Final Rule: Withholding of Advance Funds for Failure to Report
March 10, 1982
TO: STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PROGRAMS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS
SUBJECT: Final Regulations-Withholding of Advance Funds for Failure to Report
This is a final regulation which authorizes the withholding of advance Federal funds from States which fail to report IV-D collections and expenditures within the statutory time frame. The regulation amends 45 CFR Part 301 to implement the amendments made to section 455 of the Social Security Act by section 407 of Public Law 96-265.
REFERENCE: 45 CFR 301.16.
EFFECTIVE DATE: January 1, 1981
RELATED REFERENCES: OCSE issued an Action Transmittal (OCSE-AT-81-2, dated January 29, 1981) which transmitted a notice of proposed rulemaking on the provisions of section 407. Interim instructions were provided to the States in an Action Transmittal (OCSE-AT- 80-18) dated December 15, 1980.
INQUIRIES TO: OCSE Regional Representatives
Office of Child Support
Office of Child Support Enforcement
45 CFR Part 301
Child Support Enforcement Program; Withholding of Advance Funds for Not Reporting.
AGENCY: Office of Child Support Enforcement (OCSE), HHS.
ACTION: Final rule.
SUMMARY: Section 407 of Pub. L. 96-265, the Social Security Disability Amendments of 1980, prohibits advance payment of the Federal share of State child support enforcement expenses for a calendar quarter unless the State submits a full and complete expenditure report and a full and complete report of the amount of child support collected and distributed for all calendar quarters, except the prior two. This regulation implements this new requirement. We published a Notice of Proposed Rulemaking (NPRM) on these provisions on January 6, 1981 (46 FR 1319). The comments received on this notice and our responses to the comments are discussed below.
EFFECTIVE DATE: January 1, 1981
FOR FURTHER INFORMATION CONTACT:
Tom DePippo, Chief, Policy Branch, OCSE, (301) 443-5350.
Child support enforcement regulations at 45 CFR 301.15 describe the procedures for making grants to IV-D agencies. Under these procedures, IV-D agencies estimate the funds they will need for the ensuing quarter to operate the program. OCSE regional and central offices review the State's estimate and the central office computes the grant award after making any necessary adjustments to the estimate. The grant award computation form is transmitted to the IV-D agency and provides notification to the agency that it may draw the amount of the grant award as needed. In this way, IV-D agencies are able to obtain advances on the Federal share of IV-D expenditures for each quarter. The States use these advances for operating their IV-D programs during the period before their actual claims are submitted and processed for payment by OCSE.
Section 407 of Pub. L. 96-265, enacted on June 9, 1980, prohibits the Department from paying an IV-D agency an advance for a quarter unless, for all quarters but the previous two, the agency has submitted a full and complete expenditure report and a full and complete report on child support collections received and distributed.
OMB Clearance of Reporting Forms
OCSE recently obtained clearance of new expenditure and collection reporting forms from the Office of Management and Budget (OMB). At present, the new form OCSE-34 (OMB clearance number 0960-0238) must be used for reporting expenditures. OCSE published a supplemental notice to our NPRM on June 8, 1981 (46 FR 30372) to announce the approval of these new forms which replaced form OCSE-4134 and the combined forms SRS-OA-41 and OCSE-OA-41.17.
Reporting of Expenditures
45 CFR 302.15 requires IV-D agencies to file with OCSE a statement of quarterly expenditures and any necessary supporting schedules within 30 days of the end of each quarter. The State shall use the OCSE 41 for this purpose. The OCSE 41 includes user instructions which reiterate the requirement that the report be submitted within 30 days of the end of the reporting quarter.
Reporting of Collections and Distributions
45 CFR 302.15 includes requirements that IV-D agencies maintain records on amounts of child support collections and distributions, and make reports as required by the Secretary of the Department of Health and Human Services. The State shall use the OCSE-34 to report child support collections and distributions. The OCSE-34 includes user instructions which require that the report be submitted within 30 days of the end of the reporting quarter.
To implement Section 407 of Pub. L. 96-265, we have added to the regulations a new 45 CFR 301.16, Withholding of advance funds for not reporting. This regulation provides that a State agency which fails to submit full and complete expenditure and collection reports for any quarter except the two most recent quarters cannot receive an advance of Federal funds for subsequent quarters. For example, in order for a State to receive advance funding for a quarter beginning January 1, it must have submitted full and complete expenditure and collection reports for all prior quarters except for the preceding quarters ended September 30, and December 31. It does not, however, alter the existing requirements that such reports be submitted to OCSE within 30 days of the close of the reporting quarter. Rather, this new statutory provision and regulation require OCSE to withhold advance funds until reports are complete when incompleteness persists for five months beyond this 30 day reporting deadline.
Definition of Complete Report
Section 407 of Pub. L. 96-265 specifies that IV-D agency reports must be full and complete in order for the agency to receive advance FFP. It also specifies that the reports shall be "in such form and manner and containing such information as the Secretary shall prescribe or require." We have defined a "full and complete" report for purposes of this regulation as follows. A full and complete report is a report in which all applicable line items of information are reported in accordance with OCSE instructions. Those line items must contain all of the applicable information the State has in its possession for the quarter being reported and prior quarters that is appropriate for inclusion in the report. This means a State report may be judged complete even if (1) an entity participating in the program under the State plan has failed to report data to the State and these data are, therefore, not included in the report or if, (2) the entity has, in fact, reported data to the State but these data are not included in a report because the data are being questioned by the State and, therefore, not suitable for inclusion in the report. It also means that if a State fails to appropriately segregate its expenditures between AFDC and non-AFDC cases (line items on the expenditure report) or fails to report collections received from other States (a line item on the collection report), a State report may be judged incomplete. Under this definition, only line items that do not apply to a particular State may be left out of a report. If any applicable line items are not completed, the regional office will judge the entire report incomplete and notify the State in accordance with the procedures described below. With respect to a collection report, collections received by a State but not yet distributed due to adherence to normal distribution procedures under § § 302.32 and 302.51 must be reported as undistributed collections on line 9 of the OCSE-34.
If the regional office receives a State expenditure report (OCSE-41) or collection report (OCSE-34) which it determines to be incomplete according to the criteria described above, the following procedures will be carried out. First, the regional office will review the expenditure and collection reports for purposes of determining the allowability of the expenditures claimed and acceptability of the collection data reported. In notifying a State of the results of its review, the regional office will, if appropriate, also inform a State that the report(s) is incomplete. If the complete expenditure and/or collection report is not submitted within two quarters after the close of the reporting quarter, the regional office will recommend to the central office, with proper notification to the State, that no funds be advanced to the State for the upcoming quarter. Advance funds will continue to be withheld until the State submits a complete report(s) for all quarters other than the two quarters prior to the quarter for which the advance is to be made.
Processing of Expenditure Claims
As noted above, the provisions of this final rule apply to the filing of both expenditure and collection reports with OCSE by the States. We believe the requirements for filing collection reports (OCSE-34) are adequately described above. However, with respect to the filing of expenditure reports (OCSE-41), we believe it is necessary to clarify the distinction between the provisions of the new § 301.16. Withholding of advance funds for not reporting, and the provisions of the new 45 CFR Part 95, Subpart A, Time Limits for States to File Claims. The latter provisions implement Section 306 of Pub. L. 96-272, which requires States to file claims for FFP (expenditure reports) within certain time limits. These time limits apply to all the public assistance programs under the Social Security Act. For more information regarding the time limits for filing claims, see the Final Rule published by the Department in the Federal Register on January 15, 1981 (46 FR 3527), and a subsequent clarifying Final Rule published in the Federal Register on September 17, 1981 (46 FR 46134). State requests for advance funds are submitted on the form OCSE-65. Until the enactment of the withholding of advance provisions, expenditure reports were used solely to report the disposition of the funds advanced under reimbursement for allowable expenditures. Now, under the requirements of Section 407 of Pub. L. 96-265, the submittal of the expenditure report (the OCSE-41) within two quarters after the close of the reporting quarter has for the first time become a prerequisite for receiving advance funds as requested on the OCSE-65.
Under the statute, OCSE must withhold advance funds from any State that fails to submit complete expenditure and collection reports within two quarters of the close of the reporting quarter. The term "complete" for purposes of this regulation has been defined above. We must stress, however, that the two quarter time limit of § 301.16 applies only to the advance Federal funds provided to the State and not to the time limit within which a claim must be submitted in order for it to be eligible for reimbursement by OCSE. Rather, the time limit for filing claims is covered by the new regulations at 45 CFR Part 95, Subpart A. Thus, an expenditure report which does not meet the requirements as previously defined will cause a withholding of advance Federal funds from the State if it remains incomplete after two quarters. OCSE will nevertheless determine the allowability of State expenditures if claims for those expenditures are submitted within the time limits prescribed in the regulations at Part 95, Subpart A on claims payment. Allowable expenditures for which claims are submitted within the time limits of Part 95, Subpart A will be eligible for reimbursement, notwithstanding any incompleteness in the State's OCSE-41 which might cause a withholding of advance funds.
Section 407(d) of Pub. L. 96-265 specifies that the provisions of Section 407 "shall be effective in the case of calendar quarters commencing on or after January 1, 1981." We believe this effective date clearly refers to the first quarter for which an advance might be withheld. Thus, to avoid having its advance funds withheld for the January through March 1981 quarter, each State must have submitted its collection and expenditure reports for all quarters through the quarter ending June 30, 1980. OCSE issued interim instructions to the States to implement the provisions of Section 407 on this schedule. The standard for judging completeness of State collection and expenditure reports in the interim period before the issuance of final regulations has been simply that the reports be submitted to OSCE.
In our NPRM, we proposed that the new, more stringent standards for judging "completeness" be adopted retroactively to the reporting quarter ended June 30, 1980. For the reasons discussed below under the heading "Discussion of Comments," we have instead decided that the new completeness standard will take effect beginning with the first full quarter after the quarter in which this final rule is published. Thus, a State's reports for the quarter ending June 30, 1982 would have to be full and complete in order for the State to avoid a withholding of its advance funds by OCSE for the quarter beginning January 1, 1983. Until the new completeness standard takes effect (for the quarter ending June 30, 1982), the State must continue to submit reports in accordance with the interim standards established in OCSE-AT-80-18, dated December 15, 1980.
Discussion of Comments
Comments on the NPRM were received from four State agencies. A summary of the substantive comments and our responses follow:
1. Comment. One State commented on the potential difficulty of applying the standard for completeness of state reports retroactively to the reporting quarter which ended June 30, 1980.
Response. As noted above under the heading "Effective Date," we have decided to apply the new standard for completeness prospectively, that is, beginning with the first full quarter after the quarter in which this final rule is published. We agree that applying the standard for completeness retroactively to a period during which forms clearances were being obtained would be unfair to the States and would achieve a result not intended by the Congress in enacting the new provisions.
2. Comment. Two States commented that the final regulation should provide sufficient flexibility so that States would not be subject to a withholding of advance funds because of incompleteness of reports when that incompleteness was caused by failure of only one or two political subdivisions to file claims or to report collection data to the State.
Response. As noted above under the heading "Definition of Complete Report", OCSE will judge a report incomplete if a State fails to report all appropriate information in its possession for the quarter being reported and prior quarters. This means a State report may be judged complete even if entitles participating in the program under the State plan have not reported to the State. Such entitles include, but are not limited to, agencies of political subdivisions, courts and law enforcement officials, and private attorneys. OCSE will withhold advance funds, however, if a State report fails to include all available information appropriate for inclusion within two quarters from the close of the quarter in which the data became available to the State. OCSE firmly believes, however, that State agencies have a responsibility to ensure timely reporting from all entitles participating in the program for which it has ultimate responsibility. Appropriate management steps should be taken to ensure such timely reporting.
3. Comment. One State commented that, because we refer to "line items that do not apply to a particular State" under our discussion of complete reports in the preamble to the NPRM, "the States and Regional Offices should determine those line items not applicable to the States and put their agreement in writing * * * prior to the implementation of this regulation."
Response. The only line items on either of the new reporting forms which may not be applicable to all States are items 14 and 15 on the OCSE-41, pertaining to non-AFDC fees and cost recovery, respectively. Each of these items is a State plan option under Section 454(6) of the Social Security Act (42 U.S.C. 654(6)) and 45 CFR 302.33. The applicability of either of the two line items is determined by whether a given State elects either option in its IV-D State plan at Section 2.6 of the plan preprint. Therefore, there is no need for the type of agreement suggested by this commenter. However, if a State has identified a problem in this area, that State has identified a problem in this area, that State should contact the appropriate OCSE regional office to resolve the problem.
PART 301-STATE PLAN APPROVAL AND GRANT PROCEDURES
45 CFR Part 301 is amended to read as follows:
1. In 45 CFR Part 301, the table of contents is revised to read as follows:
301.0 Scope and applicability of this part.
301.1 General definitions.
301.10 State plan
301.11 State plan; format
301.12 Submittal of State plan for Governor's review.
301.13 Approval of State plans and amendments.
301.14 Administrative review of certain administrative decisions.
301.16 Withholding of advance funds for not reporting.
Authority:Sec.1102, 49 Stat. 647 (42 U.S.C. 1302)
In 45 CFR Part 301, 301.16 is added to read as follows:
§ § 301.16 Withholding of advance funds for not reporting.
(a) No advance for any quarter will be made unless full and complete reports on expenditures and collections, as required by§ § 301.15 and 302.15 of this chapter, respectively, have been submitted to the Office by the IV-D agency for all quarters immediately preceding the quarter for which the advance is to be made.
(b) For purposes of this section, a report is full and complete if:
(1) All line items of information are reported in accordance with OCSE instructions; and
(2) The report contains all applicable information available to the State and appropriate for inclusion in the report for the quarter being reported and prior quarters.
(Collection reporting form approved by OMB under OMB No. 0980-0238 and expenditure reporting form approved by OMB under OMB No. 0960-0235)
(Sec. 1102, Social Security Act 49 Stat. 947 (42 U.S.C. 1302))
(Catalog of Federal Domestic Assistance Program No. 13.679, Child Support Enforcement Program)
Note 1.-The Secretary has determined that this document is not a major rule as described by Executive Order 12291, because it does not meet any of the criteria set forth in Section 1 of the Executive Order.
Note 2.-The Secretary certifies that because these regulations apply to States and will not have a significant economic impact on a substantial number of small entitles, they do not require a regulatory flexibility analysis as provided in Pub. L. 96.354, the Regulatory Flexibility Act of 1980.
Dated: December 9, 1981.
John A. Svahn
Director, Office of Child Support Enforcement.
Approved: February 9, 1982.
Richard S. Schweiker,