39936 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Administration for Children and

Families

45 CFR Parts 98 and 99

RIN 0970–AB74

Child Care and Development Fund

AGENCY: Administration for Children

and Families (ACF), HHS

ACTION: Final rule.

SUMMARY: This final rule implements

the child care provisions of the Personal

Responsibility and Work Opportunity

Reconciliation Act (PRWORA) of 1996

(Pub. L. 104–193) and incorporates

technical corrections to PRWORA made

by the Balanced Budget Act of 1997

(Pub.L. 105–33). PRWORA appropriates

new entitlement child care funds under

section 418 of the Social Security Act

and requires that these new Federal

child care funds be subject to the Child

Care and Development Block Grant

(CCDBG) Act. The CCDBG program

which was created under the original

CCDBG Act is a discretionary fund

program. PRWORA also reauthorized

the CCDBG Act. As PRWORA requires

that these child care funds be

administered as a unified program, the

Administration for Children and

Families has named the combined funds

the Child Care and Development Fund

(CCDF). Parts 98 and 99 are the official

regulations for the Child Care and

Development Fund.

EFFECTIVE DATE: August 24, 1998.

FOR FURTHER INFORMATION CONTACT:

Barbara Binker, Director, Policy

Division, Child Care Bureau, Hubert

Humphrey Building, Room 320F, 200

Independence Avenue, SW,

Washington, DC 20201, telephone (202)

401–5145. Deaf and hearing-impaired

individuals may call the Federal Dual

Party Relay Service at 1–800–877–8339

between 8 a.m. and 7 p.m. Eastern time.

SUPPLEMENTARY INFORMATION:

Background

Section 103(c) of the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996 (PRWORA)

repealed the child care programs

authorized under title IV-A of the Social

Security Act—AFDC Child Care,

Transitional Child Care and At-Risk

Child Care. In addition, PRWORA

amended section 418 of the Social

Security Act to provide new entitlement

Federal child care funds and transferred

them to the Lead Agency under the

amended Child Care and Development

Block Grant Act. The funding under

section 418 is now subject to the CCDBG

Act. PRWORA also amended the

CCDBG Act.

The new statutory provisions,

therefore, unified what was a

fragmented child care subsidy system.

The combined and increased funding

becomes part of a holistic and

streamlined system for child care. The

integrated entitlement and discretionary

child care funding has a single, unified

purpose. The Department of Health and

Human Services has named the

combined funds the Child Care and

Development Fund (CCDF), to reflect

this integration of multiple funding

sources. The Department uses the CCDF

terminology when corresponding with

grantees and the child care field.

Goals and Purpose of the Rule

The primary goals of this rule are to:

—Amend the CCDBG regulations in

light of the child care amendments

under title VI of PRWORA,

—achieve a balance between program

flexibility and accountability,

—assure the health and safety of

children in child care,

—recognize that child care is a key

support for work, as envisioned in

TANF, and

—clarify, streamline, simplify, and

unify the Federal child care program.

The major regulatory decisions were

made to assure States have adequate

information upon which to base their

child care payments; promote public

involvement in the Plan process;

strengthen health and safety in child

care by requiring children receiving

CCDF subsidies to be age-appropriately

immunized; require coordination

between child care Lead Agencies and

agencies administering TANF, health,

education and employment programs;

streamline the CCDF application and

Plan; and provide clarifications based

on experience operating both the

CCDBG program and the now-repealed

title IV–A programs.

We received relatively few comments

during the comment period—only some

160 organizations and individuals made

approximately 500 comments, many of

which were duplicative. The content of

the comments lead us to believe that we

achieved our goal of reaching balance

among viewpoints. We made only a few

changes as a result of comments to

adjust the balance among goals. Of the

substantive changes made, we require

the Lead Agency to make available to

the public, in advance of the public

hearing, the plan it proposes to submit

to the Secretary. We require the Lead

Agency to provide consumer education

information to parents and the general

public about health and safety

requirements and about the full range of

providers available to families. We

clarified that an independent audit of a

Lead Agency shall be conducted by a

State agency that meets the generally

accepted government auditing standards

or by a public accountant who meets the

independence standards contained

therein. We added provisions regarding

tribal consortia in § 98.83. We also

added or revised provisions regarding

tribal construction at § 98.84 including

a requirement regarding the amount a

tribe new to the CCDF may spend on

construction and a provision regarding

treatment of construction planning

costs.

We made other changes to conform to

the technical amendments to PRWORA

by Pub. L. 105–33, The Balanced Budget

Act of 1997, primarily in § 98.70 and

98.71. Based on comments, we also

made other minor changes to clarify

proposed language or codify policy

contained in the preamble of the

proposed rule.

Statutory Authority

Section 658E of the Child Care and

Development Block Grant Act of 1990

requires that the Secretary shall by rule

establish the information needed in the

Block Grant Plan.

Regulatory Impact Analysis

This rule has been reviewed by the

Office of Management and Budget

(OMB) pursuant to Executive Order

12866. Executive Order 12866 requires

that regulations be reviewed to ensure

that they are consistent with the

priorities and principles set forth in the

Executive Order. The Department has

determined that this rule is consistent

with these priorities and principles. An

assessment of the costs and benefits of

available regulatory alternatives

(including not regulating) demonstrated

that the approach taken is the most costeffective and least burdensome while

still achieving the regulatory objectives.

For the most part, the regulations

implement specific requirements under

PRWORA.

We are requiring that children be ageappropriately immunized in order to

receive services under the Child Care

and Development Fund. As most States

already include immunizations in their

child care standards and provide

religious and medical exemptions from

immunizations, we do not anticipate

that this rule will have a significant

negative impact on either grantees or

families, since grantees will not be

required to provide immunizations

directly. The Vaccines for Children

Program, an important component of the

Childhood Immunization Initiative (CII),
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39937

provides immunizations to eligible

children, including those without

insurance coverage, those eligible for

Medicaid, and American Indians and

Alaska Natives. In addition, every State

receives grant funds for immunization

activities, including hiring nurses,

expanding clinic hours, assessing

coverage levels, and conducting

outreach. Immunization levels of

children 19–35 months of age are

measured by the National Immunization

Survey, the most recent survey

conducted throughout the U.S. that

provides comparable State vaccination

coverage estimates.

The immunization provision was

considered the most cost-effective and

least burdensome approach because: (1)

It helps ensure that vulnerable young

children are age-appropriately

immunized; (2) immunization of such

children is highly cost-effective; and (3)

it provides flexibility to grantees in

determining how to implement the

provision.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act (Pub.

L. 96–354) requires the Federal

government to anticipate and reduce the

impact of rules and paperwork

requirements on small businesses and

other small entities. The primary impact

of this regulation is on State, tribal and

territorial governments. To a lesser

extent the regulation could affect

individuals and small businesses.

However, the number of small

businesses affected should be limited,

and the expected economic impact on

these businesses would not be so

significant that a full regulatory

flexibility analysis is indicated.

The rule contains a number of

provisions that could result in some

decrease in the regulatory and economic

burdens on providers that are small

businesses. Because States will be

required to operate their programs

under a more consistent set of program

rules, participating providers will face a

simpler and more streamlined set of

Federal regulatory requirements.

The providers who would potentially

be most affected by this rule are inhome providers. These providers are

generally not operating as small

businesses, but as domestic employees;

thus, any impact on them need not be

specifically addressed under this Act.

State, local and tribal governments

already have authority to set general

regulatory requirements and health and

safety standards for child care

providers. If States (or other grantees)

believe that there is a substantial need

for additional requirements (to protect

the well-being of children in care), we

expect them to act under this general

authority.

While States generally have

immunization requirements for children

in child care, the proposed

immunization provision might result in

some additional children being subject

to immunization requirements or

stronger requirements for some

children. However, States have

flexibility in deciding how

immunization requirements are to be

implemented. Our rule does not dictate

that States impose requirements on

providers; rather, States can choose to

impose them on eligible families. Thus,

the immunization provision in this rule

does not necessarily affect small

businesses. Further, where States do

choose to impose additional

requirements on providers related to the

immunization provision, such

requirements would be basically

administrative in nature (e.g.,

documentation); we expect the costs of

immunization to be covered through

other funding sources. Thus, this

provision would not have a significant

economic impact on providers.

For these reasons, we certify that this

rule will not have a significant

economic effect on a substantial number

of small entities, and that a Regulatory

Flexibility Analysis is not required.

Unfunded Mandates Reform Act of

1995

Section 202 of the Unfunded

Mandates Reform Act of 1995 requires

that a covered agency prepare a

budgetary impact statement before

promulgating a rule that includes any

Federal mandate that may result in the

expenditure by State, local, and Tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year.

We have determined that this final

rule will not impose a mandate that will

result in the expenditure by State, local,

and Tribal governments, in the

aggregate, or by the private sector, of

$100 million or more in any one year.

Accordingly, we have not prepared a

budgetary impact statement, specifically

addressed the regulatory alternatives

considered, or prepared a plan for

informing and advising any significantly

or uniquely impacted small

governments.

Congressional Review of Regulations

This final rule is not a ‘‘major’’ rule

as defined in Chapter 8 of 5 U.S.C.

Paperwork Reduction Act

Sections 98.16 and 98.81 contain the

Lead Agency Plan information

requirements of the ACF–118 and ACF–

118–A respectively. Sections 98.70 and

98.71 contain the information required

by both the ACF–800 and ACF–801

child care data collections. As required

by the Paperwork Reduction Act of 1995

(44 U.S.C. 3507(d)), the Administration

for Children and Families submitted

these sections to the Office of

Management and Budget (OMB) for its

review. The Pre-Prints, ACF–118 and

ACF–118–A, have been approved by

OMB—OMB Number 0970–0114,

expires 5/31/2000. The OMB also

approved both data collection forms, the

ACF–800 (OMB Number 0970–0150,

expires 3/31/2000) and the ACF–801

(OMB Number 0970–0167, expires 11/

30/2000).

Title: State/Territorial Plan Pre-Print

(ACF–118) and Tribal Plan Pre-print

(ACF–118–A) for the Child Care and

Development Fund (Child Care and

Development Block Grant).

Description: These legislativelymandated plans serve as the agreement

between the Lead Agency and the

Federal Government as to how CCDF

programs will be administered in

conformance with legislative

requirements, pertinent Federal

regulations, and other applicable

instructions and guidelines issued by

ACF. This information will be used for

Federal oversight of the Child Care and

Development Fund.

Respondents: State governments and

territories, Tribal organizations.

ANNUAL BURDEN ESTIMATES

Instrument Number of respondents

Number of responses per

respondent

Average burden hours per

response

Total burden

hours

ACF–118 ........................................................................................................... 56 .5 30 840

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

Estimated Total Annual Burden Hours: 4,485.
39938 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

Title: Child Care Annual Aggregate Report—ACF–800.

Description: This legislatively mandated report collects program and participant data on all children and families

receiving direct CCDF services. Aggregate data will be collected and will be used to determine the scope, type, and

methods of child care delivery, and to provide a report to Congress.

Respondents: States, the District of Columbia, American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and

the U.S. Virgin Islands.

ANNUAL BURDEN ESTIMATES

Instrument Number of respondents

Number of responses per

respondent

Average burden hours per

response

Total burden

hours

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

Estimated Total Annual Burden Hours: 2,240.

Title: Child Care Quarterly Case Level Report, ACF–801.

Description: This legislatively-mandated report collects program and participant data on children and families receiving

direct CCDF services. Disaggregate data will be collected and will be used to determine the participant and program

characteristics as well as cost and level of child care services. The data will be used to provide a report to Congress.

Form ACF 801 represents the data elements to be collected and reported to ACF.

Respondents will be asked to sample the population of families receiving benefits on a monthly basis and submit

the three most current monthly samples to ACF quarterly. States are allowed to submit the data monthly if they choose

to do so. Each monthly sample is drawn independent of the other samples and retained for submission within a

quarterly report. ACF is not issuing specifications on how respondents compile overall database(s) from which samples

are drawn. ACF provided respondents sampling specifications which specify a minimum sample size of approximately

200 cases. States are allowed to submit their total monthly population.

Respondents: States, the District of Columbia, American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and

the U.S. Virgin Islands.

ANNUAL BURDEN ESTIMATES

Instrument Number of respondents

Number of responses per

respondent

Average burden hours per

response

Total burden

hours

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

Estimated Total Annual Burden Hours: 4,360.

The Administration for Children and

Families considered comments by the

public on evaluating whether the

proposed collections are necessary for

the proper performance of the functions

of ACF, including whether the

information will have practical utility.

Comments regarding specific items are

discussed in the preamble. The quality,

usefulness and clarity of the information

to be collected will be enhanced by the

technical assistance provided and the

regional meetings that ACF has

convened.

Amended Regulations, 45 CFR Part 98

We have chosen to present 45 CFR

Part 98 as an amended whole. We

believe that the publication of the whole

text of Part 98 will facilitate

understanding of the impact of the

amendments on the regulations that are

retained. In addition, we made a

number of other minor editorial changes

throughout the regulations to enhance

clarity, to reflect the change of program

name from the Child Care and

Development Block Grant (CCDBG) to

the Child Care and Development Fund

(CCDF), and to reflect the change from

‘‘Grantee’’ to ‘‘Lead Agency’’ for reasons

explained in this preamble at § 98.2.

We have made the following changes

to the regulations.

Title/heading: Part 98.

Subparts—A, E and F.

Sections—98.1, 98.13, 98.15, 98.43,

98.45, 98.51, 98.52, 98.53, 98.61, 98.62,

98.63, 98.64, 98.65, 98.70, 98.71, and

98.81.

Definitions: § 98.2 is now an

alphabetical listing.

Removed: (e), (f), (n), (o), (s), (gg) and

(nn).

Added: Child Care and Development

Fund (CCDF), Construction,

Discretionary Fund, Facility, Major

Renovation, Mandatory Funds,

Matching Funds, Modular unit, Real

property, and Tribal Mandatory Funds.

Assurances and Certifications: § 98.15

has been reorganized to reflect the

statute intent that states ‘‘assure’’ they

meet certain requirements and ‘‘certify’’

that they meet others.

Tribes: We have consolidated tribal

regulations from §§ 98.16(b), 98.17(b)

and 98.60(g) into Subpart I.

The following distribution table

summarizes what has been added,

removed, revised and redesignated.

Existing section Action New section

Added ......................................................................... 98.1(a)

98.1(a) and (b) ............................................................ Redesignated ............................................................. 98.1(b) and (c).

98.1(b)(7) .................................................................... Removed.

98.1(b)(8) .................................................................... Redesignated ............................................................. 98.1(c)(7).

98.2(a), (j), (q), (mm) .................................................. Revised ...................................................................... 98.2—Alphabetical.

98.10(b) and (e) .......................................................... Revised ...................................................................... 98.10(b) and (e).
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39939

Existing section Action New section

98.11(a) and (b)(8) ...................................................... Revised ...................................................................... 98.11(a) and (b)(8).

98.12(a) and (c) .......................................................... Revised ...................................................................... 98.12(a) and (c).

Added ......................................................................... Introductory.

98.13(a) ....................................................................... Revised ...................................................................... 98.13(a) and (b).

98.13(b) and (c) .......................................................... Removed.

98.13(a)(10) ................................................................ Redesignated ............................................................. 98.13(c).

98.13(a)(11) ................................................................ Redesignated ............................................................. 98.13(d).

98.14(a-c) .................................................................... Revised ...................................................................... 98.14(a-c).

98.15 ........................................................................... See note above. .........................................................

98.16(a) ....................................................................... Redesignated ............................................................. Introductory.

98.16(a)(1–12) ............................................................ Revised ...................................................................... 98.16(a-l).

98.16(a)(13–16) .......................................................... Removed.

Added ......................................................................... 98.16(m-q).

98.16(a)(17) ................................................................ Redesignated ............................................................. 98.16(r).

98.17(a) ....................................................................... Revised ...................................................................... 98.17(a).

98.17(c) ....................................................................... Redesignated ............................................................. 98.17(b).

98.20(a) ....................................................................... Revised ...................................................................... 98.20(a).

98.21 ........................................................................... Removed.

Added ......................................................................... 98.30(c)(3).

98.30(c)(3–5) ............................................................... Redesignated ............................................................. 98.30(c)(4–6).

98.30(d) ....................................................................... Removed.

98.30(e-g) .................................................................... Redesignated ............................................................. 98.30(d-f).

98.31 ........................................................................... Revised ...................................................................... 98.31.

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

Added ......................................................................... 98.32(c).

98.33 ........................................................................... Revised ...................................................................... 98.33.

98.40(a) ....................................................................... Revised ...................................................................... 98.40(a).

98.41(a)(1) .................................................................. Revised ...................................................................... 98.41(a)(1).

98.41(c) and (d) .......................................................... Removed.

98.41(e-g) .................................................................... Redesignated ............................................................. 98.41(c-e).

98.42(d) ....................................................................... Removed.

98.43(a) and (b) .......................................................... Revised ...................................................................... 98.43(a) and (b).

Added ......................................................................... 98.43(c).

98.43(c) and (d) .......................................................... Redesignated ............................................................. 98.43(d) and (e).

98.43(e) and (f) ........................................................... Removed.

98.45 ........................................................................... Revised ...................................................................... 98.45.

98.50(a) and (c) .......................................................... Revised ...................................................................... 98.50(a) and (c).

98.50(d) ....................................................................... Removed.

Added ......................................................................... 98.50(d-f).

98.51(a) and (b) .......................................................... Revised ...................................................................... 98.51(a).

98.51(c-f) ..................................................................... Removed.

98.51(g) ....................................................................... Redesignated ............................................................. 98.51(b).

Added ......................................................................... 98.51(c).

98.52(a) and (b) .......................................................... Revised ...................................................................... 98.52(a).

98.52(c) ....................................................................... Revised ...................................................................... 98.52(c).

98.53 ........................................................................... Revised ...................................................................... 98.53.

98.54(a) ....................................................................... Revised ...................................................................... 98.54(a).

Added ......................................................................... 98.54(b)(3).

98.60(a), (d) and (f) .................................................... Revised ...................................................................... 98.60(a), (c) and (e).

98.60(b) ....................................................................... Removed.

98.60(c-f) ..................................................................... Redesignated ............................................................. 98.60(b-e).

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

98.60(i-j) ...................................................................... Redesignated ............................................................. 98.60(h-i).

98.61(a) and (b) .......................................................... Revised ...................................................................... 98.61(a).

98.62(a-c) .................................................................... Redesignated ............................................................. 98.61(b-d).

Added ......................................................................... 98.61(e).

Added ......................................................................... 98.62(a) and (b).

98.63(a) and (b) .......................................................... Redesignated, Revised .............................................. 98.64(b).

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

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

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

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

Added ......................................................................... 98.65(f) and (g).

98.67(c) ....................................................................... Revised ...................................................................... 98.67(c).

98.70 ........................................................................... Revised ...................................................................... 98.70.

98.71 ........................................................................... Revised ...................................................................... 98.71.

98.80 Introductory ....................................................... Revised ...................................................................... 98.80.

98.80(b) and (f) ........................................................... Revised ...................................................................... 98.80(b) and (f).

98.81(a) ....................................................................... Revised ...................................................................... 98.81(a).

Added ......................................................................... 98.81(b).

98.81(b) ....................................................................... Redesignated ............................................................. 98.81(c).

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

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

98.83(g) and (h) .......................................................... Removed.
39940 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

Existing section Action New section

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

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

Added ......................................................................... 98.84.

98.90(e) ....................................................................... Revised ...................................................................... 98.90(e).

98.92(a) ....................................................................... Revised ...................................................................... 98.92(a).

98.92(b) ....................................................................... Removed.

98.92(c) ....................................................................... Revised ...................................................................... 98.92(b).

98.92(d) and (e) .......................................................... Redesignated ............................................................. 98.92(c) and (d).

Added ......................................................................... 98.92(e).

Subpart A—Goals, Purposes and

Definitions

Goals and Purposes (Section 98.1)

This section of the regulations

includes at § 98.1(a) the goals for the

Child Care and Development Fund

(CCDF) contained in section 658A of the

amended CCDBG Act.

Comment: Two commenters suggested

the goals include a requirement for

parental choice rather than the reference

to a promotion of parental choice.

Response: The goal at § 98.1(a)(2) uses

the language of section 658A of the

amended CCDBG Act which is ‘‘to

promote parental choice.’’ This goal is

operationalized by other requirements.

Lead Agencies which opt to provide

care through grants and contracts in the

state child care program are also

required to provide certificates to

parents seeking child care. Additionally,

Lead Agencies are to include in their

programs a broad range of child care

providers, including center-based care,

family child care, in-home care, care

provided by relatives and sectarian

child care providers.

Comment: Two commenters suggested

goal one include a reference to planning

functions as well as program and policy

functions.

Response: Goal one is stated in the

statute as ‘‘to allow each State

maximum flexibility in developing

child care programs and policies that

best suit the needs of children and

parents within such State.’’ Although

we agree with the commenter on the

importance of planning, we believe the

goal at § 98.1(c)(4) of this regulation

already discusses planning for delivery

of services. Furthermore, the discussion

at § 98.14 reflects our belief in the

importance of the planning function in

the administration of the CCDF within

a State.

Comment: One commenter suggested

goal five be altered to reflect that health,

safety, licensing and regulations

standards are established by state law

and regulations.

Response: Goal five of the statute

already states ‘‘to assist States in

implementing the health, safety,

licensing and registration standards

established in State regulations.’’

Comment: One commenter cited one

of the stated purposes of the CCDF is to

increase quality of child care services.

This commenter believed this term

should be defined through reference to

specific standards of quality, such as the

National Association for the Education

of Young Children (NAEYC)

accreditation standards.

Response: We have chosen to not

define quality child care in these

regulations beyond the language found

in section 658G of the Act.

Definitions (Section 98.2)

We adopted the following changes for

this section: an updated definition of

the Child Care and Development Block

Grant Act; an amended definition of a

child care certificate reflecting its use as

a required deposit for child care

services; and an amended definition of

relative child care provider which

includes great grandparents and siblings

(if living in a separate residence) as

relative providers.

We substituted the term ‘‘Child Care

and Development Fund (CCDF)’’ for

‘‘Block Grant’’ and also defined the

constituent parts of the CCDF:

Mandatory Funds, Matching Funds,

Discretionary Funds, and Tribal

Mandatory Funds.

In light of the new section 6580(c)(6)

of the Act which allows Tribes to use

CCDF funds for construction and

renovation of child care facilities, we

also adopted these terms: construction,

facility, major renovation, modular unit,

and real property.

As proposed, we have replaced

separate terms for ‘‘Grantee’’ and ‘‘Lead

Agency’’ with the single term ‘‘Lead

Agency.’’ We did this for a number of

reasons. First, there was not a

meaningful difference between those

terms. Second, we wished to remove

any ambiguity that could result from the

use of two different terms. Third, we

wanted to emphasize the streamlined

administration of all child care

programs in a State that resulted from

PRWORA. We believe that use of the

term ‘‘Lead Agency’’ conveyed that

sense of unified and expanded

responsibility better than the term

‘‘Grantee.’’ Lastly, we wanted to avoid

any confusion that could arise when the

State uses subgrantees in implementing

the CCDF. We have replaced the specific

term ‘‘Grantee,’’ as formerly defined,

with ‘‘Lead Agency’’ throughout these

regulations, although there remain some

instances where the word ‘‘grantee’’

appears in its common usage. In these

final regulations, we also corrected the

definition of Lead Agency to include all

parts of the definition of grantee which

were inadvertently omitted in the

proposed rule.

Comment: Some commenters on this

section questioned definitions for which

no changes had been proposed. For

example, commenters questioned the

distinction between a ‘‘child care

provider that receives assistance’’ and

an ‘‘eligible child care provider’’ as well

as why the definitions for various

providers were based on the location of

the care provided (e.g., in-home care)

rather than the nature of the care (e.g.,

formal vs. informal), or was based on

the number of providers present (e.g.,

group home child care provider).

Response: Because no changes were

proposed for the terms questioned by

the commenters, we refer them to the

preamble discussion for those terms in

the final rule of August 4, 1992. We

believe that explanation, found at 57 FR

34359, adequately addresses their

specific concerns. Our position, like the

definitions themselves, remains

unchanged.

Comment: One commenter wanted us

to clarify that minor remodeling, within

the limits set forth in the Act, does not

fall under the definition of major

renovation.

Response: Section 98.54(b)(1)

provides that States and others may use

CCDF funds for minor remodeling. But,

rather than create a separate definition

for minor remodeling, State Lead

Agencies may assume that an

improvement or upgrade to a facility

which is not specified under the

definition of major renovation adopted

in this rule may, by default, be

considered a minor renovation and,
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39941

therefore, is allowable under the Act.

Lead Agencies are cautioned of the

distinctions at § 98.54(b)(1) and

§ 98.54(b)(2) between minor renovations

that are permissible for sectarian

organizations and those that are

permissible for others.

Comment: Another commenter

wanted us to define ‘‘deposit’’ as used

in the definition of child care certificate

and suggested several components of a

definition.

Response: Our definition mirrors the

language of the Act. We believe that the

phrase ‘‘if * * * required of other

children’’ is sufficiently limiting of the

common usage of the word ‘‘deposit’’ as

to make the other definitions suggested

by the commenter unnecessary.

Comment: One commenter asked that

we expand the definition of certificate

to include electronic transfers using an

ATM machine, for example, suggesting

that recordkeeping could be simplified

and payments to providers made more

promptly.

Response: It is not necessary to

change the definition as suggested. The

definition already recognizes that a

certificate need not be a check, but

could be an unspecified ‘‘other

disbursement’’. Electronic transfers may

be considered child care certificates if

they meet the requirements of § 98.30(c),

i.e., issued directly to the parent, of a

value commensurate with the subsidy

value of other child care services offered

by the Lead Agency, etc.

Comment: A commenter asked that

the definition of a certificate be

broadened to include a check issued in

the name of both the parent and the

provider, regardless of whether it is sent

directly to the parent or provider.

Response: It is unclear why this

change was suggested. A check (or other

disbursement) issued in the name of

both the parent and the provider would

meet the existing definition. The critical

element is that parents can use such a

disbursement with any child care

provider they choose. If the commenter

is suggesting that the parent be limited

to only the named provider(s), which

the parent may not have chosen, then it

is not a ‘‘certificate’’ within the meaning

of the Act.

Comment: One commenter observed

that we had not proposed a definition of

‘‘special needs child’’.

Response: The Lead Agency has

complete flexibility to define this term.

It should be noted that the Lead Agency

may define the term differently for

purposes of prioritizing under § 98.44(b)

from the definition it uses for purposes

of payment rates as discussed at § 98.43.

The use of the term is unchanged since

the 1992 rule and we are unaware of the

need to regulate a definition for ‘‘special

needs child’’ now.

Comment: One commenter thought

that our definitions somehow limited

‘‘informal’’ care to only that care

provided in the child’s own home (i.e.,

in-home care) and that this reduced

needed Lead Agency flexibility as well

as limited a family’s options.

Response: We assume that the

commenter understood the regulations

to allow unregulated care only if it is

provided in the child’s own home.

There is no such restriction in these

regulations, nor has there been such a

restriction in the past. Any child care

that is legal in a jurisdiction, including

care that the jurisdiction chooses not to

regulate, is an option available under

the Act, provided the requirements

designed to protect the health and safety

of the child are also met.

Comment: One commenter observed

that the definition of relative is too

narrow and that it would exclude some

relatives as defined in some Native

American cultures, for example, the

‘‘hanai’’ system in Hawaii, where family

is informally ‘‘adopted’’ or related.

Response: Any relative who meets

applicable state and local requirements,

if any, may provide care, not just those

listed in our definition. The definition

is statutory and is provided solely for

the purpose of identifying those

relatives who may be exempted—but,

only if the Lead Agency chooses to

exempt them—from the health and

safety requirements at § 98.41. The

definition was not created to limit who

may provide care.

Comment: Finally, a commenter noted

that a definition for ‘‘tribal

organization’’ was no longer included in

this section.

Response: The PRWORA amendments

broadened the definition of ‘‘tribal

organization’’ to include the following

‘‘other organizations’’: (1) A Native

Hawaiian organization; and (2) a private

nonprofit organization established for

the purpose of serving youth who are

Indian or Native Hawaiian. However,

the ‘‘other organizations’’ may only

receive Discretionary Funds. Therefore,

since not all tribal ‘‘organizations’’ are

eligible to receive both parts of the

CCDF (Discretionary Funds and Tribal

Mandatory Funds), we initially decided

to omit this definition entirely from this

section and specifically define the new

terms for ‘‘other tribal organizations’’ in

the Preamble at § 98.61(c). The

definition for tribal organization has

been placed back in this section. This is

the same definition used in the prior

final rule (57 FR 34415, August 4, 1992).

Since the ‘‘other tribal organizations’’

may only be funded with Discretionary

Funds, they are defined and discussed

in the Preamble at Subpart G, Section

98.61(c).

Subpart B—General Application

Procedures

Lead Agency Responsibilities (Section

98.10)

The new statute did not change the

responsibilities of the Lead Agency. The

amended statute at section

658D(b)(1)(A), however, expands the

CCDF Lead Agency’s ability to

administer the CCDF program through

other agencies. This change broadens

the ability of the Lead Agency to

administer the CCDF program through

governmental or non-governmental

entities, not just ‘‘other State agencies’’

as provided in the original CCDBG Act.

These entities could include local

governmental agencies and private

organizations. The new statute and the

Conference Agreement report (H.R. Rep.

No. 725, 104th Cong., 2d Sess. (1996))

are silent regarding whether the nongovernmental agencies cited in this

statutory change must be non-profit

organizations, so ACF has not regulated

on the characteristics of the agencies

through which the Lead Agency may

administer the program.

Comment: One Lead Agency asked

whether the ability to administer the

program through other nongovernmental agencies meant that the

State child care advisory council could

have a stronger role in setting standards.

Response: The regulations have never

limited Lead Agencies from including

others in the creation of child care

policy or the setting of State standards

for child care. However, § 98.11(b)(2)

and (8) provide that the Lead Agency

shall continue to promulgate rules and

regulations governing the overall

administration of the program and that

all agencies and contractors that

determine individual eligibility shall do

so according to the rules established by

the Lead Agency.

The change in the regulation is to

allow entities other than the Lead

Agency to administer the day-to-day

operation of the program.

Comment: Another Lead Agency

asked us to delete the requirement at

§ 98.10(c) which requires consultation

with local governments. Barring that,

they asked for definitions of

‘‘appropriate representative’’ and ‘‘local

government’’.

Response: Congress created the

requirement for the Lead Agency to

‘‘consult with appropriate

representatives of units of general

purpose local government’’ at section

658D of the Act, and hence it can not
39942 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

be deleted. As States and localities

differ greatly in their governmental

structures, we believe it is inappropriate

to attempt to offer all-encompassing

definitions for these terms. A Lead

Agency may wish to consult its legal

counsel if it is unable to determine

whom it should consult with to meet

this statutory requirement.

Administration Under Contracts and

Agreements (Section 98.11)

Under the latest statutory

amendments, the Lead Agency remains

the single point of contact and retains

overall responsibility for the

administration of the CCDF program.

We have amended this section,

however, to reflect the statutory change

discussed at § 98.10 regarding the Lead

Agency’s additional flexibility to

administer the program through other

governmental or non-governmental

agencies.

Further, since we made revisions

corresponding to the added

administrative flexibility granted to the

Lead Agency, we also wanted to align

the wording of this section more closely

with the statute concerning the overall,

lead responsibility of the Lead Agency.

Thus, we have re-worded the

paragraphs in this section that suggested

that the Lead Agency ‘‘shares’’

administration of the program with

other entities, because the relationship

between the Lead Agency and other

entities through which it administers

the CCDF is not co-equal.

Comment: One commenter wanted us

to delete the requirement at § 98.11(b)(2)

requiring the Lead Agency to

‘‘Promulgate all rules and regulations

governing overall administration of the

Plan’’ contending that when the CCDF

is administered through other entities it

should be up to the other agency to

promulgate the rules for that part which

it is administering.

Response: We do not agree that this

provision should be deleted. The Lead

Agency is ultimately responsible for the

program irrespective of who administers

the day-to-day operations. And, it is the

Lead Agency against whom penalties

will be assessed even if caused by

actions of a subgrantee. It is because we

hold the Lead Agency accountable that

the provisions in § 98.11 exist.

The requirement for the Lead Agency

to promulgate rules does not preclude

subgrantees from suggesting, or even

creating the policy and procedures by

which the program or a part of the

program operates. However, those

policies and procedures must be issued

under the auspices (i.e., promulgated) of

the Lead Agency to ensure that they

conform with the requirements of the

Act and regulations, and the program

described by the Lead Agency in the

Plan it submits to ACF.

Coordination and Consultation (Section

98.12)

Section 658D(b)(1)(D) of the Act

requires the Lead Agency to coordinate

the provision of CCDF child care

services with other Federal, State, and

local child care and early childhood

development programs. Coordination is

crucial to the successful implementation

of child care programs and quality

improvement activities. The regulation

at § 98.12(a) also requires the Lead

Agency to coordinate its child care

services with the specific entities

required at § 98.14(a) to be involved in

the CCDF Plan development process:

Temporary Assistance for Needy

Families (TANF), public health,

employment services, and public

education.

The statutory changes under

PRWORA significantly heighten the

need for enhanced coordination

between TANF and child care. TANF

imposes increased work requirements

both regarding the number of TANF

families participating in work and the

number of hours they must work. At the

same time, the guarantee of child care

for families who are in work or

approved education and training and

guaranteed Transitional Child Care

assistance were eliminated when

PRWORA repealed the title IV–A child

care programs.

Moreover, PRWORA provides new

child care funding. It gives the CCDF

Lead Agency administrative oversight

over both the new funds and the funds

authorized under the amended Child

Care and Development Block Grant Act.

The law requires that States dedicate 70

percent of these new funds to the child

care needs of families that receive

assistance under a State program under

Part A of title IV of the Social Security

Act, families that attempt through work

activities to transition from such

assistance, and families that are at risk

of becoming eligible for such assistance.

Under the new law, Tribes also receive

additional child care funds and have the

option to operate TANF programs.

Tribes that operated tribal programs

under the now-repealed Job

Opportunities and Basic Skills Training

(JOBS) program, may continue to

operate work programs under the newly

created Native Employment Works

program (NEWP). Considered together,

these changes present both an

opportunity and a challenge for Lead

Agencies to serve the child care needs

of TANF families.

It is extremely important that children

and their families are linked to a system

of continuous and accessible health care

services. An ongoing Departmental

initiative encourages the linkage

between child care and health care. In

May 1995, Secretary Shalala initiated

the Healthy Child Care America

Campaign, which encourages States and

localities to forge linkages between the

health and child care communities.

Recognizing the mutually beneficial

roles, we require that the Lead Agency,

as part of its health and safety

provisions, assure that children in

subsidized care be age-appropriately

immunized. We believe that children

will benefit substantially from this

enhanced linkage between child care

and health services.

Employment is the goal for most

TANF families and employment

services are critical to the low-income

working families served by the CCDF.

Therefore, it is only prudent that the

Lead Agency coordinate with those

State agencies that are responsible for

providing employment and

employment-related services. But child

care is also emerging as an important

workforce development issue for the

entire population. As such, we believe

that Lead Agencies should undertake

policies that support and encourage

public-private partnerships that

promote high quality child care.

Linkages with education agencies are

crucial to leverage additional services

and enhance child development. One

important aspect of this linkage is the

role played by public schools as a

critical on-site resource for child care.

Although PRWORA repealed section

658H of the Child Care and

Development Block Grant Act, which

directly addressed before- and afterschool child care, in the budget for

fiscal years 1997 and 1998 Congress

nevertheless set aside $19 million

specifically to use for before- and afterschool child care activities and child

care resource and referral. We, therefore,

believe that the repeal of section 658H

should not result in a lessening of

coordination with before- and afterschool programs. We have included

requirements to coordinate with public

education agencies, both for the purpose

of child care planning and development,

as well as for more general coordination

initiatives.

Aside from requiring Lead Agency

coordination with specific entities

discussed above, we also strongly

encourage coordination with other

agencies with potential impact on child

care, including: Head Start collaborative

offices, child support, child protective

services (especially when the Lead
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39943

Agency chooses to include children

receiving protective services among the

families eligible for CCDF subsidies),

transportation, National Service, and

housing.

The Head Start comprehensive model

of health, parent involvement, family

support and education, when linked

with child care, can provide parents and

children with quality comprehensive

full day/full year services. Promising

models that fund Head Start-eligible

children in community-based child care

provided in child care centers and

homes are emerging across the country.

We encourage Lead Agencies to explore

and support such efforts.

Partnerships with National Service

programs present promising

opportunities for collaborations that can

expand and enhance child care for both

young children and school-aged

children. National Service programs

have developed several effective and

replicable models for providing the

tools and skills necessary to build the

capacity and sustainability of local child

care programs, involving parents and

community volunteers in child care

activities, and enlisting private sector

participation in meeting community

needs, including child care.

The availability of transportation is

key to enabling families to access child

care services and, ultimately, work.

Coordination with transportation

agencies and planning groups can

ensure that child care facilities are

located near major transportation nodes

for easier access and that systems of

public transportation support travel

patterns of low-income workers.

Alleviating transportation difficulties

for child care cuts down on travel time

and stress, and allows parents to focus

on achieving self-sufficiency through

work and education.

Child care and child support

enforcement programs serve many of the

same families and have a shared

mission—to promote self-sufficiency of

families and the well-being of children.

As a result, we encourage collaborative

outreach initiatives between these

programs. For example, child care

programs can disseminate information

to parents about paternity establishment

and child support enforcement. We also

encourage the two programs to

coordinate on policy issues. For

example, the programs have a common

interest in assuring that the State

guidelines used to calculate child

support awards adequately consider the

cost of child care.

Coordinating with housing agencies is

crucial for the millions of TANF

recipients and low-income workers who

receive child care subsidies and reside

in public housing. Locating child care

facilities in or near public housing

makes services more accessible, and can

provide parents with a more stable and

familiar environment for their children’s

care. Lead Agencies can work with

public housing authorities to identify

opportunities where co-located housing

and child care can serve as an

employment or entrepreneurial strategy,

and a support service for residents.

We also wish to highlight that the

regulation at § 98.12(c), which requires

States to coordinate, to the maximum

extent feasible, with any Indian Tribes

that receive CCDF funds has new

meaning in the context of the changes

made by PRWORA. As we have noted

above, Tribes are eligible to directly

receive additional child care funding,

and to operate TANF as well as

continue to operate work programs

(NEWP)—if the Tribe operated a JOBS

program in 1994. Nonetheless, the new

law did not amend section 6580(c)(5),

which specifically provides tribal

children with dual eligibility for both

tribal and State child care programs

funded under CCDF. A broad range of

options for implementing and designing

programs is available to both States and

Tribes. States and Tribes, therefore,

have a mutual responsibility to

undertake meaningful coordination in

designing child care services for Indian

families.

Comment: A few commenters thought

that our coordination requirement was

statutorily unfounded or unnecessary

because it may fail to include the most

critical partnerships.

Response: It seems unlikely that a

CCDF program could successfully meet

two of the goals of the Act—providing

child care to parents trying to achieve

independence from public assistance,

and assisting States in implementing

State health, safety and licensing

standards—without involving, at a

minimum, the additional agencies

added at § 98.14 in this rule. In fact,

since the inception of the program, we

have been told by Lead Agencies and

the public that coordination with

Federal, State, and local child care and

early childhood development programs,

and the four additional agencies listed

is critical to the ongoing successful

delivery of quality child care in a State.

This requirement recognizes that the

coordinative process helps maximize

existing resources and avoid duplicative

efforts which can result in more positive

outcomes for the families and children

served by all of the programs involved.

Comment: A number of commenters

suggested other agencies with which the

Lead Agency should be required to

coordinate, for example, representatives

of the American Academy of Pediatrics,

the National Association for the

Education of Young Children, the State

special education preschool program

administrator, the early intervention

lead agency, and the child welfare

agency, among others.

Response: Many Lead Agencies

already collaborate with some or all of

the agencies suggested and we

encourage others to do so as well.

However, we do not believe it is

prudent to expand the coordination

requirement at § 98.14 to include those

entities with whom many Lead

Agencies are already voluntarily

collaborating. We kept our required list

to a critical core of agencies. This is not

intended to diminish the importance of

other collaboration efforts. It would not

be reasonable to create an all-inclusive

list of potential collaborative agencies.

We have confined the regulations to the

core required collaboration.

Comment: Several commenters asked

if our intention was to limit

coordination only to governmental

entities. In this regard, others asked that

the reference to the public education

agency be expanded to specifically

include private and sectarian schools

and early education programs.

Response: Our requirement recognizes

that the impact for the greatest number

of families is likely achieved by

coordination at the State level. The

regulation attempts to maximize the

coordination by including those

agencies whose activities impact most of

the eligible or potentially eligible

families in a State. It is not our

intention, however, to limit

coordination to only governmental

entities. And, we encourage Lead

Agencies to coordinate with private and

sectarian schools and early education

programs, especially since such

institutions and programs are already

utilized by many families.

Comment: One commenter thought

that use of the phrase ‘‘at a minimum’’

in § 98.14(a) weakens the intent of

broader coordination with additional

entities.

Response: We agree and have

reworded the regulation.

Applying for Funds (Section 98.13)

The requirements for Tribes applying

for funds have been moved to Subpart

I and are discussed there. We have

separated the tribal requirements in

order that the discussion of tribal

requirements may be more focused and

coherent.

We simplified the application process

for States and Territories in order to

reduce the administrative burdens of

duplicative information requests and to
39944 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

provide budget information in the CCDF

Plan, which is a public document.

Heretofore, the regulations required an

annual ‘‘application,’’ separate from the

Plan. This separate application

indicated the amount of funds

requested, broken down by proposed

use (e.g., direct services, administration,

quality activities, etc.). A Plan that

describes the entire child care program

in detail is also required, but only once

every two years. In the past, the Plan

did not provide a ‘‘fiscal context’’ for

the program, since it does not include

budgetary information.

In the past, the separate application

requested extensive budget information,

largely due to the requirements related

to the now-discontinued 25 percent

setaside of funds for quality and supply

building. Because we knew that the

budget data was preliminary, we had

not required its inclusion in the Plan or

made it subject to the compliance

process. More importantly, the budget

information was not subject to the

public hearing process.

We believe that the Lead Agency, in

setting the goals and objectives of the

program and in determining how to

achieve them, must consider the

allocation of funds, as well as the

program and administrative activities

that will be undertaken. We also believe

that public knowledge of how funds

might be allocated among activities and

eligible populations is critical to the

planning process. Therefore, we are

requiring the Lead Agency to include in

its Plan an estimate of the percent or

amount of funds that it will allocate to

direct services, quality activities, and

administration. These estimates are for

the public’s consideration in the hearing

process; they will not be used to award

funds. At § 98.13(a) we have retained

the requirement that the Lead Agency

apply for funds. The ACF–696 is the

formal vehicle for providing estimates to

ACF for the purpose of awarding funds.

We intend to use the financial form

ACF–696 to fulfill this requirement, so

that the need for a separate application

is obviated.

The Plan estimates will be macrolevel estimates. That is, the Plan will

reflect an estimated amount (or

percentage) of funds that the Lead

Agency proposes to use for: all direct

services, for all quality activities and for

administration. We will not ask that

these estimates be broken down into

subcategories as we had in the separate

application.

Comment: One commenter objected to

the use of estimates thinking that the

form for formally requesting funds from

DHHS, which replaces the application

process, was at least two years from

being utilized.

Response: That form, the ACF–696,

was under OMB review when the

proposed rule was published and has

since been approved and is already in

use.

Comment: Although our proposal to

restructure the application process

received almost universal support, some

commenters wanted assurances that

States would not be held accountable if

estimates are incorrect as a result of

future policy or budget changes.

Another commenter wanted us to

require that future Plans include a

comparison between the amounts

estimated in prior Plans with the actual

expenditures for those periods.

Response: As we said in the proposed

rule, we recognize that these are

estimates and, as such, will not be

subject to compliance actions. Similarly,

approval of a Plan will not be withheld

based on the Lead Agency’s allocation

of funds among activities, unless the

Plan indicates that the requirements for

administrative cost or quality

expenditures will be violated.

We considered the suggested

requirement to compare past estimates

with actual expenditures for the same

period but rejected it for a number of

reasons. First, such a requirement

would call into question our assertion

that the estimates supplied in the Plan

are, in fact, estimates and that ACF will

not take compliance actions based on

them. Second, because expenditure

periods for funds overlap Plan periods

a full statement of actual expenditures

would not be forthcoming until several

years after the original estimate, when

the persons responsible for the estimates

may no longer be in a position to be

‘‘accountable’’ to the public for those

estimates. Lastly, interested parties can

always request that the Lead Agency

make public its spending on various

activities. In any event, the Lead Agency

is already required to provide

information on the actual use and

distribution of funds to ACF, pursuant

to section 658K of the Act.

We continue to request the various

certifications and assurances that are

required by other statutes or regulations

and that apply to all applicants for

Federal financial assistance,

specifically:

• Pursuant to 45 CFR part 93,

Standard Form LLL (SF–LLL), which

assures that the funds will not be used

for lobbying purposes. (Tribal

applicants are not required to submit

this form.)

• Pursuant to 45 CFR 76.600, an

assurance (including any required

forms) that the grantee provides a drugfree workplace.

• Pursuant to 45 CFR 76.500,

certification that no principals have

been debarred.

• Assurances that the grantee will

comply with the applicable provisions

regarding nondiscrimination at 45 CFR

part 80 (implementing title VI of the

Civil Rights Act of 1964, as amended),

45 CFR part 84 (implementing section

504 of the Rehabilitation Act of 1973, as

amended), 45 CFR part 86

(implementing title IX of the Education

Amendments of 1972, as amended) and

45 CFR part 91 (implementing the Age

Discrimination Act of 1975, as

amended).

Section 98.13 requires the Lead

Agency, not the Chief Executive Officer,

to supply the requested information.

Since the Chief Executive Officer

designates the Lead Agency, we feel that

it is unnecessary for the Chief Executive

Officer to thereafter apply for funding

each year. This change gives grantees

the flexibility to simplify the

application process further.

In summary, the CCDF application

process for States and Territories

consists of the two-year CCDF Plan as

required in § 98.17 and such other

information as may be specified by the

Secretary. For the second year of the

Plan, the Lead Agency uses the ACF–

696 to provide ACF with its estimates of

funds needed quarterly—there is no

longer a separate ‘‘application’’ needed

from States and Territories in the

second year of the Plan period.

Comment: One commenter objected to

discontinuing the separate application

because it contained information on the

mix of certificates and grants/contracts

which could be used to monitor a Lead

Agency’s compliance with Section

658(c)(2)(A) of the Act concerning the

availability of certificates.

Response: The regulations at § 98.13

never required that the Lead Agency’s

application provide information on the

use of certificates. In the past, policy

Program Instructions requested such

information to ensure that Lead

Agencies met the statutory requirement

to provide certificates. This was

necessary because some Lead Agencies

had never provided certificates prior to

the CCDBG Act and the Act required all

Lead Agencies to have a certificate

program in place by October 1, 1992.

ACF looked to the information in the

application as a indication of the Lead

Agency’s compliance with this

requirement.

In the years since that deadline,

certificates have become an integral part

of every Lead Agency’s program, in fact

many State programs are totally
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39945

certificate-based. We are satisfied that

all Lead Agencies are in conformity

with this provision of the Act. It should

be noted that Lead Agencies are

required to report to ACF the actual

numbers of children receiving

certificates per § 98.71(b)(2).

Plan Process (Section 98.14)

Section 658D(b) of the Act requires

the Lead Agency in developing the Plan

to: (1) Coordinate the provision of

services with Federal, State and local

child care and early childhood

development programs; (2) consult with

appropriate representatives of local

governments; and (3) hold at least one

hearing in the State with sufficient time

and statewide notification to provide an

opportunity for the public to comment

on the provision of child care services.

In amending the CCDBG Act to

require that the Lead Agency provide

‘‘sufficient time and Statewide

distribution’’ of the notice of hearing,

Congress established a higher standard

for public comment than previously

existed in the Act. Affording the public

a meaningful opportunity to comment

on the provision of child care services

advances public participation, Lead

Agency accountability and the overall

goals of welfare reform. Accordingly, we

have established a minimum 20-day

notice-of-hearing requirement at

§ 98.14(c). That is, the Lead Agency

must allow a minimum of 20 days from

the date of the statewide distribution of

the notice of the hearing before holding

the hearing. Many Lead Agencies have

ongoing planning processes with broad

community involvement that convene

regularly during the year. We applaud

such broad participatory approaches as

they are especially responsive to

changing needs and these approaches

may fulfil the requirements of § 98.14.

Comment: Some commenters

preferred the previous requirement for

‘‘adequate notice’’ for public hearings

and were unaware of problems or

inadequacies of that process. Others

argued for a longer notice period and a

requirement for additional hearings in a

State.

Response: Congress clearly

envisioned something different from the

existing ‘‘adequate notice’’ process

when it amended the Act to require

‘‘sufficient time and statewide

distribution’’ of the public hearing

notice. We also have received reports

that some Lead Agencies provide such

short notice of hearings as to effectively

preclude broad public participation.

In the interest of State flexibility, we

have established only a minimum

amount of time—20 days—that the

public should be notified of the hearing.

However, we encourage Lead Agencies

to consider providing longer lead times

that would allow the public more time

to prepare for hearings, especially when

only a single hearing is held in the

State. Although the Act requires the

Lead Agency to hold only one public

hearing, the Lead Agency may, of

course, hold additional public hearings.

Because of technological changes which

might allow for public comment via the

Internet or linking sites across a State

via satellite, we have not regulated an

additional number of hearings that must

be held since Lead Agencies may find

other approaches for public input that

are equally effective and less costly than

additional hearings.

As stated in the proposed rule, we

considered establishing regulations

around the newly added statutory

language that requires ‘‘statewide

distribution of the notice of hearing.’’

Clearly, the expanded Child Care and

Development Fund potentially impacts

a much wider segment of the population

than may have been the case under the

CCDBG. In light of the stronger statutory

language about public hearings, we

considered, for example, a regulation to

require the Lead Agency to employ

specific media in publicizing its hearing

or to ensure that specific portions of the

population be potentially exposed to the

hearing notice.

We rejected these and other

alternatives as restricting State

flexibility. Nevertheless, we remain

concerned that some Lead Agencies may

not respond to the heightened statutory

requirement. We, therefore, require the

Lead Agency to describe how it

achieved statewide distribution of the

notice of hearing in its description of

the hearing process required in the Plan

by § 98.16(e). We received no comments

on this proposal.

Similarly, we have not established a

specific requirement concerning written

comments from the public as suggested

by some commenters. We believe,

however, that a meaningful public

comment process must consider written

comments from persons or

organizations, especially those who are

unable to attend a hearing.

At § 98.14(c)(2) we require that the

public hearing be held before the Plan

is submitted to ACF, but no earlier than

nine months prior to the effective date

of a Plan. We recognize that States may

have established public comment

mechanisms that coincide with their

budgetary cycle but not within our

usual time frames for public hearings

and Plan submittal. Therefore, we wish

to clarify our intention in this area.

ACF does not believe that the public

hearing is held for the purposes of

‘‘approving’’ the Plan as it will be

submitted, but rather to solicit public

comment and input into the services

that will be provided through the CCDF.

For this reason, we have created a

flexible process that does not create an

undue burden on Lead Agencies, yet

insures that the statutorily required

public input is obtained.

The Plan that is submitted to ACF

must reflect the program that will be

conducted and must incorporate any

changes to the program that the Lead

Agency chooses to adopt as a result of

the input received during the public

hearing. We advise the Lead Agency to

retain a copy of the draft Plan that it

made available for public comment in

fulfillment of this requirement. We also

remind Lead Agencies that substantive

changes in their programs, after their

Plans are submitted to ACF, must be

reflected by amending the Plan per

§ 98.18(b).

Comment: A few commenters

suggested that the Lead Agency be

required to specifically respond to

comments raised at the public hearing

or at least to those comments on the

Plan that are submitted in writing,

others suggested that the Lead Agency

be required to provide a summary of all

comments received on the Plan.

Response: We decline to require Lead

Agencies to summarize or respond to

comments received during the public

hearing process. The Act does not

suggest such a requirement and it is

unclear what would result from it. We

also believe that this would be an

especially resource-intensive activity for

the Lead Agency which would not

necessarily further the goals of the Act.

Comment: Some commenters objected

to any regulation around public input

stating that they had ongoing

mechanisms for coordination or input,

such as quarterly child care steering

committee meetings, others felt that a

State legislative or budget hearing

would fulfill the requirement. Still

others argued that the public hearings

are poorly attended or not helpful.

Response: At section 658D(b)(2) of the

Act, Congress clearly ties together the

hearing and the State Plan with the

expectation that the public be afforded

an opportunity to comment on the

content of that Plan. The Act requires a

hearing ‘‘to provide the public an

opportunity to comment on the

provision of child care services under

the State plan.’’

Ongoing mechanisms, such as those

suggested by the commenters may, in

fact, meet the requirements of the Act

when they allow for the public to

comment on the provision of services

under the State Plan. Some legislative
39946 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

oversight or budget hearings, in

contrast, may not meet this statutory

requirement if they do not allow for

public comment (i.e., the public is not

afforded an opportunity to comment as

when only the State Administrator or

legislators are allowed as witnesses).

Similarly, a single state budget hearing

held for the purpose of discussing the

entire State budget may not afford any

opportunity to specifically address child

care services in the State, especially in

the detail set forth in the Plan, as

required by the Act. It is not the

auspices under which the hearing is

held that is important, but whether the

hearing allows for the necessary public

input required by the Act.

Regarding attendance or participation

at public hearings in the past, we

believe that public hearings, designed

for broad public participation and held

with sufficient notification can

nevertheless become meaningful forums

for State child care policy discussions,

especially in future years.

Comment: A few commenters

objected to the requirement that the

hearing be held no earlier than 9 months

prior to submission of the Plan to ACF

as unnecessarily prescriptive.

Response: We maintain that the

requirement that hearings be held no

earlier than 9 months before the Plan is

submitted to ACF is a balanced

approach which allows the Lead Agency

to conduct its hearing up to a full year

in advance of the effective date of the

Plan. Allowing complete latitude in

setting the date for the public hearing

might make the hearing requirement

less meaningful and creates a

disconnect—the further from the

effective date of the Plan that the

hearing is held.

Comment: A number of commenters

argued that the child care Plan must be

made available before the public hearing

is held for there to be meaningful public

input. They suggested various

timeframes and formats for making

Plans available.

Response: We agree that meaningful

public comment on the ‘‘provision of

child care services under the State plan’’

as required by the Act is hampered, if

not impossible, without knowledge of

the contents of that Plan. For example,

the Act now requires the Lead Agency

to provide ‘‘detailed descriptions’’ of

various child care policies such as

parental access, parental complaints,

and payment rates among others. In

order to meaningfully comment, the

public must know what those policies

are. We believe this can only be

accomplished by providing the public

with the Plan that the Lead Agency

proposes to submit to ACF. Therefore, at

§ 98.14(c)(3) we are requiring that the

Lead Agency make the Plan available in

advance of the required hearing.

We decline to regulate on the

timeframes or formats for making the

Plan available to the public but remind

Lead Agencies of their obligations under

the Americans with Disabilities Act for

accessibility of public information.

Comment: One commenter asked for

flexibility in the format of the Plan that

is to be submitted to the public in

advance of the hearing suggesting that

various topics such as parent fees,

eligibility and payments rates be

presented, but not necessarily in the

format of the preprint that ACF requires.

Response: We agree that the Plan that

is presented in advance of the public

hearing need not be in the format of the

preprint. However, as a practical matter,

this may be the easiest format for the

Lead Agency to use. That is because the

Act requires comments on child care

services under the ‘‘State plan’’—the

requirements for which are outlined at

§ 98.16. As long as all of the elements

of the Plan as described at § 98.16 are

provided in advance of the hearing, then

the requirement is satisfied. We note

that many of the Plan elements, such as

most of the newly statutorily-required

‘‘detailed descriptions’’ probably will

not change from Plan to Plan, hence the

preprint format may not be as

burdensome as the commenter

imagines.

Comment: A number of commenters

opposed having amendments to the Plan

subject to the public hearing. They also

objected to applying the hearing

requirement to those Plans which were

to become effective on October 1, 1997.

Response: The proposed rule neither

required nor suggested that Plan

amendments are subject to a public

hearing. As has been the policy since

the inception of the program, this final

rule also does not require a public

hearing for amendments to approved

CCDF Plans. Although an amendment to

the Plan is not subject to the Federal

regulatory hearing requirement, we

recognize that State rules or Lead

Agency practice may, nevertheless,

require a hearing or public comment

period or both.

The preamble to the proposed rule

provided that the new CCDF Plans due

to ACF in 1997 were subject to the

statutory requirements—not the

proposed regulatory requirements—for a

hearing i.e., at least one hearing with

sufficient time and statewide

distribution of the notice. Although that

issue is now moot we wish to reiterate

that both the public hearing and the

coordination and consultation processes

must be undertaken each time the entire

Plan is required to be submitted. The

regulations provide that the entire Plan

is only required to be submitted at the

beginning of each Plan biennium.

As discussed above at § 98.12, we

believe that ongoing coordination and

consultation processes are vital to the

design of a successful program.

Therefore, at § 98.14(a) we have

included a minimum list of State

agencies with which the Lead Agency

must coordinate the provision of

services under the CCDF.

The requirement to coordinate with

specific agencies includes a provision

that the Lead Agency describe the

‘‘results’’ of the coordination. In the

proposed rule, we did not elaborate on

this requirement as we thought it selfevident. Because we did not give

context to this requirement, some

commenters ascribed purposes or

expectations that we did not intend.

Therefore, we wish to elaborate on this

part of the coordination requirement.

Prior to this rule Lead Agencies were

required to provide a ‘‘description’’ of

the coordination and collaborative

processes they engaged in during the

preparation of the State Plan. This

description in the Plans, however, was

frequently merely a list of agencies with

which the Lead Agency had met. Often

these descriptions did not change over

long periods, or the dates of the

meetings listed remained unchanged

from Plan to Plan. The ‘‘description’’

gave the impression that there was little

progress resulting from the coordinative

efforts of the Lead Agencies—that little

was happening. We knew this to be an

inaccurate picture.

The Plan is not just a public

document describing the State’s

approach to child care for the purpose

of its hearing process. It also serves as

a guide for other Lead Agencies about

promising practices, different

approaches to common problems and

can be an indicator of issues that others

may face in the future. Because of the

multiple uses of the State Plan, we

wanted the ‘‘description’’ of the

coordinative effort to more accurately

reflect what we knew was the reality in

the States. No other purpose is

contemplated or intended in asking that

the Plan reflect the ‘‘results’’ of the

coordination activities.

We recognize that coordination may

not have quantifiable results, especially

in the short term. Because coordination

is an ongoing process, an explanation of

the intended outcomes of a Lead

Agency’s current and planned

coordination activities would be an

appropriate ‘‘results’’. Similarly, a

compilation of the useful lessons

learned from the coordination activities
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39947

would meet our intent in asking that the

‘‘results’’ be described in the State Plan.

Additional comments relating to the

coordination and consultation

requirement and processes are

addressed in the discussion at § 98.12

Assurances and Certifications (Section

98.15)

The PRWORA amendments made a

number of changes to the assurances

under the CCDBG. In several instances

the term ‘‘assure’’ was replaced by the

term ‘‘certify.’’ Also, as described below,

the amendments changed the content of

two of the former assurances and some

assurances were eliminated.

While ACF believes that there is no

practical difference between an

assurance or certification, when both are

given in writing, we have grouped the

assurances together at § 98.15(a) and the

certifications together at § 98.15(b).

Regarding specific substantive

changes, the new section 658E(c)(2)(D)

of the Act replaces the former assurance

regarding consumer education. The

corresponding regulatory amendment at

§ 98.15(b)(3) uses the statutory language

requiring the Lead Agency to certify it

‘‘will collect and disseminate to parents

of eligible children and the general

public, consumer education information

that will promote informed child care

choices.’’

The new section 658E(c)(2)(E) does

not contain prior language requiring

Lead Agencies to have in place a

registration process for unregulated care

providers that provided care to children

receiving subsidized care under the

CCDBG Act. We, therefore, removed the

assurance formerly found at § 98.15(i).

We note, however, that the Lead Agency

has the flexibility to continue to

maintain a registration process for

providers if it chooses. This process has

enabled States to maintain an efficient

payment system. In addition it has

provided a means to transmit relevant

information, such as health and safety

requirements and training

opportunities, to providers who might

otherwise be difficult to reach.

The Act also revises the requirement

that providers meet all licensing and

regulatory requirements applicable

under State and local law. The revised

requirement at § 98.15(b)(4) mirrors the

new statutory language that there be ‘‘in

effect licensing requirements applicable

to child care services provided within

the State.’’

For tribal programs, the amendments

specifically provide that, ‘‘in lieu of any

licensing and regulatory requirements

applicable under State and local law,

the Secretary, in consultation with

Indian tribes and tribal organizations,

shall develop minimum child care

standards (that appropriately reflect

tribal needs and available resources)

that shall be applicable to Indian tribes

and tribal organizations receiving

assistance under this subchapter’’

(section 658E(c)(2)(E)(ii)). ACF is in the

process of arranging those consultations.

The PRWORA deleted requirements

formerly found in the statute at section

658E(c)(2)(H), (I), and (J). These

provisions, which related to reporting

reductions in standards, reviewing State

licensing and regulatory requirements,

and non-supplantation were deleted.

Finally, § 98.15(a)(6) requires that

States provide an assurance that they

have not reduced their level of effort in

full-day/full-year child care services if

they use pre-Kindergarten (pre-K)

expenditures to meet the MOE

requirement. Comments relating to this

assurance, and the use of pre-K in the

CCDF in general, are discussed further

at § 98.53.

Comment: One commenter suggested

strengthening the certification at

§ 98.15(b)(3) by requiring that the

consumer education be provided

through community-based

organizations. The commenter also

wanted us to clarify that such consumer

education be made available to the

general public throughout the State.

Response: We agree that communitybased organizations may, in fact, be the

best way of providing consumer

education as discussed at § 98.33.

However, in the interests of State

flexibility, we decline to limit the Lead

Agency’s options so narrowly. We note

that the certification already requires

dissemination of consumer education

materials ‘‘to the general public’’ and it

is our expectation that such materials

are widely made available and not

limited just to families applying for or

receiving CCDF subsidies.

Comment: Another commenter asked

that the certification at § 98.15(b)(7) be

clarified to define equal access as also

meaning timely payment of the provider

by the State. The commenter wanted a

certification that payments to providers

would be processed within a stateestablished timeframe, claiming that

lengthy delays in payment made

providers reluctant or unwilling to

accept subsidized children, thereby

effecting equal access.

Response: We agree that the Lead

Agency should establish timely

payment processing standards for the

reasons stated by the commenter.

However, there is no statutory basis for

requiring such standards and we decline

to change the regulation.

Comment: One commenter noted that

§ 98.15(a)(5) contained an incorrect

citation.

Response: We have corrected the

citation to read, ‘‘pursuant to § 98.30(f).’’

Plan Provisions (Section 98.16)

We have amended § 98.16 to reflect

changes in the Plan resulting from

PRWORA. For example, we have

deleted the language on registration and

the calculation of base-year level-ofeffort previously found at § 98.16(a)

(13), (14) and (16). We substituted for

them the statutory requirements for the

Lead Agency to provide detailed

descriptions of its parental complaints

process at § 98.16(m) and its procedures

for parental access at § 98.16(n).

Similarly, we have modified some

language to reflect new statutory

language. For example, § 98.16(h) now

discusses the additional purposes for

which funds may be used, and § 98.16(l)

now requests the summary of facts upon

which payment rates were determined,

including the conduct of a market rate

survey. Section 98.16(c) has been

expanded to identify the entity

designated to receive private donated

funds pursuant to § 98.53(f). We have

also modified the language at

§ 98.16(g)(2) to reflect broader flexibility

concerning the use of in-home care. We

received many comments on these

provisions. Those comments are more

appropriately discussed in the related

sections that follow.

We take this opportunity to correct

the wording of § 98.16(j), formerly

§ 98.16(a)(10), concerning health and

safety requirements. We have removed

the word ‘‘minimum’’ here since the

legislation contains no such

qualification, nor do our regulations

limit the flexibility to establish such

requirements. We note that § 98.41

remains unaffected by this correction

since that section did not include the

use of the word ‘‘minimum.’’

We have also required at § 98.16(p)

that the Lead Agency include in the

CCDF Plan the definitions or criteria

used to implement the exception to

TANF work requirement penalties that

applies when a single custodial parent

with a child under age six has

demonstrated an inability to locate

needed child care. Among others, the

definitions or criteria would include

‘‘appropriate child care,’’ and

‘‘affordable child care arrangements.’’

We elaborate on this requirement, and

the many comments received about it,

in the discussion of consumer education

at § 98.33.

Finally, § 98.16(q)(1) provides that the

Lead Agency describe State efforts to

ensure that pre-K programs, for which
39948 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

any Federal matching funds are

claimed, meet the needs of working

parents. At § 98.16(q)(2) we codified the

provision found in the preamble of the

proposed rule at § 95.53. This section

provides that, should the Lead Agency

use public pre-K funds to meet more

than 10% of either the MOE or the

Matching requirements, the Plan will

reflect this. The Plan must also describe

how the State will coordinate its pre-K

and child care services to expand the

availability of child care when the Lead

Agency uses public pre-K funds to meet

more than 10% of either the MOE or the

Matching requirements. These

requirements are discussed at § 98.53.

The Administration on Children will

issue appropriate amendments to the

State CCDF plan preprint (ACF–118)

and the Tribal CCDF plan preprint

(ACF–118A) in Program Instructions,

which will also provide guidance on

when Lead Agencies would be required

to submit amendments. The Program

Instructions will take into consideration

appropriate lead times for

implementation.

Comment: One commenter objected to

including TANF definitions in the State

child care Plan because then the child

care Plan would have to be amended

every time TANF changed its

definitions.

Response: Including TANF

definitions in the child care Plan is not

burdensome because those TANF

definitions are unlikely to change

frequently over the two-year life of the

Plan. In any event, changes to the TANF

definitions would not appear to be a

‘‘substantial change’’ in the CCDF

program. Hence, an amendment to the

Plan would not be required as discussed

in the preamble to the 1992 rule at 57

FR 34367. We repeat that the purpose of

this provision is for public education

about the requirements upon, and

options available to, low-income

working parents as discussed in the

preamble at § 98.33.

Comment: Another commenter felt

that States should not have to ‘‘justify’’

limits on in-home care in the Plan. She

suggested that a listing of the limits on

in-home care and the policy reasons for

those limits should be sufficient.

Response: We agree. It was not our

intent to make States justify the limits

they place on in-home care. Rather, we

want the Plan to reflect their basis for

doing so, in order for the public and

ACF to better understand the State’s

policy. We have accordingly changed

the wording of the regulation. The

preamble discussion at § 98.30 remains

essentially the same as we did not use

the word ‘‘justify’’ in that discussion of

in-home care, from which the Plan

requirement is derived.

Comment: A commenter observed that

the statute does not require that the

Lead Agency itself maintain the records

of substantiated parental complaints,

but rather requires the State to maintain

such records.

Response: We agree and have changed

the wording of § 98.16(m) to reflect the

requirement as discussed at § 98.32.

Period Covered by Plan (Section 98.17)

The statute was amended at section

658E(b) to eliminate the three-year

initial period for State Plans. The rule

provides that all Lead Agencies for

States, Territories, and Tribes must

submit new Plans every two years

beginning with the Plans for Federal

Fiscal Years 1998 and 1999.

Comment: One commenter observed

that two years is too short a period for

meaningful comprehensive planning

and that such a period may not coincide

with State legislative sessions. The

commenter asked for the ability to

prepare longer range plans, such as 3 to

5 year plans, with provision for annual

updates.

Response: We agree that a longer plan

period might better suit some Lead

Agencies’ planning cycles. However,

this requirement is statutory.

Subpart C—Eligibility for Services

A Child’s Eligibility for Child Care

Services (Section 98.20)

General eligibility. The amended

statute at 658P(4)(B) expands the

definition of ‘‘eligible child’’ to include

families whose income does not exceed

85 percent of the State median income

for a family of the same size. Therefore,

§ 98.20(a)(2) reflects that change.

We retained the State flexibility at

§ 98.20(a)(1)(ii) regarding the option to

serve dependent children age 13 and

over who are physically or mentally

incapacitated or under court

supervision. States may elect to serve

children age 13 or older who are

physically or mentally incapacitated or

under court supervision up to age 19, if

they include the age limit in their CCDF

Plan.

Foster care and protective services.

Grantees have the flexibility to include

foster care in their definition of

protective services in their CCDF Plan,

pursuant to § 98.16(f)(7), and thus

provide child care services to children

in foster care in the same manner in

which they provide services to children

in protective services.

A child in a family that is receiving,

or needs to receive, protective

intervention is eligible for child care

subsidies if he or she remains in his or

her own home even if the parent is not

working, in education or in training. In

these instances, child care serves the

child’s needs as much or more than the

parent’s needs. Likewise, child care

services may also be necessary when a

child is placed in foster care. Therefore,

if Lead Agencies do not include foster

care in their definition of protective

services, they must tie eligibility for

CCDF child care of children in foster

care to the status of the foster parent’s

work, education or training.

Comment: One commenter suggested

that the option to include foster care

within the definition of protective

services should be included in the

regulatory section.

Response: We agree. Therefore, we

amended § 98.20(a)(3)(ii) and

§ 98.16(f)(7) to ensure that States

carefully consider inclusion of this

option when developing and

implementing their CCDF Plan.

Comment: Most commenters were

pleased that children in foster care

could be eligible for child care services

since many States do not differentiate

between foster care and child protective

services. However, some commenters

felt that we should include foster care

in the regulatory definition of eligible

child so that all children in foster care

would be eligible.

Response: The statute did not

specifically provide for foster care as an

eligibility criteria. As states have

varying policies regarding services for

children in foster care and protective

services, we have not included foster

care in the regulatory definition. Rather

we will allow States flexibility in

determining if, and how, they will serve

children in foster care and protective

services. Therefore, a State must

indicate its intention of providing child

care services to children in foster care—

on the same basis as children in

protective services—by including foster

care in their definition of protective

services in the CCDF Plan.

Comment: Several commenters

believed that the child’s eligibility for

child care services should not be based

on the income of the foster parents.

Response: States continue to have the

flexibility to consider a child in foster

care as a family of one, for purposes of

determining income eligibility under

§ 98.20, on a case-by-case basis.

Respite care. We further clarified that

respite child care is allowable for only

brief, occasional periods in excess of the

normal ‘‘less than 24 hour period’’ in

instances where parent(s) of children in

protective services—including foster

parents where the Lead Agency has

defined families in protective services to
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39949

include foster care families—need relief

from caretaking responsibilities. For

example, a child care arrangement by

someone other than the custodial parent

for one weekend a month to give relief

to the custodial parent(s) of children in

protective services is acceptable. We

believe that this kind of respite child

care, if necessary for support to families

with children in protective services,

would be an acceptable use of CCDF

funds.

If a State or Tribe uses CCDF funds to

provide respite child care service, i.e.,

for more than 24 consecutive hours, to

families receiving protective services

(including foster care families when

defined as protective services families),

the CCDF Plan must include a statement

to that effect in the definition of

protective services. We note this

definition of ‘‘respite child care’’ may

differ from how States or Tribes define

it for other purposes (e.g., child

welfare). Thus, respite child care must

be specified in the Lead Agency’s Plan

if it is to be considered an allowable

expenditure under CCDF.

Comment: Several commenters felt

that States should be required to

provide respite care for children with

disabilities.

Response: Since respite care is

provided to give parents time off from

parenting, rather than care to allow the

parent to participate in work or in

education or training, the CCDF cannot

be used for respite care for children

with disabilities unless the child also

needs or is receiving protective services.

Subpart D—Program Operations (Child

Care Services)—Parental Rights and

Responsibilities

Parental Choice (Section 98.30)

Cash as a certificate. Since welfare

reform has raised issues about methods

of paying for child care, we wish to

provide clarification with respect to

child care certificates provided in the

form of cash. In defining the term

‘‘certificate,’’ the statute at 658P(2) says,

‘‘The term’’ child care certificate’ means

a certificate (that may be a check or

other disbursement) that is issued by a

State or local government * * * directly

to a parent who may use such certificate

only as payment for child care services

or as a deposit for child care services if

such a deposit is required of other

children being cared for by the

provider.’’

With a certificate or two-party check,

the Lead Agency can ensure that money

is paid to a provider who meets

applicable health and safety

requirements. This is not the case when

a Lead Agency provides cash to a

parent. We strongly discourage a cash

system, because providers must meet

health and safety standards, and we

believe that the use of cash can severely

curtail the Lead Agency’s ability to

conform with this statutory

requirement.

If, nevertheless, a Lead Agency

chooses to provide cash, it must be able

to demonstrate that: (1) CCDF funds

provided to parents are spent in

conformity with the goals of the child

care program as stated at section 658A

of the Act, i.e., that the money is used

for child care; and (2) that child care

providers meet all applicable licensing

and health and safety standards, as

required by section 658E(c)(2) (E) and

(F) of the Act. Lead Agencies, therefore,

may wish to consider having parents

who receive cash attest that the funds

were used for child care and to identify

the provider. Such a statement would

help assure that the funds were

expended as intended by the statute and

lessen the possibilities for fraud.

Finally, Lead Agencies are reminded

that they must establish procedures to

ensure that all providers, including

those receiving cash payments from

parents, meet applicable health and

safety standards.

Comment: One commenter was

concerned that we ‘‘strongly

discourage’’ the use of cash. She felt that

this stifled State innovation in piloting

new service delivery systems and ran

counter to the purposes of PRWORA in

instilling personal responsibility. In

recognizing that providing cash can

only be successful with intense parent

and provider education, the commenter

argued for State flexibility to experiment

without sanctions from ACF.

Response: We appreciate the

commenter’s thoughtful approach to the

question of providing cash. Like the

commenter, we believe that without

appropriate safeguards, such as intense

consumer education and the provisions

discussed above, the provision of cash

may not fulfill the goals of either

PRWORA or the CCDBG Act. While we

continue to discourage the use of cash,

we recognize that the Lead Agency

retains the flexibility to use it.

Availability of certificates. We

received an unexpectedly large number

of comments on our proposed

clarification concerning the availability

of certificates; many with strongly

argued positions. Some comments

favored the clarification, but most

opposed it.

Even though we proposed no changes

to the regulatory language at this Part,

the comments revealed a fundamental

belief that we were proposing to lessen

the emphasis on parental choice. That is

not the case. However, because of the

depth of reaction around this topic, we

have decided to withdraw the proposed

clarification rather than try to explain it

again in different words. Therefore,

concerning the availability of

certificates, the preamble to the 1992

Final Rule continues to apply and the

regulatory language remains unchanged.

In-home care. Child care

administrators have faced a number of

special challenges in monitoring the

quality of care and the appropriateness

of payments to in-home providers. For

that reason, we give Lead Agencies

complete latitude to impose conditions

and restrictions on in-home care. We

have revised § 98.16(g)(2) to require that

Lead Agencies, in their CCDF Plans,

specify any limitations on in-home care

and the reasons for those limitations.

The Lead Agency must continue to

allow parents to choose in-home child

care. However, since this care is

provided in the child’s own home it has

unique characteristics that deserve

special attention. In-home care is

affected by interaction with other laws

and regulations. For example, in-home

providers are classified as domestic

service workers under the Fair Labor

Standards Act (FLSA) (29 U.S.C. Section

206(a)) and are therefore covered under

minimum wage. As employees, in-home

child care providers are also subject to

tax requirements. In highlighting these

special considerations, we also note that

whenever the FLSA and other worker

protections apply, ACF is committed to

maintaining the integrity of these

protections. A strong commitment to

work, and therefore to worker

protections, is critical to welfare reform.

We are mindful that in-home care

plays a valid and important role in

meeting the needs of working parents,

and that many participants in

subsidized care programs rely on such

care to meet their family needs. Access

to care that meets the needs of

individual families is critically

important to parents and children, to

schools and the workplace, and to other

community institutions that interface

with the family. While in-home care

represents only a small proportion of all

available care in most communities, it

may be the best or only option for some

families and may prove valuable,

necessary and cost-effective when

compared to other options. There are a

number of situations in which in-home

care may be the most practical solution

to a family’s child care needs. For

example, the child’s own home may be

the only practical setting in rural areas

or in areas where transportation is

particularly difficult. Employees who

work nights, swing shifts, rotating shifts,
39950 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

weekends or other non-standard hours

may experience considerable difficulty

in locating and maintaining satisfactory

center-based or family day care

arrangements. Part-time employees

often find it more difficult to make child

care arrangements than do those who

work full-time. Similarly, families with

more than one child or children of very

different ages might be faced with

multiple child care arrangements if inhome care were unavailable. Many

families also believe that very young

children are often best served in their

own homes. Given the general scarcity

of school-age child care in many

communities, in-home care may enable

some families to avoid latchkey

situations before school, after school,

and when school is not in session. For

many families, in-home care by relatives

also reflects important cultural values

and may promote stability, cohesion

and self-sufficiency in nuclear and

extended families.

We urge child care administrators to

consider the capacity of local child care

markets to meet existing demand and

the role that in-home care may play in

the ability of parents to manage work

and family life. Although in-home care

does not represent a large share of the

national supply, it fills an important

niche in the structure and functioning of

local child care markets by extending

the ability of parents to care for children

within their own families, closing gaps

in the supply of community facilities,

and creating a bridge between adult care

and self- or sibling-care as children near

adolescence.

Some Lead Agencies may choose to

limit in-home care because of cost

factors. For example, a State might

determine that minimum wage

requirements result in payments for inhome care serving only one or two

children that are much higher than the

payments for other categories of care.

Therefore, the Lead Agency could elect

to limit in-home care to families in

which three or more children require

care. The payment to the in-home

provider would then be similar to the

payment for care of the three children

in other settings. This ability to limit inhome care allows Lead Agencies to

recognize the same cost restraints that

families whose care is unsubsidized

must face.

However, since in-home care has

proven to be an important resource, we

expect Lead Agencies to consider family

and community circumstances carefully

before limiting its availability. For that

reason, CCDF Plans must specify any

limitations placed on in-home care and

the reasons for those limitations.

ACF recognizes that giving Lead

Agencies complete latitude to impose

conditions and restrictions on in-home

care may affect parents’ ability to make

satisfactory child care arrangements and

thus their ability to participate in work,

education or training. We also recognize

the challenges of implementing health

and safety requirements in the child’s

own home, monitoring in-home

providers, and complying with Federal

wage and tax laws governing domestic

workers.

Comment: Several commenters

thought we were interpreting the FLSA

and, therefore, wanted the discussion

about it deleted. Others wanted us to

say that in-home child care providers

were independent business contractors

and not domestic employees.

Response: We have not interpreted

the FLSA: we have simply restated the

FLSA’s characterization of in-home

child care providers as domestic service

workers. ACF cannot determine that inhome child care providers are to be

considered independent business

contractors.

Interpreting the FLSA, and other wage

and tax laws, is the responsibility of

other Federal agencies, such as the

Department of Labor, the Department of

the Treasury and the Social Security

Administration, as noted by several of

the commenters. While we have not

regulated that the minimum wage must

be paid to in-home providers, as some

commenters thought, we would be

extremely remiss in not alerting Lead

Agencies to the existence and possible

applicability of other laws. Nor can we

ignore violations of those laws simply

because their enforcement is the

purview of another Federal agency.

We continue to work with the

responsible Federal agencies to help

clarify issues around the use of in-home

child care providers and will work with

the other appropriate Federal agencies

to provide guidance to Lead Agencies.

We also recognize that there have been

instances where the Federal or State

agency responsible for determining the

applicability of the FLSA and the

minimum wage requirements have

reached very different conclusions in

seemingly similar cases. Therefore, we

encourage Lead Agencies to work with

the appropriate local representatives of

the other Federal agencies to resolve or

clarify the State-specific questions they

may have regarding the applicability of

other laws and regulations.

Comment: One tribe wanted us to

exempt tribes from paying the minimum

wage to in-home providers.

Response: As discussed above, ACF

does not determine the applicability of

the FLSA and cannot make exceptions

to it.

Comment: One commenter wanted us

to define in-home child care providers

as any legally-exempt provider who is

otherwise not regulated but who is

specially authorized to provide care in

the child’s home or in the provider’s

home.

Response: It is unclear why it would

be useful to define in-home care in this

way. As discussed above, the unique

characteristic of in-home is its location,

not the regulatory status of the care.

Comment: One commenter wanted us

to require that in-home providers meet

health and safety requirements. Another

commenter wanted us to state that

Federal law does not require that CCDF

subsidies be given to parents or

providers known to be operating

inconsistently with applicable laws and

regulations. In this vein, the commenter

suggested that we encourage Lead

Agencies to require provider

documentation of compliance with

applicable laws, such as worker

compensation, unemployment

compensation, income tax withholding

for employees.

Response: In-home care must meet the

requirements established by the Lead

Agency for protecting the health and

safety of children pursuant to § 98.41.

In-home care, as a category of care, is

not exempt from health and safety

standards. And, relatives who provide

in-home care are not exempt from

health and safety requirements unless

the Lead Agency specifically chooses to

exempt them, as provided for at

§ 98.41(a)(1)(ii)(A).

The regulations at § 98.54(a)(2)

require that CCDF funds ‘‘shall be

expended in accordance with applicable

State and local laws.’’ Payments made to

parents or providers who are not in

compliance with applicable laws are

subject to disallowance in accordance

with § 98.66.

Comment: Several commenters stated

that the Lead Agency should have the

ability to define limits and regulate the

use of in-home care as they see fit and

that no further requirements, beyond the

description of the limits, should be

imposed.

Response: This comment mirrors our

policy. The Lead Agency has complete

flexibility to define the limits and

regulate the use of in-home care. As a

point of clarification, while the Lead

Agency may impose limits on the use of

in-home care, it cannot flatly prohibit

the use of in-home care. In-home care

remains an option that must be offered

to parents, pursuant to § 98.30(e),

subject to the limits established by the

Lead Agency.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39951

Parental Access (Section 98.31)

We have amended the regulations at

§§ 98.31 and 98.16(n) to reflect the new

statutory requirement at section

658E(c)(2)(B) that Lead Agencies have in

effect procedures to ensure unlimited

parental access and to provide a

detailed description of those

procedures. We have also amended

§ 98.15(b)(1) to reflect the statutory

change to certify, rather than assure,

that procedures are in effect to ensure

unlimited access.

Comment: One commenter asked that

we clarify this requirement as it relates

to parents who have limited contact or

custody rights as a result of a court

order. The commenter suggested that

Lead Agency procedures may restrict

access to only those persons identified

in the provider’s records as authorized

to remove the child(ren) from the

facility.

Response: We agree that the Lead

Agency should address these situations

and should establish their procedures in

light of court ordered restricted parental

contact or custody. However, we do not

believe that it is necessary to revise the

wording of the regulation nor do we

believe that Congress intended that we

create such a detailed Federal

requirement on the Lead Agency.

Parental Complaints (Section 98.32)

We have added paragraph (c) to the

regulations at § 98.32 and amended

§ 98.16 by adding paragraph (m) to

reflect the new statutory requirements at

658E(c)(2)(C) on parental complaints.

Under the changes, Lead Agencies must

provide a detailed description of how a

record of substantiated parental

complaints is maintained and made

available to the public on request. We

have also amended the regulation at

§ 98.15(b)(2) to reflect the requirement

of the statute at 658E(c)(2)(C) that a Lead

Agency ‘‘certify’’ rather than ‘‘assure’’

that it will maintain a record of

substantiated parental complaints.

Comment: Some commenters

questioned whether the Lead Agency

had to maintain the record of

substantiated complaints, since this

function may occur at another part of

State government.

Response: We corrected the language

of this section to reflect that it is the

State, but not necessarily the Lead

Agency, that must maintain the record

of substantiated complaints and make

information regarding such parental

complaints available to the public on

request. However, in the Plan, the Lead

Agency must, nevertheless, provide the

detailed description of how such a

record is maintained and made

available.

Comment: One commenter, in

supporting the requirement,

recommended that any substantiated

complaint, whether submitted by a

parent or by someone else, be included.

Response: We agree that informed

parental decisions would be enhanced

by making all complaints, irrespective

of their source, available to the public.

And, we encourage the Lead Agency to

make all substantiated complaints

available to the public on request.

However, the Act requires only that a

record of substantiated parental

complaints must be maintained.

Parental complaints may include

substantiated complaints which

originate with persons acting in loco

parentis, for example a foster parent or

other guardian, not just a biological or

adoptive parent.

Comment: Another commenter was

concerned about the release of

confidential, libelous and/or

inappropriate material in the fulfillment

of this requirement. The commenter

voiced the expectation that we would

ensure that the State created very

structured procedures for maintaining

and guaranteeing that only substantiated

complaints are released to the public.

Response: The requirement clearly

states that only substantiated

complaints are to be released. As we

stated above, we do not believe that

Congress intended for us to create

detailed Federal requirements here.

States have the flexibility to create their

own procedures in this area, provided

the required statutory outcome is

achieved.

Consumer Education (Section 98.33)

We have amended the regulation at

§§ 98.33 and 98.15(b)(3) to reflect the

statutory requirement at section

658E(c)(2)(D) that the Lead Agency

‘‘certify’’ that it ‘‘will collect and

disseminate to parents of eligible

children and the general public,

consumer education information that

will promote informed child care

choices.’’ It is important to emphasize

that the use of the words ‘‘collect and

disseminate’’ is more proactive and

forceful than the former requirement

that consumer education ‘‘be made

available’’ to parents and the public. We

also believe that by changing the

wording, Congress wished to emphasize

the importance of consumer education

as a service to be provided by Lead

Agencies. This emphasis is also stressed

by the third goal of the CCDF, listed at

section 658A(b) of the amended CCDBG

statute, ‘‘to encourage States to provide

consumer education information to help

parents make informed choices about

child care.’’ Moreover, the amendment

to the reporting requirements at section

658K(a)(2)(D)—reflected in the revised

regulations at § 98.71(b)(3)—requires

Lead Agencies to report annually on the

manner in which consumer education

information was provided to parents

and the number of parents that received

such information.

The statute previously specified the

type of consumer education information

that the Lead Agency had to provide:

‘‘licensing and regulatory requirements,

complaint procedures, and policies and

practices relative to child care services

within the State.’’ The statute now is

less prescriptive. Consumer education

information is defined as that which

‘‘will promote informed child care

choices.’’ Thus, the statute leaves it up

to the Lead Agency to determine the

type of information that will help the

public and parents make informed child

care choices.

In the comments to the proposed rule,

however, we received numerous

comments advising us to strengthen the

consumer education requirement. Two

themes arose from the comments. One

frequently voiced comment was that

parents need to be informed that the full

range of providers is available to them,

especially when they receive

certificates. Included in the full range of

providers are sectarian and religious

providers, and we take this opportunity

to remind Lead Agencies that such

providers must be available to parents.

The second theme we heard was that

parents need to be aware of the

importance of health and safety

standards, and the extent to which

various categories of care or types of

providers provide health and safety

protections for children.

Additionally, in a report issued in

February 1998 by the Office of Inspector

General of the Department of Health and

Human Services, it was noted, ‘‘Good

consumer education is critical to

making the child care market function

properly. If parents are not able to make

informed choices, their access to the

market is limited. Further, if parents

demand safe and quality care, providers

are more likely to supply it.’’ The study

report, ‘‘States’ Child Care Certificate

Programs: an Early Assessment of

Vulnerabilities and Barriers’’ (OEI–05–

97–00320), which makes note of

Congress’ strengthening of the consumer

education requirements in the CCDBG

Act, has recommended that ACF take

steps to help States improve their

consumer education efforts.

We weighed these comments and the

new Inspector General report against

comments we received which generally

opposed any regulations at all on any of

the provisions we proposed and those
39952 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

that wanted consumer education

provisions in addition to the two

addressed above. We believe that

informed parental choice—which is the

reason for the consumer education

provisions—is supported by the

information suggested by these two

comments. We have, therefore,

reworded the regulation at § 98.33(a).

That section now specifies that Lead

Agencies must certify that consumer

education information given to parents

so they can exercise their right to choose

the type of care that best meets their

needs must, at a minimum, include

information about the full range of

providers available and on health and

safety requirements. States have

discretion in developing the content of

the consumer information materials in

these two areas; the regulations only

require that they be addressed.

While Lead Agencies have flexibility

in providing consumer education, ACF

strongly encourages Lead Agencies to

promote informed child care choices by

offering information about: the various

categories of care; the Lead Agency’s

certificate system; the rates for the

various categories of care; the sliding fee

scale; a checklist of what to look for in

choosing quality care; providers with

whom the Lead Agency has contracts for

care; the licensing regulations that some

providers must meet; the State’s policy

regarding substantiated complaints by

parents that is available upon request as

required by § 98.32; and local resource

and referral agencies that can assist

parents in choosing appropriate child

care.

The best child care arrangements are

developed in one-on-one consultation

with trained or experienced counselors.

Professional help with locating child

care is time- and cost-efficient for both

families and Lead Agencies. Thus, it

may be in the Lead Agency’s interest to

invest in strategies such as co-location

of child care resource and referral

counselors in work development offices

or agencies. Economists make the

argument that good consumer

information is critical to making the

child care market function more like

other markets. Moreover, experience has

shown that printed materials alone may

not always be a sufficient information

source, particularly if parents have low

literacy skills.

Comment: Several commenters

wanted us to require that consumer

education specifically include

information about the availability of

sectarian providers and that parents

may use certificates with religious

providers.

Response: It was partly in response to

these comments that we expanded the

requirement for consumer education to

now include information about the full

range of providers available to parents.

As the ‘‘full range of providers’’

includes sectarian and religious

providers, we do not believe it is

necessary to specify them—or other

types of providers—in regulation. Since

certificates, by definition, may be used

with any provider, including sectarian

providers, it seems unnecessary to be

more prescriptive.

Exception to individual penalties in

the TANF work requirement. Title I of

the PRWORA amends Title IV–A of the

Social Security Act and replaces the Aid

to Dependent Children (AFDC) with a

new block grant program entitled

Temporary Assistance for Needy

Families, or TANF. The new section

407(e)(2) addresses an exception to the

work requirement in the TANF program

and provides that a State may not

reduce or terminate TANF assistance to

a single custodial parent who refuses to

work when she demonstrates an

inability to obtain needed child care for

a child under six, because of one or

more of the following reasons:

(1) Unavailability of appropriate child

care within a reasonable distance from

the individual’s home or work site;

(2) Unavailability or unsuitability of

informal child care by a relative or

under other arrangements;

(3) Unavailability of appropriate and

affordable formal child care

arrangements.

The TANF penalty exception

underscores the pivotal role of child

care in supporting work and also

recognizes that the unavailability of

appropriate, affordable child care can

create unacceptable hardships on

children and families. Since Congress

provided that the new Mandatory and

Matching child care funding be

transferred to the Lead Agency under

the CCDF and also provided that at least

70 percent of the new funding must be

spent on families receiving temporary

assistance, in transition from public

assistance, or at risk of becoming

eligible for public assistance, the Lead

Agencies will be playing a critical role

in providing the child care necessary to

support the strong work provisions

found in TANF. It is therefore critical

that CCDF Lead Agencies help

disseminate information about the

TANF exception. Knowledge of this

exception, at least on the part of parents

who receive TANF, will be very

important in promoting informed child

care choices.

Therefore, we require that Lead

Agencies include information about it in

the consumer education information

they provide to TANF recipients. This

responsibility entails informing parents

that: (1) TANF benefits cannot be

reduced or terminated for parents who

meet the conditions as specified in the

statute and as defined by the TANF

agency; and (2) assistance received

during the time an eligible parent

receives the exception will count

toward the time limit on Federal

benefits stipulated by the statute at

section 408(a)(7).

In order for a Lead Agency to comply

with this requirement, it will need to

understand how the TANF agency

defines and applies the terms of the

statute to determine that the parent has

a demonstrated inability to obtain

needed child care. The elements that

require definition consist of:

‘‘appropriate child care,’’ ‘‘reasonable

distance,’’ ‘‘unsuitability of informal

care,’’ and ‘‘affordable child care

arrangements.’’

In our pre-regulatory consultations,

some groups urged us not only to ensure

that the CCDF agency disseminates

information about the TANF penalty

exception but to regulate the content of

the definitions or criteria used to

determine if a family is unable to obtain

needed child care. The approach we

have taken in this rule provides

flexibility and strikes an appropriate

balance between the roles of the CCDF

and TANF agencies. We recognize the

authority and flexibility of the TANF

program to define the terms established

by the statute. However, we strongly

encourage TANF agencies to define

‘‘appropriate care,’’ at a minimum, as

care that meets the health and safety

standards of the CCDF program,

specified at § 98.41.

We are requiring, under § 98.12 of the

regulations, that Lead Agencies

coordinate with TANF programs to

ensure, pursuant to § 98.33(b), that

TANF families with young children will

be informed of their right not to be

sanctioned if they meet the criteria set

forth in the statute and Plan. As part of

this coordination, at § 98.16(p) we are

requiring that the Lead Agency include

in its Plan the definitions or criteria the

TANF program has adopted in

implementing this exception to the

work requirement.

The new section 409(a)(11) of the SSA

specifies that if the TANF program

sanctions parents who are eligible for

this exception to the individual

penalties associated with the TANF

work requirements, it may incur a

penalty of up to five percent of its grant.

Therefore, coordination between the

Lead Agency and the TANF program in

this matter serves the best interests both

of the recipients of TANF benefits and

the service agencies themselves. ACF
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39953

issued proposed rules on the TANF

penalty provisions on November 20,

1997.

Comment: We received few comments

in support of our proposal to require

Lead Agencies to provide information

regarding the TANF penalty provisions.

Most commenters observed that this was

a TANF, not a child care issue, and that

the notice was an administrative notice,

not consumer education. Others

suggested that, in singling out TANF

families, this provision merely

continues the stigma associated with

welfare.

Response: We respect the

commenters’ views. And, we have

changed the requirement so that the

information on the penalty provision

need only be given to TANF families—

not all families. We have also amended

the regulation to recognize that other

agencies, not necessarily the Lead

Agency, may provide the information.

In light of the pressures of work

participation requirements on the TANF

agency, and ultimately on TANF

families, we believe that TANF families

need strong reinforcement of their right

to safe, affordable and appropriate care.

Informed consumer education means

that parents must not feel that they must

accept any child care, especially care

that they believe threatens the wellbeing of their child.

Comment: Some commenters

suggested that Lead Agencies should be

required to provide consumer education

only through child care resource and

referral (CCR&R) agencies.

Response: While CCR&Rs may be the

best providers of consumer education

information, there is no statutory basis

for limiting State flexibility in this way.

Comment: Several commenters

objected to including the TANF penalty

definitions or criteria in the CCDF Plan,

arguing that these belonged more

appropriately in the TANF Plan.

Response: A State’s definition of

‘‘appropriate child care,’’ ‘‘reasonable

distance,’’ etc., is germane to the

provision of child care in a State. And,

it is the overall provision of child care

in a State that the CCDF Plan is

intended to present to the public.

Because there is no fixed format for a

TANF plan, the definitions may not be

included there and thus may not be part

of the TANF 45 day notice process.

Therefore, these definitions and criteria

may not become publicly known. We do

not believe that the requirement is

either burdensome or excessive since

the TANF agency must develop the

criteria and definitions in order to

implement that program.

Subpart E—Program Operations (Child

Care Services)—Lead Agency and

Provider Requirements

Compliance With Applicable State and

Local Regulatory Requirements (Section

98.40)

We have amended the regulations at

§ 98.40(a) to reflect a change in Section

658E(c)(2)(E)(i) of the Act. The

amendment requires Lead Agencies to

certify that they have in effect licensing

requirements applicable to child care

services, and to provide a detailed

description of those requirements and of

how they are effectively enforced. This

change is also reflected in §§ 98.15 and

98.16. The statute notes, however, that

these licensing requirements need not

be applied to specific types of providers

of child care services.

Because amendments to section

658P(5)(B) have eliminated the

requirement for registration of

unlicensed providers serving families

receiving subsidized child care, we have

deleted the former regulation

§ 98.40(a)(2) requiring registration. This

change, however, does not prevent Lead

Agencies from continuing to register

unlicensed or unregulated providers,

and we encourage them to do so. Those

Lead Agencies that choose not to have

a registration process will be required to

maintain a list of providers. We discuss

this in more detail at § 98.45.

Health and Safety Requirements

(Section 98.41)

Section 658E(c)(2)(F) of the Act

requires a Lead Agency to certify that

there are in effect within the State,

under State and local law, requirements,

designed to protect the health and safety

of children, that are applicable to

providers serving children receiving

CCDF assistance. The applicable

requirements set forth in the Act

include ‘‘the prevention and control of

infectious diseases (including

immunizations).’’

Section 658E(c)(2)(F) further provides,

however, that nothing in the health and

safety requirements shall be construed

to require the establishment of

additional health and safety

requirements for child care providers

that are subject on the date of enactment

of the Act, under State and local law, to

health and safety requirements in the

categories described in the Act. The

regulations at § 98.41(a) reflect the

prohibition against establishing

additional requirements if existing

requirements comply with the Act.

As proposed originally on May 11,

1994 (59 FR 24510) and again in 1997

on July 23, 1997 (62 FR 39647), we

amended the regulation at § 98.41(a)(1)

to require that States and Territories

include as part of their health and safety

provisions for the control and

prevention of infectious diseases (by

reference or otherwise) the latest

recommendations for childhood

immunizations of their respective State

or territorial public health agency.

Based on comments received on the

most recent proposed rule, however, we

modified the final rule at § 98.41(a) to

delete language that, unintentionally,

could have caused some commenters to

believe that ACF was exceeding the Act.

Specifically, we deleted language that

related to establishing immunization

requirements. Based on another

comment, we also revised the rule to

clarify that immunizations are not the

only focus of the statutory requirement

on the prevention and control of

infectious diseases.

The immunization regulation at

§ 98.41(a)(1) applies only to States and

Territories. Consistent with the

amended Act, which requires the

Secretary to consult with Tribes and

tribal organizations to develop

minimum child care standards that are

applicable to Tribes and tribal

organizations that receive CCDF funds,

we have not extended the immunization

requirement to Tribes and tribal

organizations due to the anticipated

development of tribal health and safety

standards.

Until tribal health and safety

standards are issued, however, Lead

Agencies for Tribes and tribal

organization must meet the three basic

health and safety requirements specified

in the Act and these amended

regulations, including the basic

regulation on the prevention and control

of infectious diseases (including

immunizations). They do not, however,

have to meet the specific immunization

requirement that applies to States and

Territories under these final rules. We

anticipate that tribal immunization

requirements will be considered in the

consultation on the development of the

minimum child care standards with

Indian Tribes and tribal organizations.

While many State and territorial

public health agencies adopt the

recommendations of the Advisory

Committee on Immunization Practices

(ACIP) of the Centers for Disease Control

and Prevention (CDC), we wish to

emphasize that this amendment to the

regulations does not impose Federal

standards for immunization. Rather, it

allows the individual State or Territory

to apply its own immunization

recommendations or standards to

children receiving CCDF services. All

States and Territories have

recommendations or standards
39954 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

regarding immunization of individual

children.

The immunization provision at

§ 98.41(a)(1) is intended to ensure that

States address the statutory provision on

immunization as part of the statutorilymandated CCDF health and safety

standards.

Currently 22 percent of children in

the U.S. under the age of two are not

age-appropriately immunized. Since a

large percentage of children receiving

child care assistance are under five

years of age, we believe that the

immunization requirement will have a

positive impact in reducing the

incidence of infectious diseases among

preschool age children. Surveys of

licensed child care facilities indicate

that the majority of States require some

proof of immunizations for children

enrolled in licensed or regulated child

care centers and family day care homes.

However, individual States differ in

their specific requirements and

regulatory approaches, and

requirements for the immunization of

children in child care settings that are

exempt from licensure or other

regulatory provisions vary widely.

Vaccines are the most cost-effective

way to prevent childhood diseases.

Nationally, approximately $13.00 is

saved in direct medical costs for every

dollar spent on the measles/mumps/

rubella (MMR) vaccine, $29.00 is saved

for every dollar spent on the diphtheria/

tetanus/pertussis (DTP) vaccine, and

$6.00 is saved for every dollar spent on

the oral polio vaccine (OPV).

In requiring children to be ageappropriately immunized, we

considered that parents may not always

be able to access immunizations easily.

However, a number of national

initiatives are under way to promote

immunizations for all children. In

response to disturbing gaps in the

immunization rates for young children

in America, a comprehensive Childhood

Immunization Initiative (CII) was

developed. CII addresses five areas:

—Improving immunization services for

needy families, especially in public

health clinics;

—Reducing vaccine costs for lowerincome and uninsured families,

especially for vaccines provided in

private physician offices;

—Building community networks to

reach out to families and ensure that

young children are vaccinated as

needed;

—Improving systems for monitoring

diseases and vaccinations; and

—Improving vaccines and vaccine use.

The CDC and its partners in the

public and private sectors are working

to build a comprehensive vaccination

delivery system. The goals of the CII are

to ensure that at least 90 percent of all

two-year-olds receive each of the initial

and most critical doses, to reduce

diseases preventable by childhood

vaccination to zero, and put in place a

system to sustain high immunization

coverage. Since 1994, the National

Immunization Survey (NIS) has been

used to provide immunization coverage

estimates for all 50 States and 28 large

urban areas.

As part of the efforts in the CII,

immunization programs on the State

and local level are collaborating with

WIC programs (Special Supplemental

Food Program for Women, Infants, and

Children) to focus on children’s

immunization. For example, local WIC

clinics check the immunization records

of WIC participants, assist families to

find a primary health care provider, and

provide immunization information. Onsite immunization services are

sometimes also provided at local WIC

clinics.

On September 30, 1996, the CDC

awarded funds ranging from $130,000 to

$250,000, to education agencies in four

States (New York, South Dakota, West

Virginia, and Wisconsin) to deliver

immunization services to preschoolaged children in health centers at

elementary schools. Over the past four

years, welfare reform waivers were

granted to 18 States to allow them to

require parents to immunize their

children as a condition of receiving

assistance.

Lead Agencies for the CCDF have the

flexibility to determine the method they

will use to implement the immunization

component of these regulations. For

example, they may require parents to

provide proof of immunization as part

of the initial eligibility determination

and again at redetermination, or they

may require child care providers to

maintain proof of immunization for

children enrolled in their care. Lead

Agencies have the option to exempt the

following groups:

• Children who are cared for by

relatives (defined as grandparents, great

grandparents, siblings—if living in a

separate residence—aunts and uncles);

• Children who receive care in their

own homes;

• Children whose parents object on

religious grounds; and

• Children whose medical condition

contraindicates immunization.

While families are taking the

necessary actions to comply with the

immunization requirements, Lead

Agencies shall establish a grace period

during which children can continue to

receive child care services—unless, in

keeping with the statutory provisions

applicable to the CCDF, existing State or

local law regarding immunizations

required for the particular child care

setting would not allow for such a

period.

Finally, we encourage all Lead

Agencies to consider requirements that

provide for documenting regular

updates of a child’s immunizations.

Section 98.30(f)(2) and (3) prohibit

any health and safety requirements from

having the effect of limiting parental

access or choice of providers, or of

excluding a significant number of

providers. We do not think these new

immunization requirements will have

such an effect. Rather, we are convinced

that, when applied to all providers, they

will have the effect of enhancing

parental choice of providers, since all

providers will have the same

requirements. More importantly,

however, the requirements will promote

better health for children, their families,

and the public.

Pursuant to section 658P(5)(B) of the

amended Act, we have added ‘‘great

grandparents, and siblings (if such

providers live in a separate residence)’’

to the list of relatives who, at State

option, may be exempted from the

health and safety requirements at

§ 98.41(e) and to the definition of

‘‘eligible child care provider’’ at § 98.2.

We received many comments on the

revised health and safety provisions

from all types of commenters who made

a wide variety of observations. Several

commenters, including three Lead

Agencies, expressed their unqualified

support for the immunization provision.

A number of States who wrote to

comment on other provisions in the

proposed rule were silent regarding the

proposal, as were a couple of State

organizations. Other States expressed

support of the principle of assuring that

very young children are ageappropriately immunized. They,

however, had various concerns about

the proposed amendments to the rule

concerning health and safety provisions

as noted in the comments below. Some

States and State organizations supported

an alternate approach as noted below. A

number of children’s organizations

supported the provision, but asked for it

to be strengthened as noted below.

Comment: Some commenters said that

the proposed rule exceeded the

authority granted to the Secretary under

PRWORA and did not respect

congressional intent regarding the Act.

The commenters did not identify which

statutory provisions they believed were

exceeded. Additionally, however, they

pointed to the proposed State options

for exempting children receiving CCDF
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39955

services as evidence that ACF, not the

State, was establishing a health and

safety standard.

Response: The statutory language

regarding the establishment of health

and safety requirements for children

served by the CCDF essentially was

unchanged by PRWORA. The statute

clearly requires the State to establish

health and safety standards in three

areas. One of those areas, the control

and prevention of infectious diseases,

specifically includes immunizations in

health and safety requirements for child

care. We think that the commenters may

have focused on the provision at

658E(c)(2)(F) that states, ‘‘Nothing in

this [provision] shall be construed to

require the establishment of additional

health and safety requirements for child

care providers that are subject to health

and safety requirements in the

categories described [in the Act] on the

date of enactment of this subchapter

under State or local law.’’

The rule we adopted does not violate

this caveat to the health and safety

requirements of the Act. ACF is not

requiring States to establish additional

standards regarding immunization for

children receiving CCDF services where

those standards exist for all children

(CCDF-subsidized or not) in a category

of care. Rather, we are ensuring that

States follow the statutorily-mandated

requirement, which specifically

includes immunizations. The statute

requires immunizations in the case of

all care available to children receiving

CCDF services—not just to those

caregivers who are subject to existing

State requirements regarding

immunization of children in child care

settings. The regulation clarifies that

immunizations must be part of the

health and safety standards for all

providers.

We revised the final rule to delete the

phrase that might inadvertently have led

some to conclude that the regulation

exceeded the statute by seeming to

require new State immunization

standards. The provision now indicates

that Lead Agencies shall assure that the

State’s existing immunization standards

apply to all children receiving services

under the CCDF.

Further, the exemption options

should not be considered as evidence

that ACF is requiring specific health and

safety standards. Rather, the options

reflect recognition of the State’s

authority to determine the content of

health and safety standards and to

exempt statutorily specified relatives

from the health and safety requirement

generally.

Comment: Several commenters

suggested that ACF adopt an alternate

approach to the immunization

requirement. Specifically, they

suggested that instead ACF adopt a

provision requiring a State to describe

in its CCDF Plan its efforts to increase

immunization rates in relationship to

their child care programs and with

respect to outreach to children in

informal care.

Response: The alternative proposed

does not serve the objective of assuring

that the statutory provision is met.

Comment: Several States opposed the

CCDF rule regarding immunizations on

the grounds that they already have

requirements regarding immunizations

in child care settings.

Response: As explained in the

response to the first comment in this

section, where a State has rules for

immunization of children in child care

settings, these rules do not impose

additional or different requirements.

These rules apply in instances where a

State has not established the statutorily

required health and safety

immunization requirements for a

particular child care setting.

Comment: Two commenters noted

that the requirement for a grace period

for families to have their children

receiving CCDF services ageappropriately immunized could conflict

with existing State rules regarding

children entering child care. They asked

for the rule to take into account

instances where States have existing

immunization standards for child care

settings that do not allow for a grace

period.

Response: In the 1994 proposed rule,

when we only encouraged States to have

a grace period and recommended that

Head Start guidelines for an

immunization grace period of 90 days

be considered, we received a significant

number of comments asking that we

incorporate a grace period into the

CCDF rule on immunization. In 1994, an

overwhelming majority of comments

opposed tying the immunization

requirement to initial eligibility. The

view was that requiring immunizations

to be up to date before the child care

could start would be a barrier to

working. Commenters at that time

voiced concern that many low-income

parents might not immediately be able

to acquire the necessary immunizations

and could therefore lose access to

crucial child care services.

A significant number of commenters

in 1994 recommended that we

strengthen the language to require

Grantees to establish a grace period as

part of the immunization requirement.

With welfare reform’s stronger emphasis

on work, we believe that the grace

period is even more critical than we

envisioned in 1994. We, therefore,

retained the provision on the grace

period. States should understand,

however, that the provision at Section

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

§ 98.41(a) of these regulations, would

apply. That provision prohibits the

establishment of new or additional

standards if they exist for a particular

child care setting. We believe that the

complete regulation at § 98.41(a)

adequately conveys the principle, so

that no special modification of the rule

regarding the grace period is needed.

Comment: Some States commented

that the issue of immunizations is a

much larger issue than just for children

receiving CCDF subsidies. Some of these

commenters observed that in care

settings that States do not regulate there

could be children who are not required

to be immunized because they are not

receiving CCDF services and not subject

to other rules regarding immunization.

One commenter specifically noted that

the CCDF provision fragments efforts of

States that are seeking to develop a

comprehensive immunization plan.

Response: The fact that the

immunization issue is a bigger issue

than just within the CCDF should not

argue against using the CCDBG statutory

requirements in order to assist with the

need for very young children to be ageappropriately immunized. We do not

believe that this rule will conflict with

any other State initiative to immunize

young children. We encourage all States

to coordinate all child care and public

health services in order to foster an

importance linkage to fulfilling

immunization needs.

Comment: Some States commented

that they saw difficulties in

administering, tracking, or monitoring

the immunization requirement. There

were comments indicating that

assumptions were being made that a

cumbersome verification process would

be required of Lead Agencies.

Response: As we indicated in the

preamble to the proposed rule and in

the preamble above, we have not

imposed implementation requirements

for this provision. States have the

flexibility to implement the provision in

a manner that is not burdensome. Lead

Agencies are not required to provide

immunizations directly to children

receiving child care services. Nor are

Lead Agencies required to cover the cost

of the vaccines.

We anticipate that Lead Agencies

would incur most of the administrative

burden during the initial child care

application process when follow-up is

needed on children whose

immunizations are not current.

However, this burden should be greatly
39956 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

reduced as a result of the Childhood

Immunization Initiative. Under this

initiative, States will receive funds that

can be used to develop statewide

information systems which remind

parents when immunizations are due.

Lead Agencies for the CCDF should

work with their State immunization

program to develop comprehensive

immunization registries that will assist

in the implementation of the child care

immunization requirement.

To help ease the burden during the

initial application process, Lead

Agencies could consider: incorporating

tracking and follow-up into existing

redetermination procedures; flagging the

files of children who are not yet

immunized and allowing parents to

submit documentation by mail; or

including proof-of-immunization

information in the periodic report that

providers are already required to submit

to the Lead Agency. These processes

could be considered for both regulated

and unregulated providers.

States may also find that providing

parents with educational materials on

the importance of immunization can

play a key role in reducing

administrative burdens. While many

parents are aware that immunizations

are needed by school age, they may not

realize that children should receive

most vaccines before their second

birthday.

Comment: One commenter stated that

adding more specificity to only the

immunization part of the CCDF health

and safety standard on prevention and

control of infectious diseases could send

an unintended message that having

immunization provisions alone would

fulfill that statutory provision. The

commenter suggested that to ensure a

balance there should be more rules

regarding the scope and structure of the

statutory standard. Another commenter

suggested that ACF require or encourage

criminal background checks of

providers of CCDF services.

Response: We agree with the

commenter that the statutory provision

encompasses more than immunizations.

The law says that the State’s standards

in this area shall include

immunizations. The law would not be

understood to consist only of the aspect

of immunization in the prevention and

control of infectious diseases. Not all

diseases can be prevented by

immunizations. However, there is a

specific mention of immunization in

that provision in the Act that in our

experience has not been addressed by

all States in implementing the

provision, while other ‘‘prevention and

control’’ issues were addressed in at

least some minimal way in State Plans.

Based on the comment, we reviewed the

regulatory language and revised the

regulation to make it less likely to be

interpreted as the commenter did but

did not further regulate the statutory

language.

With respect to criminal background

checks, ACF considers such checks to

fall under the building and physical

premises safety standard in the statute.

Unlike the statutory requirement on

prevention and control of infectious

diseases, which specifically mentions

immunizations, the statute does not

specify any particular component that

would be part of the provision on

building and physical premises safety.

Therefore, we do not propose to further

regulate that health and safety

provision. We would agree with the

commenter that it is appropriate to

encourage States to adopt criminal

background checks as part of their effort

to meet CCDF health and safety

standards.

Comment: Some commenters stated

that there should be no exemption

option to requiring immunizations for

children receiving relative and in-home

care. Several recommended that the

requirement be implemented without

any possible exemptions.

Response: The Act and regulations

allow Lead Agencies the option to

exempt grandparents, great

grandparents, siblings (if the sibling

lives in a residence other than the

child’s home), aunts and uncles from

health and safety requirements.

Although this exemption is allowable by

statute, the statute does not require

States to make the exemption; States

may choose to require relative

caregivers to meet the same

immunization requirements as

established for other providers.

In allowing an exemption for in-home

care, we considered that these children

are not cared for in a communicable

group setting but in the privacy of their

own home, and therefore would be at a

more limited risk of contracting diseases

or spreading diseases than they would

be if in a group care setting with

children from different families. We

therefore think the in-home exemption

option is an appropriate reflection of the

statutory scope of the health and safety

requirement.

Finally, the regulation reflects the

basic exemption provisions (religious

and medical reasons) that States apply

to child care settings and school settings

where States have set immunization

standards. The regulation allows the

State similar flexibility in implementing

the statutorily-mandated CCDF health

and safety requirements where it does

not have existing immunization

requirements for all children in a care

setting. States have the flexibility to

determine which of the optional

exemptions to allow. However, they

may not expand the exemptions beyond

the categories outlined in the preamble

and regulation.

Comment: One commenter from an

Indian Tribe said that when a child is

in foster care, the foster care home

should be considered the child’s home

for the purpose of the exemption option

regarding in-home care.

Response: We agree with the

commenter. A foster care home would

be considered the foster child’s home

for the purpose of the CCDF

immunization exemption option

regarding in-home care. The State may

choose to include in-home care in a

foster home in the exemption for inhome care, or it may choose to not

include it. Tribes and tribal

organizations are reminded that the rule

on immunizations does not apply to

tribal child care, however, since ACF is

collaborating with Tribes to develop

tribal-specific health and safety

standards.

Comment: One commenter said that

ACF should require States to follow the

immunization recommendations of the

CDC, not the requirements of their own

State health agency, with respect to

these regulations.

Response: As we stated in this

section, while many State and territorial

public health agencies adopt the

recommendations of the Advisory

Committee on Immunization Practices

(ACIP) of the CDC, we wish to

emphasize that this regulation does not

impose Federal standards for

immunization. Rather, it allows the

individual State or Territory to apply its

own immunization recommendations or

standards to children receiving CCDF

services.

Comment: A few commenters said

they thought that the immunization

regulation does not reach children in

‘‘informal care arrangements.’’ One of

them observed that black children

would be disproportionately underserved by the requirement, because

black families tend to use a

disproportionate amount of informal

care. One of the commenters said that

the rule would not reach children where

the provider does not receive direct

payment.

Response: With the exception of the

four optional exceptions that the

regulation gives States the flexibility to

adopt independently of each other, the

immunization component of the CCDF

health and safety requirements must be

followed. To the extent relative or inhome care is considered to be
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39957

‘‘informal’’ and a State exercises its

option to exempt those settings from the

immunization regulation, a child in

those settings would not be required to

be age-appropriately immunized under

the CCDF. ACF strongly encourages

States to take full advantage of the

requirement to see to it that the

immunization needs of very young

children are met. Unless a State chooses

to exempt care in one of the specified

settings from CCDF immunization

provisions, however, it must have a

mechanism for carrying out the

provision, no matter how its payment

system is organized.

Comment: A number of commenters

stated with varying emphases their

perception that the immunization rule

places burdens on parents or providers

and could be a deterrent to parents or

providers using or participating in

CCDF services.

Response: As explained above, there

is an array of resources and approaches

available to States to ensure access to

immunizations by parents as well as

State flexibility to design a process for

implementation of the rule that is not

burdensome on providers. To meet the

needs of individual States to design the

most appropriate method of meeting the

rule, ACF intentionally left flexibility in

the regulation. We encourage States to

ensure that the requirement is met in a

manner that both fulfills the statute and

the rule as well as places minimum

burdens on families or the supply of all

categories and types of care.

Comment: Two commenters raised

issues relating to the possible adverse

side effects of immunizations. They

requested that States exempt children

receiving CCDF services from

immunization after parents have

received information about the risks and

choose not to immunize their children.

Response: All immunization

providers are required to inform parents

of potential side effects. Only a very

minute fraction of children receiving

immunizations experience harmful side

effects attributable to immunizations,

and the National Vaccine Injury

Compensation Program (NVICP) is

available to assist families whose

children have been harmed. Information

on the NVICP is available on 1–800–

338–2382. On balance, families that do

not appropriately immunize their

children place them in greater harm

than the immunizations do. Therefore,

we do not agree with the

recommendation to allow another

exemption to the immunization

regulation for children receiving CCDF

services.

Comment: A few commenters noted

that for effective implementation of the

rule, States should be required to

provide information—to parents of

CCDF-eligible children and to

unregulated providers of services to

children receiving CCDF subsidies—

about both the necessity for

immunizations and how to access free

immunizations. One commenter offered

the idea of mandating linkages between

the child care subsidy system and

public health clinics and other health

professionals. One commenter asked

that States be required to coordinate

with their State public health agency.

Response: We concur that effective

implementation would require States to

ensure parents and unregulated

providers have access to the kind of

information described by the

commenter. In keeping with the overall

objective of these revised rules to

achieve a balance between flexibility

and accountability, ACF believes that

regulation on this point is not necessary.

It is inherent for meeting the rule.

Moreover, nearly all States participate

in the Secretary’s successful Healthy

Child Care America campaign. This

campaign has a goal of linking child

care providers with the health

community and is one of the many

venues for coordination between the

child care community and the health

community.

Additionally, this final rule includes

two requirements that will enhance

coordination and informational

activities concerning immunization

under the CCDF. First, with respect to

State-level coordination, the final rule at

§ 98.14(a) requires that CCDF Lead

Agencies shall coordinate with the State

agency responsible for public health,

including the agency responsible for

immunizations. Second, based on a

large number of comments on consumer

education, we adopted at § 98.33 a

specific requirement that the Lead

Agency will collect and disseminate

consumer education information that

will promote informed child care

choices, including information about

health and safety. We consider

immunization information to be an

important part of such health and safety

information.

Further, developing partnerships

between the child care and health

community will help facilitate the

immunization process and ensure that

the health needs of children and

families are being met. We encourage

States to utilize existing service delivery

systems and networks to assist parents

in meeting immunization requirements.

The President’s Childhood

Immunization Initiative recognizes the

important role of States and local

organizations in identifying their

particular needs. In 1992, the Federal

government began helping States design

individually tailored Immunization

Action Plans. Outreach consultants in

each region assist States, local

organizations, and health professionals

in enhancing and expanding

partnerships with public and private

organizations. For more information on

partnerships with State and local

immunization programs, contact the

State Health Department or the CDC’s

National Immunization Program,

Program Operations Branch at 404–639–

8215.

Comment: One commenter said States

should be required to certify that

effective procedures are in place to

ensure that child care providers comply

with immunization requirements.

Response: We believe that the

regulation at § 98.41(d) suffices. It

requires Lead Agencies to certify that

procedures are in effect to ensure that

child care providers of services for

which assistance is provided under the

CCDF comply with all applicable health

and safety standards described in

§ 98.41(a). We think that the provision

does not require modification to cover

immunizations, to the extent that a Lead

Agency, in implementing the

immunization requirement at § 98.41(a)

places requirements on providers. We

remind commenters that the

immunization rule gives Lead Agencies

implementation flexibility.

Comment: One commenter stated that

the categories of relatives who are

exempt from CCDF health and safety

standards should be left up to the Lead

Agency.

Response: Our response remains as

stated in the Final Rule of August 4,

1992, that the intent of the statute was

to give grantees the option to exempt

certain relatives from the health and

safety requirements that all other CCDF

child care providers must meet. The

amended statute extends this exemption

to great grandparents and siblings (if

living in a separate residence) and we

have amended the regulations

accordingly. There is no statutory

authority to extend this exemption to

other types or categories of providers.

Sliding Fee Scales (Section 98.42)

For a further discussion of

copayments, see Section 98.43.

Equal Access (Section 98.43)

The Act requires Lead Agencies to

certify that payment rates are sufficient

to provide access to child care services

for eligible families that are comparable

to those provided to families that do not

receive subsidies. Section 658E(c)(4)(A)

requires the Lead Agency to provide a
39958 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

summary of the facts relied on to

determine that its payment rates are

sufficient to ensure equal access.

The regulation at § 98.43(b) requires a

Lead Agency to show that it considered

the following three key elements in

determining that its child care program

provides equal access for eligible

families to child care services:

1. Choice of the full range of

categories and types of providers, e.g.,

the categories of center-based, group,

family, in-home care, and types of

providers such as for-profit and nonprofit providers, sectarian providers,

and relative providers as already

required by § 98.30.

2. Adequate payment rates, based on

a local market survey conducted no

earlier than two years prior to the

effective date of the current Plan; and

3. Affordable copayments.

These elements must be addressed in

the summary of facts submitted in a

Lead Agency’s biennial Plan, pursuant

to § 98.16(l).

Comment: Some commenters felt that

Lead Agencies should simply be

required to summarize the facts they

relied on in setting payment rates,

without addressing the three key

elements mentioned above.

Response: Lead Agencies are free to

include additional facts they used in

determining rates that ensure equal

access. As discussed below, we are

convinced that a Lead Agency cannot

establish rates that ensure equal access

without reference to the three required

elements.

1. Full range of providers. All working

parents, regardless of income, need the

full range of categories of care and types

of providers from which they may

choose their child care services. This is

because child care needs vary

considerably according to the child’s

age and special needs, the parents’ work

schedule, provider proximity, cultural

values and expectations. Therefore, we

believe that the statutory requirement of

equal access means that low-income

working parents receiving CCDFsubsidized care must have a full range

of the categories and types of providers

from which to choose care that they

believe best meets their needs and those

of their children. This element helps

secure the parental choice requirements

at § 98.30 which already require that

parents who receive certificates be

afforded such variety.

2. Adequate payment rates. PRWORA

eliminated the requirement that, in

establishing payment rates, the Lead

Agency take into account variations in

the cost of providing care in different

categories of care, to different age

groups, and to children with special

needs. While eliminating the

requirement for different payment rates

for different categories of care, Congress

added a requirement that Lead Agencies

provide ‘‘a summary of the facts relied

on by the State to determine that such

rates are sufficient to ensure such

[equal] access.’’

The statute indicates that if families

receiving child care subsidies under the

CCDF are to have equal access to child

care, the payment rates established by a

Lead Agency should be comparable to

those paid by families who are not

eligible for subsidies. In other words,

the payment rates should reflect the

child care market. Although the

requirement for specified rate categories

has changed, the reality remains that the

market reflects differences along several

dimensions, and we do not believe that

Congress expected Lead Agencies to

establish a single payment rate for all

types of child care and all children

irrespective of age.

The focus of PRWORA on work

further highlights the need for CCDF

Lead Agencies, which now are required

by statute to administer the new

Mandatory and Matching Funds, to

establish payment rates that support

work. Child care is often the major

factor which determines whether

families are able to work—and access to

a variety of child care arrangements is

necessary both to support today’s

increasingly diverse workforce and

workplace demands, and to ensure that

the healthy development of children is

not compromised.

The major variable in the charges for

child care is the age of the child,

especially the added expense of caring

for infants and very young children.

And, payments that do not realistically

reflect the charges of caring for very

young children will frustrate the ability

of families to work. Under PRWORA,

many more families with infants and

pre-school-aged children will be

required to participate in work activities

for longer hours per week. In providing

the exception to the individual penalties

under TANF for single custodial parents

with a child under age six who cannot

obtain needed child care, Congress

recognized the special difficulties of

locating affordable care for young

children.

We anticipate that market rate surveys

will also show variations in rates among

categories of care, and we expect any

significant variations to be reflected in

the Lead Agency’s payments.

A system of child care payments that

does not reflect the realities of the

market makes it economically infeasible

for many providers to serve low-income

children—undermining the statutory

and regulatory requirements of equal

access and parental choice. Experience

with the now repealed title IV–A child

care programs and the CCDBG suggests

that providers limited their enrollment

of children with subsidies because the

subsidy payments were too low.

Similarly, failing to compensate

providers timely or not reimbursing

them for days when children are absent

also causes providers to refuse care to

children with subsidies.

Section 98.43(c) prohibits different

payment rates based on a family’s

eligibility status or circumstances. This

provision means that the Lead Agency

may not establish payments for TANF

families that differ from the payments

for child care for the working poor, or

for families in education or training, for

example. We believe that use of

different payment rates, based on an

eligibility status, precludes the

statutorily-required equal access to

child care for families receiving CCDF

subsidies. Additionally, different

payment rates would frustrate one of the

main intents in amending the Act in

1996—to have a unified child care

system with a single set of rules. This

purpose would be undercut if different

payment rates based on eligibility

criterion were permitted.

If payments for child care are to be

sufficient to provide equal access to

child care services in the open market,

then the payments must be established

in the context of market conditions. We

are convinced that a survey of market

rates is essentially the only

methodologically sound way for Lead

Agencies to ascertain whether the

payment rates they establish provide

equal access.

A market survey must be conducted

in the context of reasonably current

market conditions to ensure that the

payment rates continue to provide equal

access. Therefore, the regulations at

§§ 98.43(b)(2) and 98.16(l) require a

biennial market rate survey conducted

no earlier than two years prior to the

effective date of the currently approved

Plan.

Surveys should not be a burden to

States, which were required to conduct

market surveys in the past. States have

had a number of years’ experience with

the survey process. States have

complete flexibility to design such

surveys; we have not proposed a survey

methodology. We note, however, that

surveys may not be appropriate for

establishing payments for children with

special needs due to their need for

services on a highly individualized

basis and the effect of the Americans

with Disabilities Act on providers’

charges.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39959

In establishing payment rates we

suggest a benchmark for States to

consider. Payments established at least

at the 75th percentile of the market

would be regarded as providing equal

access. States have already recognized

that rates set at the 75th percentile—the

payment level formerly required in the

title IV–A child care programs—provide

equal access. Comparisons of past State

CCDBG and IV–A child care plans

revealed that the majority of States used

the same payment rate—the 75th

percentile IV–A rate—for both program

even though there was not a

requirement to pay at the 75th

percentile for CCDBG-funded care, only

the requirement that CCDBG rates

provide equal access. This same

requirement continues unchanged in

these regulations for the CCDF.

Comment: We received many

comments about the requirement for a

market survey; more comments favored

the requirement than opposed it. Most

of those favoring it wanted an annual

survey or additional requirements

around the timing of the survey or

implementation of the survey results.

Response: While we concur with the

commenters that it would be ideal to

conduct surveys more frequently, we

believe that a biennial survey balances

several considerations: that the rates

reasonably reflect the state of the

market, that Lead Agencies have

flexibility in designing and

implementing the survey to establish

rates, and that the administrative

burden and expense of conducting the

survey should be minimized. The Lead

Agency may conduct a complete survey

more frequently; it may also conduct

targeted subsamples in specific areas as

frequently as it deems necessary.

However, we choose not to require more

than a biennial survey.

Comment: Those commenters who

opposed the requirement maintained

that ACF had no authority to require a

survey; that the statute’s only

requirement is for ‘‘the facts relied on by

the State to determine’’ that rates are

sufficient to ensure equal access.

Response: An executive branch

agency charged with administering a

statutory program has general authority

to interpret the statutory provisions as

needed in its administration of the

program. As discussed above, we are

convinced that a survey of market rates

is the only methodologically sound way

for Lead Agencies to ascertain whether

the rates established are realistic, thus

providing the statutorily required

access.

Comment: A number of those

opposing the survey requirement said it

stifled State initiative in setting rates.

For example, one commenter said that

relying on frequent reports from

resource and referral agencies or the

State licensing bureau of provider

shortages and making quick adjustments

to rates to develop more capacity in

effected areas would be a better, more

responsive alternative to biennial

surveys. Another commenter suggested

using computer modeling in lieu of a

survey.

Response: A survey, in that it reflects

market realities, is an essential and

critical factor—but not the only factor—

that must be considered when the Lead

Agency establishes rates. It is because

survey findings are so central to

understanding and gauging what level

of payment might provide equal access

that we have made the requirement.

However, we are concerned that

commenters may have assumed

restrictions we did not intend, and have

not created, in requiring a survey. And,

we caution Lead Agencies, providers,

and others against narrowly interpreting

our survey requirement. For example, as

suggested, up-to-the-minute vacancy

data from CCR&Rs or licensing bureaus

could be used in conjunction with

market rate survey information to make

quick and frequent adjustments to the

payments to providers. In setting or

adjusting rates, we remind Lead

Agencies of the general principle that

Federal subsidy funds can not pay more

for services than is charged to the

general public for the same service.

Computer modeling or simulation still

needs to be based on some parameters

reflective of market realities if it is to

produce rates that provide equal access.

Although many commenters who

opposed the survey requirement seemed

to imply that the realities of the market

could be ignored in setting rates that

provide equal access, no plausible

alternatives to the survey were offered.

Nevertheless, we will remain open to

alternative methodologies to surveys

and revisit this regulation in light of

advancing technologies. At this time,

however, we believe that a survey is an

essential part of the ‘‘facts’’ upon which

payment rates are established.

Comment: A few commenters

observed that surveys may not produce

rates where there are few, if any,

providers of certain care, such as in

non-traditional hours.

Response: As discussed above, the

survey is not the only determinant of

rates, it is just one of the many ‘‘facts’’

to be considered. Clearly, States have

the flexibility to establish rates for care

that is needed.

Comment: One commenter suggested

that a standard index, such as the rate

of inflation, be used to adjust rates

gathered two, three, or four years in the

past in lieu of a biennial survey.

Response: Use of a standard index

alone, such as the Consumer Price Index

(CPI) or other measures of inflation, is

not an accurate indicator of actual

provider charges in the child care

market. The use of broad indices, such

as the CPI could vastly underestimate

changes in the child care market. For

example, in a large urban area the

demand for child care may drive up

child care charges faster than the broad

inflation indices would suggest. While

States are free to use such adjustments

in conjunction with surveys, especially

in years when a survey is not

conducted, they should be used with an

understanding of their limitations.

Comment: One commenter observed

that the 75th percentile is a term held

over from days of IV–A child care (and

as such was repealed by PRWORA).

Another called the 75th percentile an

arbitrary limit with no basis in fact or

statute.

Response: We have used the 75th

percentile as a reference point against

which the Lead Agency can judge if its

payment rates afford equal access. It

must be presumed that a rate that

provides access to at least three-quarters

of all care does, in fact, provide equal

access. We have not, however, required

that payments be set at the 75th

percentile, hence, it cannot be

characterized as an arbitrary limit.

It should be noted, for example, that

Lead Agencies have greater flexibility

under these regulations to recognize and

compensate higher quality child care

facilities and providers, including those

that have obtained nationally or locally

recognized accreditation or special

credentials, than they had under the

title IV–A regulations that limited

payments to the 75th percentile.

Comment: A number of commenters

wanted it clarified in the preamble that

Lead Agencies can pay rates higher than

the 75th percentile.

Response: Lead Agencies may pay

rates higher than the 75th percentile as

we have not established the 75th

percentile as the payment standard or

limit. Rather, rates established at the

75th percentile would be considered to

ensure equal access, although such rates

may be too low to purchase some child

care services, for example, where there

are acute shortages during nontraditional hours.

Comment: Several commenters urged

ACF to require that payment rates

reflect variations for different categories

of care.

Response: When establishing rates,

we expect that the Lead Agency will

take into account survey results
39960 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

showing variations in charges for

different categories of care. But, because

there may be other facts that the Lead

Agency considers, we believe such a

prescriptive requirement would

contradict the intent of the statute.

Comment: A number of commenters

wanted us to clarify whether providers

can charge amounts above the payment

rates established by the Lead Agency;

and if so, how this might deny equal

access.

Similarly, a few commenters wanted

a clarification of how a combination of

low payment rates and high copayments

can limit or deny equal access.

Response: A payment rate which

provides for equal access does not

necessarily provide access to every

provider, irrespective of the provider’s

charge. There is no statutory basis for

preventing a family from choosing a

particular provider whose charges

exceed the Lead Agency’s payment rate.

Nor is there an obligation on the part of

the Lead Agency to pay an amount that

is higher than the rate it determined is

sufficient to provide equal access. In

cases such as these, some States have

created a contractual requirement that

the provider will not charge the family

the difference between its usual charge

and the Lead Agency’s rate. By offering

the provider speedy, assured payments,

the Lead Agency has been able to

convince the providers to accept this

stipulation.

The statute requires that the payment

rate alone must ‘‘be sufficient to provide

equal access.’’ We separately discuss the

question of copayments below.

Comment: One commenter said that

market rates should reflect current

market conditions on a sub-state basis,

rather than on a statewide basis.

Response: We believe that surveys

will reflect appreciable sub-state

variations in rates, if any, which the

State must then consider in establishing

its rates.

Comment: One commenter wanted it

clarified that children with disabilities

would not be adversely affected by a

Lead Agency’s payment rates.

Response: Payments for child care

services for children with disabilities

must also provide for equal access.

3. Affordable copayments. The third

essential element of equal access is that

any copayment or fee paid by the parent

is affordable for the family and sliding

fee scales should not be designed in a

way that limits parental choice. We

wish to emphasize that Lead Agencies

have flexibility in establishing their

sliding fee scales. However, in our view,

copayment scales that require a lowincome family to pay no more than ten

percent of its income for child care, no

matter how many children are in care,

will help ensure equal access.

Recent reports by the Census Bureau

indicate that families with income

below the poverty level pay a

disproportionate share of their income—

18 percent—for child care; whereas

families above the poverty level pay

only seven percent of their income for

child care. The size of the fee paid by

a low-income working parent can be

crucial in determining whether she and

her family become, and remain, selfsufficient. When devising the fee scale

Lead Agencies should try to ensure that

small wage increases do not trigger large

increases in copayments, lest

continuation on the path to selfsufficiency be jeopardized for any

family. The size of a fee increase is an

especially important consideration

because recent changes in the Food

Stamp, housing assistance, Medicaid,

SSI, and the Earned Income Credit

programs may also affect the resources

now available to a low-income working

family.

Recent studies have shown that some

child care providers are unwilling to

accept children from families that

receive subsidies for child care because

the rates are too low. Faced with such

a situation, a parent must seek care from

a relative or other provider who perhaps

accepts the child unwillingly and is

unable to provide quality child care.

Fifty-five percent of low-income parents

use informal care arrangements,

whereas only 21% of non-poor families

do. The options to low-income families

in selecting child care are limited to a

higher degree by financial constraints

than are the options for families with

higher income. If, in addition to low

rates, the family must pay a high fee

from an already limited income, the

family can hardly be said to be on the

way to total self-support. And in such

a situation, a family cannot be said to

have equal access to child care. The

limited access to providers for these

low-income families also tends to

promote unevenness of care, and this is

an additional hazard to the child’s

development.

There is a relatively low supply of

child care for infants, for children with

disabilities and for children of parents

who work during non-traditional hours.

For families in these categories, a

combination of low payments and high

fees can limit the choice to an even

greater extent, because they encourage

parents to choose less expensive and

lower quality child care, or even not to

accept the subsidy at all.

Sliding fee scales must continue to be

based on family size and income, as

§ 98.42(b) has not changed. We note that

this regulation provides Lead Agencies

with the flexibility to take additional

elements into consideration when

designing their fee scales, such as the

number of children in care. However, as

was stated in the preamble to the

regulations published on August 4,

1992, basing fees on the cost or category

of care is not allowed (57 FR 34380).

Similarly, multiple fee scales based on

factors such as a family’s eligibility

status would be precluded.

Comment: A number of States

indicated that there is no statutory basis

for limiting the fee to ten percent of a

family’s income, or that such a limit is

unnecessarily prescriptive.

Response: We would agree with the

comments if the regulations, in fact,

established a limit on copayments. They

do not.

Lead agencies have the flexibility to

set the copayment. We have suggested,

not required, that a family’s fee be no

more than ten percent of its income.

This benchmark is offered as a reference

point for Lead Agencies to consider

when designing fee structures for

affordable care.

Comment: A few commenters felt that

ten percent should be the upper limit

charged as a fee or observed that any

fee, however low, can be a deterrent to

self-sufficiency to families below the

poverty level. Others thought that the

reference to a ten percent copay seemed

to conflict with the Lead Agency’s right

to waive the fee.

Response: As indicated above, the ten

percent of family income is offered as a

benchmark, not a limit on the Lead

Agency.

A family is required by the statute at

section 658E(c)(5) to share in the cost of

subsidized child care, unless the Lead

Agency waives the fee pursuant to

§ 98.42(c) and § 98.20(a)(3)(ii). Those

sections allow copayments to be waived

for those whose income is at or below

the poverty level and for children in

protective services on a case-by-case

basis. The State has flexibility in

deciding the amount of the fee charged

and whether to waive the fee.

Comment: One State commented that

a State should be allowed to

categorically waive the fee if a family

receives TANF.

Response: The fee can be waived, at

a State’s option, only if a TANF family’s

income is at or below the poverty level.

If TANF families’ incomes are always at

or below poverty, then the State can

categorically waive the fee. In contrast,

fees may be waived for child care in

protective services cases only on a caseby-case basis.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39961

Comment: One commenter thought

the preamble should define

‘‘affordable.’’

Response: As in 1992, we decline to

establish a regulatory standard for

‘‘affordability.’’ However, as discussed

above, we feel that a fee that is no more

than 10 percent of a family’s income

would generally be considered to be an

affordable copayment.

We decided, again, not to prescribe a

definition for ‘‘affordable’’ because we

felt that any definition would

unnecessarily undermine a Lead

Agency’s ability to establish service

priorities, be administratively difficult

to monitor and enforce, and preclude

the variation that is inherent in the

nature of block grants.

Comment: Several commenters asked

that the Lead Agency have the authority

to categorically waive the fee for

protective services and foster care, and

not just on a case-by-case basis.

Response: We do not believe that it is

consistent with the intent of the statute

to categorically waive the fee for

protective services or foster care cases.

However, we recognize that the nature

of protective service cases can be

different, and that in an individual case

it might further the purpose of the

statute to increase the availability of

child care. Therefore, § 98.20(a)(3)(ii)

gives Lead Agencies the authority to

waive income eligibility and fees for

children in protective custody on a caseby-case basis, or after consultation with

an appropriate protective services

worker.

As discussed in the preamble to the

regulations published on August 4,

1992, there is a basic distinction

between protective services cases and

foster care cases. However, as discussed

in the preamble to § 98.20 in the 1992

regulations, Lead Agencies have the

flexibility to treat foster care cases as a

family of one and thus effectively

reduce or eliminate the fee in most

foster care cases (57 FR 34369), but not

categorically.

Comment: Several commenters

believed there is a contradiction

between the ten percent benchmark and

the regulation that gives Lead Agencies

the flexibility to waive copayments on

a case-by-case basis for families at or

below the poverty level or for children

in protective services.

Response: These policies are not

contradictory, nor are we implying that

a fee of ten percent of a family’s income

is appropriate for every very lowincome family, since such a fee might

effectively prevent many low-income

families from taking advantage of the

child care subsidy. We view ten percent

as the appropriate upper limit for copayments; and as stipulated in the

regulations, a Lead Agency can waive

the co-payment for families at or below

the poverty level (§ 98.42(c)), or for

children in protective services

(§ 98.20(a)(3)(ii)).

Priority for Child Care Services (Section

98.44)

Although we proposed no changes to

this section, we received a number of

comments regarding serving children

with disabilities which indicated a need

to provide some clarification about

priority for children with ‘‘special

needs.’’

As we stated in the 1992 preamble, for

the purpose of prioritizing services,

States have the flexibility to define

children with ‘‘special needs’’ in the

CCDF Plan. ‘‘Special needs’’ can mean

groups other than children with

physical or mental disabilities. States

can and do prioritize services for

children of teen parents, homeless

children and other groups by providing

definitions in the CCDF Plan. Refer to

57 FR 34382 for a detailed discussion of

the three contexts in which the term

‘‘special needs’’ is used in these

regulations.

List of Providers (Section 98.45)

Any Lead Agency not having a

registration process must maintain a list

of the names and addresses of all

unregulated providers. It is essential

that Lead Agencies have some simple,

standardized system to record the

names and addresses of unlicensed

providers in order to pay them and to

provide them with pertinent

information about health and safety

regulations and training.

The regulations no longer specifically

require Lead Agencies to have a

registration process for providers not

licensed or regulated under State or

local law before paying them for child

care services. However, Lead Agencies

should note that they may continue

such a system, and we strongly

encourage them to do so.

Comment: A number of commenters

opposed requiring States to maintain a

list of providers and felt States should

be given options.

Response: We know that States have

developed various processes for

registering unregulated providers and

that maintaining a list of these providers

is essential to effectively managing their

child care program. We do not expect

States to set up a separate list if their

current system provides the means to

identify and communicate with

unregulated providers.

Comment: Other commenters wanted

the regulation strengthened to require

the State to make the list of providers

available to all parents as a means of

providing them with more possibilities

for care.

Response: Many unregulated

providers are providing care for friends

or relatives, and may not be providing

child care services to the public. Some

unregulated providers who are in the

child care business, but exempt from

State licensing, may want their names

included on a list given to families.

However, others may not. These are

State and local government decisions.

We will not regulate further regarding

the list of providers.

Subpart F—Use of Block Grant Funds

Child Care Services (Section 98.50)

The 70 percent requirement. Section

418(b)(2) of the PRWORA specifically

requires the State to ensure that not less

than 70 percent of the funds received by

the State under this section of the

statute are used to provide child care

assistance to families who are receiving

assistance under a State program under

Part A of title IV of the Social Security

Act, families who are attempting

through work activities to transition off

of such assistance program and families

that are at risk of becoming dependent

on such assistance program. By statute,

the 70 percent requirement applies only

to the Mandatory and Matching Funds.

Further, the amended statute at

658E(c)(2)(H) requires the State to

demonstrate in its CCDF Plan the

manner in which the State will meet the

specific child care needs of these

families. These statutory provisions are

found in these regulations at § 98.50(e)

and (f).

Comment: Several commenters noted

that in the Plan provisions we ask the

Lead Agency to ‘‘describe’’ how it will

meet the child care needs of the families

specified at § 98.50(e), whereas at

§ 98.50(f) we require the Lead Agency to

‘‘specify’’ how they will meet those

needs.

Response: We do not believe the

terms are inconsistent. The statute asks

that States ‘‘demonstrate the manner in

which the State will meet the specific

child care needs’’ of those families. We

believe that a description would provide

States the opportunity to present

specific information which would

demonstrate how they are serving this

population.

Serving other low-income working

families. Section 658E(c)(3)(D) directs

the State to ensure that a ‘‘substantial

portion’’ of the amounts available (after

a State has complied with the 70

percent requirement discussed above) is

used to provide assistance to low-
39962 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

income working families other than

those who are receiving assistance,

transitioning off assistance or at risk of

becoming dependent on assistance

under Part A of title IV of the Social

Security Act. The amounts in question

include the remaining Mandatory and

Matching Funds (provided under

Section 418) as well as the Discretionary

Funds.

Since the income level for eligible

families is increased in the statute to 85

percent of the State median income, it

is clear that Congress intended for child

care assistance to be available to more

low-income working families than were

previously eligible. We believe,

however, that families whose income is

less than 85 percent of the State median

income may well be at risk of becoming

dependent on assistance. Thus the two

populations overlap.

The regulation at § 98.50(e) provides

the statutory description of the families

who are to be served under the 70

percent provision. In addition § 98.50(f)

requires the State, pursuant to the

statute, to describe in its Plan how the

State will meet the needs of these

families. We believe, based on our

consultations, that the circumstances of

low-income working families (whose

income is below 85 percent of the State

median income) are generally no

different than the families specifically

mentioned in these regulations and thus

would expect that they would be treated

similarly. If a State elects to have a

specific description of at-risk families, it

could, for example, be included when

defining very low income or in

providing additional terminology

related to conditions of eligibility or

priority in the CCDF Plan.

Comment: Some commenters related

the ‘‘substantial portion’’ requirement to

the 70% requirement and are concerned

that there is very little funding for lowincome working families.

Response: As noted above, the 70%

requirement applies only to the

Mandatory and Matching Funds. States

must then use a ‘‘substantial portion’’ of

any remaining Mandatory and Matching

funds as well as a ‘‘substantial portion’’

of Discretionary funds to serve families

whose incomes are below 85% of SMI.

Comment: Several commenters noted

that § 98.50(d) was inconsistent with

§ 98.52(a) in that it addressed funds that

were awarded rather than expended.

Response: We have corrected

§ 98.50(d) to be consistent with our

intent that the administrative costs be

based on amounts expended. Refer to

Administrative Costs (§ 98.52) for a

more detailed discussion of this issue.

Activities to Improve the Quality of

Child Care (Section 98.51)

Not less than four percent. Section

658G of the CCDBG Act directs that a

State that receives CCDF funds shall use

not less than four percent of the amount

of such funds for activities that are

designed to provide comprehensive

consumer education to parents and the

public, activities to increase parental

choice, and activities designed to

improve the quality of child care and

availability of child care (such as

resource and referral services). We refer

to this requirement collectively as

‘‘Activities to Improve the Quality of

Child Care.’’ Section 98.51(a) provides

that the not less than four percent

requirement for quality applies to the

aggregate amount of expenditures (i.e.,

Discretionary, Mandatory, and both the

Federal and State share of Matching

funds); it need not be applied

individually to each of the component

funds. Section 98.51(a) also provides

that the four percent requirement

applies to the funds expended, rather

than the total of funds that are available

but not used. Lead Agencies, however,

have the flexibility to spend more than

four percent on quality activities.

Section 98.51(c) provides that the

quality expenditure requirement does

not apply to the maintenance-of-effort

expenditures required by § 98.53(c) in

order to claim from the Matching Fund.

The regulations at § 98.51(a)(1) are

based on the broad statutory language,

while § 98.51(a)(2) keeps, as examples,

the options for specific activities

formerly contained in the Act. Resource

and referral programs, grants or loans to

assist in meeting state and local

standards, monitoring of compliance

with licensing and regulatory

requirements, training, and

compensation are allowable quality

activities under this minimum four

percent requirement. We will continue

to collect, in the Plan, descriptions of

activities to improve the quality of child

care services. We encourage Lead

Agencies to evaluate the success of their

efforts to improve quality and we will

disseminate promising practices.

Comment: Some commenters wanted

us to remove from § 98.51(a)(2)(i) the

words ‘‘operating directly’’ as they felt

that resource and referral can be done

most effectively at the community level

rather than by state government.

Response: We agree that local

resource and referral activities are

important to child care services.

However, by removing the words

‘‘operating directly,’’ we would be

reducing the options available to the

State. Therefore we have retained the

wording in the regulation in order to

ensure State flexibility in delivering

those services.

Administrative Costs (Section 98.52)

Section 658E(c)(3)(C) of the amended

Act limits the amount of funds available

for the administrative costs of the CCDF

program to ‘‘not more than five percent

of the aggregate amount of funds

available to the State.’’ Section 98.52(a)

provides that the five percent limitation

on administrative costs applies to the

funds expended, rather than to the total

of funds that are available but not

granted or used. Thus, Lead Agencies

may not use five percent of the total

funds available to them for

administrative costs unless they use all

the available funds including Matching

Funds.

This provision also makes clear that

the five percent limitation applies to the

total Child Care and Development Fund.

The five percent limitation need not be

applied individually to each of the

component funds—the Discretionary,

Mandatory, and Matching (including the

State share) Funds. We believe this

flexibility will streamline the overall

administration of the Fund. The

limitation does not apply to the

maintenance-of-effort expenditures

required by § 98.53(c) in order to claim

from the Matching Fund.

Section 98.52(a) lists administrative

activities and is derived from the prior

regulations as modified by the PRWORA

amendments and the Conference

Agreement (H.R. Rep. 104–725 at 411).

While the statute does not define

administrative costs, it does preclude

‘‘the costs of providing direct services’’

from any definition of administrative

costs.

The Conference Agreement specifies

that the following activities ‘‘should not

be considered administrative costs’’:

(1) Eligibility determination and

redetermination;

(2) Preparation and participation in

judicial hearings;

(3) Child care placement;

(4) The recruitment, licensing,

inspection, reviews and supervision of

child care placements;

(5) Rate setting;

(6) Resource and referral services;

(7) Training [of child care staff]; and

(8) The establishment and

maintenance of computerized child care

information systems.

The regulation’s list of administrative

activities at § 98.52(a) omits the

following three activities that were

listed as administrative costs in the

1992 CCDBG rule: determining

eligibility, establishing and operating a

certificate program, and developing
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39963

systems. ‘‘Establishing and operating a

certificate program’’ was not specifically

listed by Congress as a nonadministrative cost. However, we

omitted this activity because the

components of a certificate program

would not be considered to be

administrative costs under the

Conference Agreement exclusions. For

example, certificate programs must

determine and redetermine eligibility,

provide the public with information

about the program, develop and

maintain computer systems, place

children, offer resource and referral

services, etc.—all items which the

Conference Agreement lists as not

administrative costs. All costs, then, of

these three activities: determining

eligibility, establishing and operating a

certificate program, and developing

systems, are now considered nonadministrative costs.

While these regulations reflect the

Conference Agreement language, we are

nevertheless concerned that States will

misinterpret the intent of the change

and re-direct a disproportionate amount

of expenditures on these redesignated

activities rather than on direct services

to children. We wish to emphasize that

services to children is the purpose for

which the CCDF was created. Therefore,

we would not expect a large increase in

costs to activities that are not direct

services to children. We will closely

monitor such expenditures to determine

if States are overspending for such

activities at the expense of services. As

one method of monitoring, the required

CCDF financial reporting form, the

ACF–696, separately collects the

amounts that are expended on

determining eligibility, establishing and

operating a certificate program, and

developing systems. If we determine

that there are problems, we reserve the

right to re-visit the policy and regulate

in the future.

Lastly, we clarify in § 98.52(c) that the

non-Federal expenditures required of

the State in order to meet its

maintenance-of-effort threshold for

receiving matching funds are not subject

to the five percent limitation on

administrative costs. Nevertheless,

audits of State reports of maintenanceof-effort expenditures should indicate

that administrative expenditures

included in those MOE amounts are

reasonable, necessary for carrying out

the services provided, and consistent

with other provisions of law.

Comment: Many commenters objected

to applying the five percent

administrative limitation to the amounts

expended, rather than to the amounts

allocated to the State, saying that

administrative costs might be incurred

in one year for expenditures that occur

in another.

Response: We have clarified § 98.52(a)

to reflect that the limit applies to the

amounts expended from the total

allocated, not to the amounts expended

in a single fiscal year. We understand

that it might be necessary to use more

funds for administration during the

initial start-up of an activity, or that the

period when administrative costs are

incurred may not coincide with when

the funds are actually liquidated. And,

the provision was not intended to limit

Lead Agency flexibility in the short

term.

The choice of the word ‘‘expend’’ in

the regulation, rather than ‘‘available’’

as in the statute or ‘‘allocated’’ as in the

comment, is meant to address only one

situation. Section 98.52(a) is meant to

ensure that when a State that does not

expend—within the applicable

timeframes provided for at § 98.60—the

full amounts allocated to it, the State

does not receive a windfall in

administrative cost allowances. For

example, two States are each allocated

a total of $100 million in the CCDF. At

the end of the expenditure periods,

State A has spent $50 million while

State B has expended all $100 million.

It would be unfair to allow both States

to receive $5 million in administrative

allowances since State B’s program (in

terms of dollars expended) is twice the

size of State A’s.

Comment: Some felt that the tone of

this section was threatening. They

objected to the suggestion of further

regulations in this area if Lead Agency

reports indicate disproportionate

expenditures on the activities that had

been redesignated as non-administrative

costs, i.e., determining eligibility,

establishing and operating a certificate

program, and developing systems.

Response: We did not intend to

threaten Lead Agencies. The preamble

discussion is intended to reflect our

obligations to taxpayers for prudent

management of the resources Congress

has allotted for the purpose of providing

child care services.

Comment: One commenter observed

that there was no definition of

‘‘implementation’’ in § 98.52(a)(1) and

was concerned that some might make

judgments about when implementation

began or ended.

Response: Implementation in this

context refers to the ongoing conduct or

execution of the program and does not

imply a fixed period or a process with

a beginning and/or ending date. It

would be incorrect, for example, for an

auditor to determine that

implementation of an activity had

ended.

Comment: One commenter, noting

that the regulations clearly provide that

the 5% administrative cap did not apply

to State MOE, stated that the preamble

then clouded the issue by suggesting

that ACF would monitor MOE reports in

relation to administrative expenditures.

Response: In the preamble to the

proposed rule, we did not propose

specifically to monitor MOE

expenditures. Rather, we did express

the expectation that audits of the CCDF

program should indicate that

administrative expenditures contained

in MOE amounts would be reasonable,

necessary for carrying out the services

provided, and consistent with other

provisions of law.

Administrative costs for Tribes. We

have specifically noted at § 98.52(b) that

the five percent cap on administrative

costs does not apply to Tribes, and tribal

organizations; it applies only to the

entities defined as ‘‘States.’’ Tribes,

however, are subject to the requirements

at § 98.83(g) regarding limits on

administrative expenditures.

Matching Fund Requirements (Section

98.53)

Terminology and general

requirements. In this section we have

used the phrase ‘‘expenditures in the

State’’ to encompass not only local

expenditures on child care but also

private, donated funds that meet the

requirements at § 98.53(e)(2), as

explained below. Whenever the term

‘‘State funds,’’ ‘‘State expenditures’’ or

‘‘non-Federal expenditures’’ is used it

should be understood to include State,

local or permissible private donated

funds that meet these requirements and

are expended for allowable child care

purposes. And, the language of

§ 98.53(e) reflects this.

Section 418(a)(2)(C) of the Social

Security Act creates a two-part matching

requirement. First, a State must expend

an amount that at least equals its

allowable expenditures for the title IV–

A child care programs during 1994 or

1995, whichever is greater. We refer to

this amount as the ‘‘maintenance-ofeffort’’ (MOE) threshold.

Changes to PRWORA contained in

P.L. 105–33 provide that for fiscal years

1998 and after, a State’s expenditures in

excess of its MOE threshold, up to a

maximum determined by the statute, are

matched at the applicable year’s Federal

medical assistance percentage (FMAP)

rate. (For FY 1997, state expenditures

were matched at the 1995 FMAP rate.)

The total amount that can be matched

rises each year and is equal to the sum

appropriated for that year, less the

amounts of the Mandatory Fund, the

tribal allocation and the allocation for
39964 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

technical assistance. The maximum to

be matched for each State is its share of

that total based upon the proportion of

the State’s children under age 13 to the

national total of children under age 13,

based on the best data available to the

Secretary for the second preceding year.

Section 98.53(c) lists the requirements

that States must meet if they wish to

claim Federal Matching Funds. In

summary, this section requires that the

State obligate all of its Mandatory Funds

by the end of the fiscal year (FY) they

are granted. Mandatory Funds need not

be obligated before Matching Funds are

claimed, provided that all Mandatory

Funds will be obligated by the end of

that FY. Second, they must expend

State-only dollars in an amount that

equals the State’s MOE threshold

described at § 98.53(c)(1). And third,

they must obligate the Federal and State

share of the Matching Fund by the end

of the FY.

Comment: Some commenters thought

that there was a point beyond which

Matching funds would no longer be

available to them and wanted us to

clarify that as long as the State meets the

statutory requirements that the

Matching funds would be available

throughout the fiscal year.

Response: Matching funds are

available throughout the fiscal year, and

disbursements to the State are based on

the ACF–696s submitted by the Lead

Agency. Those non-Federal

expenditures (exceeding the MOE

threshold) for which the State wishes to

claim monies from the Matching Fund

must be obligated before the end of the

fiscal year.

State expenditures allowable for MOE

and Federal Matching funds. State

expenditures on any activity or service

that meets the goals of the CCDBG Act

and that is described in the approved

CCDF Plan, if appropriate, may be used

to meet the MOE requirement or may be

claimed for Federal Matching funds

(§ 98.53(b) and (c)(2)). For MOE, these

regulations offer greater flexibility than

we offered in our interim guidance

provided in our Program Instruction,

ACYF–PI–CC–96–17, dated October 30,

1996. However, as provided at

§ 98.53(d), the same expenditure still

may not be counted for both MOE and

match purposes.

Under these regulations, States will

have flexibility to define child care

services, so long as those services meet

the requirements of the statute. For

example, State expenditures for child

care for those populations previously

served by the title IV–A or CCDBG child

care programs would be eligible for

Federal match. Similarly, State

investments in child care through the

use of State funds to expand Head Start

programs or to otherwise enhance the

quality or comprehensiveness of fullday/full-year child care would also be

eligible for Federal Matching funds

since these activities meet the goals of

the Act.

Sections 98.53(e) and (f) contain

additional qualifications on what

constitutes an expenditure in the State

for purposes of this Part. These

qualifications are the same that

generally apply to Federal programs that

provide for matching State

expenditures, with two important

clarifications.

First, § 98.53(e)(1)(i) allows a public

agency, other than the Lead Agency, to

certify its expenditures as eligible for

Federal match. This provision allows

States, for example, to use pre-K

expenditures to meet the MOE

requirement (when the regulatory

provisions for use of pre-K funds are

met) and/or receive Federal Matching

funds. The second clarification, at

§ 98.53(f), concerns the treatment of

private donated funds. It provides

greater flexibility than previously

offered as interim guidance under ACF

Program Instruction, ACYF–PI–CC–96–

17, dated October 30, 1996.

Regarding the MOE requirements, the

same State expenditure may be used to

meet both the CCDF and TANF MOE

requirements provided the expenditure

meets the requirements of both

programs. However, the amount of State

CCDF MOE expenditures that may

count for TANF MOE purposes is

limited to the amount of the State’s

share of expenditures for the programs

described at section 418(a)(1)(A) of the

Social Security Act (i.e., the now

repealed title IV–A child care programs)

for FY 1994 or FY 1995, whichever is

greater.) Section 409(a)(7)(B)(iv)(IV)

specifically provides that State

expenditures used to meet the CCDF

MOE requirement—and/or for which

CCDF Matching funds were received—

may be included in meeting the TANF

MOE requirement up to the amount set

at section 418(a). Any additional State

expenditures for child care in excess of

the amount of the CCDF MOE

requirement, and for which CCDF

Matching funds are not claimed, may

also be counted in meeting the TANF

MOE requirement when the

expenditures meet the requirements of

TANF.

In addition, pursuant to section

409(a)(7)(B)(iv)(I) of PRWORA, State

expenditures for child care may not be

included as part of the State MOE for

TANF if the funds originated with the

Federal government. Hence, Federal

funds transferred from TANF to the

CCDF would not count towards the

TANF MOE. Further, those funds could

not be used to receive CCDF Matching

funds under the general rule Federal

funds may not be used as a match

without statutory authority.

Comment: Several commenters

objected to the prohibition on using inkind expenditures for State match,

contending that this runs counter to the

regulations for the pre-TANF title IV–A

programs on which much of the CCDF

funding is now based.

Response: The pre-TANF title IV–A

programs did not allow for the

unlimited use of in-kind match as the

comments suggest. Only a small part of

the total JOBS funding (that part equal

to the State’s WIN or WIN

Demonstration allotment for fiscal year

1987) could be matched with in-kind

contributions. The match rate for these

funds was 90%; meaning the State’s

share was only 10%. The Social

Security Act, at section 403(l)(1)(B),

specifically provided for in-kind

contributions in this limited instance

only.

There is no indication that Congress

contemplated the use of in-kind match,

either in the CCDBG Act or the child

care provisions in PRWORA. In fact, in

specifying that the Secretary shall

reimburse expenditures, the provision

precludes the claiming of in-kind

match.

Comment: One commenter asked

whether State expenditures for

Kindergarten services could be counted

in meeting the MOE requirement or

claimed for match.

Response: Compulsory State

education services cannot be used to

meet the MOE requirement or to claim

matching funds. Non-compulsory

services are subject to the limits at

§ 98.53(h).

Comment: One commenter asked for

clarification of the relationship between

child care expenditures used to meet the

TANF MOE requirement and used to

claim CCDF matching funds. The

commenter observed that Section

409(a)(7)(B)(iv) of the Act precluded

using the same State expenditure for

claiming CCDF Matching funds and for

meeting the TANF MOE requirement.

Response: That section in the Act was

amended by the Balanced Budget Act of

1997 to allow certain State expenditures

to be used to claim CCDF Matching

funds and be used to meet the TANF

MOE requirement. We updated the

above discussion to reflect those

changes. Use of the same expenditure

for both purposes is subject to certain

qualifications discussed above.

Use of a private agency to receive

donated funds. Historically, private
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39965

donations to State-level programs have

been very limited; locally controlled

donations have been somewhat more

prevalent. Frequently cited reasons for

this lack of public support for seemingly

worthwhile programs have included

suspicion of government, in general,

especially government outside the

immediate community, coupled with

regulations that appeared to limit the

State’s ability to assure the donor that

the donated funds will be used in a

specific area or for the donor’s intended

purpose.

At a time when child care programs

face increased demands, and State

budgets face constraints, we have

reexamined prior ACF policies on

donated funds. We have tried to

respond to the issues that we were told

have inhibited private donations in the

past by including in the definition of

State expenditures donated funds that

meet the qualifications at § 98.53(e)(2),

even though such funds are not under

direct State control. The regulations at

§ 98.53(f) provide that private donated

funds need not be transferred to or

under the administrative control of the

Lead Agency to be eligible for Federal

match. Instead they may be donated to

the entity designated by the State to

receive donated funds. Both the Lead

Agency and the entity designated by the

State to receive donated funds must,

however, certify that the donated funds

are available and eligible for Federal

match. In addition to this dual

certification requirement, we want to

ensure Lead Agency accountability for

funds that may not be under its direct

control. Therefore, the fiscal reporting

form, the ACF 696, requires that the

Lead Agency separately report the

amount of private donated funds it uses

as match. And finally, Lead Agencies

should be aware that private donated

funds used as match are also subject to

the audit requirements at § 98.65.

This rule will allow Lead Agencies to

cooperate more closely with various

organizations, foundations, and

associations that already support high

quality child care and related activities.

It will also allow the Lead Agency to

leverage private funds in order to serve

more families, while working within

State and Federal budget restrictions.

We also take this opportunity to

clarify the regulation at § 98.53(e)(2)(i)

which requires that private funds be

donated without restriction on their use

for a specified individual, organization,

facility or institution. Under this

clarification a donor could designate a

specific geographic location for the

receipt of funds. Such a geographic

specification can be broad, such as

within the limits of a specific city, or

extremely narrow, such as a single

neighborhood. Such geographic

specification is possible whenever funds

are donated, whether the funds are

donated to the Lead Agency or to an

entity specially designated to receive

private donations.

Lead Agencies will be asked to

identify the entity that is designated to

receive private donated funds and the

purposes for which those donated funds

are expended in their Plan, pursuant to

§ 98.16(c)(2).

Comment: Several commenters

wanted us to limit the use of pre-K and

or donated funds to only those States

that had used such funding prior to FY

1997.

Response: It is not clear why the

commenters proposed such a limitation.

The regulation is designed to give Lead

Agencies additional flexibility in

maximizing child care funding while

ensuring ongoing commitments to

existing programs. We see no benefit to

limiting the use of pre-K or donated

funds as suggested.

Comment: The same commenters

wanted us to require that States submit

quarterly reports listing the entities

receiving donated funds and the uses of

those funds.

Response: We have required that the

Lead Agency identify in its Plan the

single entity designated to receive

donated funds and the allowable child

care services for which the funds will be

used. We believe that additional

requirements, such as those proposed

would be burdensome for the Lead

Agency and serve no useful purpose in

light of the policy that provides for a

single entity to receive donated funds.

Comment: Several commenters

suggested that individual programs or

providers would be accepting donated

funds.

Response: We want to clarify that the

regulation provides for the designation

of a single entity in each State to receive

donated funds. We settled on this for a

number of reasons. First, it would be

burdensome for the Lead Agency to

have to deal with hundreds of

individual providers or programs all

claiming to have receive donated funds

which are allowable. Since the Lead

Agency is ultimately responsible for the

allowability of the donated funds we

did not want to create such a burden on

them. More importantly, we did not

want to create a mechanism wherein

individual programs, providers or

jurisdictions might be forced to compete

with each other for donated funds. Nor

did we want to create a situation

wherein the Lead Agency might tie the

availability of certificates, grants or

contracts to a jurisdiction, provider or

program’s ability to attract donated

funds. We believe that allowing for the

designation of only a single entity to

receive donated funds, at least initially,

is a reasonable policy choice.

Claims for pre-K expenditures for

MOE and match purposes. Many States

fund pre-K programs for young children.

These are important early childhood

services that contribute to school

readiness. Expenditures for Statefunded public pre-K services to children

from families who meet the CCDF

eligibility criteria (as outlined in the

Plan) may meet the requirements for

allowable child care services

expenditures for MOE and match

purposes. The pre-K program must meet

each of the following four conditions:

• Attendance in the pre-K program

must not be mandatory.

• The pre-K program must meet

applicable standards of State, local or

tribal law.

• The pre-K program must allow

parental access.

• The pre-K program must not be

Federally funded (unless funded with

‘‘exempt’’ Federal funds for matching

purposes), and its State funding may not

be used as basis for claiming other

Federal funding.

In addition, pre-K expenditures

claimed may be only for those families

who are at or below 85 percent of the

State median income (SMI) (or lower

SMI established as the CCDF eligibility

criterion by the Lead Agency) and who

meet other State eligibility criteria.

During our consultations we heard the

full range of issues around allowing

States to use their pre-K expenditures to

meet the matching and MOE

requirements of the CCDF. We came

away from those consultations with

some reservations about the use of preK expenditures, but we also came away

with increased respect for the

importance of these programs.

A chief concern to working parents is

that many pre-K services are only partday and or part-year and such programs

may not serve the family’s real needs.

Some have expressed concerns that an

excessively broad approach to counting

pre-K expenditures might result in a real

reduction in full-day child care services

to potentially eligible working families.

The potential exists for a State with a

sufficiently large pre-K program to

divert all state funds away from other

child care programs and fulfill its MOE

and Matching requirements solely

through pre-K expenditures. On the

other hand, allowing pre-K expenditures

to be counted toward MOE or match

could provide a critical incentive for

States to more closely link their pre-K

and child care systems. This could
39966 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

result in a coordinated system that

would better meet the needs of working

families for full-day/full-year services

that prepare children to enter school

ready to learn. We struggled with these

issues and considered various

alternative approaches to counting preK expenditures in the CCDF.

In the end, we decided on a policy

that attempts to balance concerns about

the use of pre-K expenditures in

meeting CCDF requirements. At

§ 98.53(h)(3) and (4) we have addressed

our concerns about balance by

establishing a maximum amount of

State expenditures for pre-K services

that can be claimed for match or MOE.

Expenditures for pre-K programs may

constitute no more than 20% of the

State’s expenditures which are matched.

Similarly, expenditures for pre-K

programs may constitute no more than

20% of the State’s expenditures counted

in fulfilling the MOE requirement.

However, if a State intends to fulfill

more than 10% of either its MOE or

matching requirements with pre-K

expenditures, its CCDF Plan must reflect

that intent. Additionally, if a State

intends to fulfill more than 10% of

either the MOE or matching requirement

with pre-K expenditures, the CCDF Plan

must describe how the State will

coordinate its pre-K and child care

services to expand the availability of

child care. We established the 20%

limits because they approximate the

proportion of pre-school age children

nationwide currently receiving services

under the CCDBG. (This level also

approximates the average monthly

proportion of pre-school age children of

JOBS participants who received child

care assistance in the past.)

States may count only those pre-K

expenditures that meet the criteria as

allowable child care services explained

above (i.e., attendance is not mandatory,

the program meets applicable standards,

allows parental access, serves CCDF

eligible families as provided in the Plan,

etc.). The Lead Agency is required to

separately report on the ACF–696 the

amount of pre-K expenditures it claims

as match or uses to meet the MOE

requirement.

In addition, for MOE purposes,

§ 98.53(h)(1) provides that States cannot

reduce their level of effort in full-day/

full-year child care services if they use

pre-K expenditures to meet the MOE

requirement. And, States are required to

provide an assurance of this, pursuant

to § 98.15(a)(6). This requirement

reflects the fact that although the statute

eliminated the non-supplantation

requirement formerly found at section

658E(c)(2)(J) of the CCDBG Act, another

non-supplantation requirement was

created by section 418(a)(2)(C) of the

Social Security Act. That nonsupplantation requirement—the MOE

requirement—requires States to

continue to spend at least the same

amount on child care services that they

spent on the repealed title IV–A child

care programs, in order to receive the

new Matching Fund. Such a provision

would be meaningless if States used

MOE expenditures for services that were

not responsive to the real child care

needs of working families that the CCDF

was intended to assist, i.e., the State

‘‘buys out’’ with pre-K expenditures the

full-day/full-year child care services it

previously provided under title IV–A. In

the interest of State flexibility we have

not otherwise regulated on the types of

services that may be counted in meeting

the MOE requirement and, as discussed

below, have eased the burden on the

State in calculating the amount of preK expenditures that may be used to

meet the MOE and matching

requirements.

In contrast, there is not a similar

requirement if pre-K expenditures are

claimed for match. Since the Matching

Fund is ‘‘new money’’ it is not subject

to the same requirements that

expenditures used to meet a nonsupplantation (MOE) requirement must

meet. However, §§ 98.16(q) and

98.53(h)(2) require that States describe

in their CCDF Plan any efforts they will

undertake to ensure that pre-K programs

meet the needs of working parents if

pre-K expenditures are claimed for

match. Our different treatment of pre-K

expenditures in the MOE and matching

requirements, then, reflects a balance

between the principles of nonsupplantation and state flexibility.

Furthermore, ACF will permit States

to use a different method for calculating

the amount of pre-K services claimed for

both MOE and matching purposes than

was required under the former title IV–

A child care programs. Under the now

repealed title IV–A child care programs,

ACF required States wishing to claim

Federal match for their pre-K

expenditures to base their claim on the

number of title IV–A-eligible (or

potentially eligible) children who

actually participated in the pre-K

program. As many school districts did

not have the information to identify

whether pre-K participants were

members of IV–A-eligible families, it

was difficult for States to claim Federal

matching funds for these programs. In

fact, only a handful of States claimed

Federal Match under title IV–A for their

pre-K expenditures. In our consultations

we were asked to loosen this child-bychild approach to counting pre-K

expenditures.

In the interest of easing administrative

burdens on the Lead Agency, we have

adopted the following policy toward

calculating pre-K expenditures for

purposes of claiming MOE and

Matching funds. For pre-K expenditures

to be claimed, States must ensure that

children receiving pre-K services meet

the eligibility requirements established

in the CCDF Plan. In cases where States

do not have child specific information,

however, they must develop a sound

methodology for estimating the

percentage of children served in the preK program who are also CCDF-eligible.

Expenditure claims must reflect these

estimates.

Although the methodology should be

documented, we will not require that

the methodology be submitted to ACF

for prior review or approval. In

documenting their methodology, Lead

Agencies are reminded of the

requirement at § 98.67(c), which

provides that fiscal control and

accounting procedures must be

sufficient to permit the tracing of funds

to a level of expenditure adequate to

establish that such funds have not been

used in violation of the Act or

regulations.

Comment: Some commenters argued

against any restriction on the amount of

pre-K that could be used to satisfy the

MOE requirement saying that States

may lower or end investments in pre-K

because of the limit. Others agreed with

the 20% cap, while still others wanted

a lower cap or the exclusion of pre-K

from meeting the MOE requirement.

Response: We anticipated these

reactions and specifically requested

comments on the pre-K limit in the

proposed rule. However, none of the

commenters who argued for unrestricted

use of pre-K addressed our concerns

about ‘‘buying-out’’ existing child care

services with pre-K programs. The

argument that a State may limit pre-K is

not convincing since States usually fund

pre-K for a variety of programmatic

reasons—not because it may be an

allowable match for another program.

This regulation still gives States more

flexibility than in the past and opens

new sources of match not heretofore

available. Accordingly, as a matter of

balance, we have retained a reasonable

limit on using State pre-K expenditures

to meet the MOE requirement.

Comment: Some commenters objected

to linking the use of pre-K to meet the

MOE requirement with maintaining

expenditures on full-day/full-year child

care services. They felt that the increase

in TANF recipients accepting part-time

employment will affect the need for full

day/full year care.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39967

Response: We do not believe that true

economic self-sufficiency is readily

achievable through part-time

employment. While part-time

employment of families may have

increased at the outset of TANF, the

operation of time limits on those same

families will require increased hours of

employment just to maintain income

levels when their TANF benefits cease.

We believe, then, that it is prudent to

retain this requirement at this time.

Comment: A commenter asked if we

intended to limit pre-K programs to

families at or below 85% of the State’s

median income (SMI).

Response: We did not intend to limit

State’s ability to provide pre-K to all

families, regardless of their income.

However, only expenditures for those

services provided to families at or below

85% of the SMI (i.e., whatever limit the

Lead Agency establishes as the

eligibility criteria for CCDF-funded

child care) may be counted in meeting

the CCDF MOE requirement or to

receive Matching funds. We have

revised the discussion above to make

this point more clearly.

Family fees and the matching fund.

Section 98.53(g)(2) clarifies that family

contributions to the cost of care as

required by § 98.42 are not considered

eligible State expenditures under this

subpart. This policy is based on the fact

that family fees are not State

expenditures.

Restrictions on Use of Funds (Section

98.54)

Section 103(c) of the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996 (PRWORA)

repealed the three title IV–A child care

programs—the AFDC child care

program, the Transitional Child Care

program and the At-Risk Child Care

program. However, in appropriating

new child care funds under section 418

of the Social Security Act, the PRWORA

provides that these funds must be spent

in accordance with the provisions of the

Child Care and Development Block

Grant Act as amended. This requirement

is incorporated into § 98.54(a). This

section also provides that TANF funds

that are transferred to the Lead Agency

under the provision of the new section

404(d) of the Social Security Act are

treated as Discretionary Funds for the

purposes of § 98.60.

Other Federal funds expended for

child care, unless transferred to the

Lead Agency, are not required to be

spent in accordance with the amended

CCDBG Act. This means, for example,

that child care provided with title XX

funds or TANF funds that are not

transferred to the Lead Agency might be

subject to different requirements.

However, ACF cautions States about the

administrative and policy problems

associated with operating a variety of

Federally-funded child care programs,

e.g., one program subject to CCDBG

requirements and others not. The

amendments to the CCDBG Act

contained in the PRWORA are intended

to create a single child care program

with consistent standards and

requirements and to counteract the

fragmentation and conflicting

requirements that had arisen under

prior law.

We have also added a new section at

§ 98.54(b)(3) which clarifies the special

provisions on use of funds for

construction that apply to Tribes and

tribal organizations under the PRWORA

amendments.

Comment: One commenter felt that

allowing expenditures for minor

remodeling for non-sectarian providers,

while limiting such expenditures for

sectarian providers to only those

instances where remodeling was needed

to meet health and safety requirements,

would increase the workload of the

Lead Agency, in that it will be necessary

to track the nature of an organization

requesting funds for minor remodeling.

Response: We did not propose any

change in this regulation which has

been in effect since 1992. The regulation

implements section 658F(b) which does

require that Lead Agencies distinguish

between sectarian and non-sectarian

providers in providing CCDF funds for

minor remodeling. Nevertheless, we are

unaware that this provision has been

burdensome on Lead Agencies.

Subpart G—Financial Management

Availability of Funds (Section 98.60)

Section 418 of the Social Security Act,

which was added by PRWORA, requires

that all Federal child care funds

appropriated therein be spent in

accordance with the provisions of the

amended Child Care and Development

Block Grant. In consolidating the

Federal child care programs under a

single set of eligibility requirements,

Congress nevertheless instituted three

funding sources. We have chosen to

refer to the combined funding as the

Child Care and Development Fund—

CCDF. This term recognizes the

different sources of Federal monies

flowing into child care but the common

purposes for which they may be

expended.

Section 418 of the Social Security Act

appropriates Federal funds for the 50

States, the District of Columbia and

Indian Tribes in the form of formula

grants which we refer to as the

Mandatory Fund. A specified amount of

Federal funds is also made available

under a different formula to the 50

States and the District of Columbia to

match their allowable child care

expenditures. We refer to this amount as

the Matching Fund. Section 658B of the

Child Care and Development Block

Grant (CCDBG) Act authorizes funds to

States, Tribes and Territories according

to a third formula. We refer to the funds

authorized under the CCDBG Act as

Discretionary Funds. The formulas for

allocating each of the Funds and

requirements unique to each Fund are

discussed at §§ 98.61, 98.62 and 98.63.

Both the Mandatory and Discretionary

Funds are 100 percent Federal Funds—

no match is required to use these Funds.

Section 418(a)(2)(C) of the Social

Security Act, however, makes the

availability of Matching Funds

contingent on a State’s child care

expenditures.

We have deleted the regulation

formerly at § 98.60(g) concerning startup planning costs associated with the

initial implementation of the CCDBG

and have redesignated the remaining

regulations. All of the States began

operating a CCDBG program in FY 1991,

therefore the regulation at § 98.60(g) is

obsolete since the time frames for

obligating and expending start-up funds

have passed. We recognize that there

still may be Tribes that wish to begin a

CCDF program and for which the

question of start-up funds still applies.

Accordingly, we have addressed the

availability of funds for planning

purposes for new Tribal Lead Agencies

at § 98.83(h) in subpart I.

We have also clarified the wording of

§ 98.60(f) to indicate that 31 CFR part

205 applies only to State Lead Agencies.

Obligation period/liquidation periods.

The following table shows the

obligation and liquidation periods for

the various Funds and the maintenanceof-effort (MOE) requirements.

These funds Must be OBLIGATED by the end of the AND, must be LIQUIDATED by the end of the

Discretionary .................................. 2nd FY ........................................................................ 3rd FY.

Mandatory (State) .......................... 1st FY—only if Matching is requested ....................... NA, no limit.

Mandatory (Tribes) ......................... 2nd FY ........................................................................ 3rd FY.
39968 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

These funds Must be OBLIGATED by the end of the AND, must be LIQUIDATED by the end of the

Matching ......................................... 1st FY ......................................................................... 2nd FY.

MOE ............................................... 1st FY, and expended in that FY ............................... NA, must be liquidated in 1st FY.

The PRWORA amended the CCDBG

Act to require States and Territories to

obligate their Discretionary allotments

in the fiscal year in which they are

received, or in the succeeding fiscal

year. These amendments return the

statutory language to its status before

the Juvenile Justice and Delinquency

Prevention Amendments of 1992 (Pub.

L. 102–586). Since the final regulations

which would have incorporated the

changes from the Juvenile Justice and

Delinquency Prevention Amendments

of 1992 were never published, no

change is needed in the regulatory

language.

The FY 1997 Health and Human

Services appropriation (Pub. L. 104–

208) changed the date that the CCDF

Discretionary Funds will become

available from September 30 of the

fiscal year in which the funds are

appropriated to October 1 of the

following fiscal year. As a result, when

existing regulatory language is applied,

States and Territories have two full

fiscal years to obligate their CCDF

Discretionary Funds, instead of the year

and a day which resulted under earlier

appropriations. States and Territories

continue to have until the end of the

third fiscal year to liquidate these funds.

Section 418(b)(1) of the Social

Security Act provides that the

Mandatory Fund is available without

fiscal year limitation. However, section

418(a)(2)(C) of the Social Security Act,

which describes the conditions for

receiving Matching Funds, indicates

they are paid to a State for expenditures

that exceed the State’s Mandatory grant

and MOE level, and are only available

on an annual basis. Moreover, section

418(a)(2)(D) of the Social Security Act

requires that Matching Funds that are

not used in the fiscal year be made

available for redistribution in the

following fiscal year. Therefore, a State

wishing to claim Matching Funds must

obligate its Mandatory Funds before the

end of the fiscal year for which the

Mandatory Funds are awarded. States

not wishing to claim Federal Matching

Funds have no obligation or liquidation

deadline for their Mandatory Funds.

Also, the amount of a State’s MOE

requirement must be obligated and

liquidated before the end of the fiscal

year for which Matching Funds are

awarded. Non-Federal expenditures

(exceeding the MOE threshold) for

which the State wishes to claim monies

from the Matching Fund must also be

obligated before the end of the fiscal

year for which they are awarded.

The same obligation and liquidation

periods that apply to the State

Discretionary Funds apply to the tribal

funds. While the FY 1997 appropriation

changed the date Discretionary Funds

become available, under the revision

Tribes will continue to have two full

years to obligate the child care funds

they receive. Further, under these

regulations, Tribes will receive an

additional year to liquidate these Funds.

Retaining the previous regulations

would have had the consequence of

providing three full years to obligate

and liquidate tribal child care grants.

The amendments to the Discretionary

Fund under PRWORA for the first time

provide that tribal funds are subject to

reallotment. The two-year approach to

obligation will encourage Tribes to plan

for the timely commitment of funds and,

at the same time, make uncommitted

funds available on a timely basis to

those Tribes that are in need of

additional child care monies.

Section 98.60(d)(3) lists the obligation

and liquidation periods for States that

receive Matching Funds. In order to

accommodate the redistribution

required by section 418(a)(2)(D) of the

Social Security Act, the regulation

requires that Matching Funds must be

obligated in the fiscal year in which

they are granted and liquidated within

two years.

Returned Funds. As a result of the

changes made by PRWORA and the

change in the date of availability of the

CCDF Discretionary Funds made by the

FY 1997 HHS appropriation, § 98.60(g)

requires that funds returned to the Lead

Agency after the end of the applicable

obligation period must be returned to

the Federal government. Under this

provision, however, and as previous

regulations permitted, funds returned

during the obligation period may be reobligated for activities specified in the

Plan, provided they are obligated by the

end of the obligation period. This

provision was inadvertently deleted in

the proposed rule but has been added

back in the final rule at section

98.61(g)(1). The re-obligation of funds

will not result in any extension of the

obligation period.

The 1992 regulations allowed States

to follow State or local law or

procedures regarding funds returned

after the end of the obligation period.

The provision was applicable only to

what now are the Discretionary Funds

part of the CCDF. It recognized that

although section 685J(c) of the Act

provided for a two-year obligation

period for those funds, the Departments

of Labor, Health and Human Services

and Related Agencies Appropriations

Act, 1991 (Pub. Law 101–517) provided

that FY 1991 funds became available on

September 7, 1991. The impact of that

appropriation was that CCDBG funds

(now called Discretionary Funds) were

available for obligation only for barely

over a year, instead of for two full years.

The now-superseded provision

regarding returned funds reflected

ACF’s desire that States not be put in

the position of having to make

premature decisions regarding

obligations in a new program due to a

truncated obligation period. Also, our

reasoning for the former provision

included the consideration that, even

though the Act contained a reallotment

provision for these funds, there

appeared to be little likelihood that the

States would return them for

redistribution since they were 100

percent Federal funds.

The FY 1992 HHS appropriation (Pub.

Law 102–170) moved the availability of

CCDBG funds to the last day of the fiscal

year, and the CCDBG funds continued to

be paid on the last day of the fiscal year

in subsequent years, until the

Departments of Labor, Health and

Human Services and Related Agencies

Appropriations Act, 1997 (Pub. Law

104–208) again changed the date of the

availability of these funds. The 1997

appropriation provides that, starting

with the FY 1998 Discretionary Funds,

Discretionary Funds will be made

available on the first day of each fiscal

year. The result of this change is that

there now will be two full years to

obligate Discretionary Funds.

Further, the regulations at the former

§ 98.60(h) would have been

inappropriate to the new Mandatory and

Matching Funds provided under

PRWORA. The law, at section 418 of the

Social Security Act, requires

redistribution of the Matching Funds to

other States, if the State to which they

were granted does not use them in the

fiscal year in which they are granted.

Also, the Secretary must determine the

amount of Matching Funds available for

redistribution by the end of the first

quarter of the fiscal year following the
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39969

year the grant was awarded. The law

links use of Matching Funds to use of

the Mandatory Funds—and, as provided

in the regulations at § 98.60, Mandatory

Funds must be obligated in the year in

which they are granted if a State

requests Matching Funds. Unlike the

Discretionary and Mandatory Funds, the

Matching Funds are not 100 percent

Federal funds, and there seems to be a

greater possibility that some of these

funds would be returned for

redistribution. Thus, the former

returned funds regulations would not

have been workable for these funds, and

were changed.

Comment: Although not addressed in

the proposed regulations, many

commenters objected to our policy of

allocating Discretionary and Mandatory

Funds on a quarterly basis, rather than

as a single grant at the beginning of the

fiscal year. They felt that such a policy

should be applicable to matching grant

programs only, not to entitlements to

the States, such as the Discretionary and

Mandatory Funds.

Response: The Office of Management

and Budget has determined that each of

the individual CCDF funds are to be

apportioned to the States quarterly. We

note that other non-matching grant

programs, such as title XX, are also

subject to such quarterly

apportionments.

Comment: Some commenters

suggested that we allow unlimited

obligation and expenditure periods for

Tribal Mandatory funds, citing the

unlimited periods for State Mandatory

funds (if the State does not use

Matching funds).

Response: We have kept the proposed

obligation and liquidation time frames

for Tribal Mandatory funds. Although

there is a statutory exception for State

Mandatory funds to the normal one-year

obligation period (unless the State uses

Matching funds), Tribal Mandatory

funds are not analogous to State

Mandatory funds and have no such

statutory exception. Furthermore, in the

past, a significant number of Tribes have

returned funds to the Federal Treasury.

Therefore, we believe that the required

obligation/liquidation time frames are

reasonable and necessary to ensure that

funds are used in a timely manner.

Comment: Several commenters

wanted us to revise § 98.60(d)(5)(ii) to

allow Interagency agreements and or

contracts between government entities

at the same level to constitute

obligations.

Response: We had not proposed any

change to this regulation which has

been in effect since 1992. This issue is

addressed in the preamble to the 1992

regulations at 57 FR 34395 and that

discussion reflects our continued

position.

As a practical matter, funds that are

transferred to another part of State

government, either at the same level, or

at a lower level, simply do not reflect

the same real fiscal commitment of

funds to the CCDF program as occurs

when funds are transferred to a third

party.

Comment: One commenter observed

that § 98.60(d)(6)—regarding obligating

funds using a certificate—is problematic

because the amount of funds that may

be actually used by the family cannot be

known with certainty as the family may

use fewer hours of care than was

indicated on the certificate. The

commenter wanted to eliminate the

requirement to include the amount of

funds on the certificate.

Response: This provision is

unchanged from the 1992 final rule and

this situation was addressed in the

preamble at 57 FR 34395. Without an

amount it is unclear how the commenter

would determine how much was

obligated.

Stating an amount on the certificate

fulfills the obligation requirement, yet,

as explained in the 1992 preamble, the

Lead Agency can nevertheless make

adjustments to reflect the actual use of

funds, reobligating if within the

obligation period, to ensure the

liquidation of funds within the

prescribed period.

Comment: One commenter,

understanding the necessity to recover

fraudulently received payments,

suggested that § 98.60(i) reflect a

minimum threshold under which

recovery would not be necessary. For

example, if the administrative expense

of recovery exceeded the amount

fraudulently received.

Response: As we stated in the 1992

preamble at 57 FR 34397, any payments

not made in accordance with the Act,

regulation or approved State Plan may

not be charged to the program and will

be disallowed pursuant to § 98.66.

Should a State choose not to pursue

fraudulent payments because to do so

may not be cost-effective, the amount of

that fraudulent payment may not be

charged to the CCDF.

Allotments From the Discretionary

Fund (Section 98.61)

The allotment formulas for the

Discretionary Fund are unchanged from

the original formulas for the CCDBG and

are discussed in the 1992 preamble at 57

FR 34397.

In response to an amendment to

section 658P(14) of the CCDBG Act, we

have added a provision allowing for

Discretionary Fund grants to a Native

Hawaiian Organization and to a private

nonprofit organization established for

the purpose of serving Indian or Native

Hawaiian youth. This provision is

discussed below.

Data sources for tribal allotments. The

CCDBG Act requires the Secretary to

obtain the most recent data and

information necessary, from each

appropriate Federal agency, to

determine State funding allotments.

There is no similar statutory

requirement for determining tribal

allotments.

In past years, ACF used two separate

data sources to calculate tribal child

counts: the Bureau of Indian Affairs’

(BIA) Indian Service Population and

Labor Force Estimates Report, published

biennially, and the 1990 Census (for

Alaska-specific data). These data

sources are addressed in the CCDBG

Final Rule (45 CFR 98 and 99, published

August 1992).

In the proposed rule, ACF discussed

a new self-certification process for tribal

child counts used to calculate tribal

allotments under the Child Care and

Development Fund. This approach

affords Tribes the opportunity to select

a data source, or utilize a method for

counting tribal children, which most

accurately reflects its child population.

In addition, the child count data will

be available with minimal lag time and

will more accurately reflect the natural

fluctuations in child population. With

data sources used and discussed in the

1992 CCDBG Final Rule, it can take 2 to

3 years for changes in population (such

as reaching a child population of 50) to

be reflected.

Finally, this approach supports the

President’s April 29, 1994, mandate to

Federal agencies reaffirming the

government-to-government relationship

between Tribes and the Federal

government and directing agencies to

design solutions and tailor Federal

programs, in appropriate circumstances,

to address specific or unique needs of

tribal communities.

Beginning with funding available in

FY 1998, ACF implemented a new selfcertification method for tribal child

counts. In the proposed rule, we stated

that self-certified counts for FY 1998

would continue to include children

under age 16, consistent with the age

category in the BIA Report.

Furthermore, we proposed that for

funds available in FY 1999, tribal child

count declarations would include only

children under age 13, in accordance

with the CCDBG statute, thereby

allowing a one-year transitional period

for Tribal Lead Agencies to plan for a

self-certified child count of children

under age 13.
39970 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

We have slightly modified this

approach in this regulation to continue

to permit self-certification of tribal child

counts to include children under age 16

for funds which become available in FY

1999. While we fully embrace selfcertification of tribal child counts, based

on the practical experience in

implementing this approach for FY 1998

tribal grant awards we believe that more

time is necessary for some tribal

grantees to plan for counting children

under age 13.

This additional time is particularly

important since Tribes will no longer be

able to use the data in the BIA Report,

and there is no frequently published

national data source which provides

counts of children under age 13 for all

current or potential CCDF tribal

grantees. However, despite the

extension of the transition period, we

still plan to require self-certification of

children under age 13 beginning in FY

2000.

Each year ACF will issue instructions

for Tribes to follow in submitting their

self-certified child counts. Each tribal

grantee and each Tribe participating in

a consortium will be required to submit

a child count declaration signed by the

governing body of the Tribe or an

individual authorized to act on behalf of

the applicant Tribe or organization.

Grants to a Native Hawaiian

organization and a private nonprofit

organization serving Indian or Native

Hawaiian youth. Section 658P(14) of the

amended CCDBG Act adds the following

second definition to the term ‘‘tribal

organization’’ which are potentially

eligible for Discretionary Funds:

‘‘Other organizations—Such term includes

a Native Hawaiian Organization, as defined

in section 4009(4) of the Augustus F.

Hawkins-Robert T. Stafford Elementary and

Secondary School Improvement

Amendments of 1988 and a private nonprofit

organization established for the purpose of

serving youth who are Indians or Native

Hawaiians.’’

Section 4009(4) of the Augustus F.

Hawkins-Robert T. Stafford Elementary

and Secondary School Improvement

Amendments of 1988 defines a Native

Hawaiian Organization as:

‘‘A private nonprofit organization that

serves the interests of Native Hawaiians, and

is recognized by the Governor of Hawaii for

the purpose of planning, conducting, or

administering programs (or parts of

programs) for the benefit of Native

Hawaiians.’’

No other changes were made in the

Act with respect to Native Hawaiians or

Native Hawaiian Organizations (NHOs)

or private nonprofit organizations

(PNOs) established for the purpose of

serving youth who are Indians or Native

Hawaiians; nor is the Conference

Agreement instructive as to

Congressional intent. However, given

the statutory language, we provide at

§ 98.61(e) that only a single NHO and a

single PNO will be funded.

Several options were considered for

allocating funds in accordance with this

expanded definition of tribal

organization. We considered, for

example, treating NHOs and PNOs in

the same manner for allocation purposes

as other tribal organizations (i.e., a base

amount plus a per child amount, or only

a per child amount).

Based on an analysis of the statute,

however, we believe the Congress

intended for an NHO and a PNO to be

treated differently from Indian Tribes

and tribal organizations which are

eligible to receive CCDF funding. CCDF

funds are awarded on a formula basis to

all eligible Tribes and consortia.

However, only a single NHO and a

single PNO are to be awarded grants.

Determination of those entities requires

a discretionary grant process rather than

the formula basis used for Indian Tribes

and tribal consortia.

Eligible NHOs and PNOs, as well as

the States, are reminded that under

§ 98.80(d), Indian children continue to

have dual eligibility to receive services

funded by CCDF. Indian children and

Native Hawaiian children will continue

to be eligible for services provided

under a grant awarded to a NHO or PNO

and from the State of Hawaii (or other

State in the case of a PNO awarded to

a grantee not located in Hawaii).

Therefore, through a grant award to a

NHO and a PNO, additional child care

services (from the Discretionary Fund)

are available to children who are

currently eligible to be served under a

State CCDF program. A more detailed

explanation of dual eligibility is

provided in the Preamble at Subpart I.

For these reasons, up to $2 million is

reserved from the total amount reserved

for Tribes under the Discretionary Fund

for two grants each fiscal year. We

believe that such an amount is

substantial enough to meaningfully

serve populations that may have been

under-served in the past, without

jeopardizing existing tribal programs.

Allotments From the Mandatory Fund

(Section 98.62)

Section 418(a) of the Social Security

Act creates a capped entitlement for the

50 States and the District of Columbia.

The amounts allotted to each State and

the District are based on the Federal

share of expenditures for child care

under prior programs under title IV–A

of the Social Security Act (i.e., the

AFDC/JOBS, Transitional and At-Risk

Child Care programs) in FY 1994, FY

1995, or the average of FY 1992–1994,

whichever is greatest. Before funds are

allocated to the individual States, onequarter of one percent of the total is

reserved for the provision of technical

assistance and up to two percent is

reserved for grants to Tribes.

For Indian Tribes and tribal

organizations we have chosen to

allocate Mandatory Funds solely

according to the number of Indian

children in each Tribe’s service area.

That is, unlike the Discretionary Fund,

there is no base amount provided to

Tribes under the Mandatory Fund.

We chose this approach in response to

tribal arguments for increased funding

for direct services. We agree that tribal

child care programs would especially

benefit from additional service funds,

and we did not wish to divert any new

funds into non-service activities. Tribes

have the flexibility to expend their base

amount on administration or direct

services, including quality activities.

However, we are concerned that many

large consortia already receive

substantial sums of base amount

monies. According to the program

reports from those consortia, it appears

that these large base amounts often do

not translate into direct child care

services for tribal children. We do not

believe that tribal children would

benefit from augmenting the existing

base amount in lieu of direct child care

services.

Lastly, we listed the 13 entities in

Alaska that are eligible to receive

Mandatory Funds pursuant to the

amended section 419(4)(B) of the Social

Security Act. We listed those eligible

entities in this section of the regulation

rather than have two different

definitions of Tribes at § 98.2.

Allotments From the Matching Fund

(Section 98.63)

As provided in the statute, allotments

to each of the 50 States and the District

of Columbia are based on the formula

used to distribute funds under the nowrepealed At-Risk child care program.

The Matching Fund consists of the

amount remaining from a fiscal year’s

appropriation under section 418(a)(3) of

the Social Security Act after reserving

amounts for technical assistance and for

Tribes and awarding Mandatory Funds.

Reallotment and Redistribution of

Funds (Section 98.64)

The provisions for reallotment and

redistribution of Discretionary funds

remain essentially unchanged from the

1992 regulations. The reallotment/

redistribution process is described at 57

FR 34401, August 4, 1992. However, the
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39971

OMB-approved form ACF–696 now asks

the State to indicate if it wants any

Discretionary Funds that might be

reallotted. Discretionary Funds will be

reallotted only to those States that

request them. Therefore, the provision

formerly at § 98.64(b)(2)(iv) that

returned to the Federal government any

reallotted funds that a State ‘‘does not

accept’’ is deleted as unnecessary.

Section 418(a)(2)(D) of the Social

Security Act, which was amended after

the proposed rule was published in July

1997, now provides for the

redistribution of Federal Matching

Funds which are allotted to a State, but

not used. This new provision is now

added to the regulations at § 98.64(c)(2).

We have adopted the statutory term

‘‘redistribute’’ when discussing the

Matching Fund in the regulation.

However, we believe that the term is

comparable to the ‘‘reallotment’’ of the

Discretionary Funds and have therefore

adopted a comparable process. For

example, at § 98.64(c)(3) we have

applied the language from the

reallotment process at § 98.64(b)(2) to

describe the same limits on the amounts

of unobligated Matching grants that will

be redistributed to other States that

currently apply to the Discretionary

Fund. That is, no redistribution will be

made to States if the total to be

redistributed is less than $25,000. Nor

will any grant be made to an individual

State if it would be less than $500. As

provided in the statute, redistribution of

the Matching Funds will be based on a

formula similar to that used for the

original allotments to the 50 States and

the District of Columbia.

Section 98.64(c)(1) provides that

Matching Funds allotted to a State, but

not obligated by the end of that fiscal

year, be redistributed to the other States

which did obligate all of the Matching

Funds allocated to them. Unused

Matching Funds, then, would be made

available only to those States which

demonstrated their ability to use the

entire amount already granted to them.

According to the statute, such States

must request the redistributed funds;

the Funds will not automatically be

redistributed to all qualifying States. We

considered redistributing unused

Matching Funds among each of the 50

States and the District of Columbia,

including the States that returned the

money being reallotted. We rejected that

approach since it raised the possibility

that States which were unable to use all

of their funds in one year would again

be unable to use them in the following

year. This would result in funds

reverting to the Federal Treasury rather

than being used to assist families.

Sections 98.64(c)(3) and (4) provide

that States use the regular financial

reporting form, ACF–696, instead of a

separate notification from the State.

These provisions allow for a simplified

process by which States can both notify

us of any unobligated Matching Funds

available for redistribution and request

redistributed Matching Funds.

Section 98.64(c)(6) reflects the

statutory language that redistributed

Matching Funds are to be considered as

part of the grant for the fiscal year in

which the redistribution occurs, not as

a part of the grant for the year in which

the funds were first awarded. This is in

contrast to reallotment of Discretionary

Funds; for Discretionary Funds the

obligation period is based on the award

year and is not extended.

An amendment to section 658O of the

Act provides for the reallotment of tribal

Discretionary Funds. That amendment,

at 658O(e)(4), requires the Secretary to

reallot any portion of a tribal grant that

she determines ‘‘is not being used in a

manner consistent with the provision of

[the Act].’’

Although the statutory language

seems to suggest that the Secretary may

make a determination which is separate

and apart from the usual audit practice

on the manner of use of funds by Tribes,

there is no discussion in the Conference

Agreement to indicate such an

interpretation. Furthermore, we believe

that Congress would have been more

explicit if it desired the Secretary to

create a separate audit or investigatory

process. Therefore, § 98.64(d) provides

for a reallotment process that parallels

the State process. That is, we will

determine the amounts to be reallotted

based upon reports submitted by the

Tribes, pursuant to paragraph (d)(1) of

this section. Each Tribe must submit a

report to the Secretary indicating either

the amount of funds from the previous

year’s grant it will be unable to obligate

timely pursuant to § 98.64(d), or that it

will obligate all funds in a timely

manner. The reports must be submitted

each year by a deadline established by

the Secretary. Unless notified otherwise,

this deadline will be April 1, and the

reports may be in the form of a letter.

We chose the April 1st deadline to

allow the Secretary the necessary time

to reallot the funds and to allow Tribes

the necessary time to obligate such

funds on a timely basis. While the

proposed rule included the April 1

deadline in the regulatory language

itself, we decided in the final regulation

to leave flexibility to accommodate any

changes that might be necessary as we

implement the reallotment procedures.

We will reallot funds that Tribes

indicate are available for reallotment to

the other Tribes, in proportion to their

original allotment, if the total amount

available for reallotment is $25,000 or

more. If the total amount is less than

$25,000, we will not reallot these funds;

instead, they will revert to the Federal

Treasury. It is administratively

impractical for the Department to issue

small awards. Likewise, the Secretary

will not award any reallotted funds to

a Tribe if its individual grant award is

less than $500, as it is administratively

impractical to do so.

If a Tribe does not submit a

reallotment report by the deadline for

report submittal, we will determine that

the Lead Agency does not have any

funds available for purposes of the

reallotment. If a report is postmarked

after the deadline established by the

Secretary (April 1, unless notified

otherwise), we will not reallot the

amount of funds reported to be available

for reallotment; instead, such funds will

revert to the Federal Treasury. As

previously discussed, late reports do not

allow the Secretary sufficient time to

reallot the funds nor do they allow the

Tribes sufficient time to obligate such

funds timely as required by § 98.64(d).

We anticipate the Secretary will reallot

funds made available for reallotment

within a month of the deadline for

receipt of reallotment reports. Reallotted

funds must meet the same programmatic

and financial requirements as funds

made available to Tribes in their initial

allotments.

The statute, and hence the

regulations, remain unchanged

regarding the reallotment of

Discretionary Funds to the Territories.

That is, there is no reallotment of

Territorial Discretionary Funds.

Comment: A number of commenters

questioned why the regulation did not

specifically reflect the statute regarding

the timing of the determination and

redistribution of returned Matching

funds.

Response: Section 418(a)(2)(D) of the

Social Security Act provides that the

Secretary shall make a determination

‘‘not later than the end of the first

quarter of the subsequent fiscal year’’

whether Matching funds are available

for redistribution. And, that any

redistribution ‘‘shall be made as close as

practicable to the date’’ on which that

determination is made.

Because this is a requirement on the

Secretary, we did not believe it is

necessary to include it in the regulation.

We will follow the timeframes provided

for in the Act.

Comment: One commenter suggested

that the obligation and liquidation

periods for reallotted Matching Funds

should start from the time the funds are
39972 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

reallotted, not at the beginning of the

fiscal year in which the reallotment

takes place.

Response: The requirement is

statutory and the statute does not

provide for extending the program

period of reallotted Matching Funds.

Comment: Another commenter asked

how States will know that Matching

funds are available for redistribution,

and noted that the regulation fails to

state when a request for redistributed

Matching funds is to be made by the

State.

Response: We did not want to create

a cumbersome, time-consuming process

for redistributing Matching funds.

Therefore, we did not propose the

separate step of notifying States of the

availability of redistributed funds.

Rather, the required quarterly ACF–696

referred to in the regulation asks if the

State wishes to request redistributed

Matching funds, should any become

available. This request is to be

completed in the quarter preceding the

final quarter in a fiscal year, as

described in the instructions to the

ACF–696 published as Program

Instruction ACYF–CC–PI–05, dated

September 26, 1997. We believe that

this process will best expedite the

redistribution of Matching Funds,

should any become available. This

process should also allow us to meet the

time requirements in the Act on

redistribution, thereby maximizing the

amount of time that remains in the fiscal

year for the State to obligate the

redistributed Matching funds.

Comment: One commenter suggested

that instead of redistributing returned

State Discretionary funds to other

States, those funds should be reallotted

to the Tribes in the State that returns

them.

Response: As discussed in the

preamble to the 1992 rule at 57 FR

34401, Tribes are not eligible to receive

State funds made available for

reallotment.

Comment: Several commenters

objected to the proposed dollar

thresholds required for reallotment to

Tribes. In the proposed rule, we used

the same thresholds for Tribes as for

States—$25,000 for the total amount

available for reallotment and $500 for an

individual grant award. Commenters

argued that the thresholds for Tribes

should be lower, given the smaller size

of tribal grant awards.

Response: Based on these comments,

we considered lowering the dollar

threshold for Tribes in the final

regulation. However, after discussing

the administrative burden of small

grants with ACF fiscal staff we decided

to keep the $25,000 and $500 thresholds

because it is administratively

impractical for the Department to issue

and track grant awards for smaller

amounts.

Audits and Financial Reporting (Section

98.65)

Commenters were almost universally

opposed to our proposed regulatory

interpretation of the amended section

658K of the Act. They pointed out that

our interpretation of ‘‘an entity that is

independent of the State’’ was

inconsistent with section 7501(a)(8) of

the Single Audit Act Amendments of

1996. That section defines an

independent auditor as an ‘‘external

State or local government auditor who

meets the independence standards

included in generally accepted

government auditing standards.’’ We

have, therefore, amended the regulation

to reflect that State auditors who meet

the generally accepted auditing

standards issued by the Comptroller

General, including public accountants

who meet such independence

standards, may perform the required

audits. We also corrected certain

references, such as replacing the

reference to OMB Circular A–128 with

a reference to OMB Circular A–133,

which was issued to replace A–128 after

our proposed rule was published.

Subpart H—Program Reporting

Requirements

Reporting Requirements (Section 98.70)

Section 658K(a) of the amended Act

requires each State receiving Child Care

and Development Fund funding to

submit two reports: monthly case-level

data for families (reported quarterly)

and annual aggregate data. Territories

are considered States for reporting

purposes. The first annual aggregate

report was required to be submitted by

December 31, 1997, and annually

thereafter.

Comment: Several commenters

requested a delay in the submission of

the first case record report (ACF–801)

due to the changes made by the

technical amendments to the law. They

also requested that States be allowed to

submit data monthly rather than

quarterly.

Response: ACF recognizes these

requests as justifiable. Therefore, as

indicated at § 98.70, we extended the

due date for the first quarterly

submission (ACF–801) from February

15, 1998 to August 30, 1998. We also

allow States to submit data monthly

rather than quarterly. If they choose to

submit data monthly, the first reported

month, April 1998, is due 90 days later

by July 30, 1998, with following reports

every 30 days thereafter.

Section 658L of the Act requires the

Secretary to prepare a report to Congress

every two years summarizing the data

and information required at section

658K of the Act and § 98.71 of the

regulation.

Section 658O(c)(2)(C) of the Act

specifies that Tribes will report on

programs and activities under CCDF.

We require Tribes to submit annual

aggregate data appropriate to tribal

programs as they have previously in the

CCDBG program.

Principles for data reporting. The

amended Act significantly revised the

reporting requirements for all child care

services. As a result, ACF developed

principles to guide the implementation

of reporting requirements. ACF, in

concert with the Lead Agencies, will:

1. Meet the statutory mandate for data

reporting;

2. Streamline data collection and

reporting procedures from the previous

four programs into a single integrated

program;

3. Build on data collection systems

from the former four child care

programs;

4. Apply flexibility in phasing in the

implementation of the data collection

requirements;

5. Apply flexibility in meeting data

needs outside the Federal requirements;

6. Provide technical assistance to

Lead Agencies in the design of new or

revised data collection systems and

reporting processes, encouraging

linkages to TANF information systems

and to other relevant Federal reporting

systems;

7. Provide sampling specifications to

Lead Agencies as part of the data

collection process;

8. Provide technical assistance to

Lead Agencies in the design and use of

data for the development of program

performance measures; and

9. Commit to making the data useful

for Lead Agencies.

Content of the Reports (Section 98.71)

For States and territories. Consistent

with the requirements of section 658K

of the amended Act, we require States

to collect monthly samples of case-level

family data which are reported to ACF

quarterly, or monthly if the State

chooses to do so. To provide for

adequate time for the approval process

for sampling plans, we require at

§ 98.70(a)(3) that States submit their

sampling plan to ACF for approval 60

days prior to the submission of the first

report. States are not precluded from

submitting case-level data for the entire

population of families served under the
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39973

CCDF. Specific aggregate information is

required in the annual report.

Cost of Care. Although the statute

requires that cost of care information be

provided in both the case-level and

aggregate reports (658K(a)(1)(B)(ix) and

658K(a)(2)(B)), we will collect this

information through the case-level

report only and we will compile the

information into the aggregate. This will

eliminate duplicative reporting for the

annual aggregate report.

Section 658K(a)(2)(C) requires that the

number of payments made through

various methods by types of providers

be reported annually. Most States pay

providers monthly; a few pay more

frequently. If the statutory language is

narrowly interpreted, States would be

required to report as many as 12–24

payments or more for each subsidized

child throughout the year. Because this

information would be of limited value,

we are regulating at § 98.71(b)(2) that

the Lead Agency’s report reflect the

number of children served by payment

method and primary type of provider

during the final month of the report

period only (or for the last month of

service for those children leaving the

program before the end of the report

period). Changes in payment method or

primary provider type over the report

period should be ignored and only the

last arrangement reported.

Comment: Several commenters

requested that ACF include information

about child care provider auspice or

sponsorship in the reporting

requirements, noting that the definitions

section of these regulations (§ 98.2)

refers to the type of provider as nonprofit, sectarian, and relative providers

and that the statute uses the word

‘‘types’’.

Response: Section 658K of the CCDBG

Act as amended by the PRWORA

specifically designates the child care

data items which Congress mandated. In

Section 658K(a)(1)(B)(vii), the statute

states that quarterly case-level data

should be collected on the ‘‘type of

child care in which the child was

enrolled (such as family child care,

home care, or center-based care).’’

Additionally, Section 658K(a)(2)(A) of

the amended statute requires Lead

Agencies to report aggregate information

about the number of child care

providers that received funding ‘‘as

separately identified based on the types

of providers listed in section 658P(5).’’

Section 658P(5) specifically mentions

center-based, group home, family child

care, and relative care.

Although these statutory references

seem to conflict with the term ‘‘types of

providers’’ listed in § 98.2 of the rule,

ACF has decided that it is not

inherently inconsistent to use a different

statutory definition for reporting

purposes. Congress entertained much

discussion around reporting

requirements. Their strong need for

specific child care data can be inferred

from their resolve to include specific

reporting elements in the statute.

Additionally, even though recent

technical amendments slightly revised

the reporting requirements, no specific

direction was given in the technical

amendments to collect information

based on sponsorship.

During the time reporting procedures

have been under development, ACF has

consulted with program administrators

and system/information management

specialists at the State level, as well as

the American Public Welfare

Association and the National

Association of Child Care Resource and

Referral Agencies. We have learned that

most State information systems are built

on payment systems, rather than

provider identification systems, such as

licensing programs might maintain.

Requiring the collection of auspice or

sponsorship information would

represent a significant information

collection burden for States which is not

specifically authorized by the statute.

Program sponsorship is a difficult

element to collect. However, we do

recognize the interest of some

organizations to learn about different

sponsoring agents and toward that end

we will include sponsorship as an

optional data reporting element when

these are developed in the future.

Comment: Several commenters

requested that ACF not collect Social

Security Number (SSN) as a case

identifier. One commenter in particular

argued that the collection of Social

Security numbers may have a chilling

effect on immigrant families wishing to

apply for child care services.

Response: ACF is requiring the

collection of SSN as a case identifier

because it is necessary for gathering the

aggregate data needed for research tied

to TANF, employment and other childrelated programs. Legal immigrants who

work are entitled to receive child care

subsidies. Therefore, requesting them to

provide SSN is not a deterrent. Illegal

immigrants are prevented from working

by law and would not need subsidized

child care.

Comment: A commenter objected to

the collection of average hours of care

per month and suggested that we allow

States that collect the data weekly to be

able to report weekly averages.

Response: The technical amendments

to the law require the change in

reporting the hours of care from weekly

to monthly. Uniform reporting

requirements dictate that data be

reported by all States in the same

manner to avoid confusion in data

analysis. Therefore, all States should

report monthly hours. States that collect

the data weekly should transform the

data into monthly data. We will provide

technical assistance in how to perform

this calculation.

Comment: Several commenters

objected to the collection of ‘‘reasons for

care’’ item because it is not in the law

and puts an additional burden on the

States.

Response: The ‘‘Reason for Care’’ data

element has previously been collected

in the old CCDBG and JOBS/AFDC child

care programs and the collection of this

data does not represent a new burden

for the States. ACF will continue to

collect ‘‘reasons for care,’’ i.e. working,

training/education, or protective

services because it best informs State

and Federal planning and policy efforts.

In addition, since the State has the

option of not requiring income data for

children in protective services, these

cases need to be identified to determine

if the missing data is appropriate. We

will provide technical assistance to

States experiencing difficulties with this

data element.

Comment: One commenter

recommended using the Census Bureau

standards for reporting race.

Response: We have changed our race

definitions to comply with the new

OMB guidelines (Federal Register of 10/

30/97) for Census Bureau reporting of

race. Under these new guidelines, we

will divide the child race element into

two questions:

Child Ethnicity

1. Hispanic or Latino

2. Not Hispanic or Latino

and

Child Race

1. American Indian or Alaska Native

2. Asian

3. Black or African American

4. Native Hawaiian or Other Pacific

Islander

5. White

On the second question, respondents

will be allowed to report more than one

category.

Information concerning child care

disregards is required by the statute at

658K(a)(2)(C); however, disregards, if

used, would be provided under the

TANF programs, not child care

programs. As a result, information on

the use of the disregard will be collected

through TANF reporting procedures,

since TANF agencies can collect this

information more reliably.

Comment: One commenter was

concerned that child care disregard

information would not be collected by
39974 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

TANF since it is not required by statute.

They also were concerned that some

States may elect to spend a lot of TANF

funds on child care without transferring

the funds to CCDF.

Response: We have coordinated data

collection efforts with the TANF

program. The proposed TANF

regulations require information about

the child care disregard, as well as child

care information for families that

receive child care through TANF

funding.

Comment: Several commenters

requested that ACF collect some

additional items that are not required by

the statute but are important for

understanding the program and

improvement of program management.

The suggested elements included items

such as disability status and number of

weeks of care each month.

Response: Requiring the collection of

such items is important, but represents

a significant increase in the reporting

burden on the States. ACF has decided

against adding these items as required

elements to avoid requiring an

additional burden on the States.

However, because we recognize the

importance of such items, we will

consider these and other important

items, as we develop optional data

reporting elements, with input from the

States, in the future.

To have a complete picture of child

care services in the States, quarterly

case-level data and annual aggregate

information will be collected on all

funds of the Child Care and

Development Fund, including

Discretionary Funds (which include any

funds transferred from the TANF Block

Grant), Mandatory Funds, and Federal

and State Matching Funds, as well as

funds used for Maintenance-of-Effort

(MOE). For States that choose to pool

CCDF funds with non-CCDF funds (e.g.

title XX, or State or local funds not part

of the CCDF MOE or Match) we will

allow reporting and/or sampling on all

children served by the pooled funds, but

will require States to indicate

percentages of CCDF and non-CCDF

funds in the pool of funds. Detailed

instructions on how to construct

sampling frames for States with pooled

funds will be included in the sampling

specifications developed by ACF.

Technical assistance will be provided to

States regarding collecting data across

funding streams.

Additionally, States have indicated a

desire to compare data which are not a

part of the mandatory reporting

requirements. To meet this need and to

make the available child care data more

useful to State planning efforts, the

Department will collaborate with States

regarding a set of standardized optional

data elements. The reporting of these

data elements will not be required of

any grantee.

We have provided additional

information to Lead Agencies

concerning specific reporting

requirements, approved data

definitions, reporting formats, sampling

specifications for the quarterly caselevel report, and the submission process

in ACYF–PI–CC–97–08, dated

November 25, 1997 and in ACYF–PI–

CC–98–01, dated January 25, 1998. In

this final rule, for ease of reference, we

conformed the regulatory language at

§§ 98.71(a)(1), (6), (7), and (10) to mirror

the data collection elements of the ACF–

801, Child Care Quarterly Case Record

(OMB Number 0970–0167).

For Tribes. Tribes are neither required

to submit the aggregate annual report

nor the new case-level quarterly report

as States are. Instead, Tribes will

continue annually to submit the ACF–

700 which is currently in use. They will

include information on all children

served under the Discretionary and

Tribal Mandatory funds. As of fiscal

year 2000, Tribes will no longer be

required to submit the second page of

the ACF–700 (fiscal programmatic data

for CCDBG funds). Fiscal information

for Tribes will be collected on a separate

tribal financial reporting form.

Subpart I—Indian Tribes

This Part addresses requirements and

procedures for Indian Tribes and tribal

organizations applying for or receiving

CCDF funds. In light of unique tribal

circumstances, Subpart I balances

flexibility for Tribes with the need to

ensure accountability and quality child

care for children.

Subpart I specifies the extent to which

general regulatory requirements apply to

Tribes. In accordance with § 98.80(a), a

Tribe shall be subject to all regulatory

requirements in Parts 98 and 99, unless

otherwise indicated. Subpart I lists

general regulatory requirements that

apply to Tribes. It also identifies

requirements that do not apply to

Tribes.

Most programmatic issues that apply

to Tribes are consolidated in Subpart I.

However, financial management issues

that apply to Tribes, including the

allotment formulas and underlying data

sources, are addressed separately in

Subpart G—Financial Management.

Tribes have the option to consolidate

their CCDF funds under a plan

authorized by the Indian Employment,

Training and Related Services

Demonstration Act of 1992 (Pub.L. 102–

477). This law permits tribal

governments to integrate a number of

their federally funded employment,

training, and related services programs

into a single, coordinated

comprehensive program.

Senate Committee Report language for

that Act prohibits the creation of new

regulations for tribal programs operating

under the 102–477 initiative (S. Rep.

No. 188, 102 Cong. 2d Sess. (1992)),

therefore ACF is not promulgating any

additional regulations for the Indian

Employment, Training and Related

Services application and plan process.

ACF does publish annual program

instructions providing directions for

Tribes wishing to consolidate CCDF

funds under an Indian Employment,

Training and Related Services plan. The

Department of the Interior has lead

responsibility for administration of P.L.

102–477 programs.

General Procedures and Requirements

(Section 98.80)

Demonstrations from Consortia. The

regulation at § 98.80(c)(1) provides that

a consortium must adequately

demonstrate that each participating

Tribe authorizes the consortium to

receive CCDF funds on its behalf. This

demonstration is required once every

two years through the two-year tribal

CCDF Plan. It is the responsibility of

each consortium to inform ACF, through

an amendment to its Plan, of any

changes in membership during the Plan

period.

Consortia can demonstrate members’

agreement to participate in a number of

ways. A resolution is acceptable. We

will also accept an agreement signed by

the tribal leader or evidence that a tribal

leader participated in a vote adopting a

consortium agreement.

Comment: Several commenters

recommended a one-time or ‘‘standing’’

resolution from each consortium

member which will remain in effect

until rescinded.

Response: The purpose of the

demonstration is to show that the

member has authorized the consortium

to act on its behalf. We have not

changed this requirement because it is

a measure designed to provide

accountability to the individual

members. We recognize the challenges

of obtaining demonstrations,

particularly in rural areas in Alaska due

to seasonal work activities, but as a

standing requirement Tribes should

now be aware in advance that it will be

needed and we will remind grantees

about the demonstration requirement

well before the Plan due date.

Special requirements for Alaska

Native grantees. By statute (section 419

of the Social Security Act), only

specified Alaska Native entities may
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39975

receive Tribal Mandatory Funds. The

Metlakatla Indian Community of the

Annette Islands Reserve and the 12

Alaska Native Regional Nonprofit

Corporations are eligible to receive

Tribal Mandatory Funds. The law

provides that Discretionary Funds,

however, will continue to be available

to all the eligible Alaska Native entities

that could apply under old CCDBG

rules.

For purposes of Discretionary

funding, Alaska Native Regional

Nonprofit Corporations, which are

eligible to apply on behalf of their

constituent villages, will need to

demonstrate agreement from each

constituent village.

In the absence of such demonstration

of agreement from a constituent village,

the Corporation will not receive the perchild amount or the base amount

associated with that village. This

changes the policy stated in the

preamble to the final rule issued August

4, 1992 (57 FR 34406). The former

policy permitted Alaska Native Regional

Nonprofit Corporations to receive the

per-child amount (but not the base

amount) for a constituent village in the

absence of a demonstrated agreement

from the village that the Corporation

was applying for funding on its behalf.

Since all other tribal consortia are

required to demonstrate agreement from

their member Tribes in order to receive

Discretionary funding, this change

makes the funding requirements

consistent for all consortia grantees.

For purposes of Tribal Mandatory

Funds, since the statute specifically

cited the 12 Alaska Native Regional

Nonprofit Corporations as eligible

entities, demonstrations are not required

by member villages for these entities to

be funded.

Since the law provides that only

designated Alaska Native entities may

receive the Tribal Mandatory Funds,

there is a difference between which

Alaska Native entities can be direct

grantees for the two tribal parts of the

CCDF. Our analysis indicates, however,

that each of the Alaska tribal entities

that are eligible to receive Discretionary

Funds is served by one of the 12 Alaska

Native Regional Nonprofit Corporations

that by law can be direct grantees for the

Tribal Mandatory Funds. In instances

where there are different Alaska Native

grantees for the two parts of the fund,

we strongly encourage grantees to work

together to ensure a coordinated tribal

child care system in Alaska.

Dual eligibility. Under § 98.80(d),

Indian children continue to have dual

eligibility to receive child care services

funded by CCDF. Section 6580(c)(5) of

the Act mandates that, for child care

services funded by CCDF, the eligibility

of Indian children for a tribal program

does not affect their eligibility for a

State program. To receive services under

a program, the child must still meet the

other specific eligibility criteria of that

program.

This provision was in the original

Act, and it was not affected by the

recent PRWORA amendments.

Regulations at § 98.20(b)(1) continue to

provide that Lead Agencies may

establish eligibility requirements, in

addition to Federal eligibility

requirements, so long as they do not

‘‘discriminate against children on the

basis of race, national origin, ethnic

background, sex, religious affiliation, or

disability.’’ As a result, States cannot

have a blanket policy of refusing to

provide child care services to Indian

children.

At the same time, tribal CCDF

programs are a valuable source of child

care for Indian children, including

children whose families receive TANF

assistance. In particular, a Tribe that

operates its own TANF or work program

(or both) will have an important role in

promoting self-sufficiency for its lowincome families, including the

provision of adequate child care.

However, Indian children have dual

eligibility for CCDF child care services

regardless of whether a Tribe operates

its own TANF or work program.

Therefore, we encourage States and

Tribes to work closely together in

planning for child care services.

Coordination of child care resources

will be needed to meet the child care

needs of eligible Indian families.

Eligibility. Under § 98.80(f), Tribal

Lead Agencies continue to have the

option of using either the State’s median

income or the tribal median income in

determining eligibility for services. In

determining eligibility for services

pursuant to § 98.20(a)(2), a tribal

program may use either: (1) up to 85

percent of the State median income for

a family of the same size; or (2) up to

85 percent of the median income for a

family of the same size residing in the

area served by the tribal grantee.

Application and Plan Procedures

(Section 98.81)

Section 98.81 contains application

and Plan requirements for Tribes and

tribal consortia. In accordance with

§ 98.81(a), Tribes must apply for funds

pursuant to § 98.13, except that the

requirement at § 98.13(b)(2) does not

apply.

A Tribal Lead Agency must submit a

CCDF Plan, as described at § 98.16, with

the additions and exceptions described

in § 98.81(b).

Section 98.81(b)(2) requires

definitions of ‘‘Indian child’’ and

‘‘Indian reservation or tribal service

area’’ for purposes of determining

eligibility.

Section 98.81(b)(4) requires

information necessary for determining

the number of children for fund

allocation purposes and grant eligibility

requirements (i.e., the requirement that

a Tribe must have at least 50 children

under 13 years of age in order to directly

apply for funding). The preamble

discussion to Subpart G summarizes the

data sources used to determine tribal

allotments.

Other changes in Plan provisions are

more fully discussed in related sections

under Subpart I.

Comment: In the proposed rule we

had included a new requirement that

Tribes include a tribal resolution or

similar demonstration which identifies

the Tribal Lead Agency. A tribal leader

responded to the proposed new

requirement by stating that since he

signs the Plan materials, a resolution

identifying the Tribal Lead Agency

should not be required.

Response: We understand that some

tribal grantees may be required to

include a resolution accompanying their

Plan in order to comply with their own

tribal regulations and/or procedures.

However, as the commenter pointed out,

since a grantee must identify the Tribal

Lead Agency in its Plan, a resolution is

not necessary. We agree with this

comment and have eliminated this

proposed requirement in the final rule.

Comment: Commenters asked if the

financial reporting form could serve as

the CCDF application for Tribes.

Response: Although the financial

form ACF–696 and the CCDF Plan will

serve as the application for States and

territories, at this time Tribes are

required to report financial information

on the SF–269 form and do not use the

ACF–696. ACF is developing a CCDF

financial form specifically for Tribes.

When this form is finalized it, along

with the CCDF plan, will serve as the

application for Tribes. However, since

this form has not yet been developed,

for years when the CCDF biennial Plan

is due, the Plan itself will serve as the

application. However, in non-Plan

years, ACF will issue a Program

Instruction which describes basic

information that must be provided on an

annual basis, including the self-certified

child count, to apply for funds.

Coordination (Section 98.82)

Tribal Lead Agencies must meet the

coordination requirements at §§ 98.12

and 98.14 and the planning

requirements at § 98.14—including the
39976 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

public hearing requirement at § 98.14(c).

A Tribe must distribute notice of the

hearing throughout its service area

(rather than statewide).

Prior to the publication of new

regulations, Tribal Lead Agencies were

not required to coordinate with agencies

responsible for health education,

employment services or workforce

development, and the State or tribal

TANF agency, specified at § 98.14(a)(1).

Although it was not a specific

requirement in the Plan, during the preregulatory period ACF encouraged

Tribal Lead Agencies to coordinate with

these agencies.

We recognize that the agencies with

which each Tribal Lead Agency

coordinates may differ according to its

own unique circumstances. We also

recognize that child care is an essential

part of a Tribe’s self-sufficiency and

workforce development efforts. In

addition, the quality of child care

benefits greatly from close coordination

with the public health and education

communities.

Therefore, in recognition of these

important program linkages, in the final

regulation Tribal Lead Agencies are

required to meet the requirements at

§ 98.14(a)(1) to coordinate CCDF

activities with tribal agencies

responsible for health education,

employment services or workforce

development, and a Tribe’s TANF

agency, if the Tribe is administering its

own TANF program.

Comment: A few commenters

indicated that they were not operating

their own TANF programs and inquired

whether there was a specific mandate

for coordination with State TANF

agencies.

Response: Tribal Lead Agencies

which are not administering their own

TANF programs are not required, but

are strongly encouraged to coordinate

their program activities with the State

TANF agency.

Requirements for Tribal Programs

(Section 98.83)

In recognition of the unique social

and economic circumstances of many

tribal communities, Tribal Lead

Agencies are exempt from a number of

the CCDF requirements which apply to

State Lead Agencies.

Administrative costs. Based on input

from several tribal organizations and

tribal representatives, and as proposed,

we are providing greater flexibility for

Tribal Lead Agencies by exempting

them from the five percent

administrative cost cap at § 98.52(a).

Therefore, instead of enforcing the

statutory five percent State

administrative cost limit, a 15 percent

administrative limit for Tribal Lead

Agencies was recommended by several

tribal organizations during the course of

our pre-drafting consultations to

account for the varying infrastructural

capabilities of many Indian Tribes.

Tribal Lead Agencies may not expend

more than 15 percent of the aggregate

CCDF funds for administrative activities

(including amounts used for

construction and renovation in

accordance with section § 98.84, but not

including the base amount provided

under section § 98.83(e)).

Section 98.52(a) provides a list of

administrative activities which are

subject to the 15 percent cost limitation.

The preamble discussion of § 98.52(a)

provides an additional discussion of

related activities which are not

considered administrative activities for

purposes of the 15 percent cost cap.

Through the list of activities which

are not considered administrative costs,

the exemption from the five percent

State administrative cost cap, and the

base amount under the Discretionary

Fund, we believe Tribal Lead Agencies

will have sufficient flexibility in

determining their administrative and/or

indirect costs to run effective CCDF

programs.

We recognize that many Federal

programs permit Indian Tribes and

tribal organizations to include an

indirect costs rate in their grant awards.

Indirect costs are administrative costs

that cannot be easily charged to a

specific program. Among other things,

these generally include: the cost of

accounting services, personnel services,

and general administration of the

organization. Since the cost of these

items cannot be easily assigned to a

program that a grantee is operating, the

indirect cost rate is applied to the

grantee’s direct costs to determine the

amount the grantee will be able to

recover from the program for the

grantee’s total indirect costs.

An indirect cost rate is arrived at

through negotiation between an Indian

Tribe or tribal organization and the

appropriate Federal agency. Agreements

vary from Tribe to Tribe. For example,

some agreements may apply the indirect

cost rate to salaries and wages only;

others may apply the indirect cost rate

to salaries, wages, and fringe benefits

only.

Indirect costs, as determined by an

indirect cost agreement or cost

allocation plan pursuant to § 98.55, are

identified at § 98.52(a)(6) as an

allowable administrative expense for

tribal grantees. Tribal Lead Agencies are

reminded that regardless of their

negotiated indirect cost rates,

administrative costs may not exceed the

15 percent cost limitation at § 98.83(g).

Comment: A few commenters stated

that a 15 percent administrative cost

limit was too restrictive.

Response: The 15 percent limit is

designed to provide Tribes greater

flexibility than States which must meet

a five percent administrative cost limit

which was mandated by statute. The

preamble discussion of § 98.52(a)

provides an additional discussion of

related activities which are not

considered administrative activities for

purposes of the 15 percent cost cap.

Through these additional activities, the

exemption from the five percent State

administrative cost cap, and the base

amount under the Discretionary Fund,

we believe Tribal Lead Agencies will

have sufficient flexibility in determining

their administrative and/or indirect

costs to run effective CCDF programs.

Comment: Several commenters

requested that we adopt the following

percentages: 63.75 for direct child care

services; and 36.25 for child care

services, activities to improve the

availability and quality of child care,

and/or administrative costs.

Response: Prior to the passage of

PRWORA, the 63.75/36.25 percentages

applied to exempt Tribal Lead Agencies.

While this policy previously applied

only to exempt Tribes, following the

passage of PRWORA we extended it to

apply to all Tribes during an interim

period since the law was silent on

administrative costs for Tribes. In a

September 19, 1996 letter inviting

Tribes to apply for Tribal Mandatory

Funds and in ACF Program Instructions

ACYF–PI–CC–97–03 and ACYF–PI–CC–

97–04 we clearly indicated that this was

an interim policy and that we intended

to regulate on this issue. For the reasons

given in this preamble, we have not

retained the policy.

Comment: We received a comment

asking why the administrative cost limit

for Tribes at proposed § 98.83(g) applied

to CCDF funds that were ‘‘provided’’

while the administrative cost limit for

States at § 98.52 applied to CCDF funds

that were ‘‘expended’’.

Response: We revised the

administrative cost limit for Tribes at

§ 98.83(g) from the language in the

proposed rule to more closely parallel

the administrative cost limit for States at

§ 98.52. The revised § 98.83(g) requires

that not more than 15 percent of the

aggregate CCDF funds expended by the

Tribal Lead Agency from each fiscal

year’s allotment (including amounts

used for construction and renovation in

accordance with § 98.84, but not

including the base amount provided

under § 98.83(e)) shall be expended for
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39977

administrative costs. We are using

‘‘expended’’ rather than ‘‘provided’’ to

prevent a Tribal Lead Agency that does

not expend its full allocation from

receiving a windfall in administrative

cost allowances. The revised language

also clarifies that the administrative cost

limit applies to the amounts expended

from the total allocated, not to the

amounts expended in a single fiscal

year.

Exempt Tribes. We realize that many

smaller tribal grantees do not have the

infrastructure in place to support certain

requirements. As a result, we are

exempting Lead Agencies of smaller

Tribes and tribal organizations (with

total CCDF allocations less than an

amount established by the Secretary)

from certain requirements specified at

§ 98.83(f). Exempt tribal grantees are not

required to comply with the four

percent quality requirement at § 98.51(a)

or to run a certificate program. Nonexempt tribal grantees are required to

comply with these requirements.

The dollar threshold for determining

which Tribes are exempt is established

by the Secretary. Until Tribes are

notified otherwise, the threshold is set

at $500,000. In other words, Tribal Lead

Agencies with total CCDF allocations

less than $500,000 in a fiscal year will

be considered exempt (any unobligated

or unliquidated funds from prior fiscal

years are not included in determining

exempt/non-exempt status). Tribal Lead

Agencies with allocations equal to or

greater than $500,000 are non-exempt.

In the proposed rule, we proposed

that the threshold would be set to

include as non-exempt all Tribes which

were non-exempt prior to PRWORA.

However, due to increased

appropriations, this approach would

have greatly increased the number of

non-exempt Tribes. As an alternative,

we have chosen a reasonable dollar

threshold ($500,000) that, while more

than the dollar amount that was

mentioned in the proposed rule

($460,000), would still move some

Tribes to a non-exempt category.

The increased number of non-exempt

Tribes reflects the increased child care

funding provided directly to Tribes

under PRWORA. Since the exemption

was originally intended to recognize the

difficulty of meeting all requirements

with a small grant amount, we believe

it is reasonable for a Tribe with a grant

of $500,000 or higher to meet the four

percent quality and certificate program

requirements.

Comment: We received comments

requesting the elimination of the

exempt/non-exempt distinction. These

commenters encouraged us to provide

Tribal Lead Agencies with increased

flexibility by making all Tribes exempt.

Response: We are keeping the

exempt/non-exempt distinction since

we believe grantees with large grant

allocations should be subject to the four

percent minimum quality and certificate

program requirements. While we

appreciate the need for Lead Agency

flexibility, the need for quality child

care and parental choice for Indian

children is paramount.

Particularly given the increased

allocation of funds for child care

programs under the CCDF, we believe it

is vitally important that the tribal

grantees with larger grants establish or

maintain certificate programs so that the

families they serve may select from a

range of providers: center-based; group

home; family child care; in-home or

other providers. Many of the larger

tribal grantees already operate certificate

programs. Likewise, the four percent

minimum quality provision will help to

ensure that Tribal Lead Agencies make

the necessary investments for quality.

We believe the Tribal Lead Agencies

with larger grants can play a leadership

role in providing parental choice and

providing quality care.

Furthermore, in FY 1998, a few States

received CCDF grant awards which were

smaller than the largest tribal grant

award. These State Lead Agencies,

regardless of size, must comply with all

the CCDF requirements including the

four percent minimum quality provision

and the requirement to run a certificate

program. As a result, we believe it is

appropriate to require Tribes with larger

grants to meet these requirements.

Comment: One commenter requested

clarification on funding amounts

required for quality activities.

Response: While we strongly

encourage exempt Tribal Lead Agencies

to expend CCDF funds on quality

activities, they are not required to meet

this provision. For non-exempt Tribal

Lead Agencies subject to the quality

expenditure requirement at § 98.51(a),

not less than four percent of the

‘‘aggregate funds expended’’ by the Lead

Agency shall be expended for quality

activities. For purposes of this

requirement, the ‘‘aggregate funds

expended’’ by the Tribal Lead Agency

includes amounts used for construction

and renovation in accordance with

§ 98.84 but does not include the base

amount provided under § 98.83(e).

Comment: Several commenters

recommended that Tribes should not be

subject to § 98.43(b)(2) which requires a

market rate survey as one of the three

elements in determining equal access.

The commenters stated that more

flexible methodologies should be

permitted for tribal grantees. For

example, one commenter’s Tribe

currently establishes payment rates

based on their State’s market rate survey

because their tribal service area is

included in this market rate survey.

Response: In the final regulation, we

have not exempted Tribal Lead

Agencies from the requirement at

§ 98.43(b)(2) that their payment rates be

based on a market rate survey. However,

a Tribal Lead Agency may base its

payment rates on the State’s market rate

survey rather than conducting its own

survey if their service area is included

in the State’s survey. As noted at

§ 98.16(l), Tribal Lead Agencies must

adequately describe the method used to

ensure equal access.

While we are providing more

flexibility for Tribal Lead Agencies

regarding market rate surveys, we

strongly encourage tribal CCDF grantees

to survey their local providers in order

to establish a payment rate which is an

accurate reflection of the child care

market on their reservation or tribal

service area.

70 percent requirement. Section

418(b)(2) of the Social Security Act

provides that States ensure that not less

than 70 percent of the total amount of

the State Mandatory and Matching

funds received in a fiscal year be used

to provide child care assistance to

families receiving assistance under a

State program under Part A of title IV of

the Social Security Act, families who

are attempting through work activities

to transition from such assistance, and

families at risk of becoming dependent

on such assistance. The provision at

section 418(b)(2) does not apply to

Tribal Lead Agencies. Nonetheless,

Tribes have a responsibility to ensure

that their child care services provide a

balance in meeting the needs of families

listed in section 418(b)(2) and the child

care needs of the working poor.

Since Tribes may apply for both

Tribal Mandatory Funds and

Discretionary Funds, they are receiving

increased CCDF grant awards—

compared to amounts received prior to

PRWORA—to provide direct child care

services. Also, as we pointed out in our

discussion on dual eligibility of tribal

children, Tribes now have the option

under title IV of the Social Security Act

to operate their own TANF programs.

Additionally, Tribes that operated a

tribal Job Opportunities and Basic Skills

Training (JOBS) program in 1994 may

choose to continue a tribal work

program. Whatever the mixture of child

care, TANF, and work services a Tribe

chooses to administer, child care

services should be designed to ensure

that all eligible families receive a fair
39978 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

share of services within the tribal

service area.

Base amount. A base amount is

included in tribal grant awards under

the Discretionary Fund. As referenced at

§ 98.83(e), the base amount of any tribal

grant is not subject to the administrative

costs limitation at § 98.83(g) or the

quality expenditure requirement at

§ 98.51(a).

The base amount for each tribal grant

may be used for any activity consistent

with the purposes of the CCDF,

including the administrative costs of

implementing a child care program. For

examples of administrative costs, refer

to § 98.52(a).

Lead agency. Tribal grantees, like

States, must designate a Lead Agency to

administer the CCDF. If a tribal grantee

applies for both Tribal Mandatory

Funds and Discretionary funds, the

programs must be integrated and

administered by the same Lead Agency.

Consortia. If a Tribe participating in a

consortium arrangement elects to

receive only part of the CCDF (e.g.,

Discretionary Funds), it may not join a

different consortium to receive the other

part of the CCDF (Tribal Mandatory

Funds), or apply as a direct grantee to

receive the other part of the fund. In

order to receive CCDF program services,

individual tribal consortium members

must remain with the consortium they

have selected for the fiscal year in

which they are receiving any part of

CCDF funds. However, an Alaska Native

village that must receive Tribal

Mandatory Funds indirectly through an

Alaska Native Regional Nonprofit

Corporation may still apply directly for

Discretionary Funds.

Section 98.83(c)(1) requires that a

tribal consortium include in its two-year

CCDF Plan a brief description of the

direct child care services being provided

for each of its participating Tribes. We

included this provision for three

reasons: (1) It helps ensure that services

are being delivered to the member

Tribes; (2) since in some cases consortia

receive sizeable base amounts, it will

provide documentation of the actual

services being delivered to member

Tribes through consortia arrangements;

and (3) it provides the opportunity for

public comment, as part of the public

hearing process required by § 98.14(c),

on the services provided to member

Tribes.

Comment: One commenter was

interested in how ACF would treat an

individual consortium member that

decided to drop out of its authorized

CCDF consortium arrangement prior to

the end of the fiscal year.

Response: We strongly encourage

Tribes to closely evaluate their child

care needs and eligibility for CCDF

services before choosing to enter into a

consortium arrangement. If a situation

arises where a Tribe decides it must

relinquish its membership in a

consortium prior to the end of the fiscal

year, the CCDF funds which were

awarded to the consortium on behalf of

the departing member Tribe will remain

with the tribal consortium. The

consortium may use these funds to

provide direct child care services to

other consortium members for the

duration of the fiscal year. The final

regulations codify this policy at

§ 98.83(c)(4).

Child care standards. Section

658E(c)(2)(E)(ii) of the Act requires the

development of minimum child care

standards for Indian Tribes and tribal

organizations. Based on input from

tribal leaders and tribal child care

administrators, we are developing a

process for Tribes to establish minimum

child care standards that appropriately

reflect tribal needs and available

resources. Until the minimum standards

are developed, Tribes must have in

effect tribal and/or State licensing

requirements applicable to child care

services pursuant to § 98.40. Tribes

must also have in place requirements

designed to protect the health and safety

of children in accordance with § 98.41

of the regulations, including, but not

limited to: (1) The prevention and

control of infectious diseases (including

immunization); (2) building and

physical premises safety; and (3)

minimum health and safety training

appropriate to the provider setting.

Comment: We received comments

about the process for developing the

minimum child care standards, and

about the need for flexibility under the

standards in light of unique tribal needs

and resources.

Response: The Child Care Bureau

invited tribal leaders to consult with

ACF officials on this issue in special

focus groups at the Tribal Child Care

Conference in April 1997. In addition,

on March 26, 1997, a ‘‘Request for

Comments on the Development of

Minimum Tribal Child Care Standards’’

was published in the Federal Register.

We are continuing to consult with tribal

officials regarding the development of

these standards. Regarding the need for

flexibility, we recognize unique tribal

circumstances and the fact that many

Tribes have already developed their

own standards. We are committed to an

approach that considers both the need

for flexibility as well as the statutory

mandate to develop minimum

standards.

Planning costs for initial plan. Section

98.83(h) provides that CCDF funds are

available for costs incurred by a Tribal

Lead Agency only after the funds are

made available by Congress for Federal

obligation unless costs are incurred for

planning activities related to the

submission of an initial CCDF Plan.

Federal obligation of funds for planning

costs is subject to the actual availability

of the appropriation.

Construction and Renovation (Section

98.84)

Upon requesting and receiving

approval from the Secretary of the

Department of Health and Human

Services, a Tribal Lead Agency may use

amounts from its CCDF allocation for

construction and major renovation of

child care facilities (pursuant to section

6580(c)(6) of the Act and regulations at

§ 98.84(a)).

Under the final rule, these payments

could cover costs of amortizing the

principal and paying interest on loans

for construction and major renovation.

As was also recognized in the Head

Start procedures for construction and

renovation, which allow use of funds to

pay for principal and interest on loans,

loans are an essential part of many

construction and renovation projects.

The regulation at § 98.84(b) reflects

the statutory requirement that, to be

approved by the Secretary, a request to

use CCDF funds for construction or

major renovation must be made in

accordance with uniform procedures

developed by the Secretary. These

uniform procedures were provided to

Tribal Lead Agencies via program

instructions ACYF–CC–PI–05, issued

August 18, 1997, and ACYF–PI–CC–97–

06 issued November 4, 1997. The

Administration for Children and

Families’ Regional Offices have

responsibility for approval of

construction/renovation applications.

By statute (and § 98.84(b)), such

requests must demonstrate that: (1)

Adequate facilities are not otherwise

available to enable the Tribal Lead

Agency to carry out child care programs;

(2) the lack of such facilities will inhibit

the operation of child care programs in

the future; and (3) the use of funds for

construction or major renovation will

not result in a decrease in the level of

child care services provided by the

Tribal Lead Agency as compared to the

level of services provided by the Tribal

Lead Agency in the preceding fiscal

year. In light of the requirement that a

Tribe cannot reduce the level of child

care services, a Tribal Lead Agency

should plan in advance for anticipated

construction and renovation costs.

Section 98.84(c) allows Tribal Lead

Agencies to use CCDF funds for

reasonable and necessary planning costs
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39979

associated with assessing the need for

construction or renovation or for

preparing a request, in accordance with

the uniform procedures established by

program instruction, to spend CCDF

funds on construction or major

renovation. This section of the rule also

addresses the use of CCDF funds to pay

for the costs of an architect, engineer, or

other consultant.

The regulation at § 98.84(d) requires

Tribal Lead Agencies which receive

approval from the Secretary to use

CCDF funds for construction or major

renovation to comply with specified

requirements in 45 CFR Part 92 and any

additional requirements established by

program instruction. Title 45 CFR Part

92 does not generally apply to the Child

Care and Development Fund. However,

we made specified sections which deal

with the special circumstances of

construction and renovation applicable

for those purposes.

The ACF has an interest in property

that is constructed or renovated with

CCDF funds. This interest takes the form

of restrictions on use and disposition of

the property. The Federal interest also is

manifested in the requirement that ACF

receive a share of the proceeds from any

sale of property. These requirements

regarding Federal share and the use and

disposition of property are found at 45

CFR 92.31(b) and (c).

Title requirements at 45 CFR 92.31(a)

provide that title to a facility

constructed or renovated with CCDF

funds vests with the grantee upon

acquisition.

Title 45 CFR 92.22 concerns cost

principles and allowable cost

requirements. Consistent with these cost

principles, reasonable fees and costs

associated with and necessary to the

construction or renovation of a facility

are payable with CCDF funds, but

require prior, written approval from

ACF.

Title 45 CFR 92.25 governs program

income. Program income derived from

real property constructed or renovated

with CCDF funds must be deducted

from the total allowable costs of the

budget period in which it was

produced.

All facility construction and

renovation transactions must comply

with the procurement procedures in 45

CFR 92.36, and must be conducted in a

manner to provide, to the maximum

extent practicable, open and free

competition.

Tribal Lead Agencies must also

comply with any additional

requirements established by program

instruction. These requirements may

include, but are not limited to,

requirements concerning: the recording

of a Notice of Federal Interest in

property; rights and responsibilities in

the event of a grantee’s default on a

mortgage; insurance and maintenance;

submission of plans, specifications,

inspection reports, and other legal

documents; and modular units.

The definition of ‘‘facility’’ at § 98.2

allows Tribal Lead Agencies to use

CCDF funds for the construction or

renovation of modular units as well as

real property.

The definitions of ‘‘facility,’’

‘‘construction,’’ and ‘‘major renovation’’

are the same definitions used in Head

Start construction and renovation

procedures. While a Tribal Lead Agency

must request approval from the

Secretary before spending CCDF funds

on construction or major renovation,

approval is not necessary for minor

renovation pursuant to section 658F(b)

of the Act and regulations at § 98.84(f).

For Tribal Lead Agencies, minor

renovation includes all renovation other

than major renovation or construction.

Section 98.84(e) requires that, in lieu

of obligation and liquidation

requirements at § 98.60(e), Tribal Lead

Agencies must liquidate CCDF funds

used for construction or major

renovation by the end of the second

fiscal year following the fiscal year for

which the grant is awarded. This gives

Tribal Lead Agencies three years to

liquidate funds approved by the

Secretary for use on construction or

major renovation with no separate

obligation period. This separate

obligation/liquidation requirement

should allow sufficient time for

construction and renovation projects.

Amounts used for construction and

major renovation are not considered

administrative costs for the purpose of

the 15 percent administrative cost limit

under § 98.83(g). We do not believe that

Congress intended for us to

unnecessarily limit a Tribal Lead

Agency’s ability to use CCDF funds on

construction and renovation projects

which meet the requirements necessary

for Secretarial approval.

The ACF will transfer funds to be

used for construction and major

renovation to a separate grant award to

be used specifically for construction or

renovation activities. This approach is

necessary to track the exact amount of

funds spent on construction or

renovation.

Finally, the new statutory provision

allowing tribal construction with CCDF

funds provides an opportunity for tribal

grantees to leverage resources for quality

facilities and services by coordinating

with their Tribe’s Head Start program.

Comment: We received comments

objecting to the proposal at § 98.84(c)

that would have prohibited a Tribal

Lead Agency from using CCDF funds to

pay for the costs of an architect,

engineer, or other consultant until after

the Lead Agency’s construction/

renovation application was approved by

the Secretary. The commenters argued

that the application procedures require

construction/renovation plans and

specifications as part of an application,

and, unless Tribes are allowed to use

CCDF funds, many Tribes would be

unable to pay for the costs of architects,

engineers, or consultants necessary to

develop these plans and specifications.

Response: We eliminated the

prohibition against the use of CCDF

funds to pay for consultants prior to

application approval. As revised,

§ 98.84(c) allows a Tribal Lead Agency

to use CCDF funds to pay for the costs

of an architect, engineer, or other

consultant for a project that is

subsequently approved by the Secretary.

If the project later fails to gain

Secretarial approval, the Tribal Lead

Agency must pay for the architectural,

engineering or consultant costs using

non-CCDF funds. This approach allows

Tribes access to the expertise necessary

to prepare an application and launch a

construction/renovation project. At the

same time, it protects the Federal

government from paying for consultant

costs on a project that is not approvable.

This revised policy is consistent with

program instruction ACYF–CC–PI–05,

issued August 18, 1997. We strongly

encourage Tribes to involve ACF

Regional Office staff early in the

development of their construction/

renovation applications.

Comment: We received questions

regarding how the requirement at

§ 98.84(b)(3) would apply to new

grantees. Under this provision (as well

as the Act), use of funds for construction

and renovation cannot result in a

decrease in the Tribe’s level of child

care services compared to the preceding

fiscal year. However, a new tribal

grantee has no existing level of services

to maintain.

Response: Since § 98.84(b)(3) does not

apply to a new grantee (i.e., one that did

not receive CCDF funds the preceding

fiscal year), we added § 98.84(g) to

address the amount of CCDF funds that

a new grantee can use for construction

or renovation. This section allows a new

tribal grantee to spend no more than an

amount equivalent to its Tribal

Mandatory allocation on construction/

renovation. A new tribal grantee must

spend an amount equivalent to its

Discretionary allocation on activities

other than construction or renovation

(i.e., direct services, quality activities, or

administrative costs).
39980 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

The CCDF program is primarily

designed to provide direct child care

services. Authority for construction and

renovation was added as an amendment

under the PRWORA. The statutory

provision that prohibits a decrease in

the level of child care services clearly

indicates that Congress intended for

construction and renovation activities

only to be in addition to direct services.

Limiting the amount of CCDF funds that

a new tribal grantee may spend on

construction or renovation to the

amount of the Tribal Mandatory

allocation is consistent with

Congressional intent.

Comment: One commenter objected to

the definition for major renovation.

Section 98.2 defines ‘‘major renovation’’

as: (1) Structural changes to the

foundation, roof, floor, exterior or loadbearing walls of a facility, or the

extension of a facility to increase its

floor area; or (2) extensive alteration of

a facility such as to significantly change

its function and purpose, even if such

renovation does not include any

structural change. The commenter

objected to the second part of this

definition, arguing that some projects

may change the function and purpose of

a facility (e.g., from a community center

to a child care center) but only involve

small, non-structural renovations that

should not require an application

seeking Secretarial approval.

Response: We did not revise the

definition—which has also been used by

the Head Start program. Projects that

involve extensive alteration that change

the function and purpose of the facility

are potentially large and expensive and

should therefore be subject to

Secretarial approval. However, in order

for a project that does not involve

structural change to be considered major

renovation under the definition at

§ 98.2, it must involve both: (1)

Extensive alteration, and (2) a change in

the function and purpose of the facility.

Therefore, if a renovation project is not

extensive (and does not involve

structural change), the project would

not be considered major renovation

even if it changes the function and

purpose of the facility.

Comment: We received a question as

to whether non-exempt Tribal Lead

Agencies could count construction and

renovation costs as quality expenditures

for purposes of meeting the four percent

minimum quality requirement at

§ 98.51(a).

Response: Construction and

renovation costs cannot be counted as

quality expenditures for purposes of the

four percent minimum quality

requirement. Quality activities such as

those described at § 98.51(a)(2) (resource

and referral, provider loans, monitoring,

training and technical assistance) are

essential to the well-being of children in

child care. The size of grant awards

received by non-exempt Tribal Lead

Agencies is sufficient to allow these

Tribes to meet the four percent

minimum quality requirement through

activities other than construction or

renovation.

Comment: We received a question

regarding whether the costs of items

such as parking lots, playground

equipment, furniture, and kitchen

equipment are considered to be

construction/renovation costs?

Response: The regulations at § 98.2

define ‘‘construction’’ and ‘‘major

renovation’’ for purposes of determining

what activities are allowable under the

CCDF and when prior approval from the

Secretary is necessary.

However, these definitions do not

directly address the question of what

costs should be considered as part of the

construction and renovation project.

This question is relevant in at least three

circumstances: (1) When ensuring that

construction and renovation costs will

not result in a decrease in the level of

child care services in accordance with

§ 98.84(b)(3); (2) when providing an

estimate of construction and renovation

costs as required by the uniform

procedures established by program

instruction; and (3) when determining

which costs should come from the

separate grant award for construction

and renovation.

For these three purposes, § 98.84(h)

provides that a construction and

renovation project that requires and

receives the approval of the Secretary

must include as construction and

renovation costs the following: (1)

Planning costs as allowed at § 98.84(c);

(2) labor, materials and services

necessary for the functioning of the

facility; and (3) initial equipment, as

discussed below, for the facility. All

such costs must be identified in the

Tribal Lead Agency’s construction or

renovation application to the Secretary

and, to the extent that CCDF funds are

used, must be paid for using the

separate grant award for construction

and renovation.

Under this framework, the cost of the

construction or renovation project

includes items which are not part of the

actual facility itself, but which are

necessary for the functioning of the

facility (such as a parking lot or fence)

when the item is part of a larger

construction or renovation project that

requires and receives approval by the

Secretary.

Equipment, as used above, means

items which are tangible,

nonexpendable personal property

having a useful life of more than five

years. The intent of the five-year

threshold is to include as construction

and renovation costs only equipment

that remains useful for an extended

period of time, such as playground

equipment, furniture, and kitchen

equipment. Current operating expenses

or items that are consumed in use (such

as food, paper, books, toys or disposable

housekeeping items) are not considered

construction or renovation costs.

This relatively broad definition of

construction and renovation costs

emphasizes the importance of

considering all costs when planning

construction and renovation projects.

The alternative approach, to exclude

items such as playgrounds, parking lots

and equipment from construction and

renovation costs, would have

underestimated the true costs of

constructing or renovating a child care

facility. A new or newly renovated

facility requires the proper equipment to

be operational. Furthermore, a facility

must be constructed or renovated in a

manner that ensures the health and

safety of children in care, consistent

with § 98.41(a)(2) of the regulations.

Equipment and other costs are only

considered part of the construction or

renovation costs, however, if they are

included as part of a larger construction

or renovation project that requires and

receives approval by the Secretary.

Costs of allowable activities (e.g.,

purchase of equipment necessary to

bring a facility into compliance with

health and safety standards) that are not

part of a larger construction or

renovation project as defined at § 98.2

should be considered quality

improvement costs—not construction or

renovation costs.

Subpart J—Monitoring, Non-compliance

and Complaints

Penalties and Sanctions (Section 98.92)

We have amended paragraphs (1) and

(2) of § 98.92(a), because the statutory

amendments changed the penalty for a

Lead Agency found to have failed to

substantially comply with the statute,

the regulations, or its own Plan. We also

have deleted the former § 98.92(b) as

redundant due to the statutory

amendments. Section 658I(b)(2)(A)(ii) of

the Act gives the Secretary the option to

disallow improperly expended funds or

to deduct an amount equal to or less

than an improperly expended amount

from the administrative portion of the

Lead Agency’s allotment for the

following fiscal year. The Secretary can

also impose a penalty that is a

combination of these two options.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39981

As proposed, we also added a new

regulation at paragraph (b)(2) to

establish a penalty on the Lead Agency

for: (1) a failure to implement any part

of the CCDF program in accordance

with the Act or regulations or its Plan;

or (2) a violation of the Act or

regulations. Such penalty would be

invoked when a failure or violation by

the Lead Agency does not result in a

clearly identifiable amount of

improperly expended funds. For

example, the failure to provide the

reports required under subpart H or the

inappropriate limitation of access to a

particular type of provider in violation

of the parental choice provisions of

Subpart D do not result in a clearly

identifiable amount of improperly

expended funds. Hence, the penalties at

paragraph (a) could not be applied.

However, our stewardship of the

program since its creation indicates the

need for a more effective means of

ensuring conformity with the statute

and regulations than is offered by the

existing regulations. Section

658I(b)(2)(B) of the CCDBG Act provides

for an ‘‘additional sanction’’ if the

Secretary finds there has been noncompliance with the Plan or any

requirement of the program.

Because a failure or violation which

would cause the penalty under

§ 98.92(b)(2) to be imposed may not

have an amount of improperly

expended funds associated with it, we

needed to determine what amount of

penalty should be imposed. We

considered the range of TANF penalties

found at section 409 of the Social

Security Act and decided to use the

TANF penalty provisions for failure to

report at section 409(a)(2) as that was

most analogous to the potential CCDF

non-compliance. Accordingly,

§ 98.92(b)(2) provides that a penalty

equal to four percent of the annual

Discretionary allotment will be

withheld no earlier than the second full

quarter following the quarter in which

the Lead Agency was notified of the

potential penalty.

The TANF penalties include

provisions for good cause and corrective

action, and we have included similar

provisions in § 98.92(b)(2). We believe

that both provisions are good policy as

the goal of the new provision is to

achieve compliance with CCDF

requirements, not punishment. If there

is sufficient reason for not complying, or

if the Lead Agency will comply without

a penalty, the purpose is met without

the imposition of a penalty. The penalty

will not be applied if the Lead Agency

corrects the failure or violation before

the penalty is to be applied or if it

submits a plan for corrective action that

is accepted by the Secretary. Waiting at

least one full quarter before applying the

penalty provides sufficient time to

remedy the situations which we

envision would cause the penalty to be

invoked. The Lead Agency may, during

that time, show cause to the Secretary

why the amount of the penalty, if

imposed, should be reduced.

The paragraphs formerly located at

§ 98.92(d) and (e) are relocated at

§ 98.92(c) and (d), respectively. We have

added a new § 98.92(e) providing that it

is at the Secretary’s sole discretion to

choose the penalty to be imposed.

Comment: While a few comments

supported the need for the new penalty

at § 98.92(b)(2), most opposed it stating

that there is no basis for it in the

PRWORA statute.

Response: As we stated in the

preamble, the statutory basis for the

penalty at § 98.92(b)(2) is section

658I(b)(2)(B) of the original CCDBG Act

which provides for an ‘‘additional

sanction’’ if the Secretary finds there

has been non-compliance with the Plan

or any requirement of the program. Our

experience since the beginning of the

program indicated the need for such an

additional sanction.

Comment: Many of the same

commenters objected to the use of the

phrase ‘‘failed to properly implement’’

in the regulation, saying that it made the

entire process subjective with only the

Secretary deciding what was ‘‘proper’’.

Response: We agree that the use of the

word ‘‘proper’’ gave the appearance of a

subjective process, and we have

eliminated it. It is not the intent of the

regulation to second-guess how Lead

Agencies implement the program,

especially in light of the enormous

flexibility they have. Rather, this

regulation is specifically designed for

those clear-cut instances wherein the

Act, regulations, or Plan have not been

followed, but for which there is not an

amount of funds that are ‘‘misspent’’ as

a result.

Comment: One commenter objected to

the provision which allows the

Secretary not to apply the penalty if the

Lead Agency corrects the failure or

violation or submits an acceptable plan

for corrective action. The commenter

wanted the penalty to be applied in all

cases.

Response: As our goal is compliance

with the requirements and not

punishment, we believe it is good policy

to forgive a penalty if the Lead Agency

corrects the non-compliance without a

penalty through corrective action. We

also believe that Lead Agencies should

be able to demonstrate that special

circumstances, such as natural disasters

or other circumstances beyond their

control, prevent compliance and thus

the penalty should be reduced. We

believe that such instances will be rare.

List of Subjects

45 CFR Part 98

Child care, Grant program—social

programs, Parental choice, Reporting

and record keeping requirements.

45 CFR Part 99

Administrative practice and

procedure, Child care, Grant program—

social programs.

(Catalog of Federal Domestic Assistance

Programs: 93.575, Child Care and

Development Block Grant; 93.596, Child Care

Mandatory and Matching Funds)

Dated: March 16, 1998.

Olivia A. Golden,

Assistant Secretary for Children and Families.

Approved: June 10, 1998.

Donna E. Shalala,

Secretary, Department of Health and Human

Services.

For the reasons set forth in the

preamble, Parts 98 and 99 of Subtitle A

of Title 45 of the Code of Federal

Regulations are amended as follows:

1. Part 98 is revised as follows:

PART 98—CHILD CARE AND

DEVELOPMENT FUND

Subpart A—Goals, Purposes and

Definitions

Sec.

98.1 Goals and purposes.

98.2 Definitions.

98.3 Effect on State law.

Subpart B—General Application Procedures

98.10 Lead Agency responsibilities.

98.11 Administration under contracts and

agreements.

98.12 Coordination and consultation.

98.13 Applying for funds.

98.14 Plan process.

98.15 Assurances and certifications.

98.16 Plan provisions.

98.17 Period covered by plan.

98.18 Approval and disapproval of plans

and plan amendments.

Subpart C—Eligibility for Services

98.20 A child’s eligibility for child care

services.

Subpart D—Program Operations (Child

Care Services)—Parental Rights and

Responsibilities

98.30 Parental choice.

98.31 Parental access.

98.32 Parental complaints.

98.33 Consumer education.

98.34 Parental rights and responsibilities.
39982 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

Subpart E—Program Operations (Child Care

Services)—Lead Agency and Provider

Requirements

98.40 Compliance with applicable State and

local regulatory requirements.

98.41 Health and safety requirements.

98.42 Sliding fee scales.

98.43 Equal access.

98.44 Priority for child care services.

98.45 List of providers.

98.46 Nondiscrimination in admissions on

the basis of religion.

98.47 Nondiscrimination in employment on

the basis of religion.

Subpart F—Use of Child Care and

Development Funds

98.50 Child care services.

98.51 Activities to improve the quality of

child care.

98.52 Administrative costs.

98.53 Matching Fund requirements.

98.54 Restrictions on the use of funds.

98.55 Cost allocation.

Subpart G—Financial Management

98.60 Availability of funds.

98.61 Allotments from the discretionary

fund.

98.62 Allotments from the mandatory fund.

98.63 Allotments from the matching fund.

98.64 Reallotment and redistribution of

funds.

98.65 Audits and financial reporting

98.66 Disallowance procedures.

98.67 Fiscal requirements.

Subpart H—Program Reporting

Requirements

98.70 Reporting requirements.

98.71 Content of reports.

Subpart I—Indian Tribes

98.80 General procedures and

requirements.

98.81 Application and Plan procedures.

98.82 Coordination.

98.83 Requirements for tribal programs.

98.84 Construction and renovation of child

care facilities.

Subpart J—Monitoring, Non-Compliance

and Complaints

98.90 Monitoring.

98.91 Non-compliance.

98.92 Penalties and sanctions.

98.93 Complaints.

Authority: 42 U.S.C. 618, 9858.

Subpart A—Goals, Purposes and

Definitions

§ 98.1 Goals and purposes.

(a) The goals of the CCDF are to:

(1) Allow each State maximum

flexibility in developing child care

programs and policies that best suit the

needs of children and parents within

the State;

(2) Promote parental choice to

empower working parents to make their

own decisions on the child care that

best suits their family’s needs;

(3) Encourage States to provide

consumer education information to help

parents make informed choices about

child care;

(4) Assist States to provide child care

to parents trying to achieve

independence from public assistance;

and

(5) Assist States in implementing the

health, safety, licensing, and registration

standards established in State

regulations.

(b) The purpose of the CCDF is to

increase the availability, affordability,

and quality of child care services. The

program offers Federal funding to

States, Territories, Indian Tribes, and

tribal organizations in order to:

(1) Provide low-income families with

the financial resources to find and

afford quality child care for their

children;

(2) Enhance the quality and increase

the supply of child care for all families,

including those who receive no direct

assistance under the CCDF;

(3) Provide parents with a broad range

of options in addressing their child care

needs;

(4) Strengthen the role of the family;

(5) Improve the quality of, and

coordination among, child care

programs and early childhood

development programs; and

(6) Increase the availability of early

childhood development and before- and

after-school care services.

(c) The purpose of these regulations is

to provide the basis for administration

of the Fund. These regulations provide

that Lead Agencies:

(1) Maximize parental choice through

the use of certificates and through grants

and contracts;

(2) Include in their programs a broad

range of child care providers, including

center-based care, family child care, inhome care, care provided by relatives

and sectarian child care providers;

(3) Provide quality child care that

meets applicable requirements;

(4) Coordinate planning and delivery

of services at all levels;

(5) Design flexible programs that

provide for the changing needs of

recipient families;

(6) Administer the CCDF responsibly

to ensure that statutory requirements are

met and that adequate information

regarding the use of public funds is

provided; and

(7) Design programs that provide

uninterrupted service to families and

providers, to the extent statutorily

possible.

§ 98.2 Definitions.

For the purpose of this part and part

99:

The Act refers to the Child Care and

Development Block Grant Act of 1990,

section 5082 of the Omnibus Budget

Reconciliation Act of 1990, Pub. L. 101–

508, as amended and codified at 42

U.S.C. 9858 et seq.

ACF means the Administration for

Children and Families;

Application is a request for funding

that includes the information required

at § 98.13;

Assistant Secretary means the

Assistant Secretary for Children and

Families, Department of Health and

Human Services;

Caregiver means an individual who

provides child care services directly to

an eligible child on a person-to-person

basis;

Categories of care means center-based

child care, group home child care,

family child care and in-home care;

Center-based child care provider

means a provider licensed or otherwise

authorized to provide child care

services for fewer than 24 hours per day

per child in a non-residential setting,

unless care in excess of 24 hours is due

to the nature of the parent(s)’ work;

Child care certificate means a

certificate (that may be a check, or other

disbursement) that is issued by a grantee

directly to a parent who may use such

certificate only as payment for child

care services or as a deposit for child

care services if such a deposit is

required of other children being cared

for by the provider, pursuant to § 98.30.

Nothing in this part shall preclude the

use of such certificate for sectarian child

care services if freely chosen by the

parent. For the purposes of this part, a

child care certificate is assistance to the

parent, not assistance to the provider;

Child Care and Development Fund

(CCDF) means the child care programs

conducted under the provisions of the

Child Care and Development Block

Grant Act, as amended. The Fund

consists of Discretionary Funds

authorized under section 658B of the

amended Act, and Mandatory and

Matching Funds appropriated under

section 418 of the Social Security Act;

Child care provider that receives

assistance means a child care provider

that receives Federal funds under the

CCDF pursuant to grants, contracts, or

loans, but does not include a child care

provider to whom Federal funds under

the CCDF are directed only through the

operation of a certificate program;

Child care services, for the purposes

of § 98.50, means the care given to an

eligible child by an eligible child care

provider;

Construction means the erection of a

facility that does not currently exist;

The Department means the

Department of Health and Human

Services;
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39983

Discretionary funds means the funds

authorized under section 658B of the

Child Care and Development Block

Grant Act. The Discretionary funds were

formerly referred to as the Child Care

and Development Block Grant;

Eligible child means an individual

who meets the requirements of § 98.20;

Eligible child care provider means:

(1) A center-based child care provider,

a group home child care provider, a

family child care provider, an in-home

child care provider, or other provider of

child care services for compensation

that—

(i) Is licensed, regulated, or registered

under applicable State or local law as

described in § 98.40; and

(ii) Satisfies State and local

requirements, including those referred

to in § 98.41 applicable to the child care

services it provides; or

(2) A child care provider who is 18

years of age or older who provides child

care services only to eligible children

who are, by marriage, blood

relationship, or court decree, the

grandchild, great grandchild, sibling (if

such provider lives in separate

residence), niece, or nephew of such

provider, and complies with any

applicable requirements that govern

child care provided by the relative

involved;

Facility means real property or

modular unit appropriate for use by a

grantee to carry out a child care

program;

Family child care provider means one

individual who provides child care

services for fewer than 24 hours per day

per child, as the sole caregiver, in a

private residence other than the child’s

residence, unless care in excess of 24

hours is due to the nature of the

parent(s)’ work;

Group home child care provider

means two or more individuals who

provide child care services for fewer

than 24 hours per day per child, in a

private residence other than the child’s

residence, unless care in excess of 24

hours is due to the nature of the

parent(s)’ work;

Indian Tribe means any Indian Tribe,

band, nation, or other organized group

or community, including any Alaska

Native village or regional or village

corporation as defined in or established

pursuant to the Alaska Native Claims

Settlement Act (43 U.S.C. § 1601 et seq.)

that is recognized as eligible for the

special programs and services provided

by the United States to Indians because

of their status as Indians;

In-home child care provider means an

individual who provides child care

services in the child’s own home;

Lead Agency means the State,

territorial or tribal entity designated

under §§ 98.10 and 98.16(a) to which a

grant is awarded and that is accountable

for the use of the funds provided. The

Lead Agency is the entire legal entity

even if only a particular component of

the entity is designated in the grant

award document.

Licensing or regulatory requirements

means requirements necessary for a

provider to legally provide child care

services in a State or locality, including

registration requirements established

under State, local or tribal law;

Liquidation period means the

applicable time period during which a

fiscal year’s grant shall be liquidated

pursuant to the requirements at § 98.60.;

Major renovation means: (1) structural

changes to the foundation, roof, floor,

exterior or load-bearing walls of a

facility, or the extension of a facility to

increase its floor area; or (2) extensive

alteration of a facility such as to

significantly change its function and

purpose, even if such renovation does

not include any structural change;

Mandatory funds means the general

entitlement child care funds described

at section 418(a)(1) of the Social

Security Act;

Matching funds means the remainder

of the general entitlement child care

funds that are described at section

418(a)(2) of the Social Security Act;

Modular unit means a portable

structure made at another location and

moved to a site for use by a grantee to

carry out a child care program;

Obligation period means the

applicable time period during which a

fiscal year’s grant shall be obligated

pursuant to § 98.60;

Parent means a parent by blood,

marriage or adoption and also means a

legal guardian, or other person standing

in loco parentis;

The Plan means the Plan for the

implementation of programs under the

CCDF;

Program period means the time

period for using a fiscal year’s grant and

does not extend beyond the last day to

liquidate funds;

Programs refers generically to all

activities under the CCDF, including

child care services and other activities

pursuant to § 98.50 as well as quality

and availability activities pursuant to

§ 98.51;

Provider means the entity providing

child care services;

The regulation refers to the actual

regulatory text contained in parts 98 and

99 of this chapter;

Real property means land, including

land improvements, structures and

appurtenances thereto, excluding

movable machinery and equipment;

Secretary means the Secretary of the

Department of Health and Human

Services;

Sectarian organization or sectarian

child care provider means religious

organizations or religious providers

generally. The terms embrace any

organization or provider that engages in

religious conduct or activity or that

seeks to maintain a religious identity in

some or all of its functions. There is no

requirement that a sectarian

organization or provider be managed by

clergy or have any particular degree of

religious management, control, or

content;

Sectarian purposes and activities

means any religious purpose or activity,

including but not limited to religious

worship or instruction;

Services for which assistance is

provided means all child care services

funded under the CCDF, either as

assistance directly to child care

providers through grants, contracts, or

loans, or indirectly as assistance to

parents through child care certificates;

Sliding fee scale means a system of

cost sharing by a family based on

income and size of the family, in

accordance with § 98.42;

State means any of the States, the

District of Columbia, the

Commonwealth of Puerto Rico, the

Virgin Islands of the United States,

Guam, American Samoa, the

Commonwealth of the Northern Mariana

Islands, and includes Tribes unless

otherwise specified;

Tribal mandatory funds means the

child care funds set aside at section

418(a)(4) of the Social Security Act. The

funds consist of between one and two

percent of the aggregate Mandatory and

Matching child care funds reserved by

the Secretary in each fiscal year for

payments to Indian Tribes and tribal

organizations;

Tribal organization means the

recognized governing body of any

Indian Tribe, or any legally established

organization of Indians, including a

consortium, which is controlled,

sanctioned, or chartered by such

governing body or which is

democratically elected by the adult

members of the Indian community to be

served by such organization and which

includes the maximum participation of

Indians in all phases of its activities:

Provided, that in any case where a

contract is let or grant is made to an

organization to perform services

benefiting more than one Indian Tribe,

the approval of each such Indian Tribe

shall be a prerequisite to the letting or

making of such contract or grant; and
39984 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

Types of providers means the different

classes of providers under each category

of care. For the purposes of the CCDF,

types of providers include non-profit

providers, for-profit providers, sectarian

providers and relatives who provide

care.

§ 98.3 Effect on State law.

(a) Nothing in the Act or this part

shall be construed to supersede or

modify any provision of a State

constitution or State law that prohibits

the expenditure of public funds in or by

sectarian organizations, except that no

provision of a State constitution or State

law shall be construed to prohibit the

expenditure in or by sectarian

institutions of any Federal funds

provided under this part.

(b) If a State law or constitution

would prevent CCDF funds from being

expended for the purposes provided in

the Act, without limitation, then States

shall segregate State and Federal funds.

Subpart B—General Application

Procedures

§ 98.10 Lead Agency responsibilities.

The Lead Agency, as designated by

the chief executive officer of the State

(or by the appropriate Tribal leader or

applicant), shall:

(a) Administer the CCDF program,

directly or through other governmental

or non-governmental agencies, in

accordance with § 98.11;

(b) Apply for funding under this part,

pursuant to § 98.13;

(c) Consult with appropriate

representatives of local government in

developing a Plan to be submitted to the

Secretary pursuant to § 98.14(b);

(d) Hold at least one public hearing in

accordance with § 98.14(c); and

(e) Coordinate CCDF services

pursuant to § 98.12.

§ 98.11 Administration under contracts

and agreements.

(a) The Lead Agency has broad

authority to administer the program

through other governmental or nongovernmental agencies. In addition, the

Lead Agency can use other public or

private local agencies to implement the

program; however:

(1) The Lead Agency shall retain

overall responsibility for the

administration of the program, as

defined in paragraph (b) of this section;

(2) The Lead Agency shall serve as the

single point of contact for issues

involving the administration of the

grantee’s CCDF program; and

(3) Administrative and

implementation responsibilities

undertaken by agencies other than the

Lead Agency shall be governed by

written agreements that specify the

mutual roles and responsibilities of the

Lead Agency and the other agencies in

meeting the requirements of this part.

(b) In retaining overall responsibility

for the administration of the program,

the Lead Agency shall:

(1) Determine the basic usage and

priorities for the expenditure of CCDF

funds;

(2) Promulgate all rules and

regulations governing overall

administration of the Plan;

(3) Submit all reports required by the

Secretary;

(4) Ensure that the program complies

with the approved Plan and all Federal

requirements;

(5) Oversee the expenditure of funds

by subgrantees and contractors;

(6) Monitor programs and services;

(7) Fulfill the responsibilities of any

subgrantee in any: disallowance under

subpart G; complaint or compliance

action under subpart J; or hearing or

appeal action under part 99 of this

chapter; and

(8) Ensure that all State and local or

non-governmental agencies through

which the State administers the

program, including agencies and

contractors that determine individual

eligibility, operate according to the rules

established for the program.

§ 98.12 Coordination and consultation.

The Lead Agency shall:

(a) Coordinate the provision of

services for which assistance is

provided under this part with the

agencies listed in § 98.14(a).

(b) Consult, in accordance with

§ 98.14(b), with representatives of

general purpose local government

during the development of the Plan; and

(c) Coordinate, to the maximum

extent feasible, with any Indian Tribes

in the State receiving CCDF funds in

accordance with subpart I of this part.

§ 98.13 Applying for Funds.

The Lead Agency of a State or

Territory shall apply for Child Care and

Development funds by providing the

following:

(a) The amount of funds requested at

such time and in such manner as

prescribed by the Secretary.

(b) The following assurances or

certifications:

(1) An assurance that the Lead Agency

will comply with the requirements of

the Act and this part;

(2) A lobbying certification that

assures that the funds will not be used

for the purpose of influencing pursuant

to 45 CFR part 93, and, if necessary, a

Standard Form LLL (SF–LLL) that

discloses lobbying payments;

(3) An assurance that the Lead Agency

provides a drug-free workplace pursuant

to 45 CFR 76.600, or a statement that

such an assurance has already been

submitted for all HHS grants;

(4) A certification that no principals

have been debarred pursuant to 45 CFR

76.500;

(5) Assurances that the Lead Agency

will comply with the applicable

provisions regarding nondiscrimination

at 45 CFR part 80 (implementing title VI

of the Civil Rights Act of 1964, as

amended), 45 CFR part 84

(implementing section 504 of the

Rehabilitation Act of 1973, as amended),

45 CFR part 86 (implementing title IX of

the Education Amendments of 1972, as

amended) and 45 CFR part 91

(implementing the Age Discrimination

Act of 1975, as amended), and;

(6) Assurances that the Lead Agency

will comply with the applicable

provisions of Public Law 103–277, Part

C—Environmental Tobacco Smoke, also

known as the Pro-Children Act of 1994,

regarding prohibitions on smoking.

(c) The Child Care and Development

Fund Plan, at times and in such manner

as required in § 98.17; and

(d) Such other information as

specified by the Secretary.

§ 98.14 Plan process.

In the development of each Plan, as

required pursuant to § 98.17, the Lead

Agency shall:

(a)(1) Coordinate the provision of

services funded under this Part with

other Federal, State, and local child care

and early childhood development

programs, including such programs for

the benefit of Indian children. The Lead

Agency shall also coordinate with the

State, and if applicable, tribal agencies

responsible for:

(A) Public health, including the

agency responsible for immunizations;

(B) Employment services/workforce

development;

(C) Public education; and

(D) Providing Temporary Assistance

for Needy Families.

(2) Provide a description of the results

of the coordination with each of these

agencies in the CCDF Plan.

(b) Consult with appropriate

representatives of local governments;

(c)(1) Hold at least one hearing in the

State, after at least 20 days of statewide

public notice, to provide to the public

an opportunity to comment on the

provision of child care services under

the Plan.

(2) The hearing required by paragraph

(c)(1) shall be held before the Plan is

submitted to ACF, but no earlier than

nine months before the Plan becomes

effective.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39985

(3) In advance of the hearing required

by this section, the Lead Agency shall

make available to the public the content

of the Plan as described in § 98.16 that

it proposes to submit to the Secretary.

§ 98.15 Assurances and certifications.

(a) The Lead Agency shall include the

following assurances in its CCDF Plan:

(1) Upon approval, it will have in

effect a program that complies with the

provisions of the CCDF Plan, and that is

administered in accordance with the

Child Care and Development Block

Grant Act of 1990, as amended, section

418 of the Social Security Act, and all

other applicable Federal laws and

regulations;

(2) The parent(s) of each eligible child

within the area served by the Lead

Agency who receives or is offered child

care services for which financial

assistance is provided is given the

option either:

(i) To enroll such child with a child

care provider that has a grant or contract

for the provision of the service; or

(ii) To receive a child care certificate

as defined in § 98.2;

(3) In cases in which the parent(s),

pursuant to § 98.30, elects to enroll their

child with a provider that has a grant or

contract with the Lead Agency, the

child will be enrolled with the eligible

provider selected by the parent to the

maximum extent practicable;

(4) In accordance with § 98.30, the

child care certificate offered to parents

shall be of a value commensurate with

the subsidy value of child care services

provided under a grant or contract;

(5) With respect to State and local

regulatory requirements (or tribal

regulatory requirements), health and

safety requirements, payment rates, and

registration requirements, State or local

(or tribal) rules, procedures or other

requirements promulgated for the

purpose of the CCDF will not

significantly restrict parental choice

from among categories of care or types

of providers, pursuant to § 98.30(f).

(6) That if expenditures for preKindergarten services are used to meet

the maintenance-of-effort requirement,

the State has not reduced its level of

effort in full-day/full-year child care

services, pursuant to § 98.53(h)(1).

(b) The Lead Agency shall include the

following certifications in its CCDF

Plan:

(1) In accordance with § 98.31, it has

procedures in place to ensure that

providers of child care services for

which assistance is provided under the

CCDF, afford parents unlimited access

to their children and to the providers

caring for their children, during the

normal hours of operations and

whenever such children are in the care

of such providers;

(2) As required by § 98.32, the State

maintains a record of substantiated

parental complaints and makes

information regarding such complaints

available to the public on request;

(3) It will collect and disseminate to

parents of eligible children and the

general public, consumer education

information that will promote informed

child care choices, as required by

§ 98.33;

(4) There are in effect licensing

requirements applicable to child care

services provided within the State (or

area served by Tribal Lead Agency),

pursuant to § 98.40;

(5) There are in effect within the State

(or other area served by the Lead

Agency), under State or local (or tribal)

law, requirements designed to protect

the health and safety of children that are

applicable to child care providers that

provide services for which assistance is

made available under the CCDF,

pursuant to § 98.41;

(6) In accordance with § 98.41,

procedures are in effect to ensure that

child care providers of services for

which assistance is provided under the

CCDF comply with all applicable State

or local (or tribal) health and safety

requirements; and

(7) Payment rates for the provision of

child care services, in accordance with

§ 98.43, are sufficient to ensure equal

access for eligible children to

comparable child care services in the

State or sub-State area that are provided

to children whose parents are not

eligible to receive assistance under this

program or under any other Federal or

State child care assistance programs.

§ 98.16 Plan provisions.

A CCDF Plan shall contain the

following:

(a) Specification of the Lead Agency

whose duties and responsibilities are

delineated in § 98.10;

(b) The assurances and certifications

listed under § 98.15;

(c)(1) A description of how the CCDF

program will be administered and

implemented, if the Lead Agency does

not directly administer and implement

the program;

(2) Identification of the entity

designated to receive private donated

funds and the purposes for which such

funds will be expended, pursuant to

§ 98.53(f);

(d) A description of the coordination

and consultation processes involved in

the development of the Plan, including

a description of public-private

partnership activities that promote

business involvement in meeting child

care needs pursuant to § 98.14(a) and

(b);

(e) A description of the public hearing

process, pursuant to § 98.14(c);

(f) Definitions of the following terms

for purposes of determining eligibility,

pursuant to §§ 98.20(a) and 98.44:

(1) Special needs child;

(2) Physical or mental incapacity (if

applicable);

(3) Attending (a job training or

educational program);

(4) Job training and educational

program;

(5) Residing with;

(6) Working;

(7) Protective services (if applicable),

including whether children in foster

care are considered in protective

services for purposes of child care

eligibility; and whether respite care is

provided to custodial parents of

children in protective services.

(8) Very low income; and

(9) in loco parentis.

(g) For child care services pursuant to

§ 98.50:

(1) A description of such services and

activities;

(2) Any limits established for the

provision of in-home care and the

reasons for such limits pursuant to

§ 98.30(e)(1)(iv);

(3) A list of political subdivisions in

which such services and activities are

offered, if such services and activities

are not available throughout the entire

service area;

(4) A description of how the Lead

Agency will meet the needs of certain

families specified at § 98.50(e).

(5) Any additional eligibility criteria,

priority rules and definitions

established pursuant to § 98.20(b);

(h) A description of the activities to

provide comprehensive consumer

education, to increase parental choice,

and to improve the quality and

availability of child care, pursuant to

§ 98.51;

(i) A description of the sliding fee

scale(s) (including any factors other

than income and family size used in

establishing the fee scale(s)) that

provide(s) for cost sharing by the

families that receive child care services

for which assistance is provided under

the CCDF, pursuant to § 98.42;

(j) A description of the health and

safety requirements, applicable to all

providers of child care services for

which assistance is provided under the

CCDF, in effect pursuant to § 98.41;

(k) A description of the child care

certificate payment system(s), including

the form or forms of the child care

certificate, pursuant to § 98.30(c);

(l) Payment rates and a summary of

the facts, including a biennial local
39986 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

market rate survey, relied upon to

determine that the rates provided are

sufficient to ensure equal access

pursuant to § 98.43;

(m) A detailed description of how the

State maintains a record of substantiated

parental complaints and how it makes

information regarding those complaints

available to the public on request,

pursuant to § 98.32;

(n) A detailed description of the

procedures in effect for affording

parents unlimited access to their

children whenever their children are in

the care of the provider, pursuant to

§ 98.31;

(o) A detailed description of the

licensing requirements applicable to

child care services provided, and a

description of how such licensing

requirements are effectively enforced,

pursuant to § 98.40;

(p) Pursuant to § 98.33(b), the

definitions or criteria used to implement

the exception, provided in section

407(e)(2) of the Social Security Act, to

individual penalties in the TANF work

requirement applicable to a single

custodial parent caring for a child under

age six;

(q)(1) When any Matching funds

under § 98.53(b) are claimed, a

description of the efforts to ensure that

pre-Kindergarten programs meet the

needs of working parents;

(2) When State pre-Kindergarten

expenditures are used to meet more

than 10% of the amount required at

§ 98.53(c)(1), or for more than 10% of

the funds available at § 98.53(b), or both,

a description of how the State will

coordinate its pre-Kindergarten and

child care services to expand the

availability of child care; and

(r) Such other information as

specified by the Secretary.

§ 98.17 Period covered by Plan.

(a) For States, Territories, and Indian

Tribes the Plan shall cover a period of

two years.

(b) The Lead Agency shall submit a

new Plan prior to the expiration of the

time period specified in paragraph (a) of

this section, at such time as required by

the Secretary in written instructions.

§ 98.18 Approval and disapproval of Plans

and Plan amendments.

(a) Plan approval. The Assistant

Secretary will approve a Plan that

satisfies the requirements of the Act and

this part. Plans will be approved not

later than the 90th day following the

date on which the Plan submittal is

received, unless a written agreement to

extend that period has been secured.

(b) Plan amendments. Approved

Plans shall be amended whenever a

substantial change in the program

occurs. A Plan amendment shall be

submitted within 60 days of the

effective date of the change. Plan

amendments will be approved not later

than the 90th day following the date on

which the amendment is received,

unless a written agreement to extend

that period has been secured.

(c) Appeal of disapproval of a Plan or

Plan amendment.

(1) An applicant or Lead Agency

dissatisfied with a determination of the

Assistant Secretary pursuant to

paragraphs (a) or (b) of this section with

respect to any Plan or amendment may,

within 60 days after the date of receipt

of notification of such determination,

file a petition with the Assistant

Secretary asking for reconsideration of

the issue of whether such Plan or

amendment conforms to the

requirements for approval under the Act

and pertinent Federal regulations.

(2) Within 30 days after receipt of

such petition, the Assistant Secretary

shall notify the applicant or Lead

Agency of the time and place at which

the hearing for the purpose of

reconsidering such issue will be held.

(3) Such hearing shall be held not less

than 30 days, nor more than 90 days,

after the notification is furnished to the

applicant or Lead Agency, unless the

Assistant Secretary and the applicant or

Lead Agency agree in writing on another

time.

(4) Action pursuant to an initial

determination by the Assistant Secretary

described in paragraphs (a) and (b) of

this section that a Plan or amendment

is not approvable shall not be stayed

pending the reconsideration, but in the

event that the Assistant Secretary

subsequently determines that the

original decision was incorrect, the

Assistant Secretary shall certify

restitution forthwith in a lump sum of

any funds incorrectly withheld or

otherwise denied. The hearing

procedures are described in part 99 of

this chapter.

Subpart C—Eligibility for Services

§ 98.20 A child’s eligibility for child care

services.

(a) In order to be eligible for services

under § 98.50, a child shall:

(1)(i) Be under 13 years of age; or,

(ii) At the option of the Lead Agency,

be under age 19 and physically or

mentally incapable of caring for himself

or herself, or under court supervision;

(2) Reside with a family whose

income does not exceed 85 percent of

the State’s median income for a family

of the same size; and

(3)(i) Reside with a parent or parents

(as defined in § 98.2) who are working

or attending a job training or

educational program; or

(ii) Receive, or need to receive,

protective services and reside with a

parent or parents (as defined in § 98.2)

other than the parent(s) described in

paragraph (a)(3)(i) of this section.

(A) At grantee option, the

requirements in paragraph (a)(2) of this

section and in § 98.42 may be waived

for families eligible for child care

pursuant to this paragraph, if

determined to be necessary on a caseby-case basis by, or in consultation

with, an appropriate protective services

worker.

(B) At grantee option, the provisions

in (A) apply to children in foster care

when defined in the Plan, pursuant to

§ 98.16(f)(7).

(b) Pursuant to § 98.16(g)(5), a grantee

or other administering agency may

establish eligibility conditions or

priority rules in addition to those

specified in this section and § 98.44 so

long as they do not:

(1) Discriminate against children on

the basis of race, national origin, ethnic

background, sex, religious affiliation, or

disability;

(2) Limit parental rights provided

under Subpart D; or

(3) Violate the provisions of this

section, § 98.44, or the Plan. In

particular, such conditions or priority

rules may not be based on a parent’s

preference for a category of care or type

of provider. In addition, such additional

conditions or rules may not be based on

a parent’s choice of a child care

certificate.

Subpart D—Program Operations (Child

Care Services)—Parental Rights and

Responsibilities

§ 98.30 Parental choice.

(a) The parent or parents of an eligible

child who receives or is offered child

care services shall be offered a choice:

(1) To enroll the child with an eligible

child care provider that has a grant or

contract for the provision of such

services, if such services are available;

or

(2) To receive a child care certificate

as defined in § 98.2.

Such choice shall be offered any time

that child care services are made

available to a parent.

(b) When a parent elects to enroll the

child with a provider that has a grant or

contract for the provision of child care

services, the child will be enrolled with

the provider selected by the parent to

the maximum extent practicable.

(c) In cases in which a parent elects

to use a child care certificate, such

certificate:
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39987

(1) Will be issued directly to the

parent;

(2) Shall be of a value commensurate

with the subsidy value of the child care

services provided under paragraph (a)(1)

of this section;

(3) May be used as a deposit for child

care services if such a deposit is

required of other children being cared

for by the provider;

(4) May be used for child care services

provided by a sectarian organization or

agency, including those that engage in

religious activities, if those services are

chosen by the parent;

(5) May be expended by providers for

any sectarian purpose or activity that is

part of the child care services, including

sectarian worship or instruction;

(6) Shall not be considered a grant or

contract to a provider but shall be

considered assistance to the parent.

(d) Child care certificates shall be

made available to any parents offered

child care services.

(e)(1) For child care services,

certificates under paragraph (a)(2) of

this section shall permit parents to

choose from a variety of child care

categories, including:

(i) Center-based child care;

(ii) Group home child care;

(iii) Family child care; and

(iv) In-home child care, with

limitations, if any, imposed by the Lead

Agency and described in its Plan at

§ 98.16(g)(2).

Under each of the above categories,

care by a sectarian provider may not be

limited or excluded.

(2) Lead Agencies shall provide

information regarding the range of

provider options under paragraph (e)(1)

of this section, including care by

sectarian providers and relatives, to

families offered child care services.

(f) With respect to State and local

regulatory requirements under § 98.40,

health and safety requirements under

§ 98.41, and payment rates under

§ 98.43, CCDF funds will not be

available to a Lead Agency if State or

local rules, procedures or other

requirements promulgated for purposes

of the CCDF significantly restrict

parental choice by:

(1) Expressly or effectively excluding:

(i) Any category of care or type of

provider, as defined in § 98.2; or

(ii) Any type of provider within a

category of care; or

(2) Having the effect of limiting

parental access to or choice from among

such categories of care or types of

providers, as defined in § 98.2; or

(3) Excluding a significant number of

providers in any category of care or of

any type as defined in § 98.2.

§ 98.31 Parental access.

The Lead Agency shall have in effect

procedures to ensure that providers of

child care services for which assistance

is provided afford parents unlimited

access to their children, and to the

providers caring for their children,

during normal hours of provider

operation and whenever the children

are in the care of the provider. The Lead

Agency shall provide a detailed

description of such procedures.

§ 98.32 Parental complaints.

The State shall:

(a) Maintain a record of substantiated

parental complaints;

(b) Make information regarding such

parental complaints available to the

public on request; and

(c) The Lead Agency shall provide a

detailed description of how such record

is maintained and is made available.

§ 98.33 Consumer education.

The Lead Agency shall:

(a) Certify that it will collect and

disseminate to parents and the general

public consumer education information

that will promote informed child care

choices including, at a minimum,

information about

(1) the full range of providers

available, and

(2) health and safety requirements;

(b) Inform parents who receive TANF

benefits about the requirement at

section 407(e)(2) of the Social Security

Act that the TANF agency make an

exception to the individual penalties

associated with the work requirement

for any single custodial parent who has

a demonstrated inability to obtain

needed child care for a child under six

years of age. The information may be

provided directly by the Lead Agency,

or, pursuant to § 98.11, other entities,

and shall include:

(1) The procedures the TANF agency

uses to determine if the parent has a

demonstrated inability to obtain needed

child care;

(2) The criteria or definitions applied

by the TANF agency to determine

whether the parent has a demonstrated

inability to obtain needed child care,

including:

(i) ‘‘Appropriate child care’’;

(ii) ‘‘Reasonable distance’’;

(iii) ‘‘Unsuitability of informal child

care’’;

(iv) ‘‘Affordable child care

arrangements’’;

(3) The clarification that assistance

received during the time an eligible

parent receives the exception referred to

in paragraph (b) of this section will

count toward the time limit on Federal

benefits required at section 408(a)(7) of

the Social Security Act.

(c) Include in the biennial Plan the

definitions or criteria the TANF agency

uses in implementing the exception to

the work requirement specified in

paragraph (b) of this section.

§ 98.34 Parental rights and

responsibilities.

Nothing under this part shall be

construed or applied in any manner to

infringe on or usurp the moral and legal

rights and responsibilities of parents or

legal guardians.

Subpart E—Program Operations (Child

Care Services)—Lead Agency and

Provider Requirements

§ 98.40 Compliance with applicable State

and local regulatory requirements.

(a) Lead Agencies shall:

(1) Certify that they have in effect

licensing requirements applicable to

child care services provided within the

area served by the Lead Agency;

(2) Provide a detailed description of

the requirements under paragraph (a)(1)

of this section and of how they are

effectively enforced.

(b)(1) This section does not prohibit a

Lead Agency from imposing more

stringent standards and licensing or

regulatory requirements on child care

providers of services for which

assistance is provided under the CCDF

than the standards or requirements

imposed on other child care providers.

(2) Any such additional requirements

shall be consistent with the safeguards

for parental choice in § 98.30(f).

§ 98.41 Health and safety requirements.

(a) Although the Act specifically

states it does not require the

establishment of any new or additional

requirements if existing requirements

comply with the requirements of the

statute, each Lead Agency shall certify

that there are in effect, within the State

(or other area served by the Lead

Agency), under State, local or tribal law,

requirements designed to protect the

health and safety of children that are

applicable to child care providers of

services for which assistance is

provided under this part. Such

requirements shall include:

(1) The prevention and control of

infectious diseases (including

immunizations). With respect to

immunizations, the following

provisions apply:

(i) As part of their health and safety

provisions in this area, States and

Territories shall assure that children

receiving services under the CCDF are

age-appropriately immunized. Those

health and safety provisions shall

incorporate (by reference or otherwise)

the latest recommendation for
39988 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

childhood immunizations of the

respective State or territorial public

health agency.

(ii) Notwithstanding paragraph

(a)(1)(i) of this section, Lead Agencies

may exempt:

(A) Children who are cared for by

relatives (defined as grandparents, great

grandparents, siblings (if living in a

separate residence), aunts, and uncles);

(B) Children who receive care in their

own homes;

(C) Children whose parents object to

immunization on religious grounds; and

(D) Children whose medical condition

contraindicates immunization;

(iii) Lead Agencies shall establish a

grace period in which children can

receive services while families are

taking the necessary actions to comply

with the immunization requirements;

(2) Building and physical premises

safety; and

(3) Minimum health and safety

training appropriate to the provider

setting.

(b) Lead Agencies may not set health

and safety standards and requirements

under paragraph (a) of this section that

are inconsistent with the parental

choice safeguards in § 98.30(f).

(c) The requirements in paragraph (a)

of this section shall apply to all

providers of child care services for

which assistance is provided under this

part, within the area served by the Lead

Agency, except the relatives specified in

paragraph (e) of this section.

(d) Each Lead Agency shall certify

that procedures are in effect to ensure

that child care providers of services for

which assistance is provided under this

part, within the area served by the Lead

Agency, comply with all applicable

State, local, or tribal health and safety

requirements described in paragraph (a)

of this section.

(e) For the purposes of this section,

the term ‘‘child care providers’’ does not

include grandparents, great

grandparents, siblings (if such providers

live in a separate residence), aunts, or

uncles, pursuant to § 98.2.

§ 98.42 Sliding fee scales.

(a) Lead Agencies shall establish, and

periodically revise, by rule, a sliding fee

scale(s) that provides for cost sharing by

families that receive CCDF child care

services.

(b) A sliding fee scale(s) shall be

based on income and the size of the

family and may be based on other

factors as appropriate.

(c) Lead Agencies may waive

contributions from families whose

incomes are at or below the poverty

level for a family of the same size.

§ 98.43 Equal access.

(a) The Lead Agency shall certify that

the payment rates for the provision of

child care services under this part are

sufficient to ensure equal access, for

eligible families in the area served by

the Lead Agency, to child care services

comparable to those provided to

families not eligible to receive CCDF

assistance or child care assistance under

any other Federal, State, or tribal

programs.

(b) The Lead Agency shall provide a

summary of the facts relied on to

determine that its payment rates ensure

equal access. At a minimum, the

summary shall include facts showing:

(1) How a choice of the full range of

providers, e.g., center, group, family,

and in-home care, is made available;

(2) How payment rates are adequate

based on a local market rate survey

conducted no earlier than two years

prior to the effective date of the

currently approved Plan;

(3) How copayments based on a

sliding fee scale are affordable, as

stipulated at § 98.42.

(c) A Lead Agency may not establish

different payment rates based on a

family’s eligibility status or

circumstances.

(d) Payment rates under paragraph (a)

of this section shall be consistent with

the parental choice requirements in

§ 98.30.

(e) Nothing in this section shall be

construed to create a private right of

action.

§ 98.44 Priority for child care services.

Lead Agencies shall give priority for

services provided under § 98.50(a) to:

(a) Children of families with very low

family income (considering family size);

and

(b) Children with special needs.

§ 98.45 List of Providers.

If a Lead Agency does not have a

registration process for child care

providers who are unlicensed or

unregulated under State, local, or tribal

law, it is required to maintain a list of

the names and addresses of unlicensed

or unregulated providers of child care

services for which assistance is

provided under this part.

§ 98.46 Nondiscrimination in admissions

on the basis of religion.

(a) Child care providers (other than

family child care providers, as defined

in § 98.2) that receive assistance through

grants and contracts under the CCDF

shall not discriminate in admissions

against any child on the basis of

religion.

(b) Paragraph (a) of this section does

not prohibit a child care provider from

selecting children for child care slots

that are not funded directly (i.e.,

through grants or contracts to providers)

with assistance provided under the

CCDF because such children or their

family members participate on a regular

basis in other activities of the

organization that owns or operates such

provider.

(c) Notwithstanding paragraph (b) of

this section, if 80 percent or more of the

operating budget of a child care

provider comes from Federal or State

funds, including direct or indirect

assistance under the CCDF, the Lead

Agency shall assure that before any

further CCDF assistance is given to the

provider,

(1) The grant or contract relating to

the assistance, or

(2) The admission policies of the

provider specifically provide that no

person with responsibilities in the

operation of the child care program,

project, or activity will discriminate, on

the basis of religion, in the admission of

any child.

§ 98.47 Nondiscrimination in employment

on the basis of religion.

(a) In general, except as provided in

paragraph (b) of this section, nothing in

this part modifies or affects the

provision of any other applicable

Federal law and regulation relating to

discrimination in employment on the

basis of religion.

(1) Child care providers that receive

assistance through grants or contracts

under the CCDF shall not discriminate,

on the basis of religion, in the

employment of caregivers as defined in

§ 98.2.

(2) If two or more prospective

employees are qualified for any position

with a child care provider, this section

shall not prohibit the provider from

employing a prospective employee who

is already participating on a regular

basis in other activities of the

organization that owns or operates the

provider.

(3) Paragraphs (a)(1) and (2) of this

section shall not apply to employees of

child care providers if such employees

were employed with the provider on

November 5, 1990.

(b) Notwithstanding paragraph (a) of

this section, a sectarian organization

may require that employees adhere to

the religious tenets and teachings of

such organization and to rules

forbidding the use of drugs or alcohol.

(c) Notwithstanding paragraph (b) of

this section, if 80 percent or more of the

operating budget of a child care

provider comes from Federal and State

funds, including direct and indirect

assistance under the CCDF, the Lead
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39989

Agency shall assure that, before any

further CCDF assistance is given to the

provider,

(1) The grant or contract relating to

the assistance, or

(2) The employment policies of the

provider specifically provide that no

person with responsibilities in the

operation of the child care program will

discriminate, on the basis of religion, in

the employment of any individual as a

caregiver, as defined in § 98.2.

Subpart F—Use of Child Care and

Development Funds

§ 98.50 Child care services.

(a) Of the funds remaining after

applying the provisions of paragraphs

(c), (d) and (e) of this section the Lead

Agency shall spend a substantial

portion to provide child care services to

low-income working families.

(b) Child care services shall be

provided:

(1) To eligible children, as described

in § 98.20;

(2) Using a sliding fee scale, as

described in § 98.42;

(3) Using funding methods provided

for in § 98.30; and

(4) Based on the priorities in § 98.44.

(c) Of the aggregate amount of funds

expended (i.e., Discretionary,

Mandatory, and Federal and State share

of Matching Funds), no less than four

percent shall be used for activities to

improve the quality of child care as

described at § 98.51.

(d) Of the aggregate amount of funds

expended (i.e., Discretionary,

Mandatory, and Federal and State share

of Matching Funds), no more than five

percent may be used for administrative

activities as described at § 98.52.

(e) Not less than 70 percent of the

Mandatory and Matching Funds shall be

used to meet the child care needs of

families who:

(1) Are receiving assistance under a

State program under Part A of title IV of

the Social Security Act,

(2) Are attempting through work

activities to transition off such

assistance program, and

(3) Are at risk of becoming dependent

on such assistance program.

(f) Pursuant to § 98.16(g)(4), the Plan

shall specify how the State will meet the

child care needs of families described in

paragraph (e) of this section.

§ 98.51 Activities to improve the quality of

child care.

(a) No less than four percent of the

aggregate funds expended by the Lead

Agency for a fiscal year, and including

the amounts expended in the State

pursuant to § 98.53(b), shall be

expended for quality activities.

(1) These activities may include but

are not limited to:

(i) Activities designed to provide

comprehensive consumer education to

parents and the public;

(ii) Activities that increase parental

choice; and

(iii) Activities designed to improve

the quality and availability of child care,

including, but not limited to those

described in paragraph (2) of this

section.

(2) Activities to improve the quality of

child care services may include, but are

not limited to:

(i) Operating directly or providing

financial assistance to organizations

(including private non-profit

organizations, public organizations, and

units of general purpose local

government) for the development,

establishment, expansion, operation,

and coordination of resource and

referral programs specifically related to

child care;

(ii) Making grants or providing loans

to child care providers to assist such

providers in meeting applicable State,

local, and tribal child care standards,

including applicable health and safety

requirements, pursuant to §§ 98.40 and

98.41;

(iii) Improving the monitoring of

compliance with, and enforcement of,

applicable State, local, and tribal

requirements pursuant to §§ 98.40 and

98.41;

(iv) Providing training and technical

assistance in areas appropriate to the

provision of child care services, such as

training in health and safety, nutrition,

first aid, the recognition of

communicable diseases, child abuse

detection and prevention, and care of

children with special needs;

(v) Improving salaries and other

compensation (such as fringe benefits)

for full-and part-time staff who provide

child care services for which assistance

is provided under this part; and

(vi) Any other activities that are

consistent with the intent of this

section.

(b) Pursuant to § 98.16(h), the Lead

Agency shall describe in its Plan the

activities it will fund under this section.

(c) Non-Federal expenditures required

by § 98.53(c) (i.e., the maintenance-ofeffort amount) are not subject to the

requirement at paragraph (a) of this

section.

§ 98.52 Administrative costs.

(a) Not more than five percent of the

aggregate funds expended by the Lead

Agency from each fiscal year’s

allotment, including the amounts

expended in the State pursuant to

§ 98.53(b), shall be expended for

administrative activities. These

activities may include but are not

limited to:

(1) Salaries and related costs of the

staff of the Lead Agency or other

agencies engaged in the administration

and implementation of the program

pursuant to § 98.11. Program

administration and implementation

include the following types of activities:

(i) Planning, developing, and

designing the Child Care and

Development Fund program;

(ii) Providing local officials and the

public with information about the

program, including the conduct of

public hearings;

(iii) Preparing the application and

Plan;

(iv) Developing agreements with

administering agencies in order to carry

out program activities;

(v) Monitoring program activities for

compliance with program requirements;

(vi) Preparing reports and other

documents related to the program for

submission to the Secretary;

(vii) Maintaining substantiated

complaint files in accordance with the

requirements of § 98.32;

(viii) Coordinating the provision of

Child Care and Development Fund

services with other Federal, State, and

local child care, early childhood

development programs, and before-and

after-school care programs;

(ix) Coordinating the resolution of

audit and monitoring findings;

(x) Evaluating program results; and

(xi) Managing or supervising persons

with responsibilities described in

paragraphs (a)(1)(i) through (x) of this

section;

(2) Travel costs incurred for official

business in carrying out the program;

(3) Administrative services, including

such services as accounting services,

performed by grantees or subgrantees or

under agreements with third parties;

(4) Audit services as required at

§ 98.65;

(5) Other costs for goods and services

required for the administration of the

program, including rental or purchase of

equipment, utilities, and office supplies;

and

(6) Indirect costs as determined by an

indirect cost agreement or cost

allocation plan pursuant to § 98.55.

(b) The five percent limitation at

paragraph (a) of this section applies

only to the States and Territories. The

amount of the limitation at paragraph (a)

of this section does not apply to Tribes

or tribal organizations.

(c) Non-Federal expenditures required

by § 98.53(c) (i.e., the maintenance-ofeffort amount) are not subject to the five

percent limitation at paragraph (a) of

this section.
39990 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

§ 98.53 Matching fund requirements.

(a) Federal matching funds are

available for expenditures in a State

based upon the formula specified at

§ 98.63(a).

(b) Expenditures in a State under

paragraph (a) of this section will be

matched at the Federal medical

assistance rate for the applicable fiscal

year for allowable activities, as

described in the approved State Plan,

that meet the goals and purposes of the

Act.

(c) In order to receive Federal

matching funds for a fiscal year under

paragraph (a) of this section:

(1) States shall also expend an amount

of non-Federal funds for child care

activities in the State that is at least

equal to the State’s share of

expenditures for fiscal year 1994 or

1995 (whichever is greater) under

sections 402(g) and (i) of the Social

Security Act as these sections were in

effect before October 1, 1995; and

(2) The expenditures shall be for

allowable services or activities, as

described in the approved State Plan if

appropriate, that meet the goals and

purposes of the Act.

(3) All Mandatory Funds are obligated

in accordance with § 98.60(d)(2)(i).

(d) The same expenditure may not be

used to meet the requirements under

both paragraphs (b) and (c) of this

section in a fiscal year.

(e) An expenditure in the State for

purposes of this subpart may be:

(1) Public funds when the funds are:

(i) Appropriated directly to the Lead

Agency specified at § 98.10, or

transferred from another public agency

to that Lead Agency and under its

administrative control, or certified by

the contributing public agency as

representing expenditures eligible for

Federal match;

(ii) Not used to match other Federal

funds; and

(iii) Not Federal funds, or are Federal

funds authorized by Federal law to be

used to match other Federal funds; or

(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; and

(iii) Are not used to match other

Federal funds;

(iv) Shall be certified both by the

donor and by the Lead Agency as

available and representing expenditures

eligible for Federal match; and

(v) Shall be subject to the audit

requirements in § 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 entity designated by the

State to receive donated funds pursuant

to § 98.16(c)(2).

(g) The following are not counted as

an eligible State expenditure under this

Part:

(1) In-kind contributions; and

(2) Family contributions to the cost of

care as required by § 98.42.

(h) Public pre-kindergarten (pre-K)

expenditures:

(1) May be used to meet the

maintenance-of-effort requirement only

if the State has not reduced its

expenditures for full-day/full-year child

care services; and

(2) May be eligible for Federal match

if the State includes in its Plan, as

provided in § 98.16(q), a description of

the efforts it will undertake to ensure

that pre-K programs meet the needs of

working parents.

(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 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.

(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 either its

maintenance-of-effort or 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.

(i) Matching funds are subject to the

obligation and liquidation requirements

at § 98.60(d)(3).

§ 98.54 Restrictions on the use of funds.

(a) General. (1) Funds authorized

under section 418 of the Social Security

Act and section 658B of the Child Care

and Development Block Grant Act, and

all funds transferred to the Lead Agency

pursuant to section 404(d) of the Social

Security Act, shall be expended

consistent with these regulations. Funds

transferred pursuant to section 404(d) of

the Social Security Act shall be treated

as Discretionary Funds;

(2) Funds shall be expended in

accordance with applicable State and

local laws, except as superseded by

§ 98.3.

(b) Construction. (1) For State and

local agencies and nonsectarian

agencies or organizations, no funds shall

be expended for the purchase or

improvement of land, or for the

purchase, construction, or permanent

improvement of any building or facility.

However, funds may be expended for

minor remodeling, and for upgrading

child care facilities to assure that

providers meet State and local child

care standards, including applicable

health and safety requirements.

(2) For sectarian agencies or

organizations, the prohibitions in

paragraph (b)(1) of this section apply;

however, funds may be expended for

minor remodeling only if necessary to

bring the facility into compliance with

the health and safety requirements

established pursuant to § 98.41.

(3) Tribes and tribal organizations are

subject to the requirements at § 98.84

regarding construction and renovation.

(c) Tuition. Funds may not be

expended for students enrolled in

grades 1 through 12 for:

(1) Any service provided to such

students during the regular school day;

(2) Any service for which such

students receive academic credit toward

graduation; or

(3) Any instructional services that

supplant or duplicate the academic

program of any public or private school.

(d) Sectarian purposes and activities.

Funds provided under grants or

contracts to providers may not be

expended for any sectarian purpose or

activity, including sectarian worship or

instruction. Pursuant to § 98.2,

assistance provided to parents through

certificates is not a grant or contract.

Funds provided through child care

certificates may be expended for

sectarian purposes or activities,

including sectarian worship or

instruction when provided as part of the

child care services.

(e) The CCDF may not be used as the

non-Federal share for other Federal

grant programs.

§ 98.55 Cost allocation.

(a) The Lead Agency and subgrantees

shall keep on file cost allocation plans

or indirect cost agreements, as

appropriate, that have been amended to

include costs allocated to the CCDF.

(b) Subgrantees that do not already

have a negotiated indirect rate with the

Federal government should prepare and

keep on file cost allocation plans or

indirect cost agreements, as appropriate.

(c) Approval of the cost allocation

plans or indirect cost agreements is not

specifically required by these

regulations, but these plans and

agreements are subject to review.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39991

Subpart G—Financial Management

§ 98.60 Availability of funds.

(a) The CCDF is available, subject to

the availability of appropriations, in

accordance with the apportionment of

funds from the Office of Management

and Budget as follows:

(1) Discretionary Funds are available

to States, Territories, and Tribes,

(2) Mandatory and Matching Funds

are available to States;

(3) Tribal Mandatory Funds are

available to Tribes.

(b) Subject to the availability of

appropriations, in accordance with the

apportionment of funds from the Office

of Management and Budget, the

Secretary:

(1) May withhold no more than onequarter of one percent of the CCDF

funds made available for a fiscal year for

the provision of technical assistance;

and

(2) Will award the remaining CCDF

funds to grantees that have an approved

application and Plan.

(c) The Secretary may make payments

in installments, and in advance or by

way of reimbursement, with necessary

adjustments due to overpayments or

underpayments.

(d) The following obligation and

liquidation provisions apply to States

and Territories:

(1) Discretionary Fund allotments

shall be obligated in the fiscal year in

which funds are awarded or in the

succeeding fiscal year. Unliquidated

obligations as of the end of the

succeeding fiscal year shall be

liquidated within one year.

(2)(i) Mandatory Funds for States

requesting Matching Funds per § 98.53

shall be obligated in the fiscal year in

which the funds are granted and are

available until expended.

(ii) Mandatory Funds for States that

do not request Matching Funds are

available until expended.

(3) Both the Federal and non-Federal

share of the Matching Fund shall be

obligated in the fiscal year in which the

funds are granted and liquidated no

later than the end of the succeeding

fiscal year.

(4) Except for paragraph (d)(5) of this

section, determination of whether funds

have been obligated and liquidated will

be based on:

(i) State or local law; or,

(ii) If there is no applicable State or

local law, the regulation at 45 CFR 92.3,

Obligations and Outlays (expenditures).

(5) Obligations may include subgrants

or contracts that require the payment of

funds to a third party (e.g., subgrantee

or contractor). However, the following

are not considered third party

subgrantees or contractors:

(i) A local office of the Lead Agency;

(ii) Another entity at the same level of

government as the Lead Agency; or

(iii) A local office of another entity at

the same level of government as the

Lead Agency.

(6) For purposes of the CCDF, funds

for child care services provided through

a child care certificate will be

considered obligated when a child care

certificate is issued to a family in

writing that indicates:

(i) The amount of funds that will be

paid to a child care provider or family,

and

(ii) The specific length of time

covered by the certificate, which is

limited to the date established for

redetermination of the family’s

eligibility, but shall be no later than the

end of the liquidation period.

(7) Any funds not obligated during the

obligation period specified in paragraph

(d) of this section will revert to the

Federal government. Any funds not

liquidated by the end of the applicable

liquidation period specified in

paragraph (d) of this section will also

revert to the Federal government.

(e) The following obligation and

liquidation provisions apply to Tribal

Discretionary and Tribal Mandatory

Funds:

(1) Tribal grantees shall obligate all

funds by the end of the fiscal year

following the fiscal year for which the

grant is awarded. Any funds not

obligated during this period will revert

to the Federal government.

(2) Obligations that remain

unliquidated at the end of the

succeeding fiscal year shall be

liquidated within the next fiscal year.

Any tribal funds that remain

unliquidated by the end of this period

will also revert to the Federal

government.

(f) Cash advances shall be limited to

the minimum amounts needed and shall

be timed to be in accord with the actual,

immediate cash requirements of the

State Lead Agency, its subgrantee or

contractor in carrying out the purpose of

the program in accordance with 31 CFR

part 205.

(g) Funds that are returned (e.g., loan

repayments, funds deobligated by

cancellation of a child care certificate,

unused subgrantee funds) as well as

program income (e.g., contributions

made by families directly to the Lead

Agency or subgrantee for the cost of care

where the Lead Agency or subgrantee

has made a full payment to the child

care provider) shall,

(1) if received by the Lead Agency

during the applicable obligation period,

described in paragraphs (d) and (e) of

this section, be used for activities

specified in the Lead Agency’s approved

plan and must be obligated by the end

of the obligation period; or

(2) if received after the end of the

applicable obligation period described

at paragraphs (d) and (e) of this section,

be returned to the Federal government.

(h) Repayment of loans, pursuant to

§ 98.51(a)(2)(ii), may be made in cash or

in services provided in-kind. Payment

provided in-kind shall be based on fair

market value. All loans shall be fully

repaid.

(i) Lead Agencies shall recover child

care payments that are the result of

fraud. These payments shall be

recovered from the party responsible for

committing the fraud.

§ 98.61 Allotments from the Discretionary

Fund.

(a) To the 50 States, the District of

Columbia, and the Commonwealth of

Puerto Rico an amount equal to the

funds appropriated for the Child Care

and Development Block Grant, less

amounts reserved for technical

assistance and amounts reserved for the

Territories and Tribes, pursuant to

§ 98.60(b) and paragraphs (b) and (c) of

this section, shall be allotted based

upon the formula specified in section

658O(b) of the Act.

(b) For the U.S. Territories of Guam,

American Samoa, the Virgin Islands of

the United States, and the

Commonwealth of the Northern Mariana

Islands an amount up to one-half of one

percent of the amount appropriated for

the Child Care and Development Block

Grant shall be reserved.

(1) Funds shall be allotted to these

Territories based upon the following

factors:

(i) A Young Child factor—the ratio of

the number of children in the Territory

under five years of age to the number of

such children in all Territories; and

(ii) An Allotment Proportion factor—

determined by dividing the per capita

income of all individuals in all the

Territories by the per capita income of

all individuals in the Territory.

(A) Per capita income shall be:

(1) Equal to the average of the annual

per capita incomes for the most recent

period of three consecutive years for

which satisfactory data are available at

the time such determination is made;

and

(2) Determined every two years.

(B) Per capita income determined,

pursuant to paragraph (b)(1)(ii)(A) of

this section, will be applied in

establishing the allotment for the fiscal

year for which it is determined and for

the following fiscal year.

(C) If the Allotment Proportion factor

determined at paragraph (b)(1)(ii) of this

section:
39992 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

(1) Exceeds 1.2, then the Allotment

Proportion factor of the Territory shall

be considered to be 1.2; or

(2) Is less than 0.8, then the Allotment

Proportion factor of the Territory shall

be considered to be 0.8.

(2) The formula used in calculating a

Territory’s allotment is as follows:

YCF APF

YCF APF

Territories t t

t t

×

( × ) ×

∑

amount reserved for

 at paragraph

(a) of this section.

(ii) For purposes of the formula

specified at paragraph (b)(2)(i) of this

section, the term ‘‘YCFt’’ means the

Territory’s Young Child factor as

defined at paragraph (b)(1)(i) of this

section.

(iii) For purposes of the formula

specified at paragraph (b)(2)(i) of this

section, the term ‘‘APFt’’ means the

Territory’s Allotment Proportion factor

as defined at paragraph (b)(1)(ii) of this

section.

(c) For Indian Tribes and tribal

organizations, including any Alaskan

Native Village or regional or village

corporation as defined in or established

pursuant to the Alaska Native Claims

Settlement Act (43 U.S.C. 1601 et seq)

an amount up to two percent of the

amount appropriated for the Child Care

and Development Block Grant shall be

reserved.

(1) Except as specified in paragraph

(c)(2) of this section, grants to

individual tribal grantees will be equal

to the sum of:

(i) A base amount as set by the

Secretary; and

(ii) An additional amount per Indian

child under age 13 (or such similar age

as determined by the Secretary from the

best available data), which is

determined by dividing the amount of

funds available, less amounts set aside

for eligible Tribes, pursuant to

paragraph (c)(1)(i) of this section, by the

number of all Indian children living on

or near tribal reservations or other

appropriate area served by the tribal

grantee, pursuant to § 98.80(e).

(2) Grants to Tribes with fewer than

50 Indian children that apply as part of

a consortium, pursuant to § 98.80(b)(1),

are equal to the sum of:

(i) A portion of the base amount,

pursuant to paragraph (c)(1)(i) of this

section, that bears the same ratio as the

number of Indian children in the Tribe

living on or near the reservation, or

other appropriate area served by the

tribal grantee, pursuant to § 98.80(e),

does to 50; and

(ii) An additional amount per Indian

child, pursuant to paragraph (c)(1)(ii) of

this section.

(3) Tribal consortia will receive grants

that are equal to the sum of the

individual grants of their members.

(d) All funds reserved for Territories

at paragraph (b) of this section will be

allotted to Territories, and all funds

reserved for Tribes at paragraph (c) of

this section will be allotted to tribal

grantees. Any funds that are returned by

the Territories after they have been

allotted will revert to the Federal

government.

(e) For other organizations, up to

$2,000,000 may be reserved from the

tribal funds reserved at paragraph (c) of

this section. From this amount the

Secretary may award a grant to a Native

Hawaiian Organization, as defined in

section 4009(4) of the Augustus F.

Hawkins-Robert T. Stafford Elementary

and Secondary School Improvement

Amendments of 1988 (20 U.S.C.

4909(4)) and to a private non-profit

organization established for the purpose

of serving youth who are Indians or

Native Hawaiians. The Secretary will

establish selection criteria and

procedures for the award of grants

under this subsection by notice in the

Federal Register.

§ 98.62 Allotments from the Mandatory

Fund.

(a) Each of the 50 States and the

District of Columbia will be allocated

from the funds appropriated under

section 418(a)(3) of the Social Security

Act, less the amounts reserved for

technical assistance pursuant to

§ 98.60(b)(1) and the amount reserved

for Tribes pursuant to paragraph (b) of

this section, an amount of funds equal

to the greater of:

(1) the Federal share of its child care

expenditures under subsections (g) and

(i) of section 402 of the Social Security

Act (as in effect before October 1, 1995)

for fiscal year 1994 or 1995 (whichever

is greater); or

(2) the average of the Federal share of

its child care expenditures under the

subsections referred to in subparagraph

(a)(1) of this section for fiscal years 1992

through 1994.

(b) For Indian Tribes and tribal

organizations up to 2 percent of the

amount appropriated under section

418(a)(3) of the Social Security Act shall

be allocated according to the formula at

paragraph (c) of this section. In Alaska,

only the following 13 entities shall

receive allocations under this subpart,

in accordance with the formula at

paragraph (c) of this section:

(1) The Metlakatla Indian Community

of the Annette Islands Reserve:

(2) Arctic Slope Native Association;

(3) Kawerak, Inc.;

(4) Maniilaq Association;

(5) Association of Village Council

Presidents;

(6) Tanana Chiefs Conference;

(7) Cook Inlet Tribal Council;

(8) Bristol Bay Native Association;

(9) Aleutian and Pribilof Islands

Association;

(10) Chugachmuit;

(11) Tlingit and Haida Central

Council;

(12) Kodiak Area Native Association;

and

(13) Copper River Native Association.

(c)(1) Grants to individual Tribes with

50 or more Indian children, and to

Tribes with fewer than 50 Indian

children that apply as part of a

consortium pursuant to § 98.80(b)(1),

will be equal to an amount per Indian

child under age 13 (or such similar age

as determined by the Secretary from the

best available data), which is

determined by dividing the amount of

funds available, by the number of Indian

children in each Tribe’s service area

pursuant to § 98.80(e).

(2) Tribal consortia will receive grants

that are equal to the sum of the

individual grants of their members.

§ 98.63 Allotments from the Matching

Fund.

(a) To each of the 50 States and the

District of Columbia there is allocated

an amount equal to its share of the total

available under section 418(a)(3) of the

Social Security Act. That amount is

based on the same ratio as the number

of children under age 13 residing in the

State bears to the national total of

children under age 13. The number of

children under 13 is derived from the

best data available to the Secretary for

the second preceding fiscal year.

(b) For purposes of this subsection,

the amounts available under section

418(a)(3) of the Social Security Act

excludes the amounts reserved and

allocated under § 98.60(b)(1) for

technical assistance and under

§ 98.62(a) and (b) for the Mandatory

Fund.

(c) Amounts under this subsection are

available pursuant to the requirements

at § 98.53(c).

§ 98.64 Reallotment and redistribution of

funds.

(a) According to the provisions of this

section State and Tribal Discretionary

Funds are subject to reallotment, and

State Matching Funds are subject to

redistribution. State funds are reallotted

or redistributed only to States as defined

for the original allocation. Tribal funds

are reallotted only to Tribes. Funds

granted to the Territories are not subject

to reallotment. Any funds granted to the

Territories that are returned after they
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39993

have been allotted will revert to the

Federal government.

(b) Any portion of a State’s

Discretionary Fund allotment that is not

required to carry out its Plan, in the

period for which the allotment is made

available, shall be reallotted to other

States in proportion to the original

allotments. For purposes of this

paragraph the term ‘‘State’’ means the

50 States, the District of Columbia, and

the Commonwealth of Puerto Rico. The

other Territories and the Tribes may not

receive reallotted State Discretionary

Funds.

(1) Each year, the State shall report to

the Secretary either the dollar amount

from the previous year’s grant that it

will be unable to obligate by the end of

the obligation period or that all funds

will be obligated during such time. Such

report shall be postmarked by April 1st.

(2) Based upon the reallotment reports

submitted by States, the Secretary will

reallot funds.

(i) If the total amount available for

reallotment is $25,000 or more, funds

will be reallotted to States in proportion

to each State’s allotment for the

applicable fiscal year’s funds, pursuant

to § 98.61(a).

(ii) If the amount available for

reallotment is less than $25,000, the

Secretary will not reallot any funds, and

such funds will revert to the Federal

government.

(iii) If an individual reallotment

amount to a State is less than $500, the

Secretary will not issue the award, and

such funds will revert to the Federal

government.

(3) If a State does not submit a

reallotment report by the deadline for

report submittal, either:

(i) The Secretary will determine that

the State does not have any funds

available for reallotment; or

(ii) In the case of a report postmarked

after April 1st, any funds reported to be

available for reallotment shall revert to

the Federal government.

(4) States receiving reallotted funds

shall obligate and expend these funds in

accordance with § 98.60. The

reallotment of funds does not extend the

obligation period or the program period

for expenditure of such funds.

(c)(1) Any portion of the Matching

Fund granted to a State that is not

obligated in the period for which the

grant is made shall be redistributed.

Funds, if any, will be redistributed on

the request of, and only to, those other

States that have met the requirements of

§ 98.53(c) in the period for which the

grant was first made. For purposes of

this paragraph the term ‘‘State’’ means

the 50 States and the District of

Columbia. Territorial and tribal grantees

may not receive redistributed Matching

Funds.

(2) Matching Funds allotted to a State

under § 98.63(a), but not granted, shall

also be redistributed in the manner

described in paragraph (1) of this

section.

(3) The amount of Matching Funds

granted to a State that will be made

available for redistribution will be based

on the State’s financial report to ACF for

the Child Care and Development Fund

(ACF–696) and is subject to the

monetary limits at paragraph (b)(2) of

this section.

(4) A State eligible to receive

redistributed Matching Funds shall also

use the ACF–696 to request its share of

the redistributed funds, if any.

(5) A State’s share of redistributed

Matching Funds is based on the same

ratio as the number of children under 13

residing in the State to the number of

children residing in all States eligible to

receive and that request the

redistributed Matching Funds.

(6) Redistributed funds are considered

part of the grant for the fiscal year in

which the redistribution occurs.

(d) Any portion of a Tribe’s allotment

of Discretionary Funds that is not

required to carry out its Plan, in the

period for which the allotment is made

available, shall be reallotted to other

tribal grantees in proportion to their

original allotments. States and

Territories may not receive reallotted

tribal funds.

(1) Each year, the Tribe shall report to

the Secretary either the dollar amount

from the previous year’s grant that it

will be unable to obligate by the end of

the obligation period or that all funds

will be obligated during such time. Such

report shall be postmarked by a

deadline established by the Secretary.

(2) Based upon the reallotment reports

submitted by Tribes, the Secretary will

reallot Tribal Discretionary Funds

among the other Tribes.

(i) If the total amount available for

reallotment is $25,000 or more, funds

will be reallotted to other tribal grantees

in proportion to each Tribe’s original

allotment for the applicable fiscal year

pursuant to § 98.62(c).

(ii) If the total amount available for

reallotment is less than $25,000, the

Secretary will not reallot any funds, and

such funds will revert to the Federal

government.

(iii) If an individual reallotment

amount to an applicant Tribe is less

than $500, the Secretary will not issue

the award, and such funds will revert to

the Federal government.

(3) If a Tribe does not submit a

reallotment report by the deadline for

report submittal, either:

(i) The Secretary will determine that

Tribe does not have any funds available

for reallotment; or

(ii) In the case of a report received

after the deadline established by the

Secretary, any funds reported to be

available for reallotment shall revert to

the Federal government.

(4) Tribes receiving reallotted funds

shall obligate and expend these funds in

accordance with § 98.60. The

reallotment of funds does not extend the

obligation period or the program period

for expenditure of such funds.

§ 98.65 Audits and financial reporting.

(a) Each Lead Agency shall have an

audit conducted after the close of each

program period in accordance with

OMB Circular A–133 and the Single

Audit Act Amendments of 1996.

(b) Lead Agencies are responsible for

ensuring that subgrantees are audited in

accordance with appropriate audit

requirements.

(c) Not later than 30 days after the

completion of the audit, Lead Agencies

shall submit a copy of their audit report

to the legislature of the State or, if

applicable, to the Tribal Council(s).

Lead Agencies shall also submit a copy

of their audit report to the HHS

Inspector General for Audit Services, as

well as to their cognizant agency, if

applicable.

(d) Any amounts determined through

an audit not to have been expended in

accordance with these statutory or

regulatory provisions, or with the Plan,

and that are subsequently disallowed by

the Department shall be repaid to the

Federal government, or the Secretary

will offset such amounts against any

other CCDF funds to which the Lead

Agency is or may be entitled.

(e) Lead Agencies shall provide access

to appropriate books, documents, papers

and records to allow the Secretary to

verify that CCDF funds have been

expended in accordance with the

statutory and regulatory requirements of

the program, and with the Plan.

(f) The audit required in paragraph (a)

of this section shall be conducted by an

agency that is independent of the State,

Territory or Tribe as defined by

generally accepted government auditing

standards issued by the Comptroller

General, or a public accountant who

meets such independent standards.

(g) The Secretary shall require

financial reports as necessary.

§ 98.66 Disallowance procedures.

(a) Any expenditures not made in

accordance with the Act, the

implementing regulations, or the

approved Plan, will be subject to

disallowance.
39994 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

(b) If the Department, as the result of

an audit or a review, finds that

expenditures should be disallowed, the

Department will notify the Lead Agency

of this decision in writing.

(c)(1) If the Lead Agency agrees with

the finding that amounts were not

expended in accordance with the Act,

these regulations, or the Plan, the Lead

Agency shall fulfill the provisions of the

disallowance notice and repay any

amounts improperly expended; or

(2) The Lead Agency may appeal the

finding:

(i) By requesting reconsideration from

the Assistant Secretary, pursuant to

paragraph (f) of this section; or

(ii) By following the procedure in

paragraph (d) of this section.

(d) A Lead Agency may appeal the

disallowance decision to the

Departmental Appeals Board in

accordance with 45 CFR part 16.

(e) The Lead Agency may appeal a

disallowance of costs that the

Department has determined to be

unallowable under an award. A grantee

may not appeal the determination of

award amounts or disposition of

unobligated balances.

(f) The Lead Agency’s request for

reconsideration in (c)(2)(i) of this

section shall be postmarked no later

than 30 days after the receipt of the

disallowance notice. A Lead Agency

may request an extension within the 30-

day time frame. The request for

reconsideration, pursuant to (c)(2)(i) of

this section, need not follow any

prescribed form, but it shall contain:

(1) The amount of the disallowance;

(2) The Lead Agency’s reasons for

believing that the disallowance was

improper; and

(3) A copy of the disallowance

decision issued pursuant to paragraph

(b) of this section.

(g)(1) Upon receipt of a request for

reconsideration, pursuant to (c)(2)(i) of

this section, the Assistant Secretary or

the Assistant Secretary’s designee will

inform the Lead Agency that the request

is under review.

(2) The Assistant Secretary or the

designee will review any material

submitted by the Lead Agency and any

other necessary materials.

(3) If the reconsideration decision is

adverse to the Lead Agency’s position,

the response will include a notification

of the Lead Agency’s right to appeal to

the Departmental Appeals Board,

pursuant to paragraph (d) of this

section.

(h) If a Lead Agency refuses to repay

amounts after a final decision has been

made, the amounts will be offset against

future payments to the Lead Agency.

(i) The appeals process in this section

is not applicable if the disallowance is

part of a compliance review, pursuant to

§ 98.90, the findings of which have been

appealed by the Lead Agency.

(j) Disallowances under the CCDF

program are subject to interest

regulations at 45 CFR part 30. Interest

will begin to accrue from the date of

notification.

§ 98.67 Fiscal requirements.

(a) Lead Agencies shall expend and

account for CCDF funds in accordance

with their own laws and procedures for

expending and accounting for their own

funds.

(b) Unless otherwise specified in this

part, contracts that entail the

expenditure of CCDF funds shall

comply with the laws and procedures

generally applicable to expenditures by

the contracting agency of its own funds.

(c) Fiscal control and accounting

procedures shall be sufficient to permit:

(1) Preparation of reports required by

the Secretary under this subpart and

under subpart H; and

(2) The tracing of funds to a level of

expenditure adequate to establish that

such funds have not been used in

violation of the provisions of this part.

Subpart H—Program Reporting

Requirements

§ 98.70 Reporting requirements.

(a) Quarterly Case-level Report—

(1) State and territorial Lead Agencies

that receive assistance under the CCDF

shall prepare and submit to the

Department, in a manner specified by

the Secretary, a quarterly case-level

report of monthly family case-level data.

Data shall be collected monthly and

submitted quarterly. States may submit

the data monthly if they choose to do so.

(2) The information shall be reported

for the three-month federal fiscal period

preceding the required report. The first

report shall be submitted no later than

August 31, 1998, and quarterly

thereafter. The first report shall include

data from the third quarter of FFY 1998

(April 1998 through June 1998). States

and Territorial Lead Agencies which

choose to submit case-level data

monthly must submit their report for

April 1998 no later than July 30, 1998.

Following reports must be submitted

every thirty days thereafter.

(3) State and territorial Lead Agencies

choosing to submit data based on a

sample shall submit a sampling plan to

ACF for approval 60 days prior to the

submission of the first quarterly report.

States are not prohibited from

submitting case-level data for the entire

population receiving CCDF services.

(4) Quarterly family case-level reports

to the Secretary shall include the

information listed in § 98.71(a).

(b) Annual Report—

(1) State and territorial Lead Agencies

that receive assistance under CCDF shall

prepare and submit to the Secretary an

annual report. The report shall be

submitted, in a manner specified by the

Secretary, by December 31 of each year

and shall cover the most recent federal

fiscal year (October through September).

(2) The first annual aggregate report

shall be submitted no later than

December 31, 1997, and every twelve

months thereafter.

(3) Biennial reports to Congress by the

Secretary shall include the information

listed in § 98.71(b).

(c) Tribal Annual Report—

(1) Tribal Lead Agencies that receive

assistance under CCDF shall prepare

and submit to the Secretary an annual

aggregate report.

(2) The report shall be submitted in

the manner specified by the Secretary

by December 31 of each year and shall

cover services for children and families

served with CCDF funds during the

preceding Federal Fiscal Year.

(3) Biennial reports to Congress by the

Secretary shall include the information

listed in § 98.71(c).

§ 98.71 Content of reports.

(a) At a minimum, a State or territorial

Lead Agency’s quarterly case-level

report to the Secretary, as required in

§ 98.70, shall include the following

information on services provided under

CCDF grant funds, including Federal

Discretionary (which includes any

funds transferred from the TANF Block

Grant), Mandatory, and Matching

Funds; and State Matching and

Maintenance-of-Effort (MOE) Funds:

(1) The total monthly family income

for determining eligibility;

(2) County of residence;

(3) Gender and month/year of birth of

children;

(4) Ethnicity and race of children;

(5) Whether the head of the family is

a single parent;

(6) The sources of family income,

from employment (including selfemployment), cash or other assistance

under the Temporary Assistance for

Needy Families program under Part A of

title IV of the Social Security Act, cash

or other assistance under a State

program for which State spending is

counted toward the maintenance of

effort requirement under section

409(a)(7) of the Social Security Act,

housing assistance, assistance under the

Food Stamp Act of 1977; and other

assistance programs;

(7) The month/year child care

assistance to the family started;
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39995

(8) The type(s) of child care in which

the child was enrolled (such as family

child care, in-home care, or center-based

child care);

(9) Whether the child care provider

involved was a relative;

(10) The total monthly child care

copayment by the family;

(11) The total expected dollar amount

per month to be received by the

provider for each child;

(12) The total hours per month of

such care;

(13) Social Security Number of the

head of the family unit receiving child

care assistance;

(14) Reasons for receiving care; and

(15) Any additional information that

the Secretary shall require.

(b) At a minimum, a State or

territorial Lead Agency’s annual

aggregate report to the Secretary, as

required in § 98.70(b), shall include the

following information on services

provided through all CCDF grant funds,

including Federal Discretionary (which

includes any funds transferred from the

TANF Block Grant), Mandatory, and

Matching Funds; and State Matching

and MOE Funds:

(1) The number of child care

providers that received funding under

CCDF as separately identified based on

the types of providers listed in section

658P(5) of the amended Child Care and

Development Block Grant Act;

(2) The number of children served by

payments through certificates or

vouchers, contracts or grants, and cash

under public benefit programs, listed by

the primary type of child care services

provided during the last month of the

report period (or the last month of

service for those children leaving the

program before the end of the report

period);

(3) The manner in which consumer

education information was provided to

parents and the number of parents to

whom such information was provided;

(4) The total number (without

duplication) of children and families

served under CCDF; and

(5) Any additional information that

the Secretary shall require.

(c) At a minimum, a Tribal Lead

Agency’s annual report to the Secretary,

as required in § 98.70(c), shall include

the following information on services

provided through all CCDF tribal grant

awards:

(1) Unduplicated number of families

and children receiving services;

(2) Children served by age;

(3) Children served by reason for care;

(4) Children served by payment

method (certificate/voucher or contract/

grants);

(5) Average number of hours of care

provided per week;

(6) Average hourly amount paid for

care;

(7) Children served by level of family

income; and

(8) Children served by type of child

care providers.

Subpart I—Indian Tribes

§ 98.80 General procedures and

requirements.

An Indian Tribe or tribal organization

(as described in Subpart G of these

regulations) may be awarded grants to

plan and carry out programs for the

purpose of increasing the availability,

affordability, and quality of child care

and childhood development programs

subject to the following conditions:

(a) An Indian Tribe applying for or

receiving CCDF funds shall be subject to

all the requirements under this part,

unless otherwise indicated.

(b) An Indian Tribe applying for or

receiving CCDF funds shall:

(1) Have at least 50 children under 13

years of age (or such similar age, as

determined by the Secretary from the

best available data) in order to be

eligible to operate a CCDF program. This

limitation does not preclude an Indian

Tribe with fewer than 50 children under

13 years of age from participating in a

consortium that receives CCDF funds;

and

(2) Demonstrate its current service

delivery capability, including skills,

personnel, resources, community

support, and other necessary

components to satisfactorily carry out

the proposed program.

(c) A consortium representing more

than one Indian Tribe may be eligible to

receive CCDF funds on behalf of a

particular Tribe if:

(1) The consortium adequately

demonstrates that each participating

Tribe authorizes the consortium to

receive CCDF funds on behalf of each

Tribe or tribal organization in the

consortium; and

(2) The consortium consists of Tribes

that each meet the eligibility

requirements for the CCDF program as

defined in this part, or that would

otherwise meet the eligibility

requirements if the Tribe or tribal

organization had at least 50 children

under 13 years of age; and

(3) All the participating consortium

members are in geographic proximity to

one another (including operation in a

multi-State area) or have an existing

consortium arrangement; and

(4) The consortium demonstrates that

it has the managerial, technical and

administrative staff with the ability to

administer government funds, manage a

CCDF program and comply with the

provisions of the Act and of this part.

(d) The awarding of a grant under this

section shall not affect the eligibility of

any Indian child to receive CCDF

services provided by the State or States

in which the Indian Tribe is located.

(e) For purposes of the CCDF, the

determination of the number of children

in the Tribe, pursuant to paragraph

(b)(1) of this section, shall include

Indian children living on or near

reservations, with the exception of

Tribes in Alaska, California and

Oklahoma.

(f) In determining eligibility for

services pursuant to § 98.20(a)(2), a

tribal program may use either:

(1) 85 percent of the State median

income for a family of the same size; or

(2) 85 percent of the median income

for a family of the same size residing in

the area served by the Tribal Lead

Agency.

§ 98.81 Application and Plan procedures.

(a) In order to receive CCDF funds, a

Tribal Lead Agency shall apply for

funds pursuant to § 98.13, except that

the requirement at § 98.13(b)(2) does not

apply.

(b) A Tribal Lead Agency shall submit

a CCDF Plan, as described at § 98.16,

with the following additions and

exceptions:

(1) The Plan shall include the basis

for determining family eligibility

pursuant to § 98.80(f).

(2) For purposes of determining

eligibility, the following terms shall also

be defined:

(i) Indian child; and

(ii) Indian reservation or tribal service

area.

(3) The Tribal Lead Agency shall also

assure that:

(i) The applicant shall coordinate, to

the maximum extent feasible, with the

Lead Agency in the State in which the

applicant shall carry out CCDF

programs or activities, pursuant to

§ 98.82; and

(ii) In the case of an applicant located

in a State other than Alaska, California,

or Oklahoma, CCDF programs and

activities shall be carried out on an

Indian reservation for the benefit of

Indian children, pursuant to § 98.83(b).

(4) The Plan shall include any

information, as prescribed by the

Secretary, necessary for determining the

number of children in accordance with

§§ 98.61(c), 98.62(c), and 98.80(b)(1).

(5) Plans for those Tribes specified at

§ 98.83(f) (i.e., Tribes with small grants)

are not subject to the requirements in

§ 98.16(g)(2) or § 98.16(k) unless the

Tribe chooses to include such services,

and, therefore, the associated

requirements, in its program.
39996 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

(6) The Plan is not subject to

requirements in § 98.16(f)(8) or

§ 98.16(g)(4).

(7) In its initial Plan, an Indian Tribe

shall describe its current service

delivery capability pursuant to

§ 98.80(b)(2).

(8) A consortium shall also provide

the following:

(i) A list of participating or

constituent members, including

demonstrations from these members

pursuant to § 98.80(c)(1);

(ii) A description of how the

consortium is coordinating services on

behalf of its members, pursuant to

§ 98.83(c)(1); and

(iii) As part of its initial Plan, the

additional information required at

§ 98.80(c)(4).

(c) When initially applying under

paragraph (a) of this section, a Tribal

Lead Agency shall include a Plan that

meets the provisions of this part and

shall be for a two-year period, pursuant

to § 98.17(a).

§ 98.82 Coordination.

Tribal applicants shall coordinate as

required by §§ 98.12 and 98.14 and:

(a) To the maximum extent feasible,

with the Lead Agency in the State or

States in which the applicant will carry

out the CCDF program; and

(b) With other Federal, State, local,

and tribal child care and childhood

development programs.

§ 98.83 Requirements for tribal programs.

(a) The grantee shall designate an

agency, department, or unit to act as the

Tribal Lead Agency to administer the

CCDF program.

(b) With the exception of Alaska,

California, and Oklahoma, programs and

activities shall be carried out on an

Indian reservation for the benefit of

Indian children.

(c) In the case of a tribal grantee that

is a consortium:

(1) A brief description of the direct

child care services funded by CCDF for

each of their participating Tribes shall

be provided by the consortium in their

two-year CCDF Plan; and

(2) Variations in CCDF programs or

requirements and in child care

licensing, regulatory and health and

safety requirements shall be specified in

written agreements between the

consortium and the Tribe.

(3) If a Tribe elects to participate in a

consortium arrangement to receive one

part of the CCDF (e.g., Discretionary

Funds), it may not join another

consortium or apply as a direct grantee

to receive the other part of the CCDF

(e.g. Tribal Mandatory Funds).

(4) If a Tribe relinquishes its

membership in a consortium at any time

during the fiscal year, CCDF funds

awarded on behalf of the member Tribe

will remain with the tribal consortium

to provide direct child care services to

other consortium members for that fiscal

year.

(d) Tribal Lead Agencies shall not be

subject to the requirements at

§§ 98.41(a)(1)(i), 98.44(a), 98.50(e),

98.52(a), 98.53 and 98.63.

(e) The base amount of any tribal

grant is not subject to the administrative

cost limitation at paragraph (g) of this

section or the quality expenditure

requirement at § 98.51(a). The base

amount may be expended for any costs

consistent with the purposes and

requirements of the CCDF.

(f) Tribal Lead Agencies whose total

CCDF allotment pursuant to §§ 98.61(c)

and 98.62(b) is less than an amount

established by the Secretary shall not be

subject to the following requirements:

(1) The assurance at § 98.15(a)(2);

(2) The requirement for certificates at

§ 98.30(a) and (d); and

(3) The requirements for quality

expenditures at § 98.51(a).

(g) Not more than 15 percent of the

aggregate CCDF funds expended by the

Tribal Lead Agency from each fiscal

year’s (including amounts used for

construction and renovation in

accordance with § 98.84, but not

including the base amount provided

under § 98.83(e)) shall be expended for

administrative activities. Amounts used

for construction and major renovation in

accordance with § 98.84 are not

considered administrative costs.

(h)(1) CCDF funds are available for

costs incurred by the Tribal Lead

Agency only after the funds are made

available by Congress for Federal

obligation unless costs are incurred for

planning activities related to the

submission of an initial CCDF Plan.

(2) Federal obligation of funds for

planning costs, pursuant to paragraph

(h)(1) of this section is subject to the

actual availability of the appropriation.

§ 98.84 Construction and renovation of

child care facilities.

(a) Upon requesting and receiving

approval from the Secretary, Tribal Lead

Agencies may use amounts provided

under §§ 98.61(c) and 98.62(b) to make

payments for construction or major

renovation of child care facilities

(including paying the cost of amortizing

the principal and paying interest on

loans).

(b) To be approved by the Secretary,

a request shall be made in accordance

with uniform procedures established by

program instruction and, in addition,

shall demonstrate that:

(1) Adequate facilities are not

otherwise available to enable the Tribal

Lead Agency to carry out child care

programs;

(2) The lack of such facilities will

inhibit the operation of child care

programs in the future; and

(3) The use of funds for construction

or major renovation will not result in a

decrease in the level of child care

services provided by the Tribal Lead

Agency as compared to the level of

services provided by the Tribal Lead

Agency in the preceding fiscal year.

(c)(1) Tribal Lead Agency may use

CCDF funds for reasonable and

necessary planning costs associated

with assessing the need for construction

or renovation or for preparing a request,

in accordance with the uniform

procedures established by program

instruction, to spend CCDF funds on

construction or major renovation.

(2) A Tribal Lead Agency may only

use CCDF funds to pay for the costs of

an architect, engineer, or other

consultant for a project that is

subsequently approved by the Secretary.

If the project later fails to gain the

Secretary’s approval, the Tribal Lead

Agency must pay for the architectural,

engineering or consultant costs using

non-CCDF funds.

(d) Tribal Lead Agencies that receive

approval from the Secretary to use

CCDF funds for construction or major

renovation shall comply with the

following:

(1) Federal share requirements and

use of property requirements at 45 CFR

92.31;

(2) Transfer and disposition of

property requirements at 45 CFR

92.31(c);

(3) Title requirements at 45 CFR

92.31(a);

(4) Cost principles and allowable cost

requirements at 45 CFR 92.22;

(5) Program income requirements at

45 CFR 92.25;

(6) Procurement procedures at 45 CFR

92.36; and;

(7) Any additional requirements

established by program instruction,

including requirements concerning:

(i) The recording of a Notice of

Federal Interest in the property;

(ii) Rights and responsibilities in the

event of a grantee’s default on a

mortgage;

(iii) Insurance and maintenance;

(iv) Submission of plans,

specifications, inspection reports, and

other legal documents; and

(v) Modular units.

(e) In lieu of obligation and

liquidation requirements at § 98.60(e),

Tribal Lead Agencies shall liquidate

CCDF funds used for construction or

major renovation by the end of the

second fiscal year following the fiscal

year for which the grant is awarded.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations 39997

(f) Tribal Lead Agencies may expend

funds, without requesting approval

pursuant to paragraph (a) of this section,

for minor renovation.

(g) A new tribal grantee (i.e., one that

did not receive CCDF funds the

preceding fiscal year) may spend no

more than an amount equivalent to its

Tribal Mandatory allocation on

construction and renovation. A new

tribal grantee must spend an amount

equivalent to its Discretionary allocation

on activities other than construction or

renovation (i.e., direct services, quality

activities, or administrative costs).

(h) A construction or renovation

project that requires and receives

approval by the Secretary must include

as part of the construction and

renovation costs:

(1) planning costs as allowed at

§ 98.84(c);

(2) labor, materials and services

necessary for the functioning of the

facility; and

(3) initial equipment for the facility.

Equipment means items which are

tangible, nonexpendable personal

property having a useful life of more

than five years.

Subpart J—Monitoring, Noncompliance and Complaints

§ 98.90 Monitoring.

(a) The Secretary will monitor

programs funded under the CCDF for

compliance with:

(1) The Act;

(2) The provisions of this part; and

(3) The provisions and requirements

set forth in the CCDF Plan approved

under § 98.18;

(b) If a review or investigation reveals

evidence that the Lead Agency, or an

entity providing services under contract

or agreement with the Lead Agency, has

failed to substantially comply with the

Plan or with one or more provisions of

the Act or implementing regulations, the

Secretary will issue a preliminary notice

to the Lead Agency of possible noncompliance. The Secretary shall

consider comments received from the

Lead Agency within 60 days (or such

longer period as may be agreed upon

between the Lead Agency and the

Secretary).

(c) Pursuant to an investigation

conducted under paragraph (a) of this

section, a Lead Agency shall make

appropriate books, documents, papers,

manuals, instructions, and records

available to the Secretary, or any duly

authorized representatives, for

examination or copying on or off the

premises of the appropriate entity,

including subgrantees and contractors,

upon reasonable request.

(d)(1) Lead Agencies and subgrantees

shall retain all CCDF records, as

specified in paragraph (c) of this

section, and any other records of Lead

Agencies and subgrantees that are

needed to substantiate compliance with

CCDF requirements, for the period of

time specified in paragraph (e) of this

section.

(2) Lead Agencies and subgrantees

shall provide through an appropriate

provision in their contracts that their

contractors will retain and permit access

to any books, documents, papers, and

records of the contractor that are

directly pertinent to that specific

contract.

(e) Length of retention period. (1)

Except as provided in paragraph (e)(2)

of this section, records specified in

paragraph (c) of this section shall be

retained for three years from the day the

Lead Agency or subgrantee submits the

Financial Reports required by the

Secretary, pursuant to § 98.65(g), for the

program period.

(2) If any litigation, claim, negotiation,

audit, disallowance action, or other

action involving the records has been

started before the expiration of the

three-year retention period, the records

shall be retained until completion of the

action and resolution of all issues that

arise from it, or until the end of the

regular three-year period, whichever is

later.

§ 98.91 Non-compliance.

(a) If after reasonable notice to a Lead

Agency, pursuant to § 98.90 or § 98.93,

a final determination is made that:

(1) There has been a failure by the

Lead Agency, or by an entity providing

services under contract or agreement

with the Lead Agency, to comply

substantially with any provision or

requirement set forth in the Plan

approved under § 98.16; or

(2) If in the operation of any program

for which funding is provided under the

CCDF, there is a failure by the Lead

Agency, or by an entity providing

services under contract or agreement

with the Lead Agency, to comply

substantially with any provision of the

Act or this part, the Secretary will

provide to the Lead Agency a written

notice of a finding of non-compliance.

This notice will be issued within 60

days of the preliminary notification in

§ 98.90(b), or within 60 days of the

receipt of additional comments from the

Lead Agency, whichever is later, and

will provide the opportunity for a

hearing, pursuant to part 99.

(b) The notice in paragraph (a) of this

section will include all relevant

findings, as well as any penalties or

sanctions to be applied, pursuant to

§ 98.92.

(c) Issues subject to review at the

hearing include the finding of noncompliance, as well as any penalties or

sanctions to be imposed pursuant to

§ 98.92.

§ 98.92 Penalties and sanctions.

(a) Upon a final determination that

the Lead Agency has failed to

substantially comply with the Act, the

implementing regulations, or the Plan,

one of the following penalties will be

applied:

(1) The Secretary will disallow the

improperly expended funds;

(2) An amount equal to or less than

the improperly expended funds will be

deducted from the administrative

portion of the State allotment for the

following fiscal year; or

(3) A combination of the above

options will be applied.

(b) In addition to imposing the

penalties described in paragraph (a) of

this section, the Secretary may impose

other appropriate sanctions, including:

(1) Disqualification of the Lead

Agency from the receipt of further

funding under the CCDF; or

(2)(i) A penalty of not more than four

percent of the funds allotted under

§ 98.61 (i.e., the Discretionary Funds)

for a Fiscal Year shall be withheld if the

Secretary determines that the Lead

Agency has failed to implement a

provision of the Act, these regulations,

or the Plan required under § 98.16;

(ii) This penalty will be withheld no

earlier than the second full quarter

following the quarter in which the Lead

Agency was notified of the proposed

penalty;

(iii) This penalty will not be applied

if the Lead Agency corrects the failure

or violation before the penalty is to be

applied or if it submits a plan for

corrective action that is acceptable to

the Secretary; or

(iv) The Lead Agency may show cause

to the Secretary why the amount of the

penalty, if applied, should be reduced.

(c) If a Lead Agency is subject to

additional sanctions as provided under

paragraph (b) of this section, specific

identification of any additional

sanctions being imposed will be

provided in the notice provided

pursuant to § 98.91.

(d) Nothing in this section, or in

§ 98.90 or § 98.91, will preclude the

Lead Agency and the Department from

informally resolving a possible

compliance issue without following all

of the steps described in §§ 98.90, 98.91

and 98.92. Penalties and/or sanctions, as

described in paragraphs (a) and (b) of

this section, may nevertheless be
39998 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 /Rules and Regulations

applied, even though the issue is

resolved informally.

(e) It is at the Secretary’s sole

discretion to choose the penalty to be

imposed under paragraphs (a) and (b) of

this section.

§ 98.93 Complaints.

(a) This section applies to any

complaint (other than a complaint

alleging violation of the

nondiscrimination provisions) that a

Lead Agency has failed to use its

allotment in accordance with the terms

of the Act, the implementing

regulations, or the Plan. The Secretary is

not required to consider a complaint

unless it is submitted as required by this

section. Complaints with respect to

discrimination should be referred to the

Office of Civil Rights of the Department.

(b) Complaints with respect to the

CCDF shall be submitted in writing to

the Assistant Secretary for Children and

Families, 370 L’Enfant Promenade,

S.W., Washington, D.C. 20447. The

complaint shall identify the provision of

the Plan, the Act, or this part that was

allegedly violated, specify the basis for

alleging the violation(s), and include all

relevant information known to the

person submitting it.

(c) The Department shall promptly

furnish a copy of any complaint to the

affected Lead Agency. Any comments

received from the Lead Agency within

60 days (or such longer period as may

be agreed upon between the Lead

Agency and Department) shall be

considered by the Department in

responding to the complaint. The

Department will conduct an

investigation of complaints, where

appropriate.

(d) The Department will provide a

written response to complaints within

180 days after receipt. If a final

resolution cannot be provided at that

time, the response will state the reasons

why additional time is necessary.

(e) Complaints that are not

satisfactorily resolved through

communication with the Lead Agency

will be pursued through the process

described in § 98.90.

PART 99—PROCEDURE FOR

HEARINGS FOR THE CHILD CARE

AND DEVELOPMENT FUND

2. The heading of part 99 is revised

to read as set forth above:

3. The authority citation for part 99 is

revised to read as follows:

Authority: 42 U.S.C. 618, 9858.

4. In part 99 make the following

changes:

a. Remove the words ‘‘Child Care and

Development Block Grant’’ and add in

their place, wherever they appear, the

words ‘‘Child Care and Development

Fund.’’

b. Remove the word ‘‘Grantees’’ and

add in its place, wherever it appears, the

words ‘‘Lead Agencies.’’

c. Remove the word ‘‘Grantee’’ and

add in its place, wherever it appears, the

words ‘‘Lead Agency.’’

d. Remove the words ‘‘Block Grant

Plan’’ and add in their place, wherever

they appear, the words ‘‘CCDF Plan.’’

[FR Doc. 98–19418 Filed 7–23–98; 8:45 am]

BILLING CODE 4184–01–P