Stop Child Care Funding Fraud Act of 2026
- Sponsor
- Rep. Kennedy, Mike [R-UT-3]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Mar 4, 2026
Bottom line
The bill aims to reduce fraud and improper payments in federal child care subsidies by imposing reporting requirements and financial penalties on states that fail to meet accountability standards.
What it actually does
This bill amends the Child Care and Development Block Grant Act of 1990 to require states to report their rates of improper payments of federal child care funds and to implement corrective action plans if these rates exceed 6 percent. It establishes financial penalties, reducing federal grant allocations by 5 to 15 percent, for states with improper payment rates above specified thresholds until compliance is achieved. The bill also mandates that the Secretary's annual report to Congress include a state-by-state breakdown of improper payment rates and corrective actions.
Proponents argue
Proponents argue that the bill is essential for ensuring fiscal responsibility and protecting taxpayer dollars by holding states accountable for the proper use of federal child care funds. They contend that reducing improper payments will free up resources to serve eligible families more effectively and increase public trust in government programs.
Opponents contend
Opponents might argue that while accountability is important, the bill's punitive financial penalties could inadvertently harm vulnerable families by reducing the overall availability of child care services in states struggling with administrative capacity. They may also contend that the new reporting and documentation requirements impose unfunded mandates on states and providers, diverting resources from direct service provision.
The bill is short and clearly written, making it accessible for a quick and informed read.
Section 2(a), adding 42 U.S.C. 9858i(c)(1)
State Reports of Improper Payments
This provision requires each state to submit a report to the Secretary of Health and Human Services by June 30 of each program period. The report must detail the rate of improper payments made with federal child care funds and outline the specific actions the state plans to take to reduce this rate in future periods.
Supporters argue
Proponents argue that this reporting requirement is a crucial first step towards greater transparency and accountability, providing essential data for identifying and addressing fraud and waste in federal child care programs.
Critics contend
Opponents might contend that this adds an unfunded administrative burden on states, potentially diverting resources that could otherwise be used for direct child care services.
Tradeoffs
The provision balances the need for data-driven accountability with the potential for increased administrative costs for states.
Section 2(a), adding 42 U.S.C. 9858i(c)(2)
Incentive Penalties for High Improper Payments
This provision establishes a system of escalating financial penalties for states with high rates of improper payments. States with rates between 6% and 8% face a 5% reduction in federal funds, 8% to 10% incur a 10% reduction, and rates at or above 10% result in a 15% reduction. These penalties apply to subsequent program periods until the state implements a certified corrective action plan.
Section 2(a), adding 42 U.S.C. 9858i(c)(3)
State Corrective Action Plans
If a state reports an improper payment rate exceeding 6 percent, it must submit a corrective action plan to the Secretary within 60 days of its report. This plan must detail how the state will reduce its improper payment rate to 6 percent or less and must include verified child attendance documentation for subsidized child care services, presented in an aggregated, non-personally identifiable format.
Section 2(a), adding 42 U.S.C. 9858i(c)(4)
Definition of 'Improper Payment'
This section defines 'improper payment' for the purposes of the Act. It includes payments that exceed or are less than the correct amount, payments made to ineligible children, or payments for services that cannot be verified as compliant with the Child Care and Development Block Grant Act.
Section 2(b), amending 42 U.S.C. 9858j(a)
Enhanced Federal Reporting on Improper Payments
This provision amends the existing requirement for the Secretary to submit an annual report to Congress. The amended requirement specifies that this report must now be disaggregated by state and include a state-by-state breakdown of improper payment rates, along with the actions each state has taken to reduce those rates.
The requirement for states to include 'verified child attendance documentation' in their corrective action plans, in an aggregated format that does not contain personally identifiable information and that does not disclose identifiable child-level data.
Section 2(a), adding 42 U.S.C. 9858i(c)(3)
Why it matters:This is likely standard legislative practice to include specific operational requirements within the broader framework of a program's administration, rather than an attempt to obscure it.
Case for: Proponents would argue that this specific requirement is crucial for ensuring the integrity of payments, as verified attendance directly confirms that services were rendered to eligible children.
Case against: Critics might argue that defining 'verified' and implementing systems to collect this data in a non-personally identifiable, aggregated format will be a significant and potentially costly administrative challenge for states and child care providers.
Estimated impact: Could significantly increase administrative costs and data collection complexity for states and child care providers nationwide.