Funding Under Pressure — What To Do Now to Keep CCDF Dollars Flowing

The Department of Health and Human Services (HHS) has sent shockwaves through the early care and education world by freezing access to billions in Child Care and Development Fund (CCDF) dollars and tightening oversight requirements across all states. This is a watershed moment for ECE providers who depend on federal funds — and for the administrators who manage compliance and cash flow.

Bottom line for ECE leaders: the rules have shifted. States now must prove funds are being spent lawfully and as intended, and providers at every level should assume increased documentation, attendance verification, and reporting scrutiny are now required to keep the funds flowing.

1. State vs. Provider Responsibilities: What’s the Divide?

State Agencies Now Have To:

• Submit expanded documentation to HHS showing state systems track CCDF dollars from drawdown through provider payments and into verified services.
• Provide detailed administrative data, including beneficiary counts, payment dates, and reconciliation showing services delivered match payments drawn.
• Give additional proof of legitimacy for CCDF expenditures, such as written justifications, receipts, photo evidence, and audits.

What that means for ECE providers: States are now acting as the first line of audit and verification. They will rely on provider records to satisfy federal demands. So records start with YOU and they report on YOUR behalf.

ECE Centers & Providers Must:

• Ensure attendance data is accurate, timestamped, and reconciled with billing claims; now more than ever before.
• Maintain licensing, inspection, and monitoring reports readily available for audits.
• Document attendance vs. payment for every child receiving CCDF-subsidized care.
• Store contractual agreements, invoices, receipts, and transaction records that prove federal funds paid for actual services delivered.
• Cooperate seamlessly with state data requests and supply additional records when flagged.

2. Reporting Shifts — What Centers Must Change Now

📌 Attendance-Based Billing Is Back

HHS  reversed a Biden-era rule that allowed states to pay providers based on paper enrollment rather than actual attendance. This is a BIG shift.

States may now require payment only after verified attendance meaning:

• Billing based on attendance records, not rosters.
• Time-stamped logs for check-in/check-out become essential.
• Real-time attendance reconciliation must match claims submitted.

Key Actions for Providers:
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🚩 Flag THIS: Collect attendance data daily, sync with billing cycles, and immediately fix discrepancies.

Simple Steps to take:

1. Audit attendance and billing systems now for accuracy.
2. Switch to digital logs (or improve existing ones) with timestamped entries.
3. Prepare to supply these records to state agencies on demand.

📌 No More Upfront Payments - Cash Flow Impact

HHS guidance explicitly states upfront payments without verification of attendance may no longer be allowed.

Effects for Providers:

• Payments may now be post-service, not in advance.
• States may hold reimbursements until attendance is reconciled and verified.

What to Do:

• Adjust cash-flow forecasts to eliminate assumptions about upfront subsidy payments.
• Rework your bookkeeping to track results first, request payment second.
• Communicate these changes immediately to families relying on CCDF assistance.

3. What If You Are Under a Fraud Investigation?

While most centers aren’t under investigation, HHS has made it crystal clear that heightened documentation will be demanded if fraud is suspected — particularly for states that triggered the freeze (Minnesota, California, Colorado, Illinois, New York).

Under enhanced scrutiny, providers may be asked for:

✔ Detailed attendance records (daily logs, sign-in/out sheets)
✔ Licensing and inspection reports and correspondence
✔ Quality and compliance monitoring data
✔ Communications with families and caregivers that tie attendance to billing
✔ Receipts, invoices, and proof of expenditure supporting CCDF payments

If you receive a fraud notice from the state, escalate the response to include:

• Provider contracts and staff logs
• Checks, bank statements, and payroll records
• Corrective action plans and prior compliance documentation

These detailed artifacts are now the currency of compliance, and without them, states may not release federal dollars that flow through to you.

4. Anticipated Cash-Flow Impacts & Mitigation Strategies

Delays in payments and cash-flow crunches are now a real risk. With stricter attendance verification and no guarantee of upfront payments. Here are some considerations on what is needed to manage the shift and cash flow.

Potential Impacts

• Slower reimbursements from states back to providers.
• Reduced cash reserves if federal draws are paused.
• Increased administrative time spent supporting state requests.

Mitigation Strategies

1. Strengthen Financial Forecasts

• Budget for slower reimbursements.
• Maintain a cash cushion equal to at least 30–60 days of operating expenses.

2. Enhance Operational Efficiency

• Streamline attendance tracking systems.
• Cross-train staff on compliance drivers and documentation expectations.

3. Communicate Early and Often

• Educate families on the importance of accurate attendance reporting.
• Alert your fiscal partners (bookkeepers, CFOs) to these new risks now.

4. Partner With Your State CCDF Office

• Establish a proactive pipeline with CCDF administrators.
• Ask for a documentation checklist tailored to your state’s new reporting requirements.

Here is the Bottom Line for ECE Leaders

The HHS freeze and rollback of billing rules means higher scrutiny and a renewed emphasis on documentation integrity. If your center accepts CCDF funds remember the folloing:

⭐ Attendance must be recorded and tied to payments.
⭐ Documentation must be readily available and airtight.
⭐ Expect longer processing times unless pre-verified.
⭐ Your compliance systems must be proactive — not reactive.

This moment marks one of the most significant compliance shifts in CCDF history — and your response will determine whether federal funds stay reliable and timely for your program.

Sources to Reference

• HHS freezes child care and family assistance funds over fraud concerns.
• HHS closes Biden-era loophole, restores attendance-based billing and ends upfront payments.
• States must send administrative data + attendance/licensing records to get CCDF funds released.
• HHS requires justification and receipts/photo evidence to restore funds.
• Freezing impacts in key states and broad political context.

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