[Federal Register: May 18, 2007 (Volume 72, Number 96)]
[Rules and Regulations]
[Page 27972-27980]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18my07-8]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Part 98
RIN 0970-AC18
Child Care and Development Fund State Match Provisions
AGENCY: Administration for Children and Families (ACF), HHS.
ACTION: Final rule.
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SUMMARY: This final rule revises the Child Care and Development Fund
(CCDF) regulations to permit States to designate multiple public and/or
private entities as eligible to receive private donations that may be
certified as child care expenditures for purposes of receiving CCDF
Federal matching funds. This final rule also raises from 20 to 30
percent the amount of each State's match requirement that may be met
with public pre-kindergarten expenditures in order to implement a
provision of the President's Good Start, Grow Smart initiative. These
provisions are intended to give States increased flexibility in making
the necessary State expenditures on child care to draw down their full
allotment of CCDF Federal matching funds.
DATES: Effective: October 1, 2007.
FOR FURTHER INFORMATION CONTACT: Andrew Williams, Child Care Program
Specialist, Child Care Bureau, 1250 Maryland Ave, SW., 8th Floor,
Washington, DC 20024, telephone (202) 401-4795, e-mail
awilliams@acf.hhs.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Child Care and Development Fund
B. Summary of the Statutory Provisions Related to the State
Match Requirement
C. State Match Requirement Regulations
D. Notice of Proposed Rulemaking
II. Statutory Authority
III. Provisions of Final Rule
A. Certifying Private Donations as State Expenditures
1. Summary of the Former Regulations Regarding Certifying
Private Donations as State Expenditures in the CCDF Regulations
2. Consultation With States and Other Organizations
3. Discussion of Comments
4. Changes Made in Final Rule
B. Public Pre-Kindergarten Expenditures
1. Summary of the Former Regulations Regarding Public Pre-
Kindergarten Expenditures in the CCDF Regulations
2. Consultation With States and Other Organizations
3. Discussion of Comments
4. Changes Made in Final Rule
IV. Regulatory Impact Analyses
A. Executive Order 12866
B. Regulatory Flexibility Analysis
C. Assessment of the Impact on Family Well-Being
D. Paperwork Reduction Act
E. Unfunded Mandates Reform Act of 1995
F. Congressional Review
G. Executive Order 13132
I. Background
This final rule makes revisions to the matching fund requirements
of the Child Care and Development Fund (CCDF) regulations. The new
requirements permit States to designate multiple public and/or private
entities as eligible to receive donated funds that States certify as
child care expenditures for purposes of receiving Federal CCDF matching
funds and permit States to use public pre-kindergarten expenditures for
up to 30 percent of the expenditures required to claim their full
allotment of CCDF Federal matching funds. A discussion of comments to
the final rule's revisions that were received in response to the
publication of a Notice of Proposed Rulemaking (NPRM) on November 9,
2004, (69 FR 64881) may be found below in the preamble. This final rule
is not substantively different from the revisions proposed by the NPRM;
however, minor technical changes have been made to address concerns
raised by some commenters.
A. Child Care and Development Fund (CCDF)
CCDF assists low-income families, including families receiving or
transitioning from the Temporary Assistance for Needy Families program
(TANF), in the purchase of child care services, thereby allowing
parents to work or attend training or education. States must spend a
portion of their CCDF allotment on expenditures to improve the quality
and availability of child care.
B. Summary of the Statutory Provisions Related to the State Match
Requirement
CCDF is comprised of three funding streams--discretionary funds
subject to annual appropriation by Congress as authorized under Sec.
658B of the CCDBG Act, 42 U.S.C. 9858, and mandatory and matching funds
appropriated under Sec. 418 of the Social Security Act (``SSA''), 42
U.S.C. 618. Pursuant to Sec. 418(a)(2) of the SSA, the Federal CCDF
matching funds are the funds remaining after the mandatory funds have
been distributed to the States. Matching funds are allocated to the
States on the basis of the
[[Page 27973]]
number of children under age 13 in the State compared with the number
of children under age 13 in the Nation. These funds must be matched by
States at the State's Federal medical assistance percentage (FMAP)
rate.
C. State Match Requirement Regulations
CCDF regulations are codified at 45 CFR part 98. Previously, the
relevant matching fund requirements of the CCDF regulations provided
that donated funds from private sources could be qualified as State
expenditures for purposes of receiving Federal CCDF matching funds,
provided that such funds were transferred to or under the control of
the State CCDF Lead Agency or given to the single entity designated by
the State to receive donated funds. 45 CFR 98.53(f). In order to
qualify as State CCDF matching funds, the former CCDF regulations also
stipulated that private donations, whether they were transferred
directly to the State or to a designated entity, (i) must have been
donated without any restriction that would require their use for a
specific individual, organization, facility or institution; (ii) could
not revert to the donor's facility or use; (iii) were not used to match
other Federal funds; (iv) shall have been certified both by the donor
and by the Lead Agency as available and representing expenditures
eligible for Federal match; and (v) shall have been subject to the
audit requirements in Sec. 98.65. 45 CFR 98.53(e)(2).
The former relevant matching fund requirements also provided that
States could use public pre-kindergarten expenditures for up to 20
percent of the expenditures serving as maintenance-of-effort and up to
20 percent of the expenditures meeting CCDF matching requirements. 45
CFR 98.53(h). States seeking to use pre-kindergarten expenditures for
between 10 and 20 percent of the expenditures serving as maintenance-
of-effort or meeting CCDF matching requirements had to provide a
description of the efforts they would undertake to ensure that pre-
kindergarten programs meet the needs of working families. They also
were required to demonstrate how they will coordinate their pre-
kindergarten and child care services to expand the availability of
child care. 45 CFR 98.53(h)(4).
While retaining most of the provisions governing CCDF State
matching requirements, this rule finalizes the provisions of the NPRM
to give States more flexibility in making the necessary State
expenditures for child care to draw down their full allotment of
Federal CCDF matching funds. Since FY1999, nine States have failed to
draw down their full allotment of Federal CCDF matching funds in at
least one year. Five of these States have failed to draw down their
full allotment of Federal CCDF matching funds in multiple years. Three
States failed to draw down their full allotment of Federal CCDF
matching funds in each of fiscal years 2003 and 2004. State expenditure
and allotment data can be found at http://www.acf.dhhs.gov/programs/ccb/data/index.htm.
In recent months, ACF Regions and the Child Care
Bureau have received requests from States for increased flexibility in
the use of donated funds and public pre-kindergarten expenditures to
meet CCDF matching requirements.
Furthermore, Good Start, Grow Smart: The Bush Administration's
Early Childhood Initiative, the document that describes the President's
Good Start, Grow Smart initiative, specifically provides that the
amount of State pre-kindergarten expenditures that may be used for
Federal match should be increased to give States more flexibility in
funding quality activities in support of early learning. This final
rule implements that recommendation. Good Start, Grow Smart: The Bush
Administration's Early Childhood Initiative may be downloaded from the
President's Web site at http://www.whitehouse.gov/infocus/earlychildhood/toc.html
.
Finally, this final rule makes technical corrections and clarifies
some ambiguities in the CCDF regulations.
D. Notice of Proposed Rulemaking
A Notice of Proposed Rulemaking (NPRM) was published in the Federal
Register on November 9, 2004 (69 FR 64881) with a 60-day public comment
period. As discussed later in this preamble, we received comments from
9 commenters: three State child care administrators and six national
advocacy groups for child care.
II. Statutory Authority
This final rule is being issued under the authority granted to the
Secretary of Health and Human Services (HHS) by Sec. 658E of the CCDBG
Act, 42 U.S.C. Sec. 9858c.
III. Provisions of Final Rule
A. Certifying Private Donations as State Expenditures
1. Summary of the Former Regulations Regarding Certifying Private
Donations as State Expenditures in the CCDF Regulations
In order to certify funds donated from private sources that are not
transferred to or under State control as expenditures for the purpose
of receiving Federal CCDF matching funds, former CCDF regulations
provided that States must designate a single entity to receive such
privately donated funds and all such privately donated funds must be
transferred to this single designated entity. The specific provisions
setting forth this requirement appeared at Sec. 98.53(f) of the CCDF
regulations and provided that funds donated from private sources ``may
be given to the entity designated by the State to receive donated
funds'' in the State Plan.
2. Consultation With States and Other Organizations
Requests have been made by State officials for increased
flexibility in meeting the States' CCDF matching requirements. The
Child Care Bureau has also learned that States found the CCDF
regulations too restrictive when States sought to encourage
coordination among early childhood education programs or to implement
the President's Good Start, Grow Smart initiative. For example, the
requirement for a single designated entity to receive privately donated
funds has impeded the ability of some States to partner with multiple
organizations that are interested in contributing towards the State's
match requirement.
3. Discussion of Comments
Greater Flexibility and Coordination
Comment: Two commenters noted that the proposed rule would allow
greater flexibility in making the necessary State expenditures on child
care to draw down the full allotment of Federal CCDF matching funds and
would promote the ability of States to coordinate the use of private
funds in a more cohesive system of early care and education. However,
several commenters noted concerns regarding the tracking and reporting
that would be needed to comply with Federal requirements.
Response: It is the intent of the Child Care Bureau that the
flexibility created by this rule will ease the burden on States in
meeting their CCDF matching requirement and free more State funds for
use in coordinated efforts that emphasize quality child care and early
education.
With respect to the concerns raised by the commenters regarding the
tracking and reporting of privately donated funds, we note that States
are responsible for ensuring that private donations counted towards a
State's CCDF match requirements meet all the
[[Page 27974]]
rules and restrictions set forth for such funds in CCDF regulations. As
provided in the Child Care Bureau's October 30, 1996 Program
Instruction on Matching Funds, Maintenance of Effort, and
Administrative Costs (ACYF-PI-CC-96-17), ``Federal matching funds are
only available to match State expenditures for those child care service
[sic] and related activities, including quality activities, that are
allowable and are also included by the State as part of its program
under the Act and noted in the approved State Plan.'' Sec. 98.53(e)(2)
of the CCDF regulations (as amended by this final rule) provides for
special rules concerning privately donated funds: (1) Such funds must
be donated without any restriction that would require their use for a
specific individual, organization, facility or institution; (2) such
funds may not revert to the donor's facility or use; (3) such funds may
not be used to match other Federal funds; (4) such funds must be
certified both by the Lead Agency and by the donor (if funds are
donated directly to the Lead Agency) or the entity designated by the
State to receive donated funds pursuant to Sec. 98.53(f) (if funds are
donated directly to the designated entity) as available and
representing funds eligible for Federal match; and (5) such funds shall
be subject to the audit requirements in Sec. 98.65 of the CCDF
regulations. States must take responsibility to ensure compliance with
CCDF rules and restrictions regarding private donations when
considering which and how many private or public entities will be
designated as eligible to receive private donations for CCDF match.
We take this opportunity to make a technical change to the CCDF
regulations in response to the concern raised regarding the tracking of
private donations. Sec. 98.53(e)(2)(iv) of the former CCDF regulations
required both the donor and the Lead Agency to certify that privately
donated funds were ``available and representing expenditures eligible
for Federal match.'' Read literally in the case of a State using
private donations to an entity designated by the State to receive such
funds for the purpose of meeting CCDF matching requirements, this would
require the State and/or the designated entity to obtain numerous
certifications from individual donors who neither had control over
funds they had already donated to the designated entity, nor had the
expertise to determine whether such funds represented expenditures
eligible for Federal match.
We believe that requiring donors to certify to the availability and
eligibility of unrestricted funds donated to a designated entity would
be unduly burdensome on donors, designated entities, and Lead Agencies.
Requiring designated entities to make or collect numerous
certifications from donors who contributed some portion of unrestricted
funds, often in small amounts, that were used to pay for an expenditure
meeting CCDF State match requirements, would have a chilling effect on
the donation process. Further, we see little value in certifications
from donors who have neither control over funds that have already been
donated, nor the expertise to determine whether such funds represent
expenditures eligible for CCDF State match. We therefore revise Sec.
98.53(e)(2)(iv) to provide that privately donated funds must ``be
certified both by the Lead Agency and by the donor as available and
representing funds eligible for Federal match if funds are donated
directly to the Lead Agency. If private funds are donated directly to
the designated entity, those funds must be certified both by the Lead
Agency and the entity designated by the State to receive donated funds
as available and representing funds eligible for Federal match,
pursuant to Sec. 98.53(e).'' The preamble to the CCDF regulations
supports this interpretation, noting, ``Both the Lead Agency and the
entity designated by the State to receive donated funds must * * *
certify that the donated funds are available and eligible for Federal
match.'' 63 FR 39965. Therefore, we believe that the intent of the CCDF
regulations has always been that the Lead Agency and the entity
designated by the State to receive donated funds should certify to the
availability and eligibility of privately donated funds donated to the
designated entity, and thus consider this revision to be a technical
change. In cases where private donations are made directly to the Lead
Agency, donors are still required to make the required certifications.
Reduced Accountability/Increased Fraud and Misexpenditure
Comment: Several commenters opined that allowing States to
designate multiple entities to receive private donations would lead to
reduced accountability and increased fraud and misexpenditure.
According to these commenters, it would be difficult under the proposed
rule for States to independently determine whether funds reported as
collected were actually collected in a manner consistent with the CCDF
regulations and harder to determine whether the safeguards were being
followed. The commenters suggested: (1) Making funds subject to audit
requirements that would specifically focus on determining compliance
with safeguards applicable to donated funds; (2) collecting and
publishing information on the amount of donated funds used to help
States draw down Federal matching funds and ensuring that program
reviews include components designed to monitor compliance with Federal
requirements applicable to donated funds; and (3) requiring the State
agency, rather than the agency receiving the donated funds, to make
determinations on whether donated funds count as a State match.
Response: It is important to recognize that under existing CCDF
regulations, States have the flexibility to designate a single entity
to receive privately donated funds. To date, we are not aware of any
documented instances of fraud or misexpenditure by these designated
entities despite regular audits. We see no reason why simply allowing
States to designate more than one entity to receive privately donated
funds would lead to greater fraud or misexpenditure.
At the same time, we recognize the importance of maintaining
accountability and integrity in the program, and we reiterate that Sec.
98.53(e)(2)(v) of the CCDF regulations explicitly requires that State
match funds derived from privately donated funds are subject to the
audit requirements in Sec. 98.65 of the CCDF regulations.
Therefore, pursuant to Sec. 98.65(d), any Federal match funds drawn
down with privately donated funds that are determined through the audit
process not to have been expended in accordance with CCDF statutory or
regulatory provisions, or with the State Plan, are subject to
disallowance and being returned to the Federal government. States using
privately donated funds to meet their CCDF State match requirement,
whether such funds are received by the State or a designated third
party, should be cognizant of this requirement and implement all
necessary systems and procedures to ensure that all funds used to meet
CCDF State match requirements comply with CCDF's statutory and
regulatory requirements.
We also note that States are required to report their use of
privately donated funds to meet their CCDF State match requirement in
two places. First, in Sec. 1.8 of the Child Care and Development Fund
Plan for FFY 2006-2007, States must answer whether they will use
privately donated funds to meet a part of their CCDF State match
requirement and identify and describe the entity or
[[Page 27975]]
entities designated to receive privately donated funds. Second, States
must report on a quarterly basis the amount of privately donated funds
used to meet their CCDF State match requirement on the ACF-696
Financial Report. We recommend that States take appropriate measures
with respect to their own data-collection requirements to ensure that
donors and entities designated to receive private donations comply with
CCDF statutory and regulatory requirements.
Further, we note that the State as well as the donor or the entity
receiving privately donated funds are required by CCDF regulations to
certify that the privately donated funds are both available and
represent expenditures eligible for Federal match. Through the
certification process, States are held accountable for all privately
donated funds used as CCDF State match whether such funds are donated
to the State directly or donated to a designated entity. Further, we
reiterate that designations of privately donated funds as eligible for
CCDF Federal matching funds are subject to verification through audit.
Finally, in an effort to reduce the chances of fraud or
misexpenditure and to further clarify our regulations, we take this
opportunity to make another technical change by removing the word
``and'' after Sec. 98.53(e)(2)(ii). One Lead Agency interpreted the
inclusion of the word ``and'' between clauses (ii) and (iii) of Sec.
98.53(e)(2) to mean that privately donated funds were only required to
meet the requirements of clauses (i) and (ii) or clauses (iii)-(v), but
not all five clauses. We believe that the word ``and'' was
inadvertently left in the regulations when they were revised in 1998.
We further believe that removing the word ``and'' does not change the
meaning or our interpretation of Sec. 98.53(e)(2). However, we want to
avoid any misinterpretation of Sec. 98.53(e)(2) that might lead to
privately donated funds being claimed as CCDF State match without
meeting all five requirements of Sec. 98.53(e)(2). We consider this
revision to be a technical change.
Distorted Program Priorities
Comment: Several commenters argued that CCDF rules that prohibit
special conditions on private donations and the reversion of donations
back to the donor may be interpreted to apply only to donors and not
the entities designated to receive donations. According to these
commenters, if private donations are generated with special conditions,
entities could raise funds that would be limited to the benefit of
their members. Allowing the entity receiving donated funds to impose
special conditions or spend donated funds on their own programs
increases the risk that overall program priorities would be distorted.
The commenters suggested: (1) Specifying that the entity receiving
funds may not impose a requirement that the funds be used for a
specific individual or group of individuals, organization, facility or
institution; (2) specifying that funds may not revert to such entity's
facility or use; and (3) specifying that decisions about the
appropriate expenditures of donated funds counting as State match must
be made by the State agency rather than the entity receiving donated
funds.
Response: Sec. 98.53(e)(2) prohibits donors from placing special
conditions on private donations that would require their use for a
specific individual, organization, facility or institution or that
would result in their reversion to the donor's facility or use.
However, the preamble to the CCDF regulations makes clear that limiting
the use of privately donated funds to a specific geographic area, such
as within the limits of a specific city or even a single neighborhood,
is permissible, as this was one of the intentions of allowing separate
entities to receive privately donated funds for use as CCDF State
match. 63 FR 39965.
CCDF regulations provide that restrictions on placing special
conditions on privately donated funds apply only to donors and not to
the entities receiving them. However, CCDF regulations also provide
that the entities receiving privately donated funds as well as the
State must certify that such donated funds are both available and
eligible for Federal match. Therefore, both the entities receiving
privately donated funds as well as the State must take appropriate
steps to ensure that such funds are spent on allowable activities, as
described in the approved State Plan, that meet the goals and purposes
of the CCDBG Act. States must be vigilant in monitoring the entities
that they designate as eligible to receive privately donated funds, and
should act quickly and decisively to remove their designation if any
impropriety has occurred.
Entities that receive privately donated funds may expend such funds
on their own activities, provided that such activities qualify as
eligible child care activities under the CCDBG Act and CCDF
regulations, and provided further that such activities are permissible
under State or local law and regulations governing conflict of
interest. Qualifying child care activities may include child care
direct services or related activities, including quality activities,
provided that such services and activities meet eligibility and other
program requirements, are consistent with the goals and purposes of the
CCDBG Act, and are noted in the approved State Plan. Again, States have
the responsibility of ensuring that the activities funded through
private donations meet all the requirements to qualify as CCDF State
match. If a State determines that an entity designated to receive
private donations is acting improperly, it must remove that entity's
designation and find another source to meet the State's CCDF State
match requirement.
Competition/Inequitable Distribution of Funds
Comment: Several commenters believed that allowing States to
designate multiple entities to receive private donations creates the
risk that that such entities would compete in the collection of private
funds. These commenters opined that competition could lead to
inequitable distribution of funds because wealthy communities could
generate more private donations than poor communities. They also argued
that the proposed rule could result in competition among child care
providers that might be put in a position of having to raise funds to
contribute to match. The commenters suggested: (1) Specifying that any
State electing to use donated funds as CCDF State match must provide
assurances that CCDF matching funds will be allocated in an equitable
manner that does not result in disproportionate allocation of resources
to communities or entities based on the collection of donated funds;
and (2) requiring States to describe in their State Plans how the
allocation of funds for services and quality activities between areas
of the State is reasonable and appropriate in light of the identified
needs of the respective areas of the State.
Response: As noted above, the preamble to the CCDF regulations
makes clear that limiting the use of privately donated funds to a
specific geographic area, such as within the limits of a specific city
or even a single neighborhood, was one of the intentions of allowing
separate entities to receive privately donated funds for use as CCDF
State match. To date, we have found no evidence that this has led to
inequity in child care spending among communities of varying economic
status. We see no reason why simply allowing States to designate more
than one entity to receive privately donated funds would lead to
greater inequities among various regions of a State.
[[Page 27976]]
We take this opportunity to remind States of CCDF's parental choice
requirements. Sec. 98.30(f) of the CCDF regulations prohibits States or
local governments from establishing rules, procedures or other
requirements promulgated for purposes of the CCDF that significantly
restrict parental choice by: (i) Expressly or effectively excluding any
category of care or type of provider, or any type of provider within a
category of care; (ii) having the effect of limiting parental access to
or choice from among such categories of care or types of providers; or
(iii) excluding a significant number of providers in any category of
care or of any type of care. If a State enacted a rule, procedure or
other requirement to take advantage of the additional flexibility
provided by this final rule that had the effect of limiting parental
choice in violation of CCDF regulations, then that State would be
subject to losing all or a portion of its CCDF grant. We urge States to
consider CCDF's parental choice requirements carefully in crafting new
rules, procedures, or other requirements designed to take advantage of
this final rule.
We further urge States to monitor how State and Federal child care
funds are distributed across a State and use the flexibility provided
by CCDF statute and regulations to ensure that child care resources are
distributed equitably and optimally. Further, we will take under
advisement prior to the 2010-2011 State Plan submission process the
recommendation to require States to describe in their State Plans how
they make use of privately donated funds and whether such use leads to
disparate services across varying regions of a State. We will, at that
time, publish a Federal Register notice (OMB Control Number 0970-0114)
to solicit public comment as to the availability of child care services
that meet the needs of working parents.
Reduced Funding for Child Care
Comment: Several commenters opined that child care is not
adequately funded and that the proposed changes to CCDF regulations may
actually result in fewer child care services, particularly for infants
and toddlers. They argue that increased use of private donations to
meet CCDF State match requirements could result in shrinkage of public
commitment because legislatures might reduce appropriations in the
expectation that agencies or communities should generate private match
instead. Those commenters suggest that States be prohibited from
reducing their current child care spending for subsidies, quality
improvement, and infants and toddlers.
Response: Allowing more than one public or private entity to
receive private donations in no way changes States' CCDF matching and
MOE requirements. Whether the source of the CCDF matching or MOE funds
is from the State or from a private donation to a designated entity,
the amount required to draw down a State's full allotment of CCDF
matching funds is not altered by this regulatory change. Further, these
rules are intended to increase State flexibility and should have a
positive impact on funding child care. States ultimately have
responsibility to determine how best to address child care and this
regulation will give States additional flexibility to meet the needs of
children and families.
With respect to child care funding for certain ages of eligible
children, such as infants and toddlers, we note that States already
have the flexibility to allocate funds between direct services and
quality activities and among the various ages of eligible children
according to the particular circumstances within the State. However,
there are several requirements of States that ensure that CCDF funds
are spread across all eligible children and types of child care
activities. States are required to spend at least four percent of their
CCDF allotment on quality activities and at least 70 percent of their
allotment of CCDF mandatory and matching funds on direct services for
families receiving TANF assistance, transitioning off of TANF
assistance, or at risk of becoming dependent on TANF assistance.
Additionally, set-asides in annual appropriation of CCDF discretionary
funds require States to spend CCDF funds on specified activities, such
as ``activities that improve the quality of infant and toddler care.''
This rule is not intended to reward one group of children at the
expense of the other. Rather, this rule hopes to facilitate greater
funding opportunities for all eligible children through private
donations and to encourage greater cooperation and coordination between
the child care and early education communities. We feel this is in the
best interests of all children. However, we will continue to monitor
States' implementation of the CCDF program through State Plans, annual
State expenditure data and other reporting requirements. We also will
publish a Federal Register notice (OMB Control Number 0970-0114) to
solicit public comment as to the availability and coordination of child
care services that meet the needs of working parents prior to 2010-2011
State Plan submission process.
Lack of Rationale
Comment: Several commenters noted that the NPRM does not adequately
explain why the existing requirement restricting States to the
designation of a single entity for receipt of private donations has
been a problem and offers no examples of any instance in which it has
impeded coordination or discouraged the use of private contributions.
They argue that States should be required to demonstrate in their State
plan how they are using any increase in available funds to both improve
coordination and to increase the availability of services for low-
income working families.
Response: As noted above, since FY1999, nine States have failed to
draw down their full allotment of Federal CCDF matching funds in at
least one year, and five of these States have failed to draw down their
full allotment of Federal CCDF matching funds in multiple years. It is
our belief that greater flexibility in meeting their State match could
have helped these States draw down their full allotment of CCDF Federal
match funds. We also reiterate that the Child Care Bureau has received
requests from State officials for increased flexibility in meeting the
States' CCDF matching requirements, particularly for States seeking to
encourage coordination among early childhood education programs or to
implement the President's Good Start, Grow Smart initiative. It is our
belief that this rule change will enable States to raise more funds for
child care and encourage more public-private partnerships in increasing
the quality and availability of affordable child care.
We do see merit in the suggestion that States should be required to
demonstrate in their State Plan how they are using privately donated
funds to both improve coordination and to increase the availability of
services for low-income working families. While no regulatory changes
are needed, we will take that suggestion under advisement prior to the
2010-2011 State Plan submission process. We will, at that time, publish
a Federal Register notice (OMB Control Number 0970-0114) to solicit
public comment as to the availability and coordination of child care
services that meet the needs of working parents.
4. Changes Made in Final Rule
In order to grant States greater flexibility in meeting the
matching requirements for Federal CCDF matching funds, this final rule
provides
[[Page 27977]]
that States shall be allowed to designate multiple public and/or
private entities to receive privately donated funds that may be
certified as State expenditures for purposes of receiving Federal CCDF
matching funds. We revised Sec. 98.53(f) to provide that privately
donated funds ``may be given to the public or private entities
designated by the State to implement the child care program in
accordance with Sec. 98.11 provided that such entities are identified
and designated in the State Plan to receive donated funds pursuant to
Sec. 98.16(c)(2).'' Additionally, conforming changes to Secs.
98.16(c)(2) and 98.53(e)(2)(iv) reflect the fact that privately donated
funds may be given to ``public or private entities.''
Also, as discussed above, two technical changes are made to address
concerns noted in comments. First, Sec. 98.53(e)(2)(iv) is revised to
provide that privately donated funds must ``be certified both by the
Lead Agency and by the donor (if funds are donated directly to the Lead
Agency) or the entity designated by the State to receive donated funds
pursuant to Sec. 98.53(f) (if funds are donated directly to the
designated entity) as available and representing funds eligible for
Federal match.'' Second, the word ``and'' after Sec. 98.53(e)(2)(ii) is
removed.
B. Public Pre-Kindergarten Expenditures
1. Summary of the Former Regulations Regarding Public Pre-Kindergarten
Expenditures in the CCDF Regulations
Former CCDF regulations provided that, once States had met their
maintenance-of-effort requirement, they could use public pre-
kindergarten expenditures for up to 20 percent of their child care
expenditures designated toward meeting CCDF matching requirements.
States seeking to use the full 20 percent of pre-kindergarten
expenditures to meet the matching requirements were required to provide
a description of the efforts they would undertake to ensure that pre-
kindergarten programs met the needs of working families. They were also
required to demonstrate how they would coordinate their pre-
kindergarten and child care services to expand the availability of
child care. The specific provisions setting forth this requirement
appeared at Sec. 98.53(h)(3) of the CCDF regulations and provided that
``[i]n any fiscal year, a State may use other public pre-K funds for up
to 20% of the expenditures serving as the State's matching funds under
this subsection.''
2. Consultation With States and Other Organizations
Requests have been made by State officials for increased
flexibility in meeting the States' CCDF matching requirements. The
Child Care Bureau has also been informed that States were finding the
former CCDF regulations to be too restrictive when States sought to
encourage coordination among early childhood education programs or to
implement the President's Good Start, Grow Smart initiative. This rule
will provide greater leverage to ensure coordination between pre-
kindergarten and child care.
3. Discussion of Comments
More Funds for Quality Enhancements
Comment: Two commenters noted that CCDF funds freed by the proposed
change could be directed toward quality enhancements supporting early
learning, and that increased coordination could lead to increased
efficiencies, improved service effectiveness, and the potential to
leverage additional private donations.
Response: We agree. It is the intent of the Child Care Bureau that
the flexibility created by this rule will ease the burden on States in
meeting their CCDF matching requirement, free more State funds for use
in funding quality activities in support of early learning, and
encourage coordination among those working to improve and expand early
education and child care.
Reduced Funding for Child Care
Comment: Several commenters reiterated their argument that child
care is not adequately funded and the proposed changes to the CCDF
regulations may actually result in fewer child care services,
particularly for infants and toddlers. One commenter argued that if
preschool children move away from community-based child care to State
pre-K programs, child care providers would be left with a
disproportionate share of infants and toddlers who are more expensive
to serve. Commenters noted that increased use of pre-k expenditures for
CCDF State match could lead to the supplanting of current State
investments in child care subsidy programs and an overall reduction of
funding for child care. The commenters suggested: (1) Prohibiting
States from reducing their current child care spending for subsidies,
quality improvement, and infants and toddlers; and (2) specifying that
any State using pre-k expenditures for more than 20 percent of their
matching funds provide assurances that the State will not supplant
existing services and demonstrate that the increase in funds has not
resulted in a decline in State child care expenditures.
Response: Increasing the allowable pre-K funds for State match from
20% to 30% is intended to provide an incentive for States to more
closely link their pre-K and child care systems and establish a
coordinated system that better meets the needs of working families for
full-day/full-year services that prepare children to enter school ready
to learn. The intent is not to create an incentive for States to divert
State funds away from other child care programs to meet their Matching
requirements solely through pre-K expenditures. Additionally, we note
that to address potential concerns about the use of pre-K expenditures
in meeting CCDF requirements, expenditures for pre-K programs may
constitute no more than 30 percent of State match expenditures.
To reiterate what we stated in the 1998 final rule, a chief concern
to working parents is that many pre-K services are only part-day and or
part-year and such programs may not serve the family's real needs. CCDF
regulations require a State using pre-k expenditures to meet its CCDF
State match requirement to describe in its State Plan the efforts it
will undertake to ensure that pre-K programs meet the needs of working
parents.
We further note that CCDF regulations require that State Plans
shall reflect a State's intent to use public pre-K funds in excess of
10% of its or State matching funds in a fiscal year and how the State
will coordinate its pre-K and child care services to expand the
availability of child care. Thus, the CCDF regulations do require
States to take steps to ensure that their pre-k programs meet the needs
of working parents and, in some instances, to coordinate their pre-k
and child care services to expand the availability of child care to
all.
Rationale for Rule Change
A number of commenters argued that it is unclear how increasing the
amount of State pre-k dollars that can be used to meet the match
requirement will in any way improve coordination. These commenters
suggested requiring States to demonstrate in their State plan how they
are using any increase in available funds to both improve coordination
and to increase the availability of services for low-income working
families.
Response: As discussed above, since FY1999, nine States have failed
to draw down their full allotment of Federal CCDF matching funds in at
least one year, and five of these States have failed to draw down their
full allotment of
[[Page 27978]]
Federal CCDF matching funds in multiple years. It is our belief that
greater flexibility in meeting their State match could have helped
these States draw down their full allotment of CCDF Federal match
funds. We also reiterate that the Child Care Bureau has received
requests from State officials for increased flexibility in meeting the
States' CCDF matching requirements, particularly for States seeking to
encourage coordination among early childhood education programs or to
implement the President's Good Start, Grow Smart initiative. It is our
belief that this rule change will enable States to raise more funds for
child care and encourage more public-private partnerships in increasing
the quality and availability of affordable child care.
We do see merit in the suggestion that States should be required to
demonstrate in their State Plan how they are using any increase in
available funds to both improve coordination and to increase the
availability of services for low-income working families. While no
regulatory changes are needed, we will take that suggestion under
advisement prior to the 2010-2011 State Plan submission process.. We
will, at that time, publish a Federal Register notice (OMB Control
Number 0970-0114) to solicit public comment as to the availability and
coordination of child care services that meet the needs of working
parents.
4. Changes Made in This Final Rule
In order to grant States greater flexibility in meeting the
matching requirements for Federal CCDF matching funds, this final rule
provides that once a State has met its maintenance-of-effort
requirement, it may designate a portion of its public pre-kindergarten
expenditures as expenditures toward Federal CCDF matching funds;
provided that the portion of public pre-kindergarten expenditures
designated as State matching funds may not exceed 30 percent of the
amount of expenditures required by the State to draw down its full
allotment of Federal CCDF matching funds. We propose to revise Sec.
98.53(h)(3) to provide that, ``[i]n any fiscal year, a State may use
other public pre-K funds as expenditures serving as State matching
funds under this subsection; such public pre-K funds used as State
expenditures may not exceed 30% of the amount of a State's expenditures
required to draw down the State's full allotment of Federal matching
funds available under this subsection.'' Additionally, conforming
changes would be made to Sec. 98.53(h)(4) to provide that the CCDF Plan
``shall reflect the State's intent to use public pre-K funds in excess
of 10%, but not for more than 20% of its maintenance-of-effort or 30%
of its State matching funds in a fiscal year.''
III. Regulatory Impact Analyses
A. Executive Order 12866
Executive Order 12866 requires that regulations be drafted to
ensure that they are consistent with the priorities and principles set
forth in Executive Order 12866. The Department has determined that this
final rule is consistent with these priorities and principles.
Moreover, we have consulted with the Office of Management and Budget
(OMB) and determined that these final rules meet the criteria for a
significant regulatory action under Executive Order 12866. Thus, they
were subject to OMB review.
Executive Order 12866 encourages agencies, as appropriate, to
provide the public with meaningful participation in the regulatory
process. As described earlier, the Child Care Bureau and ACF regional
offices have been contacted by numerous States expressing their desire
for greater flexibility in meeting their matching requirement for
Federal CCDF matching funds. This rule addresses these concerns. In
addition, we have provided a 60-day public comment period and have
responded to or addressed all comments in this final rule.
B. Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. Ch. 6) (RFA) requires the
Federal government to anticipate and reduce the impact of rules and
paperwork requirements on small businesses and other small entities.
Small entities are defined in the RFA to include small businesses,
small non-profit organizations, and small governmental entities. This
rule will affect only the 50 States and the District of Columbia.
Therefore, the Secretary certifies that this rule will not have a
significant impact on small entities.
C. Assessment of the Impact on Family Well-Being
We certify that we have made an assessment of this final rule's
impact on the well-being of families, as required under Sec. 654 of the
Treasury and General Appropriations Act of 1999. This final rule will
make it easier for States to receive their full allotment of Federal
matching funds through CCDF. These funds are to be used by States to
assist low-income families in purchasing child care services, to
provide comprehensive consumer education to parents and the public, and
to improve the quality and availability of child care.
D. Paperwork Reduction Act
In order for States to use the increased flexibility provided by
the final rule, Lead Agencies must amend their Lead Agency Plans, the
information requirements of which are set forth in Sec. 98.16 of the
CCDF regulations. As required by the Paperwork Reduction Act of 1995
(44 U.S.C. 3507 (d)), the Administration for Children and Families has
submitted a copy of this section, together with a copy of this final
rule to the Office of Management and Budget (OMB) for its review.
Title: Amendment to State/Territorial Plan Pre-Print (ACF-118) for
the Child Care and Development Fund (Child Care and Development Block
Grant).
Description: The 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 is used for
Federal oversight of the Child Care and Development Fund. Because the
State Plans must accurately reflect the manner in which a State meets
the matching requirements for Federal CCDF matching funds, in order for
a State to use the increased flexibility provided by this final rule,
it must submit an amendment to its plan reflecting the change in the
manner in which it meets the matching requirement for Federal CCDF
matching funds. Because the information required to take advantage of
the provisions of this final regulation are already collected in the
ACF-118 (OMB Control Number 0970-0114), a new information collection
document will not be necessary.
Respondents: State and territorial governments.
[[Page 27979]]
Annual Burden Estimates
------------------------------------------------------------------------
Average burden
Number of Number of hour per Total burden
respondents* submittals submittal hours
------------------------------------------------------------------------
22 1 2 44
------------------------------------------------------------------------
* Estimate based upon the total number of States using private donations
and/or their public pre-kindergarten expenditures as their
expenditures toward Federal CCDF matching funds in FY2002, plus an
additional number of States that are expected to take advantage of the
increased flexibility in using private donations and/or public pre-
kindergarten expenditures to meet their State CCDF matching
requirement.
The Administration for Children and Families will consider comments
by the public on this proposed collection of information in the
following areas:
(1) Evaluating whether the proposed collection is necessary for the
proper performance of the functions of ACF, including whether the
information will have practical utility;
(2) Evaluating the accuracy of the ACF's estimate of the burden of
the proposed collection of information, including the validity of the
methodology and assumptions used;
(3) Enhancing the quality, usefulness, and clarity of the
information to be collected; and
(4) Minimizing the burden of the collection of information on those
who are to respond, including through the use of appropriate automated,
electronic, mechanical, or other technology, e.g., permitting
electronic submission of responses.
OMB is required to make a decision concerning the collection of
information contained in this final rule between 30 and 60 days after
publication of this document in the Federal Register. Therefore, a
comment is best assured of having its full effect if OMB receives it
within 30 days of publication. This does not affect the deadline for
the public to comment to the Department on the final rule. Written
comments to OMB for the proposed information collection should be sent
directly to the following: Office of Management and Budget, either by
fax to 202-395-6974 or by e-mail to OIRA_submission@omb.eop.gov.
Please mark faxes and e-mails to the attention of the desk officer for
ACF.
E. Unfunded Mandates Reform Act of 1995
Sec. 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
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.
This final rule will not 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. Expenditures made to meet the
requirements for Federal CCDF matching funds are made entirely at the
option of the State or Tribal government seeking the Federal CCDF
matching funds.
F. Congressional Review
This final rule is not a major rule as defined in 5 U.S.C. 804.
G. Executive Order 13132
Executive Order 13132 guarantees ``the division of governmental
responsibilities between the national government and the States that
was intended by the Framers of the Constitution, to ensure that the
principles of federalism established by the Framers guide the executive
departments and agencies in the formulation and implementation of
policies, and to further the policies of the Unfunded Mandates Reform
Act.''
The Secretary certifies that this final rule does not have a
substantial direct effect on States, on the relationship between the
Federal government and the States, or on the distribution of power and
responsibilities among the various levels of government. This final
rule does not preempt State law and does not impose unfunded mandates.
This final rule does not contain regulatory policies with
federalism implications that would require specific consultations with
State or local elected officials.
List of Subjects
Charitable donation, Child care, Day care, Early education, Grant
programs--social programs, Pre-kindergarten, State match.
(Catalogue of Federal Domestic Assistance Programs: 93.575, Child
Care and Development Block Grant; 93.596, Child Care Mandatory and
Matching Funds)
Dated: April 13, 2007.
Daniel C. Schneider,
Acting Assistant Secretary for Children and Families.
Approved: May 9, 2007.
Michael O. Leavitt,
Secretary, Department of Health and Human Services.
0
For the reasons set forth in the preamble, Part 98 of Subtitle A of
Title 45 of the Code of Federal Regulations are amended as follows:
PART 98--CHILD CARE AND DEVELOPMENT FUND
0
1. The authority for part 98 continues to read:
Authority: 42 U.S.C. 618, 9858.
0
2. Amend 45 CFR 98.16 to revise paragraph (c)(2) as follows:
Sec. 98.16 Plan provisions.
* * * * *
(c) * * *
(2) Identification of the public or private entities designated to
receive private donated funds and the purposes for which such funds
will be expended, pursuant to Sec. 98.53(f);
* * * * *
0
3. Amend 45 CFR 98.53 to revise paragraphs (e)(2), (f), (h)(3), and
(h)(4) to read as follows:
Sec. 98.53 Matching fund requirements.
* * * * *
(e) An expenditure in the State for purposes of this subpart may
be:
* * * * *
(2) Donated from private sources when the donated funds:
(i) Are donated without any restriction that would require their
use for a specific individual, organization, facility or institution;
(ii) Do not revert to the donor's facility or use;
(iii) Are not used to match other Federal funds;
(iv) Shall be certified both by the Lead Agency and by the donor
(if funds are donated directly to the Lead Agency) or the Lead Agency
and the entity designated by the State to receive donated funds
pursuant to Sec. 98.53(f) (if funds are donated directly to the
[[Page 27980]]
designated entity) as available and representing funds eligible for
Federal match; and
(v) Shall be subject to the audit requirements in Sec. 98.65 of
these regulations.
(f) Donated funds need not be transferred to or under the
administrative control of the Lead Agency in order to qualify as an
expenditure eligible to receive Federal match under this subsection.
They may be given to the public or private entities designated by the
State to implement the child care program in accordance with Sec.
98.11 provided that such entities are identified and designated in the
State Plan to receive donated funds in accordance with Sec.
98.16(c)(2).
* * * * *
(h) * * *
(3) In any fiscal year, a State may use public pre-K funds for up
to 20% of the funds serving as maintenance-of-effort under this
subsection. In addition, in any fiscal year, a State may use other
public pre-K funds as expenditures serving as State matching funds
under this subsection; such public pre-K funds used as State
expenditures may not exceed 30% of the amount of a State's expenditures
required to draw down the State's full allotment of Federal matching
funds available under this subsection.
(4) If applicable, the CCDF Plan shall reflect the State's intent
to use public pre-K funds in excess of 10%, but not for more than 20%
of its maintenance-of-effort or 30% of its State matching funds in a
fiscal year. Also, the Plan shall describe how the State will
coordinate its pre-K and child care services to expand the availability
of child care.
* * * * *
[FR Doc. E7-9626 Filed 5-17-07; 8:45 am]
BILLING CODE 4184-01-P