DEPART~IENT OF HEALTH AND HmvLL\1'\" SERVICES 

OFFICE OF INSPECTOR GENERAL 

WASI-Il:'iGTON, DC 2020i 

'JUlll Z013 

TO: 	 George Sheldon 

Acting Assistant Secretary 

Administration for Children and Families 

FROM: Stuart Wright 

Deputy Inspector General 

for Evaluation and Inspections 

SUBJECT: 	 Early Alert Memorandum Report : License-Exempt Child Care Providers 

in the Child Care and Development Fund Program, OEI-07-10-00231 

This early alert memorandum report identifies gaps in States' health and safety 

requirements and monitoring requirements for license-exempt child care providers in the 

Child Care and Development Fund (CCDF) program, which is administered by the 

Administration for Children and Families (ACF). The Office oflnspector General (OIG) 

is conducting an evaluation entitled Child Care and Development Fund: Monitoring of 

Licensed Child Care Providers (OEI -07-1 0-00230), with report publication anticipated in 

fall 2013 . During data collection for this evaluation, we found that a number of States 

(1) exempt CCDF subsidy-receiving providers from licensing requirements, (2) did not 

report having certain health and safety requirements for license-exempt providers, and 

(3) did not have requirements in place to monitor license-exempt providers. 

SUMMARY 

States are required to have health and safety standards in place for all providers ­

including license-exempt providers-receiving CCDF money. By statute, these 

standards must cover three areas: prevention and control of infectious disease; building 

and physical premises safety; and health and safety training. I 

In reviewing information sent to us by the States, we found that a number of States did 

not report having any requirements for license-exempt providers in at least one of the 

three areas. Additionally, a few States reported that they did not have requirements in 

place to monitor license-exempt providers. These States are not fully compliant with 

Federal regulations. Other States reported allowing providers to self-certify compliance 

I Section 658E( c )(2)(F)(i}-(iii) of the Child Care and Development Block Grant Act of 1990 (the CCDBG 

Act). 
 

 

 

 

 

 

Page 2 – George Sheldon 

with health and safety requirements, and reported limited monitoring, limited use of 

background checks, and provider nonreporting of serious injuries. We believe that these 

gaps in health and safety requirements and gaps in monitoring represent vulnerabilities 

that could potentially lead to harm for children in care, including care financed by the 

Federal government. 

On May 20, 2013, ACF issued a Notice of Proposed Rulemaking (NPRM) that included 

regulations to strengthen health and safety requirements for and oversight of CCDF 

providers.2

 Although OIG acknowledges ACF’s efforts to make its regulations more 

comprehensive, some States do not comply with the current Federal regulations for 

license-exempt providers. Therefore, we are providing this early alert memorandum so 

that ACF can use this information to bring those States into compliance with existing 

Federal regulations. 

As written, the proposed regulations do not allow providers to self-certify compliance 

with health and safety requirements, and require States to take specific steps to monitor 

all CCDF providers. OIG acknowledges the steps that ACF is taking to strengthen 

oversight of license-exempt providers through the NPRM. ACF may want to use the 

information in this memorandum report as further justification for finalizing the 

regulations with these heightened oversight requirements. 

BACKGROUND 

For a State to be eligible to receive funds through CCDF, ACF must review and approve 

a 2-year State plan.3

 To continue receiving funding, a State must submit a new State plan 

prior to the expiration of its current plan.4 

Approximately 600,000 child care providers in 50 States and the District of Columbia 

(States) provide child care funded through CCDF.5, 6 Federal regulations allow CCDF 

expenditures for four types of child care:7

 center-based, group home, family home, and 

in-home. The two types of child care providers discussed in this memorandum are 

center-based providers and family home providers; together, these two types covered, on 

average, 89 percent of children in CCDF-subsidized care in fiscal year (FY) 2009.8 

Center-based child care is provided in a nonresidential setting, and family home child 

2

 78 Fed. Reg. 29441 (May 20, 2013).
 3

 Each State plan includes information about the State’s CCDF program with regard to how it administers 

the program, child care services offered, parental rights and responsibilities, activities and services to
 

improve the quality and availability of child care, and health and safety requirements.

4 45 CFR § 98.17.
 5

 Table 7, CCDF, Number of Child Care Providers Receiving CCDF Funds (FFY 2009). Accessed at 

http://acf.hhs.gov on January 15, 2013. 6

 Although there are tribal and territorial programs in CCDF, we are looking only at State programs. Tribal 

programs are subject to different legal requirements and policies. 

7 45 CFR §§ 98.2 (Definitions) and 98.30(e)(1). 8

 Table 3, CCDF, Average Monthly Percentages of Children Served by Types of Care (FFY [Federal Fiscal
 

Year] 2009). Accessed at http://acf.hhs.gov on January 15, 2013. All fiscal years referred to in this report
 

are Federal fiscal years.
 
 

 

 

Page 3 – George Sheldon 

care is provided by one individual as the sole caregiver in a private residence other than 

the child’s residence. 

Child care providers who participate in the CCDF program must be operating legally 

within the jurisdictions in which they operate. Providers must be licensed or regulated in 

their respective jurisdictions or be legally exempt from regulation (license-exempt).9 

Some States impose regulations on providers that are not licensed—Ohio, for instance, 

certifies its family home providers. Certification in Ohio is a form of regulation under a 

process that is very similar to licensing; because these providers are still regulated, we do 

not consider them to be license-exempt. 

According to ACF data, 21 percent of children whose care is funded through CCDF are 

served by providers who would not be subject to any State or local child care 

regulations—i.e., providers that we would consider license-exempt—if they were not 

participating in the CCDF program. 

Health and Safety Requirements 

In accordance with the CCDBG Act, States must certify that under State or local law, 

they have in effect requirements designed to protect the health and safety of children 

receiving CCDF subsidies.10 Those requirements must include three areas: the 

prevention and control of infectious disease (including immunizations); building and 

physical premises safety; and minimum health and safety training appropriate to the 

provider setting. For licensed providers, States’ licensing requirements fulfill these 

statutory requirements. For license-exempt providers, ACF requires States in their State 

plans to describe which providers are exempt from licensing under State law and instructs 

them to describe how these providers will meet health and safety requirements for child 

care services in each of the three required areas. 

Monitoring Requirements 

Section 685E(c)(2)(G) of the CCDBG Act requires States to ensure that providers serving 

children whose care is subsidized through CCDF comply with applicable health and 

safety standards. Federal regulations require each State to certify that it has procedures to 

ensure that child care providers comply with applicable health and safety requirements. 

ACF reported to us that, as part of the State plan, States certify that they have licensing 

requirements applicable to child care services. States must describe those licensing 

requirements and how they are effectively enforced. However, there are no specific 

monitoring requirements for license-exempt providers. If the State conducts health and 

safety monitoring only in conjunction with licensing requirements, then license-exempt 

providers may not be effectively monitored. 

ACF Oversight Requirements 

The CCDBG Act requires Federal monitoring of each State’s compliance with its plan.11 

Although the CCDBG Act does not require States to (1) conduct routine unannounced 

inspections of child care providers, (2) perform background screenings on providers (or 

9

 ACF, Fundamentals of CCDF Administration. Accessed at http://www.acf.hhs.gov/ on March 23, 2011. 10 Section 658E(c)(2)(F) of the CCDBG Act. 11 Section 658I(b)(1) of the CCDBG Act. 
 

 

 

 

 

Page 4 – George Sheldon 

their family members), or (3) require providers to report serious injuries that occur while 

a child is in care, ACF guidance instructs each State to indicate whether it performs these 

three activities. States are also asked to describe any other methods they use to enforce 

health and safety requirements (e.g., percentage of providers inspected annually and the 

length of time between inspections).12 

METHODOLOGY 

As part of our study entitled Child Care and Development Fund: Monitoring of Licensed 

Child Care Providers (OEI-07-10-00230), we surveyed the State staff responsible for 

licensing; health and safety; and monitoring. We requested that each State describe the 

health and safety requirements that fulfill requirements in the three areas (prevention and 

control of infectious disease; building and physical premises safety; and health and safety 

training), as well as monitoring methods for licensed and license-exempt child care 

providers. 

According to CCDF State plans, 30 States allow license-exempt center-based providers to 

care for children receiving CCDF subsidies, and 33 States allow license-exempt family 

home providers to care for these children.13 

RESULTS 

States exempt many CCDF subsidy-receiving providers that provide care for 

children 

State child care licensing regulations and monitoring and enforcement policies help 

provide a minimum standard of protection for the health and safety of children in 

out-of-home care. However, States are not required to apply licensing requirements to 

specific kinds of child care providers in order for them to be eligible to receive CCDF 

funds.14 Some States exempt providers because they are subject to different regulations 

(e.g., those providers who are on Federal property and subject to requirements of the 

Department of Defense). Providers that are exempt from licensing and not subject to 

more stringent requirements may not provide the same standard of care as those providers 

that are licensed. States exempt both center-based and family home providers. 

Seven States exempt family home providers that care for children from one family, 

regardless of the number of children. Often, this is in addition to any number of the 

provider’s own children or relatives who are receiving care in the home. Eighteen States 

exempt family home providers caring for five or fewer, three or fewer, or two or fewer 

12 ACF, CCDF State and Territories Plan Preprint Guidance, FFY 2010–2011. Accessed at 

http://www.acf.hhs.gov on February 1, 2011. 13 In its CCDF State plan, Wisconsin reported allowing CCDF funding for license-exempt center-based and 

family home providers. However, on its survey, it reported that no CCDF funding is allowed for those 

providers. In its CCDF State plan, Kansas reported all family home child care providers paid with CCDF 

funds were subject to licensing under State law. However, during the period of our review, these providers 

were actually “registered,” rather than licensed. Because the Kansas registration process relied mostly on 

self-attestation of compliance, we included these providers in our analysis of license-exempt providers. 14 Section 658E(c)(2)(E) of the CCDBG Act. 
 

 

 

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children (six States total for each). See Appendix A for additional analysis of the types 

of license-exempt providers. 

Some States require providers that receive CCDF funds to register with the State. Utah, 

which exempts family home providers caring for five or fewer children, maintains a 

database of providers that are not licensed and that are paid through CCDF. These 

providers self-certify that they meet minimum health and safety standards. Parents of 

children in the care of license-exempt providers are notified that provider training is 

available and are instructed to share this information with the provider. In FY 2010, on 

average, 34 percent of children served by CCDF in Utah were cared for by 

license-exempt providers. 

Not all States required license-exempt child care providers to meet Federal health 

and safety requirements 

States are required to have in effect, under State or local law, requirements—designed to 

protect the health and safety of children—that apply to child care providers paid through 

CCDF. These requirements must include the prevention and control of infectious 

diseases; building and physical premises safety; and minimum health and safety training 

appropriate to the provider setting.15 

Several States lacked one or more of these health and safety requirements for certain 

license-exempt providers. In the extreme, Mississippi officials reported that they did not 

have jurisdiction over license-exempt providers at all; they had no requirements for either 

center-based or family home providers in any of the three areas required by the statute. 

Two States did not report any requirements for license-exempt family home providers. 

Nine States did not report any health and safety training requirements for license-exempt 

center-based providers; four additional States lacked these requirements for family home 

providers. See Appendix B for additional analysis of health and safety requirements. 

States with health and safety requirements for license-exempt providers commonly 

allowed providers to self-report compliance 

The CCDBG Act requires States to have procedures in effect to ensure that child care 

providers paid through CCDF comply with all applicable State or local health and safety 

requirements.16 Of the States that did report health and safety requirements in the 3 areas, 

9 States allowed center-based providers to self-report compliance with requirements, 

while 23 States allowed family home providers to self-report compliance with at least one 

requirement. In most States, this means providers simply return a checklist verifying 

healthy and safe conditions of the home or center (e.g., the facility has working 

telephones, child-accessible areas are free of hazards, alcohol and drugs are prohibited, 

and/or home or center is pest-free). 

15 Section 658E(c)(2)(F) of the CCDBG Act. 16 Section 658E(c)(2)(G) of the CCDBG Act. 
 

 

Page 6 – George Sheldon 

States did not always monitor license-exempt providers for compliance with health 

and safety requirements 

Although the CCDBG Act does not require States to (1) conduct routine unannounced 

inspections of child care providers, (2) perform background screenings on providers (or 

their family members), or (3) require providers to report serious injuries that occur while 

a child is in care, ACF guidance instructs each State to indicate whether it performs these 

three activities. In eight States, license-exempt family home providers are not required to 

have a background check conducted. In most States, license-exempt providers are not 

subject to routine monitoring visits. Monitoring requirements were particularly lacking 

for family home providers. Additionally, only four States require license-exempt family 

home providers to report serious injuries. See Appendix C for additional analysis of 

monitoring requirements. 

CONCLUSION 

States may and do exempt many kinds of providers from licensing. These providers, 

however, are still required to adhere to Federal health and safety requirements in order to 

be eligible for CCDF payments. We found that not all States required license-exempt 

child care providers to meet Federal health and safety requirements. Further, we found 

insufficient procedures in effect to ensure that license-exempt child care providers 

comply with applicable State or local health and safety requirements. ACF needs to be 

reasonably assured that States have Federal health and safety requirements in place for 

license-exempt providers and that States ensure compliance with these requirements 

before they authorize CCDF vouchers. 

As noted earlier, on May 20, 2013, ACF issued an NPRM that included regulations to 

strengthen health and safety requirements for and oversight of CCDF providers.17 These 

regulations, as written, propose more comprehensive health and safety requirements for 

center-based, group home, and family home CCDF providers, including license-exempt 

providers. States have the option to exempt in-home providers—i.e., individuals who 

provide child care services in the child’s own residence—and providers caring for 

relatives from these requirements. Comments on this proposed rule must be received on 

or before August 5, 2013. 

This report is being issued directly in final form because it contains no recommendations. 

If you have comments or questions about this report, please provide them within 60 days. 

Please refer to report number OEI-07-10-0231 in all correspondence. 

17 78 Fed. Reg. 29441 (May 20, 2013). 
 

Page 7 – George Sheldon 

APPENDIX A 

Types of Center-Based License-Exempt Providers 

Reason Provider Is Exempt From 

Licensing States That Exempt Providers Total Number of States 

Religious institution AL, CT, FL, IL, IN, MA, MN, MO, NH, VA 10 

Public school AL, CA, CT, FL, HI, IL, IN, LA, MA, ME, MN, MS, 

MO, NH, NY, ND, OR, UT, VA, WV, WI, WY 22 

Federal property AL, IL, KS, MI, NY, OR, TX, UT, WY 9 

Temporary/“short duration” AL, CA, HI, IN, MA, MN, MS, NY, OR, UT, WA, WV 12 

Parent located on the premises CA, IL, MI, MN, NH, OR, UT, WI 8 

Source: OIG analysis of State survey data, 2013. 

Types of Family Home License-Exempt Providers 

Reason Provider Is Exempt From 

Licensing States That Exempt Providers Total Number of States 

Serves children from one family CA, CO, MN, MT, NE, OR, WY 7 

Serves two or fewer children HI, ME, MT, NY, SC, WY 6 

Serves three or fewer children IL, NE, NH, OR, PA, WI 6 

Serves four or fewer children MO, TN 2 

Serves five or fewer children IN, IA, MS, ND, UT, VA 6 

Serves six or fewer children ID, KS 2 

All family home providers are 

exempt 

LA 1 

Source: OIG analysis of State survey data, 2013. 
 

 

 

 

 

 

 

 

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APPENDIX B 

Methods Through Which States Allow Center-Based License-Exempt Providers To 

Meet Federal Health and Safety Requirements 

Methods Through Which States Allow 

Center-Based License-Exempt Providers To 

Meet Health and Safety Requirements 

Number of States With 

Requirement for 

Prevention and Control of 

Infectious Disease 

Number of States With 

Requirement for Building 

and Physical Premises 

Safety 

Number of States 

With Requirement for 

Health and Safety 

Training 

Has same requirements as for licensed 

providers, or verifies requirements through an 

inspection 

5 7 6 

Allows center-based license-exempt providers 

to meet requirements through public school 

requirements or other accreditation 

14 13 10 

Allows center-based license-exempt providers 

to meet requirements through self-reported 

compliance with health and safety requirements 

9 8 4 

Did not allow CCDF funding to providers* 1 1 1 

No requirement 1 1 9 

Total 30 30 30 

*Note: In its CCDF State plan, Wisconsin reported allowing CCDF funding for license-exempt center-based and family home providers. However, on its survey 

it reported that no CCDF funding is allowed for those providers. 

Source: OIG analysis of State survey data, 2013. 

Health and Safety Requirement Fulfillment for Family Home License-Exempt 

Providers 

Methods Through Which States Allow 

Family Home License-Exempt Providers To 

Meet Health and Safety Requirements 

Number of States With 

Requirement for 

Prevention and Control of 

Infectious Disease 

Number of States With 

Requirement for Building 

and Physical Premises 

Safety 

Number of States 

With Requirement for 

Health and Safety 

Training 

Has same requirements as for licensed 

providers, or verifies requirements through an 

inspection 

8 6 3 

Allows family home providers to meet 

requirements through training 1 1 11 

Allows family home providers to meet 

requirements through self-reported compliance 

with health and safety requirements 

21 23 10 

Did not allow CCDF funding to providers* 1 1 1 

No requirement 3 3 9 

Total 34** 34** 34** 

*Note: In its CCDF State plan, Wisconsin reported allowing CCDF funding for license-exempt center-based and family home providers. However, on its survey 

it reported that no CCDF funding is allowed for those providers. 

**Note: In its CCDF State plan, Kansas reported that all family home child care providers paid with CCDF funds were subject to licensing under State law. 

However, these providers were actually “registered,” not licensed, so we included them in our analysis of license-exempt providers. 

Source: OIG analysis of State survey data, 2013. 
 

 

 

Page 9 – George Sheldon 

APPENDIX C 

Measures States Have in Place To Monitor Center-Based License-Exempt and 

Family Home License-Exempt Providers 

Measure 

Number of States With Measure 

in Place Regarding 

Center-Based 

License-Exempt Providers 

Number of States With 

Measure in Place Regarding 

Family Home 

License-Exempt Providers 

State conducts routine announced visits 6 8 

State conducts routine unannounced visits 7 9 

State does not conduct routine visits 19* 23* 

State performs background checks 15 26 

State does not perform background checks 15 8 

State requires providers to report serious injuries 6 4 

State does not require providers to report serious 

injuries 24 29 

*Note: Two States reported that they conduct both routine announced and routine unannounced visits for center-based 

license-exempt providers. Six States reported that they conduct both types of visits for family home license-exempt 

providers. 

Source: OIG analysis of State survey data, 2013.