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Final Rule: Repayment of Federal Funds by Installments


Published: June 15, 1977

Repayment of Federal Funds by Installments




June 15, 1977


SUBJECT: Repayment of Federal Funds by Installments

ATTACHMENT:Amendment to 45 CFR Chapter III that Permits State agencies owing significant amounts of Federal funds to repay them by installments over a period up to 3 years.


REFERENCE: 45 CFR 304.40

EFFECTIVE: June 6, 1977

INQUIRIES TO: OCSE Regional Representatives

Deputy Director

Office of Child Support Enforcement



Repayment of Federal Funds by Installments

AGENCY: Office of Child Support Enforcement, HEW.

ACTION: Final regulation.

SUMMARY: This new regulation will permit State agencies owing significant amounts of Federal funds to repay them by installments over a period up to 3 years. The regulation applies when hardship would result from immediate repayment of the entire amount. The policy was developed in response to State agency requests. It will avoid potential adverse impact on the child support enforcement program.

EFFECTIVE DATE: The regulation is effective on June 6, 1977.


Suzanne M. Duval, 202-472-4510.


Notice of proposed rulemaking was published on January 19, 1977 (42 FR 3663) with opportunity for public comment through March 7, 1977. A single comment from a State agency suggested that the method and amount of repayment which qualifies for installments be open to negotiation.

The Department prefers to establish a minimum repayment schedule and leave States free to set payments at or above the established minimum.

The purpose of the regulation is to prevent fiscal hardship on States, and to avoid the possibility that they might be forced to cut back the child support enforcement program and thus adversely affect beneficiaries of this program. The basis for the regulation is the Department's belief that the policy will enable States to operate programs more effectively. No change has been made in response to the single comment. The regulation, as proposed, is adopted.

45 CFR Part 304 is amended by adding a new Section 304.40 to read as follows:

§ 304.40 Repayment of Federal funds by installments

(a) Basic Conditions. When a State has been reimbursed Federal funds for expenditures claimed under Title IV-D, which is later determined to be unallowable for Federal financial participation, the State may make repayment of such Federal funds in installments provided: (1) The amount of the repayment exceeds 2 1/2 percent of the estimated annual State share of expenditures for the IV-D program as set forth in paragraph (b) of this section; and

(2) The State has notified the OCSE Regional Representative in writing of its intent to make installment repayments. Such notice must be given prior to the time repayment of the total was otherwise due.

(b) Criteria governing installment repayments. (1) The number of quarters over which the repayment of the total unallowable expenditures will be made will be determined by the percentage the total of such repayment is of the estimated State share of the annual expenditures for the IV-D program as follows:

Total repayment amount as percentage of State share of annual expenditures for the IV-D program Number of quarters to make repayment
2.5 percent or less 1
Greater than 2.5 but not greater than 5 2
Greater than 5 but not greater than 7.5 3
Greater than 7.5, but not greater than 10 4
Greater than 10, but not greater than 15 5
Greater than 15, but not greater than 20 6
Greater than 20, but not greater than 25 7
Greater than 25, but not greater than 30 8
Greater than 30, but not greater than 47.5 9
Greater than 47.5, but not greater than 65 10
Greater than 65, but not greater than 82.5 11
Greater than 82.5, but not greater than 100 12

The quarterly repayment amount for each of the quarters in the repayment schedule shall not be less than the following percentages of estimated State share of the annual expenditures for the program against which the recovery is made.

For each of the following quarters: Repayment installment may not be less than these percentages
1 to 4 2.5
5 to 8 5.0
9 to 12 17.5

If the State chooses to repay amounts representing higher percentages during the early quarters, any corresponding reduction in required minimum percentages would be applied first to the last scheduled payment, then to the next to the last payment, and so forth as necessary.

(2) The latest OCSE-OA-25 submitted by the State shall be used to estimate the State's share of annual expenditures for the IV-D program. That estimated share shall be the sum of the State's share of the estimates (as shown on the latest OCSE-OA-25) for four quarters, beginning with the quarter in which the first installment is to be paid.

(3) In case of termination of the program, the actual State share--rather than the estimate--shall be used for determination whether the amount of the repayment exceeds 2 1/2 percent of the annual State share for the IV-D program. The annual State share in these cases will be determined using payments computable for Federal funding as reported for the program by the State on its Quarterly Statement of Expenditures (SRS-OA-41) reports submitted for the last four quarters preceding the date on which the program was terminated.

(4) Repayment shall be accomplished through adjustment in the quarterly grants over the period covered by the repayment schedule.

(5) The amount of the repayment for purpose of paragraphs (a) and (b) of this section may not include any amount previously approved for installment repayment.

(6) The repayment schedule may be enacted beyond 12 quarterly installments if the total repayment amount exceeds 100% of the estimated State share of annual expenditures.

In these circumstances, the criteria in paragraphs (b) (1) and (2) or (3) of this section, as appropriate, shall be followed for repayment of the amount equal to 100% of the annual State share. The remaining amount of the repayment shall be in quarterly amounts not less than those for the 9th through 12th quarters.

(7) The amount of a retroactive claim to be paid a State will be offset against any amounts to be, or already being, repaid by the State in installments, under the same title of the Social Security Act. Under this provision the State may choose to:

(i) Suspend payments until the retroactive claim due the State has, in fact, been offset; or

(ii) Continue payments until the reduced amount of its debt (remaining after the offset), has been paid in full. This second option would result in a shorter payment period.

A retroactive claim for the purpose of this regulation is a claim applicable to any period ending 12 months or more prior to the beginning of the quarter in which the payment is to be made by the Service.

(8) Interest on repayments will not be charged unless mandated by court order.

(Sec. 1102, 49 Stat. 647 (42 U.S.C. 1302)

(Catalog of Federal Domestic Assistance Program No. 13.679-Child Support Enforcement.)

Note.-The Department has determined that this document does not require preparation of an Inflationary Impact Statement under Executive Order 11821 and OMB Circular A-107.

Joseph F. Califano, Jr,,


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