Discretionary funds: Discretionary funds are 100 percent federal funds and are allocated to states using a proportional formula based on three factors:
- The young child factor: The state’s share of children younger than age 5
- The school lunch factor: The state’s share of children receiving free or reduced-price lunch
- The allotment proportion factor: The state’s per capita income (averaged over 3 years)
Mandatory funds: These are 100 percent federal funds. Each state’s share of the funds is based on the federal share of its funding for the now repealed Aid to Families with Dependent Children (AFDC)-linked child care programs (AFDC, JOBS Child Care, Transitional Child Care, and At-Risk Child Care). The share is based on federal funds received in FY 1994, FY 1995, or an average of funds received in FY 1992–1994, whichever is greater.
Matching funds: Matching funds are remainder funds, that is, the difference between the amount appropriated by Congress for a given year (under section 418(a)(3) of the Social Security Act), less amounts reserved for technical assistance, research, and tribal mandatory funds, and the amount of mandatory funds distributed to states. Matching funds are allocated to states on the basis of the number of children younger than age 13, compared with the national total of children younger than age 13. (The data are to be based on the best that are available for the second year preceding the allocation.)
To receive these funds, a state must
- provide matching funds at the current Medicaid match rate,
- obligate the federal and state share of matching funds in the year in which the matching funds are awarded,
- obligate all of its mandatory funds in the fiscal year in which the mandatory funds are awarded, and
- obligate and expend its maintenance of effort (MOE) funds in the year in which the matching funds are awarded.
Note: The term state, as used in this document, generally includes territories except when specifically referring to CCDF mandatory or matching funds. Territories do not receive mandatory or matching funds.
States may meet the match requirement through expenditures of the following:
- Public funds: Public funds appropriated directly to the state’s Lead Agency may be used to meet state match requirements. Public funds may include general revenue funds, county or other local public funds, state-specific funds (tobacco tax, lottery), or any other public funds. Match requirements may be met by expenditure of public funds transferred from another public agency to the Lead Agency, as long as they are under the administrative control of the Lead Agency or certified by the contributing public agency as representing expenditures eligible for federal match. Federal funds or funds used to match other federal funds may not be used to meet CCDF match requirements, unless authorized by federal law to be used to match other federal funds. 
- Public prekindergarten funds: In any fiscal year, a state may use public prekindergarten funds for up to 30 percent of the required match and up to 20 percent of the MOE requirement.  Public prekindergarten expenditures may be eligible for match if the state includes in its CCDF Plan a description of the efforts it will undertake to ensure that prekindergarten programs meet the needs of working parents. The assessment of the prekindergarten limitations will take place at the end of the applicable fiscal year, and not by quarter. 
- Private donated funds: The state match may include donated funds from private sources. The funds must be certified both by the state Lead Agency and either the donor or the entity designated by the Lead Agency to receive privately donated funds. In order for donated funds to be counted toward the match, the funds must have been donated without any restriction that would require their use for a specific individual, organization, facility, or institution, and may not revert to the donor’s facility or use. Additionally, the funds may not be used to match other federal funds and must be subject to audit.  Donated funds do not need to be under the administrative control of the Lead Agency to qualify as an expenditure for federal match. However, Lead Agencies do need to identify and designate in the CCDF Plan the donated funds given to public or private entities to implement the CCDF child care program.
In-kind contributions and parent copayments for child care services are not eligible state expenditures for meeting match requirements. 
Maintenance of effort (MOE): MOE means that a state must continue to expend its own funds at the level at which it was matching the former AFDC-linked child care programs in FY 1994 or FY 1995, whichever was greater.
The CCDF final rule clarifies that public prekindergarten funds may also serve as maintenance-of-effort funds as long as the state can describe how it will coordinate prekindergarten and child care services to expand the availability of child care while using public prekindergarten funds as no more than 20 percent of the state’s maintenance of effort or 30 percent of its matching funds in a single fiscal year. If expenditures for prekindergarten services are used to meet the maintenance-of-effort requirement, the state must certify that it has not reduced its level of effort in full-day, full-year child care services.
 Child Care and Development Fund, 45 C.F.R. §§ 98.55, 98.60, 98.61, 98.62, 98.63 (2016).
 Child Care and Development Fund, 45 C.F.R. § 98.55(e)(1) (2016).
 CCDF state Match Provisions final rule, published May 18, 2007, with an effective date of October 1, 2007 (72 Fed. Reg. 27,972). This final rule revised the CCDF regulations to give states increased flexibility in making the necessary state expenditures on child care to access their full allotment of CCDF federal matching funds.
 Child Care and Development Fund, 45 C.F.R. § 98.53(h) (2016).
 Child Care and Development Fund, 45 C.F.R. § 98.55(e)(2) (2016).
 Child Care and Development Fund, 45 C.F.R. § 98.55(g) (2016).