Child Care: Multiple Factors Could Have Contributed to the Recent Decline in the Number of Children Whose Families Receive Subsidies
Published: 2010-05-05T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As Congress considers reauthorization of the laws which provide funding for the Child Care and Development Fund (CCDF), there is interest in understanding what accounts for recent trends in child care subsidy receipt among eligible families and what research says about subsidies' effects on parents' ability to obtain and maintain employment. The U.S. Department of Health and Human Services (HHS) administers CCDF, but states have flexibility in its implementation. As requested, GAO examined: (1) trends in federal estimates of the number and proportion of eligible children and families who receive child care subsidies, (2) factors that may affect trends in estimates of the number of children served, and (3) what is known about the extent to which access to subsidies supports low-income parents' employment. To address these issues, GAO reviewed recent federal estimates of the number and proportion of eligible children and families served; conducted a survey of state child care administrators in 50 states and the District of Columbia; interviewed HHS officials, state officials in four selected states, and researchers and experts in child care subsidies; and reviewed research on the relationship between subsidy receipt and employment outcomes. GAO is not making recommendations in this report. HHS generally agreed with the report and provided technical comments, which GAO incorporated as appropriate.
section_title: What GAO Found
paragraphs: From 2006 to 2008, the estimated average monthly number of children served by CCDF declined by about 170,000 (10 percent), after remaining relatively stable for a number of years. However, state data vary, as 34 states reported decreases in the number served during this period, while 17 states reported increases. Along with a decline in the number served by CCDF, an estimate for a key performance measure also shows a decline in the proportion of eligible children whose families received subsidies funded by key federal programs from 2006 to 2007. Overall, estimates indicate that annually about one-third or fewer of eligible children received subsidies funded by CCDF and other federal programs between 2004 and 2007. Estimates occur at this level partly because many states cannot serve all eligible families with available resources and partly because eligible families do not always seek subsidies. HHS, state officials, and experts cited multiple factors that could have influenced the recent overall decline in children served by CCDF. These include state decisions about resource allocation, such as increasing provider payments, as reported in GAO's survey, or decreasing Temporary Assistance for Needy Families funds transferred to CCDF, as shown by expenditure data. Also, changes in state-level requirements and the recession may have affected the availability of providers. Finally, economic factors can affect the demand for subsidies, and the recession may have affected parents' child care choices or their ability to meet work-related requirements. However, since 2006, some states took actions that could increase access to subsidies, such as increasing income eligibility limits or extending eligibility to unemployed parents. Research has linked access to child care subsidies to increases in the likelihood of low-income mothers' employment. Study results have varied in the extent to which subsidies affect employment, in part due to differences in data, scope, and methodology. Some research reviewed and experts interviewed indicated that the size of the effect on employment outcomes may vary based on other factors, such as child care options and employment flexibilities available to families. Experts also suggested that when child care prices increase, mothers may change their work hours or shift to lower-cost providers, for example, rather than exiting the labor force altogether.

section_title: Letter
paragraphs: Survey data from the U.S. Census Bureau indicate that for families with  working mothers living below the federal poverty line, child care costs on  average comprised nearly 30 percent of their monthly income in 2005.  Child care subsidies can help such low-income families pay for the care  their children need while allowing parents to work or participate in  education or training programs. The federal government provides funding  to states through the Child Care and Development Fund (CCDF) for  improving the affordability, availability, and quality of child care. States  also have the option of using some part of their Temporary Assistance for  Needy Families (TANF) funds for child care, either by providing subsidies  directly to eligible participants or providers or by transferring a portion of  these funds to CCDF. Both CCDF and TANF are block grant programs that  allow states substantial flexibility in setting eligibility criteria. In fiscal  year 2008, federal expenditures for child care subsidies funded by the  CCDF and TANF programs totaled $8.45 billion, comprised of $6.83 billion  in CCDF expenditures, including TANF transfers to CCDF, and $1.62  billion in direct TANF expenditures for child care.
States have the flexibility to adjust their policies for providing child care  subsidies to respond to external circumstances and to achieve specific  policy goals. When using CCDF funds, states can set a range of child care  assistance policies, such as eligibility criteria and child care provider  reimbursement rates, or payment amounts, which can affect families’  access to subsidies and the subsidy amount they receive. Since 2001, many  states have made changes to their child care assistance policies, and we  previously reported on those changes which occurred through March  2005. However, since then, changes in the law and economic  circumstances have occurred that may have affected state policies and the  demand for child care subsidies. For example, the Deficit Reduction Act of  2005 (DRA) effectively increased the work participation rates that states  must achieve in their TANF programs and also increased mandatory  funding for the CCDF program. Furthermore, the American Recovery and  Reinvestment Act of 2009 (Recovery Act), which became law on February  17, 2009, made available $2 billion in additional discretionary funds for  child care assistance. States can use this funding to support subsidies for  low-income families and activities to improve child care quality. The  Recovery Act also provided $5 billion to a temporary emergency  contingency fund for TANF to assist states in fiscal years 2009 and 2010,  which states can use for specified activities, which may include child care.  Finally, the economic downturn that began in December 2007 has been  accompanied by increased unemployment levels, potentially affecting  overall demand for child care.
As Congress considers reauthorization of the laws which provide funding  for the CCDF, there is interest in understanding what accounts for recent  trends in child care subsidy receipt and what research says about  subsidies’ effects on parents’ ability to obtain and maintain employment.  At your request, we examined (1) trends in federal estimates of the  number and proportion of eligible children and families who receive child  care subsidies, (2) factors that may affect trends in estimates of the  number of children served, and (3) what is known about the extent to  which access to child care subsidies supports low-income parents’  employment.
To learn about HHS’s estimates of the number and proportion of eligible  children who receive child care subsidies, we interviewed officials from  the U.S. Department of Health and Human Services (HHS), and we  reviewed CCDF administrative data and related documentation on the  proportion of eligible children whose families receive subsidies, known as  a coverage rate. We also reviewed related survey findings from the U.S.  Department of Education (Education), as well as relevant federal laws and  regulations. See appendix II for our assessment of the reliability of CCDF  administrative data and coverage rate estimates. To identify factors that  may affect current trends in estimates of the number of children served,  we conducted a Web-based survey of state child care administrators in all  50 states and the District of Columbia. We received a 100 percent  response rate. We analyzed the survey to determine recent state policy  changes and their impact on access to and the amount of child care  subsidies. We also interviewed HHS officials and three experts in the area  of child care subsidies for low-income families. In addition, we  interviewed state child care and TANF program administrators in  Colorado, Florida, Illinois, and New York, which were selected for  geographic diversity, administrative organization, and the amount of  Recovery Act funds allocated and drawn down. We also reviewed  administrative and expenditure data for the key federal programs that  fund child care subsidies. Our interviews with agency officials and  experts, review of agency data, related literature, and state child care  policies allowed us to reasonably conclude that the identified factors  could have had the described effects. However, we did not design our  review to definitively distinguish between these factors and other  explanations or to systematically assess their relative contribution. To  determine what is known about the impact of child care subsidies on low- income parents’ employment, we conducted a literature search and  identified and reviewed 31 studies that appeared in peer-reviewed journals  between 1995 and 2009 (see app. III). In addition, we interviewed four of  the studies’ authors.
We conducted this performance audit from May 2009 to May 2010 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives. Appendix I provides further information on  our scope and methodology.
subsections: section_title: Background
paragraphs: The CCDF is the key mechanism through which the federal government  provides funding for child care subsidies to support work among low- income families, and is administered by the Administration for Children  and Families within HHS. The component funds of the CCDF were  identified under the Personal Responsibility and Work Opportunity  Reconciliation Act of 1996: (1) mandatory funding for child care subsidies  under section 418 of the Social Security Act; (2) matching funds under  section 418 of the Social Security Act, which a state receives if it has met  certain maintenance of effort and matching requirements; and (3)  discretionary funding under the Child Care and Development Block Grant  Act of 1990 (CCDBG Act), as amended. Each state must expend its own  funds each year at the level it was doing so under former child care  programs in fiscal year 1994 or 1995, whichever is greater, which is  referred to as CCDF maintenance of effort (MOE).
Each state’s annual federal CCDF allocation consists of separate  mandatory, matching, and discretionary funds. A state does not have to  obligate or spend any state funds to receive the discretionary and  mandatory funds. However, for a state to receive its federal matching  funds, a state must meet its MOE requirements, and provide state  matching funds at the state’s federal Medicaid matching rate. Despite  increases in CCDF mandatory funding under the DRA, CCDF funding  overall, when including the three major funding streams, has remained  relatively stable from fiscal years 2002 to 2008. In fiscal year 2009, the  combined budget for CCDF was $7 billion, which included supplemental  discretionary funding provided under the Recovery Act. Federal funding  for child care subsidies also comes from the TANF program,  and to a  lesser extent, the Social Services Block Grant (SSBG) program. States can  spend TANF directly on child care, and may transfer up to 30 percent of  their TANF block grant funds to CCDF. TANF funds transferred to CCDF  are subject to the requirements of the CCDBG Act, as amended, but states  have discretion with regard to whether or not they apply CCDBG rules to  TANF funds spent directly on child care. The Recovery Act also provided  additional funding for the TANF program. Child care expenditures as  itures as  reported by HHS since fiscal year 1998 are shown in figure 1.  reported by HHS since fiscal year 1998 are shown in figure 1.
To manage their programs, federal agencies can develop coverage rates to  estimate the proportion of the potentially eligible population participating  in a particular program, as HHS does for federal programs that fund child  care assistance. As we reported in 2005, coverage rates can be valuable  management tools in monitoring access to federally funded assistance.  Once a baseline trend is established for a coverage rate, movement up or  down may alert federal program managers to changes in demand for  assistance, access to this assistance, or interaction with other programs  and allow for appropriate adjustments.
Federal law and CCDF regulations require that states collect data on  services provided under CCDF, including TANF funds transferred to  CCDF, and mandatory, matching, and discretionary funds. States must  submit these data to HHS through quarterly reports—although some  submit these data monthly—as well as annual reports. HHS uses these  data to estimate the average monthly number of children served and the  annual number of children served. However, HHS does not collect data on  the number of working families receiving child care assistance directly  funded by TANF, an issue we previously reported and raised as a matter  for congressional consideration, nor does it collect these data for the  SSBG program.
Federal law provides in general that to be eligible for CCDF funds children  must be younger than 13 years old and living with parents who are  working, enrolled in school or training, or searching for a job. Once these  requirements are satisfied, states consider a variety of factors in  establishing eligibility for child care assistance. States have many policies  that can affect the allocation of resources for child care subsidies,  including prioritizing different types of recipients, such as families  currently receiving TANF cash assistance, families transitioning from  TANF or with a recent TANF history, and other low-income working  families (see fig. 2). For child care subsidies funded by CCDF, states may  set any maximum family income eligibility requirement at or below 85  percent of the state median income for families of the same size. States  may also have policies prescribing other criteria that affect access to child  care subsidies, such as the amount of time families can spend searching  for employment and restrictions on the number of total or new enrollees.
In addition, states have flexibility in determining the amount of subsidies  families receive through the child care assistance programs funded by  CCDF. Provider payments are based on the combined state subsidy and  required family co-payment. States have discretion in setting provider  payment amounts, which must be sufficient to ensure equal access to child  care services for eligible families comparable to those for families not  receiving subsidies. States show that the provider payment amounts are  adequate to ensure equal access by, among other things, conducting a  market rate survey every 2 years. States must permit families to purchase  care from any legally operating child care provider, which may include  child care centers, family members, neighbors, and after-school programs.  While states generally require families to make a co-payment, some states  exempt families from making co-payments if they are at or below 100  percent of the poverty level. Since co-payments are a portion of the  providers’ payment amounts, larger co-payments can result in smaller  subsidies to families, and smaller co-payments can increase the effective  subsidy amount. In 2002, we found great variation in child care subsidy  and co-payment amounts and made similar observations in 2005.
In our 2005 report, we found that between January 2001 and March 2005,  many (19) states made eligibility and enrollment changes that may have  had an overall effect of decreasing access to child care subsidy programs.  In addition, 35 states reported that they increased provider payment  amounts during that time, but fewer states reported increases in co- payments, which may have had an overall effect of increasing the amount  of the subsidies to families, possibly allowing them a broader selection of  providers.
To support more effective policy making on child care, according to HHS,  since fiscal year 2000, Congress has authorized HHS to spend  approximately $10 million annually from its discretionary funding  appropriation for research, demonstration, and evaluation. The Child Care  Bureau within HHS administered these research activities until 2007, when  responsibility shifted to the Office of Planning, Research and Evaluation  within the Administration for Children and Families. HHS reported that  these research efforts have focused on increasing knowledge about the  efficacy of child care subsidy policies and programs in supporting  employment and self-sufficiency outcomes for parents, and in providing  positive learning and school readiness outcomes for children.
section_title: The Estimated Number of Children Whose Families Receive Child Care Subsidies Has Declined in Recent Years
paragraphs: From fiscal years 2006 to 2008, declines have taken place in the estimated  number of children whose families receive child care subsidies funded by  CCDF—the only one of the three key federal block grants used for this  purpose for which HHS collects and publishes participation numbers. As  shown in figure 3, after an initial increase, the average monthly number of  children and families served by CCDF has remained relatively stable over  time, but these numbers have decreased in recent years. In fiscal year  2006, nearly 1.8 million children were served by CCDF in an average  month, and preliminary data for 2008 indicates that this number has  decreased to approximately 1.6 million children—a decrease of about  170,000 children (10 percent).
The national data mask some variations among states. In all, 34 states  reported declines in the average monthly number of children served by  CCDF from fiscal year 2006 to 2008, and the remaining states reported  increases. However, state-reported decreases in the average monthly  number served by CCDF varied, as declines ranged from a few hundred  children in some states to a decline of 70,600 children (40 percent) in  California. Nearly half of all states reported decreases of 20 percent or less  in the average monthly number of children served during this time period,  but some states reported larger declines. For example, the average  monthly number of children served in the District of Columbia decreased  by 57 percent (2,100 children), and North Carolina had a 27 percent  decrease (21,900 children). At the same time, 17 states experienced  increases in the average monthly number of children served, and these  data also varied by state. Pennsylvania had the largest increase, having  served 15,300 more children (18 percent) in an average month in fiscal  year 2008 in comparison to fiscal year 2006, and Ohio had the second  largest increase with 8,900 children (22 percent). As shown in figure 4,  states varied in whether they reported increases or decreases in the  number of children served from fiscal years 2006 to 2008.
Although states use other federal funding, such as TANF and SSBG, to  support child care subsidies, HHS does not collect case-level data on the  numbers served by these grants. As a result, the recent decline shown in  figure 3 does not fully reflect the number of children and families receiving  subsidies funded through federal resources. However, two annual  estimates help to provide some data on children served by these non- CCDF funding streams. First, annual data reported by states on the total  number of children served, which may include children funded by other  federal programs, such as TANF and SSBG, also indicate a less-marked  decline of approximately 4 percent (159,000) in the number of children  served from 2006 to 2008. In lieu of case-level data on the number of  children served directly by TANF and SSBG, HHS developed a second  estimate for these numbers using expenditure data from TANF and SSBG  and average monthly costs under CCDF. Current estimates also indicate a  decline in the number of TANF- and SSBG-funded children from fiscal year  2006 to 2007. For more information about CCDF administrative data that  HHS collects from states, see appendix II.
In addition to the recent decline in the numbers served by CCDF, from  fiscal year 2006 to 2007, a key performance measure also shows a decline  in the estimated proportion of potentially eligible children whose families  receive child care subsidies funded by several federal block grants. HHS  has published several estimates of the proportion of eligible children  whose families receive child care subsidies from these key federal  programs—CCDF, TANF, and SSBG. Such coverage rate information can  help program managers more effectively address issues related to program  access. However, coverage rate estimates must be interpreted carefully  because of limitations in the data sources and estimation methodologies  used.
As shown in table 1, all of these estimates indicate that about one-third or  fewer of the potentially eligible children have received child care subsidies  funded by CCDF, TANF, and SSBG between fiscal years 2004 and 2007.  Two divisions within HHS—the Office of the Assistant Secretary for  Planning and Evaluation and the Child Care Bureau—calculate coverage  rate estimates. Both types of estimates are based on the same core  elements of administrative and financial data, but differ in how they  determine the potentially eligible population (see app. I for more  information). For example, because states have some flexibility in  establishing their eligibility criteria, one set of estimates is based on the  number of children potentially eligible under state requirements.  Alternatively, another set of estimates consistently applies a common  eligibility standard—the number of children in families with incomes  below 150 percent of the poverty level—to allow for more comparable  estimates across states. HHS has used this coverage rate estimate as an  annual performance measure with the target of maintaining the proportion  served by CCDF, TANF, and SSBG at 32 percent. Recently, HHS revised  this performance measure to reflect children in families with incomes  equal to or below 85 percent of state median income, the maximum level  allowed under the law.
Further, as seen in table 1, among those estimates that have been compiled  annually using the number of children in families below 150 percent of the  poverty level as the basis, the estimated coverage rate has declined from  34 percent in 2006 to 30 percent in 2007. HHS had previously established a  performance target of 32 percent for fiscal years 2004 to 2010. The  department’s new target, based on the number of children in families with  incomes equal to or below 85 percent of state median income, is to  maintain the proportion of children served by CCDF, directly by TANF,  and by SSBG at 17 percent for fiscal years 2006 to 2010 and 18 percent for  2011. This change in the way HHS calculates its coverage rate—switching  from 150 percent of the federal poverty level to 85 percent of state median  income—increases the estimated number of children potentially eligible  for these subsidies (i.e., the denominator), which would have the effect of  decreasing the estimated coverage rate. Accordingly, the estimated 2006  coverage rate declined from 34 percent to 17 percent when the  methodology for calculating the denominator was changed. HHS reported  having met this target for 2006—the most recent year for which it has  published this coverage rate with the new criteria for determining the  potentially eligible population of children; the 2007 and 2008 coverage rate  estimates are not yet available.
In general, full coverage may not be expected or achieved for a variety of  reasons. Because federal funds for child care subsidies are delivered to  states in multipurpose block grants, the number of children who can  receive subsidies is determined, in part, by the size of the grant and  choices that states make regarding how to fund and structure their subsidy  programs. In addition, other state and federal programs, such as Head  Start and TANF, provide services or offer funds that may substitute for  child care subsidies in some circumstances and age groups. Finally, some  families potentially eligible for child care assistance under federal and  state rules, including many who pay for child care, do not receive  subsidies, may be temporarily ineligible but difficult to exclude from  estimates of potentially eligible families, or may obtain care from  providers unwilling or unable to accept subsidies. For example, the  National Household Education Surveys Program found in 2005 that only  about 50 percent of families with incomes below roughly 150 percent of  the federal poverty level that pay for one or more regular child care  arrangements reported receiving assistance with their child care fees from  any public or private source. Although the longer-term trend in HHS’s  published coverage rate has been relatively stable, the estimate used for its  previous performance measure indicates a decline in coverage for child  care subsidies from fiscal years 2006 to 2007.
section_title: Multiple Factors Could Have Contributed to the Recent Decline in the Number of Children Served by State Child Care Subsidy Programs, but Some States Have Taken Steps to Expand Access
paragraphs: HHS, state officials, and experts we contacted cited multiple factors as  potential influences on the overall decline in the numbers served by CCDF  from fiscal years 2006 to 2008, which occurred even as some states took  steps to expand access. However, it is difficult to draw general  conclusions about the relative importance of specific factors. A complex  relationship exists among factors that affect the number of children  receiving child care subsidies, making it difficult to determine the extent  to which specific factors are individually responsible for changes in access  or numbers served. In addition, different sets of factors may combine in  individual states to either decrease or increase the number of children  served. The potential factors fell into three groups:    state decisions that affect resource allocation, such as availability of TANF  for child care or trends toward higher provider payments;    changes in provider supply and requirements; and,    economic factors that may affect parents’ ability to meet work-related  eligibility criteria for subsidies or their child care choices.
subsections: section_title: State Decisions
paragraphs: Each state’s decisions regarding how to use funding from flexible sources  not specifically dedicated to subsidized child care services can affect both  the number of children served and the overall proportion of eligible  children receiving subsidies. Most states reported using additional sources  of funding, beyond CCDF resources and required state matching and MOE  funding, to support child care subsidies, such as Recovery Act, TANF,  SSBG, and other state funds (see fig. 5). In general, among the additional  funding sources for child care subsidies apart from the Recovery Act,  states were most likely to report changes in TANF transfers into CCDF  and in other state funds. Many states had already added Recovery Act  funds by the time we conducted our survey. In addition to Recovery Act  funds, states more often reported adding or increasing funding from most  other sources including state funds and TANF transfers, since July 2006,  compared to eliminating or decreasing such funds. However, it is  important to note that survey responses reflected relatively long-term  trends (from 2006 through the fall of 2009) and these trends may not  accurately reflect more recent or future periods.
States’ decisions to use their federal TANF funds—through transfers to  CCDF and direct spending for child care—have contributed substantial  amounts to the total federal funding that supports state child care subsidy  programs over a period of general stability in federal funding of CCDF in  recent years. However, HHS officials we interviewed attributed the recent  decline in numbers served by CCDF, in part, to state funding decisions  regarding whether to transfer TANF funds to CCDF. Such decisions can  affect the numbers of children and families that states report as being  served by CCDF. Nationally, TANF funding transferred to CCDF increased  about 8 percent between fiscal years 2006 and 2007, from about $1.9  billion to about $2 billion, but declined sharply, by about 17 percent, or  about $350 million, in fiscal year 2008.
Although fewer funds transferred to CCDF can result in fewer children  served through that program, this change does not necessarily equate to a  commensurate decrease in total children served. States can also use TANF  and other federal and state funds to directly provide child care subsidies  to offset in whole or in part a decrease in children served through CCDF  (however, the amounts of these funds can vary from year to year). Based  on our analysis, 10 states decreased TANF transfers and 4 eliminated them  from 2006 to 2008. Twelve of these states, including the 4 states that did  not transfer TANF funds to CCDF in fiscal year 2008 as they had in fiscal  year 2006, reported a decrease in the number of children served by CCDF  during the same time period. These states also reported a decrease in the  total number of children subsidized by a larger group of funds, which may  include TANF direct and SSBG, although the extent of the overall decrease  varied considerably by state. Conversely, 2 states that had decreased  TANF transfers recorded no or minor decreases in total children served,  which may, in part, be a consequence of spending additional funds to  support child care services.
According to an official from one large state we surveyed that did not  transfer TANF funds to CCDF in fiscal year 2008 as it had in prior years,  the number of estimated children served through CCDF dropped between  fiscal years 2006 and 2008. According to our analysis this was about a 40  percent decrease, with this state alone accounting for over 40 percent of  the national decline in children served by CCDF between fiscal years 2006  and 2008. While withdrawal of TANF transfers was closely linked to the  sharp decrease in the number of this state’s children served through  CCDF, the overall number of children the state reported receiving  subsidies from all funding sources, including sources beyond CCDF, such  as SSBG and TANF funds spent directly on child care, also decreased—but  by about 2.4 percent. The state’s increase in the use of TANF funds to  directly support child care may have helped limit the decline in the  number of children receiving subsidies. Nationally TANF funds spent to  directly support child care increased from about $1.2 billion in fiscal year  2006 to about $1.6 billion in fiscal year 2008, or over 30 percent.
For fiscal years 2009 and 2010, states have additional federal funds  available to consider when making decisions about using TANF funds for  child care. These include the Recovery Act funds for CCDF as well as a  temporary emergency contingency funding for TANF to assist states in  fiscal years 2009 and 2010 to help them meet increasing caseloads in their  TANF programs associated with the current recession. In a related report  that examined changes in TANF caseloads and spending since the  recession that began in December 2007, we found that 7 of 11 states we  studied with increased spending on TANF cash assistance either  maintained or increased the amount of TANF-related spending for family  and work supports between June 2008 and June 2009 by accessing  available resources. These supports included child care subsidies,  transportation subsidies, subsidized employment, CCDF, and SSBG. The  remaining four states reduced spending for family and/or work supports to  offset the cost of increased spending on cash assistance. However,  officials in several states that had not reduced their spending on work  supports offered that they expected there would be cuts in TANF-related  spending for these services in the near future because of state budget and  resource constraints associated with their growing caseloads, which is  consistent with our observations of state responses in prior periods of  caseload increase.
In addition to effects attributable to states’ use of varied sources of  funding, HHS officials also suggested that the trend toward higher  provider payment amounts might be constraining the numbers of children  states could serve, particularly if funding remains stable. According to our  survey, the majority of states reported they had increased child care  payment amounts since 2006 (see fig. 6). Many of these states reported  they had increased provider payment amounts to keep pace with market  rates for child care. However, about a third of states reported no change in  provider payment amounts. This trend toward higher payments for child  care providers is longstanding, having also been reported in our last  survey, while the decline in the number of children receiving subsidies is  relatively recent. A senior HHS official suggested states previously may  have had the resources available to accommodate these increases in  provider payment amounts without decreasing the overall number of  children receiving subsidies, but that this may no longer be true during the  recession.
Twenty-two states we surveyed in 2009 did not provide child care  assistance to all eligible families who applied (see fig. 7), compared to 20  states that reported not being able to serve all eligible applicants in our  2005 survey, possibly as a result of state decisions that affect resource  allocation. States that reported not providing assistance to all eligible  applicants, which included many of the most populous states, often cited  limited funding. However, some states that reported being able to serve all  eligible applicants may have set their policies in order to achieve this goal.  For example, an official from one of the four states we selected to  interview said that the state had been able to serve all eligible applicants  because the state’s income eligibility limit was set at a level that allows all  families with incomes below this limit to be served. In 2009 this income  eligibility limit was about 192 percent of the 2009 federal poverty level for  a family of three.
GAO-05-667.
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section_title: Provider Supply and State- level Requirements
paragraphs: Forty-three percent of states we surveyed reported that the number of  regulated providers had decreased since 2006 (see fig. 8). States attributed  these decreases to a number of factors, including increased state  requirements and the current economic recession, which resulted in  higher unemployment and fewer parents seeking child care.
State-level requirements for child care providers, which can affect the  availability of providers eligible to receive child care subsidies, are also  cited as a potential contributor to the decline in the number of children  served by CCDF. Officials from one selected state and at least one other  state we surveyed suggested that more rigorous state-level requirements  for child care providers could have left some families without access to  child care if their provider became ineligible for participation in the  subsidy program. Officials in one of these states attributed the decreased  number of children served in that state to two recently implemented  requirements for license-exempt child care providers who receive subsidy  payments. According to a state official, one requirement mandated that  license-exempt providers (those caring for three or fewer children) submit  to a child abuse and neglect background check and provide their social  security number. A second requirement, implemented in 2007, requires  such providers to provide a copy of their social security card and valid  photo identification. When this state initiated these requirements to  increase accountability, some providers stopped participating in the child  care program. The number of children receiving subsidies funded by  CCDF in this state declined by about 17 percent between fiscal years 2006  and 2008.
section_title: Economic Factors
paragraphs: Economic factors, which can affect the demand for child care subsidies,  may be contributing to the decline in the number of children served by  CCDF. States we surveyed and experts we spoke with identified economic  factors that may affect parents’ ability to meet work-related eligibility  requirements or that could affect parents’ child care choices. Some states  we surveyed suggested that they saw a decreasing demand for child care  due to rising unemployment. Some also suggested that fewer hours  worked by parents seeking child care or changed work schedules could  result in fewer families being eligible for subsidies. Even if families remain  eligible, experts noted that changed work schedules, such as a reduction  in the number of hours worked per week, can make it difficult for families  to obtain child care subsidies. We previously reported that studies on child  care identify the traditional operating hours of program offices, among  other things, as a barrier to obtaining child care subsidies for working  families, such as those who change work schedules and must reapply for  child care. In addition, research has also found that the administrative  process to apply for child care subsidies can be difficult and time  consuming, causing some families to choose not to apply. A researcher  told us this was especially the case when work changes occur.
section_title: Some States Took Actions That Could Increase Access
paragraphs: The number of children served by CCDF nationwide declined by 10  percent from 2006 to 2008. However, 17 states individually saw increases  in the number served during this same time period. We did not find a  consistent relationship between the states that reported increases to HHS  in the numbers served and those that reported changes in policies that  could increase access in response to our survey. Since 2006, some states,  including some of those reporting increases in the numbers served, have  taken various actions that could increase families’ access to child care  subsidies, and in some cases for those families struggling due to the  economic downturn. For example, our survey indicates that although the  majority of states did not make changes to eligibility and enrollment  policies that could clearly have the effect of increasing access to child care  subsidies, 16 states reported making policy changes that could increase  access (see fig. 9). Our 2005 survey effort also used a method to measure  access and, in that year, 8 states reported they had increased access.
When looking specifically at income eligibility policies, although the  majority of states did not make changes to these criteria, 18 states  reported increases to their income eligibility limits during the period since  2006—three times as many as in our previous report on state child care  policy changes from 2001 to 2005 (see fig. 10). Eight of these states  reported increases in the number of children receiving subsidies funded by  CCDF between fiscal years 2006 and 2008. States gave various reasons for  the increases in income eligibility limits, such as keeping up with changes  in the federal poverty level, which would not necessarily affect the number  of children eligible, although the number of children in poverty has  increased since 2006.
Increases in income eligibility limits raised the median income eligibility  limit among states, which could represent an increase in access to child  care subsidies. In 2009, the median state income eligibility limit was about  192 percent of the federal poverty level, while in 2005 it was about 184  percent (see fig. 11). As shown in this figure, one state, which allows  flexibility at the local level, has an income eligibility limit set at about 295  percent of the 2009 federal poverty level—the highest among all states.
This percentage approximates the federally prescribed maximum  eligibility limit of 85 percent of the state’s median income.
Over one quarter of states we surveyed reported they increased access by  changing policies related to eligibility criteria—other than income  eligibility limits—that qualify a family for child care subsidies, such as  work and educational activity requirements. These policy changes most  often benefited other low-income families that do not currently receive or  have not recently received TANF benefits. Several states reported they did  this in order to support low-income families during the economic  downturn, such as those facing unemployment or reduced work hours  (see fig. 12).
Nine states reported decreasing co-payments, which can affect the  affordability of child care (see fig. 13). Two of these states reported they  did so to help families deal with impacts of the downturn in the economy  and rising prices, such as for child care as well as for fuel for  transportation. However, states were most likely to report making no  changes to the co-payments paid by families receiving child care subsidies.
By December 2009, most states had drawn down some Recovery Act  funds, and over half of all states reported plans to use these funds to make  changes that could increase access to subsidies for children and families.  For example, the majority of the 15 states that reported having waiting  lists reported drawing down some Recovery Act funds by the fall of 2009,  and most planned to use these funds to reduce the number of families on  these lists. In addition, some states said that Recovery Act funds would  allow them to raise their income eligibility limits and potentially serve  more families. Most states also planned to use Recovery Act funds to  provide education and training scholarships and grants for child care  providers or to upgrade their management information systems or  technology, or both.
section_title: Research Indicates That Child Care Subsidies Increase the Likelihood of Low- Income Mothers’ Employment, but Studies Have Found Variation in the Size of the Effects
paragraphs: Research we reviewed and experts we spoke to indicate that child care  subsidies increase the likelihood of low-income mothers’ employment.  Consistent with our findings in 1994 that reducing child care costs for low- income mothers increases the likelihood they will be able to work, the  studies published from 1995 to 2009 that we examined found that receiving  a child care subsidy or decreasing child care costs had a positive effect on  employment outcomes for low-income mothers. In addition, two of these  studies looked at the relationship between federal or state funding for  child care subsidies and employment outcomes. Overall, the results of the  studies we reviewed varied in terms of the size of the effect on  employment outcomes. See table 2 for a methodological summary of the  31 peer-reviewed studies that we identified for our literature review.
Overall, we found that studies using these various types of data yielded the  same conclusion with regard to child care subsidies increasing the  likelihood of low-income mothers’ employment. Until the mid-1990s, when  child care subsidies started becoming more widely available, and therefore  could be studied directly, most research examined the relationship  between the price charged by child care providers and mothers’  employment outcomes to infer the likely effects of the subsidies on those  outcomes. Recognizing that child care subsidies have the effect of  reducing the price of child care for subsidy recipients, early studies  statistically estimated economic models of mothers’ employment  decisions at various child care prices. For example, in our 1994 report we  applied an economic model to survey data, and this analysis predicted that  providing a full subsidy to mothers who pay for child care could  increase—from 29 percent to 44 percent—the proportion of mothers at or  below the federal poverty level who work.
While studies have found similar results related to the direction of the  effect of child care subsidies or decreases in child care prices on low- income mothers’ employment, their results varied in the size of these  subsidies’ effects on employment, due in part to differences in data, scope,  and methodology. For example, research and experts we interviewed  indicated that the effect of child care subsidies on mothers’ employment  can vary by family characteristics, such as marital status. Some studies  estimated that child care subsidies may have a greater likelihood of  affecting single mothers’ employment in comparison to married mothers’  employment. For example, one study found that for single mothers, a 1  percent decrease in the price of child care would result in about a 1.3  percent increase in full-time employment, compared to a 0.75 percent  increase for married mothers. Such results indicate that the employment  status of single mothers may be more sensitive to changes in the price of  child care, in comparison to married mothers, who may be able to share  child care responsibilities and costs with their spouses.
Some aspects of study methodology have important implications for  findings. After accounting for the extent to which subsidy receipt is  contingent on employment, another study found that subsidy receipt  increased the probability of single mothers’ employment by 15.3 percent.  According to an HHS official, studies that do not take this factor into  account may find that subsidies have no influence on employment because  potential recipients have to be employed in order to qualify for subsidies.  The Office of Planning, Research and Evaluation within the Administration  for Children and Families is currently conducting some work on how best  to measure employment outcomes in light of this issue.
Studies we reviewed and experts we spoke to also indicated that the  extent of these subsidies’ effects on employment can vary due to multiple  factors, such as the child care options and employment flexibilities  available to families. Experts we interviewed suggested that when child  care prices increase, mothers may change their scheduled work hours or  shift to lower-quality child care, for example, rather than simply exiting  the labor force. Some mothers may already be working, but using unpaid  child care, such as care provided at no cost by a grandmother or friend,  when they become eligible for a child care subsidy program. When these  mothers receive a child care subsidy or when the price of child care  decreases, they may switch to a paid child care arrangement without  altering their employment status.
In addition to the studies that evaluated the impact of child care subsidy  receipt and changes in child care prices on the likelihood of employment,  we identified two studies that examined the impact of aggregate public  funding for child care subsidies (as opposed to individual subsidy receipt)  on mothers’ employment. For example, one study that examined public  funding for child care subsidies from 1991 to 1996 found that every $1,000  allocated for Child Care and Development Block Grant assistance per  single mother with at least one child under the age of 13 years was  associated with a 26 percentage point increase in employment for this  population. This study also found that a $1,000 increase in average state  spending for all types of child care subsidies per single female household  including a child under 13 years of age was associated with a 3.6  percentage point increase in employment among single mothers within  these households. Similarly, another study, which looked at child care  funding in Miami-Dade County during a 24-month period from 1996 to  1998, found that funding increases for subsidized child care were linked to  increases in the likelihood of employment for current and former welfare  recipients. This study included several variables to adjust for other  factors that might have affected employment, such as other major policy  and administrative changes, as well as controls for human capital and  socio-demographic characteristics and labor market conditions. In  addition, HHS noted in its annual report to Congress for fiscal years 2004  and 2005—the most current report available—that its sponsored research  has indicated subsidies are associated with increased employment rates  and earnings for low-income families, reduced return to welfare programs  for assistance, reduced barriers to finding employment, and increased  likelihood of maintaining employment.
Finally, several studies we reviewed identified a relationship between  subsidy receipt and the type of child care used, as families receiving  subsidies are more likely to use center-based care, which typically  involves care provided for 12 or more children in a nonresidential facility.  One researcher we spoke to indicated that when the price of child care is  lower for families, parents tend to move their children into center-based  care, which parents may view as being of higher quality. States typically  impose staffing and training requirements on child care centers that are  generally higher than those for family child care providers that care for  just a few children.
While some research has indicated a relationship between subsidies and  the type of care selected, research we reviewed and experts we spoke to  indicated that little work has been done to document the direct effect of  subsidy receipt on the quality of care selected by working families. Some  experts said this was due to the lack of datasets that combine subsidy  receipt with reliable measures of child care quality. A 2006 literature  review funded by HHS also suggested a need for future research studying  the effect of child care subsidies while taking into consideration how  parents consider child care subsidies, other public benefits, and the  availability of quality care in their communities when making decisions  with regard to employment and child care. HHS recently announced  several new research grant awards that focus on parental decision making  related to child care and employment through their Child Care Research  Scholars and Secondary Analyses of Data on Child Care grant programs,  which have project end dates in 2010 and 2011.
section_title: Concluding Observations
paragraphs: Reliable, high-quality child care is critical to sustaining parents’ ability to  work, while safeguarding their children’s health and intellectual  development. In addition, given the research that links child care subsidies  to employment in low-income families, the multiple sources of funding  states can use to subsidize child care play an important role in supporting  employment for these families. The flexibility states have in the design of  their programs affects the number and characteristics of families eligible  for child care through CCDF in each state. Moreover, the flexibility in  allocating funds from sources not explicitly dedicated to child care, such  as TANF funds, allows states to shift resources as needed to reflect state  conditions and priorities. Because states often exercise these flexibilities  concurrently, it is difficult to attribute the changes in the number of  children served—regardless of whether the number increased or  decreased—to any single factor or set of factors. It may also be difficult to  predict how these factors will affect the number of children served in the  future. For example, past trends in states’ use of the various sources of  funds available for child care may not be good predictors of these funds’  future availability for this purpose, particularly given stresses that a  prolonged recession might place both on state budgets and certain human  services.
Although states’ flexibility in use of federal funds helps to shift resources  to cover ongoing state needs, it, along with the lack of data on the number  children receiving child care directly funded by TANF as we reported in  the past, poses challenges in compiling integrated information on the use  of child care subsidies. Such information can be helpful to monitor the  effects of federal spending on specific program objectives, such as  improving the affordability, availability, and quality of child care, and  allowing parents to work or participate in education or training programs.  Further, this flexibility can create uncertainty regarding the amounts  available for child care assistance from year to year, particularly when  states shift emphasis on TANF direct funding. As the nation moves toward  economic recovery and creates new jobs that provide unemployed parents  with opportunities to return to work, child care assistance may play a key  role in supporting parents’ transition back to the workforce. States will  likely continue to face difficult decisions about the use of their resources  available for child care subsidies.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS for review and comment. HHS’s  comments are reproduced in appendix IV. In its comments HHS generally  agreed with GAO’s findings. HHS did not contest the potential role of any  factors we identified, but elaborated on particular ones it views as  important. For example, HHS commented that it believes the decline in the  number of children served by CCDF is primarily attributable to the decline  in inflation-adjusted CCDF spending and increasing child care and subsidy  costs. While our report provides information on these factors, we believe  that due to the number of concurrent changes in policy and funding, and  the manner in which data are collected, it is difficult to determine to what  extent changes in individual factors or funding sources, such as CCDF  spending, account for changes in the number of children served. HHS  noted that it still lacks authority to require states to report the numbers of  families and children receiving child care services funded directly by  TANF. HHS commented that it is not only important to track and measure  the numbers of children receiving child care services, but it is also  important to increase child care quality and improve information about the  quality of child care services being received. HHS noted that, in addition to  its role as a work support for parents, quality child care—which it  considers a key benefit of the CCDF program—is also important to  ensuring children are safe, healthy, and successful in school and in life.  HHS also provided technical comments, which GAO incorporated as  appropriate.
We are sending copies of this report to the Honorable Kathleen Sebelius,  Secretary of HHS, and interested congressional committees. The report  also is available at no charge on the GAO Web site at http://www.gao.gov.  If you or your staff have any questions about this report, please contact me  at (202) 512-7215 or brownke@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Staff who made key contributions to this report are listed in  appendix V.
section_title: Appendix I: Objectives, Scope and Methodology
paragraphs: Our review focused on (1) trends in federal estimates of the number and  proportion of eligible children and families who receive child care  subsidies, (2) factors that may affect trends in estimates of the number of  children served, and (3) what is known about the extent to which access  to child care subsidies supports low-income parents’ employment.
subsections: section_title: Coverage Rate Estimates for Child Care Subsidies
paragraphs: To address our first objective, we spoke with U. S. Department of Health  and Human Services (HHS) officials from the Child Care Bureau to learn  about Child Care and Development Fund (CCDF) administrative data  that the agency uses to develop coverage rate estimates. We reviewed  guidance provided by HHS to states and related reports regarding these  data. In addition, we obtained information on state data collection efforts  from our survey of state child care administrators and interviews with  state child care and Temporary Assistance for Needy Families (TANF)  program administrators in four selected states. We selected these  states—Colorado, Florida, Illinois, and New York—to achieve variation  in geographic location, administrative organization, and the amount of  American Recovery and Reinvestment Act of 2009 (Recovery Act) funds  allocated to and drawn down by the state. In our interviews with state  officials, we asked questions about their processes for developing  complete and unduplicated counts of children receiving subsidies and  their challenges in doing so; however, we did not test the extent of actual  duplication or incompleteness. We determined that both the child care  coverage rate estimates and CCDF administrative data were sufficiently  reliable for the purposes of our report. For more detailed information  about our assessment of data reliability for these data, please see  appendix II.
We also interviewed HHS officials and reviewed relevant documents to  identify child care subsidy rate of receipt estimates, or coverage rates,  developed by federal agencies. HHS has developed two sets of child care  subsidy coverage rates that estimate the proportion of the eligible  population that actually receives subsidies. One estimate, developed by  the Office of the Assistant Secretary for Planning and Evaluation (ASPE),  uses state-defined eligibility criteria to determine the potentially eligible  population. HHS’s other national coverage rate estimate, developed by the  Child Care Bureau, generally defines families potentially eligible to receive  child care subsidies as those with income below 150 percent of the federal  poverty level, with children under the age of 13, and with parents or  guardians working or in school. In fiscal year 2010 HHS redefined those  potentially eligible to receive child care subsidies as families with incomes  equal to or below 85 percent of the state median income, rather than those  below 150 percent of the federal poverty level.
section_title: Survey of State Child Care Administrators and Interviews with HHS Officials and Child Care Subsidy Experts
paragraphs: To identify factors that may affect current trends in these estimates we  used data collected from our Web-based survey that provided detailed  information about recent state policy changes and their impact on access  to child care and child care subsidy amounts. We also interviewed HHS  officials and three experts in the area of child care subsidies that we  identified based on their research on child care for low-income families. In  addition, we analyzed administrative and expenditure data from HHS for  key federal programs that fund child care subsidies. Our interviews with  agency officials and experts, and review of agency data, related literature,  and state child care policies allowed us to reasonably conclude that the  identified factors could have had the proposed effects. However, we did  not design our review to definitively distinguish between these factors and  other explanations or to systematically assess their relative contribution.
Our survey gathered information to identify changes in state policies  affecting access to child care subsidies for low-income families since July  2006. The survey was directed to state child care administrators in all 50  states and the District of Columbia. This survey collected information on  how states changed their policies for three categories of families—TANF  families, families who recently stopped receiving TANF benefits  (transitioning families), and other low- or moderate-income families—why  those changes were made, and states’ plans for Recovery Act funding. The  survey was conducted between July and November 2009.
subsections: section_title: Process for Developing and Administering the Survey Instrument
paragraphs: We based our survey questions on the survey instrument used to collect  data for our prior report on child care subsidies. We held pretests of our  survey with state child care administrators from three states to help  ensure that the questions were clear, the terms used were precise, the  questions were unbiased, and the questionnaire could be completed in a  reasonable amount of time. We modified the questionnaire to incorporate  findings from each pretest.
Our survey questionnaire obtained information on state policy changes  with regard to child care subsidies since July 2006. Specifically, we asked  states to provide information about changes to policies related to (1)  income eligibility; (2) other eligibility criteria, such as activities or  conditions that qualify families for assistance; (3) priorities for certain  types of families, such as TANF families; (4) use of waiting lists; (5)  opening enrollment to new applicants; (6) co-payments; and (7) provider  payment amounts. We also included questions on states’ plans for  Recovery Act funding and data collection efforts.
We conducted the survey using a Web-based, self-administered  questionnaire. In the questionnaire, we asked that state child care  administrators be the lead survey respondent and provide contact  information for state staff who could answer questions requiring more  detailed knowledge. We obtained contact information for surveyed state  administrators from HHS. We sent e-mail notifications to these officials  beginning on July 31, 2009. To encourage them to respond, we sent two  follow-up e-mails over a period of about 4 weeks. During this time, we  made phone calls to encourage those who did not respond to complete our  questionnaire. In all, we received a response rate of 100 percent.
The practical difficulties of conducting any survey may also introduce  other types of errors, commonly referred to as nonsampling errors. For  example, the type of difficulties that can introduce unwanted variability  into the survey results include the way a particular question is interpreted,  the sources of information that are available to respondents, or the way  the data are entered into the database or were analyzed. We took steps in  the development of this questionnaire, in the data collection, and in the  data analysis to minimize such errors. Specifically, a survey specialist  designed the questionnaire in collaboration with staff with subject matter  expertise. Then, as previously mentioned, the draft questionnaire was  pretested to ensure that questions were relevant, clearly stated, and easy  to comprehend. The questionnaire was also reviewed by an additional  survey specialist. Data analysis was conducted by a data analyst working  directly with staff with subject matter expertise. When the data were  analyzed, a second independent data analyst checked all computer  programs for accuracy. Since this was a Web-based survey, respondents  entered their answers directly into the electronic questionnaires. This  eliminated the need to have the data keyed into databases, thus removing  an additional source of error.
Our data analysis included identifying changes to state child care subsidy  eligibility and enrollment policies. We based the direction of policy  changes—increasing or decreasing access, both increasing and decreasing  access, or no change—on changes states reported in response to each of  the three questions related to access. These questions asked about  changes to (1) income eligibility levels, (2) other eligibility criteria (such  as work requirements), and (3) enrollment. In order to do this, we  aggregated responses to each question for each state and for each family  type—TANF families, transitioning families, and other low- or moderate- income families. For example, in order to determine the direction of policy  changes for our question related to changes in income eligibility levels if a  state marked “increased” for at least one family type and “stayed the  same,” “don’t know,” or “not applicable” for all other family types, we  identified the state’s response to the question as “increased.” We  performed similar analyses for responses marked “decreased.” We also  performed these types of analyses for the two questions related to other  eligibility and enrollment policies. (See figs. 10 and 12.)
In order to identify the states that made consistent changes in the direction  of policies related to access to child care subsidies, such as increases or  decreases, we combined the aggregated responses to each of the three  questions related to eligibility and enrollment policies for each state. Among  the states that made consistent changes, we identified the states which  made a set of changes that could clearly have the effect of increasing or  decreasing access to child care subsidies. For example, we identified states  as “increased” as those that identified as “increased” for at least one  question and “stayed the same,” or “unchanged,” for the other two  questions. We performed a similar analysis for states identified as  “decreased.” In addition, we identified states that made set of changes that  included “increased” for at least one question and “decreased” for at least  one question, as “mixed.” Finally, we identified states that did not answer or  responded “don’t know” to at least one question as “unknown.” (See fig. 9.)
section_title: Review of Literature on Child Care Subsidies
paragraphs: To determine what is known about the impact of child care subsidies on  employment, we conducted a literature search for studies that analyzed  relationships between child care subsidies or changes in child care costs  and employment outcomes. To identify existing studies from peer- reviewed journals, we conducted searches of various databases, such as   EconLit, ProQuest, PolicyFile, and Social SciSearch. We also asked all of  the external researchers that we interviewed to recommend additional  studies. From these sources, we identified 31 studies that appeared in  peer-reviewed journals between 1995 and August 2009 and were relevant  to our research objective on the effect of child care subsidies on  employment outcomes. We performed these searches and identified  articles from June 2009 to October 2009.
To assess the methodological quality of the selected studies, we obtained  information about each study being evaluated and about the features of  the evaluation methodology. We based our data collection and  assessments on generally accepted social science standards. We  conducted an extensive literature review, examined summary level  information about each piece of literature, and then from this review,  identified articles that were germane to our report. We then evaluated the  methods used in the research, eliminated some research if we felt the  methods were not appropriate or rigorous, and then summarized the  research findings. In addition, for articles directly cited in the report, we  performed an initial in-depth review of the findings and methods, and then  a GAO economist performed a secondary review and confirmed our  reported analysis of the finding. As a result, the 31 studies that we selected  for our review met our criteria for methodological quality. We  supplemented our synthesis by interviewing four of these studies’ authors.  We also conducted an interview with an official at the Office of Planning,  Research and Evaluation within the Administration for Children and  Families.
section_title: Appendix II: Data Reliability Assessment for CCDF Administrative Data and Child Care Subsidy Coverage Rates
paragraphs: This appendix describes the methodology and results of our assessment of  data reliability for administrative data on the number of children served by  CCDF and estimates of child care subsidy rates of receipt, or coverage  rates, published by federal agencies that we reviewed. In addition, we  outline limitations of these data and specific issues related to the methods  used to compile them in order to fully describe their quality. Specifically,  this appendix contains a discussion of CCDF administrative data, and  child care subsidy coverage rate estimates published by HHS, as well as  survey data on child care assistance received by low-income families with  paid arrangements collected by the U.S. Department of Education  (Education). In our review of CCDF administrative data and child care  subsidy coverage rate estimates, we did not review any primary data or  complete any electronic testing. Instead, we relied on secondary data  sources provided by HHS and Education to assess the reliability of these  data. Based on our assessment, we determined that these data are  sufficiently reliable for the purposes of this report, which describes the  range of available federal estimates.
subsections: section_title: CCDF Administrative Data
paragraphs: To assess the reliability of the data elements from CCDF administrative  data needed to answer the engagement objectives, we interviewed HHS  officials knowledgeable about CCDF administrative data and reviewed  relevant documentation. The state-provided CCDF administrative data that  HHS relies on, in part, to develop coverage rate estimates for child care  subsidies can be affected by the funding sources used, how states  administer these funds, and the methods states use to report on numbers  served. As required by federal statute, states must report to HHS on the  numbers of children and families served by CCDF, including TANF funds  transferred to CCDF. States must provide these data to HHS on a quarterly  basis (although some states choose to provide them monthly), through the  ACF-801 report, and annually, through the ACF-800 report (see fig. 14).
States can combine or pool a number of funding sources to support child  care subsidies. HHS allows states to report the total number served by all  these pooled funds, such as TANF funds spent directly and not transferred  to CCDF, because states may not have the ability to identify children  served only by CCDF. In these cases, HHS must estimate the number  served by CCDF using a state-reported pooling factor, which is the  percentage of funds spent on child care subsidies from CCDF. HHS uses  the pooling factor to weight the state-reported data in order to determine  the number of children and families served solely by CCDF. The  department multiplies a state’s pooling factor by the total number served  in order to develop adjusted counts of those served by CCDF.
State pooling factors can vary from year to year, which may impact  changes in the reported number of children and families served by CCDF.  For example, one state had a 25 percent decline in its pooling factor from  fiscal years 2006 to 2008 and reported a decrease of 21 percent in the  average monthly adjusted number of children served by CCDF during the  same time period. Given the decline in the pooling factor during this  period, it is difficult to know the extent to which this state’s decline in the  numbers served occurred as a result of funding changes or other factors,  such as a decreasing demand for child care subsidies. HHS does not  routinely assess the reliability of state-reported pooling factors. However,  it has taken steps in recent years to improve their accuracy by providing  states with additional guidance and technical assistance, such as a pooling  factor spreadsheet and checklist to help states account for funding across  multiple fiscal years. In addition, if the pooling factor changes by more  than 5 percent, states must provide a written explanation for the change  before HHS releases the final dataset for a particular fiscal year. HHS  officials said that changes in the pooling factor can often occur due to a  state audit.
States also make different decisions on whether to transfer TANF funds to  CCDF, or administer a separate TANF-funded child care assistance  program altogether. For example, one state may decide to transfer its  TANF funding for child care to CCDF, while another state may decide not  to do so, and instead spends its TANF funds directly on a separate child  care assistance program. For these two states, when reviewing their C administrative data on the numbers served, it would appear as if the  second state did not serve as many children as the first state, when  actually, these two states could be serving similar numbers. States can  also vary in the amount of TANF funding transferred to CCDF or spent  directly on child care subsidies from year to year, which may impact the  administrative data on numbers served by CCDF.
Another factor that can potentially have an effect on the number of  children and families reported as being served by CCDF is the method  states use to provide these data. When states submit their ACF-801 data,  the  HHS allows them to provide either full population or sample data on  numbers served by CCDF, and states must have their sampling plan  approved by the Administration for Children and Families within HHS. I the absence of full population data, the department uses state-reported  sample data to generate estimated average monthly counts of the numb served. However, according to HHS officials, providing full population  data helps to improve the overall quality of CCDF administrative dat the national level because it relies less on estimated numbers. HHS  officials said that full population data can also benefit HHS and states  because it would allow additional types of analyses, such as longitudina evaluations of trends over time in patterns of subsidy receipt. HHS has  been encouraging states that submit sample data to switch to reporting fu population data, and department officials told us that in recent years the  number of states providing sample nine states provided sample data.   data has declined. For fiscal year 2008,  While HHS collects an annual count of the children and families served by  CCDF from states’ ACF-800 reports, the department does not report these  data in its biennial report to Congress, nor does it use the annual cou develop coverage rates. Instead, the department reports an average  monthly adjusted number of the children and families served by CCDF. The monthly data are also used by ASPE and the Child Care Bureau to  develop coverage rate estimates. HHS officials told us they have more  confidence in the data from the ACF-801 report used to develop average  monthly counts, in comparison to the annual counts reported on the ACF- 800 reports, and they feel that an average monthly count provides a bett picture of the CCDF caseload. For example, HHS officials said families  may receive subsidies for their children for only a short period of time or  for multiple times within a year. As a result, according to HHS officials, an  ing  average monthly count provides more realistic information on those be er  served, and they had concerns it would be confusing to report both an  annual and monthly count of children and families served.
While required to report an unduplicated annual count to HHS, states can  face challenges in doing so, and the department is taking steps to address  data quality issues. Our survey found that most states (46) reported being  capable of generating a complete, unduplicated count of the total number  of families or children receiving child care subsidies supported by CCDF  and TANF funds, but several reported that aggregating data from multiple  systems or accounting for children served by multiple providers or under  protective services, for example, can be challenging. In addition, five  jurisdictions reported being unable to generate such a count. These states  reported reasons such as a lack of unique identifiers and being unable to  account for children served by multiple funding streams and those served  in different settings, such as child care centers under contract with state  agencies. In addition, one state told us that children served by contracted  child care providers, representing 10 percent of the state’s caseload, were  not currently included in their quarterly ACF-801 reports provided to HHS,  which are used by the department to generate average monthly adjusted  counts.
In general, HHS was aware of these challenges, and provides technical  assistance to states through its contractor via email and phone. HHS runs a number of technical assistance reports through its informatio system to review the quality of the data. Other resources provided by HHS to states include written guidance, such as technical bulletins, and  information provided at the annual state child care administrators’  meeting. In addition, HHS’s contractor conducts technical assistance s visits each year to six states. During the 26 state site visits that were   HHS, the  conducted between fiscal years 2004 to 2009, according to department identified several issues in several states, such as gaps or  duplication, which seemed to only have a relatively small effect on the  total numbers of families and children served nationally.
In a written summary of recent site visits, HHS acknowledged that all grantees experience some issues with their data reporting. However,  HHS noted that grantees are extremely responsive to suggestions for  improvement, especially when they have the direct authority and  resources to make these changes and improvements. HHS reported that  data issues that arose during these site visits to state grantees involved t HHS-defined categories: data extraction, sampling, population coverage,  definitions, system ownership, and data entry. Overall, HHS reported the issues have had little impact on the data on the number of families and  se  children served, or on the characteristics or profiles of those served. While  HHS acknowledged that some of the issues could affect assessments of  the characteristics of families and children served within particular states,  officials noted they would have limited effects on national estimates.
In terms of duplication, HHS provided us with information showing that  most states had low percentages of families with duplicate social securi numbers. For example, most states in fiscal year 2007 had an average of  less than 1 percent of their caseload reporting duplicate social security  licate  numbers. Only six states had average monthly percentages of dup social security numbers greater than 1 percent, and none were greater  than 3.4 percent. Overall, HHS also provided us with information  indicating that most states had social security numbers on file for the vast  majority of families served by the CCDF program. States have the option  of using unique identifiers in lieu of social security numbers, and one state  does so exclusively and does not collect social security numbers. Other  than this one state, in fiscal year 2007, eight states reported having social security numbers for less than 95 percent of their caseload in an average month. According to HHS, these states are instead reporting state ca identification numbers. In addition, HHS officials informed us that o slightly more than 50,000 family records, or less than 1 percent, had  n either a state identification number nor a social security number.
section_title: HHS’s Child Care Subsidy Coverage Rate Estimates and Education’s Survey Data
paragraphs: HHS has published several types of coverage rate estimates for the  number of children whose families receive child care subsidies. These  estimates come from administrative data in the form of individual records  about participating families and children. Education has also published  other rate of receipt estimates based on surveys that ask samples of the  public whether they participate in particular government programs. Either  method can measure participation inaccurately. For instance, data that are  analyzed or entered into a database incorrectly may have measurement  error. Survey data may have an additional amount of error due to the  practical difficulties of conducting any survey. For example, respondents  may have difficulties in interpreting a particular question, such as whether  they participate in a specific program being asked about. In addition,  different respondents may have different sources of information available  to answer the question. This variation across respondents can make  survey data inaccurate.
To assess the reliability of data used to compile child care subsidy  coverage rate estimates, we interviewed HHS officials knowledgeable  about CCDF administrative data and reviewed relevant documentation.
States can use funding from three HHS programs to support child care  subsidies—CCDF, TANF, and the Social Services Block Grant (SSB G)  programs; and HHS develops two types of coverage rates estimates that  include subsidies funded by all three of these programs. For those  estimates developed by HHS, the department uses administrative data on CCDF, which includes funds transferred from TANF, to determine the  average monthly number of children served, and estimates the number served directly by TANF and by SSBG based on expenditure data collected for these two programs. More specifically, HHS estimates the average  monthly number of children served through these two funding sources by  dividing the total amount spent on child care services under the two  programs, by the average subsidy cost per child. For example, for its fisc year 2005 estimate, HHS assumed that child care funded directly by T TANF maintenance of effort, and SSBG had the same subsidy costs per  child as CCDF-funded care—about $310 per month. In addition, the department assumed that the additional children served by these programs  have the same age and poverty distribution as the CCDF children.
section_title: Appendix III: Studies Examining the Effect of Child Care Subsidies on Employment Outcomes
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Baum II, Charles L. “A Dynamic Analysis of the Effect of Child Care Costs  on the Work Decisions of Low-Income Mothers with Infants.”  Demography, vol. 39, no. 1 (2002): 139-164.
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Blau, David M., and Erdal Tekin. “The Determinants and Consequences of  Child Care Subsidies for Single Mothers in the USA.” Journal of  Population Economics, vol. 20, no. 4 (2007): 719-741.
Brooks, Fred. “Impacts of Child Care Subsidies on Family and Child Well- Being.” Early Childhood Research Quarterly, vol. 17, no. 4 (2002): 498-511.
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Connelly, Rachel, and Jean Kimmel. “The Effect of Child Care Costs on the  Employment and Welfare Recipiency of Single Mothers.” Southern  Economic Journal, vol. 69, no. 3 (2003): 498-519.
Connelly, Rachel, and Jean Kimmel. “Marital Status and Full-time/Part- time Work Status in Child Care Choices.” Applied Economics, vol. 35,   no. 7 (2003): 761-777.
Crawford, April. “The Impact of Child Care Subsidies on Single Mothers’  Work Effort.” Review of Policy Research, vol. 23, no. 3 (2006): 699-711.
Danziger, Sandra K., Elizabeth Oltmans Ananat, and Kimberly G.  Browning. “Childcare Subsidies and the Transition from Welfare to Work.”  Family Relations, vol. 53, no. 2 (2004): 219-228.
Davis, Elizabeth E., and Marcie Jefferys. “Child Care Subsidies, Low-Wage  Work and Economic Development.” International Journal of Economic  Development, vol. 9, no. 3 (2007): 122-158.
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Gennetian, Lisa A., Danielle A. Crosby, Aletha C. Huston, and Edward D.  Lowe. “Can Child Care Assistance in Welfare and Employment Programs  Support the Employment of Low-Income Families?” Journal of Policy  Analysis and Management, vol. 23, no. 4 (2004): p. 723-743.
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Han, Wenjui, and Jane Waldfogel. “Child Care Costs and Women’s  Employment: A Comparison of Single and Married Mothers with Pre- School-Aged Children.” Social Science Quarterly, vol. 82, no. 3 (2001):   552-568.
Hofferth, Sandra, and Nancy Collins. “Child Care and Employment  Turnover.” Population Research and Policy Review, vol. 19, no. 4 (2000):  357-395.
Kimmel, Jean. “Child Care Costs as a Barrier to Employment for Single  and Married Mothers.” The Review of Economics and Statistics, vol. 80,  no. 2 (1998): 287-299.
Kimmel, Jean, and Lisa M. Powell. “Nonstandard Work and Child Care  Choices of Married Mothers.” Eastern Economic Journal, vol. 32, no. 3  (2006): 397-419.
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Meyers, Marcia K., Theresa Heintze, and Douglas A. Wolf. “Child Care  Subsidies and the Employment of Welfare Recipients.” Demography,   vol. 39, no. 1 (2002): 165-179.
Michalopoulos, Charles, and Philip K. Robins. “Employment and Child- Care Choices of Single-Parent Families in Canada and the United States.”  Journal of Population Economics, vol. 15, no. 3 (2002): 465-493.
Press, Julie E., Jay Fagan, and Lynda Laughlin. “Taking Pressure Off  Families: Child-Care Subsidies Lessen Mothers’ Work-Hour Problems.”  Journal of Marriage and Family, vol. 68, no. 1 (2006): 155-171.
Queralt, Magaly, Ann Dryden Witte, and Harriet Griesinger. “Changing  Policies, Changing Impacts: Employment and Earnings of Child-Care  Subsidy Recipients in the Era of Welfare Reform.” The Social Service  Review, vol. 74, no. 4 (2000): 588-619.
Ribar, David C. “A Structural Model of Child Care and the Labor Supply of  Married Women.” Journal of Labor Economics, vol. 13, no. 3 (1995):   558-597.
Robins, Philip K. “Welfare Reform and Child Care: Evidence From 10  Experimental Welfare-to-Work Programs.” Evaluation Review, vol. 31,   no. 5 (2007): 440-468.
Tekin, Erdal. “Child Care Subsidy Receipt, Employment, and Child Care  Choices of Single Mothers.” Economics Letters, vol. 89, no. 1 (2005): 1-6.  ——-. “Single Mothers Working at Night: Standard Work and Child Care  Subsidies.” Economic Inquiry, vol. 45, no. 2 (2007): 233-250.  ——-. “Childcare Subsidies, Wages, and Employment of Single Mothers.”  The Journal of Human Resources, vol. 42, no. 2 (2007): 453-487.
section_title: Appendix IV: Comments from the U.S. Department of Health and Human Services
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: Betty Ward-Zukerman, Assistant Director, and Julianne Hartman Cutts,  Analyst-in-Charge, managed this assignment. Heddi Nieuwsma and  Meghan Squires made significant contributions to all aspects of this report.  Kate Van Gelder and James Bennett provided writing and graphics  assistance. In addition, Harold J. Brumm, Jr. made key contributions; and  Walter K. Vance, Jeff M. Tessin, and Monique B. Williams provided design  and methodological assistance. Ashley L. McCall assisted with our  literature search, and James Rebbe provided legal assistance.
section_title: Related GAO Products
paragraphs: Temporary Assistance for Needy Families: Implications of Changes in  Participation Rates. GAO-10-495T. Washington, D.C.: March 11, 2010.
Temporary Assistance for Needy Families: Fewer Eligible Families Have  Received Cash Assistance Since the 1990s, and the Recession’s Impact on  Caseloads Varies by State. GAO-10-164. Washington, D.C.: February 23, 2010.
Poverty in America: Consequences for Individuals and the Economy.  GAO-07-343T. Washington, D.C.: January 24, 2007.
Welfare Reform: Better Information Needed to Understand Trends in  States’ Uses of the TANF Block Grant. GAO-06-414. Washington, D.C.:  March 3, 2006.
Child Care: Additional Information Is Needed on Working Families  Receiving Subsidies. GAO-05-667. Washington, D.C.: June 29, 2005.
Means-Tested Programs: Information on Program Access Can Be an  Important Management Tool. GAO-05-221. Washington, D.C.: March 11,  2005.
Child Care: Recent State Policy Changes Affecting the Availability of  Assistance for Low-Income Families. GAO-03-588. Washington, D.C.: May  5, 2003.
Child Care: States Exercise Flexibility in Setting Reimbursement Rates  and Providing Access for Low-Income Children. GAO-02-894.  Washington, D.C.: September 18, 2002.
Child Care: States Have Undertaken A Variety of Quality Improvement  Initiatives, but More Evaluations of Effectiveness Are Needed.  GAO-02-897. Washington, D.C.: September 6, 2002.
Welfare Reform: States Provide TANF-Funded Work Support Services to  Many Low-Income Families Who Do Not Receive Cash Assistance.  GAO-02-615T. Washington, D.C.: April 10, 2002.
Child Care: States Increased Spending on Low-Income Families.  GAO-01-293. Washington, D.C.: February 2, 2001.
Welfare Reform: States’ Efforts to Expand Child Care Programs.  GAO/HEHS-98-27. Washington, D.C.: January 13, 1998.
Child Care: Child Care Subsidies Increase Likelihood That Low-Income  Mothers Will Work. GAO/HEHS-95-20. Washington, D.C.: December 30,  1994.