Educational Integrity in Corporate Childcare: Addressing Poor Regulatory Oversight through Head Start’s Compliance Model

By: Anthony Alas

$60.4 billion. That’s the annual revenue from childcare in the private sector.^[1] Children have become piles of profit for corporations, and the American family demands its dividends. As long as childcare remains in corporate hands,^[2] childcare corporations must deliver on their promise to the public that children will receive high-quality, early childhood education.

Unfortunately, though unsurprisingly, corporations are not fulfilling their promise. And while corporations should not be excused from their inaction, a lack of regulatory oversight is partially to blame. To avoid risking the public objective, childcare corporations should adopt the crafty use of parents within Head Start’s compliance model. At the center-level, parents provide some of the best independent oversight and can serve as temporary checks-and-balances on corporate childcare.

Big Childcare’s Duty to the Public

“They wouldn’t allow me in the [daycare center] which I would find out later was because they didn’t want me seeing that they were 16 children over the limit. The fire chief grabbed his own heart and said some medical terms I did not understand regarding my son. My first thought was ‘I did not know my son had a heart problem’ my second thought was ‘get me to the hospital’ my third thought was ‘where were the police officers’. I ran to my car and got in it. The daycare owner got in my car with me and she drove me to the hospital. Where with[]in minutes I knew there was neglect that happened that day . . . . I quickly realized no one was watching my child that day.”^[3]

The California-based childcare center was nearly four times over the maximum teacher-to-child ratio.^[4] After a fire burned the center down, three childcare employees were arrested for child endangerment.^[5]

Teacher-to-child ratios are monitored by independent inspectors, but as of 2023, 10 percent of California centers had not received inspections since before COVID-19.^[6] In other states, 50 percent of centers remain overdue for inspections.^[7] Even when inspections are provided, states like Minnesota have an absurd 81 percent of centers violating compliance standards.^[8] In the tragedy above, three year old Deacon lost his life primarily because of the gross, horrid carelessness of childcare employees. But secondarily, the tragedy was also caused because the childcare industry is plagued by a shortage of inspectors.^[9]  Families will continue paying for private childcare, and corporations will continue to provide services at a profit. This relationship needs independent oversight.

Unfortunately, licensed, center-based care dominates the private childcare market.^[10] “Big Childcare”—the top eleven publicly-traded childcare corporations—serve 7.5 million children every year through center-based care.^[11] Big Childcare must balance two objectives: (1) the financial objective to meet the bottom line, and (2) the public objective to provide high-quality childcare for long-term economic and social benefits. Childcare is a public good, and the need for childcare will never go away. When corporations profit off of a public good, they must do more to ensure that pursuit of the bottom line does not compromise the public objective—and harm children along the way.^[12]

Generally, corporations utilize internal compliance programs to avoid risks embedded in their respective industry.^[13] A corporate compliance program implements strategies through training, policies, procedures, and oversight to effectively prevent, detect, and resolve violations that put the corporation at some form of risk.^[14] In childcare, state inspectors act as the primary outside regulators.^[15]

Specifically, inspectors ensure that a licensed center meets fundamental compliance measures, such as health & safety standards, staff qualifications, teacher-to-child ratios, and general best practices.^[16] Inspectors also respond to anonymous complaints and assess a center’s self-corrective policy for violations.^[17]

Although maintaining health & safety standards alone is not sufficient to indicate high-quality programing, quality of education is indirectly tied to health & safety standards in childcare.^[18] Since inspectors ensure centers maintain these standards, inspectors are also indirectly ensuring that centers provide higher-quality early childhood education. But a lack of inspectors means Big Childcare can more easily get away with violations that impact quality of education.

Utilizing Head Start’s Non-Profit Compliance Model in For-Profit Childcare Centers

Head Start, the federally-funded, non-profit childcare program has long utilized a compliance model that avoids challenges and risks currently threatening the private childcare sector. Big Childcare’s compliance programs should adopt Head Start’s compliance model at the center-level in order to avoid the risks associated with scarce regulatory oversight.

Head Start is the most heavily regulated childcare program in the U.S. and is least likely to violate regulation requirements,^[19] follows more stringent federal regulations,^[20] and is more likely to have higher-quality education.^[21] On the other hand, for-profit childcare centers unsurprisingly have lower-quality educational services than non-profit centers and are more likely to violate compliance standards.^[22] In short, meeting basic compliance standards has the effect of improving the quality of childcare.^[23]

The Head Start compliance model holds five primary governance bodies: a Governing Body, a Policy Council, a Policy Committee, a Parent Committee, and Management Staff.^[24]

Head Start’s compliance model sets itself apart from for-profit models in that Head Start, uniquely, utilizes parents at every level of governance. For example, the Governing Body is composed of three members: one with expertise in fiscal management, one with expertise in early childhood, and a licensed attorney with industry familiarity.^[25] Other members are optional, but additional members must be reflective of the community and must include current or former parents of Head Start with expertise in either education, business administration, or community affairs.^[26] The Policy Council is responsible for the program’s short-term goals, long-term goals, and operations through policies and procedures.^[27] Parents must constitute the majority of members on the Policy Council.^[28] Every Head Start program is also required to establish a Parent Committee.^[29] Composed exclusively of parents currently enrolled in the program, the Parent Committee must be established as soon as possible in the school year.^[30] Parent Committee members are elected, and parents can also be elected to any other governance body including the high-level Policy Council, Policy Committee, and Governing Body.^[31] The Parent Committee advises management staff at the ground, center-level on implementation of policies, procedures, and services.^[32] The Parent Committee also has direct communication lines to each governance body.^[33]

In practice, parents serve two roles in this compliance structure uniquely tailored to the childcare industry. (1) Parents act as majority stakeholders because their children benefit or suffer from effective policies and procedures. The compliance model allows space for the local community to use their voice and influence the way centers operate. It is unlikely that Big Childcare brings the scrutinizing eye of parents onto their board of directors like in Head Start. However, adopting this model at the center-level allows parents, who are reflective of the local community, to tailor policies & procedures towards particular risks in the classroom or community. Likewise, (2) parents provide independent oversight of each center. In an industry in which regulatory oversight is lacking, parents can serve as effective, independent regulators. The use of parents is also cost-effective as fewer resources need to be dedicated to alternative internal-compliance mechanisms.

It is in the best interest of corporations to earn the local community’s trust. Although families never appreciate tuition costs, corporate childcare centers with happier communities means more children and tuition money. Corporate compliance programs are voluntarily implemented and supposedly driven by ethical values, so compliance programs should utilize parents—at least—within the center-level in order to fill the hole of regulatory oversight. So long as childcare remains in corporate hands, for-profit childcare corporations must avoid risking the public objective of providing high-quality early childhood education. Corporate compliance programs in a for-profit setting must be tailored to the unique needs, risks, and ethical public objectives embedded in the childcare industry. Of course, regulatory oversight of the industry needs to be improved. While that infrastructure is put into place, families have the most to lose when a center violates regulatory standards. Childcare corporations should adopt Head Start’s crafty, cost-effective use of parents to ensure that the public objective of high-quality education is met.

^[1] Grand View Rsch., U.S. Child Care Market Size, Share & Trends Analysis Report By Type (Early Care, Early Education & Daycare, Backup Care), By Delivery Type (Organized Care Facilities, Home-based Settings), And Segment Forecasts, 2023 –  2030 (2023), https://www.grandviewresearch.com/industry-analysis/us-child-care-market; see Maria Aspan, Is ‘Big Day Care’ The Solution to America’s Childcare Woes—Or is it Risky to Mix Profits and Toddlers?, Fortune (Aug. 23, 2021 4:00 AM) (noting that the childcare market was worth $47.2 billion only a few years ago), https://fortune.com/2021/08/23/daycare-childcare-costs-infrastructure-bright-horizons-kindercare-learning-care-group/#:~:text=Call%20them%20Big%20Day%20Care,dominated%20by%20center%2Dbased%20care.

^[2] Adam Harris, Private Equity has its Eyes on the Child-Care Industry, The Atlantic (Feb. 21, 2024) https://www.theatlantic.com/ideas/archive/2024/02/private-equity-childcare/677511/.

^[3] Dani Morin, Deacon’s Story, Dani Morin (last accessed Feb. 16, 2023), https://danimorin.com/2022/01/28/deacons-story/.

^[4] Id.

^[5] 3 Fontana Daycare Staff Arrested in Connection to Child’s Death, Abc 7 (Nov. 9, 2016), https://abc7.com/deacon-morin-danielle-fontana-daycare-death-jimenez-family/1599651/.

^[6] Madison Hall, More Than 14,000 Licensed Childcare Centers in the U.S. are Behind on State-Mandated Inspections, Bus. Insider (Oct. 17, 2023 11:00 PM), https://www.businessinsider.com/childcare-centers-are-behind-on-inspections-2023-10.

^[7] Id.

^[8] Id.

^[9] Id.

^[10] Jiashan Cui & Luke Natzke, Early Childhood Program Participation: 2019, Nat. Cen. for Educ. Stat. 3 (Inst. of Educ. Sci., 2019) (stating that 62% of children attended center-based care before attending Kindergarten); Grand View Rsch., supra note 1 (“The organized care facilities segment accounted for the highest revenue share of 71.7% in 2022 . . . . The rising number of working parents, technological advancement, and growing funding for supporting quality early education drive segment growth.”).

^[11] Elliot, Haspel, Childcare is in Chaos. Private Equity and For-Profit Chains are Swooping in., New Republic (Oct. 28, 2022), https://newrepublic.com/article/168322/child-care-daycare-private-equity-for-profit#:~:text=Together%2C%20the%20top%2011%20chains,center%2Dbased%20care%20every%20day.

^[12] See Lisa M. Fairfax, Achieving the Double Bottom Line: A Framework for Corporations Seeking to Deliver Profits and Public Services, 9 Stan. J. of L., Bus. & Fin. 199, 239 (2004); see also Morin, supra note 3.

^[13] Sung Hui Kim, Gatekeepers Inside Out, 21 Georgetown J. of Legal Ethics 411, 450 (“To ensure that employees carry out their corporate duties in ways that do not expose the company to unreasonable risks of criminal or civil liability, inside counsel’s duties have formally expanded to include training employees about potential liability . . . . planning and design of corporate compliance programs (e.g., creating standard operating procedures and protocols for dealing with consumer product complaints), and monitoring ongoing compliance practices (i.e., receiving periodic reports and pursuing actions which pose the threat of corporate liability).”); Miriam Hechler Baer, Governing Corporate Compliance, 50 Bos. Coll. L. Rev. 949, 995 (“Even better for the [compliance] industry, compliance begets more compliance. Once a corporation hires compliance experts to design and implement a compliance program, it will likely also hire experts to audit and monitor the program. Manned by lawyers and encouraged by the government’s stance on self-regulation, the compliance industry grows to meet the corporation’s growing need to design and manage an internal bureaucracy.”).

^[14] See Baer, supra note 13, at 949 (explaining corporate compliance as “internal programs that corporations adopt in order to educate employees, improve ethical norms, and detect and prevent violations of law”.).

^[15] Admin. For Child. & Fam., Monitoring and Inspections, Off. Of Child Care (last accessed Feb. 1, 2024), https://childcare.gov/consumer-education/monitoring-and-inspections.

^[16] See, id.

^[17] Id.

^[18] See Admin. For Child. & Fam., Look, Listen and Ask: Tips for Choosing a Quality Child Care Center, Off. Of Child Care (last accessed Mar. 16, 2024), https://childcare.gov/sites/default/files/2022-04/Choosing-a-Child-Care-Center.pdf (noting that key features of a quality child care center include meeting a variety of basic health & safety standards); V. Joseph Hotz & Mo Xiao, The Impact of Regulations on the Supply and Quality of Care in Child Care Markets, Am. Econ. Rev. (Jun. 30, 2011), (“Thus, our evidence indicates that the imposition of either [minimum staff-child ratio requirements, minimum educational requirements, and certain minimum safety standards] increases the quality of center-based care in local markets. This is consistent with the quality assurance effect dominating the cost-of-quality effect among typical consumers and with the regulation of these inputs actually improving the quality of child care. It is also consistent with Ronnen’s prediction that imposing minimum quality standards will not only reduce the provision of low-quality services but also will generate strategic increases in the quality provided by already high-quality centers.”).

^[19] U.S. Dep. of Health and Hum. Servc., Data Brief on Child Safety in Head Start Programs, Off. Of Head Start, (Last updated Apr. 17, 2023), https://eclkc.ohs.acf.hhs.gov/data-ongoing-monitoring/article/data-brief-child-safety-head-start-programs, (stating that less than 1% of Head Start locations were cited for child safety issues).

^[20] Maia C. Connors & Allison H. Friedman-Krauss, Varying States of Head Start: Impacts of a Federal Program Across State Policy Contexts, 10 J. of Rsch. on Educ. Effectiveness 675, 694 (2017), (noting that, although actual practices vary across programs and states, Head Start is required to comply with federal performance standards that are more stringent than state licensing requirements, and the federal standards  are associated with higher quality of program).

^[21] See Laura Sosinsky, For-profit/Nonprofit Differences in Center-Based Child Care quality: Results from the National Institute of Child Health and Human Development Study of Early Child Care and Youth Development, 28 J. Of Applied Dev. Psych. 390, 393 (Sep. 2007) (stating that the highest quality care was provided by public agencies, while the lowest quality was provided by for-profit chains with minimal regulations).Sosinsky, supra note 17 at 393 (stating that the highest quality care was provided by public agencies, while the lowest quality was provided by for-profit chains with minimal regulations).

^[22] Sosinsky, supra note 21 at 393 (stating that the highest quality care was provided by public agencies, while the lowest quality was provided by for-profit chains with minimal regulations).

^[23] V. Joseph Hotz & Mo Xiao, The Impact of Regulations on the Supply and Quality of Care in Child Care Markets, Am. Econ. Rev. (Jun. 30, 2011), (“Thus, our evidence indicates that the imposition of either [minimum staff-child ratio requirements, minimum educational requirements, and certain minimum safety standards] increases the quality of center-based care in local markets. This is consistent with the quality assurance effect dominating the cost-of-quality effect among typical consumers and with the regulation of these inputs actually improving the quality of child care. It is also consistent with Ronnen’s prediction that imposing minimum quality standards will not only reduce the provision of low-quality services but also will generate strategic increases in the quality provided by already high-quality centers.”).

^[24] See 42 U.S.C. § 9837.

^[25] 42 U.S.C. § 9837(c)(1)(B).

^[26] 42 U.S.C. § 9837(c)(1)(B).

^[27] 42 U.S.C. § 9837(c)(2)(D).

^[28] 42 U.S.C. § 9837(c)(2)(B).

^[29] 45 C.F.R. § 1301.4(a).

^[30] 45 C.F.R. § 1301.4(a).

^[31] 45 C.F.R. § 1301.4(a).

^[32] 45 C.F.R. § 1301.4(b).

^[33] 45 C.F.R. § 1301.4(b).