Administration for Children and Families (ACF) - Child Care and Development Fund

High-priority program

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Program level Payment Integrity results

Sponsoring agency: Department of Health and Human Services

The Child Care and Development Fund program is a federally funded, state-administered block grant program with each state having maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state. States tailor their review of errors to reflect the policies and procedures unique to their state and therefore, states have varying requirements for establishing and verifying a client’s eligibility.

View on Federal Program Inventory

PROGRAM METRICS

$13,485 M

in FY 2021 outlays, with a

95.6%

payment accuracy rate

PROGRAM METRICS

$8,699 M

in FY 2022 outlays, with a

96.0%

payment accuracy rate

PROGRAM METRICS

$8,699 M

in FY 2023 outlays, with a

96.4%

payment accuracy rate

PROGRAM METRICS

$17,096 M

in FY 2024 outlays, with a

95.1%

payment accuracy rate

PROGRAM METRICS

$18,699 M

in FY 2025 outlays, with a

95.1%

payment accuracy rate

  • Improper payment estimates over time
    View as:

    Chart toggle amounts:
    Proper payments
    Overpayment
    Underpayment
    Technically improper
    Unknown

Payment Integrity results

  • FY 2021 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    10/2019 - 09/2020


    Confidence interval:

    >95%


    Margin of error:

    +/-3.0

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M

Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $142.25 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $142.25 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $37.17 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $37.17 M

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$37.17 M

Unknown Payment Details

Missing or insufficient documentation in the case record

The amount of payments that could either be proper or improper but the agency is unable to determine whether they were proper or improper as a result of insufficient or lack of documentation is $408.94 M


Cause of insufficient or lack of documentation & why the documentation is needed for determination of payment type
Payment cause Amount Description of the documentation that was not provided and explanation of why the program is unable to conclude whether the payment is proper or improper without that documentation

Evaluation of corrective actions

HHS attributes the improper payment estimate decrease to HHS’ successful multi-pronged approach to supporting states as they continue to experience challenges in their efforts to comply with the CCDF reauthorization and related regulations. HHS provided technical assistance while also allowing needed flexibility due to the unprecedented circumstances of COVID-19.

Future payment integrity outlook

Administration for Children and Families (ACF) - Child Care and Development Fund has NOT established a baseline.

The program's current year improper payment and unknown payment rate of 4.36 % has been achieved with a balance of payment integrity risk and controls and represents the lowest rate that can be achieved without disproportionally increasing another risk, therefore it is the tolerable rate.

CCDF is a block grant that is administered by the states. The reporting of national error and improper payment measures in the CCDF program is based on state-specific policies. Each state has the flexibility to determine the threshold at which an error resulted in an improper payment. Since CCDF payments occur at the state level, information systems and other infrastructure needed to reduce CCDF improper payments need to be addressed at the state level. The reported rate, which is well below the 10% threshold, is deemed tolerable.

Additional programmatic information

  • FY 2022 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    10/2020 - 09/2021


    Confidence interval:

    90% to <95%


    Margin of error:

    +/-5.0

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0 M

Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $91.04 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $91.04 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $23.13 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $23.13 M

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$23.13 M

Unknown Payment Details

Unknown errors are related to insufficient documentation to determine if the payment is proper. For states reporting in FY 2022, the missing information or documentation primarily related to activity verification/need requirement; income Information/paystubs; entire case file; work/activity schedule; and application/redetermination. Additional missing documentation related to residency; verification of parent care; hours/type of care; age/citizenship; and guardianship.

The amount of payments that could either be proper or improper but the agency is unable to determine whether they were proper or improper as a result of insufficient or lack of documentation is $230.53 M


Cause of insufficient or lack of documentation & why the documentation is needed for determination of payment type
Payment cause Amount Description of the documentation that was not provided and explanation of why the program is unable to conclude whether the payment is proper or improper without that documentation

Evaluation of corrective actions

Improper payment corrective action plans for the Child Care and Development Fund program addresses the specific cause of errors, which at the federal level, is typically in the form of targeted training and technical assistance. For identified improper payments attributable to recipient actions, recipients may receive heightened training and technical assistance and/or consequences such as limitations on the availability of funds, disallowances, or future offset of funds in the event that improper payments are identified. In addition to the improper payment error rate calculation activities, overpayments are identified and recovered through Single Audits as required by the Single Audit Act Amendments of 1996 and Department of Health and Human Services Office of Inspector General audits.

For each of the above activities, recipients are subject to disallowances for any expenditures not made in accordance with program regulations. Further, federal awarding agencies must issue management decisions on audit findings within six months. The management decision must state whether the audit finding is sustained; the reasons for the decision; and the expected recipient action to
repay disallowed costs, make financial adjustments, and/or take other action.

Issuance of a management decision is a high priority within the agency and the applicable office is held accountable for timely resolution of audit findings.

Future payment integrity outlook

Administration for Children and Families (ACF) - Child Care and Development Fund has NOT established a baseline.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $11,635.5 M
Current year +1 estimated future improper payment and unknown payment rate 0 %

The program's current year improper payment and unknown payment rate of 3.96 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

The Child Care and Development Block Grant Act of 2014 and Child Care and Development Fund regulations (2016) required states to create and adopt new policies and procedures, requiring states to implement large-scale changes to their child care programs. The Administration for Children and Families anticipated reestablishing the baseline and setting a reduction target in FY 2022, however, limitations and restrictions due to COVID-19 impacted states’ abilities to complete planned actions as states were granted needed flexibility. In addition, the error rate may continue to fluctuate as a result of time-limited policies associated with supplemental COVID funding. These factors will continue to impact the improper payment rate in the FY 2022 measurement and beyond, making it challenging to establish a baseline and determine a tolerable rate until all states have substantially completed planned actions.

The Child Care and Development Block Grant Act of 2014 (CCDBG) and CCDF regulations (2016) required states to create and adopt new policies and procedures. State grantees have been implementing large-scale changes to their child care programs and the Administration for Children and Families (ACF)
anticipated that the improper payment rate could be affected as states work to meet the new requirements. ACF anticipated reestablishing the baseline and setting a reduction target in FY 2022, however, limitations and restrictions due to COVID-19 impacted states’ abilities to complete planned actions as states were
granted needed flexibility. In addition, the error rate may continue to fluctuate as a result of time-limited policies associated with supplemental COVID funding. The effects of COVID-19 will continue to impact the improper payment rate in the FY 2022 measurement and beyond, making it challenging to establish a baseline, develop a tolerable rate, and therefore assess needs with respect to internal controls, human capital and information system and other infrastructure to reduce improper payments and unknown payments to the tolerable rate.

The program has not determined a tolerable rate. Therefore, the program has not identified needs with respect to internal controls, human capital and information system and other infrastructure to reduce improper payments and unknown payments to the tolerable rate.

Additional programmatic information

The Child Care and Development Fund (CCDF) program is a federally funded, state-administered block grant program with each state having maximum flexibility in developing the CCDF programs and policies that best suit the needs of children and families within that state. States tailor their review of errors to reflect the policies and procedures unique to their state and therefore, states have varying requirements for establishing and verifying a client’s eligibility. For this reason, there is not a common lexicon for root cause data/eligibility themes across states and current CCDF program regulations do not require states to collect and report the root cause of errors in pre-determined categories. The data used to calculate and report improper and unknown payments data is collected by the states and aggregated at the federal level, and states are not required to report dollar amounts associated with individual root causes. Therefore, while the specific root causes of errors and associated corrective actions are identified by each reporting state under the policies unique to the state, the errors are consolidated into one control cause category for this aggregate reporting at the federal level.

  • FY 2023 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    10/2021 - 09/2022


    Confidence interval:

    90% to <95%


    Margin of error:

    +/-5.0

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Training
    HHS utilized training as a corrective action in the Child Care and Development Fund program. HHS conducted site visits with states needing assistance to address root causes; provided states with technical assistance on policy and procedure changes to meet the Child Care and Development Block Grant Act of 2014 requirements; delivered technical assistance to states updating or developing IT systems that will improve practices and reduce errors; and conducted joint case reviews with all reporting states, which included state and federal staff. HHS also funded the Office of Child Care’s National Center on Subsidy Innovation and Accountability to provide technical assistance to states and territories on program integrity and accountability, including targeting technical assistance to states to support reauthorization requirements.
    FY2023 Q4
    Completed
    Training
    HHS's planned corrective action for states reporting in FY 2023 Child Care and Development Fund program include continuing to provide targeted technical assistance based on the reported specific causes of errors for the states. Some states reporting in FY 2023 have planned corrective actions that include fixing system errors and implementing new, enhanced systems; providing guidance, training, and technical assistance to eligibility staff; reviewing and updating policies and procedures manuals and providing policy clarifications to eligibility staff; meeting with state eligibility agencies to discuss errors; and continuing audit, monitoring, and review efforts.
    FY2025
    Planned

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M

Overpayments are outside of HHS's control because the Child Care and Development Fund is a federally funded, state-administered block grant program, with funds awarded to states/recipients who then disburse funds to sub-recipients. Under the Child Care and Development Block Grant Act of 2014, states have flexibility within federal guidelines over key policy levers—including subsidy payment rates, co-payment amounts contributed by the family, income thresholds for determining eligibility, and quality improvement investments. Each state has maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state.
Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $81.74 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $81.74 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Outside Agency Control Contractor or Provider Status $81.74 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $17.91 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $17.91 M

Eligibility element/information needed Eligibility amount
Contractor or Provider Status $17.91 M

Mitigation strategies taken Mitigation strategies planned
Training Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$17.91 M

Unknown Payment Details

Payments are unknown for the Child Care and Development Fund program because at the time of the HHS review, the available documentation was not sufficient to determine if the payment was proper or improper. Under the Child Care and Development Block Grant Act of 2014, states have maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state. As such, key eligibility documentation requirements are controlled by states, and thus the specific documentation that the state failed to provide that make payments unknown vary across states. For example, one of the key federal policy levers is income thresholds for determining eligibility, for which some states require paystubs to verify income. In instances where the paystub is missing and there are no other mechanisms in place to verify income, it cannot be determined if the payment was proper or improper.

The amount of payments that could either be proper or improper but the agency is unable to determine whether they were proper or improper as a result of insufficient or lack of documentation is $209.39 M


Cause of insufficient or lack of documentation & why the documentation is needed for determination of payment type
Payment cause Amount Description of the documentation that was not provided and explanation of why the program is unable to conclude whether the payment is proper or improper without that documentation
States $209.39 M The specific documentation that the state failed to provide for the Child Care and Development Fund program varies from state to state. This is because under the Child Care and Development Block Grant Act of 2014, states have maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state. Further, states have flexibility within federal guidelines over key policy levers—including subsidy payment rates, co-payment amounts contributed by the family, income thresholds for determining eligibility, and quality improvement investments. Since the state did not have sufficient documentation in accordance with the state's specific requirements, we were unable to conclude if the payment was proper or improper.

Mitigation strategies taken Mitigation strategies planned
Training Training

Evaluation of corrective actions

HHS's level of planned and completed corrective actions address the causes of the Improper Payments and Unknown Payments in the Child Care and Development Fund program and is proportional to the severity of the associated amount and rate and root causes for several reasons. Historically, training, and targeted technical assistance have been the primary methods used to address improper and unknown payments in the program. The improper payment rate has shown a steady decline since FY 2020, most recently decreasing from 3.96% in FY 2022 to 3.55% in FY 2023. The maintenance of an error rate that is consistently below the statutory threshold indicates that this approach is appropriately addressing the root causes of the errors and are successful in reducing Improper Payments and Unknown Payments. HHS will continue to receive specific root causes of errors and associated corrective actions from each reporting state under the policies unique to the state. Using this data, HHS will continue to provide targeted technical assistance to address the specific causes of errors for the state. Further, the requirement for states with improper payment rates exceeding 10 percent to submit a formal Corrective Action Plan, and HHS’s process of working closely with states under a formal corrective action plan or needing assistance to address root causes of errors will continue to be a priority for the Agency.

Future payment integrity outlook

Administration for Children and Families (ACF) - Child Care and Development Fund has NOT established a baseline.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $13,691 M
Current year +1 estimated future improper payments $0 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 0 %

The program's current year improper payment and unknown payment rate of 3.55 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

The Child Care and Development Block Grant Act of 2014 and Child Care and Development Fund regulations (2016) required states to create and adopt new policies and procedures. State recipients have been implementing large-scale changes to their child care programs and HHS anticipated that the improper payment rate could be affected as states work to meet the new requirements. HHS anticipated reestablishing the baseline and setting a reduction target in FY 2023, however, limitations and restrictions due to COVID-19 impacted states’ abilities to complete planned actions as states were granted needed flexibility. The effects of COVID-19 will continue to impact the improper payment rate in the FY 2023 measurement and beyond, making it challenging to establish a baseline and determine a tolerable rate until all states have substantially completed planned actions.

The Child Care and Development Block Grant Act of 2014 and Child Care and Development Fund regulations (2016) required states to create and adopt new policies and procedures. State recipients have been implementing large-scale changes to their child care programs and HHS anticipated that the improper payment rate could be affected as states work to meet the new requirements. HHS anticipated reestablishing the baseline and setting a reduction target in FY 2023, however, limitations and restrictions due to COVID-19 impacted states’ abilities to complete planned actions as states were granted needed flexibility. The effects of COVID-19 will continue to impact the improper payment rate in the FY 2023 measurement and beyond, making it challenging to determine a target rate. For these reasons, HHS is still working to establish a baseline, develop a tolerable rate, and therefore assess needs with respect to internal controls, human capital and information systems and other infrastructure to reduce improper payments and unknown payments to a determined tolerable rate.

HHS has not determined a tolerable rate for the Child Care and Development Fund program, therefore, the program did not request resources in the most recent budget submission to establish and maintain internal controls to reduce improper payments and unknown payments to a determined tolerable rate.

Additional programmatic information

The Child Care and Development Fund program is a federally funded, state-administered block grant program with each state having maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state. States tailor their review of errors to reflect the policies and procedures unique to their state and therefore, states have varying requirements for establishing and verifying a client’s eligibility. For this reason, there is not a common lexicon for root cause data/eligibility themes across states and current Child Care and Development Fund program regulations do not require states to collect and report the root cause of errors in pre-determined categories. The data used to calculate and
report improper and unknown payments data is collected by the states and aggregated at the federal level, and states are not required to report dollar amounts associated with individual root causes. Therefore, while the specific root causes of errors and associated corrective actions are identified by each reporting state under the policies unique to the state, the errors are consolidated into one control cause category for this aggregate reporting at the federal level.

  • FY 2024 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    10/2022 - 09/2023


    Confidence interval:

    90% to <95%


    Margin of error:

    +/-5.0

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Training
    HHS utilized training as a corrective action in the Child Care and Development Fund program. HHS conducted site visits with states needing assistance to address root causes; provided states with technical assistance on policy and procedure changes to meet the Child Care and Development Block Grant Act of 2014 requirements; delivered technical assistance to states updating or developing IT systems that will improve practices and reduce errors; and conducted joint case reviews with all reporting states, which included state and federal staff. HHS also funded the Office of Child Care’s National Center on Subsidy Innovation and Accountability to provide technical assistance to states and territories on program integrity and accountability, including targeting technical assistance to states to support reauthorization requirements.
    FY2024 Q4
    Completed
    Training
    HHS's planned corrective action for states reporting in FY 2024 Child Care and Development Fund program include continuing to provide targeted technical assistance based on the reported specific causes of errors for the states. Some states reporting in FY 2024 have planned corrective actions that include fixing system errors and implementing new, enhanced systems; providing guidance, training, and technical assistance to eligibility staff; reviewing and updating policies and procedures manuals and providing policy clarifications to eligibility staff; meeting with state eligibility agencies to discuss errors; and continuing audit, monitoring, and review efforts.
    FY2026
    Planned

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M

Overpayments are outside of HHS's control because the Child Care and Development Fund is a federally funded, state-administered block grant program, with funds awarded to states/recipients who then disburse funds to sub-recipients. Under the Child Care and Development Block Grant Act of 2014, states have flexibility within federal guidelines over key policy levers—including subsidy payment rates, co-payment amounts contributed by the family, income thresholds for determining eligibility, and quality improvement investments. Each state has maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state.
Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $776.05 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $776.05 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Outside Agency Control Contractor or Provider Status $776.05 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $67.45 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $67.45 M

Eligibility element/information needed Eligibility amount
Contractor or Provider Status $67.45 M

Mitigation strategies taken Mitigation strategies planned
Training Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$67.45 M

Unknown Payment Details

Evaluation of corrective actions

HHS's planned actions for the Child Care and Development Fund program are adequate because HHS received specific root causes of errors and associated corrective actions identified by each reporting state under the policies unique to the state. HHS provided and will continue to provide targeted technical assistance based on the reported specific causes of errors for the state. Historically, training, and targeted technical assistance have been the primary methods used to address improper and unknown payments in the program. The reduction in the unknown payment rate from 2.41% in FY 2023 to 0% in FY 2024 and the maintenance of an error rate that is consistently below the statutory threshold indicates that this approach is adequate.

The actions planned and taken, by HHS are adequate because for the Child Care and Development Fund program, HHS receives specific root causes of errors and associated corrective actions identified by each reporting state under the policies unique to the state. HHS provides targeted technical assistance based on the reported specific causes of errors for the state. Further, the maintenance of an improper payment rate that is consistently below the statutory threshold indicates that this approach is adequate.

The actions taken by HHS are focused on the cause of the Improper Payments in the Child Care and Development Fund program because the assistance is targeted to address the root causes of errors identified by each reporting state. Further, HHS conducts site visits with individual states. In addition, joint case reviews that include federal and state staff are conducted for each reporting state.

The effective implementation and prioritization of corrective actions for the Child Care and Development Fund program are evidenced in HHS's requirement that states with improper payment rates exceeding 10 percent are required to submit a formal Corrective Action Plan, which leads to additional monitoring and oversight of the implementation of the corrective actions. Further, HHS receives and reviews specific root causes of errors and associated corrective actions identified by each reporting state under the policies unique to the state. Based on these reviews, HHS provides targeted technical assistance for the reported specific causes of errors for the states. In addition, the unknown payment rate for the Child Care and Development Fund Program decreased from 2.41% in FY 2023 to 0% in FY 2024.

Future payment integrity outlook

Administration for Children and Families (ACF) - Child Care and Development Fund has established a baseline.

The reduction target is less than the estimated future Improper Payment and Unknown Payment rate for the Child Care and Development Fund program because the program has sufficient data to establish a baseline. This baseline is based on actual data target data reported by states over a three year reporting period. This three year reporting period is significant because approximately one-third of states report each year. Having three years of data results in each state's data being considered in the calculation of a reduction target.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $20,255 M
Current year +1 estimated future improper payments $1,012.75 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 5.0 %
Current year +1 estimated future improper payment and unknown payment reduction target 4.91 %

The program's current year improper payment and unknown payment rate of 4.93 % has been achieved with a balance of payment integrity risk and controls and represents the lowest rate that can be achieved without disproportionally increasing another risk, therefore it is the tolerable rate.

The Child Care and Development Fund program knows that the Improper Payment and Unknown Payment rate has reached a tolerable rate because the rate has been relatively stable for several years, with fluctuations not exceeding +/- 1.5% year-over-year across two full reporting cycles. Each state reports data once every three years, with approximately one-third of states reporting each year, resulting in six years of total data and two years of data for each state.

HHS has resources to reduce improper payments and unknown payments to the tolerable rate for the Child Care and Development Fund program. However, an increase in funding that includes a request to increase the federal administrative set-aside to improve accountability and oversight for the Child Care and Development Fund from one half of one percent to one percent was requested in the HHS FY 2025 Justification of Estimates for Appropriations Committees to maintain and augment its ability to reduce improper payments and unknown payments to the tolerable rate. Dedicated federal administrative funds are used for federal staff, program supports, IT/data systems modernization and maintenance, program oversight, and accountability, and overhead costs. Further, up to one-half of one percent of the Child Care and Development Fund program funding is reserved for the provision of training and technical assistance. ACF provides this technical assistance through targeted support, intensive and long-term engagement with recipients, peer-to-peer learning opportunities between the states, information briefs and toolkits, and other strategies that are responsive to recipient requests for support. The increase in training and technical assistance funding in FY 2023 resulted in continued investment in technical assistance to support recipients in improving their IT systems, including enrollment and eligibility tools for families and payments processes for providers, in order to improve the family and provider experience in the child care system. It also allowed for investments in other efforts to support recipients, including efforts related to payment practices, rate setting, and increasing access for families.

The HHS FY 2025 Justification of Estimates for Appropriations Committees includes a request to increase the federal administrative set-aside from one half of one percent to one percent to improve accountability and oversight for the Child Care and Development Fund. Dedicated federal administrative funds are used for federal staff, program supports, IT/data systems modernization and maintenance, program oversight, and accountability, and overhead costs. An increase to one percent will allow HHS to improve feedback timelines and increase support for recipients, including efforts related to payment practices, rate setting, and increasing access for families.

Additional programmatic information

The Child Care and Development Fund program is a federally funded, state-administered block grant program with each state having maximum flexibility in developing the Child Care and Development Fund programs and policies that best suit the needs of children and families within that state. States tailor their review of errors to reflect the policies and procedures unique to their state and therefore, states have varying requirements for establishing and verifying a client’s eligibility.
For this reason, there is not a common lexicon for root cause data/eligibility themes across states and current Child Care and Development Fund program regulations do not require states to collect and report the root cause of errors in pre-determined categories. The data used to calculate and report improper and unknown payments data is collected by the states and aggregated at the federal level, and states are not required to report dollar amounts associated with individual root causes. Therefore, while the specific root causes of errors and associated corrective actions are identified by each reporting state under the policies unique to the state, the errors are consolidated into one control cause category for this aggregate reporting at the federal level.

Accountability for detecting, preventing, and recovering improper payments

HHS evaluates its processes and controls each year in accordance with the requirements of the Office of Management and Budget Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Controls, which includes Appendix C, Requirements for Payment Integrity Improvement. As part of this annual assessment, HHS requires its offices to complete an Internal Control and Risk Management Certification that is signed by a senior member of the applicable office. Further, the HHS Operating Division prepares an assurance statement which represents the HHS Operating Division head's informed judgement as to the overall adequacy and effectiveness of Internal controls within the HHS Operating Division related to operations, reporting, and compliance. In addition, non-federal entities that receive federal funds, including states, local governments, tribes, and non-profit organizations, are subject to audit requirements under the Single Audit Act of 1984, as amended in 1996. The implementing guidance, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, that was in effect during FY 2023, required Single Audits for nonfederal entities that expend $750,000 or more in federal awards during the nonfederal entity’s fiscal year. With the Office of Management and Budget's April 2024 released revisions to the Uniform Guidance, the threshold increases to $1,000,000 effective October 01, 2024. In addition to the improper payment error rate calculation activities, overpayments are identified and recovered through Single Audits and HHS Office of Inspector General audits. For each of the aforementioned activities, recipients are subject to disallowances for any expenditures not made in accordance with program regulations.

  • FY 2025 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    10/2023 - 09/2024


    Confidence interval:

    90% to <95%


    Margin of error:

    +/-5.0

Causes

The primary root causes of the improper payments and unknown payments in the FY 2025 Child Care and Development Fund (CCDF) program were missing or insufficient documentation in case records and administrative errors in applying eligibility policies. CCDF did not have any unknown payments in FY 2025.

In some sampled cases, required eligibility verification materials—such as income documentation, employment or education verification, and provider authorization records—were either incomplete, outdated, or not retained in the file. When case records lacked the documentation needed to confirm eligibility, payments could not be validated during the review process, resulting in improper or unknown payments.

Administrative errors in applying eligibility policies were an additional contributor to improper payments. Errors included incorrect calculations of family income, calculation of care needed, and incorrect assessment of family copayments.

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M
Amount of overpayments outside the agency's control $845.47 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
Amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
Amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $845.47 M

Underpayment root cause Underpayment amount
Amount of underpayments $75.99 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $75.99 M

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

The amount that could either be proper or improper but the agency is unable to determine whether it was proper or improper as a result of insufficient or lack of documentation $0.0 M

Prevention

HHS has planned and implemented a series of corrective actions to address the root causes of improper payments and unknown payments in the FY 2025 Child Care and Development Fund (CCDF) program. Over the course of FY 2025 and extending into FY 2026, HHS will continue providing targeted technical assistance (TA) to states based on the specific causes of errors identified in their reporting.

States reporting in FY 2025 plan to initiate corrective measures including the development or enhancement of eligibility and case-management systems and the issuance of updated guidance and training to eligibility staff. Several states also plan to review and update their policy and procedures manuals to address identified vulnerabilities and ensure clearer guidance for front-line staff. In addition, some states are holding structured meetings with eligibility agencies to discuss errors, clarify requirements, and develop sustainable approaches to eliminating repeat error types. States also conduct ongoing monitoring, audit activities, and quality-assurance reviews as part of their long-term strategy for preventing improper and unknown payments. These state-level corrective actions are expected to continue into FY 2026.

At the federal level, HHS employed training as a central corrective action throughout FY 2025. In addition, HHS conducted virtual site visits with states needing targeted support to address identified root causes of errors. These oversight and technical assistance activities will continue through FY 2026 based on state needs. During these activities, HHS provided technical assistance on policy and procedural changes required to meet the Child Care and Development Block Grant (CCDBG) Act of 2014, ensuring that states understand and implement the statutory requirements that reduce improper payment risks.

To further strengthen accountability and program integrity, HHS conducted joint case reviews with reporting states during FY 2025, bringing together both state and federal partners to identify process weaknesses and ensure consistent interpretation of eligibility requirements. Additionally, HHS funded the Office of Child Care’s National Center on Subsidy Innovation and Accountability, which continues to provide focused TA to states and territories on program integrity. This federal support is ongoing and is expected to continue through FY 2026, ensuring that states have continuous access to expertise and resources to prevent future improper and unknown payments.
HHS’s planned actions for the Child Care and Development Fund program are adequate because the agency receives detailed information from each reporting state on the root causes of errors and the corresponding corrective actions taken under state-specific policies. Using this information, HHS has provided—and will continue to provide—targeted technical assistance tailored to the identified causes of errors in each state. Historically, training and targeted technical assistance have been the primary strategies for reducing improper and unknown payments in the program. The program has consistently maintained an error rate below the statutory threshold, demonstrating that this approach is effective.

HHS implements and prioritizes corrective actions for the Child Care and Development Fund (CCDF) program through a structured, root-cause–driven approach that ensures interventions directly address the underlying sources of Improper Payments and Unknown Payments. Each reporting state is required to identify specific causes of errors based on its own policies and administrative processes, allowing HHS to tailor corrective actions to the state’s needs. These corrective actions are further strengthened by federal–state collaboration, including ongoing oversight and technical assistance activities and joint case reviews, which provide opportunities for real-time feedback, and clarification of policy questions.

Corrective actions are also prioritized based on risk, particularly for states with improper payment rates exceeding the statutory 10-percent threshold. These states must submit a formal Corrective Action Plan, triggering heightened federal oversight and targeted technical assistance from HHS. This prioritization model ensures resources are directed to areas where noncompliance or systemic weaknesses pose the greatest risk. The adequacy of these corrective actions is reflected in the CCDF program’s consistently low improper payment rate and HHS’s ability to sustain performance below statutory limits.

Payment type Mitigation strategies taken Mitigation strategies planned
Overpayments Training Training
Underpayments Training Training

Eligibility element/information needed Description of the eligbility element/information
Contractor or Provider Status Status or standing of contractor or provider, including recipient eligibility to provide medical services

Additional information

The Child Care and Development Fund (CCDF) program is a federally funded, state-administered block grant program that gives states flexibility to design programs and policies that best suit the needs of children and families in their states. States tailor their review of errors to reflect the policies and procedures unique to their state and therefore, states have varying requirements for establishing and verifying a client’s eligibility.

For this reason, there is not a common lexicon for root cause data/eligibility themes across states and current CCDF program regulations do not require states to collect and report the root cause of errors in pre-determined categories. The data used to calculate and report improper payments data is collected by the states and aggregated at the federal level, and states are not required to report dollar amounts associated with individual root causes. Therefore, while the specific root causes of errors and associated corrective actions are identified by each reporting state under the policies unique to the state, the errors are consolidated into one control cause category for this aggregate reporting at the federal level. Although this approach limits the level of detail available in nationwide reporting, it preserves state flexibility and supports targeted corrective actions that reflect each state’s program design.

Reduction target

4.67 %

HHS has the internal controls, human capital, information systems, and related infrastructure needed to reduce improper and unknown payments to a level at which further reductions would exceed the cost of additional corrective actions. The agency leverages dedicated federal administrative funds to support a skilled workforce, maintain and modernize IT and data systems, and strengthen program oversight and accountability functions. Additionally, HHS invests in comprehensive training and technical assistance for Child Care and Development Fund (CCDF) recipients—funded at up to one-half of one percent of the program’s appropriation—to improve state and territory capacity to implement effective prevention, detection, and reporting practices. These combined resources and supports ensure that HHS can monitor program integrity efficiently and cost-effectively, maintaining improper payments at a tolerable rate consistent with statutory and administrative requirements.

The most recent budget submissions request will maintain current resources to support payment integrity efforts within CCDF. Funding is directed toward maintaining the capacity to detect, prevent, and reduce improper payments, as well as to support states in implementing stronger eligibility verification and program integrity controls. The budget also emphasizes investments in technical assistance and training for states to improve compliance with federal requirements. These resources aim to ensure that CCDF funds are used appropriately and reach the families and providers for whom they are intended.

HHS employs a multilayered approach to ensure that executive managers, program officials, and, where appropriate, state and local governments are held accountable for meeting improper payment reduction goals. Each year, HHS conducts a comprehensive assessment of internal controls in accordance with OMB Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Controls, including Appendix C, which specifically addresses payment integrity improvement. As part of this process, senior officials in each HHS office must complete and sign an Internal Control and Risk Management Certification, affirming their responsibility for maintaining effective controls that prevent, detect, and reduce improper payments. Operating Divisions also submit annual assurance statements, which require leadership to evaluate and attest to the adequacy of internal controls over operations, financial reporting, and compliance—including controls related to payment accuracy.

Beyond federal leadership accountability, HHS ensures that states, local governments, tribes, and nonprofit organizations receiving federal funds meet accountability standards through the Single Audit process. Entities that expend at least $1,000,000 in federal awards are required to undergo an annual Single Audit. These audits evaluate if recipients have effective controls in place and if federal funds, including Child Care grants, are spent in accordance with applicable requirements. Findings from Single Audits and HHS Office of Inspector General (OIG) audits are used to identify overpayments and may result in the repayment of disallowed costs, complementing enforcement mechanisms for improper payment recovery.
HHS further reinforces accountability by using audit results, monitoring activities, and internal reviews to guide corrective action expectations for both internal leadership and external recipients. Executive managers and program offices are expected to address identified weaknesses promptly, and failure to do so can influence performance evaluations and oversight decisions. Collectively, these steps create a robust framework that emphasizes oversight, prevention, and timely recovery of overpayments, ensuring all levels of program administration are responsible for maintaining strong payment integrity.

$75.99 M