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entitled 'Child Care: Additional Information Is Needed on Working 
Families Receiving Subsidies' which was released on July 29, 2005. 

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Report to the Ranking Minority Member, Subcommittee on Education and 
Early Childhood Development, Committee on Health, Education, Labor, and 
Pensions, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

June 2005: 

Child Care: 

Additional Information Is Needed on Working Families Receiving 
Subsidies: 

GAO-05-667: 

Contents: 

Letter: 

Appendix I: Briefing Slides: 

Appendix II: Comments from the Department of Health and Human Services: 

Abbreviations: 

CCDF: Child Care and Development Fund: 

HHS: Department of Health and Human Services: 

MOE: maintenance-of-effort: 

SMI: state median income: 

TANF: Temporary Assistance for Needy Families: 

United States Government Accountability Office: 

Washington, DC 20548: 

June 29, 2005: 

The Honorable Christopher J. Dodd: 
Ranking Minority Member: 
Subcommittee on Education and Early Childhood Development: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

Dear Senator Dodd: 

Since the Congress enacted welfare reform legislation in 1996, child 
care assistance has served as a key support for work efforts among low- 
income families.[Footnote 1] Researchers have found that reliable, high-
quality child care is critical to sustaining parents' ability to work, 
while safeguarding their children's health and intellectual 
development. States have flexibility in determining which low-income 
families are provided child care subsidies funded by the Child Care and 
Development Fund (CCDF), Temporary Assistance for Needy Families 
(TANF), and related state resources. States must balance the funds 
available for subsidies with the number of families who want subsidized 
child care. In doing so, states may find it necessary to change child 
care policies that affect program access or the amount of subsidy that 
eligible families receive. 

As Congress considers reauthorizing CCDF and TANF, we updated our 
previous report "Child Care: Recent State Policy Changes Affecting the 
Availability of Assistance for Low-Income Families"[Footnote 2] by 
providing current information on: 

* the choices states have made for providing child care assistance to 
(1) TANF families, (2) families transitioning off TANF, and (3) other 
low-income families;

* the extent to which states have changed policies since 2001 that 
could affect access to child care assistance programs and the amounts 
of subsidies provided to families; and: 

* the number of children and families receiving child care assistance 
from CCDF and TANF funds. 

To address our first and second objectives, we surveyed child care 
administrators in 50 states and the District of Columbia on their 
respective state's child care assistance policies. The survey asked 
them whether their states had made changes to key policies that could 
affect access to child care assistance programs and subsidy amounts 
since March 2003. All 50 states and the District of Columbia responded 
to our survey between March 11 and March 31, 2005. We compared these 
responses with responses to a previous survey we conducted in March and 
April 2003 covering policies and practices from 2001 through 2003. We 
combined the results from the two surveys to provide a 4-year 
assessment of changes between January 2001 and March 2005. Our analyses 
of state policy changes are limited to the information that states 
reported in our surveys about the direction of change (e.g., increasing 
or decreasing income eligibility and co-payments), if any. To gather 
information on the number of children and families receiving child care 
assistance from CCDF and TANF funds, we reviewed the Department of 
Health and Human Services' (HHS) data on number of children served 
through CCDF and held discussions with HHS officials about the 
availability of data on the number of children and families served 
through TANF. In addition, we held discussions with HHS officials on 
the collection and maintenance of available data and determined they 
were sufficiently reliable for the purposes of this report. 
Furthermore, we interviewed officials in five states--Kentucky, 
Maryland, Massachusetts, Oregon and Wyoming--to gain a more in-depth 
perspective on child care policy changes in their states. We conducted 
this review from February 2005 through May 2005 in accordance with 
generally accepted government auditing standards. 

On May 25, 2005, we briefed your staff on the results of our review. 
This report formally conveys the information provided during that 
briefing. (See app. I for the briefing slides.) In summary, we found 
the following: 

All states make TANF, transitioning families, and other low-income 
families eligible for assistance. However, some states set additional 
criteria that may limit the extent of service to transitional and, 
especially, to other low-income families. Thirty-one states--an 
increase of six states since our previous report--reported that, using 
their state's eligibility criteria, they were able to provide child 
care assistance to all the families who apply and are deemed eligible 
for such assistance. Most states reported that they give higher 
priority to TANF families than transitional and other low-income 
working families when program resources are insufficient to serve all 
who apply. 

Since 2001, many states have made changes in eligibility and enrollment 
policies that could decrease program access while at the same time may 
provide larger subsidies to families receiving assistance. Thirty-five 
states made the following eligibility and enrollment changes that 
affect program access since 2001: 

* 19 made changes tending to decrease access to assistance. 

* 8 made changes tending to increase access to assistance. 

* 8 made a mix of changes. 

In addition, many states have made co-payment and provider 
reimbursement rate changes, but of those that made changes, more states 
increased provider rates than increased co-payments, which could result 
in families receiving larger subsidies. States may be providing larger 
subsidies in an effort to keep pace with increasing child care fees or 
to provide families with a broader array of options among providers. 

According to HHS data, the number of children and families receiving 
child care assistance under CCDF has remained relatively constant since 
2001, but little is known about those subsidized with TANF direct 
funds. According to HHS, approximately 1.75 million children and over 1 
million families have been served through CCDF (including TANF dollars 
transferred to CCDF) on an average monthly basis since fiscal year 
2001. However, HHS officials did not have information on working 
families receiving child care assistance directly through TANF funds, 
although most ($1.4 billion of $1.7 billion) of the federal TANF funds 
directly spent on child care is directed to these families. 

Because we believe that additional information on working families 
assisted directly through TANF would be valuable to policy makers and 
program managers in ensuring the efficiency, effective and 
accountability of federal supports for child care, in our May 25, 2005, 
briefing, we recommended that the Assistant Secretary for Children and 
Families find cost-effective ways to collect this information. We 
provided a draft copy of this report, including the briefing slides, to 
officials in the U.S. Department of Health and Human Services' 
Administration for Children and Families, which oversees state CCDF and 
TANF programs. In its comments on the draft, ACF disagreed with our 
recommendation (see app. II). ACF mentioned that states are required to 
report such disaggregated case record information only for families 
receiving "assistance" under the TANF program. ACF explained that 
during its rule-making process, a wide range of organizations providing 
comments raised concerns about the relationship between certain 
services, such as child care, and "assistance" under the TANF program. 
Consequently, ACF does not plan to collect this information on working 
families without new legislation. Therefore, we are suggesting that 
Congress may wish to require that, for child care subsidies directly 
funded by TANF, ACF find cost-effective ways to collect data on the 
numbers of children and families receiving these subsidies and the 
types of care they obtain, without regard to whether the subsidies are 
defined as "assistance" under TANF regulations. We have changed the 
briefing slides to reflect this matter for congressional consideration. 

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time, we will send copies this report to 
relevant congressional committees and other interested parties and will 
make copies available to others upon request. The report will also be 
available on GAO's 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. Betty Ward-Zukerman--Assistant Director, Danielle Giese-- Analyst-
In-Charge, Sonya Harmeyer, Luann Moy, Cathy Hurley and James Rebbe also 
made key contributions to this report. 

Sincerely yours,

Signed by: 

Marnie S. Shaul: 
Director, Education, Workforce, and Income Security Issues: 

Enclosure: 

[End of section]

Appendix I: Briefing Slides: 

[See PDF for images] 

[End of slide presentation] 

[End of section]

Appendix II: Comments from the Department of Health and Human Services: 

DEPARTMENT of HEALTH AND HUMAN SERVICES: 
ADMINISTRATION FOR CHILDREN AND FAMILIES: 
Office of the Assistant Secretary, Suite 600: 
370 L'Enfant Promenade, S.W.: 
Washington, D.C. 20447: 

JUN 16 2005: 

Ms. Marnie S. Shaul: 
Director, Education, Workforce, and Income Security Issues: 
U. S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Ms. Shaul: 

The Administration for Children and Families appreciates the 
opportunity to provide comments on recommendations in the U.S. General 
Accountability Office's draft report entitled, "Child Care: Additional 
Information Is Needed on Working Families Receiving Subsidies" (GAO-05- 
667). 

If you have any questions regarding our comments, please contact 
Shannon Christian, Associate Commissioner, Child Care Bureau, at (202) 
690-6782. 

Sincerely,

Signed by: 

Wade F. Horn, Ph.D.: 
Assistant Secretary for Children and Families: 

Attachment: 

COMMENTS OF THE ADMINISTRATION FOR CHILDREN AND FAMILIES ON THE DRAFT 
REPORT ENTITLED: "CHILD CARE: ADDITIONAL INFORMATION IS NEEDED ON 
WORKING FAMILIES RECEIVING SUBSIDIES" (GAO-05-667): 

The Administration for Children and Families (ACF) appreciates the 
opportunity to comment on the Govermnent Accountability Office's (GAO) 
draft report (slides). 

GAO Recommendations: 

We are recommending that, for child care assistance directly funded by 
TANF (the Temporary Assistance for Needy Families program), the 
Assistant Secretary for Children and Families find cost-effective ways 
to collect data on the numbers of children and families receiving 
assistance and the types of care they obtain and make efforts to ensure 
the quality of these data. 

ACF Comments: 

ACF does not agree with this recommendation. The current policy was 
developed during a formal rulemaking process and after weighing the 
advantages and disadvantages of various options based on extensive 
public comment. As we explained during the entrance and exit 
conferences, under Section 411 of the Social Security Act, the 
collection of disaggregated case-record information is limited to 
"families receiving assistance" under the TANF program. 

In addition to authorizing data collection, the terms "assistance" or 
"families receiving assistance" are used in many places in the statute. 
Critically, most of the prohibitions and requirements of Section 408 of 
the Social Security Act apply to the provision of "assistance" 
including the five-year lifetime limit. The numerator and denominator 
of the work participation requirements of Section 407 are also limited 
to "families receiving assistance" There are also penalties attached to 
a state's failure to comply with or meet these requirements. Therefore, 
how the term is defined affects not only data collection, state 
behavior and penalties, but also, most critically, the requirements 
imposed on the lives of families. 

Initially, ACF wanted the child care information recommended by GAO, so 
in our proposed rule of November 20, 1997 (Federal Register 62, No. 
224, 62124 et. seq.), we clarified that child care, work subsidies, and 
allowances, which cover living expenses for individuals in education or 
. training, were included in the definition of "assistance." A wide 
range of commenters-including states, advocates and union groups-wanted 
changes to the proposed rule. A significant number of them indicated 
that this was one of the most important issues in the Notice of 
Proposed Rulemaking (NPRM). All of these commenters wanted to narrow 
the scope of benefits included in the definition and a significant 
number sought to exclude child care, transportation, and other work 
supports from the definition of "assistance." Recognizing that we would 
lose some valuable child care information, we found substantial merit 
in the arguments of commenters and adopted their recommendation. 
Without new legislation, we do not intend to change this position. 

With respect to proposed legislation reauthorizing TANF and child care, 
we do agree with the changes to the term "assistance" and child care 
data collection reflected in Senate bill S. 667, the Personal 
Responsibility and Individual Development for Everyone (PRIDE) Act, 
passed by the Senate Finance Committee. Under the bill, the current 
definition of "assistance" is also modified to exclude child care and 
transportation aid for families without a worker (making all child care 
aid "non-assistance"). The bill also extends the Child Care Development 
Block Grant case-level reporting to TANF-funded child care. 

Slide #1: We recommend that the term "assistance" not be used because 
it is a term with special meaning in TANF and is not used 
interchangeably with the term "subsidy." If GAO decides to use the term 
"assistance" anyway, it will require more explanation than the footnote 
(in Slide #2) currently provides. 

Slide #2, footnote and throughout the slides: To avoid any unnecessary 
confusion, GAO should consider restricting its use to the term 
"subsidies" when referring to child care aid. Under TANF, child care 
can be "assistance" or "non-assistance" For example, on Slide #7 and 
Slide #30, GAO writes, "HHS does not collect data [or have information] 
on working families who receive child care assistance directly funded 
by TANF.." What GAO refers to as "assistance," however, is considered 
"non-assistance" under the TANF final rules. 

Slide #5,

* Second bullet: We recommend the following wording, with our edits in 
bold: "Thus, our results generally reflect changes that result from 
state actions, rather than changes that have occurred due to inflation."

* Third bullet: We recommend the following rewording, edits in bold: 
"We did not determine the effect of these state policy changes on the 
number of eligible children and families receiving child care 
assistance funded by the Child Care Development Fund (CCDF) and TANF."

Slide #7,

* First bullet: We recommend rephrasing the first sentence to make 
clear that the CCDF-funded children (including those served with 
dollars transferred to CCDF from TANF) are mutually exclusive of the 
TANF- funded children with regard to the number of children and 
families served (data collected). 

* Also, we recommend adding, "the number of after "HHS does not collect 
data on." In addition, we recommend adding a footnote explaining that 
HHS does not have the regulatory authority to collect caseload data on 
children in working families receiving child care subsidies funded 
directly through TANF,

* GAO writes that 80 percent of "federal" TANF dollars spent on child 
care were directed at working families. It is unclear why GAO would 
limit its analysis to federal dollars, because the more relevant count 
of how many families and children are assisted is the total funding. 
For TANF caseload counts, for example, caseloads are based on combined 
federal and state funds. 

Slide #8, first bullet: We recommend the following rewording: 
"..families earning up to 85 percent of the state median income.."

Slide #13: While the graphics are useful in demonstrating the trade- 
offs between program access and subsidy amount, it would be helpful to 
provide a footnote that says, "Reimbursement rates that are too low may 
affect family access to care and their ability to use the subsidy 
program."

Slide #15, second bullet: The second sentence would be clearer if it 
read, "However, other criteria set by these states, including income 
eligibility limits and the extent to which TANF families are given 
priority, may limit who is eligible for services."

Slide #33, second bullet: This refers to "poor" families. Is this what 
was intended, or should the reference be broader--to low income 
families, e.g., to include families with incomes just above poverty as 
well? 

[End of section] 

FOOTNOTES

[1] We use the terms "assistance" and "subsidies" interchangeably, 
although HHS in the context of child care subsidies limits the term 
"assistance" to TANF benefits provided to nonworking families. 

[2] GAO, Child Care: Recent State Policy Changes Affecting the 
Availability of Assistance for Low-Income Families, GAO-03-588 
(Washington: D.C.: May 5, 2003). 

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