Child care certificates, also referred to as vouchers, are issued by Lead Agencies directly to parents to confirm eligibility for payment for child care. States[2] may issue certificates of eligibility before parents select a provider, but certificates are often linked to a specific provider of the parent’s choice.

Some Lead Agencies also provide services through grants or contracts with eligible providers to directly serve CCDF-eligible families. Grants and contracts may be used for increasing supply and quality of services for children in underserved areas and underserved populations (such as children with special needs or infants and toddlers), or for coordinating services with other programs (such as Head Start (HS), Prekindergarten, or afterschool care). Grants and contracts are also used to increase the supply of high-quality care.

The CCDBG Act emphasizes that Lead Agencies should increase the number and percentage of low-income children in high-quality settings. Lead Agencies have flexibility in determining the payment mechanisms for providing eligible low-income families with assistance. However, when grants and contracts are used, Lead Agencies must give parents the option of a child care voucher, even if a contracted slot is available.

Lead Agencies must ensure that, to the extent possible, parents have the opportunity to choose from the full range of eligible child care settings. This supports families’ needs and preferences for their children. Child care settings include center-based care, family child care (FCC), and in-home child care.

Regardless of which payment strategy is used, parents must have unlimited access to their children while they are in the child care setting during operating hours. Lead Agencies must certify and describe the procedures that ensure unlimited parental access.

Lead Agencies must identify shortages in the supply of high-quality child care providers that meet parents’ need and preferences. Existing needs assessments and population data collected by State Advisory Councils, Head Start State Collaboration Offices, child care resource and referral agencies, and Head Start and Early Head Start grantees may help states make a determination of which needs are most pressing and how best to target state and CCDF funds to build the supply of quality care for particular populations.

States must also include whether they plan to use grants and contracts in building supply, and how supply-building mechanisms will address the needs identified. Their descriptions must

• identify shortages in the supply of high-quality child care providers,
• list the data sources used to identify shortages, and
• describe the method of tracking progress to support equal access and parental choice.

The key to increasing access to child care for at-risk populations is increasing the supply of child care services in underserved areas and for targeted groups. The law and final rule require states to develop strategies for increasing the supply and quality of child care services for these groups:[3]

• Children in underserved areas
• Infants and toddlers
• Children with disabilities
• Children in nontraditional-hour care.

These strategies may include using grants and contracts, targeted FCC Support, start-up funding, technical assistance support, recruitment of providers, tiered payment rates to providers, support for improving business practices, accreditation supports, child care health consultation, mental health consultation, and other strategies identified by the state. States must report in their CCDF Plans which strategies they use to increase the supply and improve the quality of child care services for underserved populations.

The use of grants and contracts, as well as vouchers, is an allowable strategy for addressing the needs of underserved populations and communities. States can award grants and contracts to providers in order to provide financial incentives to offer care for special populations, require higher quality standards, and guarantee certain numbers of slots to be available for low-income children eligible for subsidy.

Grants and contracts can provide financial stability for child care providers by paying in regular installments, paying based on maintenance of enrollment, or paying prospectively rather than on a reimbursement basis. Without stable funding, it can be difficult for providers—particularly those in low-income or rural communities—to pay for the higher costs associated with providing high-quality child care. States are encouraged to explore how grants and contracts can be used as part of a strategy to increase the supply of high-quality care. While Lead Agencies may use grants and contracts to build supply, they must still provide CCDF families with the option of choosing a certificate or voucher to access child care.[4]

Grants and contracts may be used to support the following:

• Family child care networks
• Start-up funding
• Technical assistance support
• Recruitment of providers
• Tiered payment rates
• Support for improving business practices, such as management training, paid sick leave, and shared services
• Accreditation supports
• Child care health consultation
• Mental health consultation
• Existing needs assessments and population data collected by State Advisory Councils, Head Start State Collaboration Offices, CCR&R, and Head Start and Early Head Start grantees may help states make a determination of which needs are most pressing and how best to target state and CCDF funds to build the supply of quality care for particular populations.

Lead agencies must also prioritize investments for increasing access to high-quality child care and development services for children of families in areas that have significant concentrations of poverty and unemployment and do not currently have sufficient numbers of such programs.

[1] CCDBG Act of 2014 658E(c)(2)(A), 658P(2); Child Care and Development Fund, 45 C.F.R. § 98.30(a) (2016).

[2] CCDF regulations define state as follows: “any of the states, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, the Commonwealth of the Northern Marianas Islands, and includes tribes unless otherwise specified” [Child Care and Development Fund, 45 C.F.R. § 98.2 (2016)]. For ease of reading, the term state is used inclusively throughout this resource unless otherwise specified.

[3] CCDBG Act of 2014 658 E(c)(2)(M); Child Care and Development Fund, 45 C.F.R. § 98.46(b) (2016).

[4] CCDBG Act of 2014 658 E(c)(2)(A); Child Care and Development Fund, 45 C.F.R. § 98.46(b) (2016).