Reimbursement for Services, Including Medicaid and Child Care, for Head Start Children and Families

ACYF Administration on Children, Youth and Families	U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Administration for Children and Families
	1. Log No. ACYF-IM-HS-95-27	2. Issuance Date: 07/24/95
	3. Originating Office: Head Start Bureau
	4. Key Word: Reimbursement and Cost Allocation

INFORMATION MEMORANDUM

TO: Head Start Grantees and Delegate Agencies

SUBJECT: Reimbursement for Services, Including Medicaid and Child Care, for Head Start Children and Families

PURPOSE: The purpose of this memorandum is to clarify a long standing policy in the Head Start program that encourages grantees to use Head Start funds wisely and appropriately by following good business practices.

Specifically, the policy deals with grantees that use Head Start funds for services which are allowable under the Head Start Act and applicable cost principles, and which are reimbursed by other Federal or nonfederal sources or are otherwise available to Head Start children and families. An example, familiar to most grantees, is the United States Department of Agriculture's (USDA) Child and Adult Care Food Program. In this program, Head Start grantees expend their Head Start resources for these services and are subsequently reimbursed by USDA.

BACKGROUND AND GENERAL REIMBURSEMENT POLICY

The general concept that forms the basis of our reimbursement policy is that the expenditure of Head Start funds must be for services or costs which are necessary and reasonable for the operation of a Head Start program and which are allowable expenditures under the Head Start Act and applicable cost principles. However, it has always been our position that the Head Start program should be the "payer of last resort" when another funding source has Primary responsibility for providing a service.

Ideally, when Head Start children are in need of services which are the primary responsibility of another agency, that agency would provide the services directly. However, in many cases, this is not possible because of a shortage of providers (in the Medicaid program, for example). In such circumstances a grantee may expend Head Start resources for allowable costs, under an approved budget, even though there is another funding source specifically established to provide or fund the services. In the case of Medicaid, grantees should apply to the State Medicaid agency for provider status in order to be eligible for reimbursement.

REIMBURSEMENT FOR CHILD CARE

The Report of the Advisory committee on Head Start Quality and Expansion and the reauthorization of the Head Start Act move the Head Start program in two important areas, among others: serving pregnant women and children from birth to age 3, and increased services to families who need full-day services to meet job training or employment objectives. In both of these areas, child care will be an important service.

In the recent guidance for use of funding increases, Head Start grantees were authorized to use a portion of their increase to provide full-day, full-year child care services to Head Start families who need such services. Therefore, as long as the child care services are part of the wide range of services provided to children enrolled in Head Start and the comprehensive nature of the service is maintained, "child care" is an allowable cost under the Head Start program.

Although Head Start grantees may provide full-day, full-year child care using Head Start dollars when necessary, funding for child care services is available from several ACF child care programs which serve low-income families. These programs are explained in the attachment. They include the Child Care and Development Block Grant (CCDBG) and programs administered under title IV-A of the Social Security Act (AFDC child care, Transitional Child Care, and At-Risk Child Care.)

The Head Start Bureau recognizes that these other funding sources may have limitations in either statute or regulation regarding how much can be paid for services. These limitations are determined by formula, by actual costs in a geographic area, or by other methods, and they affect Head Start grantees in very specific, locally-determined ways. Since these programs, administered by States, Territories or Tribes, allow a wide range of options for implementation, the guidance in this Memorandum is only intended to apply on a general basis.

BUDGET AND COST CONSIDERATIONS

Where feasible, grantees should develop their child care programs, including cost sharing agreements, in conjunction with other child care funding agencies in order to take advantage of these other funding sources. As long as cost sharing arrangements are worked out and approved in advance, no on-going cost allocation procedures would be necessary to separate the child care costs from other Head Start costs. Rather, grantees which rely on reimbursement for a substantial part of their operating budgets should explicitly address the other funding source(s) in their Head Start refunding application. For example, the Federal funding official needs to know about the arrangements with the other agencies, any issues that might affect the level or timing of the planned reimbursement, and any documentation needed by the funding sources involved. When the application is approved and the grantee's budget is funded, the planned reimbursement is an integral part of the operation of the program. Substantial deviation from the approved budget (e.g., a large number of "no-shows" in a child care program reduces potential reimbursement) should be brought to the attention of the Federal funding official promptly so that a revised budget can be approved.

Careful documentation of the reimbursement arrangements and the approval of the Federal funding official will assist auditors and Federal reviewers when Head Start program financial records are reviewed. Specifically, the documentation should provide sufficient information so that auditors can understand the flow of funds in all relevant accounts. It is especially important to avoid interfund transfers (transfers in which funds from one funding source are used to cover shortfalls in another) which could lead to a disallowance of the costs. Finally, of course, if a program provides child care services to additional children who are not Head Start-eligible, or eligible but not enrolled, such costs would have to be charged exclusively to other sources as appropriate.

CONCLUSIONS AND RECOMMENDATIONS

Head Start grantees should assure that providing needed services to children and families is their highest priority. Where services can be provided by referring children and families to other programs, then referral arrangements should be made. Where Head Start dollars are needed to provide the services but reimbursement is available, then reimbursement for as large a share of the costs as possible should be negotiated. In this context, reimbursement could be in the form of payments from agencies or from individuals in the form of vouchers or similar payment mechanisms. We recognize that reimbursement may, in some cases, be for less than one hundred percent of the cost of providing the services. However, reimbursement and cost issues should not deter grantees from providing needed services to children and their families.

Grantees should review their current practices to assure that they are receiving appropriate reimbursement from USDA, Medicaid, child care and other sources. In addition, grantees should look for other Federal, State, or local programs which could provide funding for services currently paid for by Head Start.

Inquiries about this memorandum should be directed to your Regional office or to the American Indian or Migrant Programs Branch.

This memorandum has been jointly developed and is supported by the Head Start Bureau and the Child Care Bureau.

Attachment: Child Care Programs Administered by the ACYF Child Care Bureau

/S/
Helen H. Taylor
Associate Commissioner
Head Start Bureau

cc: Regional Administrators
American Indian and Migrant Programs Branches

CHILD CARE PROGRAMS ADMINISTERED BY THE ACYF CHILD CARE BUREAU

The Child Care Bureau is a newly formed unit in ACYF which provides a single locus for child care activities within ACF. The bureau seeks to enhance the quality, availability and affordability of child care services, to promote safe and healthy environments that support children's development, to enhance parental choice and involvement in their children's care, and to facilitate the linkage of child care with other community services. The Child Care Bureau also works with other ACYF bureaus to promote integrated family-focused services and coordinated delivery systems.

The Child Care Bureau consolidates in a single organization the responsibility for five Federal child care programs carried out under three legislative authorities as described below.

1. State Dependent Care Planning and Development Grants

The State Dependent Care Planning and Development Grant program (Pub. L. 98-55B as amended), enacted in 1986, provides funds to States and Territories through a formula grant. This program has been instrumental in the growth of child care resource and referral services and school-age child care programs over the past decade. Statutory requirements are located at 42 U.S.C. 9871; it was reauthorized by Pub.L. 103-252.

2. Family Support Act of 1988 (FSA)

The Family Support Act of 1988 (Pub.L. 100-485) amended title IV-A of the Social Security Act, by adding section 402(g), which significantly expanded ACYF's ability to fund child care services. The amendment created two new child care programs: AFDC Child Care and Transitional Child Care. Both of these programs are entitlement, and both require matching State funds. Statutory requirements are located at 42 U.S.C., section 602(g).

A. AFDC Child Care
The FSA guarantees child care necessary for working AFDC recipients and for AFDC recipients in approved education or training activities (including the Job opportunities and Basic Skills Training (JOBS) Program). This provision is often called AFDC child care or JOBS child care. The regulations for AFDC child care are located at 45 CFR part 255.

B. Transitional Child Care (TCC)
The FSA also addressed the need for transitional child care during the 12 months after a family becomes ineligible for AFDC due to work. The regulations specific to TCC are located at 45 CFR part 256. However, many of the regulations for AFDC child care (part 255) also apply to TCC.

3. Omnibus Budget Reconciliation Act of 1990 (OBRA '90)

With OBRA 190, Congress established two additional child care programs that further extended child care services to the Nation's low-income families: (1) an optional At-Risk Child Care program (child cake needed by low-income working families who are otherwise at risk of becoming eligible for AFDC); and (2) the Child Care and Development Block Grant (CCDBG) which also primarily serves working families.

A. At-Risk Child Care (ARCC)
OBRA 190 amended title IV-A of the Social Security Act by adding section 402(i), establishing the ARCC program. Though optional, the ARCC program has been implemented by all States and the District of Columbia. This program, like the other title IV-A child care programs, requires the State to match Federal funds. However, unlike these other programs, ARCC funding is capped and its funds are distributed according to a formula. The statutory provisions for ARCC are located at 42 U.S.C. 9858. The regulations are located at 45 CFR part 257.

B. Child Care and Development -Block Grant (CCDBG)
The CCDBG has been implemented by all States and Territories, the District of Columbia, and 226 Tribal grantees (of which 25 are Tribal consortia) . The purpose of the CCDBG is to increase the availability, affordability, and quality of child care services. This program offers Federal funding to States, Territories, and Federally-recognized Tribes and Tribal consortia in order to (1) provide low-income families with the financial resources to find and afford quality child care; (2) enhance the quality and increase the supply of child care for all families, including those who do not receive direct subsidies; (3) provide parents with a broad range of options in addressing their child care needs, particularly through the issuance of certificates; (4) strengthen the role of the family; (5) improve the quality of, and coordination among, child care programs and early childhood development programs; and (6) increase the availability of early childhood development programs and before and after school services. The statutory provisions for the CCDBG program are found at 42 U.S.C. 9858. Regulations are located at 45 CFR parts 98 and 99.

In support of these five child care programs, the Child Care Bureau develops policies, monitors service delivery systems, and provides technical assistance in close cooperation with ten ACF regional offices which in turn work directly with States, Territories and Tribes.