Stop Child Care Funding Fraud Act of 2026

Section 658K of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858i) is amended by adding at the end the following:

Not later than June 30 of the each program period referred to in section 658E(d), a State shall submit to the Secretary a report on the rate of the improper payments made by such State with funds received under this subchapter during such period and the a breakdown of actions the State will take to lower such rate in subsequent program periods.

If a State report submitted under paragraph (1) identifies a rate of improper payments for program period referred to in section 658E(d) that—

(A) exceeds 6 percent but is less than 8 percent, then the Secretary shall reduce by 5 percent the aggregate amount of funds such State would otherwise receive under this subchapter for each subsequent program period;

(B) is at least 8 percent but is less than 10 percent, then the Secretary shall reduce by 10 percent the aggregate amount of funds such State would otherwise receive under this subchapter each subsequent program period; and

(C) equals or exceeds 10 percent, then the Secretary shall reduce by 15 percent the aggregate amount of funds such State would otherwise receive under this subchapter for each subsequent program period;

until the Secretary certifies that such State has implemented a corrective action plan submitted under paragraph (3) and submitted to the Secretary all data required under such plan.

If for any such period the State report submitted under paragraph (1) identifies a rate of improper payments that exceeds 6 percent, such State shall complete, and submit to the Secretary not later than 60 days after submission of such report, a payment corrective action plan to reduce the report such rate to not more than 6 percent. Such plan shall contain verified child attendance documentation for subsidized child care services provided with funds received under this subchapter, in an aggregated format that does not contain personally identifiable information and that does not disclose identifiable child-level data.

For purposes of this subsection, the term improper payment means a payment made under this subchapter for child care services provided to a child, that does not comply with this subchapter because—

(A) such payment exceeds the amount that should have been paid to provide such services to such child;

(B) such payment is less than the amount that should have been paid to provide such services to such child;

(C) such payment is made to provide such services to such child who is not eligible to receive such services; or

(D) such payment is made for such services in an amount that cannot be verified to be in compliance with this subchapter.

Nothing in this subsection shall be construed to prevent the Secretary from withholding from a State funds such State would otherwise receive under this subchapter if the Secretary determines such State has violated a provision of this subchapter or a regulation issued to carry out this subchapter.

The 1st sentence of section 658L(a) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858j) is amended—

(1) by inserting disaggregated by State after report; and

(2) by inserting (including a State-by-State breakdown showing the improper payment rate of each State and the actions taken by each State to lower its improper payment rates) after analysis.