oversight

Child Care: How Do Military and Civilian Center Costs Compare?

Published by the Government Accountability Office on 1999-10-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to Congressional Requesters




October 1999
                CHILD CARE
                How Do Military and
                Civilian Center Costs
                Compare?




GAO/HEHS-00-7
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-279806

      October 14, 1999

      The Honorable Trent Lott
      Majority Leader
      United States Senate

      The Honorable Larry E. Craig
      United States Senate

      The Honorable Paul D. Coverdell
      United States Senate

      The demand for child care has increased dramatically in the past several
      decades as the number of mothers who work outside the home has grown.
      About 39 percent of women with children under the age of 6 were in the
      labor force in 1975; by March 1997, that figure had risen to 65 percent.
      Recognizing the importance of child care arrangements to all working
      families, the Congress streamlined federal programs in 1996 and increased
      funding in fiscal year 1997. Proposals have been introduced in the 106th
      Congress that address the affordability and quality of care. An important
      question underlying these proposals is how much high-quality child care
      costs.

      Researchers and practitioners agree that high-quality child care settings
      are those in which a sufficient number of well-trained caregivers have
      positive interactions with children engaged in developmentally
      appropriate activities in safe environments. Both the Congress and the
      administration have praised the high quality of the child development
      program operated by the Department of Defense (DOD) and identified it as
      a model for the rest of the nation. Therefore, to provide a benchmark cost
      estimate for the Congress as it addresses these child care issues, you
      asked us to compare the cost of DOD’s high-quality child development
      program with the cost of comparable care in the civilian market. As agreed
      with your offices, our objectives were to (1) identify the objectives of the
      military child development program and describe how it operates,
      (2) determine the full cost of operating DOD’s U.S. child development
      centers and the cost per child-hour for center-based care, and (3) compare




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                   the cost per child in DOD child development centers with the full cost of
                   comparable quality child care in the civilian market.1

                   The military child development centers in our review included only those
                   of the Air Force because it was the only service whose centers had all
                   demonstrated high quality by meeting the accreditation standards of the
                   National Association for the Education of Young Children (NAEYC).2 Our
                   cost estimate data for the Air Force centers came primarily from that
                   service and other government sources. We also surveyed all Air Force
                   child development centers to collect cost information that these
                   government sources did not provide. Our cost estimates for civilian child
                   care centers came from information provided by a research study3 of 150
                   child care centers identified as providing high-quality care out of a sample
                   of 401 centers in four states. Although not necessarily representative of all
                   high-quality child care centers, these data are the only source of cost
                   information available in an existing database. Appendix I provides
                   additional details about our methodology and its limitations. We
                   conducted our work between April 1998 and July 1999 in accordance with
                   generally accepted government auditing standards.


                   The primary objective of the military’s child development program is to
Results in Brief   help military families balance the competing demands of family and
                   military responsibilities by providing high-quality child care at affordable
                   rates. DOD’s child development program is implemented in each service

                   1
                    The full cost estimate represents what it costs to operate a center when all costs are counted. This
                   estimate includes both expended costs (total cash costs for daily operations) as well as other costs
                   that the Air Force incurs but does not charge its centers. Expended costs include labor, staff education
                   and training, food, supplies, equipment, and utilities. Air Force occupancy cost (annual value of center
                   space) is imputed and counted only as a component of the full cost estimate. Also included in the full
                   cost estimate are legal services and donations. Donations include services that volunteers provide the
                   centers as well as donated goods and cash. Most of our full cost findings are expressed as the cost per
                   child-hour, a measure that standardizes the cost of care across all types of centers, regardless of the
                   number of children served or the hours of operation. Although we present our cost information in
                   dollars and cents, our findings are estimates and not as accurate as this level of measurement implies.
                   We refer to our cost findings as “complete” or “total” costs. We discuss data quality issues and other
                   study limitations in app. I.
                   2
                    NAEYC is the nation’s largest association of early childhood professionals. Its purpose is to improve
                   professional practice in early childhood care and education and increase public understanding of
                   high-quality early childhood programs. NAEYC administers, through a voluntary system, an early
                   childhood program accreditation process designed to set standards of excellence in early childhood
                   education.
                   3
                    Child care centers examined in Cost, Quality and Child Outcomes in Child Care Centers, ed. Suzanne
                   W. Helburn (Denver: Economics Department, University of Colorado at Denver, 1995) were selected
                   using a stratified random sample of 100 centers in each of four participating states with approximately
                   equal representation of for-profit and nonprofit centers. The four participating states were California,
                   Colorado, Connecticut, and North Carolina.



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and provides several child care options, including center care, family child
care, and before- and after-school programs. To promote a high-quality
child development program, DOD requires that caregiver salaries meet
certain prescribed minimum levels and that caregivers across all military
services complete comprehensive child development training. In addition,
DOD is required by law to maintain strict oversight of the safety standards
of its child development settings through inspections. For example, the
military’s child development facilities are subject to four unannounced
inspections a year. Funding for the program comes from parent fees as
well as federal funds. Center caregiver salaries are paid primarily with
parent fees. Federal funds go toward supplies, equipment, staff training
costs, and some staff salaries. About $315 million in federal funds was
obligated in fiscal year 1998 for DOD’s child development program. DOD
allocated approximately 80 percent of this amount to child development
centers, 10 percent to family child care, and 10 percent to school-age care.

We estimated that the cost to the Air Force of operating its U.S. child
development centers was approximately $81.4 million in fiscal year 1997,
and the estimated cost per child-hour in these centers was $3.86. Labor
costs—which include the salaries and benefits of child development
center caregivers, directors, and support staff—composed 75 percent of
the estimated cost, with the majority of labor costs representing the
salaries and benefits of caregivers. The estimated cost per child-hour
varied significantly for different age groups, from $5.41 for infants, to $4.28
for toddlers, to $3.24 for preschoolers. Child-hour costs are higher for
younger children because quality standards for young children require
more caregivers per child. Because almost half the children that the Air
Force centers serve are under the age of 3, the centers’ total costs and
costs per child-hour are higher than if they served a smaller proportion of
children under the age of 3.

When adjusted for age distribution of the children, the costs of high-quality
care in Air Force and civilian centers were not substantially different. The
adjustment reduced the Air Force cost per child-hour from $3.86 to $3.42,
which is about 7 percent higher than the cost of care in civilian centers.
Another factor that affects the overall cost per child-hour in Air Force
centers is the caregiver compensation rate. Air Force centers pay their
caregivers, on average, about $1.04 more per hour than comparable
civilian centers do.




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Background

Military and Civilian Child   Both military and civilian child care services are supplied by providers
Care Settings                 operating in varied settings: with center care, a child is cared for in a
                              nonresidential setting; with family child care, a child is cared for in the
                              home of a provider; and with in-home care, a child is cared for in his or her
                              own home. Child care centers—also known as child development centers
                              in the military and nursery schools or preschools in the civilian
                              sector—are nonresidential facilities. Military centers are located on
                              military bases, while civilian centers are located in a variety of
                              establishments, including churches, schools, businesses, and public
                              agencies. Family child care is provided to a small number of unrelated
                              children—typically fewer than six—in a provider’s home. On military
                              bases, the provider’s home is military housing, and the provider is a
                              military spouse. Civilian in-home care, such as that provided by au pairs or
                              nannies, usually is provided for the children of the family that resides in
                              the home. Military families may make arrangements independently for
                              in-home care, but care by au pairs or nannies is not a service offered by
                              the military child development program. In addition, some military and
                              civilian centers and family child care homes also offer before- and
                              after-school care.


Child Care Quality and        Military and civilian child care providers are concerned about the quality
Cost                          of the child care experience. Researchers and professional associations
                              have addressed the concern for quality by identifying two broad quality
                              dimensions that pertain to all child care programs: children’s daily
                              interactions with their caregivers and structural features of the child care
                              environment. Research has shown that child-caregiver interactions are
                              most closely linked with children’s development. Thus, child care is
                              considered high-quality when caregivers are sensitive in responding to
                              children’s social behavior, participate in their play and learning activities,
                              and guide their behavior in a positive manner. Structural features include
                              group size, the number of children assigned to a team of caregivers in a
                              classroom; child-to-staff ratio, the number of children per caregiver in a
                              classroom; caregiver training; and the amount of floor space per child.4
                              Along with adequate space, resilient playground surfaces and frequent
                              staff and child hand washing are important health and safety structural
                              features of high-quality child care. Another important structural feature,

                              4
                               The child-to-staff ratios for various group sizes that NAEYC recommends for high-quality care are
                              provided in app. II.



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particularly for infants and toddlers, is low staff turnover, which
researchers have tied to higher caregiver compensation. While structural
features are not directly associated with children’s development, they
support and facilitate positive child-caregiver interactions.5

Standards established by professional associations address both the
interactive and structural dimensions of child care quality. For example,
both NAEYC’s accreditation standards and the measures included in the
Early Childhood Environment Rating Scale—a widely recognized tool
used to assess the dimensions of quality in child care centers—address the
quality of child-caregiver interactions as well as structural features of the
child care environment.6 A civilian center’s compliance with NAEYC and
other professional association standards is voluntary. For the military
child development program, the military services elected to meet NAEYC
standards as a supplement to DOD’s requirements for child development
and safety.7 Thus, both DOD and NAEYC child care standards serve as a basis
for DOD’s child development program.

Using statistical measures for child-caregiver interactions and structural
features of centers, as well as for numerous other variables, the Cost,
Quality and Child Outcomes in Child Care Centers study examined the
relationship among the quality of care, the cost of care, and the
developmental progress of children in civilian center-based child care.
Conducted by a team of economists and developmental psychologists
from four universities, the study had as its fundamental objective
explaining the quality of care prevalent in child care centers by looking at
the operation of child care markets. Among a broad range of findings, the
study produced three that were pertinent to our analysis:




5
 See Child Care: Use of Standards to Ensure High Quality Care (GAO/HEHS-98-223R, July 31, 1998) for
more information on structural features of the child care environment. State child care standards,
which are mandatory, primarily focus on the structural dimensions of care. The Maternal and Child
Health Bureau, Public Health Service, U.S. Department of Health and Human Services, has developed
guidelines for child health and safety, but compliance is voluntary.
6
 Child development researchers at the University of North Carolina developed the Early Childhood
Environment Rating Scale for child care centers to use in self-assessment and for use in program
evaluations and other types of research. This rating scale was used in the Cost, Quality and Child
Outcomes in Child Care Centers study. See app. I for a more detailed discussion of the child care
quality measures used in our study.
7
 Military child development centers are required to meet standards of operation necessary for
accreditation by an appropriate national early childhood programs accrediting body.



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                             •   High-quality center-based child care costs more, but not a lot more, than
                                 other center-based care.8
                             •   The quality of care in child care centers is related to several components
                                 of labor cost, including child-to-staff ratios, caregivers’ wages, and
                                 caregivers’ education and training.
                             •   Most center-based care, especially of infants and toddlers, is mediocre at
                                 best.

                                 The 401 centers in the study population were selected from lists of
                                 licensed child care facilities in the four participating states. Although the
                                 states were not selected randomly, the study team believed the child care
                                 centers in the four states to be representative of early care and education
                                 programs in the United States. Centers were selected for data collection
                                 within each state using a stratified random sample, with approximately
                                 equal representation of for-profit and nonprofit centers. Approximately
                                 100 centers were selected in each state. Of the 401 centers, 25 were
                                 accredited by NAEYC.9


Quality Initiatives in the       To address reports of poor program quality and greater demand from its
Military Child                   military personnel for child care services, DOD took steps to improve its
Development Program              child development program beginning in the 1980s. In a 1982 report, we
                                 highlighted several problems in the program, including unsafe child care
                                 facilities, a lack of DOD-wide program standards, and inadequate training of
                                 the program’s caregivers.10 In response to our report, DOD issued a Child
                                 Care Action Plan in 1983 that focused on improving DOD child development
                                 facilities by replacing or renovating them. It also addressed child-to-staff
                                 ratios and group sizes and set minimum DOD-wide standards for the
                                 operation of child development programs. The plan became the basis for
                                 DOD’s child care policy for all its military services.




                                 8
                                  The mean cost per child-hour for all 401 centers in the study sample was $2.31 in 1992 dollars, using
                                 the same cost components included in our cost estimate. When the 1992 dollars are adjusted for
                                 inflation to 1997 dollars, this cost estimate becomes $2.64. However, in addition to representing the
                                 total study sample of centers of varying quality, rather than a subsample of high-quality centers, this
                                 cost estimate differs from our estimate of the cost per child-hour in civilian high-quality centers in two
                                 important ways. First, this estimate was based on enrollment, rather than the number of children in
                                 attendance, as the measure of children served; second, this estimate excluded three for-profit child
                                 care centers operated at a place of business, which were considered outliers because they tend to have
                                 high-quality care as well as high costs. See app. I for additional details about our methodology.
                                 9
                                  See table I.1 for a comparison of NAEYC standards and the measures used to select our subsample of
                                 high-quality centers.
                                 10
                                     Military Child Care Programs: Progress Made, More Needed (GAO/FPCD-82-30, June 1, 1982).



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                          In 1988, a series of congressional hearings on the military child
                          development program considered several allegations of child abuse at
                          military child development centers. The hearings led to the enactment of
                          the Military Child Care Act (MCCA) of 1989, which mandated further
                          changes in the military’s center program.11 Most of the provisions in the
                          act were designed to improve the quality of care, either by improving the
                          quality of the caregivers themselves or by ensuring that DOD standards are
                          enforced. While most of the provisions in MCCA pertained to the military’s
                          child development centers, DOD issued guidance in the 1990s extending key
                          provisions, such as inspections and training requirements, to family child
                          care and school-age programs. In 1996, DOD took another step toward
                          implementing servicewide quality standards by directing the military
                          services to work toward accreditation by a national accrediting body for
                          all child development centers.12 As of June 1999, 89 percent of all military
                          centers were accredited by NAEYC, while in the civilian sector, where
                          accreditation is voluntary, approximately 6 percent were NAEYC-accredited.


                          According to DOD, its child development program has several objectives,
DOD’s Child               including helping families balance military and family responsibilities;
Development Program       improving the family’s economic well-being; and promoting children’s
Is Structured to          cognitive, social, emotional, and physical development in all DOD’s child
                          development program settings. The military’s program includes a range of
Promote High-Quality,     child care options to accommodate the needs of working military
Affordable Care           personnel. While the Office of Family Policy (OFP) within the Office of the
                          Secretary of Defense is responsible for developing overall child care
                          policy, each military service issues its own regulations based on DOD policy
                          and is responsible for operating its own program. OFP’s child care policies
                          are designed to promote a qualified and stable workforce and effectively
                          enforce OFP’s health and safety standards. The military’s program is funded
                          from a combination of federal appropriations and parent fees.


DOD Provides a Range of   To meet the needs of working military parents, who often work
Child Care Options        nonstandard hours, including shift work, nights, and weekends, DOD offers
                          several child care arrangements. Specifically, the military services offer
                          three principal forms of child care: child development centers, family child
                          care, and before- and after-school programs (“school-age care”). Those

                          11
                           The Military Child Care Act was revised and codified with the enactment of P.L. 104-106, section
                          568(a)(1), February 10, 1996. The provisions are currently found in sections 1791-1798 of title 10, USC.
                          12
                           In addition, a 1998 White House memorandum directed all federal child care centers to be accredited
                          by 2000.



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eligible for the military’s child development program include active duty
military personnel, DOD civilian personnel, reservists on active duty or
during inactive duty personnel training, and DOD contractors. First priority
for DOD’s child development program is given to employed parents who are
active duty military and civilian personnel. The military assists families in
finding at least one affordable child care option located either on or off the
military base.

On-base centers were the original source of formalized child care on
military bases and still serve as the principal component of the military’s
child development program. DOD’s center-based care serves about
41 percent of all children participating in the military child development
program in about 800 centers worldwide. DOD’s child development centers
vary in size, with the largest serving about 300 children. Most of the
centers serve children aged 6 weeks to 5 years, with about 45 percent of
the children under the age of 3. These centers typically operate from 6:00
a.m. to 6:30 p.m., 5 days a week. Many centers also offer a part-day
preschool program and hourly care.

DOD’s family child care programs generally are provided by the spouses of
active duty military personnel living in government-owned or -leased
housing. The military services serve about 35 percent of the children in the
military’s program in approximately 10,000 family child care homes in the
United States and overseas. Family child care homes serve the same
population as centers and provide services for sick and special needs
children. In addition, they offer extended-hour and weekend care to
accommodate military shift work and provide long-term care during
military deployments. According to DOD officials, the flexible hours offered
by family child care homes play an important role in providing child care
during nontraditional hours and ensuring that parents are available for
military duties on short notice.

All military services operate before- and after-school care programs for
children aged 6 to 12. These programs, which offer care during holidays
and summer vacation, are housed in various facilities, including child
development centers, youth centers, and schools located on military
installations. While in the past the military services have focused more on
center and family child care, the services’ child development program
managers told us that they are now looking to either expand the
school-age program or improve its quality. According to one service
manager, one service is trying to do both.




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                            OFP develops overall child development policies that pertain to centers,
                            family child care, and school-age care. Each military service issues its own
                            child care regulations that are based on DOD’s policies, publishes
                            instructions that pertain to the specific operations of its program, and
                            administers its own program. While the services have the authority to
                            issue child care regulations that are more restrictive than OFP policies,
                            most military services’ child development program managers told us that,
                            generally, they do not make policies more restrictive because doing so
                            might increase the cost of program operations. Military base officials make
                            decisions about the operation and management of their particular child
                            development programs. For example, officials determine whether to offer
                            center-based care, family child care, or both and whether to expand
                            existing programs or facilities. Center directors are responsible for the
                            day-to-day operation of the centers, and a family child care director at
                            each base oversees the family child care providers.


Improved Wages,             DOD requires that caregiver salaries meet certain prescribed minimum
Comprehensive Training      levels. In addition, OFP policies follow statutory requirements, which
Requirements, and           mandate specific training requirements and strict oversight of DOD’s child
                            care standards to enhance the quality of its child development program.
Centralized Oversight       While most if these requirements relate only to center-based care, DOD has
Promote High-Quality Care   comparable training requirements for caregivers in its centers, family child
                            care homes, and school-age programs and carries out comparable
                            inspections and similar background checks on all its caregivers. The
                            services also offer resource and referral programs that provide parents
                            with information on and referrals to all program components.

Improved Wages              In 1990, to provide military centers with a more qualified and stable
                            workforce, DOD began paying center caregivers wages equivalent to those
                            of other employees on the same military base with comparable training,
                            seniority, and experience. Before this policy change, most military
                            caregivers, like their civilian counterparts, were paid minimum wage and
                            received few benefits. According to DOD officials, improved wages for
                            center caregivers reduced turnover significantly and improved the quality
                            of care by providing a more stable workforce. Staff turnover in the military
                            program is now less than 40 percent annually, down from 300 percent on
                            some military bases during the 1980s. According to OFP, current turnover is
                            primarily the result of the “normal transfer” of military personnel, whose




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                         spouses work in child care, from one military base to another.13 Research
                         has shown that higher staff salaries are associated with better-quality child
                         development centers and that children who attend centers with lower staff
                         turnover develop better social and language skills.

Comprehensive Training   DOD’s training program for its newly hired caregivers in centers, family
Requirements             child care homes, and school-age programs requires that caregivers first
                         complete orientation training before they are allowed to work directly
                         with the children. Center and family child care providers must then
                         complete 15 competency-based training modules within 18 months of their
                         start date in order to be retained. OFP used nationally recognized
                         competency standards to develop these modules, which focus on areas
                         such as promoting a safe and healthy learning environment, advancing
                         physical and intellectual competency, and supporting the social and
                         emotional development of a child.14 Caregivers for the school-age program
                         must complete 36 hours of training based on these competency modules
                         within the first year of work. Finally, all center, family, and school-age
                         caregivers must attend 24 hours of training annually.15 DOD’s training
                         requirements apply uniformly across all military services.

                         To improve the quality of training for caregivers, DOD is also required by
                         law to ensure that each child development center employs a training and
                         curriculum specialist, and DOD policy requires that the specialist be a
                         professionally qualified early childhood educator. According to the
                         director of OFP, the training and curriculum specialist provides training for
                         center, family child care, and school-age providers. This person is
                         responsible for developing the program’s curriculum, promoting
                         developmentally appropriate practices, instructing caregiver staff, and
                         ensuring that the staff demonstrate skills as a result of the required
                         training.



                         13
                           During 1997, 27 percent of child care teachers and 39 percent of assistant teachers left their jobs in
                         civilian centers. In that same year, one-fifth of civilian centers reported losing 50 percent or more of
                         their teaching staff. See M. Whitebook and others, Worthy Work, Unlivable Wages: The National Child
                         Care Staffing Study, 1988-1997 (Washington, D.C.: Center for the Child Care Workforce, 1998), p. 8.
                         14
                          The Council for Early Childhood Professional Recognition operates the Child Development Associate
                         National Credentialing Program. Focusing on the skills of early childhood and educational
                         professionals, the program is designed to provide performance-based training and assessment of child
                         care staff and family child care providers. The program represents a national effort to provide child
                         development credentials to qualified caregivers who work with children from birth through age 5.
                         15
                           In the civilian sector, fewer than half of the states require any training for newly hired center
                         caregivers before they can begin working, and only 11 require similar training for family child care
                         providers. Forty-four states require some kind of annual ongoing training for center caregivers, and 31
                         require annual ongoing training for family child care providers.



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                        DOD has also initiated an “up or out” policy that links its training program
                        to wages and promotion. DOD requires that center caregivers complete all
                        training modules to remain employed and to receive the highest hourly
                        wage available to DOD caregivers. Because family child care providers are
                        independent contractors and generally set their own fees, their wages are
                        not tied to training requirements. However, family child care providers can
                        lose their contract to provide care if they do not complete the required and
                        ongoing training.

Centralized Oversight   DOD strictly enforces its child care standards, such as those pertaining to
                        safety issues. The law requires DOD to ensure that each center receives not
                        fewer than four unannounced inspections a year. DOD’s policy states that
                        base personnel must conduct three of the four unannounced inspections,
                        including at least one comprehensive health and sanitation inspection, one
                        comprehensive fire and safety inspection, and one inspection led by a
                        representative with authority to verify compliance with DOD child care
                        standards. By law, a fourth inspection is carried out by representatives
                        from a higher level of command, including a child development specialist.
                        This fourth inspection includes a review of the center’s curriculum, staff,
                        and training; interviews with parents; and an assessment of the safety and
                        appropriateness of indoor and outdoor equipment. In addition to these
                        quarterly inspections, base personnel conduct monthly fire and food
                        sanitation inspections at centers. If a center program is in compliance with
                        DOD standards, DOD issues a certificate to operate. If the center is not in
                        compliance and the violation is life-threatening, the base commander is
                        required by law to take immediate action to correct the problem. In
                        non-life-threatening cases, the violation must be corrected within 90 days
                        or the center is closed until the violation is remedied.

                        DOD policy also requires that family child care homes be inspected
                        quarterly. These unannounced inspections include fire, safety, health, and
                        program inspections and ensure that child-to-staff ratios are maintained.16
                        According to DOD and military service officials, these homes also are
                        monitored monthly by a family child care director who works at the base.
                        In addition, a multidisciplinary team that includes a child development
                        specialist randomly inspects a representative sample of family child care
                        homes. Because most family child care homes are located on military
                        bases, they are not subject to state licensing requirements. However, as is
                        the case with centers, they may be closed if the provider fails to promptly
                        correct a violation.

                        16
                         The size of the housing and age of the children determine the maximum number of children a
                        provider may care for. Most providers may care for no more than six children, including their own,
                        under the age of 8.



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                             School-age programs, which are housed in child development centers,
                             youth centers, schools, or other base facilities, are subject to at least one
                             comprehensive and one unannounced inspection annually. These
                             programs follow the same certification and remedy process for violations
                             that centers do.


Federal Funds Help Pay for   DOD’s child development program is funded with a mix of federal funds
DOD’s Program and            and parent fees. Federal funds are provided directly to DOD’s center, family
Reduce Cost to Families      child care, and school-age programs in the form of program subsidies.
                             These funds are used to reduce the cost of child care for military families
                             while improving the quality and availability of care. Increased demand for
                             child care in the military over the last 2 decades has influenced how the
                             military services spend their federal child care funding.

                             Federal funds pay for supplies, equipment, training, and some salaries for
                             program staff, as well as for construction of new centers and maintenance
                             of existing centers. These funds also pay for some specific costs
                             associated with family child care. For example, DOD pays the cost of
                             administering the program, which includes the salaries of the family child
                             care directors. In addition, DOD provides indirect financial support through
                             its resource lending libraries, which loan equipment such as cribs, high
                             chairs, toys, books, and other supplies to these providers. These libraries,
                             which also are paid for with federal funds, are located on most military
                             bases with child development programs. A total of approximately
                             $315 million in federal funds was obligated in fiscal year 1998 for military
                             child development program operations, including $253 million for
                             center-based care, $31 million for family child care, and $31 million for
                             school-age programs (see table 1).




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Table 1: Funding Obligated for DOD
Child Development Program, Fiscal    Dollars in millions
Year 1998                                                                                        Family         School-
                                     Appropriation type                           Centers     child care       age care          Total
                                     Air Force
                                     O&Ma                                            $78.8           $6.4          $13.1         $98.3
                                     MilConb                                          17.0                b               b
                                                                                                                                  17.0
                                     Army
                                     O&M                                              68.6           10.1              8.4        87.1
                                                                                                          b               b
                                     MilCon                                              0                                             0
                                     Navy/Navy Reserve
                                     O&M                                              62.6           11.5              7.3        81.4
                                                                                                          b               b
                                     MilCon                                            5.0                                            5.0
                                     US Marine Corps
                                     O&M                                              13.8            2.5              2.6c       18.9
                                                                                                          b               b
                                     MilCon                                            7.0                                            7.0
                                     Total                                         $252.8           $30.5          $31.4       $314.7
                                     a
                                      Operation and maintenance (O&M) funds pay for child development program expenses such as
                                     the salaries and benefits of administrative and management personnel, supplies, equipment, and
                                     utilities.
                                     b
                                      Military construction (MilCon) funds are appropriated for construction of new centers. Family
                                     child care providers reside in military housing, which is built with funds provided through
                                     congressional appropriations for government housing. School-age programs not located in child
                                     development centers can be located in youth centers, chapels, or dependent schools. Funding
                                     for these facilities is provided through different accounts.
                                     c
                                     Includes funding for resource and referral services and oversight requirements.

                                     Source: DOD Budget Exhibit, Child Development, School-Age Care, Family Centers, and Family
                                     Advocacy Program (PB-50), Jan. 1999.



                                     Parent fees for center and school-age care pay for most caregiver wages in
                                     these two programs. These fees are based on a sliding scale that is
                                     determined according to family income in order to ensure that military
                                     personnel with the lowest incomes can afford child care. For example,
                                     military families in the lowest two income categories ($0 to $23,000 and
                                     $23,001 to $34,000) paid $38 to $62 per child per week for center care
                                     during the 1998-99 school year. Families with annual incomes over $55,000
                                     paid $86 to $97 per child. (See table 2.) In addition, to help ensure
                                     adequate funding for military child care, federal law requires that DOD
                                     estimate total parent fees each year and provide at least as much in federal
                                     funds to child development centers. Because family child care providers




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                                          are considered independent contractors by military bases, these providers
                                          negotiate their fees directly with their customers.

Table 2: Parent Fees for Military Child
Development Centers, School Year                                                                  Range of weekly
1998-99                                                                                            fees authorized              Optional
                                          Total family income                                            per childa      high-cost rangeb
                                          $0-23,000                                                          $38-51                 $43-54
                                          23,001-34,000                                                        48-62                  53-66
                                          34,001-44,000                                                        59-74                  65-79
                                          44,001-55,000                                                        72-84                  78-90
                                          55,000+                                                              86-97                89-101
                                          a
                                           Base commanders may authorize up to a 20-percent reduction of fees charged for each
                                          additional child from the same family.
                                          b
                                           An optional high-cost range may be used in areas where it is necessary to pay higher wages to
                                          caregivers to compete in the local labor market.



                                          Demand for child care has increased as a result of the increase in the
                                          number of military personnel with families, women in the military, and
                                          families with both parents in the military. In addition, the number of
                                          military spouses working outside the home increased from 30 percent in
                                          1970 to 62 percent in 1997. In the early 1990s, DOD established a formula
                                          for estimating the need of its military families for child care services that
                                          was based on the number of children up to age 12 in military families
                                          whose parents worked outside the home and needed some type of child
                                          care. According to DOD, as of 1998, the military services were meeting
                                          about 56 percent of the projected need for child care. DOD’s goal is to meet
                                          80 percent by 2005. The director of OFP stated that DOD believes that the
                                          remaining 20 percent of military families with young children will not
                                          request child care either because the parents have alternating work
                                          schedules or because relatives care for their children.

                                          During fiscal years 1985 through 1998, the military services built about 208
                                          new centers to accommodate the child care needs of their military
                                          families. Military personnel generally show a preference for placing their
                                          children in centers, in part because center fees are generally lower than
                                          those charged by family child care providers. OFP’s director told us that
                                          because of the high cost of constructing and operating child development
                                          centers, the high cost of caring for young children in these centers, and
                                          military parents’ need for child care, most military services are trying to
                                          encourage the use of more family child care providers. For example, in the




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                             1990s, the Army, Navy, and Marine Corps began offering subsidies in the
                             form of direct cash payments to family child care providers so that they
                             could charge fees comparable to center fees.17 While the Marine Corps
                             primarily target providers caring for infants and toddlers for subsidies, the
                             Army and Navy offer subsidies to providers caring for children up to 5
                             years of age. The Army targets some of its subsidies to providers that are
                             caring for special needs children and to those that are open extended
                             hours. The Navy program manager told us that about half of Navy base
                             commanders are offering family child care providers some amount of
                             subsidy.


                             Air Force child development centers are similar to centers in the other
The High Proportion          military services. They serve children in various age groups and are
of Young Children in         required to follow servicewide regulations designed to promote
Air Force Centers            high-quality care. The estimated cost to the Air Force of operating its U.S.
                             center program was about $81.4 million in fiscal year 1997, and the
Results in Higher            estimated cost per child-hour in Air Force centers was $3.86. Labor costs
Costs                        constituted three-fourths of this cost and differed depending on the age of
                             the child, with significantly higher labor costs per child-hour for young
                             children. In addition, a large proportion of the children at Air Force
                             centers are in the youngest age groups, increasing the centers’ total child
                             care costs and cost per child-hour.


Centers’ Labor Costs         We estimated that the Air Force’s total cost for operating its child
Constitute Majority of Air   development centers in the United States was approximately $81.4 million
Force Estimated Cost         in fiscal year 1997, the most recent year for which data were available.
                             Labor costs accounted for 75 percent of the total estimated cost. The cost
                             of labor in Air Force centers includes costs for direct labor (caregivers)
                             and indirect labor (all other staff). Salaries and benefits of caregivers
                             accounted for about 52 percent of the total cost and 70 percent of labor
                             costs. The Air Force employs about 1,800 caregivers in its U.S. centers and
                             about 600 other employees, including directors, administrative staff, and
                             cooks. Many of the centers have an assistant director as well as a director,
                             and 19 percent also have annex directors that serve children in additional
                             space outside the main center building. In addition, almost all centers have
                             a training and curriculum specialist who provides services for center

                             17
                               According to the chief of the Air Force Family Member Program, the Air Force’s primary child care
                             goal is to ensure that all parents that need child care have a child care option available to them. She
                             said the Air Force does not have sufficient resources to increase the amount of care available and to
                             reduce the cost of care. She believes that as more Air Force centers are built and, consequently, more
                             center care is available, family child care providers will be forced to bring their fees more in line with
                             center fees.



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                                      caregivers and management staff, and most centers have their own cooks
                                      who prepare breakfast and lunch for the children.18

                                      About 64 percent of Air Force centers (93) are located in the United States,
                                      with the remaining located on military bases overseas.19 U.S. centers are
                                      housed on military bases, in either newly constructed facilities built
                                      specifically for use as child development centers or buildings that were
                                      renovated to conform to DOD child care standards. We estimated that the
                                      cost of providing this space constitutes the second largest component of
                                      center cost—about 10 percent of the total cost. Supplies used by the
                                      center, such as classroom and administrative materials, were the third
                                      largest component, accounting for about 7 percent. (See table 3.)

Table 3: Estimated Full Cost of Air
Force Child Development Centers,                                                                                            Percentage of
Fiscal Year 1997                      Cost component                                                     Total cost             total cost
                                      Labor (wages and benefits)
                                           Direct labor                                                $42,655,050                       52.40
                                           Indirect labor                                               18,763,938                       23.05
                                      Supplies                                                            5,710,243                       7.01
                                      Food                                                                3,939,678                       4.84
                                      Utilities                                                           1,537,571                       1.89
                                      Equipment                                                             582,165                       0.72
                                      Total expended costs                                             $73,188,645                       89.91
                                      Occupancy                                                           7,936,879                       9.75
                                      Donations                                                             237,281                       0.29
                                      Legal services                                                         46,295                       0.06
                                      Noncash costs                                                     $8,220,455                       10.10
                                      Full cost                                                        $81,409,100                        100a
                                      a
                                       Percentages do not equal 100 because of rounding.

                                      Source: GAO analysis of Air Force center data.




                                      18
                                       Training and curriculum specialists in the Air Force also serve family child care providers and
                                      caregivers in the school-age program.
                                      19
                                          The number of Air Force child development centers reported is based on the response to our survey.



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Caring for Younger                        The overall estimated cost per child-hour in Air Force centers was $3.86 in
Children Increases Air                    fiscal year 1997.20 However, the cost varied for different age groups, with
Force Labor Costs per                     younger children costing more. For example, our estimated cost for
                                          children aged 6 to 12 months was about $5.40 per child-hour, compared
Child-Hour                                with about $3.96 for toddlers aged 24 to 36 months and $3.23 for full-day
                                          preschoolers aged 3 to 5 years. (See fig. 1.)



Figure 1: Estimated Cost per Child-Hour at Air Force Centers, by Age Group, Fiscal Year 1997




                                          Source: GAO analysis of Air Force center data.




                                          The higher cost per child-hour is associated with the younger age groups
                                          because the child-to-staff ratios are lower for younger children, which




                                          20
                                           The annual cost per child in an Air Force child development center in the United States was about
                                          $8,028 in fiscal year 1997.



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results in fewer children per caregiver.21 Because centers have to hire
more caregivers for younger children, the overall cost of labor per
child-hour increases. Our analysis shows that in U.S. Air Force centers
there are about three infants per caregiver, about four and one-half
toddlers per caregiver, and about eight preschoolers per caregiver.
Consequently, direct labor costs are higher per child-hour for the youngest
children. (See app. III.) While more staff are assigned to the groups of
younger children, the average caregiver compensation rate, about $11.20
per hour (including salaries and benefits), did not differ substantially
across the various age groups.

Just as the other military services do, the Air Force employs a high
percentage of young people with young children.22 Because many of these
families prefer center-based care, a high proportion of children served in
Air Force centers are young children. Nearly half are under 3 years of age:
38 percent are toddlers and 10 percent are infants. Moreover, the cost of
toddler care and the cost of preschooler care represent about the same
proportion of the total cost of child care—about 42 percent—even though
preschoolers constitute half the children. In addition, even though infants
account for only 10 percent of all the children in Air Force centers, the
cost of their care accounts for about 14 percent of the overall cost of child
care. (See table 4.) Thus, the centers’ total cost and their cost per
child-hour are higher than if they served a smaller proportion of children
under the age of 3.




21
  DOD’s standards for child-to-staff ratios generally follow the NAEYC standards (see app. II). The
child-to-staff ratios that we estimated are based on actual attendance reported by the centers in fiscal
year 1997. According to the Air Force Child and Youth Services manager, the observed ratios exceed
the DOD standards (fewer children per staff) because of the child absentee rate in the centers. She
noted that, on average, about 12 percent of children are absent each day from Air Force centers
because of Air Force personnel work schedules, illness, and family vacations. For example, many Air
Force personnel often fly an average of 3 days a week and are home the rest of the week. In addition,
military personnel receive regular “home leave” and may keep their children home during these days.
22
 Thirty-three percent of Air Force personnel are under the age of 26. In addition, 38 percent of
employed Air Force spouses have children under the age of 2.



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Table 4: Age Group Distribution and
Cost of Care at Air Force Centers,                                                                    Percentage of            Percentage of
Fiscal Year 1997                      Children’s age                                                       children                total cost
                                      Infants
                                      6 weeks-6 months                                                             3.38                       4.76
                                      6-12 months                                                                  6.80                       9.52
                                      Subtotal                                                                   10.18                    14.28
                                      Toddlers
                                      12-24 months                                                               16.20                    19.81
                                      24-36 months                                                               22.05                    22.67
                                      Subtotal                                                                   38.25                    42.48
                                      Preschoolers
                                      3-5 years                                                                  46.62                    39.07
                                      Part-day preschoolers
                                      3-5 years                                                                    3.77                       3.26
                                      Subtotal                                                                   50.39                    42.33
                                      School-aged children
                                      6 years and over                                                             1.19                        .90
                                      Total                                                                        100                        100
                                      Note: Percentages do not equal 100 because of rounding.

                                      Source: GAO analysis of Air Force center data.




                                      The hourly cost for care is about 20 percent higher in Air Force centers
Cost per Child-Hour Is                than in civilian centers of comparable quality because the Air Force’s labor
Similar in Air Force                  costs are higher. To a great extent, differences in the age distribution of
and Civilian Centers                  the children served explained the difference in the centers’ labor costs: a
                                      higher proportion of Air Force center children than of civilian center
When Adjusted for                     children are under the age of 3. When we adjusted the Air Force estimated
Age Distribution                      cost to account for the difference in the children’s age, the overall Air
                                      Force cost per child-hour decreased $3.86 to $3.42, which is about
                                      7 percent higher than civilian centers’ cost per child-hour. Air Force
                                      centers also compensate their caregivers more per hour than civilian
                                      centers.

                                      The civilian centers’ overall cost per child-hour was $3.19.23 Table 5 breaks
                                      down the per-child-hour cost components—overall and for each age
                                      group—showing that the most costly component in both Air Force and
                                      civilian centers’ overall cost per child-hour was the cost of labor. Labor

                                      23
                                        The annual cost per child for the civilian child care centers was about $6,635 in fiscal year 1997.



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                                            represented 75 percent of the cost per child-hour in Air Force centers and
                                            67 percent in civilian centers. The greatest difference between the
                                            individual cost components of the Air Force and civilian centers was also
                                            in the cost of labor—a difference of 78 cents per child-hour. The other cost
                                            components differed by less than half that amount.24


Table 5: Unadjusted Components of Costs per Child-Hour, by Age Group, Fiscal Year 1997
                                    Air Force                                                                  Civilian
                                                        School-                                                               School-
Cost                                                       aged                                                                  aged
component          Infants   Toddlers Preschoolers      children      Overall Infants        Toddlers Preschoolers            children          Overall
Labor
  Salaries,
  wages, and
  benefits          $4.63       $3.32        $2.27        $2.04          $2.91     $3.95          $3.33            $1.88          $1.74          $2.12
                         a           a              a            a             a
  Training costs                                                                     0.02          0.02              0.01          0.01           0.01
Subtotal            $4.63       $3.32        $2.27        $2.04          $2.91     $3.97          $3.35            $1.89          $1.75          $2.13
Occupancyb           0.38        0.37            0.38       0.42          0.38       0.46          0.46              0.36          0.38           0.38
Food                    0        0.21            0.21       0.18          0.19          0          0.13              0.12          0.09           0.12
       c
Other                0.39        0.37            0.37       0.29          0.37       0.35          0.32              0.28          0.26           0.28
Total
expended costs      $5.40       $4.27        $3.23        $2.93          $3.85     $4.78          $4.26            $2.65          $2.48          $2.91
Donationsd           0.01        0.01            0.01       0.01          0.01       0.37          0.26              0.30          0.18           0.28
Total cost          $5.41       $4.28        $3.24        $2.94          $3.86     $5.15          $4.52            $2.95          $2.66          $3.19
                                            a
                                             Air Force training costs include compensation of the training and curriculum specialist employed
                                            by each child development center. This cost was not broken out separately but is included in the
                                            Air Force cost of labor.
                                            b
                                             This is the estimated cost of space. For Air Force child development centers, occupancy cost is
                                            imputed because centers are not actually charged for the cost of space. The cost of construction
                                            is assumed by Air Force bases and paid out of military construction funds. For civilian centers,
                                            occupancy cost may include the cost of utilities and repair and maintenance services.
                                            c
                                             Includes cost of utilities, legal services, liability insurance, taxes, supplies, equipment, and
                                            payments to a parent company, if incurred.
                                            d
                                             Donations include services that volunteers provide the child development centers, as well as
                                            donated goods and cash.

                                            Source: GAO analysis of Air Force and civilian center data. The fiscal year 1992 civilian center
                                            data were escalated to fiscal year 1997 using the Consumer Price Index.




                                            24
                                              The 27-cent difference in the dollar value of donations the centers received was the second greatest
                                            component cost difference. Air Force centers received comparatively fewer donations, representing
                                            less than 1 percent of their overall cost per child-hour. However, donations constituted 9 percent of
                                            civilian centers’ cost per child-hour and consisted mostly of center space and volunteers’ services.



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                                      The difference in Air Force and civilian centers’ labor costs is explained in
                                      large part by the difference in the age distributions of the children they
                                      serve. Most of a child care center’s labor cost is determined by the number
                                      of caregivers employed. When centers follow professional standards that
                                      require fewer children per caregiver for young children, centers employ
                                      more staff to provide care for younger children than for older children.
                                      Thus, the higher the proportion of young children in the centers’ care, the
                                      higher their overall labor costs per child-hour. As noted, the Air Force
                                      centers served a high proportion of young children. In fact, as table 6
                                      shows, a higher percentage of Air Force center children (48 percent) than
                                      of civilian center children (15 percent) were under 3 years of age. Because
                                      Air Force centers served a higher proportion of young children than
                                      civilian centers did, their overall labor costs per child-hour were higher.

Table 6: Centers’ Proportion of
Children, by Age Group, Fiscal Year   Numbers in percent
1997                                  Children’s agea                                                           Air Force         Civilian
                                      Infants
                                                                                                                                           b
                                      6 weeks-6 months                                                                 3.38
                                                                                                                                           b
                                      6-12 months                                                                      6.80
                                      Subtotal                                                                       10.18            4.99
                                      Toddlers
                                                                                                                                           b
                                      12-24 months                                                                   16.20
                                                                                                                                           b
                                      24-36 months                                                                   22.05
                                      Subtotal                                                                       38.25          10.39
                                      Preschoolers
                                      3-5 years                                                                      46.62          72.95
                                      Part-day preschoolers
                                                                                                                                           b
                                      3-5 years                                                                        3.77
                                      School-aged children
                                      6 years and over                                                                 1.19         11.68
                                      Total                                                                            100            100
                                      Note: Percentages do not equal 100 because of rounding.
                                      a
                                       Categories for this column apply only to Air Force center data. See note in app. I concerning age
                                      group assignment and measurement of children’s ages in the civilian center data.
                                      b
                                      Data for civilian centers were not broken down into this subcategory.

                                      Source: GAO analysis of Air Force and civilian center data.




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                  In view of the importance of children’s age as a factor in the overall cost
                  per child-hour, we adjusted the Air Force cost estimate to take account of
                  the age distribution differences between the Air Force and civilian centers’
                  child populations. To do so, we calculated what the Air Force centers’
                  costs would have been had the age distribution of the children they served
                  been the same as that of the civilian centers. The result was that the
                  difference in the centers’ overall cost of labor per child-hour was reduced
                  from 78 cents to 35 cents. Much of the 35-cent difference in the cost of
                  labor that is left can be attributed to the higher compensation that Air
                  Force centers pay caregivers—an average hourly compensation rate of
                  $11.20 (salaries and benefits), which is $1.04 higher than the rate paid at
                  civilian centers.

                  Finally, substituting the age distribution of the civilian centers’ children for
                  that of the Air Force centers’ children reduced the overall cost per
                  child-hour from $3.86 to $3.42, a decline from about 20 percent to about
                  7 percent. Thus, when we adjusted for age distribution, the cost of
                  high-quality child care in Air Force and civilian centers was not
                  substantially different.


                  DOD commented on a draft of this report and generally concurred with our
Agency Comments   findings. However, DOD raised three issues about our research methods
                  and how they might have affected the difference we found in Air Force
                  and civilian centers’ overall cost per child-hour. While the issues DOD
                  raised are important study design considerations, the magnitude and
                  direction of any cost differences that would result cannot be estimated.
                  Moreover, as we concluded, the cost difference between Air Force and
                  civilian centers is not substantial, and any shift in cost differences
                  resulting from the issues DOD raised is unlikely to change that conclusion.

                  First, DOD considered the measure we used for the number of children
                  served by Air Force centers dissimilar from the one we used for civilian
                  centers and suggested that the Air Force center cost per child-hour was
                  somewhat high in comparison to the civilian center cost because of that
                  dissimilarity. However, we used the same measure—attendance—for the
                  number of children served in both Air Force and civilian centers. For Air
                  Force centers, attendance was based on counts conducted every hour of
                  every day at each center; for each civilian center, attendance was based on
                  a 1-year extrapolation of attendance reported for the day on which the
                  Cost, Quality and Child Outcomes in Child Care Centers study team visited
                  to collect data. Presumably, the Air Force center attendance data were



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more precise than the extrapolations we used for the civilian centers. But
we have no basis for determining whether more precise civilian center
attendance data, if they had been available, would have been higher or
lower than the extrapolated data. Thus, there is no basis for concluding
whether more precise civilian center data would have decreased or
increased the difference between estimated Air Force center costs and
estimated civilian center costs.

Second, DOD argued that the Air Force and high-quality civilian centers
were not comparable in terms of quality because of the method we used to
select the civilian centers. DOD suggested that a difference in the centers’
quality of care resulting from the sample selection procedure might
explain the cost difference that we found. We selected civilian centers for
our study from the Cost, Quality and Child Outcomes in Child Care
Centers study sample on the basis of a score of 4.5 or higher on either an
overall index of quality or a second index.25 DOD pointed out correctly that
a score of 4.5 to 5 on an overall index of quality was considered mediocre
in the Cost, Quality and Child Outcomes in Child Care Centers study of
April 1995. However, the goal in identifying civilian centers for our
comparative cost analysis was to select civilian centers of a quality
comparable to the Air Force centers. To achieve that goal, we had to find a
way of measuring child care quality in both sets of centers. The only
readily available information on the quality of care in the Air Force centers
was the fact that all of those centers had been accredited by NAEYC.
However, data on the quality of care in all 401 civilian centers in the Cost,
Quality and Child Outcomes in Child Care Centers study sample had been
collected using the two indexes noted above—an overall index of quality
and a second index. A small number of these civilian centers (25) also
were accredited by NAEYC. We looked at the NAEYC-accredited civilian
centers’ scores on the two indexes of quality as surrogate measures for the
Air Force centers’ scores on these indexes. We found that only 11 of the 25
had scored 5 or higher, while 4 had scored below 4.5. Rather than use the
lowest score as our cutoff point for identifying high-quality centers, we
selected the more conservative score of 4.5 or higher as the range in which
NAEYC-accredited centers’ scores likely would fall on the two indexes of
child care quality. Thus, we were satisfied that using a score of 4.5 or
higher on either of the two indexes to select high-quality civilian centers
for our analysis provided a subsample of centers comparable in quality to
the Air Force centers.



25
  See app. I for a discussion of our sample selection procedures.



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Finally, DOD asserted that the cost per child-hour for the entire military
child development system—child development centers, family child care,
and school-age care—might have been less than the cost per child-hour for
the Air Force child development center program. Unfortunately, the
detailed cost data for all military services and all types of care that we
needed in order to estimate the cost per child for the entire system were
not available for either the military or the civilian child development
systems.

DOD also had several technical comments, which we incorporated in the
report where appropriate. DOD’s comments are included in appendix IV.


As agreed with your offices, unless you publicly release its contents
earlier, we will make no further distribution of this report until 30 days
after its issue date. At that time, we will send copies to the Honorable
William S. Cohen, Secretary of Defense, and congressional committees
with an interest in this matter. We also will make copies available to others
on request.

If you or your staff have any questions about this report, please contact me
on (202) 512-7215 or Karen Whiten, Assistant Director, on (202) 512-7291.
Other GAO contacts and staff acknowledgments are listed in appendix V.




Cynthia M. Fagnoni
Director, Education, Workforce, and
  Income Security Issues




Page 24                                          GAO/HEHS-00-7 Child Care Costs
Page 25   GAO/HEHS-00-7 Child Care Costs
Contents



Letter                                                                                          1


Appendix I                                                                                     28
                        Study Scope                                                            28
Scope and               Limitations of the Cost Analysis                                       32
Methodology             Procedures Used to Estimate Air Force Child Development                34
                          Center Costs
                        Procedures Used to Estimate Civilian Child Care Costs                  42
                        Factors Affecting Air Force Costs                                      45

Appendix II                                                                                    46

Child-to-Staff Ratios
Within Group Size
Recommended by
NAEYC
Appendix III                                                                                   48

Fiscal Year 1997
per-Child-Hour Cost
Components for Air
Force Child
Development Centers,
by Age Group
Appendix IV                                                                                    50

Comments From the
Department of
Defense
Appendix V                                                                                     52

GAO Contacts and
Staff
Acknowledgments



                        Page 26                                     GAO/HEHS-00-7 Child Care Costs
         Contents




Tables   Table 1: Funding Obligated for DOD Child Development Program,             13
           Fiscal Year 1998
         Table 2: Parent Fees for Military Child Development Centers,              14
           School Year 1998-99
         Table 3: Estimated Full Cost of Air Force Child Development               16
           Centers, Fiscal Year 1997
         Table 4: Age Group Distribution and Cost of Care at Air Force             19
           Centers, Fiscal Year 1997
         Table 5: Unadjusted Components of Costs per Child-Hour, by Age            20
           Group, Fiscal Year 1997
         Table 6: Centers’ Proportion of Children, by Age Group, Fiscal            21
           Year 1997
         Table I.1: Comparison of NAEYC Standards and the Overall Index            31
           of Quality Developed for the Cost, Quality and Child Outcomes
           Study

Figure   Figure 1: Estimated Cost per Child-Hour at Air Force Centers, by          17
           Age Group, Fiscal Year 1997




         Abbreviations

         CIS        Caregiver Interaction Scale
         CPI        Consumer Price Index
         DOD        Department of Defense
         ECERS      Early Childhood Environment Rating Scale
         FTE        full-time equivalent
         GS         general schedule
         ITERS      Infant/Toddler Environment Rating Scale
         MCCA       Military Child Care Act
         NAEYC      National Association for the Education of Young Children
         OFP        Office of Family Policy
         TIS        Teacher Involvement Scale


         Page 27                                        GAO/HEHS-00-7 Child Care Costs
Appendix I

Scope and Methodology


              This appendix discusses in more detail the scope and methodology for
              determining the cost per child of Air Force and civilian center-based child
              care.


              Our cost analysis did not cover the entire military child development
Study Scope   program because we could not find detailed cost data for all services or
              for all types of care. The military child development program is
              implemented throughout the Department of Defense (DOD), but the
              military services conduct program cost accounting and reporting
              independently for the child development programs they operate. Each of
              the military services’ child development program managers has some
              discretion over the cost data collected and maintained by the program. So,
              when we searched for sources of program cost data at DOD, we found only
              two reports about child development program funding that all four
              services submitted in comparable format: (1) the Appropriated and
              Nonappropriated Fund Expense Summary for 1997 (the “7000.12 report”)
              and (2) DOD’s Program Budget Exhibit (known as the PB-50) for its child
              development program. However, neither of these reports contained
              information at the level of detail needed to estimate and analyze the full
              cost of child development program operations in all four military services,
              particularly for those cost components we expected to be the most
              important: the cost of labor and space. Moreover, none of the services
              collected information on the salaries and benefits of family child care
              providers.

              To design the comparative cost analysis, we also had to identify sources of
              total cost information for civilian child care. After an extensive literature
              review, we found that only the Cost, Quality and Child Outcomes in Child
              Care Centers study collected complete cost information for civilian child
              care programs, and that this study was limited to child care centers.
              Although a study of civilian family child care was under way, that study’s
              data file was not released in time to use it in our study. Thus, we narrowed
              the study scope to child care centers, the child care type for which the
              most complete cost data for both military and civilian child care were
              available. Because the study focus was the cost of high-quality child care,
              we limited the scope of the military cost analysis to the Air Force child
              development center program, the only one of the four military programs in
              which all centers had achieved National Association for the Education of
              Young Children (NAEYC) accreditation. We treated NAEYC accreditation as
              the measure of quality attained by the Air Force centers and selected a
              subsample of high-quality civilian centers from the Cost, Quality and Child



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Scope and Methodology




Outcomes in Child Care Centers study population for our comparative
cost analysis, using an overall index of quality for infant, toddler, and
preschool learning environments that the Cost, Quality and Child
Outcomes study team had developed for their work.

We did not attempt to independently assess the quality of the DOD or
civilian centers included in our study. However, to determine whether the
Air Force child development centers were comparable to the subsample of
high-quality civilian centers, we examined the similarity of the NAEYC
accreditation standards and the Cost, Quality and Child Outcomes study
team’s overall index of quality. To compare the accreditation standards
and the index of quality, we adapted 15 indicators of child care quality
specified by the National Research Council’s Panel on Child Care Policy.26
The Panel developed these indicators to compare the provisions of six sets
of professional standards on child care quality, including the NAEYC
standards and the Early Childhood Environment Rating Scale (ECERS) used
in this study.

While not identical, the standards NAEYC uses to assess centers for
accreditation and the dimensions of quality measured by the overall index
are analogous. Both NAEYC standards and the overall quality index measure
child-caregiver interactions and structural features of the child care
environment. NAEYC’s National Academy of Early Childhood Programs
developed the accreditation standards by reviewing child development
research, child development program standards in localities, and the
judgments of 175 specialists in the early childhood field. The accreditation
standards address the quality of interactions between children and
caregivers as well as structural features such as child-to-staff ratios and
group size.

The Cost, Quality and Child Outcomes study team’s overall index of quality
integrates measures from four scales for early childhood learning
environments: (1) ECERS, (2) the Infant/Toddler Environment Rating Scale
(ITERS), (3) the Caregiver Interaction Scale (CIS), and (4) the Teacher
Involvement Scale (TIS). ECERS is designed to assess the surroundings
created for children and adults in an early childhood setting. It is used in
one classroom at a time for groups of children 2 to 6 years old. Ratings are
based on the situation observed in the classroom or reported by the
teacher, rather than on plans for the future. ITERS is an adaptation of ECERS
by its authors especially for use with infants and toddlers. The CIS

26
 See National Research Council, Panel on Child Care Quality, Who Cares for America’s Children?
(Washington, D.C: National Research Council, 1990), app. B, “Professional Standards for Early
Childhood Programs,” pp. 324-39.



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Scope and Methodology




measures teacher involvement and teacher style, producing scores for
“sensitivity,” “harshness,” “detachment,” and “permissiveness.” The TIS also
measures child-caregiver interactions, focusing on how a caregiver
interacts with children during periods of observation. The caregiver’s
degree of involvement is scored on a 6-point scale, ranging from “ignore”
to “simple” to “intense.”

The NAEYC standards incorporate all 15 of the indicators of quality
developed by the Panel on Child Care Quality. ECERS and ITERS together
account for 11 of the indicators among their scales and 2 more, “staff/child
ratio” and “group size,” could be calculated from the study team’s data file.
The indicator “potential for forming an affectionate relationship with a
familiar caregiver,” which ECERS and ITERS do not measure directly, is
captured by the CIS and the TIS. One indicator, which pertained to a
requirement for caregiver training, was not measured by the scales in the
Cost, Quality and Child Outcomes study team’s overall index of quality or
by other data collection instruments used in their study. However, because
all but 1 of the 15 quality indicators are represented in the accreditation
standards and index of quality, we considered the definition of child care
quality used in both assessment tools consistent and the quality of care in
the two sets of centers comparable. See table I.1 for the results of the
comparison.




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                                                 Appendix I
                                                 Scope and Methodology




Table I.1: Comparison of NAEYC Standards and the Overall Index of Quality Developed for the Cost, Quality and Child
Outcomes Study
                                                  NAEYC                   Scales in the overall index of quality
Indicatorsa                                                standards              ECERS                ITERS                 CIS                  TIS
Fosters potential for forming an affectionate
relationship with a familiar caregiver.                               x                                      x                  x                   x
Encourages frequent positive interaction
between caregiver and children. Caregivers
are responsive, positive, accepting, and
comforting.                                                           x                  x                   x                  x                   x
Requires caregiver training related to child
development.                                                          x
Provides opportunities for caregiver training.                        x                  x                   x
                                                                                          b                   b                  b                  b
Specifies a maximum group size.                                       x
                                                                                          b                   b                  b                  b
Specifies a child-to-staff ratio.                                     x
Provides curriculum that encompasses both
socioemotional and cognitive development.                             x                  x                   x
Provides children opportunities to select
activities.                                                           x                  x                   x
Values experience with cooperative group
process.                                                              x                                      x
Provides structured but not overly rigid
curriculum.                                                           x                  x                   x
Encourages recognition and appreciation of
children’s culture.                                                   x                  x                   x
Provides child-oriented physical environment.                         x                  x                   x
Provides orderly and differentiated physical
setting.                                                              x                  x                   x
Provides for parental involvement.                                    x                  x                   x
Encourages parent/staff conferences and
communication.                                                        x                  x                   x
                                                 a
                                                 Adapted from indicators developed by the National Research Council’s Panel on Child Care
                                                 Quality.
                                                 b
                                                     Measured by other Cost, Quality and Child Outcomes study team data collection instruments.



                                                 We also examined the scores that the 25 accredited centers in the Cost,
                                                 Quality and Child Outcomes study population received on the overall
                                                 index of quality and a second index that combined scores on the ECERS and
                                                 ITERS indexes. Of the 25 accredited centers in the entire study sample, 21
                                                 met the criteria for inclusion in the high-quality subsample and were




                                                 Page 31                                                          GAO/HEHS-00-7 Child Care Costs
                         Appendix I
                         Scope and Methodology




                         included among the 150 selected.27 That is, 21 accredited centers had
                         scores on the overall index of quality or the ECER/ITER index of 4.5 or
                         higher. Four accredited centers whose scores were less than 4.5 on both
                         indexes were not selected for the high-quality subsample, suggesting that
                         the measures of child care center quality employed by the overall index of
                         quality and the ECER/ITER index are slightly more stringent than NAEYC
                         standards.


                         Because there was no single data set for our analysis, we used multiple
Limitations of the       sources of existing data and a questionnaire we developed. The fact that
Cost Analysis            most data had been collected for purposes other than our study resulted in
                         some limitations. Therefore, although we present our cost information in
                         dollars and cents, our findings are estimates and are not as accurate as this
                         level of measurement implies. The following measurement and analysis
                         issues should be considered in reviewing our findings.


DOD and Air Force Cost   The Air Force Semiannual Child Development Center Report and the
Data Required            Appropriated and Nonappropriated Fund Expense Summary for 1997 are
Supplementation          administrative cost reports developed for routine Air Force planning and
                         budgeting. Therefore, several of the data items of interest for our study
                         had to be supplemented with data from other sources or imputed. For
                         example, the semiannual report provided the salary grade of child
                         development center civil service employees paid under the Civil Service
                         general schedule (GS) but not the step or locality.28 The expense summary
                         reported the cost of supplies purchased by the child development centers,
                         but the cost item included bulk supplies for the family child care and
                         school-age programs as well. One-half of the Air Force installations did not
                         report food costs on a more detailed expense summary provided by the
                         Services Directorate of the Air Force Family Member Program. For these
                         and other items, we supplemented the data provided by DOD with data
                         from our survey or additional sources. The Air Force data used in our cost
                         estimate have not been audited by the Air Force audit service.




                         27
                          For purposes of our analysis, we considered centers that scored 4.5 or more on the 7-point index to
                         be high-quality.
                         28
                           The U.S. Civil Service System’s general schedule designates positions by salary grade, from 1 to 15.
                         Salary increments between grades are designated by steps. Pay adjustments, known as locality pay,
                         also are made to compensate for disparities in Civil Service and private sector salaries and wages for
                         comparable positions.



                         Page 32                                                           GAO/HEHS-00-7 Child Care Costs
                              Appendix I
                              Scope and Methodology




Selecting a Measure for the   Air Force and civilian child development centers counted the number of
Cost-per-Child Analysis       children served in several ways, and only some of the information was
Required Balancing            available by the age groups of the children served. The Air Force’s
                              semiannual report had information on hourly attendance; the total number
Accuracy Against              of hours children spent in the child development center classrooms during
Availability                  the year; and the total number of children the center had the physical
                              space to house, also called the number of “child care spaces.” However, in
                              the semiannual report, only the information on the number of hours
                              children spent in the child development center classrooms was reported
                              by age group. The Cost, Quality and Child Outcomes in Child Care Centers
                              study data file had information on the number of children enrolled and on
                              the number of children in attendance on the date of data collection. Both
                              measures were available by the age groups of the children served. Both
                              measures also were expressed as the number of full-time-equivalent (FTE)
                              children served—that is, the total number of children who attended for the
                              full day as well as children who attended for only part of the day.
                              However, information on actual hourly attendance and on the number of
                              child care spaces in civilian centers was not available in the Cost, Quality
                              and Child Outcomes in Child Care Centers study data file.

                              Because the Air Force data on hourly attendance and the civilian data on
                              daily attendance were the most similar measures, and both were available
                              by age group, we selected them as measures for the number of children
                              served. However, because the Cost, Quality and Child Outcomes in Child
                              Care Centers study’s daily attendance measure was counted only 1 day in
                              the year, we converted it to a measure of the total number of hours
                              children in high-quality civilian centers spent in the classroom during a
                              year by assuming that the number of children in attendance in civilian
                              centers was the same on every day of the year. This assumption may have
                              yielded a total that was slightly more or slightly less than the actual
                              number of children served in civilian centers.


Current Total Cost Data on    Because the most recent data available on the full cost of civilian child
Civilian Child Care Centers   care centers and on the wages of child care providers were collected in
Were Not Available            1992, we had to approximate the Cost, Quality and Child Outcomes in
                              Child Care Centers cost data, adjusted for inflation as indicated by the
                              Consumer Price Index (CPI). While the Employment Cost Index in the
                              Economic Report of the President shows that workforce wages increased
                              at about the same rate as the CPI, this measure would be less precise than
                              the actual wage information available for the Air Force child development
                              center staff.



                              Page 33                                         GAO/HEHS-00-7 Child Care Costs
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                              Scope and Methodology




Our Air Force and Civilian    In the Air Force child development program, the Air Force administers
Cost Analyses Did Not         and incurs the cost for all program operations, including oversight,
Include the Costs of          inspection, resource and referral services for parents seeking child care,
                              and centers. In the civilian child care center market, however, entities
Oversight, Inspections, or    other than child care centers pay for and perform the regulatory and
Resource and Referral         referral functions. State governments monitor and inspect child care
Services                      centers, and both public and for-profit organizations provide resource and
                              referral services. Civilian resource and referral agencies provide a range of
                              services—consumer education, databases of services, child care supply
                              studies, and training for providers—but do not care for children.
                              Therefore, to ensure comparability, we excluded the cost of regulatory
                              and referral activities from our analysis.


Labor Cost Information in     Center directors provided wage and benefit information on all caregiver
the Cost, Quality and Child   staff but were given the option of providing either the same level of detail
Outcomes Data File Was        for all additional staff positions or total annual wages and benefits. Some
                              centers provided the detailed wage and benefit information, but most
Not as Detailed as That in    centers did not. It was not possible, therefore, to separate the civilian
the Semiannual Report         center labor cost information into direct and indirect labor costs for
                              comparison with the Air Force center labor cost data.

                              We describe the measurement and analysis procedures that underlie all of
                              these issues in greater detail in the sections that follow.


                              To develop estimates of the cost of child care at Air Force child
Procedures Used to            development centers, we used fiscal year 1997 data from the Air Force
Estimate Air Force            Semiannual Child Development Center Report concerning the number of
Child Development             hours of child care provided at each center and wage rates for center staff,
                              as well as other data we obtained from a number of sources. In estimating
Center Costs                  the cost of providing care to specific age groups of children at each center,
                              we allocated costs other than direct labor costs to each age group on the
                              basis of that age group’s share of the total hours of care provided at the
                              center.


Data Sources Used to          The two Air Force Semiannual Child Development Center Reports filed for
Estimate Air Force Cost       each Air Force child development center in fiscal year 1997 were the
Components                    primary sources of the data used in our estimates of the cost of care. From
                              these reports, we obtained information on the number of hours of care for
                              each age group of children during the 6-month period covered by the



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                        Scope and Methodology




                        report, the number of staff-hours devoted to the care of each age group,
                        the number of caregivers and other staff at the center, the wage rates of
                        those staff paid from nonappropriated funds, and the grade levels of staff
                        paid from appropriated funds.

                        A second data source was the questionnaire responses we received from
                        each Air Force child development center. In October 1998, we sent
                        questionnaires to the directors of all child development centers
                        (93) located on the 67 Air Force bases in the United States. By
                        February 1999, all questionnaires had been returned. The questionnaire
                        provided information on the distribution of caregiver staff by grade level
                        across the various age groups of children, the estimated number of hours
                        of volunteer help and the value of any donated items received by the
                        center during that fiscal year, the indoor square footage of space occupied
                        by the center, and the dollar amount of expenditures made by the center
                        during fiscal year 1997 for supplies.

                        We collected the survey data to supplement the cost information available
                        in the child development centers’ semiannual reports. Because some Air
                        Force child development program coordinators submitted a single
                        semiannual report for two or more centers located on their bases, we had
                        only 75 semiannual reports. Therefore, when we entered the survey and
                        semiannual report data into a single data file, we combined the survey
                        responses of bases that had submitted one semiannual report but two or
                        more survey questionnaires. Thus, for analysis purposes, the total number
                        of Air Force child development centers was 75.

                        To determine the hourly wage rates to be used in estimating the cost of
                        labor performed at a center by employees paid by appropriated funds, we
                        referred to the 1997 GS pay schedule applicable to the geographic location
                        of the center. To determine the per-square-foot rental cost of indoor space,
                        we used the General Services Administration publication, Summary
                        Report of Real Property Leased by the United States Throughout the
                        World as of September 30, 1996. As discussed below, we also used a few
                        other data sources for specific items of information in developing our cost
                        estimates.


Estimating Procedures   Because the Air Force semiannual reports and our survey of child
                        development centers did not furnish information about the costs of
                        utilities, food, major equipment, occupancy, legal services, or donations,
                        we used supplementary data sources and estimating procedures to



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               Scope and Methodology




               develop cost estimates for these components. In general, we estimated
               direct labor costs for caring for each age group of children from
               information contained in the semiannual report that directly related
               caregiver staff-hours of work to each age group.

               For all cost items other than direct labor, we had to make assumptions
               regarding what portion of each should be considered attributable to each
               of the various age groups of children served by the center. For almost
               every such cost item, we allocated the cost proportionally according to
               each age group’s share of the total number of hours of child care provided
               by the center during fiscal year 1997. Thus, for example, if care for 3- to
               5-year-olds constituted 20 percent of a center’s total child care hours, we
               allocated 20 percent of that center’s estimated annual cost of utilities to
               the 3- to 5-year-old age group. In three instances, we varied this allocation
               procedure slightly. In the cases of the costs of cribs and playground
               equipment, it did not seem reasonable to follow this procedure. Only the
               youngest children would likely make use of cribs, and, conversely, the
               youngest children would not make use of playground equipment.
               Therefore, we allocated the costs of cribs to children 2 years of age or
               younger, and within that category to each of these groups—6 weeks to 6
               months, 6 to 12 months, and 12 to 24 months—on the basis of each group’s
               total number of child-hours. In allocating the cost of playground
               equipment, we excluded the 12-month-old and younger group and
               allocated the cost to the remaining age groups according to each group’s
               total number of child-hours. Similarly, when allocating food costs, we
               excluded the 12-month-old and younger group, since we believe that their
               parents provide that group’s food.

               The following paragraphs describe in more detail the cost components
               included in our estimates and the method we used to estimate the
               magnitude of each of them.

Direct Labor   The term “direct labor” refers to the work of caregiver staff in classrooms.
               To estimate the cost of direct labor for each age group of children at each
               center, we multiplied the total number of staff-hours shown on the two
               fiscal year 1997 semiannual reports as having been spent providing care to
               that age group by the relevant hourly wage. To determine the relevant
               hourly wage for each age group’s care, we needed three items of
               information: the grade levels of the staff members providing the care, the
               number of child-hours of care provided by each grade level, and the hourly
               wage of each grade level. Since the semiannual reports did not associate
               grade levels with the staff-hours shown, we used information from our



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Scope and Methodology




center questionnaire to estimate the grade level distribution of the
staff-hours.

On our questionnaire, center directors were asked to indicate, for a typical
day, which grade levels of staff were assigned to each age group of
children and how many staff-hours of each grade level were devoted to
each age group of children. We applied the staffing pattern indicated in
response to that question to the total number of staff-hours shown in the
semiannual reports for each age group. For example, if a center director’s
response indicated that on a typical day one-half of the staff time devoted
to the 3- to 5-year-old age group was the time of a GS-4 staff person, we
assumed that half of the staff-hours shown on that center’s semiannual
report as devoted to the 3- to 5-year-old age group were GS-4 staff-hours. In
those instances in which a center questionnaire did not indicate which
grade levels of caregiver staff served a particular age group, we applied to
that age group the median wage rate among caregivers for that age group
at centers that did provide caregiver grade level information for that age
group.

For caregiver staff paid from nonappropriated funds, we obtained the
hourly wage information for each grade level directly from the semiannual
report for the second half of fiscal year 1997. For those paid from
appropriated funds, the GS employees, we used the GS hourly wage rates
for the employees’ grade level shown in the 1997 GS pay schedule for the
locality pay area in which the center is located. By reviewing the Office of
Personnel Management’s Central Personnel Data File, we determined for
the job series in which most caregiver staff are employed—Job Series
1702, Education and Training Technician—and for each grade level in that
series, the average step of all employees at that grade level. In our cost
estimating procedure, we assumed, for each GS-graded employee, that the
employee was at whatever the average step was for all employees at that
grade level. Thus, for every GS-graded employee, we assumed that the
employee’s hourly wage rate in fiscal year 1997 was the rate in the center’s
geographic location applicable to the nationwide average step for Job
Series 1702 employees at the grade level of the employee in question.

To each hourly wage rate we added a factor to cover the cost of fringe
benefits. Air Force officials informed us that for GS-graded employees,
fringe benefits equal 25 percent of salary, and for employees paid from
nonappropriated funds, fringe benefits equal 22 percent of wages.
Therefore, to account for benefit costs, we multiplied all GS hourly wage
rates by 1.25 and all nonappropriated funds employees’ wage rates by 1.22.



Page 37                                          GAO/HEHS-00-7 Child Care Costs
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                 Scope and Methodology




                 By applying the appropriate estimated hourly wage (and benefit) rate to
                 the number of staff-hours reported for each age group of children, we
                 arrived at an estimated total direct labor cost for each age group.

Indirect Labor   We considered as indirect labor all work performed by center employees
                 other than the direct caregivers. Included in this category is the work of
                 salaried employees, such as the center director, assistant directors, and
                 training and curriculum specialists, as well as hourly employees, such as
                 administrative staff and food service personnel, among others. From the
                 semiannual reports for the second half of fiscal year 1997, we obtained the
                 number and pay grades of these salaried employees, and for the
                 nonsalaried employees, we obtained the number of hours worked each
                 week. We then multiplied the number of hours per week worked by each
                 hourly employee, or estimated hours per week worked, by the employee’s
                 reported, or assumed, hourly wage rate; we then multiplied the resulting
                 number by 52 (number of weeks) and added that total to the annual salary
                 of the salaried employees (including for both categories of employees the
                 cost of fringe benefits) to arrive at an estimate of the center’s total cost of
                 indirect labor. (Since training and curriculum specialists also work with
                 the family child care providers and school-age caregivers, we allocated
                 only one-third of their salaries to Air Force center costs.) We then
                 allocated a portion of that total cost to each age group of children, on the
                 basis of its proportion of total child-care hours, to estimate the indirect
                 labor cost of providing care to each age group.

Supplies         We obtained estimates of the cost of supplies directly from the centers in
                 their questionnaires. We asked each center director to estimate the cost of
                 supplies purchased during fiscal year 1997. Questionnaires from a few
                 centers did not provide an estimate of the cost of supplies, so for each of
                 those centers, we estimated supply cost on the basis of the center’s
                 number of child-hours for the year. We developed the quantitative
                 relationship between child-hours and supply cost by examining the
                 relationship between those two quantities among the many centers that
                 did provide estimates of the cost of supplies.

Food             We estimated the centers’ food costs on the basis of information reported
                 by each Air Force base’s Appropriated Fund Expense Summary for 1997
                 (7000.12 report). As with other cost elements, we then allocated this total
                 cost across the various age groups of children, with the exception of the
                 6-week to 12-month age group. We excluded this group because such
                 young children do not consume the kind of food purchased by the centers.
                 For a large number of centers, the 7000.12 report did not show the cost of



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                  Scope and Methodology




                  food. For those centers for which food cost data were missing, we
                  estimated food costs on the basis of the number of meals served by the
                  center. We developed the quantitative relationship between the number of
                  meals served and food cost by examining the relationship among centers
                  that did provide estimates of the cost of food.

Utilities         From the Air Force’s Appropriated and Nonappropriated Fund Expense
                  Summary for 1997 we determined the total amount of utilities costs
                  incurred by all centers worldwide in fiscal year 1997. We then calculated
                  the percentage of centers located outside the United States and reduced
                  the total amount of worldwide utilities costs by that percentage, assuming
                  that the remaining amount was attributable to centers in the United States.
                  We then allocated that remaining amount across all U.S. centers on the
                  basis of the total indoor square footage of space used by each center.
                  Thus, for example, if the indoor square footage of a given center
                  constituted 5 percent of the total indoor square footage of all domestic
                  centers, that center would be allocated 5 percent of the total estimated
                  utilities costs of all U.S. centers.

Major Equipment   We defined the cost of using major equipment as the 1-year allocation of
                  the acquisition cost of all capital equipment (equipment whose purchase
                  price exceeds $300).29 Thus, the use of equipment cost would be equal to
                  the straight-line depreciation charge on equipment that the center could
                  take if it were a private sector firm. Therefore, it was necessary for us to
                  determine, or assume, three items of information: the kinds and quantities
                  of equipment a center would use, the purchase price of each item of
                  equipment, and the expected useful life of each item of equipment. To
                  estimate the kinds and quantities of equipment a center would use, we
                  interviewed the directors of two large centers, a medium-sized center, and
                  a small center who had reasonably complete information available on the
                  types of equipment that their centers used.30 With a few exceptions, we
                  used the average of the two large centers’ purchase costs for each item of
                  equipment as our estimate of the purchase cost for that same item for all
                  centers.




                  29
                   Major equipment included items in a child development center’s kitchen, office, classroom, and
                  playground, such as refrigerators, freezers, television cameras and monitoring systems, swings, and
                  outdoor playhouses.
                  30
                    We contacted centers on Air Force bases that reported having only one child development center. A
                  center was considered small if, on the semiannual report submitted for fiscal year 1997, the director
                  reported 89 or fewer full-day children in attendance, medium if the director reported 90 to 124 full-day
                  children in attendance, and large if the director reported 125 or more full-day children in attendance.



                  Page 39                                                            GAO/HEHS-00-7 Child Care Costs
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Scope and Methodology




To estimate the quantities of each item of equipment that a center would
use, we began by assuming that each center would use only one of each
item of kitchen, playground, classroom, and office equipment. For three
items—cribs, coat racks, and shelving units—we assumed that the
quantity used by a center would vary according to the number of children
served by the center. To estimate the quantity of each of these items that
each center would use, we began by setting as a standard the equipment
configuration used by one of the two large centers from which we had
obtained cost information. We then compared the total number of
child-hours of care provided by each center during fiscal year 1997 to the
total for the center we were using as our standard and calculated the
percentage relationship between the two. We used this relationship as the
basis for estimating the quantity of each of the four items of equipment
that each center would use. For example, if a given center had as its total
number of child care hours 10,000 hours and the “standard” center had a
total of 15,000 hours, we would assign to the center two-thirds of the
quantity of each item that the “standard” center used. If the standard
center used 300 shelving units, we would assume that the other center
would use 200 shelving units. The two exceptions to this method involved
cribs and outdoor playground equipment. Because we assumed that cribs
would be used by only the youngest children, we “assigned” cribs to
centers on the basis of total child-hours for only children 2 years of age or
younger. We also assumed that outdoor playground equipment would not
be used by children under the age of 1.

After estimating the quantity of each item of equipment a center would
use, we multiplied that quantity by the estimated unit purchase cost of that
item to arrive at an estimate of the total purchase cost of that item. We
then divided that cost by the number of years of expected useful life of the
item to obtain an estimated annual usage cost. The measures of expected
useful life we used for the various items of equipment ranged from 5 to 15
years and were based on the experience reported to us by the center
directors we had interviewed regarding the kinds of equipment used at
their centers. Finally, since the purchase prices we used in our analysis
were 1998 prices and the centers acquired much of the equipment in
previous years, we converted our 1998 usage costs to costs expressed in
an earlier year’s dollars in order to replicate as closely as possible the
purchase costs the centers had incurred when they acquired the
equipment. For purposes of this conversion, we made an assumption that
each item of equipment being used at centers in fiscal year 1997 had at that
time been in use for half its useful life. Thus, for example, if a category of
equipment has a useful life of 10 years, we assumed that each such item of



Page 40                                           GAO/HEHS-00-7 Child Care Costs
                 Appendix I
                 Scope and Methodology




                 equipment had been purchased 5 years earlier, or in fiscal year 1993. We
                 thus deflated the 1998 purchase price of all such items to their 1993 price.
                 We added the estimated annual usage costs of all items of equipment in
                 each center to estimate that center’s total annual equipment usage cost.
                 The total cost of each center’s use of equipment was then allocated across
                 the center’s age groups of children.

Occupancy        The cost element that we refer to as occupancy represents the annual cost
                 of using the space occupied by each center. We defined occupancy cost as
                 the annual rent that a center would be required to pay if it were to lease its
                 space on the commercial rental market. In the center questionnaire, we
                 asked the center director to indicate the total square footage of indoor
                 space used for center activities, including administrative activities. We
                 multiplied that number by $5.93 to arrive at an estimated annual
                 occupancy cost. We chose the $5.93-per-square-foot rate on the basis of
                 the average cost per square foot of space leased by the Air Force in 1996,
                 as stated in the 1999 General Services Administration’s report on real
                 property. That cost was $5.80. Using the CPI to determine the inflation
                 factor, we raised the $5.80 cost to the $5.93 figure.

Legal Services   We based our estimate of the annual cost of legal services provided to
                 each center on the opinion of officials of the Office of the Air Force Judge
                 Advocate General regarding the extent of provision of such services.
                 Those officials estimated that, on average, about 1-1/2 hours per month of
                 the time of a lieutenant colonel or a colonel would be spent in providing
                 such services. We therefore determined the midpoint between the lowest
                 annual pay rate of the lieutenant colonel and highest pay rate of the
                 colonel and divided that amount by the 2,080 hours in a federal work year
                 to arrive at an hourly rate. We multiplied that figure by 1.5 to estimate a
                 monthly cost and then multiplied that cost by 12 to estimate the annual
                 cost of the legal services provided to each center. We then allocated that
                 cost across the age groups of children receiving care at each center.

Donations        In the center questionnaire we asked each center director to estimate the
                 number of hours of volunteer help the center received during a typical
                 week in fiscal year 1997. For each center, we multiplied the number of
                 reported hours of such help by 52 to estimate the total number of hours of
                 such work for the year. We then multiplied that total by the minimum
                 wage rate of $5.15 an hour in effect in 1997 to estimate the total value of
                 volunteer labor donated to the center in fiscal year 1997. We then allocated
                 that total figure across the various age groups of children served by the
                 center.



                 Page 41                                           GAO/HEHS-00-7 Child Care Costs
                             Appendix I
                             Scope and Methodology




                             In the center questionnaire we also asked each center director to estimate
                             the total value of donations of such items as toys and supplies received by
                             the center during fiscal year 1997. We allocated that total value across the
                             various age groups of children.

Other Costs                  We did not attempt to estimate an imputed value for insurance or taxes for
                             the Air Force child development centers.


                             The Cost, Quality and Child Outcomes in Child Care Centers study data
Procedures Used to           file was the only source of data we used to develop estimates of the cost of
Estimate Civilian            care at civilian child care centers. The Cost, Quality and Child Outcomes
Child Care Costs             study team was an interdisciplinary group composed of economists and
                             child development psychologists from universities in four states, led by the
                             University of Colorado at Denver. The team selected the child care centers
                             examined in the study using a stratified random sample of approximately
                             100 centers in subregions of each of four participating states, with
                             approximately equal representation of for-profit and nonprofit centers.
                             The four participating states were California, Colorado, Connecticut, and
                             North Carolina.

                             The data we used most extensively were from an interview with the
                             director of each child care center in the subsample. The interview was
                             quite extensive and included all of the cost items.


Selection of the Subsample   An important aspect of the Cost, Quality and Child Outcomes in Child Care
of High-Quality Civilian     Centers study that made the data suitable for comparison with the Air
Centers                      Force child development centers was a measure of the quality of each
                             civilian child care center. Because DOD child development centers are
                             acknowledged to be of high quality, it was important to compare the Air
                             Force centers selected for the cost analysis only with high-quality civilian
                             centers.

                             The study employed several measures of center quality, but two in
                             particular for centers with infants, toddlers, and preschoolers. These
                             measures were obtained by direct observation. Two members of the study
                             team randomly picked two rooms in the center and observed the
                             interaction in the rooms for 6 hours. The first measure was the ECER/ITER
                             scale, a combined measure of the ECERS and ITERS. The studies’ authors
                             used these because they are well established global measures of child care
                             processes. The second measure the authors computed was a scale called



                             Page 42                                          GAO/HEHS-00-7 Child Care Costs
                        Appendix I
                        Scope and Methodology




                        INDEXECW, which is a weighted process index scaled to ECERS and
                        includes measures from the CIS and TIS. We selected our high-quality
                        subsample by choosing centers that scored 4.5 or higher on either of these
                        two 7-point scales. The resulting subsample included 150 centers or
                        37 percent of the Cost, Quality and Child Outcomes study population.


Estimating Procedures   The Cost, Quality and Child Outcomes study team collected extensive
                        information on the costs of operating a civilian child care center. This
                        information allowed us to compare costs with those of Air Force child
                        development centers. Information on the following components of cost
                        was obtained during the interview of the director. Directors were asked to
                        provide records of the last fiscal year’s expenses for review by the study
                        team. The following cost components were collected as total annual costs
                        for the center, per year: (1) wages, (2) nonwage benefits, (3) staff
                        education/training costs, (4) subcontractor costs, (5) occupancy cash
                        costs, (6) food service costs, (7) insurance costs, (8) other operating costs,
                        (9) overhead costs, and (10) the subsidy supplied. The subsidy is the
                        estimated value of donated goods and services, such as volunteer labor,
                        donated food, building space, and utilities. We used these cost
                        components to estimate the overall cost per child and cost per child by age
                        group for the high-quality civilian centers. Regarding labor costs, although
                        a few centers provided separate direct and indirect labor costs, most
                        centers in the Cost, Quality and Child Outcomes in Child Care Centers
                        study did not. Therefore, we developed our own estimates of the portion
                        of total labor costs that should be considered direct labor and the portion
                        that should be considered indirect labor. For those few centers that
                        provided separate amounts for direct and indirect labor costs, we
                        calculated the overall proportions of total labor costs attributable to direct
                        and indirect labor costs, which were about 82 percent and 18 percent,
                        respectively. We then applied these proportions to total labor costs for all
                        centers.

                        The cost data were collected in the spring of 1993 but were requested for
                        the latest fiscal year. We assumed the latest fiscal year would be 1992 and
                        adjusted the civilian costs from 1992 to 1997 by using the CPI.


Allocating Costs by     As noted, the study provided annual costs for the entire center, not costs
Child-Hours             by age group. Because we needed to compare the civilian with the military
                        child care costs by age group, we needed to allocate center costs by the
                        proportion that each age group’s child-hours constituted of the center



                        Page 43                                          GAO/HEHS-00-7 Child Care Costs
                         Appendix I
                         Scope and Methodology




                         total. Once we calculated the number of child-hours in each age group, we
                         knew the proportion each age group represented of the whole.


Child-Hours              During the director’s interview, the director was asked what age group
                         each room in the center contained and how many FTE children were there
                         on that particular day. These responses were used to determine whether
                         each room had infants (0 to 18 months), toddlers (19 to 30 months),
                         preschool-aged children (2 to 5 years), kindergarten-aged children (5
                         years), or school-aged children (6 years and older).31 We used the reported
                         age group in each room to add up the FTE children for different age groups
                         across the 150 high quality-centers. The total number of FTE children for
                         the center for the year is calculated from the number there on the day of
                         the interview. First, we multiplied the number of children present on the
                         day of the interview by eight, resulting in the number of child-hours per
                         day. We then multiplied the daily number of hours by five (the number of
                         days in a week that most centers were open) to get weekly hours. Next, we
                         multiplied the weekly hours by 52 (weeks per year). If a center closed for
                         the summer, we subtracted the number of months the center was closed
                         times 4.3 (average number of weeks in a month) from the total for a yearly
                         figure. We then allocated the costs on the basis of the percentage of total
                         child-hours each age group had.


Caregiver Compensation   The Cost, Quality and Child Outcomes in Child Care Centers study
Rate                     included the hourly wage rate for many of the caregivers and aides, but
                         not all. The rest of the compensation information consisted of annual
                         salaries. We divided the annual salary by 52 weeks times the number of
                         hours worked per week (minus the number weeks the center was closed)
                         to achieve an hourly rate. We then calculated total compensation by
                         adding employee benefits, which were equivalent to 19.73 percent of the
                         wage rate, to the wage.


Child-To-Staff Ratios    The Cost, Quality and Child Outcomes in Child Care Centers study data
                         file had information that allowed us to compute ratios of the number of
                         children per caregiver in the centers’ classrooms, known as the


                         31
                          The ages of children in the age group categories are approximate. The Cost, Quality and Child
                         Outcomes study team learned during data collection that children in many centers were assigned to
                         groups on the basis of their developmental level, rather than their chronological age. Therefore,
                         because very young children develop at different rates, it was possible that children as old as 18
                         months were placed in infant rooms, and children as young as 2-1/2 might be placed in preschool
                         rooms.



                         Page 44                                                         GAO/HEHS-00-7 Child Care Costs
                        Appendix I
                        Scope and Methodology




                        “child-to-staff ratio.” One segment of the data file contained information
                        on the number of hours a week that each caregiver and aide worked. First,
                        we divided the total number of hours worked by all of the caregivers in
                        our subsample by the total number of FTE caregivers. This gave us the
                        average number of hours worked. We then multiplied that figure by 52,
                        and subtracted the time the center was closed. Because we already had
                        child-hours, this additional information on caregiver-hours allowed us to
                        calculate a ratio of child-hours to caregiver-hours for each age group.


                        To further understand how much the age distribution of the centers’
Factors Affecting Air   children affected the overall Air Force cost per child-hour, we estimated
Force Costs             what the Air Force centers’ cost would be using the age distribution of the
                        civilian centers’ children. We reestimated the Air Force overall cost per
                        child-hour, substituting the age distribution of the civilian centers’ children
                        for the age distribution of Air Force children in the total cost estimate.
                        This estimate allowed us to calculate the dollar value of the difference that
                        the age distribution of the children contributed to the overall cost per
                        child-hour.




                        Page 45                                           GAO/HEHS-00-7 Child Care Costs
Appendix II

Child-to-Staff Ratios Within Group Size
Recommended by NAEYC


                                                                           Group size
Age of children                   6           8      10        12        14        16        18         20        22        24           28
Infants (birth-12 months)        3:1      4:1
Toddlers (12-24 months)          3:1      4:1        5:1      4:1
2-year-olds (24-30 months)                4:1        5:1      6:1
2-1/2-year-olds (30-36 months)                       5:1      6:1       7:1
3-year-olds                                                             7:1        8:1       9:1     10:1
4-year-olds                                                                        8:1       9:1     10:1
5-year-olds                                                                        8:1       9:1     10:1
6- to 8-year-olds                                                                                    10:1       11:1      12:1
9- to 12-year-olds                                                                                                        12:1      14:1
                                    Notes: Smaller group sizes and lower child-to-staff ratios have been found to be strong predictors
                                    of compliance with indicators of quality, such as positive interactions among staff and children
                                    and developmentally appropriate curriculum. Variations in group sizes and ratios are acceptable
                                    in cases in which programs demonstrate a very high level of compliance with criteria for
                                    interactions, curriculum, staff qualifications, health and safety, and physical environment.

                                    Source: NAEYC.




                                    Page 46                                                         GAO/HEHS-00-7 Child Care Costs
Page 47   GAO/HEHS-00-7 Child Care Costs
Appendix III

Fiscal Year 1997 per-Child-Hour Cost
Components for Air Force Child
Development Centers, by Age Group

                                         0-6 months
               Cost components   Cost per hour         % of total
               Direct labor              $3.73              68.8
               Indirect labor             0.90              16.6
               Supplies                   0.28                5.2
               Utilities                  0.07                1.4
               Food                         0                  0
               Equipment                  0.04                0.7
               Space                      0.38                7.1
               Legal services               0                  0
               Volunteers                 0.01                 .2
               Donations                    0                  0
               Total                     $5.43               100




               Page 48             GAO/HEHS-00-7 Child Care Costs
                                        Appendix III
                                        Fiscal Year 1997 per-Child-Hour Cost
                                        Components for Air Force Child
                                        Development Centers, by Age Group




6-12 months          12-24 months         24-36 months               3-5 years           Part-day preschool             6 and over
Cost per   % of      Cost per   % of       Cost per      % of     Cost per       % of      Cost per                  Cost per      % of
   hour    total        hour    total         hour       total       hour        total        hour % of total           hour       total
   $3.75      69.5      $2.84   60.2          $2.12       53.3        $1.38      42.7          $1.41          42.4       $1.34      45.6
    0.87      16.2       0.91   19.4              0.90    22.7         0.88      27.3           0.94          28.3        0.70      24.0
    0.27       5.1       0.27    5.8              0.27     6.8         0.27       8.5           0.23           7.0        0.19          6.4
    0.07       1.4       0.07    1.5              0.07     1.8         0.07       2.3           0.08           2.3        0.08          2.8
      0         0        0.21    4.5              0.21     5.3         0.21       6.3           0.21           6.3        0.18          6.1
    0.04       0.8       0.02    0.4              0.03     0.7         0.03       0.9           0.03           1.0        0.02          0.7
    0.38       7.0       0.37    7.9              0.37     9.2         0.38      11.7           0.39          11.8        0.42      14.2
      0         0          0        0               0       .1            0         .1              0           .1           0           .1
    0.01       0.2       0.01    0.2              0.01     0.2         0.01       0.3           0.03           0.8        0.01          0.2
      0         0          0        0               0       .1            0         .1              0            0           0           0
   $5.40      100       $4.72    100          $3.97       100         $3.23       100          $3.33           100       $2.94       100
                                        Note: Because of rounding, individual percentages in a column do not always equal 100 percent
                                        and cost components do not always equal totals.

                                        Source: GAO analysis of Air Force center data.




                                        Page 49                                                         GAO/HEHS-00-7 Child Care Costs
Appendix IV

Comments From the Department of Defense




              Page 50         GAO/HEHS-00-7 Child Care Costs
Appendix IV
Comments From the Department of Defense




Page 51                                   GAO/HEHS-00-7 Child Care Costs
Appendix V

GAO Contacts and Staff Acknowledgments


                  Karen Whiten, Assistant Director, (202) 512-7291
GAO Contacts      Sara Edmondson, Evaluator-in-Charge, (202) 512-8516


                  In addition to those named above, the following individuals made
Staff             important contributions to this report: Elizabeth Morrison was responsible
Acknowledgments   for determining the Air Force cost estimates and analyzing DOD’s child
                  development program; James Wright provided guidance on study design,
                  measurement, and data analysis; John Smale, Jr., provided survey and data
                  analysis support; Joan Vogel created the data files and provided the
                  computer programming for estimating the Air Force and civilian costs; and
                  Janet Mascia and Alicia Cackley provided technical guidance on child care
                  quality and cost measurement issues.




(116016)          Page 52                                        GAO/HEHS-00-7 Child Care Costs
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