Civilian Personnel: Additional Guidance and Consistent Data Reporting Could Help Improve the Marine Corps' Budget Management

The Marine Corps requested $1.81 billion to pay for approximately 16,000 civilian employees in its fiscal year 2020 budget request. The Office of Management and Budget directs federal agencies to develop civilian personnel budgets by calculating workload requirements, the time needed to complete the work, and the number of FTEs needed. The Marine Corps uses a unique budget formulation process that relies on prior fiscal year budget data to calculate FTE estimates for future civilian personnel budget requests.

Senate Report 115-290, accompanying a bill for the DOD Appropriations Act, 2019, included a provision for GAO to review how the Marine Corps develops its civilian labor requirements for both FTEs and funding and examine the benefits and shortfalls of the Manage to Payroll process. This report (1) describes how the Marine Corps formulates its civilian personnel budget request and (2) assesses the Marine Corps' management of its civilian personnel budget and FTEs, including the benefits and weaknesses of the process.

GAO reviewed DOD civilian personnel budget policies, analyzed fiscal years 2013 through 2018 Marine Corps budget data that tracks spending and FTE allotment, and compared 2013 through 2018 budget execution data to budget request data.

The Marine Corps develops its civilian personnel budget request using prior fiscal year budget execution data with adjustments based on input from sources such as the Office of the Undersecretary of Defense (Comptroller) [OUSD(C)] and the Department of the Navy. As part of the Department of the Navy, the Marine Corps' budget request is added to the Navy's overall budget request, which is incorporated into the Department of Defense's (DOD) overall budget request.

The Marine Corps manages its civilian personnel based on dollar amounts—not full-time equivalent (FTE) workload like the other military services—through an approach called Manage to Payroll. Specifically, while the Marine Corps requests a certain number of FTEs each year as required by policy, the Marine Corps distributes the funds it receives to its commands by dollar amount and not based on the FTEs requested. This approach has benefits, such as providing flexibility to employ civilians based on current mission requirements. However, under this approach, for fiscal year 2019, internal Marine Corps' data show that four of its commands are either exceeding or not reaching their requested dollar amounts. Marine Corps policy does not provide guidance to its commands to manage FTEs to requested amounts. Without such updated guidance the Marine Corps risks overspending or underspending on its personnel requirements. In addition, internal Marine Corps civilian FTE data for fiscal years 2013 through 2018 is not consistent with data that OUSD(C) used to formulate DOD's overall civilian personnel budget request, as shown in the figure below.

The Marine Corps has not identified or reconciled differences between its internal data compared to data submitted in the annual budget request. If information in the Marine Corps' budget request does not reflect internal Marine Corps data, then Congress and DOD leadership may not have sufficient and appropriate information to make informed planning decisions.

GAO recommends that the Marine Corps 1) updates its budget policies to include guidance for commands to manage civilian personnel to FTEs and 2) identifies and reconciles differences between its internal data and data OUSD(C) uses to formulate the Marine Corps' annual budget request. DOD concurred with both recommendations.

The Marine Corps requested $1.81 billion to pay salaries and benefits for  approximately 16,000 civilian employees in its fiscal year 2020 budget  request, which is a $64.9 million increase from its estimated actual fiscal  year 2019 spending. The Marine Corps manages its civilian personnel  budget process based on the dollar amount required to pay civilian  personnel, instead of full-time equivalent (FTE) workload forecasts like  the other military services, through an approach referred to as “Manage to  Payroll”. The Manage to Payroll approach was established by the  Department of the Navy in October 1986 in response to congressional  criticism of the Navy’s ability to manage its civilian personnel budget  process. The Marine Corps, as part of the Department of the Navy, also  implemented Manage to Payroll in 1986. While the Marine Corps  continues to use this approach, the Navy no longer uses Manage to  Payroll to manage its civilian personnel budget process. Instead, the  Navy formulates its civilian personnel budget based on civilian personnel  full-time equivalent workload, as directed by the Office of Management  and Budget (OMB) Circular A-11.

Senate Report 115-290, accompanying a bill for the Department of  Defense (DOD) Appropriations Act, 2019, included a provision that we  review how the Marine Corps develops its civilian personnel labor  requirements for both FTEs and funding and examine the benefits and  shortfalls of Manage to Payroll. This report (1) describes how the Marine  Corps formulates its civilian personnel budget request, and (2) assesses  the Marine Corps’ management of its civilian personnel budget and FTEs,  including the benefits and weaknesses of the process.

For objective one, we obtained and reviewed Marine Corps, DOD,  Department of Navy, and OMB policies that guide the budget formulation  process to determine what requirements exist across each level of  oversight and how the Marine Corps’ civilian budget request is developed.  We also discussed the process and requirements with agency officials.

For objective two, we reviewed the Marine Corps process for managing  its civilian personnel budget and FTEs and compared it to Marine Corps  orders and administrative memorandums. We also obtained and analyzed  fiscal years 2013 through 2018 budget execution data from the Marine  Corps that tracks both spending and FTE amounts across the major  subordinate commands to determine how funding for civilian personnel is  distributed to the major subordinate commands within the Marine Corps.  We compared the Marine Corps’ civilian personnel budget execution data  from fiscal years 2013 through 2018 to its budget request. The Marine  Corps maintains its civilian personnel data in the Standard Accounting,  Budgeting, and Reporting System (SABRS). To assess the reliability of  the Marine Corps’ data, we reviewed policies and procedures related to  data collection and entry, evaluated Marine Corps internal data reliability  checks, and interviewed cognizant officials. Based on this, we determined  that the data were sufficiently reliable for the purposes of our reporting  objectives. We interviewed Marine Corps, Department of Navy, and Office  of the Under Secretary of Defense (Comptroller)  officials  about their perceptions of the benefits and weaknesses of the Marine  Corps budget execution process. This included interviewing Headquarters  Marine Corps officials and Marine Corps major subordinate command  officials to determine if the Marine Corps budget execution process  differed based on organizational structure within the Marine Corps and  what procedures exist for each major subordinate command if its actual  FTEs do not reach or exceed its requested amount. Appendix I provides  additional details about our scope and methodology.

We conducted this performance audit from November 2018 to September  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Organizational Roles and Responsibilities

Numerous organizations have roles and responsibilities in formulating  and executing the Marine Corps’ budget. Specifically:

Office of Management and Budget. OMB directs federal agencies,  including DOD and the military services, to develop, among other  things, civilian personnel budget requests by calculating workload  requirements, the time needed to complete the workload and the  number of FTEs needed to perform the work for the upcoming fiscal  year. Every year, OMB releases an update to OMB Circular A-11,  which provides guidance for budget formulation for the upcoming  fiscal year. OMB Circular A-11 states that federal agencies should  take steps to assess, and as appropriate, restructure, retain, and  resize their FTE counts to achieve missions as effectively and  efficiently as possible.

Office of the Under Secretary of Defense (Comptroller). OUSD(C)  issues the DOD’s Financial Management Regulation for budget  formulation and execution. The Financial Management Regulation  directs statutory and regulatory financial management requirements,  systems, and functions for all organizational entities within the DOD.

Department of the Navy. According to Department of Navy budget  officials, they provide annual budget formulation guidance to all of the  budget submitting offices, including the Marine Corps, through the  Program Budget Information System, the Navy’s Financial  Management & Budget web portal. According to these officials, the  guidance contains detailed instructions and updates for budget  formulation, worksheets for checking the accuracy of submitted data,  and points of contact for budget formulation questions.

Marine Corps Deputy Commandant for Programs and Resources  (DC P&R). DC P&R is the lead for determining and allocating civilian  labor budgets. The DC P&R delegates this responsibility to the Fiscal  Director who monitors major subordinate command and Headquarters  Marine Corps labor budget execution to ensure compliance with  Manage to Payroll budget controls. DC P&R sub-allocates the portion  of the budget that will be executed against civilian labor by each major  subordinate command and Headquarters Marine Corps. In order to  hold the major subordinate commands and Headquarters Marine  Corps accountable for exercising prudent Manage to Payroll authority,  DC P&R monitors civilian labor execution and issues Mange to Payroll  reports on a monthly basis.

Marine Corps Director for Civilian Human Resources (DCHR).  DCHR provides program direction, technical advice, guidance and  assistance to major subordinate commands, Headquarters Marine  Corps staff agencies, and servicing human capital resource offices in  carrying out Manage to Payroll responsibilities, with regard to position  classification. DCHR also holds individuals with delegated  classification authority accountable for carrying out effective Manage  to Payroll responsibilities, when it comes to classification of position  descriptions.

DOD Inspector General Report on Marine Corps Civilian Personnel Budget Development

In June 2018, the DOD Inspector General reported that, among other  things, the Marine Corps did not justify or fully provide supporting  documentation for how it determined its civilian personnel pay  requirements for the Marine Corps’ fiscal year 2017 budget request. The  Department of the Navy concurred with a DOD Inspector General  recommendation that the Department of Navy establish and implement  controls for the civilian pay budget process. The Marine Corps stated in  an unpublished written response that it is reviewing its current budget  formulation and other metrics through the fiscal year 2020 budget  formulation process, with a plan of implementing an updated budget  documentation process for the fiscal year 2021 budget request. The DOD  Inspector General also found that the Marine Corps did not determine  civilian pay funding levels using FTEs calculated from projected hours to  be worked, as required by OMB. As a result, the DOD Inspector General  recommended that the Marine Corps determine its budgeted civilian pay  funding levels using FTEs calculated based on projected hours to be  worked, as required by OMB. In its unpublished written response to the  DOD Inspector General report, the Marine Corps stated that it determines  FTEs in accordance with OMB and is working to provide greater  emphasis on FTEs in its budget documents. See appendix II for more  details on the DOD Inspector General’s report.

The Marine Corps Develops Its Civilian Personnel Budget Request Using Prior Fiscal Year Data with Adjustments from Various Sources

The Marine Corps formulates its annual civilian personnel budget request  using prior fiscal year budget execution data as a baseline, then makes  adjustments for the upcoming fiscal year based on inputs from various  sources like the Department of the Navy and OUSD(C).

First, according to Marine Corps officials, the Marine Corps gathers  information from several sources to start the budget formulation process  including previous fiscal year budget information, information from the  Program Objective Memorandum (POM) process, feedback from Marine  Corps commands, OUSD(C) guidance, Department of Navy guidance,  and the National Security Strategy. To develop its civilian personnel  budget request for fiscal year 2020, the Marine Corps used fiscal year 2018 information as a starting point and incorporated changes made  through the POM process and other inputs, according to Marine Corps  Programs and Resources officials.

Second, Marine Corps officials explained during the budget formulation  process, the Department of the Navy publishes a Civilian Pricing Tool that  financial management and budget officials use to evaluate civilian  personnel pricing estimates. The Marine Corps has access to the Civilian  Pricing Tool throughout the budget process. After all the inputs are  included and the pricing calculations are completed, the Marine Corps  officials explained, the Deputy Commandant, Programs and Resources  presents the POM to the Commandant of the Marine Corps for approval  and inclusion in the Department of the Navy’s overall budget request.

Third, according to Department of Navy officials, they conduct a thorough  analytic review of each line item’s dollar amount and FTE request in the  Marine Corps’ budget request before submitting its total budget to  OUSD(C). Once the Department of the Navy has reviewed and approved  of the Marine Corps budget request, including its request for civilian  personnel funding, the Department of the Navy sends the budget request  to OUSD(C) for review.

Fourth, according to Department of the Navy officials, OUSD(C) reviews  the Marine Corps’ civilian personnel budget request as part of the  Department of the Navy’s overall budget request submission, including  any change in year-to-year FTE growth, to determine if the Marine Corps  properly justified these changes. Once OUSD(C)’s review of the  Department of the Navy’s budget submission is complete, the Navy’s  budget request is submitted with the other military department’s budget  requests to OMB for review. During this period, according to Department  of the Navy officials, OMB has monthly conversations with the military  departments, including the Department of the Navy, about its budget  formulation process. OMB has the authority to raise concerns with a  particular military department’s budget request during a passback  period. Once the passback period with OMB is complete and the budget  request is approved by OUSD(C), the entire Department of Navy budget  is submitted to the Office of the Secretary of Defense.

Finally, according to Department of the Navy officials, the Office of the  Secretary of Defense makes adjustments to the Department of the Navy’s  budget request according to DOD and OMB priorities, and after OUSD(C)  provides feedback to each military service, the military services’ budget  request, as modified, is incorporated into the President’s budget  request.

Marine Corps Manages Its Civilian Personnel Budget Process Based on Dollar Amount, which Has Benefits and Weaknesses

Marine Corps Manages the Execution of Its Civilian Personnel Budget Execution Based on Dollar Amount, Not FTEs

The Marine Corps manages the execution of its civilian personnel budget  based on the dollar amount, not FTE workload forecasts, through an  approach referred to as “Manage to Payroll.” Specifically, the Manage to  Payroll approach places an emphasis on spending the amount of dollars  or funding available for civilian personnel and not on executing a  calculated full-time equivalent civilian personnel workload. Further,  Marine Corps Order 12510.2D requires officials delegated Manage to  Payroll authority to be accountable for establishing positions to  accomplish the mission with maximum efficiency and productivity  balanced against the civilian labor budget. The Manage to Payroll  approach is comprised of three separate functions: (1) position  management, (2) position classification, and (3) compensation  management.

Position management. The process of organizing and structuring  organizations to accomplish their mission with maximum economy,  efficiency, and productivity. Managers and supervisors determine the  type of organizational structure needed to fulfill the functions assigned  to a particular unit, how many positions are needed, how positions  should be designed, and the most cost effective way of filling the  requirement.

Position classification. The function that assigns an individual  position to the appropriate pay plan, occupational series, title, and  grade.

Compensation management. For positions where funding levels are  prescribed by the Deputy Commandant for Programs and Resources,  the major subordinate commands and Headquarters Marine Corps  staffing agencies must ensure salary costs and other cost drivers (i.e.  overtime, awards, incentives, etc.) do not exceed the civilian labor  funding levels.

To implement this approach, the Marine Corps’ Director for Civilian  Human Resources, among other things, provides program direction,  technical advice, guidance and assistance to the major subordinate  commands, Headquarters Marine Corps staff agencies, and servicing  human resources offices for carrying out Manage to Payroll  responsibilities. In order to hold individuals with delegated classification  authority accountable for carrying out effective Manage to Payroll  responsibilities, the Director for Civilian Human Resources also conducts  consistency reviews in coordination with the human resources offices to  validate proper classification of positions. These reviews involve verifying  positions are classified in accordance with Office of Personnel  Management classification standards and within sound position  management principles.

Additionally, the Marine Corps Deputy Commandant for Programs and  Resources is the lead for determining and allocating the Marine Corps’  civilian personnel budget and sub-allocates the portion of the budget that  will be spent against civilian labor by each major subordinate command  and Headquarters Marine Corps.

Benefits and Weaknesses Exist with the Marine Corps’ Management of Its Civilian Personnel Budget Execution

According to Marine Corps officials, there are benefits to using the  Manage to Payroll approach for managing its civilian personnel budget  execution. These benefits, according to Marine Corps officials, include:

Flexibility in spending. This approach provides flexibility to the major  subordinate commanders by allowing them the ability to prioritize their  own current mission requirements and functions rather than spending  their civilian personnel budget on workload requirements used to  formulate a civilian personnel budget request during the previous  fiscal year.

Management of personnel requirements. The process allows  commanders to manage their personnel requirements to fit with  mission priority rather than adhering to the FTE-based workload  requirements used to formulate their civilian personnel budget  request.

Visibility. This process enables officials at Marine Corps Programs  and Resources and Headquarters Marine Corps to have direct control  over and closely monitor the major subordinate commands’ civilian  personnel budget execution.

However, weaknesses exist with the Marine Corps’ Manage to Payroll  approach to managing its civilian personnel budget execution. Our  analysis of the Department of the Navy’s annual budget request, which  includes Marine Corps civilian personnel FTE data, found that the number  of civilian FTEs the Marine Corps reported does not match the number of  civilian FTEs it requested. This discrepancy between the number of FTEs  requested and the number of FTEs reported is a result of the Marine  Corps managing civilian personnel to dollar amounts and not to FTEs.  Specifically, funding provided by Congress annually for the Marine Corps  to manage its civilian personnel is based on the number of FTEs the  Marine Corps requested for a particular fiscal year. However, during the  budget execution process, Headquarters Marine Corps distributes funding  to the major subordinate commands by dollar amount and not by FTEs  requested.

The President’s budget request, which is the sole single document with  budget information for the entire government, contains (1) a record of  actual receipts and spending levels for the fiscal year just completed, (2)  a record of current-year estimated receipts and spending, and (3)  estimated receipts and spending for the upcoming fiscal year and 9 years  beyond, as proposed by the President. Additionally, OMB Circular A-11  requires that current year FTE estimates should be consistent with  previous year actuals, should be fully funded, and should be very close to  the actual usage reported at the end of the fiscal year. For example, the  estimates in the previous year’s budget should be very close to the  actuals published in the current budget. Table 1 shows the difference  between the Marine Corps FTEs estimates in its annual civilian personnel  budget request and its reported usage of actual FTEs for the previous  year’s budget execution contained in the budget requests from fiscal  years 2013 through 2018.

When asked about the difference between estimates and reported usage  of actual FTEs, a Headquarters Marine Corps official stated that they  were generally unaware of the importance of the budget data in  measuring the degree to which an agency was exceeding or not reaching  its requested FTEs. However, the official also acknowledged that a  possible consequence of not managing to estimated FTEs could be a  reduction in future funding for civilian personnel because budget data  provided to Congress for civilian personnel is based on FTE workload and  not the amount of dollars spent on civilian personnel. Therefore, a result  of the Marine Corps managing to dollar amounts and not to FTEs may  result in Congressional decision-making based on incorrect data, which  may result in the major subordinate commands having to eliminate civilian  positions.

Department of the Navy officials confirmed this and told us that the  Marine Corps’ use of Manage to Payroll puts Department of the Navy  resources at risk of reduction. Additionally, according to Department of  the Navy officials, the Navy’s financial management branch does not  support the Marine Corps’ use of Manage to Payroll and recommends  that the Marine Corps begin to manage its civilian personnel resources  using the same process as the Navy’s other budget submitting offices, by  formulating civilian personnel funding requests with estimated FTE  requirements and then monitoring execution of the budget by actual  FTEs. Additionally, by formulating and monitoring civilian personnel  budgets by FTEs, there would be more transparency in how the Marine  Corps is actually executing its civilian personnel budget.

Our review of the Marine Corps’ policy for managing its civilian personnel  budget execution found that it does not provide guidance for major  subordinate commands to manage actual civilian FTEs to requested  amounts. Specifically, Marine Corps Order 12510.2D provides budget  execution requirements but does not include requirements on managing  civilian FTEs. According to officials with Marine Corps Programs and  Resources, Marine Corps Order 12510.2D is a Manpower and Reserve  Affairs Department document that focuses on personnel actions rather  than explicitly establishing cost controls. Specifically, the order states that  individuals delegated Manage to Payroll authority are accountable for  establishing positions to accomplish the mission with maximum efficiency  and productivity balanced against the labor budget.

Federal internal control standards state that management should  document the organization’s internal control responsibilities in its policies  at the appropriate level of detail to allow management to monitor the  control activity effectively. Without updated guidance for major  subordinate commands to formulate and execute its civilian personnel  budget to estimated FTEs, the Marine Corps risks overspending or  underspending on its personnel requirements. Additionally, decision  makers may not have sufficient information to effectively and efficiently  provide funding for Marine Corps civilian personnel.

Internal Marine Corps Spending Data Does Not Align with Budget Request Data

Our analysis of Marine Corps internal spending data found that the dollar  amount the Marine Corps is projecting to spend on civilian personnel for  fiscal year 2019 is $1,749,444,000, which is in line with the  $1,750,500,000 provided in its budget request for managing civilian  personnel. However, our analysis of 15 major subordinate commands  found that four of them are either exceeding or not reaching their  requested dollar amounts by $5 million dollars or more. For example, for  fiscal year 2019, Marine Corps Systems Command is projected to  overspend its requested civilian personnel dollar amount by $24.7 million  and Marine Corps Cyber Command is projected to fall short of its  requested civilian personnel dollar amount by $7.9 million dollars in fiscal  year 2019. Table 2 shows the variation in projected dollar amount by  major subordinate commands for fiscal year 2019.

Marine Corps Programs and Resources officials stated that when a major  subordinate command exceeds its requested dollar amount, the major  subordinate command is not compensated from larger Marine Corps  accounts, but the command must find additional funding from within its  other accounts, which may mean a funding cut to another program to  make up the difference.

Our review of Marine Corps civilian personnel data also found that Marine  Corps data on civilian FTEs is not consistent with data that OUSD(C)  uses to formulate DOD’s request for civilian personnel FTEs in its annual  budget submission. The Marine Corps uses a database called SABRS to  maintain and track civilian personnel FTE data for fiscal years 2013  through 2019. To develop DOD’s defense-wide annual civilian  personnel budget request, OUSD(C) uses data from the Program  Resources Collection Process system. Our review of Marine Corps data  maintained in SABRS found that it does not match the data DOD  provided in its annual budget request submissions, which comes from  OUSD(C)’s Program Resources Collection Process system, for fiscal  years 2013 through 2018. Table 3 shows the difference between the  Marine Corps’ internal civilian FTE data in SABRS and the civilian FTE  data provided in the annual budget request.

An OUSD(C) official told us that the two sources should match because  all data, including civilian personnel dollar amounts and FTEs, should be  submitted and processed through the Program Resources Collection  Process system. Marine Corps officials explained that they were aware of  the variations between their internal FTE data and the DOD budget  request data. The officials further explained that one instance of variation  in the data occurs because the Department of the Navy uses another  database, the Work Year Personnel Cost system, to prepare its annual  budget request, which includes the Marine Corps’ request for civilian  personnel FTEs, before submitting the request to OUSD(C).

According to the Marine Corps officials, the Work Year Personnel Cost  system automatically deletes error transactions while SABRS does not,  as error transactions in SABRS are manually edited. These types of error  transactions occur because they did not pass one or more edits in  SABRS, did not find the required matching transaction, or have some  other issue that is keeping the transaction from processing. The Marine  Corps corrects error transactions manually while errors transactions in the  Work Year Personnel Cost System are deleted automatically without  correction, which creates differences in the data between the two  systems. Marine Corps officials stated that, as a result, the Work Year  Personnel Cost database typically underestimates Marine Corps civilian  FTEs, and that variations in actual FTE data between the SABRS and  Work Year Personnel Cost databases explains why it appears the Marine  Corps is not reaching its requested civilian personnel FTEs.

The Marine Corps has not identified or reconciled differences between  internal Marine Corps civilian personnel FTE data compared to data  submitted in the annual budget request. Additionally, federal internal  control standards state that management should use quality information  to achieve the entity’s objectives; that reliable internal and external  sources provide data that are reasonably free from errors and faithfully  represent what they purport to represent; and that information is  appropriate, current, complete, accurate, accessible, and provided on a  timely basis.

Congress and DOD leadership rely on information presented in an  agency’s annual budget request to help determine policies and to make  financial decisions. Our prior work has found that civilian FTEs, by  themselves, may not be reliable measures of the cost of the civilian  personnel workforce and changes in civilian FTEs may not achieve  commensurate changes in monetary spending. However, in that report  we also noted that, according to OUSD(C) officials, FTEs are typically the  primary measure OUSD(C) uses in managing and reporting on DOD’s  civilian workforce. Therefore, without reliable Marine Corps civilian  personnel data, senior leaders in DOD and decision makers in Congress  may not have sufficient and appropriate information to make informed  planning and spending decisions and may risk funding not accurately  tracking with actual needs.

To develop its annual civilian personnel budget request, the Marine Corps  uses a process that relies on prior fiscal year budget execution data  instead of calculating civilian personnel workload requirements and the  number of FTEs needed to perform the work. Without updated guidance  for the major subordinate commands to manage their respective civilian  personnel budget execution to requested FTEs, the Marine Corps risks  overspending or underspending on its personnel requirements. Further,  assessments of Marine Corps civilian personnel FTE and DOD budget  data found that the Marine Corps’ data does not match comparable data  DOD reported in its annual budget request documentation. Congress and  DOD leadership rely on FTE information presented in the Marine Corps’  annual budget request to help determine policies and to make financial  decisions. Without civilian personnel data that are free from errors and  are consistent with how the Marine Corps is managing its civilian  personnel, senior leaders in DOD and decision-makers in Congress will  not be able to make informed planning and spending decisions and may  risk funding not accurately tracking with actual needs. As a result, the  Marine Corps risks having its annual civilian personnel funding reduced.

We are making the following two recommendations to the Secretary of  the Navy:  The Secretary of the Navy should ensure that the Commandant of the  Marine Corps updates the Marine Corps’ civilian personnel budget  formulation and execution policies to include guidance for the major  subordinate commands to manage civilian personnel to FTEs.  (Recommendation 1)

The Secretary of the Navy should ensure that the Commandant of the  Marine Corps identifies and reconciles any differences between the  Marine Corps’ internal civilian personnel data and the civilian personnel  data the Department of the Navy uses to support its annual budget  request. (Recommendation 2)

We provided a draft of this report to DOD for review and comment. In  written comments, DOD concurred with both recommendations and noted  actions that the Marine Corps plans to take. DOD’s comments are  reprinted in appendix III. DOD also provided technical comments, which  we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Navy, and the  Commandant of the Marine Corps. In addition, this report is available at  no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-3604 or farrellb@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV.

For our first objective, to determine how the Marine Corps develops its  civilian personnel budget request, we obtained and reviewed Marine  Corps, Department of Defense (DOD), Department of Navy, and Office of  Management and Budget policies that guide the budget process in order  to determine what requirements exist across each level of oversight and  discussed these requirements with agency officials. To further analyze  the Manage to Payroll process, we also obtained and reviewed Marine  Corps Program Objective Memorandum requests, budget formulation and  execution documents, budget analyses, financial spreadsheets, and  budget presentations. We also interviewed responsible officials about  these processes and requirements.

For our second objective, to assess the Marine Corps’ management of its  civilian personnel budget and FTEs, we reviewed the Marine Corps’  process for managing its civilian personnel budget and FTEs and  compared it against Marine Corps orders and administrative messages.  To examine Marine Corps policies for budget data entry, coordination,  and management, we compared them to the Marine Corps Financial  Management Standard Operating Procedure Manual. To determine how  the Marine Corps manages its civilian personnel funding, how the Marine  Corps measures budget execution by major subordinate command, and  how the Marine Corps monitors and collects data on budget execution,  we interviewed officials from Marine Corps Programs and Resources.

To identify Manage to Payroll requirements and Marine Corps policies for  managing its civilian personnel we interviewed officials from Marine Corps  Manpower and Reserve Affairs. We also interviewed officials in the  Marine Corps Programs and Resources office, Marine Corps Systems  Command, Marine Corps Cyber Command, the Department of the Navy,  and the Office of the Under Secretary of Defense (Comptroller) about  their perceptions of the benefits and weaknesses of the Manage to  Payroll process. To measure whether the Marine Corps exceeded or fell  below its civilian personnel full-time equivalents (FTE) budget request, we  compared the Marine Corps’ civilian personnel budget execution data to  its budget request data from the same fiscal year to determine if Marine Corps actual FTEs matched this data from year to year. To measure  whether the Marine Corps was consistently exceeding or falling below its  FTE budget request at each major subordinate command, we reviewed  Marine Corps budget execution spreadsheets displaying end-of-year  budget and FTE projections.

To provide a statistical measurement of the Marine Corps’ efforts to  manage its civilian personnel budget, we obtained and analyzed fiscal  year 2013-18 budget execution data from the Marine Corps’ Standard  Accounting, Budgeting, and Reporting System (SABRS) that tracks both  dollar amount and FTE allotment across the major subordinate  commands. We also used SABRS data to determine how funds are  allocated to the major subordinate commands within the Marine Corps.  To determine if differences in reported FTE totals existed between the  Marine Corps’ internal data and publically available data, we compared  SABRS’ civilian personnel FTE actual data from fiscal year 2013-18 to its  requested FTEs. To assess the reliability of the Marine Corps’ data, we  reviewed policies and procedures related to data collection and entry,  evaluated Marine Corps internal data reliability checks, and interviewed  cognizant officials. Based on this, we determined that the data were  sufficiently reliable for the purposes of our reporting objectives.

We conducted this performance audit from November 2018 to August  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Appendix II: Department of Defense Inspector General Reports on Military Departments’ Civilian Pay Budgets

In June 2018, the Department of Defense (DOD) Inspector General  issued a report on the civilian personnel budget formulation process of  the Department of the Navy, which included information on the Marine  Corps. In its report, the DOD Inspector General found that the Marine  Corps could not justify or support how it determined its civilian personnel  pay requirements for fiscal year 2017’s Marine Corps budget request.  Specifically, the report noted that Marine Corps budget officials could not  fully explain the rationale for their civilian pay budget adjustments.  According to the DOD Inspector General report, the Marine Corps did not  maintain documentation to support these budget adjustments or material  showing how it calculated average basic compensation amounts and  benefit rates. The DOD Inspector General also reported that Marine  Corps officials were unable to explain or provide support regarding the  calculation of the civilian pay dollars and full-time equivalents (FTE)  associated with these adjustments.

In its unpublished written response to the DOD Inspector General’s  report, the Marine Corps concurred with the DOD Inspector General’s  recommendation that the Marine Corps determine budgeted civilian pay  funding levels using full-time equivalents calculated based on projected  hours to be worked, as required by Office of Management and Budget  Circular A-11. The Marine Corps’ written response also acknowledged  that having source data, assumptions, calculations, and better  documentation related to budget formulation would provide for retention  of institutional knowledge and would benefit budget officials formulating  future budgets. The Marine Corps’ unpublished written response also  stated that it is reviewing other command metrics within the department,  which will be performed throughout the remainder of the present budget  cycle with a plan of implementation during the next budget cycle.

The DOD Inspector General’s report stated that the Marine Corps did not  determine civilian pay funding levels using FTEs calculated from  projected hours to be worked, as directed in Office of Management and  Budget (OMB) Circular A-11. According to the DOD Inspector General’s  report, in its fiscal year 2017 budget formulation, Marine Corps officials  stated that they considered FTEs to be the same as end strength for  budget formulation purposes, assuming that one person would be on  board for an entire year even though these officials acknowledged that  this was not expected to be the reality during budget execution. As a  result, the DOD Inspector General recommended that the Marine Corps  determine its budgeted civilian pay funding levels using FTEs calculated  as required by OMB Circular A-11 requirements.

In its unpublished written response to the DOD Inspector General’s  report, the Marine Corps stated that it determines FTEs in accordance  with OMB Circular A-11. Marine Corps Programs & Resources officials  told us that they use cumulative hours paid in a fiscal year divided by the  number of work hours in that fiscal year to generate the number of FTEs  executed. These officials told us that they then divide the cumulative  amount paid by the number of FTEs to receive the average work year  cost for that fiscal year. Marine Corps officials stated that Programs &  Resources budget officials then adjust the civilian personnel budget  request during the Department of Navy pricing tool time frame, typically  reducing FTEs by the recommendation provided by the tool, which uses  18 months of execution data. Marine Corps officials told us that, as result  of the DOD Inspector General’s report, they are working to provide  greater emphasis on FTEs in their budget formulation documents.

Appendix III: Comments from the Department of Defense

Appendix IV: GAO Contacts and Staff Acknowledgments

Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov.

In addition to the contact named above, Vincent Balloon (Assistant  Director), Timothy Carr, Brian Pegram, Clarice Ransom, Aaron Safer- Lichtenstein, Shari Nikoo, Michael Silver, Carter Stevens, John Van  Schaik and Gregory Wong made key contributions to this report.

Defense Health Care: Additional Assessments Needed to Better Ensure  an Efficient Total Workforce. GAO-19-102. (Washington, D.C.: Nov. 27,  2018).

DOD Civilian and Contractor Workforces: Additional Cost Savings Data  and Efficiencies Plan Are Needed. GAO-17-128. (Washington, D.C.: Oct.  12, 2016).

Civilian and Contractor Workforces: Complete Information Needed to  Assess DOD’s Progress for Reductions and Associated Savings.  GAO-16-172. (Washington, D.C.: Dec. 23, 2015).

Defense Headquarters: DOD Needs to Reassess Personnel  Requirements for the Office of Secretary of Defense, Joint Staff, and  Military Service Secretariats. GAO-15-10. (Washington, D.C.: Jan. 21,  2015).

Human Capital: DOD Should Fully Develop Its Civilian Strategic  Workforce Plan to Aid Decision Makers. GAO-14-565. (Washington, D.C.:  July 9, 2014).

Human Capital: Opportunities Exist to Further Improve DOD’s  Methodology for Estimating the Costs of Its Workforces. GAO-13-792.  (Washington, D.C.: Sept. 25, 2013).

Human Capital: Additional Steps Needed to Help Determine the Right  Size and Composition of DOD’s Total Workforce. GAO-13-470.  (Washington, D.C.: May 29, 2013).

In fiscal year 2019, 4 of 15 Marine Corps commands either over- or underspent by $5 million or more on civilian personnel.

The Marine Corps bases its budget requests on prior fiscal year spending rather than the hours projected for full-time employees to do the work, as recommended by the Office of Management and Budget. Though this approach has benefits, such as flexibility to use employees based on mission priorities, it makes over- or underspending more likely.

We recommended the Marine Corps use OMB’s guidelines to better manage the risk of over- or underspending in future budget requests.


Child Care: States Report Child Care and Development Funds Benefit All Children in Care

CCDF is the primary source of federal funding for child care subsidies. States administering CCDF are subject to requirements that improve the quality of child care for all children, nonsubsidized as well as subsidized. In March 2018, the Consolidated Appropriations Act, 2018 was enacted, which provided $5.2 billion in additional CCDF discretionary funding for fiscal year 2018, approximately twice the amount provided in fiscal year 2017. GAO was asked to review state use of CCDF funds and their potential impact on nonsubsidized children.

GAO examined (1) the extent to which states use CCDF funds to support their child care system, (2) the kinds of CCDF–related activities states engage in that affect children who are not receiving CCDF subsidies, and (3) how states plan to use the increase in CCDF funding from the Consolidated Appropriations Act, 2018. GAO collected information from state CCDF administrators through a survey to the 50 states and the District of Columbia (D.C.) and interviews with officials in 15 states, including D.C., selected to reflect diverse characteristics and locations. GAO also reviewed relevant federal laws, regulations, and guidance, and interviewed Department of Health and Human Services officials.

GAO makes no recommendations in this report.

A majority of states used funding from the Child Care and Development Fund (CCDF) in fiscal year 2017 to entirely or mostly support 7 of 10 major state child care activities GAO identified in its survey of 51 state CCDF programs. These activities, components of which are also required by CCDF, represent diverse aspects of state child care systems and are a key means through which states may choose to improve the quality of their child care. States reported that they relied primarily on CCDF funding for child care resource and referral systems, consumer education, and health and safety standards establishment and training more frequently than for other activities.

States reported in GAO's survey that a range of CCDF quality activities affect the care of children not receiving CCDF subsidies (nonsubsidized children), including three activities cited by all states—consumer education, child care licensing, and professional development of the child care workforce. CCDF administrators in most of the 15 states GAO interviewed said they have elected to apply certain requirements for caregivers subsidized under CCDF to all state licensed child care providers. For example, child care providers may be subject to monitoring and professional development requirements, whether or not they care for children receiving subsidies. CCDF administrators also stated that, as a result, all children in the care of licensed providers in these states—including nonsubsidized children—benefit from the enhanced requirements.

States most often reported in GAO's survey that they plan to spend new CCDF funds provided in the Consolidated Appropriations Act, 2018, on quality activities that benefit all children in child care including licensing, consumer education, and professional development. For example, officials GAO interviewed in several states described plans to enhance public state child care websites to make them more user-friendly for all families or available in other languages, such as Spanish. However, more than a third of the interviewed states said their spending plans were still in flux, and more than half said they faced challenges making spending decisions because it was unclear whether the new funds would be provided in the future.

The federal child care subsidy program known as the Child Care and  Development Fund (CCDF) is the primary source of federal funding  dedicated to assisting low-income families who are working or  participating in education and training by increasing their access to quality  child care. In fiscal year 2016, the most recent year for which data are  publicly available, CCDF provided child care assistance to about 1.4  million children each month. Discretionary funding for CCDF is  authorized by the Child Care and Development Block Grant (CCDBG) Act  of 1990, as amended, and the U.S. Department of Health and Human  Services (HHS) administers the funds to states. In addition to authorizing  funding, the CCDBG Act of 2014 included various requirements for  states, among them ones designed to improve child care for all children  receiving child care, including children who do not receive child care  subsidies (nonsubsidized children). For example, the law requires states  to conduct comprehensive background checks for all licensed and  regulated child care providers, which includes providers who may  exclusively serve nonsubsidized children. In addition, the law requires  states to certify that they have certain policies, including making the  results of monitoring and inspection reports available electronically in a  consumer-friendly format. In March 2018, the Consolidated  Appropriations Act, 2018 was enacted, which provided $5.2 billion in  discretionary CCDF funding for fiscal year 2018, nearly twice the amount  provided in fiscal year 2017.

You asked us to review states’ use of CCDF funds and their potential  impact on nonsubsidized children. This report addresses (1) the extent to  which states use CCDF funds to support their child care system, (2) the  kinds of CCDF activities states engage in that affect children who are not  receiving CCDF subsidies, and (3) how states plan to use the increase in  CCDF funding from the Consolidated Appropriations Act, 2018.

To answer our objectives, we collected information from state CCDF  administrators in two ways. First, we surveyed CCDF administrators in  the 50 states and the District of Columbia (D.C.) using a Word-enabled  questionnaire in May and June 2018 and received a 100 percent  response rate. We asked state CCDF administrators about certain child  care activities, including the proportion of all funds used by the state in  fiscal year 2017 to support each activity that came from CCDF and  whether the activity affects nonsubsidized children receiving child care.  We selected 10 activities that states may use to improve the quality of  their child care services. We also asked about additional child care  activities in their states that affect nonsubsidized children. In addition, we  asked states about their plans to use the new CCDF funds appropriated  under the Consolidated Appropriations Act, 2018, for those and other  state child care activities, including ones related to other CCDBG Act  requirements. We took several steps to minimize measurement error and  data collection and processing errors. Specifically, we pre-tested draft  versions of the questionnaire with CCDF administrators in three states to  check the clarity of the questions and layout of the questionnaire, and  made revisions, as appropriate. Second, we conducted semi-structured  interviews with CCDF administrators in 15 states, including D.C., in May  and June 2018 to collect in-depth information about the ways in which  state child care activities may affect nonsubsidized children and states’  plans to use the new funding. We selected states that reflected variation  in the level of CCDF funding set aside for quality activities, according to  the most recently available data from HHS, and geography (see appendix  I for a list of these states). Through our interviews and follow-up, we also  obtained information from states on the potential impacts of not having  received the new funds and challenges associated with the new funding.  While information obtained during these interviews is not generalizable  and may be preliminary and subject to change, it provides point-in-time  insight into state plans for these funds from a variety of states. We also  reviewed relevant federal laws, regulations, and guidance, and  interviewed HHS officials.

We conducted this performance audit from January 2018 to April 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

In fiscal year 2019, states are required to spend at least 8 percent of  CCDF funding for “quality activities”—activities that are designed to  improve the quality of child care services the state provides. These  activities may include supporting the professional development of the  child care workforce and improving the supply and quality of child care  programs and services for infants and toddlers. Table 1 describes  examples of quality activities states may choose to fund with their  required quality set-aside, as well as requirements for states to carry out  certain activities from the CCDBG Act of 2014, where applicable.

After setting aside funds for quality activities and administrative activities,  states must spend at least 70 percent of discretionary funds that remain  on subsidies for eligible families. They provide subsidies to eligible  families through the CCDF program in the form of certificates or vouchers  to use for child care in homes, child care centers, and classrooms, or  through grants or contracts to child care providers. Children receiving  CCDF subsidies may receive care alongside nonsubsidized children— that is, children who may be eligible for child care subsidies but who do  not receive them, or who may be ineligible for child care subsidies.

A Majority of States Reported Relying on CCDF Funds to Support Key Quality Child Care Activities

A majority of states used fiscal year 2017 CCDF funds to entirely or  mostly fund 7 of 10 major state child care activities, according to our  survey of CCDF administrators in the 50 states and D.C. (see fig. 1).  The 10 child care activities included in our survey, components of which  are also required by CCDF, are key means through which states may  choose to improve the quality of their child care services (i.e., quality  activities). They also represent diverse aspects of a state’s child care  system.

Among states that relied on CCDF funding to support the quality  activities, we found that, on average, states funded 6 of the 10 activities  entirely or mostly with CCDF. Nearly one-third of states (16) funded at  least 8 of the 10 to that degree.

States reported that they relied on CCDF funding most frequently for the  following activities: child care resource and referral systems, consumer  education, and health and safety standards establishment and training.

Child care resource and referral systems. More than three-quarters of  states (40) reported in our survey that all (22) or most (18) of the funding  they used for their child care resource and referral systems in fiscal year  2017 came from CCDF. Statewide systems of child care resource and  referral agencies can serve an important role in supporting state quality  improvement efforts, though not all states have them, according to HHS.  For example, child care resource and referral agencies may provide  training and technical assistance to child care providers and share  consumer education with families, among other things. States may use  CCDF funds to establish or support a system of local or regional agencies  that is coordinated by a lead child care resource and referral  organization. Officials in the states we interviewed described various  ways in which their child care resource and referral agencies support  child care providers and parents, such as:

Delivering professional development, including training and technical  assistance, to child care providers, regardless of whether or not the  providers accept subsidized children, according to several CCDF  administrators interviewed.

Supporting parents by determining eligibility for subsidies, providing  referrals for care, and offering information on child care quality,  according to state officials. For example, one state houses eligibility  specialists in regional child care resource and referral agencies,  through which families apply for subsidies, while another state uses  these agencies to refer families to child care providers and support  families with specialists, including mental health consultants and  infant specialists, as needed.

Consumer education. About 70 percent of states (36) reported that all  (12) or most (24) of the funding they used for consumer education  activities in fiscal year 2017 came from CCDF. Consumer education  activities are intended to help parents seeking child care make informed  decisions and improve access to information that supports child  development. States must certify that they have policies to make public  the results of child care providers’ monitoring and inspection reports, as  well as certify that they will collect and disseminate information on child  care services available through CCDF, research and best practices  concerning child development, and state policies regarding the social- emotional and behavioral health of children, among other requirements.  Moreover, many of the 15 states we interviewed used child care resource  and referral agencies to do this. Examples from our state interviews  illustrate that:

One state promotes awareness of its quality rating and improvement  system for child care providers through materials available from the  state’s child care resource and referral agencies, according to its  CCDF administrator.

Another state’s child care resource and referral system has a public  awareness campaign aimed at the parents of infants, toddlers, and  preschoolers to help families understand and identify quality child  care, according to the head of the state’s child care resource and  referral network.

Parents in a third state can obtain information on child development  through resources available from lending libraries, according to the  state’s CCDF administrator.

Health and safety standards. About 70 percent of states (36) also  reported entirely funding (15) or mostly funding (21) the development or  deployment of training for health and safety standards with CCDF in fiscal  year 2017. According to the CCDBG Act, states are required to certify  that they have health and safety standards in specific topic areas, such as  the use of safe sleeping practices and pediatric first-aid, and certify that  all CCDF providers will receive minimum health and safety training in  these areas. Most of the 15 states that we interviewed went beyond  CCDBG Act requirements and elected to apply their health and safety  training requirements to all licensed child care providers in the state, and  in some cases, to child care providers that are exempt from licensing. In  doing so, officials described how their requirements served to elevate the  health and safety of children in care regardless of whether they receive  CCCF subsidies. Several state officials specifically credited the CCDBG  Act as the impetus for their states’ changes. State officials we interviewed  also described taking various approaches, including offering financial  incentives, to facilitate child care providers in meeting training  requirements. Examples of these approaches and their impact include the  following:

One state official said that while the state child care agency had  wanted to increase health and safety requirements for child care  providers for years, the reauthorization of the CCDBG Act propelled  the state forward in its efforts to increase child care quality and require  the same health and safety training of all licensed and license-exempt  providers.

One state offers health and safety grants to child care providers to  meet these requirements, while another is considering increasing  child care provider payment rates to a level that will allow them to  meet the updated health and safety requirements, according to state  officials.

CCDF administrators in two states told us they are developing online  training modules for the required health and safety training so child  care providers can access the modules more easily and for free or  have mailed training DVDs to every child care program in the state.

CCDF administrators in almost all of the 15 states we interviewed told us  their states set aside more than the minimum amount that CCDF required  to support quality in 2017. They described how their states use quality  set-aside funds to support child care licensing programs, accreditation,  and quality rating systems for child care providers, among other things.  Some state officials we interviewed also described specific supports for  infants and toddlers, such as partnerships to provide training for child  care providers around the care of this age group, and increases in  provider payment rates for infant and toddler care, which is costly to  provide, from the infant and toddler-specific set-aside. According to one  state CCDF administrator, the ability to divert funds to activities that  benefit infants and toddlers is critical as this is the neediest age—a time  when children and parents need the most support.

States Report That Consumer Education, Licensing, and Professional Development, Among Other Quality Activities, Also Affect Children Not Receiving Subsidies

A range of CCDF quality activities, including consumer education, child  care licensing, and professional development of the child care workforce  affect the care of children not receiving subsidies (nonsubsidized  children), according to our 51-state survey of CCDF administrators (see  fig. 2). On average, states reported that 9 of the 10 activities included in  our survey affect nonsubsidized children receiving child care in the state,  with more than 40 percent of states (22) reporting that all of the activities  affect nonsubsidized children, according to our analysis of the survey  data. As previously noted, the activities serve as key supports for building  quality in state child care systems.

Of these activities, CCDF administrators unanimously cited three in our  survey as affecting nonsubsidized children: consumer education;  licensing, monitoring or background checks for child care; and  professional development. Below are some specific examples of the way  nonsubsidized children are affected by these activities, as discussed with  CCDF administrators in our 15 state interviews.

Consumer education. During our interviews, state officials discussed  ways in which their CCDF programs share important information on child  care quality and child development with all families, including those not  receiving subsidies. As previously noted, many of the 15 states we  interviewed rely on their child care resource and referral agencies to  provide such information to the public. HHS requires states to have a  website that includes, among other things, a searchable list of licensed  child care providers and information about the provider’s quality rating, if  available. States we interviewed use these and other consumer  education tools, such as billboards, public service announcements, and  commercials in an effort to reach a wide-ranging audience.

Licensing, monitoring, or background checks. According to the  CCDBG Act, states must certify they have policies to annually conduct  unannounced inspections of all licensed CCDF providers for compliance  with all child care licensing standards, including health, safety, and fire  standards, with at least one pre-licensure inspection. But most of the 15  states we interviewed have elected to apply certain CCDBG Act  requirements for CCDF providers, including those pertaining to monitoring  and inspections, to all licensed providers in the state, according to their  states’ CCDF administrators. Officials in several states suggested that  updating their requirements for all licensed providers with the CCDF  requirements establishes a high-quality foundation for child care that  reflects the importance of a healthy and safe environment for all children  receiving care, regardless of whether children receive a subsidy.  Examples from some states that we interviewed are:  In one state, where subsidized children make up about 20 percent of  children in licensed care, the state’s CCDF administrator estimated  that significant numbers of nonsubsidized children benefit from higher  quality care, including from more extensive monitoring of all licensed  providers.

Another state applied the requirements for CCDF providers to all  license-exempt child care providers (including those not serving  subsidized children), which helps ensure that all children in care  benefit from the updated monitoring, health and safety, and  background check requirements.

An official from another state that does not apply CCDBG Act  requirements more broadly said that, because nonsubsidized children  share classrooms with subsidized children, requirements that apply to  subsidized providers, in turn, also still benefit the nonsubsidized  children in their classrooms. In particular, he said that the requirement  that all CCDF providers that serve subsidized children be inspected  has opened up child care centers that previously, as license-exempt  providers, were not inspected, and has resulted in improvements in  some centers.

Professional development. CCDF administrators we interviewed  recognize professional development as key to high-quality child care for  all children, including nonsubsidized children. The CCDBG Act requires  states to describe the training and professional development  requirements designed to enable CCDF providers to promote the social,  emotional, physical, and cognitive development of children. According to  HHS, states must also require ongoing training for CCDF providers that is  accessible, appropriate to the age and setting of the children served, and  aligned to a progression of professional development that includes a  minimum number of annual hours of training for the child care workforce.  As with certain other CCDBG Act requirements, a majority of states we  interviewed have established the same professional development  requirements for all licensed child care providers, whether or not they  care for subsidized children, according to state officials. One CCDF  administrator said that the updated CCDF requirements for subsidized  providers were an impetus for her state to raise the training requirements  for providers that do not care for children receiving subsidies and that are  unlicensed. She said the updated, more comprehensive training requirements help ensure that all children are in care with child care  providers that parents can trust.

CCDF administrators also highlighted characteristics of their states’  professional development activities that serve to positively impact  nonsubsidized children as well—namely, availability, accessibility, and  affordability of professional development opportunities to child care  providers. For example, state officials told us of making these  opportunities available to all child care providers through online training  courses, training and onsite consultation from child care resource and  referral agencies, technical assistance and coaching, and resource  lending libraries. Nearly all states we interviewed use their states’ quality  set-aside funds to support such training, technical assistance, and/or  coaching opportunities. Where training may not be free, CCDF  administrators told us of financial incentives that assist child care  providers in their efforts to increase quality through professional  development. For example, several states use their quality set-aside  funds to offer scholarship grant programs available to child care providers  to help increase their qualifications, whether or not they care for  subsidized children. One state offers incentive payments based on a  provider’s level of attainment in the state’s career ladder, for which all  providers are eligible to apply, according to its CCDF administrator, and  can result in provider development that benefits the nonsubsidized  children in their care.

In addition to spending on quality activities, states reported through our  interviews that nonsubsidized children also indirectly benefit from state  spending on subsidies. According to officials in many of the 15 states that  we interviewed, states’ spending on subsidies helps increase the  economic stability of CCDF providers, which, in turn, also benefits  nonsubsidized children in their care. Officials said that subsidizing  providers to help pay for the cost of care for eligible families can provide a  consistent source of revenue for CCDF providers that allows them to  continue stable operations, invest in professional development, and  increase teacher pay, for example. Such spending, in turn, can lead to  improved child care quality as well as access (i.e., by helping providers  stay in business) to nonsubsidized children, too, who are in their care,  according to state officials.

However, officials in many states we interviewed also noted that CCDF  subsidies or related policies may negatively impact nonsubsidized  children and families. For example, several said that state increases in  payment rates for CCDF providers may lead providers to similarly  increase the rates they charge for the nonsubsidized children in their  care, which, some noted, could drive families for whom such care is no  longer affordable to alternative, unregulated providers that may have  lower quality standards. Rate increases can be particularly difficult for  middle-income families who do not qualify for CCDF and are struggling to  meet the current market rate of child care, according to one state’s CCDF  administrator. CCDF administrators from several other states also noted a  drop in CCDF child care providers in recent years due to various factors,  including low payment rates, extensive CCDF requirements for  inspections and background checks, and an insufficient number of  children to sustain operating costs, for example. In much of one state’s  neediest areas, local elementary schools often provide the highest quality  care, according to the state’s CCDF administrator; however, with the  addition of background checks that some school districts have found  administratively burdensome and duplicative, the official said that many  districts have dropped out of the CCDF program.

States Most Often Report Plans to Spend the New CCDF Funds on Quality Activities That Affect All Children in Care, Despite Funding Uncertainty

Among quality activities, states most often reported plans to spend the  new discretionary CCDF funding from the Consolidated Appropriations  Act, 2018 on three—licensing, consumer education, and professional  development—the same activities that all states reported affect  nonsubsidized children, according to our survey of CCDF administrators  in the 50 states and D.C. (see fig. 3).

Licensing, monitoring, or background checks. More than two thirds of  states we surveyed (34) plan to spend the new CCDF funds on child care  licensing or related activities of monitoring and background checks.  During our interviews, many state CCDF administrators provided  examples of how they plan to use new funds on licensing-related  activities, such as hiring or increasing pay of licensing staff or making  administrative or system improvements to facilitate the interstate  background checks required under the CCDBG Act. For example, one  state plans to enhance its online background check portal to streamline  interstate coordination while another state plans to help providers pay for  the interstate background check fees by offsetting the increased cost for  the next 1 or 2 years. A third state, which has been operating under an  HHS waiver that allowed for delayed implementation of the interstate  background check requirements, now plans to use new funds to conduct  the required checks, according to the state’s CCDF administrator. Without  the new funds, officials from two states said that they may have had to  reduce funding to other child care activities, including subsidies, in order  to allocate the additional resources needed to comply with licensing,  monitoring, or background check requirements.

Consumer education. More than half of states we surveyed (30) said  they plan to spend new funds on consumer education activities. Some  state officials we interviewed described plans to enhance public state  child care websites to make them more user-friendly or available in other  languages, such as Spanish. For example, one state plans to improve  online access to provider information by featuring a dashboard with a  snapshot of each provider’s license history, including inspection  violations. Officials from another state said they plan to use new funds to  launch a public engagement campaign to provide timely and important  information about child care and state-based child care services. In the  absence of the new funding, officials from two states said they would  likely need to reduce their efforts to better educate families statewide  about important child development information and the states’ publicly- available tools that can help parents identify high-quality child care.  Specifically, officials from one state said they would have to forgo plans to  make their public child care website more sophisticated and consumer- friendly and officials from another state said they would not be able to  conduct their planned public education campaigns.

Professional development. More than half of states we surveyed (30)  said they plan to fund professional development activities for child care  providers. Officials we interviewed in several states told us about plans to  use the new funds to implement or improve online professional  development systems, such as by increasing online course offerings or  creating training applications accessible by cellphone, which can improve  accessibility for all child care providers. We also heard about plans in five  states to use some new funds to provide specialized training, including  training focused on infant and toddler-specific topics, caring for children  exposed to trauma, and emergency planning and response. CCDF  administrators from two other states described plans to fund more  scholarships for child care workforce training and certification programs,  including Child Development Associate credential programs. Lastly,  officials in one state told us they plan to create a mentorship program  whereby high-quality licensed providers mentor licensed-exempt  providers in order to help providers who are interested in becoming  licensed improve their quality and professional development  qualifications. Without the new funds, officials from one state said they  would not have been able to continue to support as many professional  development opportunities that support both subsidized and  nonsubsidized children, such as conferences, networking events, and  coaching. Another CCDF administrator expressed concern that in the  absence of the new funds, her state may have struggled to implement a  new workforce registry system that tracks child care providers’ education  and credentials.

Most states reported plans to allocate the new funds to multiple state  child care activities, according to our analysis of the survey data.  Specifically, we found that more than two thirds of states plan to fund at  least three of the activities, and half of states plan to fund at least five  activities.

Moreover, according to our survey, about 40 percent of states (20) also  plan to spend at least some of the new funds to increase the proportion of  funding set aside for quality activities beyond the required minimum for  the year—which, as described earlier, they can use to fund these  activities. During our interviews, we heard about states’ plans to spend  new funds on a variety of qualifying activities, including child care  resource and referral systems, accreditation of child care providers, and  development of high-quality program standards. In the absence of the  new funds, one state CCDF administrator told us that the state would  likely have had to eliminate some optional quality activities, such as  financial support to help providers become accredited. She further  explained that the state is more willing to cut back on quality activities  when there is insufficient funding than to disenroll families from the CCDF  program.

Aside from quality activities, states we surveyed also reported plans to  spend new CCDF funds toward subsidies. More than half of states (31)  plan to spend at least some of the new funds on increasing payment rates  for CCDF providers or lowering parental copayments. For example, one  state official we interviewed told us about plans to increase payment rates  for infant and toddler care, with a goal to increase access to child care for  infants and toddlers across the state. In addition, about half of states (25)  we surveyed reported plans to spend new funds to implement two  requirements that allow families to continue receiving subsidies for a  longer period of time—the 12-month eligibility period and the graduated  phase-out of assistance. Lastly, nearly one-third of surveyed states (16)  reported plans to use new funds to pay for subsidies for children on their  wait lists to receive child care. CCDF administrators in all of the states  we interviewed that use a wait list (5) stated that they might have had to  expand their wait lists in the absence of the new funds.

However, several state CCDF administrators expressed uncertainty about  their states’ plans for using the new CCDF funds in interviews (conducted  in May and June 2018). Officials from more than a third of the 15 states  we interviewed (6) said their spending plans were still in flux. In some of  these states, officials said they were still developing and reviewing their  funding proposals as part of their state’s legislative and budgeting  process and they were awaiting future legislative approval or spending  authorization. For example, in one state, the CCDF administrator said  she was awaiting information on how much money the state would  receive before she planned to convene stakeholder groups to discuss  potential funding proposals. In another state, the CCDF administrator said  her office needed to wait for other local budget appropriation decisions  before her office could commit the new CCDF funds to specific priorities.  Officials in more than half of the 15 states we interviewed also told us  they faced challenges making spending decisions because they were  unclear whether the new funds would be provided on an ongoing basis.  For example, CCDF administrators in two states that plan to expand  subsidies to children on their wait lists expressed concerns about having  to disenroll children from the program if funding is discontinued. Officials from several states suggested that they are proceeding cautiously with  spending decisions given there is no guarantee that the increased funds  will be provided in the future, while an official from another state told us  they are operating under the assumption that the new funds will be  provided on an ongoing basis and do not have a contingency plan in the  event that the funds are not continued.

We provided a draft of this report to HHS for review and comment. HHS  provided technical comments only, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Department of Health and  Human Services, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff members who made key contributions to this  report are listed in appendix II.

Appendix II: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Janet Mascia (Assistant  Director), Avani Locke (Analyst-in-Charge), and Elizabeth Hartjes made  key contributions to this report. Also contributing to the report were Seto  Bagdoyan, James Bennett, Randy De Leon, Kirsten Lauber, Sheila R.  McCoy, Jonathon Oldmixon, Jessica Orr, James Rebbe, Almeta Spencer,  and Amy Sweet.

Discretionary funding for the Child Care and Development Fund—a significant source of federal funding for child care subsidies—was approximately doubled in 2018 to $5.2 billion.

States must use some of the money they get to improve the quality of their child care services. In fiscal year 2017, a majority of states put their funds toward major state activities such as consumer education and establishing health and safety standards.

Most of the states reported that they plan to spend new funds on activities that benefit all children in child care, such as supporting child care licensing and professional development of the child care workforce.

This text has been updated to clarify funding.