Stop Child Care Funding Fraud Act of 2026

Bill Number

H.R. 7794

Origin Chamber

House

Congress

119th Congress, Session 2

Policy Area

Families

Status

Introduced

Latest Action

2026-03-04: Referred to the House Committee on Education and Workforce.

Last Updated

2026-05-15T08:07:54Z

AI-Generated Summary

Purpose

The "Stop Child Care Funding Fraud Act of 2026" (H.R. 7794) aims to increase transparency and accountability in how states manage federal child care funds provided through the Child Care and Development Block Grant Act of 1990. It targets the prevention and reduction of improper payments—such as overpayments, underpayments, or funds given to ineligible recipients—in state-administered child care subsidy programs.

Key Provisions

• State Reporting Requirements: By June 30 of each program period (typically a two-year cycle), states must submit a report to the Secretary of Health and Human Services detailing their rate of improper payments for child care services funded by the block grant, along with planned actions to reduce that rate in future periods.
• Funding Penalties for High Improper Payment Rates:
• If the rate exceeds 6% but is below 8%, the state's future funding is reduced by 5%.
• If the rate is 8% or higher but below 10%, funding is reduced by 10%.
• If the rate is 10% or higher, funding is reduced by 15%.
• These reductions continue until the state implements an approved corrective action plan and provides required data.
• Corrective Action Plans: States with improper payment rates over 6% must submit a plan within 60 days of their report. The plan must include verified documentation of child attendance for subsidized services, presented in an aggregated (summarized) format that protects personal privacy and avoids identifiable child-level details.
• Definition of Improper Payment: This includes payments that are too high or too low for eligible services, payments for ineligible children, or payments that cannot be verified as compliant with federal rules.
• Secretary's Authority: The Secretary retains the power to withhold funds from states for any violations of the block grant program rules, independent of these new penalties.
• Enhanced Federal Reporting: The Secretary's annual report to Congress must now include a state-by-state breakdown of improper payment rates and the actions each state is taking to address them.
• Effective Date: The law takes effect one year after enactment.

Significant Changes to Existing Law

• Adds a new subsection (c) to Section 658K of the Child Care and Development Block Grant Act, introducing mandatory state reporting on improper payments, tiered funding penalties, and corrective action requirements—none of which existed before.
• Modifies Section 658L(a) to require the Secretary's report to be disaggregated by state and include specific details on improper payments and state responses, expanding beyond general program analysis.

Potential Impacts

• On Government Agencies: States may face reduced federal funding, incentivizing them to strengthen oversight, verification processes, and data systems for child care subsidies. The Department of Health and Human Services will need to review reports, approve plans, and track compliance, potentially increasing administrative workload.
• On Citizens: Families relying on child care subsidies could benefit from more efficient use of funds, reducing waste and fraud, though short-term funding cuts in high-error states might limit program access. Child care providers may need to improve record-keeping to avoid payment issues.
• On International Relations: No direct impacts, as this is a domestic program focused on U.S. states and federal funding.

Main Stakeholders Affected

• States: Primary administrators of the block grant funds; they bear reporting, planning, and potential financial penalties.
• Federal Government (Department of Health and Human Services): Oversees implementation, enforces penalties, and produces enhanced reports to Congress.
• Child Care Providers and Families: Indirectly affected through potential changes in subsidy availability and program integrity; providers must comply with verification rules to receive payments.
• Taxpayers: Benefit from reduced improper payments, which could save federal dollars on the program (which supports low-income working families).

Notable Legal, Constitutional, or Political Implications

• Legal: Reinforces existing federal authority over grant conditions without altering core program eligibility or benefits. The privacy protections in aggregated data align with federal laws like the Privacy Act, preventing disclosure of personal information.
• Constitutional: No apparent conflicts; it operates within Congress's spending power under Article I, Section 8, by attaching conditions to federal funds without coercing states unduly (penalties are tied to performance, not mandates).
• Political: Emphasizes fiscal accountability and anti-fraud measures in social welfare spending, potentially appealing across party lines by targeting waste in a popular program. It could spark debates on federal overreach into state administration or the adequacy of funding levels amid penalties.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Kennedy, Mike [R-UT-3]

Cosponsors (3)

Rep. Pfluger, August [R-TX-11], Rep. Luna, Anna Paulina [R-FL-13], Rep. Calvert, Ken [R-CA-41]

Recent Actions

• 2026-03-04: Referred to the House Committee on Education and Workforce.
• 2026-03-04: Introduced in House
• 2026-03-04: Introduced in House

Bill Versions

• Stop Child Care Funding Fraud Act of 2026 — issued 2026-03-04 — PDF (5 pages)