In June 2022, the California Department of Social Services agreed to award a new $1 million grant to Buds and Blossoms Preschool for a new infant care program to serve low-income children.

Yet, seven months after receiving the grant award notification, the program still hadn't received the new funds, and the business owners were forced to take out a loan to cover the costs. This begs the obvious question: why?

Although California has a significant unmet need for early care and education (ECE) programs, processing new funding awards can take weeks and months to materialize. While this challenge is not unique to the ECE space, programs in this field often rely on support from multiple funding streams. Beyond that, various federal and state regulatory, administrative, accountability, and reporting requirements create additional hurdles for agency program administrators that dictate where and how the funding should be awarded. In turn, these requirements may prevent funds from being distributed efficiently and on time to ECE programs and individual ECE providers.

Overcoming Regulatory Hurdles

Regulatory hurdles are one of many reasons the Government Accountability Office (GAO) notes that the funds from many available grants go unused altogether.

Agencies can take several steps to alleviate bottlenecks with federal funding and ensure that these critical funds reach their intended recipients quickly, with the necessary compliance guardrails to meet the regulatory, administrative, accountability and reporting requirements. Tapping into private sector partnerships and looking to technology partners capable of assisting with common challenges can expedite the process.

In addition, organizations should create a plan to monitor allowable public fund spending and collaborate with other state and local program administrators to establish rules and improve public fund distribution.

One specific solution to improving fund distribution is digitalized funding. Organizations can improve the distribution of funds and expedite the funding process by digitizing funding sources. Organizations are realizing the benefits of these solutions, with research showing that the global use of instant payment and digital wallet transaction systems has grown by double digits for the second year in a row.

The Rise of Digital Funding Sources

A digital wallet is a tool that state and local agencies and organizations can provide to a distributed network of programs or individuals to make "rule-based" purchases or payments for various goods and services. These solutions allow the end users to purchase flexibly and efficiently within the guidelines established by the agency or organization, but at the same time allow administrators to maintain the necessary compliance and fiscal accountability requirements in managing budget and program rules.

Within the ECE space, administrators, teachers and individual providers are starting to feel the relief of using digital wallets. With improved efficiency, stringent compliance guardrails, and reduced staff workloads, these fiscal management solutions help streamline internal financial and administrative processes, giving more time for program staff to focus on providing high-quality care to the children served by the ECE programs.

Administrators and staff need as much time as possible to develop the most comprehensive ECE programs and ensure they will better support the next generation of young children.

Additionally, digital wallets ensure compliance with program and government regulations. Compliance requires staying informed on safety standards, policies and operations. Beyond regulated initiatives, organizations need to establish their own compliance culture. Organizations that prioritize compliance and embed it into their day-to-day operations are much more prepared to manage potential incidents.

The funding and availability of an adequate supply of high-quality ECE programs are essential to support the growth, healthy development, and future success of the next generation of young children. We can't delay the process of distributing these critical funds to ECE programs any more than is necessary – if the federal or state government agencies have already allocated the funds, they should get to the intended programs and families sooner rather than later.

Innovative fiscal management solutions bring invaluable fiscal compliance and workforce relief. ECE organizations and state and local agencies should maximize the use of these cutting-edge technology-based resources to balance compliance and convenience to better facilitate delivering high-quality ECE services.

About the author

Michael López, Ph.D. is ClassWallet’s Senior Director of Strategic Initiatives in Early Child Care. With an impressive track record spanning over 30 years, Mike brings a wealth of experience in applied policy-relevant research, particularly in the areas of early care and education and equity at the national, state, and local levels. His expertise and dedication make him a national early childhood expert and a passionate advocate for low-income, culturally, and linguistically diverse populations.