My Gym has all the coaches credentialed up to level 5, but haven't started with the kids. I come from a gymnastics background so I'm used to it. I think the same is with alot of other similar activities.
Coaches are the ones "credentialing" their kids, so yes, of course there is room for um, "error" to get their kids to Level 5. And yes, it is another way for USASF to collect money (maybe Varsity isn't giving them enough cash anymore-- sorry, side rant).
But, there are some good things about credentialing kids too -- it helps me as a gym owner explain why Sally Sue, who can't do a round-off tuck, can't work on her full yet, the governing body sets progressions, and we teach by those progressions. Last year, before the athlete credentialing stuff came out, we did our own "level" system based on the USASF rules and we had a number of kids pick up clinics, camps, and privates to get to the next level. Plus, if done right, it gives the parents a reality check about where their kid really is skill-wise.
Like everything, there are pros and cons, and its only as good as you make it.
Coaches of the gyms get to credential their own? And nobody can question or check on the results they gave to each individual? Does that give them the freedom to stretch the results a bit? Uh, heck yeah? Really, what is the point if you don't have someone unbiased doing the credentialling. Sheeeeesh.