You budgeted your month around 14 CCDF-funded slots at full enrollment. Rent, food, and two assistant teachers are fixed costs whether every chair is filled or not. Then flu season hits — three kids miss a full week each, one family takes an unexcused vacation, and your next subsidy deposit lands $1,800 light because your state now pays on attendance, not enrollment. If that scenario just tightened your chest, you are not alone. A new federal rule that took effect July 13, 2026 has flipped how thousands of child care programs get paid, and how you track attendance on paper will now determine how reliably cash hits your bank.
The change is the Department of Health and Human Services' final rule titled "Restoring Flexibility in the Child Care and Development Fund," published May 12, 2026. It did not create a new program. It unwound four requirements that many states had spent two years scrambling to implement — and for daycare owners, the most consequential of those four is the return to attendance-based billing.
This guide breaks down what changed, why your state has options again, and how to rebuild your invoicing, bookkeeping, and cash-flow habits so a light attendance week does not become a payroll crisis.
What CCDF Is and Why It Matters to Your Bottom Line
The Child Care and Development Fund is the primary federal funding stream that helps families with low incomes afford child care. Congress funds it through the Child Care and Development Block Grant Act and Section 418 of the Social Security Act. For federal fiscal year 2026, Congress appropriated $12.381 billion, distributed by formula to all 50 states, the District of Columbia, five territories, and 264 tribal organizations.
Most of that money reaches providers like you through vouchers or certificates: a family qualifies, the state authorizes a number of hours or days, and you submit for payment. In federal fiscal year 2023, the most recent year with complete data, CCDF subsidized care for more than 1.6 million children from 994,000 families in an average month. States also must spend at least 12% of their CCDF dollars on quality-improvement activities — $2.9 billion in 2022 alone, plus another $477 million for infant and toddler care.
If you accept even a handful of subsidy families, CCDF is not a side program. It is a payer mix decision that behaves like a big, slow-paying client with its own invoicing rules.
The Whiplash Timeline: From 2024 Mandates to 2026 Flexibility
To understand why your state contact keeps sending conflicting guidance, rewind two years:
September 2016: HHS modernized CCDF after Congress reauthorized the block grant in 2014. States got flexibility in how they set co-payments, paid providers, and built supply.
March 2024: HHS tightened four practices nationwide, aiming to improve affordability and stabilize providers. In one stroke it required states to (1) cap family co-payments at 7% of income, (2) use some grants or contracts for direct services to infants, toddlers, children with disabilities, and underserved areas, (3) pay providers prospectively at the start of the service period, and (4) pay based on a child's authorized enrollment rather than daily attendance.
Immediately after: 55 of 56 states and territories asked for — and received — two-year waivers because their eligibility systems, payment platforms, and budgets could not pivot that fast. Nineteen states later asked for two more years. States told HHS the 2024 mandates were more expensive and more operationally tangled than estimated, and that enrollment-based, prospective payments raised fraud and improper-payment risks just as funding had grown 50% — from $8.1 billion in 2019 to $12.4 billion in 2026.
January 2026: HHS proposed rescinding the four mandates, restoring the pre-2024 flexibility.
May 12, 2026: The final rule published, effective July 13, 2026. It does not forbid any of the four practices. It simply stops requiring them. A state that already pays on enrollment, caps co-pays at 5%, or pays prospectively may keep doing so. A state that never managed to switch may now stay on attendance-based, reimbursement-style billing without chasing a waiver.
The practical consequence: where you operate now dictates which rulebook you live under for the next year or two, and many states are actively reconsidering which option they want.
The Four Rescinded Requirements, in Plain English
1. The 7% Co-Payment Cap Is Gone
The 2024 rule forced every state, territory, and participating tribe to ensure no family paid more than 7% of its income in co-payments, regardless of how many children were in care. The 2026 rule removes that federal ceiling and reverts to the statutory test: co-payments must be "not a barrier to families receiving assistance" on a sliding fee scale.
As of March 2026, 31 states plus D.C. and five territories already met the 7% test voluntarily; 15 states plus D.C. sat exactly at 7%, and 16 states plus five territories were already below 7% — some as low as 1%. Those states may keep their lower co-pays. Others now have room to raise co-pays to stretch CCDF dollars to more families, which trades lower cost per family for longer waitlists if they do not.
For you, this matters when a family hands you a co-payment each week. If your state raises its sliding scale, your front-desk collection rate and your bad-debt write-offs need attention.
2. Grants and Contracts Are Optional Again
The 2024 rule required states to deliver some direct services through grants or contracts, at minimum for infants and toddlers, children with disabilities, and children in underserved areas. The intent was to build supply where vouchers alone had not. By March 2026 only seven states and one territory had managed grants for children with disabilities, 11 states and one territory for infants and toddlers, and 10 states for underserved areas — even some states with long histories of contracting could not retrofit their programs in time.
The 2026 rule returns that choice to states. A state may still use grants or contracts to guarantee slots — and if it does, it must still offer every family a voucher option — but many will revert to pure voucher systems because that is what their fiscal and data systems already support. If you were hoping for a stable contracted slot with guaranteed monthly revenue, ask your lead agency whether that pathway will continue.
3. Prospective Payment Is No Longer Required
The 2024 rule required paying providers at or before the start of the service period, with limited exceptions. The 2026 rule restores the 2016 option: a state may pay prospectively or pay on reimbursement within no more than 21 calendar days after receiving a complete invoice.
States that struggled with prospective pay — and the program-integrity questions it raised when care was paid for before it was delivered — now have explicit permission to pay after care is documented. That shifts timing risk back to you, especially in month one of enrollment or when invoices are incomplete.
4. Enrollment-Based Pay Is No Longer Required — and This Is the Big One for Your Books
The 2024 rule required, with limited exceptions, paying you based on a child's authorized enrollment — the hours or days the state approved — rather than whether the child actually attended. The theory matched private-pay practice: parents reserve a spot and pay whether the child is there or not, so providers can cover fixed costs.
The 2026 rule rescinds that mandate. HHS estimated enrollment-based pay would have cost states about $16.5 million per year, on top of other transfers estimated at $34.2 million annually by 2027. Rescinding it lets states redirect more dollars to direct services and, in HHS's phrase, gives them "greater flexibility to support program integrity and combat potential fraud."
What replaces the mandate is a menu. To satisfy the statutory requirement to delink payment from a child's occasional absences "to the extent practicable," a state now may choose any of:
- Paying on enrollment rather than attendance
- Paying in full if a child attends at least 85% of authorized time
- Paying in full if a child is absent five or fewer days in a four-week period
- Any alternative the state justifies in its CCDF Plan
In other words, your state can keep enrollment-based pay, switch to a threshold model, or revert to strict attendance billing with carve-outs for occasional absences. Until your state publishes its updated plan and payment policy, assume nothing.
What Attendance-Based Billing Actually Looks Like
If your state chooses one of the attendance-linked options, these are the mechanics that will show up in your remittance advice:
Attendance day defined by your authorization. If a child is authorized full-time Monday-Friday and attends Monday and Tuesday but misses Wednesday-Friday with no documented reason, a strict attendance model pays two of five days. Under the 85% model, missing more than 15% of authorized time in the period dips you below the threshold and triggers a reduced payment. Under the five-day rule, the first five absences in a four-week window are paid at 100%; the sixth is not.
"Occasional absences" still get paid — but not unlimited absences. The statute recognizes holidays and illness happen. States must delink payment from occasional absences, but they are not required to pay for chronic absenteeism or for a slot that is functionally empty. The difference between "five paid absences" and "unlimited paid enrollment" is exactly where your cash-flow variance lives.
Documentation burden rises. Enrollment-based pay needed one authorization to generate one payment. Attendance-based pay needs daily attendance records, often with arrival and departure times, absence reasons, and sometimes parent signatures. Missing or late attendance logs are the number one reason providers report delayed or reduced reimbursements under attendance models. Build the record the same day; reconstructing a week at invoicing time is where errors creep in.
Secondary providers complicate counting. If a child splits time between your center and another provider, commenters urged states to apply absence thresholds at the provider level, not the child level, so one provider's payment is not dragged down by absences at the other. Check how your state counts it — and invoice each authorization separately so you can trace which ledger line got trimmed.
Bookkeeping Habits That Keep a Variable Subsidy From Wrecking Your Month
Whether your state pays on enrollment or attendance, your fixed costs do not flex with a child's attendance. The bookkeeping goal is to make the variability visible early enough to act on it.
Separate Subsidy Revenue From Private-Pay Revenue — Then Split It Again
Create distinct income accounts for:
- CCDF subsidy payments (state share)
- Family co-payments for CCDF families
- Private-pay tuition
Do not net the state payment and the co-payment together. The state share is a government receivable; the co-payment is a household receivable with different collection risk. When a state raises co-pays, you will see it in the second account first — rising balances and slower turnover — before it shows up as enrollment churn.
Track Authorized vs. Attended Hours, Not Just Dollars
Add two non-financial metrics to your monthly close:
- Authorized days or hours per child per month
- Attended days or hours per child per month
- Paid absences credited under your state's threshold
The gap between authorized and attended is your unbilled or uncollectible reserve. If your state uses the 85% rule, calculate the attendance rate weekly; one bad flu week can push a family below the threshold, and you have a narrow window to collect make-up documentation or offer a make-up day if your policy allows it.
Invoice Like a Government Contractor
Attendance-based reimbursement rewards clean, complete invoices:
- Submit within your state's window — many require complete invoices within days of month-end to meet the 21-day payment standard. Late submission is late payment by your own hand.
- Attach the attendance record the state actually accepts, not your internal sign-in sheet if they require a specific form or electronic check-in.
- Include your written payment agreement terms on every invoice packet: rate, schedule, fees, and the dispute process. The 2026 rule still requires the state to maintain a timely appeal and dispute process for payment inaccuracies — use it when a remittance does not match your attendance log, but you will lose leverage without contemporaneous records.
Reserve for the Swing
Enrollment-based pay smooths revenue; attendance-based pay does not. If 20% of your licensed capacity is CCDF-funded and your state pays on attendance with a five-day grace, model a worst-case month where each subsidized child misses six days. That shortfall is not a surprise — it is a predictable seasonal variance. Many stable centers hold a one-month operating reserve and accrue a small bad-debt allowance against co-payments, replenished when attendance runs high in steadier months.
Reconcile the Remittance, Every Time
When payment arrives, match three documents: your attendance log, your invoice, and the state's remittance advice. Code the differences immediately:
- Short-pay for absences beyond the threshold → contra-revenue or attendance variance, not an expense
- Short-pay for incomplete documentation → accounts receivable, correct and resubmit
- Co-payment the family did not pay you → accounts receivable from the family, not a reduction of state revenue
If you use QuickBooks, Xero, or a plain-text ledger, keep a separate clearing account for "CCDF receivable" so you can see at a glance what the state owes you versus what families owe you.
Watch the Policy Signals in Your State Plan
States must describe their payment practices in the CCDF Plan, including how they ensure timely payment, how they delink occasional absences, and how they reflect generally accepted payment practices such as paying on a part-time or full-time basis and covering reasonable mandatory registration fees. When your state files its amended plan after July 13, read that section. The choice between "we pay on enrollment," "we pay in full at 85% attendance," and "we pay for five absences" will be spelled out there before it shows up in your deposit.
A Practical Checklist for the Next 30 Days
- Call your lead agency analyst. Ask: which payment option did you select for the amended plan — enrollment, 85%, five-day, or an alternative — and does it apply to all providers or vary by setting?
- Pull your last three remittances. Calculate your actual attendance rate for each subsidized child. You may be surprised how often you were already below 85% without realizing it.
- Standardize daily attendance. One clipboard or tablet at the entrance, two timestamps per child per day, absence reason captured at check-in. Train every opener and closer the same way.
- Separate your chart of accounts. Add the three income accounts above and a CCDF receivable account if you do not have them.
- Build an absence-threshold tracker. A simple spreadsheet with conditional formatting for "four absences this period — next absence is unpaid" prevents end-of-month shock.
- Rewrite your family handbook paragraph. State in plain language what the family's co-payment covers, when it is due, and what happens when the state's payment does not cover an absence beyond the threshold — without shifting a state policy cost onto the family in a way that creates a barrier the state prohibits.
- Set a resubmission calendar. If an invoice is short-paid, you have a dispute window. Diarize it the same week the remittance lands.
What Did Not Change
A few obligations survived the rollback intact. Lead agencies must still ensure timely payment, pay on a part-time or full-time basis rather than hourly slices, cover reasonable mandatory registration fees, give you your payment terms in writing, notify you promptly when a family's eligibility change affects your payment, and maintain an appeal process. Those guardrails were in the 2016 rule and remain, whatever absence model your state picks.
Simplify Your Financial Management
Attendance-based reimbursement makes your revenue more granular — more rows to capture, more thresholds to monitor, and more matching between attendance logs and state remittances. Keeping those records in a transparent, version-controlled ledger pays for itself the first time you need to prove a day's attendance to resolve a short payment. Beancount.io offers plain-text accounting that gives you complete control over your financial data, works with the tools you already use, and stays auditable when a state auditor asks how you got from sign-in sheet to income statement. Get started for free and keep your subsidy bookkeeping as steady as your classroom routines.