This study examined the extent to which states are adequately ensuring the health and safety of children who are cared for in informal care settings receiving public funds. Protections were analyzed for children receiving in-home care or family child care in settings that are legally exempt from state licensing or registration requirements. The report begins with background information on policy and exempt child care. The next section reports on protections for children attending exempt family child care, noting that these children receive few health and safety inspections. The implications of state inspections, staff training, immunizations, and criminal background checks are discussed, as are recommended steps states should take to ensure the health and safety of these children. The next section discusses protection for children being cared for in their own homes, and steps the states should take to ensure their safety. Three appendixes contain requirements listed by state for subsidized family child care providers who are exempt from licensure; and inspection, child immunization, and criminal background and child abuse registry check requirements for relatives and for unrelated caregivers who provide subsidized child care. (WP)