Child Care and Development Fund

SUMMARY: This final rule implements the child care provisions of the

Personal Responsibility and Work Opportunity Reconciliation Act

(PRWORA) of 1996 (Pub. L. 104-193) and incorporates technical

corrections to PRWORA made by the Balanced Budget Act of 1997 (Pub.L.

105-33). PRWORA appropriates new entitlement child care funds under

section 418 of the Social Security Act and requires that these new

Federal child care funds be subject to the Child Care and Development

Block Grant (CCDBG) Act. The CCDBG program which was created under the

original CCDBG Act is a discretionary fund program. PRWORA also

reauthorized the CCDBG Act. As PRWORA requires that these child care

funds be administered as a unified program, the Administration for

Children and Families has named the combined funds the Child Care and

Development Fund (CCDF). Parts 98 and 99 are the official regulations

for the Child Care and Development Fund.

EFFECTIVE DATE: August 24, 1998.

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Reconciliation Act of 1996 (PRWORA) repealed the child care programs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

entitlement Federal child care funds and transferred 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.

The new statutory provisions, therefore, unified what was a

fragmented child care subsidy system. The combined and increased

funding becomes part of a holistic and streamlined system for child

care. The integrated entitlement and discretionary child care funding

has a single, unified purpose. The Department of Health and Human

Services has named the combined funds the Child Care and Development

Fund (CCDF), to reflect this integration of multiple funding sources.

The Department uses the CCDF terminology when corresponding with

grantees and the child care field.

Goals and Purpose of the Rule

The primary goals of this rule are 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.

The major regulatory decisions were made to assure States have

adequate information upon which to base their child care payments;

promote public involvement in the Plan process; strengthen health and

safety in child care by requiring children receiving CCDF subsidies to

be age-appropriately immunized; require coordination between child care

Lead Agencies and agencies administering TANF, health, education and

employment programs; streamline the CCDF application and Plan; and

provide clarifications based on experience operating both the CCDBG

program and the now-repealed title IV-A programs.

We received relatively few comments during the comment period--only

some 160 organizations and individuals made approximately 500 comments,

many of which were duplicative. The content of the comments lead us to

believe that we achieved our goal of reaching balance among viewpoints.

We made only a few changes as a result of comments to adjust the

balance among goals. Of the substantive changes made, we require the

Lead Agency to make available to the public, in advance of the public

hearing, the plan it proposes to submit to the Secretary. We require

the Lead Agency to provide consumer education information to parents

and the general public about health and safety requirements and about

the full range of providers available to families. We clarified that an

independent audit of a Lead Agency shall be conducted by a State agency

that meets the generally accepted government auditing standards or by a

public accountant who meets the independence standards contained

therein. We added provisions regarding tribal consortia in Sec. 98.83.

We also added or revised provisions regarding tribal construction at

Sec. 98.84 including a requirement regarding the amount a tribe new to

the CCDF may spend on construction and a provision regarding treatment

of construction planning costs.

We made other changes to conform to the technical amendments to

PRWORA by Pub. L. 105-33, The Balanced Budget Act of 1997, primarily in

Sec. 98.70 and 98.71. Based on comments, we also made other minor

changes to clarify proposed language or codify policy contained in the

preamble of the 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 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 regulations implement specific requirements

under PRWORA.

We are requiring that children be age-appropriately immunized in

order to receive services under the Child Care and Development Fund. As

most States already include immunizations in their child care standards

and provide religious and medical exemptions from immunizations, we do

not anticipate that this rule 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),

[[Page 39937]]

provides immunizations to eligible children, including those without

insurance coverage, those eligible for Medicaid, and American Indians

and Alaska 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 most recent 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 this regulation 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.

The rule contains a number of provisions that could result in some

decrease in the regulatory and economic burdens on providers that are

small businesses. 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.

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

is a substantial need for additional requirements (to protect the well-

being of children in care), we expect 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 rule 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 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.

For these reasons, we certify that this rule will not have a

significant economic effect on a substantial number of small entities,

and that a Regulatory Flexibility Analysis is not required.

Unfunded Mandates Reform Act of 1995

Section 202 of the Unfunded Mandates Reform Act of 1995 requires

that a covered agency prepare a budgetary impact statement before

promulgating a rule that includes any Federal mandate that may result

in the expenditure by State, local, and Tribal governments, in the

aggregate, or by the private sector, of $100 million or more in any one

year.

We have determined that this final rule will not impose a mandate

that will result in the expenditure by State, local, and Tribal

governments, in the aggregate, or by the private sector, of $100

million or more in any one year. Accordingly, we have not prepared a

budgetary impact statement, specifically addressed the regulatory

alternatives considered, or prepared a plan for informing and advising

any significantly or uniquely impacted small governments.

Congressional Review of Regulations

This final rule is not a ``major'' rule as defined in Chapter 8 of

5 U.S.C.

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 submitted these sections to the Office of Management and

Budget (OMB) for its review. The Pre-Prints, ACF-118 and ACF-118-A,

have been approved by OMB--OMB Number 0970-0114, expires 5/31/2000. The

OMB also approved both data collection forms, the ACF-800 (OMB Number

0970-0150, expires 3/31/2000) and the ACF-801 (OMB Number 0970-0167,

expires 11/30/2000).

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.

Annual Burden Estimates

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

Number of Average burden

Instrument Number of responses per hours per Total burden

respondents respondent response hours

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

ACF-118......................................... 56 .5 30 840

ACF-118a........................................ 243 .5 30 3,645

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

Estimated Total Annual Burden Hours: 4,485.

[[Page 39938]]

Title: Child Care Annual 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: States, the District of Columbia, American Samoa,

Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin

Islands.

Annual Burden Estimates

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

Number of Average burden

Instrument Number of responses per hours per Total burden

respondents respondent response hours

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

ACF-800......................................... 56 1 40 2,240

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

Estimated Total Annual Burden Hours: 2,240.

Title: Child Care Quarterly Case Level 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. States are allowed to submit the data

monthly if they choose to do so. 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 provided

respondents sampling specifications which specify a minimum sample size

of approximately 200 cases. States are allowed to submit their total

monthly population.

Respondents: States, the District of Columbia, American Samoa,

Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin

Islands.

Annual Burden Estimates

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

Number of Average burden

Instrument Number of responses per hours per Total burden

respondents respondent response hours

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

ACF-801......................................... 56 4 20 4,360

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

Estimated Total Annual Burden Hours: 4,360.

The Administration for Children and Families considered comments by

the public on evaluating whether the proposed collections are necessary

for the proper performance of the functions of ACF, including whether

the information will have practical utility. Comments regarding

specific items are discussed in the preamble. The quality, usefulness

and clarity of the information to be collected will be enhanced by the

technical assistance provided and the regional meetings that ACF has

convened.

Amended Regulations, 45 CFR Part 98

We have chosen to present 45 CFR Part 98 as an amended whole. 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. 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) and (nn).

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.

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

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).

[[Page 39939]]

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.................. Introductory.

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........... Introductory.

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.

98.32............................... Revised................ 98.32.

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).

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)............................ Redesignated, Revised.. 98.60(g).

98.60(i-j).......................... Redesignated........... 98.60(h-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, Revised.. 98.64(b).

Added.................. 98.63(a-c).

98.64(a-d).......................... Removed. .................................................

Added.................. 98.64(a), (c) and (d).

98.65(a)............................ Revised................ 98.65(a).

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.................. Revised................ 98.80.

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.................. Revised................ 98.82 Introductory.

98.83(c-f).......................... Revised................ 98.83(c-f).

98.83(g) and (h).................... Removed. .................................................

[[Page 39940]]

98.83(i)............................ Redesignated, Revised.. 98.83(g).

Added.................. 98.83(h).

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 includes at Sec. 98.1(a) the goals

for the Child Care and Development Fund (CCDF) contained in section

658A of the amended CCDBG Act.

Comment: Two commenters suggested the goals include a requirement

for parental choice rather than the reference to a promotion of

parental choice.

Response: The goal at Sec. 98.1(a)(2) uses the language of section

658A of the amended CCDBG Act which is ``to promote parental choice.''

This goal is operationalized by other requirements. Lead Agencies which

opt to provide care through grants and contracts in the state child

care program are also required to provide certificates to parents

seeking child care. Additionally, Lead Agencies are to include in their

programs a broad range of child care providers, including center-based

care, family child care, in-home care, care provided by relatives and

sectarian child care providers.

Comment: Two commenters suggested goal one include a reference to

planning functions as well as program and policy functions.

Response: Goal one is stated in the statute as ``to allow each

State maximum flexibility in developing child care programs and

policies that best suit the needs of children and parents within such

State.'' Although we agree with the commenter on the importance of

planning, we believe the goal at Sec. 98.1(c)(4) of this regulation

already discusses planning for delivery of services. Furthermore, the

discussion at Sec. 98.14 reflects our belief in the importance of the

planning function in the administration of the CCDF within a State.

Comment: One commenter suggested goal five be altered to reflect

that health, safety, licensing and regulations standards are

established by state law and regulations.

Response: Goal five of the statute already states ``to assist

States in implementing the health, safety, licensing and registration

standards established in State regulations.''

Comment: One commenter cited one of the stated purposes of the CCDF

is to increase quality of child care services. This commenter believed

this term should be defined through reference to specific standards of

quality, such as the National Association for the Education of Young

Children (NAEYC) accreditation standards.

Response: We have chosen to not define quality child care in these

regulations beyond the language found in section 658G of the Act.

Definitions (Section 98.2)

We adopted the following changes for this section: an updated

definition of the Child Care and Development Block Grant Act; an

amended definition of a child care certificate reflecting its use as a

required deposit for child care services; and an amended definition of

relative child care provider which includes great grandparents and

siblings (if living in a separate residence) as relative providers.

We substituted the term ``Child Care and Development Fund (CCDF)''

for ``Block Grant'' and also defined the constituent parts of the CCDF:

Mandatory Funds, Matching Funds, Discretionary Funds, and Tribal

Mandatory Funds.

In light of the new section 6580(c)(6) of the Act which allows

Tribes to use CCDF funds for construction and renovation of child care

facilities, we also adopted these terms: construction, facility, major

renovation, modular unit, and real property.

As proposed, 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, with ``Lead Agency'' throughout these regulations,

although there remain some instances where the word ``grantee'' appears

in its common usage. In these final regulations, we also corrected the

definition of Lead Agency to include all parts of the definition of

grantee which were inadvertently omitted in the proposed rule.

Comment: Some commenters on this section questioned definitions for

which no changes had been proposed. For example, commenters questioned

the distinction between a ``child care provider that receives

assistance'' and an ``eligible child care provider'' as well as why the

definitions for various providers were based on the location of the

care provided (e.g., in-home care) rather than the nature of the care

(e.g., formal vs. informal), or was based on the number of providers

present (e.g., group home child care provider).

Response: Because no changes were proposed for the terms questioned

by the commenters, we refer them to the preamble discussion for those

terms in the final rule of August 4, 1992. We believe that explanation,

found at 57 FR 34359, adequately addresses their specific concerns. Our

position, like the definitions themselves, remains unchanged.

Comment: One commenter wanted us to clarify that minor remodeling,

within the limits set forth in the Act, does not fall under the

definition of major renovation.

Response: Section 98.54(b)(1) provides that States and others may

use CCDF funds for minor remodeling. But, rather than create a separate

definition for minor remodeling, State Lead Agencies may assume that an

improvement or upgrade to a facility which is not specified under the

definition of major renovation adopted in this rule may, by default, be

considered a minor renovation and,

[[Page 39941]]

therefore, is allowable under the Act. Lead Agencies are cautioned of

the distinctions at Sec. 98.54(b)(1) and Sec. 98.54(b)(2) between minor

renovations that are permissible for sectarian organizations and those

that are permissible for others.

Comment: Another commenter wanted us to define ``deposit'' as used

in the definition of child care certificate and suggested several

components of a definition.

Response: Our definition mirrors the language of the Act. We

believe that the phrase ``if * * * required of other children'' is

sufficiently limiting of the common usage of the word ``deposit'' as to

make the other definitions suggested by the commenter unnecessary.

Comment: One commenter asked that we expand the definition of

certificate to include electronic transfers using an ATM machine, for

example, suggesting that recordkeeping could be simplified and payments

to providers made more promptly.

Response: It is not necessary to change the definition as

suggested. The definition already recognizes that a certificate need

not be a check, but could be an unspecified ``other disbursement''.

Electronic transfers may be considered child care certificates if they

meet the requirements of Sec. 98.30(c), i.e., issued directly to the

parent, of a value commensurate with the subsidy value of other child

care services offered by the Lead Agency, etc.

Comment: A commenter asked that the definition of a certificate be

broadened to include a check issued in the name of both the parent and

the provider, regardless of whether it is sent directly to the parent

or provider.

Response: It is unclear why this change was suggested. A check (or

other disbursement) issued in the name of both the parent and the

provider would meet the existing definition. The critical element is

that parents can use such a disbursement with any child care provider

they choose. If the commenter is suggesting that the parent be limited

to only the named provider(s), which the parent may not have chosen,

then it is not a ``certificate'' within the meaning of the Act.

Comment: One commenter observed that we had not proposed a

definition of ``special needs child''.

Response: The Lead Agency has complete flexibility to define this

term. It should be noted that the Lead Agency may define the term

differently for purposes of prioritizing under Sec. 98.44(b) from the

definition it uses for purposes of payment rates as discussed at

Sec. 98.43. The use of the term is unchanged since the 1992 rule and we

are unaware of the need to regulate a definition for ``special needs

child'' now.

Comment: One commenter thought that our definitions somehow limited

``informal'' care to only that care provided in the child's own home

(i.e., in-home care) and that this reduced needed Lead Agency

flexibility as well as limited a family's options.

Response: We assume that the commenter understood the regulations

to allow unregulated care only if it is provided in the child's own

home. There is no such restriction in these regulations, nor has there

been such a restriction in the past. Any child care that is legal in a

jurisdiction, including care that the jurisdiction chooses not to

regulate, is an option available under the Act, provided the

requirements designed to protect the health and safety of the child are

also met.

Comment: One commenter observed that the definition of relative is

too narrow and that it would exclude some relatives as defined in some

Native American cultures, for example, the ``hanai'' system in Hawaii,

where family is informally ``adopted'' or related.

Response: Any relative who meets applicable state and local

requirements, if any, may provide care, not just those listed in our

definition. The definition is statutory and is provided solely for the

purpose of identifying those relatives who may be exempted--but, only

if the Lead Agency chooses to exempt them--from the health and safety

requirements at Sec. 98.41. The definition was not created to limit who

may provide care.

Comment: Finally, a commenter noted that a definition for ``tribal

organization'' was no longer included in this section.

Response: The PRWORA amendments broadened the definition of

``tribal organization'' to include the following ``other

organizations'': (1) A Native Hawaiian organization; and (2) a private

nonprofit organization established for the purpose of serving youth who

are Indian or Native Hawaiian. However, the ``other organizations'' may

only receive Discretionary Funds. Therefore, since not all tribal

``organizations'' are eligible to receive both parts of the CCDF

(Discretionary Funds and Tribal Mandatory Funds), we initially decided

to omit this definition entirely from this section and specifically

define the new terms for ``other tribal organizations'' in the Preamble

at Sec. 98.61(c). The definition for tribal organization has been

placed back in this section. This is the same definition used in the

prior final rule (57 FR 34415, August 4, 1992). Since the ``other

tribal organizations'' may only be funded with Discretionary Funds,

they are defined and discussed in the Preamble at Subpart G, Section

98.61(c).

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.

Comment: One Lead Agency asked whether the ability to administer

the program through other non-governmental agencies meant that the

State child care advisory council could have a stronger role in setting

standards.

Response: The regulations have never limited Lead Agencies from

including others in the creation of child care policy or the setting of

State standards for child care. However, Sec. 98.11(b)(2) and (8)

provide that the Lead Agency shall continue to promulgate rules and

regulations governing the overall administration of the program and

that all agencies and contractors that determine individual eligibility

shall do so according to the rules established by the Lead Agency.

The change in the regulation is to allow entities other than the

Lead Agency to administer the day-to-day operation of the program.

Comment: Another Lead Agency asked us to delete the requirement at

Sec. 98.10(c) which requires consultation with local governments.

Barring that, they asked for definitions of ``appropriate

representative'' and ``local government''.

Response: Congress created the requirement for the Lead Agency to

``consult with appropriate representatives of units of general purpose

local government'' at section 658D of the Act, and hence it can not

[[Page 39942]]

be deleted. As States and localities differ greatly in their

governmental structures, we believe it is inappropriate to attempt to

offer all-encompassing definitions for these terms. A Lead Agency may

wish to consult its legal counsel if it is unable to determine whom it

should consult with to meet this statutory requirement.

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.

Comment: One commenter wanted us to delete the requirement at

Sec. 98.11(b)(2) requiring the Lead Agency to ``Promulgate all rules

and regulations governing overall administration of the Plan''

contending that when the CCDF is administered through other entities it

should be up to the other agency to promulgate the rules for that part

which it is administering.

Response: We do not agree that this provision should be deleted.

The Lead Agency is ultimately responsible for the program irrespective

of who administers the day-to-day operations. And, it is the Lead

Agency against whom penalties will be assessed even if caused by

actions of a subgrantee. It is because we hold the Lead Agency

accountable that the provisions in Sec. 98.11 exist.

The requirement for the Lead Agency to promulgate rules does not

preclude subgrantees from suggesting, or even creating the policy and

procedures by which the program or a part of the program operates.

However, those policies and procedures must be issued under the

auspices (i.e., promulgated) of the Lead Agency to ensure that they

conform with the requirements of the Act and regulations, and the

program described by the Lead Agency in the Plan it submits to ACF.

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. The regulation

at Sec. 98.12(a) also requires 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. 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 guaranteed Transitional Child Care

assistance were eliminated when PRWORA repealed the title IV-A child

care programs.

Moreover, PRWORA provides new child care funding. It gives the CCDF

Lead Agency administrative oversight over both the new funds and 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 that receive assistance

under a State program under Part A of title IV of the Social Security

Act, families that attempt through work activities to transition from

such assistance, and families that are at risk of becoming eligible for

such assistance. Under the new law, Tribes also receive additional

child care funds 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 under the newly created Native Employment Works program

(NEWP). 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 are

linked to a system of continuous and accessible health care services.

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 the mutually beneficial roles, we 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 between child care and health services.

Employment is the goal for most TANF families and employment

services are critical to the low-income working families served by the

CCDF. Therefore, 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 undertake policies that

support and encourage public-private partnerships that promote high

quality child care.

Linkages with education agencies are crucial to leverage additional

services and enhance 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 budget for fiscal years

1997 and 1998 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 requiring Lead Agency coordination with specific

entities discussed above, we also 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

[[Page 39943]]

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. 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 nodes 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 (NEWP)--if

the Tribe operated a JOBS program in 1994. 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.

Comment: A few commenters thought that our coordination requirement

was statutorily unfounded or unnecessary because it may fail to include

the most critical partnerships.

Response: It seems unlikely that a CCDF program could successfully

meet two of the goals of the Act--providing child care to parents

trying to achieve independence from public assistance, and assisting

States in implementing State health, safety and licensing standards--

without involving, at a minimum, the additional agencies added at

Sec. 98.14 in this rule. In fact, since the inception of the program,

we have been told by Lead Agencies and the public that coordination

with Federal, State, and local child care and early childhood

development programs, and the four additional agencies listed is

critical to the ongoing successful delivery of quality child care in a

State. This requirement recognizes that the coordinative process helps

maximize existing resources and avoid duplicative efforts which can

result in more positive outcomes for the families and children served

by all of the programs involved.

Comment: A number of commenters suggested other agencies with which

the Lead Agency should be required to coordinate, for example,

representatives of the American Academy of Pediatrics, the National

Association for the Education of Young Children, the State special

education preschool program administrator, the early intervention lead

agency, and the child welfare agency, among others.

Response: Many Lead Agencies already collaborate with some or all

of the agencies suggested and we encourage others to do so as well.

However, we do not believe it is prudent to expand the coordination

requirement at Sec. 98.14 to include those entities with whom many Lead

Agencies are already voluntarily collaborating. We kept our required

list to a critical core of agencies. This is not intended to diminish

the importance of other collaboration efforts. It would not be

reasonable to create an all-inclusive list of potential collaborative

agencies. We have confined the regulations to the core required

collaboration.

Comment: Several commenters asked if our intention was to limit

coordination only to governmental entities. In this regard, others

asked that the reference to the public education agency be expanded to

specifically include private and sectarian schools and early education

programs.

Response: Our requirement recognizes that the impact for the

greatest number of families is likely achieved by coordination at the

State level. The regulation attempts to maximize the coordination by

including those agencies whose activities impact most of the eligible

or potentially eligible families in a State. It is not our intention,

however, to limit coordination to only governmental entities. And, we

encourage Lead Agencies to coordinate with private and sectarian

schools and early education programs, especially since such

institutions and programs are already utilized by many families.

Comment: One commenter thought that use of the phrase ``at a

minimum'' in Sec. 98.14(a) weakens the intent of broader coordination

with additional entities.

Response: We agree and have reworded the regulation.

Applying for Funds (Section 98.13)

The requirements for Tribes applying for funds 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.

We simplified the application process for States and Territories in

order to reduce the administrative burdens of duplicative information

requests and to

[[Page 39944]]

provide budget information in the CCDF Plan, which is a public

document. Heretofore, the regulations required an annual

``application,'' separate from the Plan. This separate application

indicated 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. In the past, the Plan did 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. At Sec. 98.13(a) we have retained the requirement that the

Lead Agency apply for funds. The ACF-696 is the formal vehicle for

providing estimates to ACF for the purpose of awarding funds. We intend

to use the financial form ACF-696 to fulfill this requirement, so that

the need for a separate application is obviated.

The 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.

Comment: One commenter objected to the use of estimates thinking

that the form for formally requesting funds from DHHS, which replaces

the application process, was at least two years from being utilized.

Response: That form, the ACF-696, was under OMB review when the

proposed rule was published and has since been approved and is already

in use.

Comment: Although our proposal to restructure the application

process received almost universal support, some commenters wanted

assurances that States would not be held accountable if estimates are

incorrect as a result of future policy or budget changes. Another

commenter wanted us to require that future Plans include a comparison

between the amounts estimated in prior Plans with the actual

expenditures for those periods.

Response: As we said in the proposed rule, we recognize that these

are estimates and, as such, will not be subject to compliance actions.

Similarly, approval of a Plan will not 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.

We considered the suggested requirement to compare past estimates

with actual expenditures for the same period but rejected it for a

number of reasons. First, such a requirement would call into question

our assertion that the estimates supplied in the Plan are, in fact,

estimates and that ACF will not take compliance actions based on them.

Second, because expenditure periods for funds overlap Plan periods a

full statement of actual expenditures would not be forthcoming until

several years after the original estimate, when the persons responsible

for the estimates may no longer be in a position to be ``accountable''

to the public for those estimates. Lastly, interested parties can

always request that the Lead Agency make public its spending on various

activities. In any event, the Lead Agency is already required to

provide information on the actual use and distribution of funds to ACF,

pursuant to section 658K of the Act.

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 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).

Section 98.13 requires the Lead Agency, not the Chief Executive

Officer, to supply the requested information. Since 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 change gives grantees the flexibility to simplify the application

process further.

In summary, the 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 uses the ACF-696 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.

Comment: One commenter objected to discontinuing the separate

application because it contained information on the mix of certificates

and grants/contracts which could be used to monitor a Lead Agency's

compliance with Section 658(c)(2)(A) of the Act concerning the

availability of certificates.

Response: The regulations at Sec. 98.13 never required that the

Lead Agency's application provide information on the use of

certificates. In the past, policy Program Instructions requested such

information to ensure that Lead Agencies met the statutory requirement

to provide certificates. This was necessary because some Lead Agencies

had never provided certificates prior to the CCDBG Act and the Act

required all Lead Agencies to have a certificate program in place by

October 1, 1992. ACF looked to the information in the application as a

indication of the Lead Agency's compliance with this requirement.

In the years since that deadline, certificates have become an

integral part of every Lead Agency's program, in fact many State

programs are totally

[[Page 39945]]

certificate-based. We are satisfied that all Lead Agencies are in

conformity with this provision of the Act. It should be noted that Lead

Agencies are required to report to ACF the actual numbers of children

receiving certificates per Sec. 98.71(b)(2).

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. 98.14.

Comment: Some commenters preferred the previous requirement for

``adequate notice'' for public hearings and were unaware of problems or

inadequacies of that process. Others argued for a longer notice period

and a requirement for additional hearings in a State.

Response: Congress clearly envisioned something different from the

existing ``adequate notice'' process when it amended the Act to require

``sufficient time and statewide distribution'' of the public hearing

notice. We also have received reports that some Lead Agencies provide

such short notice of hearings as to effectively preclude broad public

participation.

In the interest of State flexibility, we have established only a

minimum amount of time--20 days--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. Because of technological changes which might allow for public

comment via the Internet or linking sites across a State via satellite,

we have not regulated an additional number of hearings that must be

held since Lead Agencies may find other approaches for public input

that are equally effective and less costly than additional hearings.

As stated in the proposed rule, 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,

require 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). We received no comments

on this proposal.

Similarly, we have not established a specific requirement

concerning written comments from the public as suggested by some

commenters. 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 require that the public 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 within our usual time frames for public

hearings and Plan submittal. Therefore, we wish to clarify our

intention in this area.

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 have created 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).

Comment: A few commenters suggested that the Lead Agency be

required to specifically respond to comments raised at the public

hearing or at least to those comments on the Plan that are submitted in

writing, others suggested that the Lead Agency be required to provide a

summary of all comments received on the Plan.

Response: We decline to require Lead Agencies to summarize or

respond to comments received during the public hearing process. The Act

does not suggest such a requirement and it is unclear what would result

from it. We also believe that this would be an especially resource-

intensive activity for the Lead Agency which would not necessarily

further the goals of the Act.

Comment: Some commenters objected to any regulation around public

input stating that they had ongoing mechanisms for coordination or

input, such as quarterly child care steering committee meetings, others

felt that a State legislative or budget hearing would fulfill the

requirement. Still others argued that the public hearings are poorly

attended or not helpful.

Response: At section 658D(b)(2) of the Act, Congress clearly ties

together the hearing and the State Plan with the expectation that the

public be afforded an opportunity to comment on the content of that

Plan. The Act requires a hearing ``to provide the public an opportunity

to comment on the provision of child care services under the State

plan.''

Ongoing mechanisms, such as those suggested by the commenters may,

in fact, meet the requirements of the Act when they allow for the

public to comment on the provision of services under the State Plan.

Some legislative

[[Page 39946]]

oversight or budget hearings, in contrast, may not meet this statutory

requirement if they do not allow for public comment (i.e., the public

is not afforded an opportunity to comment as when only the State

Administrator or legislators are allowed as witnesses). Similarly, a

single state budget hearing held for the purpose of discussing the

entire State budget may not afford any opportunity to specifically

address child care services in the State, especially in the detail set

forth in the Plan, as required by the Act. It is not the auspices under

which the hearing is held that is important, but whether the hearing

allows for the necessary public input required by the Act.

Regarding attendance or participation at public hearings in the

past, we believe that public hearings, designed for broad public

participation and held with sufficient notification can nevertheless

become meaningful forums for State child care policy discussions,

especially in future years.

Comment: A few commenters objected to the requirement that the

hearing be held no earlier than 9 months prior to submission of the

Plan to ACF as unnecessarily prescriptive.

Response: We maintain that the requirement that hearings be held no

earlier than 9 months before the Plan is submitted to ACF is a balanced

approach which allows the Lead Agency to conduct its hearing up to a

full year in advance of the effective date of the Plan. Allowing

complete latitude in setting the date for the public hearing might make

the hearing requirement less meaningful and creates a disconnect--the

further from the effective date of the Plan that the hearing is held.

Comment: A number of commenters argued that the child care Plan

must be made available before the public hearing is held for there to

be meaningful public input. They suggested various timeframes and

formats for making Plans available.

Response: We agree that meaningful public comment on the

``provision of child care services under the State plan'' as required

by the Act is hampered, if not impossible, without knowledge of the

contents of that Plan. For example, the Act now requires the Lead

Agency to provide ``detailed descriptions'' of various child care

policies such as parental access, parental complaints, and payment

rates among others. In order to meaningfully comment, the public must

know what those policies are. We believe this can only be accomplished

by providing the public with the Plan that the Lead Agency proposes to

submit to ACF. Therefore, at Sec. 98.14(c)(3) we are requiring that the

Lead Agency make the Plan available in advance of the required hearing.

We decline to regulate on the timeframes or formats for making the

Plan available to the public but remind Lead Agencies of their

obligations under the Americans with Disabilities Act for accessibility

of public information.

Comment: One commenter asked for flexibility in the format of the

Plan that is to be submitted to the public in advance of the hearing

suggesting that various topics such as parent fees, eligibility and

payments rates be presented, but not necessarily in the format of the

preprint that ACF requires.

Response: We agree that the Plan that is presented in advance of

the public hearing need not be in the format of the preprint. However,

as a practical matter, this may be the easiest format for the Lead

Agency to use. That is because the Act requires comments on child care

services under the ``State plan''--the requirements for which are

outlined at Sec. 98.16. As long as all of the elements of the Plan as

described at Sec. 98.16 are provided in advance of the hearing, then

the requirement is satisfied. We note that many of the Plan elements,

such as most of the newly statutorily-required ``detailed

descriptions'' probably will not change from Plan to Plan, hence the

preprint format may not be as burdensome as the commenter imagines.

Comment: A number of commenters opposed having amendments to the

Plan subject to the public hearing. They also objected to applying the

hearing requirement to those Plans which were to become effective on

October 1, 1997.

Response: The proposed rule neither required nor suggested that

Plan amendments are subject to a public hearing. As has been the policy

since the inception of the program, this final rule also does not

require a public hearing for amendments to approved CCDF Plans.

Although an amendment to the Plan is not subject to the Federal

regulatory hearing requirement, we recognize that State rules or Lead

Agency practice may, nevertheless, require a hearing or public comment

period or both.

The preamble to the proposed rule provided that the new CCDF Plans

due to ACF in 1997 were subject to the statutory requirements--not the

proposed regulatory requirements--for a hearing i.e., at least one

hearing with sufficient time and statewide distribution of the notice.

Although that issue is now moot we wish to reiterate that both the

public hearing and the coordination and consultation processes must be

undertaken each time the entire Plan is required to be submitted. The

regulations provide that the entire Plan is only required to be

submitted at the beginning of each Plan biennium.

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 requirement to coordinate with specific agencies includes a

provision that the Lead Agency describe the ``results'' of the

coordination. In the proposed rule, we did not elaborate on this

requirement as we thought it self-evident. Because we did not give

context to this requirement, some commenters ascribed purposes or

expectations that we did not intend. Therefore, we wish to elaborate on

this part of the coordination requirement.

Prior to this rule Lead Agencies were required to provide a

``description'' of the coordination and collaborative processes they

engaged in during the preparation of the State Plan. This description

in the Plans, however, was frequently merely a list of agencies with

which the Lead Agency had met. Often these descriptions did not change

over long periods, or the dates of the meetings listed remained

unchanged from Plan to Plan. The ``description'' gave the impression

that there was little progress resulting from the coordinative efforts

of the Lead Agencies--that little was happening. We knew this to be an

inaccurate picture.

The Plan is not just a public document describing the State's

approach to child care for the purpose of its hearing process. It also

serves as a guide for other Lead Agencies about promising practices,

different approaches to common problems and can be an indicator of

issues that others may face in the future. Because of the multiple uses

of the State Plan, we wanted the ``description'' of the coordinative

effort to more accurately reflect what we knew was the reality in the

States. No other purpose is contemplated or intended in asking that the

Plan reflect the ``results'' of the coordination activities.

We recognize that coordination may not have quantifiable results,

especially in the short term. Because coordination is an ongoing

process, an explanation of the intended outcomes of a Lead Agency's

current and planned coordination activities would be an appropriate

``results''. Similarly, a compilation of the useful lessons learned

from the coordination activities

[[Page 39947]]

would meet our intent in asking that the ``results'' be described in

the State Plan.

Additional comments relating to the coordination and consultation

requirement and processes are addressed in the discussion at Sec. 98.12

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, we 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 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 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 were deleted.

Finally, Sec. 98.15(a)(6) requires that States provide an assurance

that they have not reduced their level of effort in full-day/full-year

child care services if they use pre-Kindergarten (pre-K) expenditures

to meet the MOE requirement. Comments relating to this assurance, and

the use of pre-K in the CCDF in general, are discussed further at

Sec. 98.53.

Comment: One commenter suggested strengthening the certification at

Sec. 98.15(b)(3) by requiring that the consumer education be provided

through community-based organizations. The commenter also wanted us to

clarify that such consumer education be made available to the general

public throughout the State.

Response: We agree that community-based organizations may, in fact,

be the best way of providing consumer education as discussed at

Sec. 98.33. However, in the interests of State flexibility, we decline

to limit the Lead Agency's options so narrowly. We note that the

certification already requires dissemination of consumer education

materials ``to the general public'' and it is our expectation that such

materials are widely made available and not limited just to families

applying for or receiving CCDF subsidies.

Comment: Another commenter asked that the certification at

Sec. 98.15(b)(7) be clarified to define equal access as also meaning

timely payment of the provider by the State. The commenter wanted a

certification that payments to providers would be processed within a

state-established timeframe, claiming that lengthy delays in payment

made providers reluctant or unwilling to accept subsidized children,

thereby effecting equal access.

Response: We agree that the Lead Agency should establish timely

payment processing standards for the reasons stated by the commenter.

However, there is no statutory basis for requiring such standards and

we decline to change the regulation.

Comment: One commenter noted that Sec. 98.15(a)(5) contained an

incorrect citation.

Response: We have corrected the citation to read, ``pursuant to

Sec. 98.30(f).''

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 identify the entity

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. We received

many comments on these provisions. Those comments are more

appropriately 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 required at Sec. 98.16(p) that the Lead Agency 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, and the

many comments received about it, in the discussion of consumer

education at Sec. 98.33.

Finally, Sec. 98.16(q)(1) provides that the Lead Agency describe

State efforts to ensure that pre-K programs, for which

[[Page 39948]]

any Federal matching funds are claimed, meet the needs of working

parents. At Sec. 98.16(q)(2) we codified the provision found in the

preamble of the proposed rule at Sec. 95.53. This section provides

that, should the Lead Agency use public pre-K funds to meet more than

10% of either the MOE or the Matching requirements, the Plan will

reflect this. The Plan must also describe how the State will coordinate

its pre-K and child care services to expand the availability of child

care when the Lead Agency uses public pre-K funds to meet more than 10%

of either the MOE or the Matching requirements. These requirements are

discussed at Sec. 98.53.

The Administration on Children will issue appropriate amendments to

the State CCDF plan preprint (ACF-118) and the Tribal CCDF plan

preprint (ACF-118A) in Program Instructions, which will also provide

guidance on when Lead Agencies would be required to submit amendments.

The Program Instructions will take into consideration appropriate lead

times for implementation.

Comment: One commenter objected to including TANF definitions in

the State child care Plan because then the child care Plan would have

to be amended every time TANF changed its definitions.

Response: Including TANF definitions in the child care Plan is not

burdensome because those TANF definitions are unlikely to change

frequently over the two-year life of the Plan. In any event, changes to

the TANF definitions would not appear to be a ``substantial change'' in

the CCDF program. Hence, an amendment to the Plan would not be required

as discussed in the preamble to the 1992 rule at 57 FR 34367. We repeat

that the purpose of this provision is for public education about the

requirements upon, and options available to, low-income working parents

as discussed in the preamble at Sec. 98.33.

Comment: Another commenter felt that States should not have to

``justify'' limits on in-home care in the Plan. She suggested that a

listing of the limits on in-home care and the policy reasons for those

limits should be sufficient.

Response: We agree. It was not our intent to make States justify

the limits they place on in-home care. Rather, we want the Plan to

reflect their basis for doing so, in order for the public and ACF to

better understand the State's policy. We have accordingly changed the

wording of the regulation. The preamble discussion at Sec. 98.30

remains essentially the same as we did not use the word ``justify'' in

that discussion of in-home care, from which the Plan requirement is

derived.

Comment: A commenter observed that the statute does not require

that the Lead Agency itself maintain the records of substantiated

parental complaints, but rather requires the State to maintain such

records.

Response: We agree and have changed the wording of Sec. 98.16(m) to

reflect the requirement as discussed at Sec. 98.32.

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. The rule provides that all Lead

Agencies for States, Territories, and Tribes must submit new Plans

every two years beginning with the Plans for Federal Fiscal Years 1998

and 1999.

Comment: One commenter observed that two years is too short a

period for meaningful comprehensive planning and that such a period may

not coincide with State legislative sessions. The commenter asked for

the ability to prepare longer range plans, such as 3 to 5 year plans,

with provision for annual updates.

Response: We agree that a longer plan period might better suit some

Lead Agencies' planning cycles. However, this requirement is statutory.

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. Therefore, Sec. 98.20(a)(2) reflects that change.

We retained the State flexibility 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. 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 their CCDF Plan.

Foster care and protective services. Grantees have the flexibility

to include foster care in their definition of protective services in

their CCDF Plan, pursuant to Sec. 98.16(f)(7), 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.

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. Likewise, child

care services may also be necessary when a child is placed in foster

care. Therefore, 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.

Comment: One commenter suggested that the option to include foster

care within the definition of protective services should be included in

the regulatory section.

Response: We agree. Therefore, we amended Sec. 98.20(a)(3)(ii) and

Sec. 98.16(f)(7) to ensure that States carefully consider inclusion of

this option when developing and implementing their CCDF Plan.

Comment: Most commenters were pleased that children in foster care

could be eligible for child care services since many States do not

differentiate between foster care and child protective services.

However, some commenters felt that we should include foster care in the

regulatory definition of eligible child so that all children in foster

care would be eligible.

Response: The statute did not specifically provide for foster care

as an eligibility criteria. As states have varying policies regarding

services for children in foster care and protective services, we have

not included foster care in the regulatory definition. Rather we will

allow States flexibility in determining if, and how, they will serve

children in foster care and protective services. Therefore, a State

must indicate its intention of providing child care services to

children in foster care--on the same basis as children in protective

services--by including foster care in their definition of protective

services in the CCDF Plan.

Comment: Several commenters believed that the child's eligibility

for child care services should not be based on the income of the foster

parents.

Response: States continue to have the flexibility to consider a

child in foster care as a family of one, for purposes of determining

income eligibility under Sec. 98.20, on a case-by-case basis.

Respite care. We further clarified that respite child care is

allowable for only brief, occasional periods in excess of the normal

``less than 24 hour period'' in instances where parent(s) of children

in protective services--including foster parents where the Lead Agency

has defined families in protective services to

[[Page 39949]]

include foster care families--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) of children in protective services 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 care 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.

Comment: Several commenters felt that States should be required to

provide respite care for children with disabilities.

Response: Since respite care is provided to give parents time off

from parenting, rather than care to allow the parent to participate in

work or in education or training, the CCDF cannot be used for respite

care for children with disabilities unless the child also needs or is

receiving protective services.

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.

Comment: One commenter was concerned that we ``strongly

discourage'' the use of cash. She felt that this stifled State

innovation in piloting new service delivery systems and ran counter to

the purposes of PRWORA in instilling personal responsibility. In

recognizing that providing cash can only be successful with intense

parent and provider education, the commenter argued for State

flexibility to experiment without sanctions from ACF.

Response: We appreciate the commenter's thoughtful approach to the

question of providing cash. Like the commenter, we believe that without

appropriate safeguards, such as intense consumer education and the

provisions discussed above, the provision of cash may not fulfill the

goals of either PRWORA or the CCDBG Act. While we continue to

discourage the use of cash, we recognize that the Lead Agency retains

the flexibility to use it.

Availability of certificates. We received an unexpectedly large

number of comments on our proposed clarification concerning the

availability of certificates; many with strongly argued positions. Some

comments favored the clarification, but most opposed it.

Even though we proposed no changes to the regulatory language at

this Part, the comments revealed a fundamental belief that we were

proposing to lessen the emphasis on parental choice. That is not the

case. However, because of the depth of reaction around this topic, we

have decided to withdraw the proposed clarification rather than try to

explain it again in different words. Therefore, concerning the

availability of certificates, the preamble to the 1992 Final Rule

continues to apply and the regulatory language remains unchanged.

In-home care. 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

give Lead Agencies complete 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 reasons for those limitations.

The Lead Agency must continue to allow parents to choose in-home

child care. However, since this care is provided in the child's own

home it has unique characteristics that deserve special attention. 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 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.

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,

[[Page 39950]]

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, CCDF Plans

must specify any limitations placed on in-home care and the reasons for

those limitations.

ACF recognizes that giving Lead Agencies complete 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.

Comment: Several commenters thought we were interpreting the FLSA

and, therefore, wanted the discussion about it deleted. Others wanted

us to say that in-home child care providers were independent business

contractors and not domestic employees.

Response: We have not interpreted the FLSA: we have simply restated

the FLSA's characterization of in-home child care providers as domestic

service workers. ACF cannot determine that in-home child care providers

are to be considered independent business contractors.

Interpreting the FLSA, and other wage and tax laws, is the

responsibility of other Federal agencies, such as the Department of

Labor, the Department of the Treasury and the Social Security

Administration, as noted by several of the commenters. While we have

not regulated that the minimum wage must be paid to in-home providers,

as some commenters thought, we would be extremely remiss in not

alerting Lead Agencies to the existence and possible applicability of

other laws. Nor can we ignore violations of those laws simply because

their enforcement is the purview of another Federal agency.

We continue to work with the responsible Federal agencies to help

clarify issues around the use of in-home child care providers and will

work with the other appropriate Federal agencies to provide guidance to

Lead Agencies. We also recognize that there have been instances where

the Federal or State agency responsible for determining the

applicability of the FLSA and the minimum wage requirements have

reached very different conclusions in seemingly similar cases.

Therefore, we encourage Lead Agencies to work with the appropriate

local representatives of the other Federal agencies to resolve or

clarify the State-specific questions they may have regarding the

applicability of other laws and regulations.

Comment: One tribe wanted us to exempt tribes from paying the

minimum wage to in-home providers.

Response: As discussed above, ACF does not determine the

applicability of the FLSA and cannot make exceptions to it.

Comment: One commenter wanted us to define in-home child care

providers as any legally-exempt provider who is otherwise not regulated

but who is specially authorized to provide care in the child's home or

in the provider's home.

Response: It is unclear why it would be useful to define in-home

care in this way. As discussed above, the unique characteristic of in-

home is its location, not the regulatory status of the care.

Comment: One commenter wanted us to require that in-home providers

meet health and safety requirements. Another commenter wanted us to

state that Federal law does not require that CCDF subsidies be given to

parents or providers known to be operating inconsistently with

applicable laws and regulations. In this vein, the commenter suggested

that we encourage Lead Agencies to require provider documentation of

compliance with applicable laws, such as worker compensation,

unemployment compensation, income tax withholding for employees.

Response: In-home care must meet the requirements established by

the Lead Agency for protecting the health and safety of children

pursuant to Sec. 98.41. In-home care, as a category of care, is not

exempt from health and safety standards. And, relatives who provide in-

home care are not exempt from health and safety requirements unless the

Lead Agency specifically chooses to exempt them, as provided for at

Sec. 98.41(a)(1)(ii)(A).

The regulations at Sec. 98.54(a)(2) require that CCDF funds ``shall

be expended in accordance with applicable State and local laws.''

Payments made to parents or providers who are not in compliance with

applicable laws are subject to disallowance in accordance with

Sec. 98.66.

Comment: Several commenters stated that the Lead Agency should have

the ability to define limits and regulate the use of in-home care as

they see fit and that no further requirements, beyond the description

of the limits, should be imposed.

Response: This comment mirrors our policy. The Lead Agency has

complete flexibility to define the limits and regulate the use of in-

home care. As a point of clarification, while the Lead Agency may

impose limits on the use of in-home care, it cannot flatly prohibit the

use of in-home care. In-home care remains an option that must be

offered to parents, pursuant to Sec. 98.30(e), subject to the limits

established by the Lead Agency.

[[Page 39951]]

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 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.

Comment: One commenter asked that we clarify this requirement as it

relates to parents who have limited contact or custody rights as a

result of a court order. The commenter suggested that Lead Agency

procedures may restrict access to only those persons identified in the

provider's records as authorized to remove the child(ren) from the

facility.

Response: We agree that the Lead Agency should address these

situations and should establish their procedures in light of court

ordered restricted parental contact or custody. However, we do not

believe that it is necessary to revise the wording of the regulation

nor do we believe that Congress intended that we create such a detailed

Federal requirement on the Lead Agency.

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 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.

Comment: Some commenters questioned whether the Lead Agency had to

maintain the record of substantiated complaints, since this function

may occur at another part of State government.

Response: We corrected the language of this section to reflect that

it is the State, but not necessarily the Lead Agency, that must

maintain the record of substantiated complaints and make information

regarding such parental complaints available to the public on request.

However, in the Plan, the Lead Agency must, nevertheless, provide the

detailed description of how such a record is maintained and made

available.

Comment: One commenter, in supporting the requirement, recommended

that any substantiated complaint, whether submitted by a parent or by

someone else, be included.

Response: We agree that informed parental decisions would be

enhanced by making all complaints, irrespective of their source,

available to the public. And, we encourage the Lead Agency to make all

substantiated complaints available to the public on request. However,

the Act requires only that a record of substantiated parental

complaints must be maintained. Parental complaints may include

substantiated complaints which originate with persons acting in loco

parentis, for example a foster parent or other guardian, not just a

biological or adoptive parent.

Comment: Another commenter was concerned about the release of

confidential, libelous and/or inappropriate material in the fulfillment

of this requirement. The commenter voiced the expectation that we would

ensure that the State created very structured procedures for

maintaining and guaranteeing that only substantiated complaints are

released to the public.

Response: The requirement clearly states that only substantiated

complaints are to be released. As we stated above, we do not believe

that Congress intended for us to create detailed Federal requirements

here. States have the flexibility to create their own procedures in

this area, provided the required statutory outcome is achieved.

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 CCDBG

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 annually on the

manner in which consumer education information was provided to parents

and the number of parents that received such information.

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.

In the comments to the proposed rule, however, we received numerous

comments advising us to strengthen the consumer education requirement.

Two themes arose from the comments. One frequently voiced comment was

that parents need to be informed that the full range of providers is

available to them, especially when they receive certificates. Included

in the full range of providers are sectarian and religious providers,

and we take this opportunity to remind Lead Agencies that such

providers must be available to parents. The second theme we heard was

that parents need to be aware of the importance of health and safety

standards, and the extent to which various categories of care or types

of providers provide health and safety protections for children.

Additionally, in a report issued in February 1998 by the Office of

Inspector General of the Department of Health and Human Services, it

was noted, ``Good consumer education is critical to making the child

care market function properly. If parents are not able to make informed

choices, their access to the market is limited. Further, if parents

demand safe and quality care, providers are more likely to supply it.''

The study report, ``States' Child Care Certificate Programs: an Early

Assessment of Vulnerabilities and Barriers'' (OEI-05-97-00320), which

makes note of Congress' strengthening of the consumer education

requirements in the CCDBG Act, has recommended that ACF take steps to

help States improve their consumer education efforts.

We weighed these comments and the new Inspector General report

against comments we received which generally opposed any regulations at

all on any of the provisions we proposed and those

[[Page 39952]]

that wanted consumer education provisions in addition to the two

addressed above. We believe that informed parental choice--which is the

reason for the consumer education provisions--is supported by the

information suggested by these two comments. We have, therefore,

reworded the regulation at Sec. 98.33(a). That section now specifies

that Lead Agencies must certify that consumer education information

given to parents so they can exercise their right to choose the type of

care that best meets their needs must, at a minimum, include

information about the full range of providers available and on health

and safety requirements. States have discretion in developing the

content of the consumer information materials in these two areas; the

regulations only require that they be addressed.

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 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 licensing regulations that some

providers must meet; the State's policy regarding 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 skills.

Comment: Several commenters wanted us to require that consumer

education specifically include information about the availability of

sectarian providers and that parents may use certificates with

religious providers.

Response: It was partly in response to these comments that we

expanded the requirement for consumer education to now include

information about the full range of providers available to parents. As

the ``full range of providers'' includes sectarian and religious

providers, we do not believe it is necessary to specify them--or other

types of providers--in regulation. Since certificates, by definition,

may be used with any provider, including sectarian providers, it seems

unnecessary to be more prescriptive.

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 critical role in

providing the child care necessary to support the strong work

provisions found in TANF. It is therefore critical that CCDF Lead

Agencies help disseminate information about the TANF exception.

Knowledge of this exception, at least on the part of parents who

receive TANF, will be very important in promoting informed child care

choices.

Therefore, we require that Lead Agencies include information about

it in the consumer education information they provide to TANF

recipients. 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) assistance received during the time an eligible parent

receives the exception will count toward the time limit on Federal

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 rule provides flexibility and

strikes an appropriate balance between the roles of the CCDF and TANF

agencies. We recognize the authority and 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.

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 TANF families with young children will be informed

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 serves the best interests both of the recipients of TANF

benefits and the service agencies themselves. ACF

[[Page 39953]]

issued proposed rules on the TANF penalty provisions on November 20,

1997.

Comment: We received few comments in support of our proposal to

require Lead Agencies to provide information regarding the TANF penalty

provisions. Most commenters observed that this was a TANF, not a child

care issue, and that the notice was an administrative notice, not

consumer education. Others suggested that, in singling out TANF

families, this provision merely continues the stigma associated with

welfare.

Response: We respect the commenters' views. And, we have changed

the requirement so that the information on the penalty provision need

only be given to TANF families--not all families. We have also amended

the regulation to recognize that other agencies, not necessarily the

Lead Agency, may provide the information.

In light of the pressures of work participation requirements on the

TANF agency, and ultimately on TANF families, we believe that TANF

families need strong reinforcement of their right to safe, affordable

and appropriate care. Informed consumer education means that parents

must not feel that they must accept any child care, especially care

that they believe threatens the well-being of their child.

Comment: Some commenters suggested that Lead Agencies should be

required to provide consumer education only through child care resource

and referral (CCR&R) agencies.

Response: While CCR&Rs may be the best providers of consumer

education information, there is no statutory basis for limiting State

flexibility in this way.

Comment: Several commenters objected to including the TANF penalty

definitions or criteria in the CCDF Plan, arguing that these belonged

more appropriately in the TANF Plan.

Response: A State's definition of ``appropriate child care,''

``reasonable distance,'' etc., is germane to the provision of child

care in a State. And, it is the overall provision of child care in a

State that the CCDF Plan is intended to present to the public. Because

there is no fixed format for a TANF plan, the definitions may not be

included there and thus may not be part of the TANF 45 day notice

process. Therefore, these definitions and criteria may not become

publicly known. We do not believe that the requirement is either

burdensome or excessive since the TANF agency must develop the criteria

and definitions in order to implement that program.

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 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) of the Act requires a Lead Agency to certify

that there are in effect within the State, under State and local law,

requirements, designed to protect the health and safety of children,

that are applicable to providers serving children receiving CCDF

assistance. The applicable requirements set forth in the Act include

``the prevention and control of infectious diseases (including

immunizations).''

Section 658E(c)(2)(F) further provides, however, that nothing in

the health and safety requirements shall be construed to require the

establishment of additional health and safety requirements for child

care providers that are subject on the date of enactment of the Act,

under State and local law, to health and safety requirements in the

categories described in the Act. The regulations at Sec. 98.41(a)

reflect the prohibition against establishing additional requirements if

existing requirements comply with the Act.

As proposed originally on May 11, 1994 (59 FR 24510) and again in

1997 on July 23, 1997 (62 FR 39647), we amended the regulation at

Sec. 98.41(a)(1) to require that States and Territories include as part

of their health and safety provisions for the control and prevention of

infectious diseases (by reference or otherwise) the latest

recommendations for childhood immunizations of their respective State

or territorial public health agency.

Based on comments received on the most recent proposed rule,

however, we modified the final rule at Sec. 98.41(a) to delete language

that, unintentionally, could have caused some commenters to believe

that ACF was exceeding the Act. Specifically, we deleted language that

related to establishing immunization requirements. Based on another

comment, we also revised the rule to clarify that immunizations are not

the only focus of the statutory requirement on the prevention and

control of infectious diseases.

The immunization regulation at Sec. 98.41(a)(1) applies only to

States and Territories. Consistent with the amended Act, which requires

the Secretary to consult with Tribes and tribal organizations to

develop minimum child care standards that are applicable to Tribes and

tribal organizations that receive CCDF funds, we have not extended the

immunization requirement to Tribes and tribal organizations due to the

anticipated development of tribal health and safety standards.

Until tribal health and safety standards are issued, however, Lead

Agencies for Tribes and tribal organization must meet the three basic

health and safety requirements specified in the Act and these amended

regulations, including the basic regulation on the prevention and

control of infectious diseases (including immunizations). They do not,

however, have to meet the specific immunization requirement that

applies to States and Territories under these final rules. We

anticipate that tribal immunization requirements will be considered in

the consultation on the development of the minimum child care standards

with Indian Tribes and tribal organizations.

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 amendment to the regulations does not impose

Federal standards for immunization. Rather, it allows the individual

State or Territory to apply its own immunization recommendations or

standards to children receiving CCDF services. All States and

Territories have recommendations or standards

[[Page 39954]]

regarding immunization of individual children.

The immunization provision at Sec. 98.41(a)(1) is intended to

ensure that States address the statutory provision on immunization as

part of the statutorily-mandated CCDF health and safety standards.

Currently 22 percent of children in the U.S. under the age of two

are not age-appropriately immunized. 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. 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.

Vaccines are the most cost-effective way to prevent childhood

diseases. Nationally, approximately $13.00 is saved in direct medical

costs for every dollar spent on the measles/mumps/rubella (MMR)

vaccine, $29.00 is saved for every dollar spent on the diphtheria/

tetanus/pertussis (DTP) vaccine, and $6.00 is saved for every dollar

spent on the oral polio vaccine (OPV).

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.

Lead Agencies for the CCDF have the flexibility to determine the

method they will use to implement the immunization component of these

regulations. 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.

Lead Agencies 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 shall establish a grace period

during which children can continue to receive child care services--

unless, in keeping with the statutory provisions applicable to the

CCDF, existing State or local law regarding immunizations required for

the particular child care setting would not allow for such a period.

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.

Pursuant to section 658P(5)(B) of the amended Act, 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.

We received many comments on the revised health and safety

provisions from all types of commenters who made a wide variety of

observations. Several commenters, including three Lead Agencies,

expressed their unqualified support for the immunization provision. A

number of States who wrote to comment on other provisions in the

proposed rule were silent regarding the proposal, as were a couple of

State organizations. Other States expressed support of the principle of

assuring that very young children are age-appropriately immunized.

They, however, had various concerns about the proposed amendments to

the rule concerning health and safety provisions as noted in the

comments below. Some States and State organizations supported an

alternate approach as noted below. A number of children's organizations

supported the provision, but asked for it to be strengthened as noted

below.

Comment: Some commenters said that the proposed rule exceeded the

authority granted to the Secretary under PRWORA and did not respect

congressional intent regarding the Act. The commenters did not identify

which statutory provisions they believed were exceeded. Additionally,

however, they pointed to the proposed State options for exempting

children receiving CCDF

[[Page 39955]]

services as evidence that ACF, not the State, was establishing a health

and safety standard.

Response: The statutory language regarding the establishment of

health and safety requirements for children served by the CCDF

essentially was unchanged by PRWORA. The statute clearly requires the

State to establish health and safety standards in three areas. One of

those areas, the control and prevention of infectious diseases,

specifically includes immunizations in health and safety requirements

for child care. We think that the commenters may have focused on the

provision at 658E(c)(2)(F) that states, ``Nothing in this [provision]

shall be construed to require the establishment of additional health

and safety requirements for child care providers that are subject to

health and safety requirements in the categories described [in the Act]

on the date of enactment of this subchapter under State or local law.''

The rule we adopted does not violate this caveat to the health and

safety requirements of the Act. ACF is not requiring States to

establish additional standards regarding immunization for children

receiving CCDF services where those standards exist for all children

(CCDF-subsidized or not) in a category of care. Rather, we are ensuring

that States follow the statutorily-mandated requirement, which

specifically includes immunizations. The statute requires immunizations

in the case of all care available to children receiving CCDF services--

not just to those caregivers who are subject to existing State

requirements regarding immunization of children in child care settings.

The regulation clarifies that immunizations must be part of the health

and safety standards for all providers.

We revised the final rule to delete the phrase that might

inadvertently have led some to conclude that the regulation exceeded

the statute by seeming to require new State immunization standards. The

provision now indicates that Lead Agencies shall assure that the

State's existing immunization standards apply to all children receiving

services under the CCDF.

Further, the exemption options should not be considered as evidence

that ACF is requiring specific health and safety standards. Rather, the

options reflect recognition of the State's authority to determine the

content of health and safety standards and to exempt statutorily

specified relatives from the health and safety requirement generally.

Comment: Several commenters suggested that ACF adopt an alternate

approach to the immunization requirement. Specifically, they suggested

that instead ACF adopt a provision requiring a State to describe in its

CCDF Plan its efforts to increase immunization rates in relationship to

their child care programs and with respect to outreach to children in

informal care.

Response: The alternative proposed does not serve the objective of

assuring that the statutory provision is met.

Comment: Several States opposed the CCDF rule regarding

immunizations on the grounds that they already have requirements

regarding immunizations in child care settings.

Response: As explained in the response to the first comment in this

section, where a State has rules for immunization of children in child

care settings, these rules do not impose additional or different

requirements. These rules apply in instances where a State has not

established the statutorily required health and safety immunization

requirements for a particular child care setting.

Comment: Two commenters noted that the requirement for a grace

period for families to have their children receiving CCDF services age-

appropriately immunized could conflict with existing State rules

regarding children entering child care. They asked for the rule to take

into account instances where States have existing immunization

standards for child care settings that do not allow for a grace period.

Response: In the 1994 proposed rule, when we only encouraged States

to have a grace period and recommended that Head Start guidelines for

an immunization grace period of 90 days be considered, we received a

significant number of comments asking that we incorporate a grace

period into the CCDF rule on immunization. In 1994, an overwhelming

majority of comments opposed tying the immunization requirement to

initial eligibility. The view was that requiring immunizations to be up

to date before the child care could start would be a barrier to

working. Commenters at that time voiced concern that many low-income

parents might not immediately be able to acquire the necessary

immunizations and could therefore lose access to crucial child care

services.

A significant number of commenters in 1994 recommended that we

strengthen the language to require Grantees to establish a grace period

as part of the immunization requirement. With welfare reform's stronger

emphasis on work, we believe that the grace period is even more

critical than we envisioned in 1994. We, therefore, retained the

provision on the grace period. States should understand, however, that

the provision at Section 658E(c)(3)(F), which is reflected at

Sec. 98.41(a) of these regulations, would apply. That provision

prohibits the establishment of new or additional standards if they

exist for a particular child care setting. We believe that the complete

regulation at Sec. 98.41(a) adequately conveys the principle, so that

no special modification of the rule regarding the grace period is

needed.

Comment: Some States commented that the issue of immunizations is a

much larger issue than just for children receiving CCDF subsidies. Some

of these commenters observed that in care settings that States do not

regulate there could be children who are not required to be immunized

because they are not receiving CCDF services and not subject to other

rules regarding immunization. One commenter specifically noted that the

CCDF provision fragments efforts of States that are seeking to develop

a comprehensive immunization plan.

Response: The fact that the immunization issue is a bigger issue

than just within the CCDF should not argue against using the CCDBG

statutory requirements in order to assist with the need for very young

children to be age-appropriately immunized. We do not believe that this

rule will conflict with any other State initiative to immunize young

children. We encourage all States to coordinate all child care and

public health services in order to foster an importance linkage to

fulfilling immunization needs.

Comment: Some States commented that they saw difficulties in

administering, tracking, or monitoring the immunization requirement.

There were comments indicating that assumptions were being made that a

cumbersome verification process would be required of Lead Agencies.

Response: As we indicated in the preamble to the proposed rule and

in the preamble above, we have not imposed implementation requirements

for this provision. States have the flexibility to implement the

provision in a manner that is not burdensome. Lead Agencies are not

required to provide immunizations directly to children receiving child

care services. Nor are Lead Agencies required to cover the cost of the

vaccines.

We anticipate that Lead Agencies would incur most of the

administrative burden during the initial child care application process

when follow-up is needed on children whose immunizations are not

current. However, this burden should be greatly

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reduced as a result of the Childhood Immunization Initiative. Under

this initiative, States will receive funds that can be used to develop

statewide information systems which remind parents when immunizations

are due. Lead Agencies for the CCDF should work with their State

immunization program to develop comprehensive immunization registries

that will assist in the implementation of the child care immunization

requirement.

To help ease the burden during the initial application process,

Lead Agencies could consider: incorporating tracking and follow-up into

existing redetermination procedures; flagging the files of children who

are not yet immunized and allowing parents to submit documentation by

mail; or including proof-of-immunization information in the periodic

report that providers are already required to submit to the Lead

Agency. These processes could be considered for both regulated and

unregulated providers.

States may also find that providing parents with educational

materials on the importance of immunization can play a key role in

reducing administrative burdens. While many parents are aware that

immunizations are needed by school age, they may not realize that

children should receive most vaccines before their second birthday.

Comment: One commenter stated that adding more specificity to only

the immunization part of the CCDF health and safety standard on

prevention and control of infectious diseases could send an unintended

message that having immunization provisions alone would fulfill that

statutory provision. The commenter suggested that to ensure a balance

there should be more rules regarding the scope and structure of the

statutory standard. Another commenter suggested that ACF require or

encourage criminal background checks of providers of CCDF services.

Response: We agree with the commenter that the statutory provision

encompasses more than immunizations. The law says that the State's

standards in this area shall include immunizations. The law would not

be understood to consist only of the aspect of immunization in the

prevention and control of infectious diseases. Not all diseases can be

prevented by immunizations. However, there is a specific mention of

immunization in that provision in the Act that in our experience has

not been addressed by all States in implementing the provision, while

other ``prevention and control'' issues were addressed in at least some

minimal way in State Plans. Based on the comment, we reviewed the

regulatory language and revised the regulation to make it less likely

to be interpreted as the commenter did but did not further regulate the

statutory language.

With respect to criminal background checks, ACF considers such

checks to fall under the building and physical premises safety standard

in the statute. Unlike the statutory requirement on prevention and

control of infectious diseases, which specifically mentions

immunizations, the statute does not specify any particular component

that would be part of the provision on building and physical premises

safety. Therefore, we do not propose to further regulate that health

and safety provision. We would agree with the commenter that it is

appropriate to encourage States to adopt criminal background checks as

part of their effort to meet CCDF health and safety standards.

Comment: Some commenters stated that there should be no exemption

option to requiring immunizations for children receiving relative and

in-home care. Several recommended that the requirement be implemented

without any possible exemptions.

Response: The Act and regulations allow Lead Agencies the option to

exempt grandparents, great grandparents, siblings (if the sibling lives

in a residence other than the child's home), aunts and uncles from

health and safety requirements. Although this exemption is allowable by

statute, the statute does not require States to make the exemption;

States may choose to require relative caregivers to meet the same

immunization requirements as established for other providers.

In allowing an exemption for in-home care, we considered that these

children are not cared for in a communicable group setting but in the

privacy of their own home, and therefore would be at a more limited

risk of contracting diseases or spreading diseases than they would be

if in a group care setting with children from different families. We

therefore think the in-home exemption option is an appropriate

reflection of the statutory scope of the health and safety requirement.

Finally, the regulation reflects the basic exemption provisions

(religious and medical reasons) that States apply to child care

settings and school settings where States have set immunization

standards. The regulation allows the State similar flexibility in

implementing the statutorily-mandated CCDF health and safety

requirements where it does not have existing immunization requirements

for all children in a care setting. States have the flexibility to

determine which of the optional exemptions to allow. However, they may

not expand the exemptions beyond the categories outlined in the

preamble and regulation.

Comment: One commenter from an Indian Tribe said that when a child

is in foster care, the foster care home should be considered the

child's home for the purpose of the exemption option regarding in-home

care.

Response: We agree with the commenter. A foster care home would be

considered the foster child's home for the purpose of the CCDF

immunization exemption option regarding in-home care. The State may

choose to include in-home care in a foster home in the exemption for

in-home care, or it may choose to not include it. Tribes and tribal

organizations are reminded that the rule on immunizations does not

apply to tribal child care, however, since ACF is collaborating with

Tribes to develop tribal-specific health and safety standards.

Comment: One commenter said that ACF should require States to

follow the immunization recommendations of the CDC, not the

requirements of their own State health agency, with respect to these

regulations.

Response: As we stated in this section, while many State and

territorial public health agencies adopt the recommendations of the

Advisory Committee on Immunization Practices (ACIP) of the CDC, we wish

to emphasize that this regulation does not impose Federal standards for

immunization. Rather, it allows the individual State or Territory to

apply its own immunization recommendations or standards to children

receiving CCDF services.

Comment: A few commenters said they thought that the immunization

regulation does not reach children in ``informal care arrangements.''

One of them observed that black children would be disproportionately

under-served by the requirement, because black families tend to use a

disproportionate amount of informal care. One of the commenters said

that the rule would not reach children where the provider does not

receive direct payment.

Response: With the exception of the four optional exceptions that

the regulation gives States the flexibility to adopt independently of

each other, the immunization component of the CCDF health and safety

requirements must be followed. To the extent relative or in-home care

is considered to be

[[Page 39957]]

``informal'' and a State exercises its option to exempt those settings

from the immunization regulation, a child in those settings would not

be required to be age-appropriately immunized under the CCDF. ACF

strongly encourages States to take full advantage of the requirement to

see to it that the immunization needs of very young children are met.

Unless a State chooses to exempt care in one of the specified settings

from CCDF immunization provisions, however, it must have a mechanism

for carrying out the provision, no matter how its payment system is

organized.

Comment: A number of commenters stated with varying emphases their

perception that the immunization rule places burdens on parents or

providers and could be a deterrent to parents or providers using or

participating in CCDF services.

Response: As explained above, there is an array of resources and

approaches available to States to ensure access to immunizations by

parents as well as State flexibility to design a process for

implementation of the rule that is not burdensome on providers. To meet

the needs of individual States to design the most appropriate method of

meeting the rule, ACF intentionally left flexibility in the regulation.

We encourage States to ensure that the requirement is met in a manner

that both fulfills the statute and the rule as well as places minimum

burdens on families or the supply of all categories and types of care.

Comment: Two commenters raised issues relating to the possible

adverse side effects of immunizations. They requested that States

exempt children receiving CCDF services from immunization after parents

have received information about the risks and choose not to immunize

their children.

Response: All immunization providers are required to inform parents

of potential side effects. Only a very minute fraction of children

receiving immunizations experience harmful side effects attributable to

immunizations, and the National Vaccine Injury Compensation Program

(NVICP) is available to assist families whose children have been

harmed. Information on the NVICP is available on 1-800-338-2382. On

balance, families that do not appropriately immunize their children

place them in greater harm than the immunizations do. Therefore, we do

not agree with the recommendation to allow another exemption to the

immunization regulation for children receiving CCDF services.

Comment: A few commenters noted that for effective implementation

of the rule, States should be required to provide information--to

parents of CCDF-eligible children and to unregulated providers of

services to children receiving CCDF subsidies--about both the necessity

for immunizations and how to access free immunizations. One commenter

offered the idea of mandating linkages between the child care subsidy

system and public health clinics and other health professionals. One

commenter asked that States be required to coordinate with their State

public health agency.

Response: We concur that effective implementation would require

States to ensure parents and unregulated providers have access to the

kind of information described by the commenter. In keeping with the

overall objective of these revised rules to achieve a balance between

flexibility and accountability, ACF believes that regulation on this

point is not necessary. It is inherent for meeting the rule. Moreover,

nearly all States participate in the Secretary's successful Healthy

Child Care America campaign. This campaign has a goal of linking child

care providers with the health community and is one of the many venues

for coordination between the child care community and the health

community.

Additionally, this final rule includes two requirements that will

enhance coordination and informational activities concerning

immunization under the CCDF. First, with respect to State-level

coordination, the final rule at Sec. 98.14(a) requires that CCDF Lead

Agencies shall coordinate with the State agency responsible for public

health, including the agency responsible for immunizations. Second,

based on a large number of comments on consumer education, we adopted

at Sec. 98.33 a specific requirement that the Lead Agency will collect

and disseminate consumer education information that will promote

informed child care choices, including information about health and

safety. We consider immunization information to be an important part of

such health and safety information.

Further, developing partnerships between the child care and health

community will help facilitate the immunization process and ensure that

the health needs of children and families are being met. We encourage

States to utilize existing service delivery systems and networks to

assist parents in meeting immunization requirements.

The President's Childhood Immunization Initiative recognizes the

important role of States and local organizations in identifying their

particular needs. In 1992, the Federal government began helping States

design individually tailored Immunization Action Plans. Outreach

consultants in each region assist States, local organizations, and

health professionals in enhancing and expanding partnerships with

public and private organizations. For more information on partnerships

with State and local immunization programs, contact the State Health

Department or the CDC's National Immunization Program, Program

Operations Branch at 404-639-8215.

Comment: One commenter said States should be required to certify

that effective procedures are in place to ensure that child care

providers comply with immunization requirements.

Response: We believe that the regulation at Sec. 98.41(d) suffices.

It requires Lead Agencies to certify that procedures are in effect to

ensure that child care providers of services for which assistance is

provided under the CCDF comply with all applicable health and safety

standards described in Sec. 98.41(a). We think that the provision does

not require modification to cover immunizations, to the extent that a

Lead Agency, in implementing the immunization requirement at

Sec. 98.41(a) places requirements on providers. We remind commenters

that the immunization rule gives Lead Agencies implementation

flexibility.

Comment: One commenter stated that the categories of relatives who

are exempt from CCDF health and safety standards should be left up to

the Lead Agency.

Response: Our response remains as stated in the Final Rule of

August 4, 1992, that the intent of the statute was to give grantees the

option to exempt certain relatives from the health and safety

requirements that all other CCDF child care providers must meet. The

amended statute extends this exemption to great grandparents and

siblings (if living in a separate residence) and we have amended the

regulations accordingly. There is no statutory authority to extend this

exemption to other types or categories of providers.

Sliding Fee Scales (Section 98.42)

For a further discussion of copayments, see Section 98.43.

Equal Access (Section 98.43)

The Act requires Lead Agencies to certify that payment rates are

sufficient to provide access to child care services for eligible

families that are comparable to those provided to families that do not

receive subsidies. Section 658E(c)(4)(A) requires the Lead Agency to

provide a

[[Page 39958]]

summary of the facts relied on to determine that its payment rates are

sufficient to ensure equal access.

The 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 f

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