House passes bill to change federal childcare operations

On June 3, the House of Representatives passed bill HR 7726, The Stop Child Care Scams Act of 2026. The bill continues efforts begun early in the year to establish new requirements in the Child Care and Development Block Grant Program (CCDBG) also known as the Child Care and Development Fund (CCDF) to combat alleged fraud. In the Rules Committee, HR 7726 combined a number of earlier pieces of legislation considered by the House Education Committee in March, which had a mix of partisan and bipartisan support before passing through the chamber in a final 217-207 vote along party lines.

In their press release on the passage, Republicans mentioned a commitment to ensuring CCDBG funds support the people they are intended to serve and to helping the government recover funds lost to fraud. The release references a Government Accountability Office Report from 2020[1] which found a 4% improper payment rate in the CCDBG fund.

Democrats expressed concern that despite a shared commitment to reducing fraud in government programs, no evidence of widespread fraud has been found to exist in the CCDBG program and that the combined elements in the bill could inadvertently harm families and children. Among the challenges, they believed the legislation could add unnecessary layers of additional and costly bureaucracy, create confusion on how important decisions affecting program funds and operations would be made, and disqualify programs for paperwork errors.

HR 7726 would:

• Require, rather than allow, the Secretary of Health and Human Services (hereafter "the Secretary") to disqualify states from receiving financial assistance for a finding of noncompliance
   
• Ensure that the state Child Care Development Fund (CCDF) plans include descriptions of the state’s internal controls for program integrity and accountability
   
• Debar CCDBG providers receiving a final determination of fraud from receiving additional financial assistance. Debar providers receiving funds from the Child and Adult Care Food program receiving a final determination of fraud from receiving those nutrition funds. Add that providers debarred from the Child and Adult Care Food Program (CACFP) would lose the ability to participate in the CCDBG program, and vice versa.
   
• Create a threshold of a 5% improper payment rate for states, and establishes that, if the improper payment rate is above 5% for 2 consecutive years, the state will be ineligible for all funds, while allowing the Secretary to be the final arbiter of withholding or providing funds to that state
   
• Establish 3-year periodic monitoring by the Secretary, under which the Secretary will designate “high-risk” states and subject those states to “additional monitoring as determined by the Secretary”
   
• Eliminate the authority to waive sanctions on states including for such reasons as a conflict of the sanctions with the state’s ability to carry out the purposes of the law, allowing time for state legislatures to implement provisions, and extraordinary circumstances such as natural disaster or financial crisis
   
• Require the Comptroller General to conduct a study within 2 years regarding fraud prevention measures in early childhood, child care, and child nutrition programs (Head Start, CCDBG, and CACFP) including to identify whether the data collected by the federal government is sufficient to successfully identify fraud
   
• Require States to submit to the Secretary an annual report disaggregated by payment categories to include technically improper payments (system error payments), non-fraudulent overpayments and underpayments, and “suspected and verified fraudulent payments”

Organizations representing childcare supporters, such as First Five Years Fund and Child Care Aware of America, have been raising alarm that a number of components within the combined legislation could be deeply harmful to an unnecessarily broad universe of states, providers and families that had not engaged in fraudulent activities.

“Fraud or misuse of childcare funds is unacceptable,” the First Five Years Fund wrote. “At the same time… this bill not only misses the opportunity to strengthen childcare but could have sweeping negative consequences for states, providers and families.”

The bill now moves on to the Senate for consideration.