Testimony of: 
Gloria L. Jarmon 
Deputy Inspector General for Audit Services 
Office of Inspector General, U.S. Department of Health and Human Services 
      Hearing Title: The Foundation for Success:  Strengthening the Child Care 
and Development Block Grant Program 
House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
 
 
Chairman Rokita, Ranking Member McCarthy, and other distinguished Members of the 
Subcommittee, thank you for the opportunity to testify about the U.S. Department of Health and 
Human Services (HHS) Office of Inspector Generals (OIG) recent reviews of the Child Care and 
Development Block Grant, also known as the Child Care and Development Fund (CCDF) program.  
In fiscal year (FY) 2013, Congress appropriated $5.1 billion to the CCDF which provides financial 
assistance for child care for approximately 1.6 million children each month.  Within HHS, the 
Administration for Children and Families (ACF) administers the CCDF as a block grant to the 
States.  My testimony today summarizes challenges related to monitoring the health and safety of 
children served by the CCDF program and fiscal controls over CCDF funds to ensure that they are 
used to improve the availability, quality, and affordability of child care.  I will also discuss 
improper payments1 in the CCDF program and reported corrective actions.  
 
Since 2012, we have conducted a series of reviews of States efforts to administer and implement 
the CCDF program.  See the attachment for a list of OIG reports related to the CCDF program.  
States are required to have health and safety standards in place for all providers, including 
providers receiving CCDF money. 2  By statute, these standards must cover three areas:  prevention 
and control of infectious disease, building and physical premises safety, and health and safety 
training.  OIG has focused on States monitoring to ensure that providers that received CCDF funds 
complied with State requirements related to the health and safety of children.    
                                                           
1 An improper payment is any payment that should not have been made or that was made for an incorrect amount 
(either an overpayment or an underpayment). 
 
2 Section 658E(c)(2)(F)(i)-(iii) of the Child Care and Development Block Grant Act of 1990. 
 
1  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
   
OIG oversight efforts also include an examination of States use of funds for targeted purposes. 
Specifically, CCDF provides discretionary funding for three targeted areas known as Infant and 
Toddler, Quality and School Age Resources, and Referrals funds.  These targeted programs are 100 
percent federally funded.  OIG audits have assessed whether State agencies complied with Federal 
requirements in the expenditure of targeted funds for activities that improve the availability, 
quality, and affordability of child care.  We also have ongoing work to assess States controls for 
determining eligibility of the family to receive child care services, regulating and monitoring the 
child care providers, and ensuring proper payment for services. In addition, we annually report on 
HHSs compliance with the Improper Payments Information Act of 2002 (IPIA), as amended, 
regarding the reporting of improper payments.  OIG reporting includes an evaluation of the 
accuracy and completeness of HHSs reported estimated improper payments for the CCDF 
program.  
 
On the basis of this work, OIG has three key takeaways: 
  Vulnerabilities exist in States standards and monitoring of child care providers that put the 
health and safety of some children at risk.  Federal requirements mandating that States 
strengthen minimum health and safety requirements (including background checks) and 
strengthen monitoring (including unannounced site visits) would reduce those risks.  
  Weaknesses in certain States fiscal controls over obligation and liquidation activities put 
CCDF funds at risk of being misspent. 
  HHS had identified the CCDF program as being susceptible to significant improper 
payments. HHS reported significant progress in reducing the improper payment rate for the 
CCDF program from 9.4 percent in FY 2012 to 5.9 percent in FY 2013.  However, 
sustained attention will be needed to further reduce improper payments in this program. 
 
Following are more details regarding the CCDF program and applicable Federal requirements, the 
results of our reviews, and conclusions. 
 
 
 
2  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  Background and Federal Requirements Related to the Child Care and Development Fund 
 
CCDF subsidizes child care for low-income children under age 13 whose parents work or attend 
educational or job training programs.3  After a parent enrolls in the program, he or she may either 
enroll the child with an eligible provider that has a grant or contract for the provision of services or 
receive a child care certificate (a check or voucher), which must be used as payment for child care 
services.4    States may contribute matching funds and are responsible for determining program 
priorities and overseeing funds.  As such, States share responsibility with ACF for protecting the 
financial integrity of the CCDF program.  In addition, States must designate a lead agency to 
administer program funds and submit a plan to ACF for approval.  A State plan identifies the 
purposes for which CCDF funds will be expended for 2 fiscal years.  
 
Federal regulations require that States have sufficient fiscal control and accounting procedures 
adequate to demonstrate that funds have been used in accordance with legal requirements of the 
block grant.5  CCDF program requirements provide that a State has 2 fiscal years to obligate CCDF 
funds and a third fiscal year to liquidate those funds.  Any funds not obligated or liquidated during 
the specified period will revert to the Federal government.6  The CCDF program consists of 
discretionary, mandatory and matching funds for direct services, non-direct services, quality 
activities and administration costs.  Several of our audits have looked at targeted funds, 
discretionary funds used for activities that improve the availability, quality, and affordability of 
childcare and to support the administration of these activities.     
OIG is required to review HHSs annual improper payment information to determine and report 
compliance with IPIA as amended by the Improper Payments and Elimination Recovery Act of 
                                                           
3 At the option of the State, services may be provided for a child under age 19 who is physically or mentally incapable 
of caring for him or herself or is under court supervision.  45 CFR  98.20 lays out eligibility requirements. 
 
4 45 CFR  98.30. 
 
5 45 CFR  98.67(c). 
 
6 45 CFR  98.60(d)(7). 
 
3  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  2010.7  HHS had identified CCDF as one of its eight programs susceptible to significant improper 
payments.  Because of this designation, IPIA requires that HHS estimate improper payments for 
the program, take corrective actions to reduce improper payments, and annually report to Congress 
the actions taken to reduce improper payments for those programs with estimated improper 
payments exceeding $10 million.  For FY 2013 reporting, HHS estimated that improper payments 
for the CCDF program totaled about $306 million, or a 5.9-percent error rate.  
 
 
OIG Has Identified Challenges in Monitoring the Health and Safety of Children Served by 
the CCDF Program  
 
Gaps in oversight and monitoring can place the health and safety of children at risk, as our work 
has demonstrated.  In September 2013, we issued our first report of a series8 to address the health 
and safety of children under the care of licensed providers that receive CCDF funding.9  This report 
focused on the State of Connecticuts onsite monitoring activities for 20 selected providers.  We 
determined that all 20 of the providers we reviewed did not comply with one or more State 
licensing requirements to ensure the health and safety of children.  Specifically, we found that 19 
of the 20 providers did not always comply with 1 or more requirements related to the physical 
conditions of the family homes and 8 of the providers did not comply with required criminal 
records and protective services checks.  Two of the providers voluntarily surrendered their licenses 
after our review of their compliance with State licensing regulations.  
 
 
                                                           
7 OIG is required to review how HHS is assessing the programs improper payment information it reports as well as the 
accuracy and completeness of the reporting in HHSs annual Agency Financial Report. 
 
8 Connecticut Family Day Care Home Providers Did Not Always Comply With State Health and Safety Licensing 
Requirements (A-01-12-02504, September 23, 2013). 
 
9 OIG has ongoing health and safety reviews of family homes and day care centers in 10 States and 1 territory. These 
include Arizona, Connecticut, Louisiana, Maine, Michigan, Minnesota, Missouri, New York, Pennsylvania, Puerto 
Rico, and South Carolina.  We considered various risk factors for our selection of States and child care providers.  
Examples include previous health and safety findings, length of time since last State inspection, geographical location, 
and total children receiving CCDF funds.    
 
4  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  Examples of health and safety violations included:   
  lighter fluid, charcoal, gasoline, and a propane tank found either in unlocked cabinets or in 
the childrens outdoor play area, all accessible to children; 
  an outdoor play area that was not properly protected from the driveway by a fence or other 
child-safe barrier;  
  a smoke detector that did not have a battery; and 
  homes without adequate sleeping arrangements for the children in their caree.g., three 
children sleeping on the same air mattress in the living room instead of each child having 
his or her own sleeping arrangement. 
 
Our work examining the CCDF program has also focused on each States health and safety 
requirements for licensed child care providers, including an in-depth review of monitoring 
activities in five States representing 35 percent of children served in licensed settings in FY 2009.  
In November 2013, we reported10 that all States complied with the Federal requirement to have 
health and safety requirements in place for licensed child care providers.  Although there is no 
required Federal standard, States monitoring requirements for licensed providers did not always 
meet ACFs recommendations for background screenings or the recommended standards for 
unannounced inspections.  For example, only 15 States reported performing background checks 
sufficient to be considered comprehensive background screenings for both center-based and family 
home providers.  As another example, 21 States did not report requirements for routine 
unannounced inspections that met recommended national standards.11  Routine unannounced 
inspections are a means for States to determine whether providers are maintaining healthy and safe 
environments for children.  Moreover, monitoring of licensed providers was not conducted in 
accordance with States own requirements.  For five selected States that we further reviewed, four 
                                                           
10 Child Care and Development Fund:  Monitoring of Licensed Child Care Providers (OEI-07-10-00230, November 4, 
2013). 
 
11 ACF partners with another HHS agency component, the Health Resource and Services Administration (HRSA) to 
disseminate the book entitled Caring for Our Children: National Health and Safety Performance Standards; 
Guidelines for Out-of-Home Child Care Programs, funded by a HRSA grant.  According to the National Standards, a 
licensing agency should conduct at least two inspections per year of each center and family home.  At least one of the 
inspections should be unannounced; more unannounced inspections should be conducted if needed for the facility to 
achieve satisfactory compliance. 
 
5  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  States that required routine unannounced inspections failed to comply with their own requirements 
and none of the five States adhered to their own frequency requirements for reviewing providers 
compliance with State requirements for background screening.  We found that ACF did little to 
monitor how States were overseeing CCDF providers. 
In July 2013, we issued an early alert memorandum12 to ACF regarding the gaps in health and 
safety requirements and monitoring for license-exempt providers.  These gaps represent 
vulnerabilities that could potentially lead to harm for children in care, including care financed by 
the Federal Government.  We found that a number of States did not report having any requirements 
for certain license-exempt providers for at least one of the three health and safety areas.13  As such, 
these States were not fully compliant with Federal regulations.  Additionally, a few States reported 
that they did not have requirements in place to monitor license-exempt providers.    Other States 
reported allowing providers to self-certify compliance with health and safety requirements, and 
reported limited monitoring, limited use of background checks, and provider non-reporting of 
serious injuries.  
On May 20, 2013, ACF issued a Notice of Proposed Rulemaking that proposed regulations that 
ACF expects would strengthen health and safety requirements for the oversight of child care 
providers.14  These proposed regulations would provide more comprehensive health and safety 
requirements for center-based, group home, and family home CCDF providers (including license-
exempt providers).  For example, the proposed regulations would not allow providers to self-certify 
compliance with health and safety requirements and would require States to take specific steps to 
monitor all CCDF providers.  Comments on the proposed rule were due on or before August 5, 
2013.  To date, ACF has not issued its final regulations. 
                                                           
12 License-Exempt Child Care Providers in the Child Care and Development Fund Program (OEI-07-10-00231, July 
11, 2013). 
 
13 States may exempt certain providers from State specific licensing requirements (i.e., license-exempt providers). The 
types of providers that are license-exempt vary by State.  For example, center-based child care providers located in 
public schools are exempted from licensing requirements in 22 States.  As another example, family home child care 
providers that serve children from one family are exempted from licensing requirements in seven States.  However, all 
providers, including license-exempt, must meet Federal health and safety standards.   
 
14 78 Fed. Reg. 29941 (May 20, 2013). 
 
6  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  OIG Has Identified Weaknesses in the Fiscal Controls Over CCDF Targeted Funds in 
Certain States 
For FY 2013, CCDF targeted funds awarded to States totaled about $300 million. Financial 
stewardship at the Federal and State levels is paramount to help ensure that these vital Federal 
dollars are spent for their intended purposes and in accordance with program requirements.  OIG 
audits have assessed whether State agencies complied with Federal requirements in the expenditure 
of targeted funds for Infant and Toddler, Quality and School Age Resources, and Referrals funds.  
Our findings regarding the fiscal accounting of CCDF targeted funds were similar for each of the 
four State reviews.15  We found that several States lacked supporting documentation for 
expenditures, improperly reobligated targeted funds after the obligation period, and did not refund 
unliquidated funds after the award period had ended.  In these instances, we found that States did 
not have adequate policies and procedures in place to monitor the obligation and liquidation of 
CCDF targeted funds pursuant to Federal requirements.  In addition, one State had not set up its 
accounting system to track expenditures to the funding source or grant year of the funding source.  
Instead, the State relied on externally created spreadsheets to allocate and support reported 
expenditures.  However, the States financial reporting process did not ensure the accuracy and 
validity of those spreadsheets, which were used to calculate expenditures reported to ACF.   
To date, our audits in four of seven States reviewed16 have identified a total of $5.8 million in 
targeted fund expenditures that did not comply with Federal requirements for FYs 2004 - 2009.  
The four States expended $57.2 million in CCDF targeted funds during this same time period.  
These weaknesses in financial controls put additional funds at risk of being misspent.   
 
                                                           
15 The four States are Iowa, Louisiana, Nebraska, and Virginia.  In addition, we have audits underway at six additional 
States that are expected to be issued in FY 2014.  We considered several risk factors for our selection of States, 
including total CCDF funds expended and claimed for Federal reimbursement, geographical location, and input from 
ACF. 
 
16 OIG completed audits in seven States:  four States with OIG reported findingsIowa, Louisiana, Nebraska, and 
Virginiaand three States with no OIG reported findingsConnecticut, Michigan, and Ohio.  These seven States 
expenditures of targeted funds totaled $120.3 million in CCDF funds for FYs 2004 - 2009. 
 
7  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  HHS Reported Significant Improper Payment Reductions Under the CCDF; Sustained 
Attention Is Needed to Continue This Progress  
To improve the accountability of Federal agencies administration of funds, IPIA requires agencies, 
including HHS, to publish improper payment estimates for programs and activities identified as 
being susceptible to significant improper payments.  HHS annually reports estimated improper 
payments for the CCDF program in its Agency Financial Report.  HHS has made significant 
progress in reducing the CCDF improper payment rate from 9.4 percent in FY 201217 to 5.9 
percent in FY 2013.  Looking ahead, further reductions of this rate are important to protect the $5.1 
billion at stake.  This is a challenging goal for many reasons.   
As steward of taxpayer dollars, HHS is accountable for how States spend federal CCDF dollars and 
for safeguarding these funds from improper payments.  States are also responsible for ensuring that 
these funds are used for the intended purposes outlined in the grant award. Measuring improper 
payments and designing and implementing actions to minimize or eliminate them are not simple 
tasks, particularly for grant programs that rely on quality administration efforts at the State level.  
Implementing strong preventive controls can help mitigate improper payments, increasing public 
confidence and avoiding the difficult pay and chase aspects of recovering improper payments.  
For FY 2013, HHS reported that administrative and documentation errors accounted for 51 percent 
of the reported $306 million of estimated improper payments.  Errors were due primarily to the fact 
that documentation was missing or insufficient.  Examples of missing or insufficient 
documentation include missing case records; incomplete documentation about the work, 
educational, or training activity of the head of the household; and insufficient documentation of 
earned income.  HHS reported that the remaining 49 percent of estimated improper payments 
resulted from verification errors.  These types of errors occurred when there was a lack of 
information to verify portions of a case record.  HHS stated that the errors consisted of the failure 
                                                           
17 In its FY 2013 Agency Financial Report, HHS stated that the published FY 2012 estimated improper payment rate 
had been overstated because incorrect data for a small number of States had not been detected prior to the 2012 
publication.  OIG had brought this reporting error to HHSs attention during our review of its 2012 reported improper 
payment information.  For its 2013 publication, HHS stated that the correct 2012 estimated improper payment rate was 
9.2 percent.  However, HHS would continue to report the initial 2012 estimate of 9.4 percent in its 2013 publication for 
consistency. 
8  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  to apply policy correctly such as inability to determine income calculation method and incorrect 
computation of the hours of care needed.  
HHS reported corrective actions that it and States are taking to target payment errors in the CCDF 
program.  Examples of HHS corrective actions include providing technical assistance to States 
through on-site visits and Webinars, coordination of conference calls with State Administrators to 
facilitate peer-to-peer sharing of error causes and program improvements, and implementation of a 
technical assistance tool entitled Grantee Internal Control Self-Assessment Instrument for States 
with high error rates.  According to HHS, the tool will help States assess their internal control 
systems, identify areas of risk, and develop mitigation strategies.  States have also initiated 
corrections to reduce CCDF payment errors.  Examples include performing ongoing case record 
reviews; developing training plans that include policy clarifications, calculation tools, and 
checklists to ensure accuracy in processing eligible children for child care assistance; and 
enhancing automated systems to track attendance of children receiving child care, produce 
monitoring reports, and generate computer edits.  Collectively, these corrective actions are 
important steps for HHS and States to further minimize improper payments and ensure the proper 
administration of the CCDF program and compliance with Federal requirements.  Sustained 
attention by HHS will be needed to continue achieving significant reductions of improper payments 
in the CCDF program.  
   
Conclusion 
OIG will continue its oversight of CCDF to help ensure the health and safety of children, improve 
program integrity, and ensure sound financial management.  We have ongoing audits in these areas 
at various State agencies that oversee the provision of childcare services to ensure that they comply 
with Federal requirements.  Given our findings and recommendations to date, we support 
Congressional or administrative action that will enhance the health and safety of children. This is 
especially important with respect to the facilities where children are receiving care and with respect 
to the background checks of the providers that are delivering services.  Additionally, increased 
accountability for funds and further reduction of improper payments are also important. 
9  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  I thank the Subcommittee for its commitment to our shared goalsensuring that Federal CCDF 
dollars are used for their intended purposes of providing affordable child care to low-income 
families that does not sacrifice quality or safety.  
Thank you for your interest in our work and the opportunity to testify on OIG oversight of the 
CCDF program.  I would be pleased to answer your questions.   
 
   
10  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014 
  ATTACHMENT 
 
 
RELATED OFFICE OF INSPECTOR GENERAL REPORTS for 2012 and 2013  
 
 
Report Title  Report Number  Date Issued 
Child Care and Development Fund:  Monitoring of Licensed 
OEI-07-10-00230  11/4/2013 
Child Care Providers 
Virginia Properly Obligated and Liquidated Most Targeted 
A-03-12-00251  10/17/2013 
Funds Under the Child Care and Development Fund Program 
Louisiana Improperly Claimed Some Child Care and 
A-06-12-00057  9/30/2013 
Development Fund Targeted Funds 
Connecticut Family Day Care Home Providers Did Not 
Always Comply With State Health and Safety Licensing  A-01-12-02504  9/23/2013 
Requirements 
License-Exempt Child Care Providers in the Child Care and 
OEI-07-10 00231  7/11/2013 
Development Fund Program 
Nebraska Improperly Claimed Some Child Care and 
A-07-12-03175  4/30/2013 
Development Targeted Funds 
Michigan Properly Obligated and Liquidated Targeted Funds 
A-05-12-00062  4/26/2013 
Under the Child Care and Development Fund Program 
Ohio Properly Obligated and Liquidated Targeted Funds 
A-05-12-00061  4/26/2013 
Under the Child Care and Development Fund Program 
Iowa Improperly Claimed Some Child Care and Development 
A-07-11-03163  3/28/2012 
Targeted Funds 
 
U.S. Department of Health and Human Services Met Many  
A-17-13-52000  3/15/2013 
Requirements of the Payments Information Act of 2002 but 
Was Not Fully Compliant 
Connecticut Properly Obligated and Liquidated Targeted 
Funds Under the Child Care and Development Fund Program  A-01-12-02505  2/21/2013 
 
 
 
11  House Committee on Education and the Workforce 
Subcommittee on Early Childhood, Elementary, and Secondary Education 
March 25, 2014