to the heightened statutory requirement. We, therefore,
expect the Lead Agency to describe how it achieved statewide
distribution of the notice of hearing in its description of the hearing
process required in the Plan by Sec. 98.16(e). Although we decline to
propose a prescriptive rule in this matter at this time, we
specifically reserve the authority to regulate further if Lead Agency
Plans or actions indicate a less than ``statewide distribution of the
notice of hearing'' as exemplified above.
Similarly, we have not established a specific requirement
concerning written comments from the public. We believe, however, that
a meaningful public comment process must consider written comments from
persons or organizations, especially those who are unable to attend a
hearing.
At Sec. 98.14(c)(2) we have proposed that the hearing be held
before the Plan is submitted to ACF, but no earlier than nine months
prior to the effective date of a Plan. We recognize that States may
have established public comment mechanisms that coincide with their
budgetary cycle but not with our usual time frames for public hearings
and Plan submittal. Therefore, we wish to clarify our intention in this
area.
It is our expectation that the Lead Agency will submit at least a
draft of the Plan for public comment through a hearing. We believe
that, in some instances, the CCDF Plan may be the only public document
that summarizes the child care policy of the State. As such, the Plan
is an important part of the effort to keep the public well informed of
State policies and programs.
ACF does not believe that the public hearing is held for the
purposes of ``approving'' the Plan as it will be submitted, but rather
to solicit public comment and input into the services that will be
provided through the CCDF. For this reason, we are proposing a flexible
process that does not create an undue burden on Lead Agencies, yet
insures that the statutorily required public input is obtained.
The Plan that is submitted to ACF must reflect the program that
will be conducted and must incorporate any changes to the program that
the Lead Agency chooses to adopt as a result of the input received
during the public hearing. We advise the Lead Agency to retain a copy
of the draft Plan that it made available for public comment in
fulfillment of this requirement. We also remind Lead Agencies that
substantive changes in their programs, after their Plans are submitted
to ACF, must be reflected by amending the Plan per Sec. 98.18(b).
The potential impact of PRWORA on the child care programs in every
State cannot be underestimated. We believe the public should be
involved in creating the flexible child care systems allowed by PRWORA.
Therefore, the Plan to be submitted to ACF for the Federal Fiscal Year
beginning October 1,

[[Page 39619]]

1997, is subject to the amended statutory hearing requirement. All Lead
Agencies must conduct a new public hearing before submitting the Plan
to ACF.
As discussed above at Sec. 98.12, we believe that ongoing
coordination and consultation processes are vital to the design of a
successful program. Therefore, at Sec. 98.14(a) we have included a
minimum list of State agencies with which the Lead Agency must
coordinate the provision of services under the CCDF. The results of the
coordination with these State agencies must be reflected in each
biennial Plan submitted to ACF.
Both the public hearing and the coordination and consultation
processes must be undertaken each time the entire Plan is required to
be submitted. Although an amendment to the Plan is not subject to the
regulatory hearing requirement, State rules may require a hearing or
public comment period.
Assurances and Certifications (Section 98.15)
The PRWORA amendments made a number of changes to the assurances
under the CCDBG. In several instances the term ``assure'' was replaced
by the term ``certify.'' Also, as described below, the amendments
changed the content of two of the former assurances and some assurances
were eliminated.
While ACF believes that there is no practical difference between an
assurance or certification, when both are given in writing, the
proposed amendments have grouped the assurances together at
Sec. 98.15(a) and the certifications together at Sec. 98.15(b).
Regarding specific substantive changes, the new section
658E(c)(2)(D) of the Act replaces the former assurance regarding
consumer education. The proposed corresponding regulatory amendment at
Sec. 98.15(b)(3) uses the statutory language requiring the Lead Agency
to certify it ``will collect and disseminate to parents of eligible
children and the general public, consumer education information that
will promote informed child care choices.''
The new section 658E(c)(2)(E) does not contain prior language
requiring Lead Agencies to have in place a registration process for
unregulated care providers that provided care to children receiving
subsidized care under the CCDBG Act. We, therefore, removed the
assurance formerly found at Sec. 98.15(i). We note, however, that the
Lead Agency has the flexibility to continue to maintain a registration
process for providers if it chooses. This process has enabled States to
maintain an efficient payment system. In addition it has provided a
means to transmit relevant information, such as health and safety
requirements and training opportunities, to providers who might
otherwise be difficult to reach.
The Act also revises the requirement that providers meet all
licensing and regulatory requirements applicable under State and local
law. The revised requirement proposed at Sec. 98.15(b)(4) mirrors the
new statutory language that there be ``in effect licensing requirements
applicable to child care services provided within the State.''
For tribal programs, the amendments specifically provide that, ``in
lieu of any licensing and regulatory requirements applicable under
State and local law, the Secretary, in consultation with Indian tribes
and tribal organizations, shall develop minimum child care standards
(that appropriately reflect tribal needs and available resources) that
shall be applicable to Indian tribes and tribal organizations receiving
assistance under this subchapter'' (section 658E(c)(2)(E)(ii)). ACF is
in the process of arranging those consultations.
The PRWORA deleted requirements formerly found in the statute at
section 658E(c)(2)(H), (I), and (J). These provisions, which related to
reporting reductions in standards, reviewing State licensing and
regulatory requirements, and non-supplantation would therefore be
deleted by this proposed revised rule.
Finally, we propose at Sec. 98.15(a)(6) that States provide an
assurance that they have not reduced their level of effort in full-day/
full-year services if they use pre-K expenditures to meet the MOE
requirement, as discussed further at Sec. 98.53.
Plan Provisions (Section 98.16)
We have amended Sec. 98.16 to reflect changes in the Plan resulting
from PRWORA. For example, we have deleted the language on registration
and the calculation of base-year level-of-effort previously found at
Sec. 98.16(a)(13), (14) and (16). We substituted for them the statutory
requirements for the Lead Agency to provide detailed descriptions of
its parental complaints process at Sec. 98.16(m) and its procedures for
parental access at Sec. 98.16(n). Similarly, we have modified some
language to reflect new statutory language. For example, Sec. 98.16(h)
now discusses the additional purposes for which funds may be used, and
Sec. 98.16(l) now requests the summary of facts upon which payment
rates were determined, including the conduct of a market rate survey.
Section 98.16(c) has been expanded to include the entities designated
to receive private donated funds pursuant to Sec. 98.53(f). We have
also modified the language at Sec. 98.16(g)(2) to reflect broader
flexibility concerning the use of in-home care. This change is
addressed more fully under our discussion of parental choice later in
this Preamble. The other changes in Plan provisions are more fully
discussed in the related sections that follow.
We take this opportunity to correct the wording of Sec. 98.16(j),
formerly Sec. 98.16(a)(10), concerning health and safety requirements.
We have removed the word ``minimum'' here since the legislation
contains no such qualification, nor do our regulations limit the
flexibility to establish such requirements. We note that Sec. 98.41
remains unaffected by this correction since that section did not
include the use of the word ``minimum.''
We have also proposed to add Sec. 98.16(p), which would require the
Lead Agency to include in the CCDF Plan the definitions or criteria
used to implement the exception to TANF work requirement penalties that
applies when a single custodial parent with a child under age six has
demonstrated an inability to locate needed child care. Among others,
the definitions or criteria would include ``appropriate child care,''
and ``affordable child care arrangements.'' We elaborate on this
requirement in the discussion of consumer education at Sec. 98.33.
Finally, we propose to add Sec. 98.16(q), which provides that the
Lead Agency describe State efforts to ensure that pre-Kindergarten
programs, for which Federal matching funds are claimed, meet the needs
of working parents. This requirement is discussed at Sec. 98.53.
Period Covered by Plan (Section 98.17)
The statute was amended at section 658E(b) to eliminate the three-
year initial period for State Plans. We therefore made corresponding
amendments in this proposed rule to provide that all Lead Agencies for
States, Territories, and Tribes must submit new Plans every two years.
This process begins with the Plans to be submitted in summer 1997 for
approval for implementation on October 1, 1997. Those Plans, when
approved, will be applicable for Federal Fiscal Years 1998 and 1999.
All current Lead Agencies must submit new Plans if they wish to receive
the CCDF funds that become available on October 1, 1997.

[[Page 39620]]

Subpart C--Eligibility for Services

A Child's Eligibility for Child Care Services (Section 98.20)
General eligibility. The amended statute at 658P(4)(B) expands the
definition of ``eligible child'' to include families whose income does
not exceed 85 percent of the State median income for a family of the
same size, instead of the 75 percent level previously stipulated.
Therefore, Sec. 98.20(a)(2) is amended to reflect that change.
We amended the regulation at Sec. 98.20(a)(1)(ii) regarding the
option to serve dependent children age 13 and over who are physically
or mentally incapacitated or under court supervision. We retained the
State option to serve older children. However, our amendment removes
the reference to the definition of ``dependent child'' in the State
plan under title IV-A of the Social Security Act, since the amended
title IV-A of the Social Security Act no longer requires a State to
adopt a single definition of ``dependent child.'' We are proposing
instead that States may elect to serve children age 13 or older who are
physically or mentally incapacitated or under court supervision up to
age 19, if they include the age limit in the eligibility and priority
terminology section of their CCDF Plan.
Additionally, the statute eliminates the requirement for States to
reserve a specific portion of their funds for activities designed to
establish or expand and conduct early childhood development or before-
and after-school care programs. Therefore, the regulations providing
additional conditions for eligibility for before- and after-school and
early childhood development services at Sec. 98.21 are deleted. ACF
believes that the setaside enabled many States to develop and expand
such services. Further, the FY 1997 Appropriations Bill included $19
million in Discretionary funds which, according to the Conference
Report, H.Rpt. 104-863 (1996), were targeted specifically for resource
and referral activities and for school-age child care activities. This
action acknowledges the important role that school-age child care plays
in the lives of families. With the added flexibility under the amended
CCDBG Act States can continue to provide child care services to all
eligible children, including these targeted populations, without a
requirement that specific portions must go to any particular program.
Foster Care and Protective Services
We are clarifying that grantees have the flexibility to include
foster care in their definition of protective services in their Plan
and thus provide child care services to children in foster care in the
same manner in which they provide services to children in protective
services.
We previously distinguished between children in protective services
and children in foster care by allowing child care subsidies for foster
care only when the foster parent is working, in education or in
training. The distinction was made only in the preamble language; the
regulatory and statutory language provides for child protective
services as a separate eligibility criterion but is silent about foster
care. Therefore, this change in interpretation does not require a
regulatory change.
Under the existing regulations, a child in a family that is
receiving, or needs to receive, protective intervention is eligible for
child care subsidies if he or she remains in his or her own home even
if the parent is not working, in education or in training. In these
instances, child care serves the child's needs as much or more than the
parent's needs. In many States, Territories and Tribes, however, foster
care is an integral part of the protective services system. Some
grantees do not differentiate between protective services for families
who remain intact and for those children who are in a foster placement.
Lead Agencies electing to include foster care in their definition
of protective services are required to state so in their CCDF Plan. If
Lead Agencies do not include foster care in their definition of
protective services, they must tie eligibility for CCDF child care of
children in foster care to the status of the foster parent's work,
education or training.
We also wish to clarify the type of CCDF-funded child care services
allowable for families who also receive protective services. In the
preamble to the current regulations (57 FR 34360, Aug 4, 1992), we gave
Lead Agencies the option to allow child care for more than 24
consecutive hours when it is due to the nature of the parent's work,
and as long as the care is actually child care, not ``institutional''
services. Thus, child care normally covers a less than 24-hour period
except in instances where the work schedule of the parent(s) requires
longer periods of care.
Regarding respite child care, we said in the preamble (57 FR 34368,
Aug. 4, 1992), ``Grantees have the flexibility to allow a child
receiving, or in need of, protective services, to receive respite child
care.'' We wish to clarify that respite child care is allowable for
only brief, occasional periods in excess of the normal ``less than 24
hour period'' in instances where protective services parent(s)--
including foster parents where the Lead Agency has defined protective
service families to include foster care--need relief from caretaking
responsibilities. For example, a child care arrangement by someone
other than the custodial parent for one weekend a month to give relief
to the custodial parent(s) that are protective service families is
acceptable. We believe that this kind of respite child care, if
necessary for support to families with children in protective services,
would be an acceptable use of CCDF funds.
If a State or Tribe uses CCDF funds to provide respite child care
service, i.e., for more than 24 consecutive hours, to families
receiving protective services (including foster families when defined
as protective services families), the CCDF Plan must include a
statement to that effect in the definition of protective services. We
note this definition of ``respite child care'' may differ from how
States or Tribes define it for other purposes (e.g., child welfare).
Thus, respite child care must be specified in the Lead Agency's Plan if
it is to be considered an allowable expenditure under CCDF.
Finally, we have reconsidered our position concerning the selection
of providers in child protective services (CPS) cases. In the preamble
at 57 FR 34369, Aug. 4, 1992 we suggested that the CPS caseworker could
question, but only on a case-by-case basis, a parent's choice of
provider and could determine that the choice of provider is not in the
best interest of the child.
The children and families who receive, or who need to receive,
protective services are obviously in crisis. The CPS system must
respond quickly and appropriately, yet sensitively, to the needs of
such families--the need to protect the child should be foremost.
To meet these needs, some States have higher licensing standards
for, or established networks of, specially trained child care providers
to be used in CPS cases. In such instances, we believe that the State's
obligation to protect the child would best be accomplished by allowing
the State to require the use of such providers as the norm in CPS
cases, if the State so chooses. The parent could, nevertheless, request
another provider, which the CPS caseworker would consider on a case-by-
case basis. Because our policy was originally only stated in preamble,
no change to the regulations is required.

[[Page 39621]]

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

Parental Choice (Section 98.30)
Cash as a certificate. Since welfare reform has raised issues about
methods of paying for child care, we wish to provide clarification with
respect to child care certificates provided in the form of cash. In
defining the term ``certificate,'' the statute at 658P(2) says, ``The
term `child care certificate' means a certificate (that may be a check
or other disbursement) that is issued by a State or local government *
* * directly to a parent who may use such certificate only as payment
for child care services or as a deposit for child care services if such
a deposit is required of other children being cared for by the
provider.''
With a certificate or two-party check, the Lead Agency can ensure
that money is paid to a provider who meets applicable health and safety
requirements. This is not the case when a Lead Agency provides cash to
a parent. We strongly discourage a cash system, because providers must
meet health and safety standards, and we believe that the use of cash
can severely curtail the Lead Agency's ability to conform with this
statutory requirement.
If, nevertheless, a Lead Agency chooses to provide cash, it must be
able to demonstrate that: (1) CCDF funds provided to parents are spent
in conformity with the goals of the child care program as stated at
section 658A of the Act, i.e., that the money is used for child care;
and (2) that child care providers meet all applicable licensing and
health and safety standards, as required by section 658E(c)(2) (E) and
(F) of the Act. Lead Agencies, therefore, may wish to consider having
parents who receive cash attest that the funds were used for child care
and to identify the provider. Such a statement would help assure that
the funds were expended as intended by the statute and lessen the
possibilities for fraud. Finally, Lead Agencies are reminded that they
must establish procedures to ensure that all providers, including those
receiving cash payments from parents, meet applicable health and safety
standards.
Availability of certificates. Section 658E(c)(2)(A) of the Act
requires States to provide assurances that parents of each eligible
child who receives or is offered CCDF child care services 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. 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. This statutory requirement is reflected in
the regulations at Sec. 98.30(a). The requirement basically is repeated
at Sec. 98.30(d) (formerly Sec. 98.30(e)).
Based on our experience administering the CCDBG program, we have
found that the duplication of the certificate option in the regulations
has created some misunderstanding that the CCDBG Act gives preeminence
to certificates. We wish to clarify that repetition of the provision
should not be interpreted as giving preeminence to certificates. Both
the statute and the regulations promote parental choice, not a specific
method for achieving choice. Neither the statute nor the regulation can
be interpreted accurately as giving a preference to certificates or to
contracted slots.
If a choice of providers is denied to parents to whom services are
offered, the complaints process set forth in Sec. 98.93 provides an
appropriate mechanism for redress. The Administration for Children and
Families will respond to all complaints filed through this process.
We want to clarify that, although certificates must be an option
for parents whenever services are offered, it may not be necessary to
offer certificates whenever services are being used. For example, 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 participating eligible children and are being used or
``reserved'' for those specific children. Availability of funding will
continue to determine when child care subsidies are to be offered.
We want to emphasize that Lead Agencies are not precluded from
entering into grants or contracts for child care services. Depending
upon the child care needs of the eligible population in discrete
geographic markets, grants and contracts may be necessary to ensure a
stable supply of child care services. In essence, the Lead Agency must
make a good faith effort to balance the funding for grants or 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, we have found that Lead
Agencies are operating certificate programs that provide for parental
choice. While some offer only certificates, others commit funds on a
proportional basis between certificates and contracts based on the
particular needs of individual areas or populations. Some Lead
Agencies, for example, have found 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 address these specific shortages.
In planning the distribution of funds for grants or contracts and
certificates, Lead Agencies should ensure that parents who choose
certificates are not placed on a waiting list while substantial numbers
of contracted slots in the same area remain unutilized.
Child care administrators have told us that there are areas where
the need for subsidized low-income child care exceeds the available
resources. Thus, if certificate funds are fully reserved for children
who are already enrolled, and no subsidized slots are available, it may
be necessary to begin a waiting list for certificates. Similarly,
because many Lead Agencies allocate funds on a locality-by-locality
basis, there may be waiting lists in some areas, while services are
still available in others.
In addition to a certificate's being used for child care services,
the statute at amended section 658P(2) stipulates that a certificate
can also serve as a deposit for child care services, if such a deposit
is required of other children being served by the provider. We have
added regulations at Sec. 98.30(c)(3) to reflect this new provision.
The amendments eliminated language at section 658E(c)(2)(A)(iii)
requiring a certificate program to be in place by October 1, 1992,
since all Lead Agencies must now have a certificate program in place,
except for Tribes that are exempt under Sec. 98.83(f). We have amended
Sec. 98.30 of the regulations accordingly.
We have also amended Sec. 98.30 to reflect that section
658E(c)(2)(E) of the Act no longer requires registration of providers.
For further discussion about registration, see the preamble at
Sec. 98.45.
In-home care. In-home child care is still a required category of
care; however, since this care is provided in the child's own home it
has unique characteristics that deserve special attention. First, in-
home care is affected by 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. Section
206(a)) and are therefore covered under minimum wage. As employees, in-
home child care providers are also subject to tax requirements. In
highlighting these special considerations, we also note that

[[Page 39622]]

whenever the FLSA and other worker protections apply, ACF is committed
to maintaining the integrity of these protections. A strong commitment
to work, and therefore to worker protections, is critical to welfare
reform.
Second, child care administrators have faced a number of special
challenges in monitoring the quality of care and the appropriateness of
payments to in-home providers. For that reason, we propose to give Lead
Agencies greater latitude to impose conditions and restrictions on in-
home care. We have revised Sec. 98.16(g)(2) to require that Lead
Agencies, in their CCDF Plans, specify any limitations on in-home care
and the rationale for those limitations.
We are mindful that in-home care plays a valid and important role
in meeting the needs of working parents, and that many participants in
subsidized care programs rely on such care to meet their family needs.
Access to care that meets the needs of individual families is
critically important to parents and children, to schools and the
workplace, and to other community institutions that 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. There are a number of situations in
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 scarcity of school-age child care in many
communities, in-home care 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 reflects
important cultural values and may promote stability, cohesion and self-
sufficiency in nuclear and extended families.
We 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 fills an important niche 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 Lead Agencies may choose to limit in-home care because of cost
factors. 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 payments for other
categories of care. Therefore, the Lead Agency 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 Lead Agencies to recognize the same cost restraints
that families whose care is unsubsidized must face.
However, since in-home care has proven to be an important resource,
we expect Lead Agencies to consider family and community circumstances
carefully before limiting its availability. For that reason, we are
proposing that CCDF Plans specify any limitations placed on in-home
care and the rationale for those limitations.
ACF recognizes that giving Lead Agencies greater latitude to impose
conditions and restrictions on in-home care may affect parents' ability
to make satisfactory child care 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, monitoring in-home providers, and 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.
Parental Access (Section 98.31)
We have amended the regulations at Secs. 98.31 and 98.16(n) to
reflect the new statutory requirement at section Sec. 658E(c)(2)(B)
that Lead Agencies have in effect procedures to ensure unlimited
parental access and to provide a detailed description of those
procedures. We have also amended Sec. 98.15(b)(1) to reflect the
statutory change to certify rather than assure that procedures are in
effect to ensure unlimited access.
Parental Complaints (Section 98.32)
We have added paragraph (c) to the regulations at Sec. 98.32 and
amended Sec. 98.16 by adding paragraph (m) to reflect the new statutory
requirements at Sec. 658E(c)(2)(C) on parental complaints. Under the
changes, Lead Agencies must provide a detailed description of how a
record of substantiated parental complaints is maintained and made
available to the public on request. We have also amended the regulation
at Sec. 98.15(b)(2) to reflect the requirement of the statute at
658E(c)(2)(C) that a Lead Agency ``certify'' rather than ``assure''
that it will maintain a record of substantiated parental complaints.
Consumer Education (Section 98.33)
We have amended the regulation at Secs. 98.33 and 98.15(b)(3) to
reflect the statutory requirement at section 658E(c)(2)(D) that the
Lead Agency ``certify'' that it ``will collect and disseminate to
parents of eligible children and the general public, consumer education
information that will promote informed child care choices.'' It is
important to emphasize that the use of the words ``collect and
disseminate'' is more proactive and forceful than the former
requirement that consumer education ``be made available'' to parents
and the public. We also believe that by changing the wording, Congress
wished to emphasize the importance of consumer education as a service
to be provided by Lead Agencies. This emphasis is also stressed by the
third goal of the CCDF, listed at section 658A(b) of the amended
statute, ``to encourage States to provide consumer education
information to help parents make informed choices about child care.''
Moreover, the amendment to the reporting requirements at section
658K(a)(2)(D)--reflected in the revised regulations at
Sec. 98.71(b)(3)--requires Lead Agencies to report twice a year on the
manner in which consumer education information was provided to parents
and the number of parents that received such information.

[[Page 39623]]

The statute previously specified the type of consumer education
information that the Lead Agency had to provide: ``licensing and
regulatory requirements, complaint procedures, and policies and
practices relative to child care services within the State.'' The
statute now is less prescriptive. Consumer education information is
defined as that which ``will promote informed child care choices.''
Thus, the statute leaves it up to the Lead Agency to determine the type
of information that will help the public and parents make informed
child care choices.
While Lead Agencies have flexibility in providing consumer
education, ACF strongly encourages Lead Agencies to promote informed
child care choices by offering information about: the various
categories of care; the freedom of parents to choose the type of care
that best meets their needs; the Lead Agency's certificate system; the
rates for the various categories of care; the sliding fee scale; a
checklist of what to look for in choosing quality care; providers with
whom the Lead Agency has contracts for care; the basic health and
safety regulations that all providers must meet; the Lead Agency's
policy regarding its file of substantiated complaints by parents that
is available upon request as required by Sec. 98.32; and local resource
and referral agencies that can assist parents in choosing appropriate
child care.
The best child care arrangements are developed in one-on-one
consultation with trained or experienced counselors. Professional help
with locating child care is time-and cost-efficient for both families
and Lead Agencies. Thus, it may be in the Lead Agency's interest to
invest in strategies such as co-location of child care resource and
referral counselors in work development offices or agencies. Economists
make the argument that good consumer information is critical to making
the child care market function more like other markets. Moreover,
experience has shown that printed materials alone may not always be a
sufficient information source, particularly if parents have low
literacy rates.
Exception to Individual Penalties in the TANF Work Requirement
Title I of the PRWORA amends Title IV-A of the Social Security Act
and replaces the Aid to Dependent Children (AFDC) with a new block
grant program entitled Temporary Assistance for Needy Families, or
TANF. The new section 407(e)(2) addresses an exception to the work
requirement in the TANF program and provides that a State may not
reduce or terminate TANF assistance to a single custodial parent who
refuses to work when she demonstrates an inability to obtain needed
child care for a child under six, because of one or more of the
following reasons:
(1) Unavailability of appropriate child care within a reasonable
distance from the individual's home or work site;
(2) Unavailability or unsuitability of informal child care by a
relative or under other arrangements;
(3) Unavailability of appropriate and affordable formal child care
arrangements.
The TANF penalty exception underscores the pivotal role of child
care in supporting work and also recognizes that the unavailability of
appropriate, affordable child care can create unacceptable hardships on
children and families. Since Congress provided that the new Mandatory
and Matching child care funding be transferred to the Lead Agency under
the CCDF and also provided that at least 70 percent of the new funding
must be spent on families receiving temporary assistance, in transition
from public assistance, or at risk of becoming eligible for public
assistance, the Lead Agencies will be playing a dominant role in
providing the child care necessary to support the strong work
provisions found in TANF. It is critical, therefore, that CCDF Lead
Agencies help disseminate information about the TANF exception.
Knowledge of this exception on the part of parents also will be very
important in promoting informed child care choices.
Therefore, we propose to require that Lead Agencies include
information about it in their consumer education programs. This
responsibility entails informing parents that: (1) TANF benefits cannot
be reduced or terminated for parents who meet the conditions as
specified in the statute and as defined by the TANF agency; and (2) the
time during which an eligible parent receives the exception will count
toward the time limit on benefits stipulated by the statute at section
408(a)(7).
In order for a Lead Agency to comply with this requirement, it will
need to understand how the TANF agency defines and applies the terms of
the statute to determine that the parent has a demonstrated inability
to obtain needed child care. The elements that require definition
consist of: ``appropriate child care,'' ``reasonable distance,''
``unsuitability of informal care,'' and ``affordable child care
arrangements.''
In our pre-regulatory consultations, some groups urged us not only
to ensure that the CCDF agency disseminates information about the TANF
penalty exception but to regulate the content of the definitions or
criteria used to determine if a family is unable to obtain needed child
care. The approach we have taken in this proposed rule provides
flexibility and strikes an appropriate balance between the roles of the
CCDF and TANF agencies. We recognize the flexibility of the TANF
program to define the terms established by the statute. However, we
strongly encourage TANF agencies to define ``appropriate care,'' at a
minimum, as care that meets the health and safety standards of the CCDF
program, specified at Sec. 98.41. The definition should also take into
account the results of many studies that show the value of quality
child care for low-income children and the benefits to many of these
children from more enriched child care.
We are requiring, under Sec. 98.12 of the regulations, that Lead
Agencies coordinate with TANF programs to ensure, pursuant to
Sec. 98.33(b), that case workers, eligibility workers, and others who
work with TANF recipients in both the TANF and the CCDF programs will
inform families with young children of their right not to be sanctioned
if they meet the criteria set forth in the statute and plan. As part of
this coordination, at Sec. 98.16(p) we are requiring that the Lead
Agency include in its plan the definitions or criteria the TANF program
has adopted in implementing this exception to the work requirement.
The new section 409(a)(11) of the SSA specifies that if the TANF
program sanctions parents who are eligible for this exception to the
individual penalties associated with the TANF work requirements, it may
incur a penalty of up to five percent of its grant. Therefore,
coordination between the Lead Agency and the TANF program in this
matter will serve the best interests both of the recipients of TANF
benefits and the service agencies themselves. ACF will issue proposed
rules on the TANF penalty provisions later this year.

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

Compliance with Applicable State and Local Regulatory Requirements
(Section 98.40)
We have amended the regulations at Sec. 98.40(a) to reflect a
change in Section 658E(c)(2)(E)(i) of the Act. The amendment requires
Lead Agencies to certify that they have in effect licensing
requirements applicable to child care services, and to provide a
detailed description of those requirements and of how they are
effectively enforced. This

[[Page 39624]]

change is also reflected in Secs. 98.15 and 98.16. The statute notes,
however, that these licensing requirements need not be applied to
specific types of providers of child care services.
Because amendments to section 658P(5)(B) have eliminated the
requirement for registration of unlicensed providers serving families
receiving subsidized child care, we have deleted the former regulation
Sec. 98.40(a)(2) requiring registration. This change, however, does not
prevent Lead Agencies from continuing to register unlicensed or
unregulated providers, and we encourage them to do so. Those Lead
Agencies that choose not to have a registration process will be
required to maintain a list of providers. We discuss this in more
detail at Sec. 98.45.
Health and Safety Requirements (Section 98.41)
Section 658E(c)(2)(F), as amended, requires a Lead Agency to
certify, rather than assure, that health and safety regulations
applicable to child care providers are in place. We have amended the
regulations at Secs. 98.41(a) and 98.15(b)(5) to conform with the
amended statute.
We propose to amend the regulation at Sec. 98.41(a)(1) to require
that States and Territories incorporate in their health and safety
provisions (by reference or otherwise) the latest recommendations for
childhood immunizations of their respective State or territorial public
health agency. While many State and territorial public health agencies
adopt the recommendations of the Advisory Committee on Immunization
Practices (ACIP) of the Centers for Disease Control and Prevention
(CDC), we wish to emphasize that this proposed new requirement does not
impose Federal standards for immunization but allows for decision of
the individual State or Territory regarding immunization requirements.
The proposed new immunization requirements at Sec. 98.41(a)(1)
apply only to States and Territories. While tribal Lead Agencies must
meet health and safety requirements that address the prevention and
control of infectious diseases (including immunizations), they do not
have to meet the specific immunization requirements that apply to
States and Territories. In the proposed rule published May 11, 1994 (59
FR 24510), which was never finalized, ACF proposed specific
immunization requirements for Tribes. However, consistent with the
amendments in PRWORA, we have not included those specific requirements
in this proposed rule. We anticipate that tribal immunization
requirements will be addressed in the minimum child care standards that
are being developed by ACF in consultation with Indian Tribes and
tribal organizations. New section 658E(c)(2)(E)(ii) of the CCDBG Act
requires the development of minimum child care standards for Indian
Tribes and tribal organizations.
Our youngest and most vulnerable children remain at risk for
vaccine-preventable diseases. The measles epidemic of 1989-1991
resulted in more than 55,000 reported cases of the disease, 11,000
hospitalizations, and more than 130 deaths. Half of those who died were
infants. Although immunization rates for two-year-olds are now at an
all-time high of 76 percent, and vaccine-preventable diseases are at an
all-time low, more than one million two-year-olds still are not
adequately protected. Childhood vaccines protect young children against
infectious diseases that could lead to serious illness and deaths. Data
reveal that by age two, when children should have received most of
their vaccines, more than 24 percent of American children are not
adequately protected against childhood diseases. Over one million
children need at least one dose of polio vaccine; 640,000 children
require a dose of MMR (measles/mumps/rubella); and about 530,000
children have not received all their pertussis shots.
Since a large percentage of children receiving child care
assistance are under five years of age, we believe that the
immunization requirement will have a positive impact in reducing the
incidence of infectious diseases among preschool age children. Vaccines
are the most cost-effective way to prevent childhood diseases.
Nationally, approximately $10.00 are saved in direct medical costs for
every dollar spent on the measles/mumps/and rubella (MMR) vaccine,
$6.00 are saved for every dollar spent on the diphtheria/tetanus/
pertussis (DTP) vaccine, and $3.00 are saved for every dollar spent on
the oral polio vaccine (OPV). For every dollar spent on immunization,
as much as $29.00 can be saved in direct and indirect medical costs.
In requiring children to be age-appropriately immunized, we
considered that parents may not always be able to access immunizations
easily. However, a number of national initiatives are under way to
promote immunizations for all children. In response to disturbing gaps
in the immunization rates for young children in America, a
comprehensive Childhood Immunization Initiative (CII) was developed.
CII addresses five areas:

--Improving immunization services for needy families, especially in
public health clinics;
--Reducing vaccine costs for lower-income and uninsured families,
especially for vaccines provided in private physician offices;
--Building community networks to reach out to families and ensure that
young children are vaccinated as needed;
--Improving systems for monitoring diseases and vaccinations; and
--Improving vaccines and vaccine use.

The CDC and its partners in the public and private sectors are
working to build a comprehensive vaccination delivery system. The goals
of the CII are to ensure that at least 90 percent of all two-year-olds
receive each of the initial and most critical doses, to reduce diseases
preventable by childhood vaccination to zero, and put in place a system
to sustain high immunization coverage. Since 1994, the National
Immunization Survey (NIS) has been used to provide immunization
coverage estimates for all 50 States and 28 large urban areas.
As part of the efforts in the CII, immunization programs on the
State and local level are collaborating with WIC programs (Special
Supplemental Food Program for Women, Infants, and Children) to focus on
children's immunization. For example, local WIC clinics check the
immunization records of WIC participants, assist families to find a
primary health care provider, and provide immunization information. On-
site immunization services are sometimes also provided at local WIC
clinics.
On September 30, 1996, the CDC awarded funds ranging from $130,000
to $250,000, to education agencies in four States (New York, South
Dakota, West Virginia, and Wisconsin) to deliver immunization services
to preschool-aged children in health centers at elementary schools.
Over the past four years, welfare reform waivers were granted to 18
States to allow them to require parents to immunize their children as a
condition of receiving assistance.
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, and requirements for the
immunization of children in child care settings that are exempt from
licensure or other regulatory provisions vary widely.

[[Page 39625]]

Lead Agencies have the flexibility to determine the method they
will use to implement the immunization requirement. For example, they
may require parents to provide proof of immunization as part of the
initial eligibility determination and again at redetermination, or they
may require child care providers to maintain proof of immunization for
children enrolled in their care. The requirements established by the
Lead Agency will generally be applicable to all children receiving CCDF
assistance and in all child care settings. However, States have the
option to exempt the following groups:
Children who are cared for by relatives (defined as
grandparents, great grandparents, siblings--if living in a separate
residence--aunts and uncles);
Children who receive care in their own homes;
Children whose parents object on religious grounds; and
Children whose medical condition contraindicates
immunization.
While families are taking the necessary actions to comply with the
immunization requirements, Lead Agencies must establish a grace period
during which children can continue to receive child care services.
Finally, we encourage all Lead Agencies to consider requirements
that provide for documenting regular updates of a child's
immunizations.
Section 98.30(f) (2) and (3) prohibit any health and safety
requirements from having the effect of limiting parental access or
choice of providers, or of excluding a significant number of providers.
We do not think these new immunization requirements will have such an
effect. Rather, we are convinced that, when applied to all providers,
they will have the effect of enhancing parental choice of providers,
since all providers will have the same requirements. More importantly,
however, the requirements will promote better health for children,
their families, and the public.
Other revisions. Based on former statutory provisions,
Sec. 98.41(c) of the 1992 regulations required a Lead Agency to include
in its annual report a rationale for any reduction it might have made
in standards applicable to child care, and paragraph (d) required each
Lead Agency to review the licensing requirements of each licensing
agency in the area served by the Lead Agency and report its findings in
its first or second annual report. We have deleted both these
requirements because of changes in the statute at section 658E(c)(2)
(H) and (I).
Pursuant to section 658P(5)(B) of the amended statute, we have
added ``great grandparents, and siblings (if such providers live in a
separate residence)'' to the list of relatives who, at State option,
may be exempted from the health and safety requirements at
Sec. 98.41(e) and to the definition of ``eligible child care provider''
at Sec. 98.2.
Sliding Fee Scales (Section 98.42)
We have simplified Sec. 98.42 of the regulations by removing
separate references to services under Secs. 98.50 and 98.51.
For a further discussion of copayments, see Sec. 98.43.
Equal Access (Section 98.43)
We have changed the title of this section to ``Equal Access,'' from
``Payment Rates,'' because the amended CCDBG Act now focuses on equal
access for families receiving subsidies to child care services. Under
the amendments, Lead Agencies are required to certify that payment
rates are sufficient to provide access to child care services for
eligible families that are comparable to those provided to ineligible
families. The amended section 658E(c)(4)(A) also requires the Lead
Agency to provide a summary of the facts relied on to determine that
its payment rates are sufficient to ensure equal access.
The proposed regulation at Sec. 98.43(b) requires a Lead Agency to
show that it considered the following three key elements in determining
that its child care program provides equal access for eligible families
to child care services:
1. Choice of the full range of categories and types of providers,
e.g., the categories of center-based, group, family, in-home care, and
types of providers such as for-profit and non-profit providers,
sectarian providers, and relative providers as already required by
Sec. 98.30.
2. Adequate payment rates, based on a local market survey conducted
no earlier than two years prior to the effective date of the current
Plan; and
3. Affordable copayments. These elements must be addressed in the
summary of facts submitted in a Lead Agency's biennial Plan, pursuant
to Sec. 98.16(l).
1. Full range of providers. All working parents, regardless of
income, need a full range of categories and types of providers from
which they may choose their child care services, because their child
care needs vary considerably according to the child's age and special
needs, the parents' work schedule, provider proximity, cultural values
and expectations. Therefore, we believe that the statutory requirement
of equal access means that low-income working parents receiving CCDF-
subsidized care must have a full range of the categories and types of
providers from which to choose care that they believe best meets their
needs and those of their children. The parental choice requirements at
Sec. 98.30 already require that parents who receive certificates be
afforded such variety.
2. Adequate payment rates. The statute at section 658E(c)(4)(A)
eliminated the requirement that, in establishing payment rates, the
Lead Agency take into account variations in the cost of providing care
in different categories of care, to different age groups, and to
children with special needs. We have amended Sec. 98.43 to conform with
the statute. However, while eliminating the requirement for different
payment rates for different categories of care, Congress added a
requirement that Lead Agencies provide ``a summary of the facts relied
on by the State to determine that such rates are sufficient to ensure
such [equal] access.''
The statute suggests that if families receiving child care
subsidies under the CCDF are to have equal access to child care, the
payment rates established by a Lead Agency should be comparable to
those paid by families who are not eligible for subsidies. In other
words, the payment rates should reflect the child care market. Although
the statute has changed, the reality remains that the market reflects
differences along several dimensions, and we do not believe that
Congress expected Lead Agencies to establish a single payment rate for
all types of child care.
Child care is often the major factor in whether families are able
to work--and access to a variety of child care arrangements is
necessary both to support today's increasingly diverse workforce and
workplace demands, and to ensure that the healthy development of
children is not compromised. The focus of PRWORA on work further
highlights the need for CCDF Lead Agencies, which now are required by
statute to administer the new Mandatory and Matching Funds, to
establish payment rates that support work as well as enable the
developmental needs of children to be met.
The major variable in the cost of child care is the age of the
child, especially the added expense of caring for infants and very
young children. Under PRWORA, many more families with infants and pre-
school-aged children will be required to participate in work activities
for longer hours per week. Payments that do not reflect the expense of
caring for very young children will frustrate the ability of families
to work. In providing the exception to the

[[Page 39626]]

individual penalties under TANF for single custodial parents with a
child under age six who cannot obtain needed child care, Congress
recognized the special difficulties of locating care for young
children. We have proposed a consumer education provision at Sec. 98.33
that recognizes the relationship between the TANF provision and the
responsibilities of the CCDF Lead Agency. Consequently, we also expect
Lead Agencies to ensure that their payment rates reflect the market
rate variations in the cost of providing child care to different age
groups as well as the additional costs of providing care to children
with special needs. We anticipate that market rate surveys will also
show variations in rates among categories of care, and we expect any
significant variations to be reflected in the Lead Agency's payments.
A system of child care payments that does not reflect the demands
of the market makes it economically infeasible for many providers to
serve low-income children. This undermines the statutory and regulatory
requirements of equal access and parental choice. Experience with the
now-repealed title IV-A child care programs and the CCDBG suggests that
providers limit their enrollment of children with subsidies because the
subsidy payments were too low. Similarly, failing to compensate
providers timely or not reimbursing them for days when children are
absent also causes providers to refuse care to children with subsidies.
At Sec. 98.43(c) we have added a provision prohibiting different
payment rates based on a family's eligibility status or circumstances.
This provision means that the Lead Agency may not establish payments
for TANF families that differ from the payments for the families of the
working poor, or for families in education or training, for example. We
believe that multiple payment rates based on an eligibility status
precludes the statutorily-required equal access to child care for
families receiving CCDF subsidies. Additionally, such multiple payment
rates would frustrate one of the main intents in amending the Act--to
have a unified child care system with only a single set of rules. This
purpose would be undercut if different payment rates based on
eligibility criterion were permitted.
With the exception of payments for children with special needs, who
sometimes require services on a highly individualized basis, we believe
that a survey of market rates is the only methodologically sound way
for Lead Agencies to gather the facts necessary to establish payments
that are realistic and thus provide the required equal access for low
income families. Implementation of this provision should not be a
burden to States, which were required to conduct local market surveys
in implementing the now-repealed title IV-A child care programs. We
also know from comparing State plans for the two programs, that the
great majority of States used the IV-A payment rates for subsidies
provided under the Child Care and Development Block Grant. Thus, States
have had a number of years' experience with the survey process. States
retain the flexibility to design such surveys; we have not proposed a
survey methodology.
We propose that Lead Agencies conduct such a survey biennially to
ensure that their payments reflect reasonably current market
conditions. We have amended the regulations at Secs. 98.43(b)(2) and
98.16(l) to include this proposed requirement. Lead Agencies must
provide evidence in the biennial Plan to show that a local market rate
survey was conducted no earlier than two years prior to the effective
date of the currently approved Plan, together with an explanation of
how the survey was conducted.
We have not established specific requirements for the payments
established by Lead Agencies. Lead Agencies have the flexibility to
establish payments, based on a biennial survey, which provide CCDF-
subsidized families with equal access to the full range of care in
their areas. We would consider parents to have equal access, however,
if payments are established at least at the 75th percentile of the rate
in the child care market. States and families have both recognized that
the 75th percentile, which we required in the now-repealed title IV-A
child care programs, generally provided families receiving subsidies
with a range of care that was adequate to support their work schedules
and the needs of their children.
Since the requirement to conduct a market survey biennially is
intended to ensure that payments reflect reasonably current market
conditions, lengthy delays between the survey and basing the payments
on that survey would undermine the intent of the requirement.
Therefore, we propose that a Lead Agency conduct its survey no earlier
than two years prior to the effective date of the currently approved
Plan; and payments derived from that survey must be in place no later
than the beginning of the second year of the Plan for which the survey
was conducted. The survey will be the basis for payments for only two
years.
We propose to revise Secs. 98.43 and 98.16 to remove the ten
percent limit on payment differences within a category of care. We also
propose to remove the reference to limits on payment differences in
Sec. 98.16. This revision recognizes the change in focus of the statute
to a factual basis for the establishment of payments and the
elimination of the requirement to establish payment rates by category
of care. It will also provide Lead Agencies the flexibility to
recognize and compensate higher quality child care facilities and
providers, including those that have obtained nationally recognized
accreditation or special credentials. This will also give the Lead
Agency the flexibility to address possible shortages of certain types
of care--for example, care during non-traditional hours or on
weekends--when the survey results for this care are incomplete, not
obtainable, or contradict the agency's experience in providing such
care.
3. Affordable copayments. The third essential element of equal
access is that any copayment or fee paid by the parent is affordable
for the family and sliding fee scales should not be designed in a way
that limits parental choice. We wish to emphasize that Lead Agencies
have flexibility in establishing their sliding fee scales. However, in
our view, copayment scales that require a low-income family to pay no
more than ten percent of its income for child care, no matter how many
children are in care, will help ensure equal access.
Recent reports by the Census Bureau indicate that families with
income below the poverty level pay a disproportionate share of their
income--18 percent--for child care; whereas families above the poverty
level pay only seven percent of their income for child care. The size
of the fee paid by a low-income working parent can be crucial in
determining whether she and her family become, and remain, self-
sufficient. When devising the fee scale Lead Agencies should try to
ensure that small wage increases do not trigger large increases in
copayments, lest continuation on the path to self-sufficiency be
jeopardized for any family. The size of a fee increase is an especially
important consideration because recent changes in the Food Stamp,
housing assistance, Medicaid, SSI, and the Earned Income Credit
programs may also affect the resources now available to a low-income
working family.
Sliding fee scales must continue to be based on family size and
income, as currently required at Sec. 98.42(b). While Lead Agencies
have flexibility to take

[[Page 39627]]

additional elements into consideration when designing their fee scales,
basing fees on the cost or category of care could violate the statutory
requirements of equal access and parental choice. Similarly, multiple
fee scales based on factors such as a family's eligibility status would
be precluded.
List of Providers (Section 98.45)
We have renamed this section ``List of Providers'' because the
amendments to section 658(E)(c)(2)(E) of the Act eliminated the
language on the registration of unlicensed or unregulated providers. We
have also deleted the requirement at Sec. 98.16 to describe the
registration process in the biennial Plan.
At Sec. 98.45, however, we propose to require any Lead Agency not
having a registration process to maintain a list of the names and
addresses of all unregulated providers. It is essential that Lead
Agencies have some simple, standardized system to record the names and
addresses of unlicensed providers in order to pay them and to provide
them with pertinent information about health and safety regulations and
training.
The regulations would no longer specifically require Lead Agencies
to have a registration process for providers not licensed or regulated
under State or local law before paying them for child care services.
However, Lead Agencies should note that they may continue such a
system, and we strongly encourage them to do so.

Subpart F--Use of Block Grant Funds

Child Care Services (Section 98.50)
The 70 percent requirement. Section 418(b)(2) of the PRWORA
specifically requires the State to ensure that not less than 70 percent
of the funds received by the State are used to provide child care
assistance to families who are receiving assistance under a State
program under Part A of title IV of the Social Security Act, families
who are attempting through work activities to transition off of such
assistance program and families that are at risk of becoming dependent
on such assistance program. We wish to clarify that the 70 percent
requirement applies only to the Mandatory and Matching Funds. Further,
the amended statute at 6

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-19062. Public record. Not legal advice.