Attachment 1:Notice of Proposed Rulemaking

ACF Administration for Children and Families	U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Administration for Children, Youth and Families
	Log No.: 45 CFR Parts 1355, 1356, and 1357
	Issuance Date: December 31, 1980
	Originating Office: Office of Human Development Services
	Key Word: Foster Care Maintenance Assistance and Adoption Assistance; Child Welfare Services

PROPOSED RULES DEPARTMENT OF HEALTH AND HUMAN SERVICES

AGENCY: Office of Human Development Services (OHDS), HHS.

ACTION: Notice of Proposed Rulemaking.

SUMMARY: The Department is proposing regulations to govern the new title IV-E program, Federal financial participation for Foster Care and Adoption Assistance, and revisions to the title IV-B program, Child Welfare Services, of the Social Security Act, contained in Pub. L. 96-272, the Adoption Assistance and Child Welfare Act of 1980. Interim Final Regulations have also been issued to notify States of the procedures and protections that must be in place before a State can receive its share of title IV-B funds if appropriations are made in excess of $141 million. These provisions also apply to transfer of funds from title IV-E to title IV-B for use in child welfare services, and to reimbursements for the allowable costs of voluntary placements of children in foster care.

DATES: Comments must be received on or before March 16, 1981. Comments on the proposed rule for fiscal requirements, including allotments, the transfer of funds and administrative and training expenditures under title IV-E (Sec. 1356.80) must be received on or before January 30, 1981.

ADDRESS: Send written comments to: Frank Ferro, P.O. Box 1182, Washington, D.C. 20013.

FOR FURTHER INFORMATION
Contact: Frank Ferro, Associate Chief, Children's Bureau, (202) 755-7418.

SUPPLEMENTARY INFORMATION: Public Meetings.

Public meetings on this proposed rulemaking will be held on the dates and at the locations listed below. For further information, contact the Regional Program Director in the appropriate Regional Office of the Administration for Children, Youth and Families.
January 9: Federal Reserve Bank Building Auditorium, 600 Atlantic Avenue, Boston, Massachusetts 02210,
Contact: Tina Janey Burell, (617) 223-6450.

January 9: Richard B. Russell Building, 75 Spring Street, N.W., Atlanta, Georgia 39323,
Contact: James K. Vaughn, (404) 221-2300.

January 12: Federal Building, Rooms 13029 and 15018, 450 Golden Gate Avenue, San Francisco, California 94102,
Contact: Beverly Wood, (415) 556-6153.

January 13: American Dental Society Building, 211 E. Chicago Avenue, Chicago, Illinois 60606,
Contact: Forrest Lewis, (312) 353-1784.

January 14: Dallas Public Library, Room: Auditorium, 1954 Commerce Street, Dallas, Texas 75202,
Contact: Patricia Newlin, (214) 767-6596.

January 16: Federal Building, Room 140, 601 E. 12th Street, Kansas City, Missouri 64106,
Contact: Richard Schrader, (816) 374-5401.

January 19: The Regency Inn, 3900 Elati Street, House of Common, Denver, Colorado 90204,
Contact: Ms. Sue Dignum, (303) 292-9010.

January 23: William J. Green Federal Building, Room 3306, 600 Arch Street, Philadelphia, Pennsylvania 19101,
Contact: Donald Barrow, (215) 596-0390.

January 28: World Trade Center Building, Room 4430, 2 World Trade Center, New York, New York,
Contact: Caroline Gionta, (212) 264-2405.

January 29: New Federal Building, 915 Second Avenue, Seattle, Washington 98101,
Contact: Ms. Jeanne Craig, (206) 442-0838.

The Department has established a demonstration project to assist qualified applicants with certain costs of commenting on these proposed regulations. The purpose of this project is to learn whether this kind of assistance will achieve a more complete discussion of significant issues and a greater diversity of oral and written comments. This project is described in a Notice published in Part VI of the Federal Register on December 17, 1980 (45 FR 83172). Please refer to that Notice for complete information on criteria for eligibility, on reimbursable costs and on completing the application form. The following is a summary of the demonstration project. Four of the ten meetings to be held during the comment period--

Kansas City (Jan. 16), Denver (Jan. 19), Philadelphia (Jan. 23), and Seattle (Jan. 29)-- have been chosen for the demonstration project as sites where selected applicants can be assisted to participate if they could not otherwise afford to do so. Applicants for the regional meeting in Kansas City must live in Iowa, Kansas, Missouri or Nebraska; applicants for the meeting in Denver must live in Colorado, Montana, North Dakota, South Dakota, Utah or Wyoming; and applicants for the meeting in Philadelphia must live in Delaware, Maryland, Pennsylvania, Virginia, West Virginia or the District of Columbia. Finally, applicants for the meeting in Seattle must live in Alaska, Idaho, Oregon or Washington State. The states listed are the states served by each of the four regional offices.

In addition, interested persons throughout the country and the territories are eligible to apply for funding to prepare written comments (such as compilations of membership surveys) or to gather information to back up their positions on the issues in these proposed regulations. The Department will give special consideration to applications for written comments from those regions where assistance to attend regional meetings is not available.

Applications for assistance to participate in one of the four regional meetings must be postmarked on or before the following dates: for the Kansas City meeting--December 26, 1980; for the Denver meeting--December 29, 1980; for the Philadelphia meeting--January 2, 1981; and for the Seattle meeting-- January 8, 1981. Applications for assistance in preparing written comments must be postmarked on or before January 21, 1981. These deadlines have been set to allow the Department sufficient time to review applicants and notify successful applicants. However, late applications will be considered to the extent possible.

An Evaluation Board will review all applications. To approve an application, the Board must be able to decide that it meets all the following three criteria:

The information the applicant plans to present will help the Department decide the issues in the proposed regulations.
The applicant represents an interest that otherwise might not be heard.
The applicant cannot otherwise afford the costs of participating in a regional meeting or developing written comments. An application must contain the information necessary to show whether these three criteria are met. It must identify the issues of concern to the applicant, his or her positions on the issues, and for whom the applicant speaks. It must also describe the applicant's financial situation.

For further information and for application forms,
Contact: Carel Hedlund, Demonstration Project, Department of Health and Human Services, Room 706.E, 200 Independence Avenue, S.W., Washington, D.C. 20201, Telephone: (202) 245-7545.
The Department urges everyone interested in the regulations to make their views known during the comment period by attending a regional meeting or submitting written comments, whether or not they wish to apply for assistance.

Background
The landmark Adoption Assistance and Child Welfare Act of 1980 (Pub. L. 96- 272) was enacted on June 17, 1980. Section 101 of Pub. L. 96-272 amended title IV of the Social Security Act (the Act) and created a new part E--Federal Payments for Foster Care and Adoption Assistance (IV-E). That section provides for a phased repeal of Section 408 of the Act, which currently provides authority for Federal matching in State foster care payments under the Aid to Families with Dependent Children program (AFDC-FC). States may continue to receive Federal matching for AFDC-FC payments under Title IV, Part A of the Act (IV-A) until September 30, 1982 or, if earlier, the quarter in which the State implements an approved State plan under title IV-E. Public Law 96-272 also amended Title IV, Part B of the Act (IV-B) to consolidate, restate and in some instances modify the existing Child Welfare Services program. The most significant modification set new conditions on the States for receipt of their share of increased appropriations intended to improve protections for children in foster care. The new law mandates needed improvement in the States' child welfare and social service programs, strengthens and improves the program of Federal support for foster care of needy and dependent children, establishes a program of Federal Financial participation to encourage adoptions of children with special needs, and encourages support for the family.

The impetus behind the passage of Pub. L. 96-272 was the belief of Congress, and most State child welfare administrators, supported by extensive research, that the public child welfare system responsible for serving children, youth and families had become a receiving or holding system for children living away from parents rather than a system that assists parents in carrying out their roles and responsibilities and provides alternative permanent placement for children who cannot return to their own homes. Studies show that under current policies and procedures thousands of children are stranded in the public foster care system with little hope of being reunited with their families or having a permanent home through adoption or other permanency planning, thereby causing harm to the children and high costs to the States. The passage and enactment into law of Pub. L. 96-272 (formerly HR 3434) demonstrates a Federal commitment to provide financial and technical assistance to States to make changes in their child welfare services systems. To reduce the number of children entering foster care, emphasis is placed upon the use of preplacement preventive services to help solve or alleviate the family problems that would otherwise result in the child's removal from the home. To reduce the number of children already in the foster care system, the law requires States to undertake several initiatives.

A State must enact a law by October 1, 1982, establishing annual goals for reducing the number of IV-E children remaining in foster care over 24 months. If a State is to receive Federal financial participation (FFP) in foster care maintenance payments under title IV-E after October 1, 1983, it must provide services in all political subdivisions to facilitate the reunification of foster children with their families. To ensure that children do not remain adrift in the foster care system, a State must implement case plan and case review procedures that cyclically assess the appropriateness of the child's placement and reevaluate the services provided to assist the child and the family. To encourage family reunification, a State must attempt to place a child in close proximity to the family and in the least restrictive (most family like) setting, and finally, for those children who cannot be reunited with their families and who have "special needs" as defined in the regulation, financial assistance will be available to families adopting these children.

In short, the new law rests on three pillars:
Prevention of unnecessary separation of the child from the parents; Improved Quality of Care and Services to children and their families; Permanency through reunification with parents or through adoption or other permanency planning. The foregoing is a brief summary of the major goals of the law. Sections II, III and IV of the Supplemental Information will discuss the more important provisions of the proposed regulation.
1. Approach to Writing the Regulation Pub. L. 96-272 establishes a new program, the title IV-E program, which will replace the title IV-A foster care program not later than October 1, 1982. In addition, the law makes changes in the IV-B child welfare services program and it ties the two programs together with numerous program and fiscal incentives. Thus, careful attention should be given to the cross references and linkages between Parts B and E. These linkages are discussed under the specific sections to which they apply. They include funding provisions with respect to amount and timeliness of appropriations, transfer of funds, service requirements, administrative costs and training regulations. While the goals of the law can become somewhat obscured by the complexity of the interrelationship of the IV-B and IV-E programs, numerous provisions are drafted in the law with great specificity and leave little doubt as to intent. Consequently, the Department was able to incorporate into the regulation nearly verbatim many provisions of the law. The law gave the Department discretion in implementing other important provisions. The Department held a public meeting to discuss the issues with outside organizations and established a senior level policy group to discuss alternative policy options and make formal recommendations to the Secretary. Inevitably in writing regulations, difficult choices must be made from alternatives representing competing values and goals. This regulation is aimed to bring about changes within a reasonable timetable and may require participating States to make fundamental changes in their child welfare systems. Ultimately, the States will be the instrument of change. Many States have already begun to make the requisite changes. This regulation is drafted in recognition of the diversity of States and the variety of problem solving approaches extant. The Department has made every effort to be sensitive to State practice and has incorporated State recommendations in its approach and in framing the provisions of the proposed regulation. At the same time the regulation is specific enough to produce consistency in interpretation and uniformity in implementation. The Department's purpose has been to draft a regulation designed to foster the desired changes, while allowing flexibility in the means of producing the changes required by the law. The requirements were developed after seriously weighing their consequences for children, parents, State practice, caseworkers, and others affected by the regulation.
2. Financial Impact Cost considerations are a critical element in the regulatory decision process. Full implementation of the intent of Pub. L. 96-272 and of the proposed regulation is expected to have considerable impact on the Nation's public child welfare services system. Cost consequences, although not solely determinative, were carefully considered in drafting the regulation provisions. For example, the Department chose to require only those preplacement preventive services and reunification services that are essential to accomplishing the goals of the legislation, rather than a more extensive list of required services which the Department concluded was too costly and would cause a financial drain from other vitally needed services. In dealing with the information and reporting requirements, cost and program considerations were combined.
  
  The information and reporting requirements in the Act have been interpreted to allow development of a Statewide information system that will meet the reporting requirements of both Pub. L. 95-266, the Adoption Opportunities Act, and of Pub. L. 96-272. The Department believes the regulation will protect the best interests of children and families served, carry out legislative requirements, address the diverse range of capabilities existing in the States, and lead to a marked reduction of the average number of children in foster care. It is estimated that the foster care caseload will decline 5% in FY 81 compared to the average number of children in care in FY 80. Improved permanency planning practices begun in FY 81 will have their greatest impact on the average FY 82 caseload which is expected to decline a further 15% from the average number of children in care in FY 81. Continuing declines of approximately 5% per year are expected in FY 83 and FY 84 when the caseload size is expected to stabilize at approximately 360,000, or nearly 30% lower than the average number of children in care during FY 80. If the cost maintaining children in substitute care continues to inflate at the same average rate that occurred between 1975 and 1978, cost savings per year by FY 84, due to the anticipated reduction in the number of children in out-of-home placement, would be over one billion dollars for the Nation's foster care system. Based upon conditions established in Executive Order 12044 and the Secretary's implementing instructions, the Department has conducted a threshold study and has determined that a full regulatory analysis is not required. The Department has classified this regulation as a significant regulation under Executive Order 12044.
3. Reporting and Recordkeeping Requirements The proposed regulation contains reporting and recordkeeping requirements. The Department is required to submit to the Office of Management and Budget, for review and approval, the following sections and/or forms pertaining to reporting and recordkeeping requirements:
  - Inventory of Children in Foster Care (Sec. 1357.30(a)(3))
  - Statewide Information System (Sec. 1357.30(a)(4))
  - Report on Voluntary Placements (Sec. 1357.30(a)(4)(iv))
  - Federal Reports on Child Welfare Services (Sec. 1357.20(c)(10)) The Department will submit these sections and forms to OMB. The following sections and/or forms have been submitted to OMB for approval.
  - IV-B Child Welfare Services State Plan Guidelines which contain an Annual Summary of Child Welfare Services and an Annual Budget Request (Section 1357.40(a)(4)) Approved by OMB for one year.
  - Interim State Plan for title IV-E of the Social Security Act. The permanent IV-E State plan will be submitted following publication of the final regulations for Pub. L. 96-272. IV-E Expenditures Reports (Section 1356.80) IV-E Estimates of Expenditures (Section 1356.80)
4. Coordination
  
  The Department believes that coordination of services in a time of scarce resources is vital to ensure the most appropriate and cost effective use of available resources. Pub. L. 96-272 is explicit in requiring that the title IV-E and title IV-B programs be coordinated with each other, with the Title XX services program and with other Federal and State programs. The proposed regulations facilitates coordination by mandating the common organizational location of the IV-E, IV-B and title XX programs within the single State Agency and by encouraging the development of common service programs to meet the plan requirements of title IV-E and title IV-B. The proposed regulation also contains requirements that States assess the relevance and appropriateness of related programs and services. This assessment, along with supporting policies and procedures, must be provided to local agencies to facilitate inter-program referrals and to enable periodic assessment of the effectiveness of the State's system for coordinating services.
5. Immediate Implementation Activities
  States may immediately apply for available funds under title IV-E provided they have a DHHS approved State Plan. At this time, title IV-E does not authorize the Secretary to make estimated payments in advance of State expenditures. Therefore, Federal funds will be available on a reimbursement basis only. The Congress has passed a technical amendment to the Act to permit the making of estimated payments in advance of State expenditures. As of the date of publication of the proposed regulation, the President has not signed the technical amendment. For Fiscal Year 1981, the Department will issue an interim title IV-E State Plan preprint to be used by the States to certify they have met the necessary requirements in the law. The present interim preprint is based solely on the provisions of the Act and not on this NPRM. Federal funds will be made available for FFP to reimburse States that have an approved interim IV-E State plan. A revised IV-E State Plan preprint will be made available to the States when the final regulation is issued.
6. Contents of Federal Register
  
  Regulation Package The Department is concurrently publishing several regulatory documents pertaining to the Adoption Assistance and Child Welfare Act of 1980 (Pub. L. 96-272). These documents are all published in this edition of the Federal Register. They include:
  1. Notice of Proposed Rulemaking for Pub. L. 96-272.
    
    The NPRM contains new Parts 1355, 1356 and 1357 of title 45 of the Code of Federal Regulations to implement the new IV-E program, revise the IV-B regulation, and implement new provisions in the IV-B program required by the amended Act. The NPRM also includes the provisions pertaining to State eligibility for additional payments (Section 427 of Pub. L. 96-272) which are also being published as an interim final rule in this issue of the Federal Register. The current regulation for the IV-B program is commingled with that of the IV-A services program for the territories in 45 CFR Part 1392. The proposed regulation for 45 CFR Parts 1355, 1356 and 1357 which is included in this document, will replace the provisions for IV-B in Part 1392. The fiscal requirements for title IV-E are stated in section 1356.80. Included in this section are the conditions for the Federal financial participation in State payments and administration and training expenditures, and foster care allotment limitations. A shorter comment period has been provided for this section because States may be faced with a limitation on foster care funds, therefore the basis for the allotment must be finalized. Further, the regulations governing administrative and training expenditures must be finalized in order to have cost allocation plans approved. Finally, the allotment limitations govern the possible transfer of title IV-E funds not used for foster care to title IV-B. These activities will all occur during the fiscal year, no later than halfway through the third quarter of fiscal year 1981. Also, the State legislatures must appropriate State and local funds to match the Federal funds. Advance knowledge will be needed in order for the correct amounts to be requested by the State agencies and approved by the State legislatures.
  2. Notice of Proposed Rulemaking for amendments to Medicaid Provisions in 42 CFR Parts 431, 435 and 436. This regulation would amend the Medicaid Program to implement the provisions of Pub. L. 96-272 that apply to Title XIX. The proposed rule extends Medicaid eligibility to children for whom payments are made under the title IV-E Foster Care Maintenance Payments Program or the Adoption Assistance Program, and the two additional groups now eligible for IV- A foster care (children voluntarily placed in foster care and children in public institutions).
  3. Interim Final Rule for Requirements for State Eligibility for Additional Payments, 45 CFR 1357.30. This regulation governs criteria that apply to several provisions in Pub. L. 96-272 whereby States may qualify to receive additional funds for child welfare services, transfer funds from Title IV-E to Title IV-B for use in child welfare services, or be partially reimbursed for costs of voluntary placement of children in foster care. These provisions are also being published as part of the proposed rule for Pub. L. 96-272 so that the reader will not have to refer to the Interim Final Rule provisions when reviewing the NPRM.
    
    Discussion of these provisions is contained in the Supplemental Information to the NPRM for Pub. L. 96-272. The Interim Final Rule contains a reproduction of the relevant sections of the NPRM requirements, but does not reiterate the discussion of these provisions set forth in the Supplemental Information section of the NPRM. The Department finds that it is impracticable and contrary to the public interest to follow rulemaking procedures for this provision, and that good cause exists to publish this portion of the regulations as an interim final. These provisions are being published as an interim final rule because the Department recognizes that States must be notified of the standards the Secretary will apply in determining whether the requirements of Section 427(a) and (b) of the Act have been met. States meeting these requirements are immediately eligible to receive federal funds for foster care maintenance payments for voluntarily-placed children. It is also important that States be notified of these standards so that they may make appropriate plans to meet the standards and qualify for the additional funds under Section 427(a) of the Act. Notwithstanding the omission of rulemaking proceedings, public comments will be accepted for seventy-five days following publication. Based on the comment received, the Department will make appropriate changes. The changes will not be retroactive.

Title IV-E--Federal Payments for Foster Care Maintenance and Adoption Assistance

The law creates a new program under title IV-E (IV-E) of the Social Security Act. The IV-E program closely parallels the foster care program currently provided under title IV-A, Aid to Families with Dependent Children program. However, the IV-E program also makes available Federal financial participation (FFP) in adoption assistance payments for "special needs" children. Federal matching funds for adoption assistance payments are not available under title IV-A. The IV-E program will eventually replace the IV-A foster care program. Beginning October 1, 1982, foster care funds will no longer be available under title IV-A. Until September 30, 1982 a State may operate its foster care programs under either title IV-E or IV-A. If a State chooses to continue under the IV-A program, the State must meet the title IV-A requirements. Although the Federal agency responsibility for the administration of the title IV-A foster care program will be transferred to the Office of Human Development Services, the essential application and financial management procedures for title IV-A will not be altered. For purposes of summarizing the IV-E provisions of Pub. L. 96-272, the law may be divided into the following general areas: State Plan Requirements; Foster Care Maintenance Payment Program; Children Voluntarily Placed in Foster Care; and, the Adoption Assistance Program. State Plan Requirements:

The State plan requirements contained in the amended Act (Sec. 471 of the Act (include many requirements applicable to AFDC State plans under title IV-A. Title IV-E State plans are also subject to additional administrative requirements. The plan would have to be administered by the same State agency that administers the Child Welfare State Grant Program under title IV-B of the Act. An independent audit would be required, at least once every three years, of the programs under titles IV-B and IV-E (Sec. 471(a)(13) of the Act). State plans must contain provisions to restrict the use or disclosure of information concerning individuals assisted under the State plan to purposes directly connected with the administration of the plan and other Federal programs. States are required to establish by law, by October 1, 1982, for each fiscal year beginning with fiscal year 1984, goals as to the maximum number of IV-E children in the State who will remain in foster care after having been in care over 24 months (Sec. 471(a)(14) of the Act). The amended Act (Sec. 471(a)(16) of the Act) strengthens the requirements for case plans and case reviews for children in foster care. Effective October 1, 1983, State plans must provide that reasonable efforts are made to prevent removal of the child from his or her home prior to foster care placement and that reasonable efforts are made to enable the child to return home (Sec. 471(a)(15) of the Act). Also effective October 1, 1983, the agency must show that reasonable efforts had been made to prevent removal, in order for the child to receive title IV-E assistance payments (Sec. 472(a)(1) of the Act).

Foster Care Maintenance Payment Program: Title IV-E authorizes FFP in assistance for all children currently eligible for AFDC-FC funds under title IV-A. Under title IV-A, Federal AFDC-FC payments are funds available for maintenance payments for a child otherwise eligible for AFDC payments, who is placed in a foster home or nonprofit private child care institution.

Eligibility for FFP under title IV-E includes children in public child care institutions which accommodate no more than 25 children. Children receiving foster care maintenance payments under title IV-E are deemed, for purposes of titles XIX and XX, to be dependent children as defined in title IV-A, and are, therefore, eligible for Medicaid as categorically needy and the title XX services (Sec. 472(d) of the Act). In the past, Federal matching funds for AFDC-FC payments have been available to States on an open-ended, entitlement basis. Under Pub. L. 96-272 and under the amended title IV-A Foster Care program, there is a ceiling on foster care FFP funds for each fiscal year 1981 to 1984, if appropriation for title IV-B child welfare services equals or exceeds specified amounts: $163.55M for fiscal year 1981, $220M for fiscal year 1982, and $266M for each of fiscal years 1983 and 1984 (Sec. 474(b)(1) and (2) of the Act). Federal funds made available to a State under its IV-E foster care allotment ceiling, which are not used for maintenance payments, may be transferred for use for child welfare services under title IV-B (at a 75 percent matching rate), under certain conditions (Sec. 474(c) of the Act).

No State may increase its IV-B funds by a transfer of IV-E funds beyond certain specified amounts until it has implemented the protections required by Section 427(a) and (b) of the Act. Under the old law, States received Federal matching for AFDC payments (including AFDC-FC payments) on the basis of either the AFDC formula (used by only four States) or the Medicaid matching formula. All FFP for foster care maintenance payments and adoption assistance payments under the title IV-E program is determined using the Medicaid matching formula (Sec. 474(a)(1) and (2) of the Act). Children Voluntarily Placed in Foster Care: In the past, Federal AFDC matching funds were not available for children placed in foster care without a judicial determination. Section 102 of Pub. L. 96-272 temporarily amends title IV-E to authorize FFP in expenditures made after September 30, 1980 and before October 1, 1983 (and under title IV-A, expenditures made after September 30, 1979, and before October 1, 1983) for foster care maintenance payments with respect to a child removed from home under a voluntary placement agreement.

FFP is available only for expenditures made on behalf of voluntarily placed children after the State has implemented the protections and procedures mandated by Section 427(b) of the Act including a program of preplacement preventive services. Adoption Assistance Program: Pub. L. 96-272 provides for FFP in State adoption assistance payments (Sec. 473 of the Act). There was no such authority prior to Pub. L. 96-272. States participating in the title IV-E program are required to establish a program of adoption assistance payments (Sec. 471(a)(1) of the Act). Adoption assistance payments must be made under an adoption assistance agreement to parents who adopt an eligible child after the effective date of a State's approved title IV-E State plan. With an approved State plan, adoption assistance payments will also be available for assistance payments for adoptions made on or after June 17, 1980. FFP for these payments will not be retroactive but will be available from the effective date of the Plan. FFP for adoption assistance is available for a child with "special needs" who is eligible for SSI, AFDC, or foster care maintenance payments under title IV- E. An adoption assistance agreement is required for each child. Children receiving adoption assistance payments under title IV-E would be considered to be receiving AFDC and therefore, eligible for Medicaid (as categorically needy) and title XX services (Sec. 473(b) of the Act).

FFP for adoption assistance payments is permanent, on an open-ended entitlement basis, and is determined based on the Medicaid matching formula (Sec. 474(a)(2) of the Act). The following is a discussion of the significant provision of the proposed IV-E regulation. A. Case Review System The proposed regulation, in Section 1356.40, requires that the State agency administering or supervising the administration of the IV-E State plan implement a case review system that will apply to each child receiving foster care maintenance payments. The case review system includes a case plan (Sec. 1356.40(d)(2)), periodic review of the child's status (Sec. 1356.40(d)(3)), and procedural safeguards to protect the rights of the child and the parent (Sec. 1356.40(d)(6)).

Case Plan.--

The law as implemented by the proposed regulation (Sec. 1356.40(d)(2) requires that each child receiving foster care maintenance payments have a case plan. The proposed regulation also requires that the State agency ensure that the child's case plan address the essential elements.

These elements are: the type of facility in which each child is placed; the appropriateness of the placement and how it serves the best interests, as well as any special needs, of the child; service requirements and recommendations made by the court or administrative review panel and how the agency will comply with these requirements and recommendations; an assessment of the circumstances which necessitated placement and what conditions in the child's own home need improvement before the child can be returned home, and what services will be provided to meet this objective; identification of goals to be achieved for the child while in placement, and what services will be provided to attain these goals; an estimated date when the child will be returned home or an alternative plan, including adoption will be undertaken. The plan must indicate the extent to which the child, if of appropriate age, and the parent(s) have been involved in the development of the case plan. The elements stated above are in the law either as part of the definitions of a case plan or the case review system. In addition to being minimal requirements of a case plan, they are considered to exemplify the best professional practice and be most essential to ensure that the best interests of the child and family are continually served, and that agencies adhere to the provisions of the law which are designed to protect those best interests. Further, these elements will emphasize a close working relationship among the agency, the child and the parent(s) by involving the parent(s) in case planning. This effort should facilitate early reunification with the biological family.

The continuing involvement of the parent(s) and courts further reduces the possibility of the child being "lost" in the foster care system, and will ensure that the services needed, will be provided in a timely fashion. A written case plan is a dynamic document, changing periodically as the child's and family's situation and progress is reviewed. This regulation requires that the initial case plan covering all of the essential elements be developed within a 30-day period starting at the time the agency assumes responsibility for providing services or placing the child. This time span permits the agency and the family to access the situation, set goals, identify needed services, and estimate a point in time when reunification is to take place or an alternative plan undertaken. The proposed regulation also requires documentation in the case record of agency actions, services provided, and decision-making. This record will provide accountability for the child's movement within the foster care system (Sec. 1356.40(d)(2)(iii)).

Essential information required by the Act draws heavily from the language found in the current regulation for AFDC-FC, 45 CFR 233.110. The recordkeeping required by the proposed regulation is similar to that required under title IV-A Foster Care; however, the proposed regulation provides more detailed guidance in the continuous updating and recording of the results of administrative actions or reviews affecting the child. Systematic and meaningful recording will contribute to agency accountability for the best interests of the child.

Least Restrictive Placement in Close Proximity to the Parents or Family Home.--

The law as implemented by the proposed regulation requires that the case plan ensure that children in foster care be placed in the least restrictive (most family-like) setting available. In drafting the proposed regulations, the Department was particularly sensitive to the importance of keeping children in their own community and in the most family-like setting while still meeting the needs of the child (Sec. 1356.40(d)(2)(i)). The draft regulation lists the order of consideration for foster care placements, starting with family care and proceeding to group arrangements and institutional care (Sec. 1356.40(d)(2)(i)). In selecting the appropriate foster care setting for each child, agencies are required to explore the possibility of placement in the extended family of the child or with other relative(s) before exploring the resources of foster parents unknown to the child (Sec. 1356.40(d)(2)(i)). The regulation underscores the need for sensitivity and attention to the child's cultural, ethnic and racial group in the selection of the placement. The requirement of placement in close geographical proximity to the home of the child's parent(s) reinforces the emphasis of the legislation to keep children who are in placement in close contact with their families. Research supports the conclusion that frequent visitation has a direct and positive effect in aiding the return of children to their homes. The placement must be consistent with the best interest and special needs of the child.

Periodic Review and Composition of Administrative Review Board.--The law as implemented by the proposed regulation requires that the State agency must conduct a case review no less frequently than once every six months for each child in foster care (Sec. 1356.40(d)(3)). This review may be conducted by a court or administrative review panel (Sec. 1356.40(d)(3)). The administrative review panel, constituted by the State agency to meet the obligation to conduct administrative reviews every six months, must include at least one person who is not responsible for direct case management or delivery of services to the family or child being reviewed (Sec. 1356.40(d)(4)(i)). The proposed regulation lists some of the possible sources for selecting this person(s) including the use of citizens qualified by experience, training or professional background (Sec. 1356.40(d)(4)(i)). The administrative review is the point at which the principal parties to a foster care placement and in the child's life have the opportunity to discuss the case plan, progress made toward resolution of problems and achievement of goals, and to reach some understanding about the child's current and future status. It is of particular importance that the child be present and participate in the process, so that the child has immediate access to the information presented and can offer his or her own point of view, ask questions, and share in the planning for the future. Participation in this critical activity will relieve the anxiety of awaiting the decisions of others, increase the likelihood of a decision the child can understand, meets the child's unique and individual needs and allows for an experience in personal growth related to responsibility for his or her own life. Unless there are reasons of age or condition that would preclude attendance, the foster child should be a part of the administrative review.

The regulation defines "children of an appropriate age" and "appropriate notice to the child" in order to provide guidelines within which States may determine when children should be involved in the events which vitally concern them. The definitions take into account the child's ability to understand the events without excessive anxiety or emotional stress (Sec. 1356.40(d)(1) (i) and (ii)).

This assumes that caseworkers will be prepared to make a judgment about the child's ability to understand the proceedings and to participate in the process. Workers should also be able to assist and support any child in preparation for and participation in the administrative review and other activities related to planning and placement. As stated previously, the administrative review panel must include at least one person who is not directly responsible for the case management of, or the delivery of services to the child and parent(s) who are subjects of the review (Sec. 1356.40(d)(4)(i)). This individual, who is outside of the direct line of supervision may not be the worker, that worker's supervisor, or other levels of supervision or administration who could directly influence the lower levels of decision-making regarding the placement of the child. This provision does not exclude these agency personnel from being a part of the review panel. However, at least one other member who is not in that direct line of influence and who can provide a point of view independent of those in line authority must be a member of the review panel. The proposed regulation requires that persons involved in the administrative review receive instruction in their role and the purposes of their review (Sec. 1356.40(d)(4)(ii)).

An administrative review panel may be comprised of a majority of persons who are not agency personnel. It is important that they understand their roles within the context of the purpose of the review, the agency's child welfare services system and the program objectives. An understanding and awareness of the rights and responsibilities of the public agency as well as the family, foster family, and child will help to ensure that their participation in the review process will promote the best interests of the child and family. The State Agency has responsibility for establishing its own review system, according to its own geographic needs and resources available. The proposed regulation does not prescribe how a State is to do this, as logical limitations on the time of agency staff and volunteers will adequately determine the number of panels that must be appointed to review the State agency's cases.

Dispositional Hearings.--The law requires that dispositional hearings be held by a court of competent jurisdiction or an administrative body appointed or approved by the court, no later than eighteen months after the original placement and periodically thereafter during the child's continuation in foster care. We are proposing that after the initial dispositional hearing, subsequent hearings be held every twelve months unless the court orders a different time period (Sec. 1356.40(d)(5)(i)). A second dispositional hearing consequently would occur only if the child had been in care approximately 30 months, with subsequent hearings every 12 months thereafter. The Department believes that the need for protection increases rather than decreases as the child remains in foster care without a permanent home.

Procedural Safeguards for the Child and Parents.--The law and the Department recognize the need for specific procedural safeguards for the child and parent(s). The proposed regulation specifies procedural safeguards in a significant action or event undertaken by the agency which affects the child or the family. These safeguards require that the child and family be given advance notice of the action (Sec. 1356.40(d)(6)(ii)

and an opportunity to present their opinions to the person responsible for the case management or delivery of services (Sec.1356.40(d)(6)(ii)(D)). Procedural safeguards will apply to every child under title IV-E (Sec. 1356.40(d)(6)) unless the agency can demonstrate that the child's health or well-being would be endangered by prior notification of the actions planned.

Appeals, Fair Hearings, and Grievances States are required to provide a system of appeals and fair hearings for title IV-E (Sec. 1356.30(g)) and title IV-B (Sec. 1357.20(c)(11)). Under this system applicants or recipients may appeal denial, reduction, or termination of service(s) or benefit(s); or the failure of the State agency to act on a request for service(s) or benefit(s) with reasonable promptness. The requirement for a system of fair hearings and appeals is written into the new regulation in essentially the same form as is currently in effect under the IV-A Foster Care program, the IV-B program and the title XX program. The mechanism for fair hearings is already in place for these programs. Many children receive services from all of these programs, and all programs are operated by the same agency. For these reasons the Department believes that establishment of this common requirement will not create an additional burden on State agencies. Moreover, the requirement encourages coordination and consistency to protect the rights of the applicants for and recipients of services under these programs. States must also provide a system for recipients to present grievances to the State agency concerning the operation of a service or benefit program (Sec. 1357.20(c)(11)).

The current IV-B and IV-A regulations require a grievance system. The Department believes that such a system is necessary in order to allow recipient involvement in a form that will ensure efficient administration of the State plan. It is also a cost efficient requirement, in that an informal grievance system will serve to reduce the number of cases requiring a full scale hearing and appeal.

Program Manuals and Issuances The availability of program manuals is necessary to assure recipients knowledgeable participation in the program and informed exercise of their fair hearings rights.

Safeguarding Information; Personnel Standards. Departmental provisions for safeguarding information currently in effect for title IV-A and XX programs are made applicable to the IV-E and IV-B programs under this regulation by referral to the existing regulations (Sec. 1356.30(f) and Sec. 1357.20(c)(12). The government-wide requirement with respect to use of merit personnel standards in 5 CFR Part 900 will apply to the title IV-E and IV-B programs.
Reasonable Efforts: Reunification Services and Preplacement Preventive Services Under Title IV-E. Section 471(a)(15) of the Act requires that effective October 1, 1983, States make reasonable efforts in each case:

prior to placement in foster care, to prevent or eliminate the need for removal of the child from his or her home; and

make it possible for the child to return home.

Reasonable effort is broadly defined as the State having services systems in place that are required in Sec. 1357.30(a)(5) and (b)(3) and ensuring that they are appropriately applied in each case according to this proposed regulation and the State developed guidelines for workers. States may meet the requirement under IV-E (Sec. 1356.40(e)) by meeting the respective requirements for reunification (1357.30(a)(5)) and preplacement preventive services (Sec. 1357.30(b)(3)) provided under title IV-B. The reasonable efforts provision under IV-E cross references the relevant IV-B provisions. For a more complete discussion of the relevant IV-B provisions, see Requirements for State Eligibility for Additional Payments under the IV-B section of this Supplemental Information.

To meet the reunification service requirement, a State must implement a program of services designed to reunify children with their families. That program of services must contain individual counseling for parent(s) and child (Sec. 1357.30(a)(5)(i)(A)) and other reunification services the state identifies as necessary and appropriate (Sec.1357.30(a)(5)(i)(B)). To ensure that reasonable efforts are made to provide these services to each child or family in need, the proposed regulation requires that there be documentation in the case plan of efforts to reunify the child with his/her family, and statement as to why these efforts failed or were not required. The law and proposed regulation intend that services be readily accessible to each IV-E child and family in need. The preplacement preventive services requirement in the proposed regulation parallels the reunification services requirement in that a program of essential preventive services must be implemented and operating. The program must contain the following services: twenty-four hour emergency caretaker and homemaker services; day care; crisis counseling; individual and family counseling; emergency shelters; and access to emergency financial assistance and arrangements for the provision of temporary child care to provide respite to the family for a brief period (Sec. 1357.30(b)(3)(i)). In addition, the State must provide other services which it identifies as necessary and appropriate (Sec. 1357.30(b)(3)(ii)).

To comply with the provision in the law requiring that reasonable efforts be made in each case to prevent removal of the child from the family, the regulation requires that there must be documentation in the case plan of efforts to prevent the need for placement and a statement of why those efforts have failed. The required services must be available and accessible to all children and families in need, not just the IV-E child who by definition is already in foster care. Preventive services are intended to reach the child before he or she becomes a IV-E foster child, and therefore, must be available to all children in need. The Department believes it is important to reiterate that reunification and preplacement services be available and readily accessible to all children and families in need. A reasonable effort must go beyond an explanation in the case plan that these services were not available. The caseworker must be given the tools essential to implementing the goals of the law and proposed regulation. The required services are essential tools and must be available for the caseworker to utilize. The regulations also require that written guidelines be prepared by the State Agency to assist the caseworker in providing reunification and preplacement preventive services (Sec. 1357.30(b)(3)(iii)). These guidelines are intended to assist the worker to make appropriate case assessments, to determine appropriate services, and to ensure that decisions serve the best interests of the child and family.

Standards for Foster Homes and Institutions. Pub. L. 96-272 provides that the standards for child care institutions or foster family homes must be reasonably in accord with recommended standards of national organizations including standards related to admission policies, safety, sanitation, and protection of civil rights (Sections 471(a)(10) and 2003(d)(i)(F) of the Act). In writing the regulatory provision implementing the law the Department considered a wide range of options from preparing detailed, required Federal standards to regulating only the areas to be covered in standards, thus permitting States to develop the specific requirements. The Department has adopted the latter approach by presenting the basic elements that each State must address in its standards for foster care homes and child care institutions (Sec. 1356.40(h)). The detailed standards must be reasonably in accord with the recommended national standards. The required areas to be addressed in State standards must be present to adequately safeguard children in foster care and promote permanency planning. The Department believes that States must have flexibility in determining the specific requirements.

The Department also considers that the proposed approach will protect the child and will not create extensive or burdensome new Federal requirements. With regard to the use of standards developed by national organizations and already adhered to by many States, it is proposed that the State have flexibility to use one or all of the designated sets of standards as the basis for development of their own requirements (Sec. 1356.40(h)(2)). The sets of standards addressed in this proposed regulation were developed by national organizations with experience and established credentials in the field of child welfare. The national standards cover more areas than those addressed in this regulation. The selection of particular areas does not imply that other areas are not important in operating and providing services to children. The areas addressed were selected because they deal with matters that impact directly upon children and their families. This includes health and safety for the children, provision of basic care needed by all children and activities which are needed to carry out permanency planning.

Review of State Standards and Reimbursement The law as implemented by this proposed regulation requires that States periodically review their standards for foster care homes and child care institutions (Sec. 1356.40(j)). It also requires that States review the level of payment for foster care maintenance and adoption assistance to ensure their continuing appropriateness (Sec. 1356.40(k) and Sec. 1356.60(e)). The Department is proposing that standards be reviewed every three years, and the level of payment for foster care maintenance and adoption assistance be reviewed every two years (Sec. 1356.40 (j) and (k) and Sec. 1356.60(e)). The Department considered making the review periods consistent, but recognized that costs change rapidly. Also, review of payment amounts should be a less complex process than review of the standards. Methodology for data gathering and analysis of cost variables affecting amounts can be standardized to provide the agency with valuable and current information. The Department proposed a longer cycle for standards review, believing that the three year cycle is appropriate to the difficulty of the task. States can develop their own method of review provided that public participation occurs in the review process.

Placement Pursuant to a Voluntary Agreement

The new provision in the Act for FFP in expenses for voluntary foster care placements is a significant departure from the title IV-A foster care program in which only placements resulting from judicial orders were considered eligible for FFP. For the first time, FFP can be claimed for foster care maintenance payments made on behalf of children placed under a voluntary placement agreement as long as specified requirements are met (Sec. 1356.50(a)). Many of these requirements protect the rights of the child and the parent(s) when the child enters foster care under a voluntary agreement and with the assurance of appropriate services to the child and the family. The voluntary placement agreement must be a written binding agreement which states the legal status of the child, and the rights and obligations of the parent(s) or guardian(s), the child, and the agency while the child is in placement (Sec. 1356.50(c)(2)). The voluntary placement agreement must be clearly explained to the parents and must be revocable upon the request of the parents or guardian(s), unless the State opposes the request for revocation and obtains a judicial determination that the child's best interests would not be served by returning the child home (Sec. 1356.50(f)). The regulation requires that the parent(s) gives the State agency at least five work days notice of their intent to revoke the agreement. The State must either return the child or obtain a court order continuing the child in care within the five days. DHHS considered 24 hours and 72 hours as alternatives to the five day period. Both were rejected as being too brief a time for the agency to take the proper action to respond to the revocation. If, on the other hand, the child and family are easily prepared for the child's return, the return should proceed with all due speed. The Department requests comment on the period of advance notice.

Conditions for Payment of Voluntary Placements. The use of the voluntary placement agreement reduces agency and court costs and offers maximum protection to the child and family. Federal financial participation in the costs for voluntary foster care placements are available when the basic title IV-E plan requirements are met and all the provisions contained in Sec. 427(b) of the Act are in place and operating in the State. These provisions are: completion of an inventory (Sec. 1357.30(a)(3)); implementation and operation of Statewide information system (Sec. 1357.30(a)(4); case review system (Sec. 1356.40(d)); a reunification services program designed to return children in foster care to their families (Sec. 1357.30(a)(5)); and preplacement preventive services designed to help children remain with their families (Sec. 1357.30(b) (3) and (4)). No Federal payments will be available for a child in care for more than 180 days without a determination by a court of competent jurisdiction to the effect that continued placement is in the child's best interest (Sec. 1356.50(b)). Pub. L. 96-272 (Sec. 102(a)(1)) provides for FFP in allowable expenditures for voluntary placements made after September 30, 1980, and before October 1, 1983.

Availability of Federal Funds To Reimburse Public Child Care Institutions.

The law and this implementing regulation have broadened eligibility for FFP in foster care maintenance payments to include public child care institutions accommodating no more than 25 residents. However, the law excludes FFP for placements in detention facilities, forestry camps, training schools or other facilities operated primarily for the detention of children who are determined to be delinquents (Sec. 1355.20(d)). Group homes in the community which primarily serve delinquent youth fall within the restriction of the definition and are not eligible for FFP under this program.

Establishment of Goals in State Law.

The law (Sec. 471(a)(14) of the Act) as implemented by this proposed regulation, requires that States write specific foster care goals into State law for each fiscal year beginning with Fiscal Year 1983. The State law must be enacted on or before October 1, 1982 (Sec. 1356.40(f)). This provision is a State plan requirement which must be met if a State is to be eligible for IV-E payments (Sec. 1356.80(c)). The Department encourages State agencies to begin working with their State legislatures immediately and not await publication of the final regulation to make preparations to comply with this provision.

Adoption Assistance Program.

For the first time, Federal financial participation is available to provide adoption assistance for children with "special needs" (Sec. 1356.60). Previously , either the State or the adoptive parents were responsible financially for the care of the child. The severe costs of providing proper care for children with special needs has been a significant hindrance to the adoption of thousands of AFDC-foster care children.

Initiation of Adoption Assistance Payments.

Congress specified that adoption assistance payments were to begin at the time of adoption. However, if an interlocutory decree granting the prospective adoptive parent(s) guardianship or legal custody pending a final decree of adoption is issued, payments may begin at that time (Sec. 1356.60(a)(3)). The intent of Congress was to ensure that these children have the additional procedural safeguards provided by a judicial determination. The option of having assistance begin at placement for adoption was rejected as contrary to Congress' desire to have judicial involvement before initiating assistance payments.

Periodic Recertification of Adoption Assistance Payment.

Pub. L. 96-272 specifies that the amount of the adoption assistance payments may be readjusted periodically by the State with the concurrence of the adopting parent(s) and that the parents shall keep the State informed of any change in circumstances. The proposed regulation requires an annual recertification of the Adoption Assistance agreement including the amount of the payment to families that have adopted children with special needs (Sec. 1356.60(f)). The annual recertification is adapted from the Model State Subsidized Adoption Act and Regulation published by the Department in 1976. The Model Act has been implemented by several States with adoption subsidy programs.

Interstate Continuance of the Adoption Assistance Agreement.

Adoption assistance agreements must contain a provision protecting the interests of the child when the adoptive family moves to another State (Sec. 1356.60(b)(3)(ix)). Effective October 1983, the adoption assistance agreement shall remain in effect regardless of the State of residence of the adoptive parent(s) and the child move to another State (Sec. 1356.60(b)(4)). The Department has concluded that the adoptive parent(s) is entitled to know the parameters of coverage under agreements executed prior to October 1, 1983 (Sec. 1356.60(b)(3)). Therefore, the regulation has been drafted to require the State to include, in agreements executed prior to October 1, 1983, a clear statement on whether the agreement and attendant responsibilities remain in force if the adoptive parent(s) change their State of residence (Sec. 1356.60(b)(3)). While recognizing the October 1, 1983 effective date imposed by Sec. 476(b)(4)(A) of the Act, the Department believes that the pre-1983 informational requirement in the regulation will enable an adoptive parent(s) to make necessary and informed decisions about the child and themselves.

Eligibility for Title XX and Title XIX Services.

The Adoption Assistance and Child Welfare Act of 1980, Pub. L. 96-272, mandates title XIX and title XX eligibility for children for whom payments are made under the Foster Care Maintenance Payments Program or the Adoption Assistance Program. These children are deemed to be recipients of Aid to Families with Dependent Children (AFDC) under title IV-A or IV-E of the Social Security Act (Sections 472(d) and 473(b) of Pub. L. 96-272) for purposes of title title XIX and title XX of the Act. Both Medicaid (title XX of the Act) and title XX are State-administered programs, jointly financed by the Federal and State governments, that provide medical assistance and social services to certain groups of low-income persons. AFDC recipients are automatically eligible for both programs by virtue of their AFDC status. By providing for "deemed" AFDC status, the new legislation provides mandatory title XIX and title XX coverage for children receiving payments under the States' IV-E program. The Health Care Financing Administration's proposed regulation amendment accompanying this NPRM amends the title XIX program to require the State making the foster care maintenance payments or the adoption assistance payments to provide Medicaid coverage. This consistent with the longstanding requirement that the State providing cash assistance that triggers Medicaid eligibility is also fiscally responsible for providing Medicaid for the individuals involved. Usually, when a recipient of a cash assistance program that is linked to Medicaid moves to another State, the individual loses eligibility for that program and Medicaid in the originating state, and is covered for both programs by the new State if he or she meets that State's requirements. However, as explained earlier, for purposes of title IV-E, the Department has determined that, when a family moves to another State, eligibility and responsibility for adoption assistance payments will remain with the originating State (Sec. 1356.40(c) and 1356.60(g)). Therefore, eligibility and responsibility for providing Medicaid coverage will remain with the originating State. This is a continuation and extension of the Department's policy that has been applied to the AFDC Foster Care program previously authorized under title IV-A of the Act. That program required that the originating State continue responsibility for AFDC foster care and Medicaid when a foster care placement is made out-of-state. It is also consistent with the general intent of the title XIX statute and the requirement noted above that ties State responsibility for Medicaid to State responsibility for cash assistance. The proposed regulation provides that children for whom adoption assistance payments are made will be deemed eligible in the State of residence and that State will be responsible for the provision of title XX services if these services are requested and needed. This provision is consistent with current program provisions in title XX. Because eligibility for title XIX and title XX are triggered by an actual cash payment under the adoption assistance program, however minimal, States should be sure that at least a minimal payment is made to families who particularly need title XIX coverage but not necessarily other assistance or services. The Department welcomes comment on this proposed regulation.

Active Promotion of Adoption Assistance Program.

The Department recognizes the need to promote and publicize the availability of adoption assistance so that prospective adoptive parents, including current foster families, will be aware that this program exists. This will enable a larger number of potential adoptive parents to be informed about the program and to consider adopting children with special needs. The dissemination of information is necessary to the success of the entire adoption assistance effort which rests on willingness of the citizenry to become involved in the program. Active promotion also provides the opportunity to share this information with the general public so that an understanding of the purpose and existence of the adoption assistance program is more widespread (Sec. 1356.60(h)).

Training Under Title IV-E. The implementation of the title IV-E program requires the use of a wide range of skills on the part of the child welfare worker providing services to children, parents, foster parents, and potential adoptive parents. To ensure the availability of essential skills, staff training must be an important element of the State agency's management plan. Federal financial participation is available at the 75% rate for training expenditures incurred under title IV- E (Sec. 1356.80(b)). The regulation currently governing staff development expenditures under title IV-A, 45 CFR 235.60-66, is being applied to title IV- E. That regulation appears to be most advantageous to the program. However, State agencies should give careful consideration, in their planning, to the Assessment of training needs and development of training plans in those programs which are to be coordinated with title IV-E so that resources for staff development can be combined beneficially. This will aid in achieving optimal use of those resources. The regulation includes training costs for foster parents, adoptive parents and child care institution staff related to providing foster care (Sec. 1356.80(b)). Title IV-E of the Act establishes a continuing relationship between adoptive parent(s) and the agency to provide continued support, as needed, to the adoptive parent(s) in the care of the child. This provision is interpreted to include training for this purpose.

Withholding of IV-E Funds for Non-Compliance.

The basis and procedure by which the Department, would if necessary withhold funds based on non-compliance are stated in the proposed regulation (Sec. 1356.75). The proposed regulation adopts present Department-wide procedures (45 CFR 213) for handling this type of action. However, it is anticipated that the Department will not use this authority unless and until other less formal methods of ensuring compliance with the approved title IV-E State plan requirements have been exhausted.

Fiscal Requirements

Federal financial participation is available for state expenditures for foster care maintenance payments and adoption assistance payments at the Federal medical assistance percentage rate as promulgated by the Secretary in accordance with Section 1905(b) of the Act. In addition, the regulation provides for an FFP rate of 75% for State training expenditures and 50% for other expenditures needed for proper and efficient administration of the State plan (Sec. 1356.80). Training expenditures may include both in-service training and training at educational institutions, both long-term and short-term, through grants to the institution or direct financial assistance to trainees. Reimbursement is available for training persons employed, about to be employed foster parents or other child care staff providing foster care services to IV-E children (Sec. 1356.80). The costs of conducting the activities essential to fulfilling the plan requirements under Sections 471 of the Act (Sec. 1356.80) are considered as necessary for the proper and efficient administration of the State plan under title IV-E, except for the nonrecurring costs of adoption and the cost of complying with the reporting requirements which are deemed to be child welfare services costs and may not be reimbursed under this part. Furthermore, the costs of direct services to children, parents or foster parents to ameliorate personal problems and which go beyond the activities specified in the regulation are to be funded from other programs. The regulation delineates such social service costs from those required to carry out the provisions under title IV-E. Apart from these exceptions it is recognized that the activities prescribed in the law and the protections provided under Section 427 may overlap. The regulation, therefore, provides flexibility to the States to choose which program to charge these costs and the method used for charging and claiming costs (Sec. 1356.80 (c) and (d)). Because of this flexibility it is important that there be assurances and controls to prevent duplicate charges for the same activities and costs and to allocate these costs to the appropriate programs as outlined in the State cost allocation plan.

Allotments.

There are a number of provisions in the Amendments that emphasize the primary goal of helping children remain with their families when problems arise. One of these provisions is the limitation, in the form of State allotments, on the Federal funds that may be paid on behalf of foster children under AFDC-FC programs. This provision is directed toward limiting the inappropriate use of foster care and it will apply equally to titles IV-A and IV-E foster care. We are planning to issue regulations to state this for title IV-A-Foster Care. The allotment represents the maximum amount of FFP available in foster care. The allotments are mandatory only if the title IV-B appropriation reaches certain "trigger" levels specified in the Act. However, even if the appropriations under IV-B do not reach the specified levels, and the trigger is not activated, the allotment must be computed. Funds allotted but not used for title IV-A or IV-E foster care may be transferred to title IV- B and used for child welfare services, if States meet certain other conditions, to protect children and their families, as specified in Section 1356.80(e)(6). In summary, then, the allotments must be computed and will serve as a planning aid for States and the District of Columbia. (The Territories have a separate ceiling under Section 1108(a) of the Act.) The law specifies three methods for the determination of the amount of allotment. Each State is entitled to the higher of the amount calculated under paragraphs (1) or (2) of Section 1356.80(e). Some States may be entitled to choose the amount calculated (3) of Section 1356.80(e). The State need not select the same option each year. The first method uses the 1978 expenditures for AFDC-FC as a base amount and provides for a percentage increase (or decrease) based on the changes in the Consumer Price Index for each fiscal year (1.3332% for FY 1981 (Sec. 1356.80(e)). The base amount is composed of FFP in three types of State expenditures computed for fiscal year 1978 and added together: maintenance payments, administrative costs and training costs.

Maintenance payments:

The regulation describes the payments as limited to two categories. The first is allowable payments matched by Federal funds that have been claimed or may be claimed and paid, which are submitted to HHS within the time limits specified in Section 306 of Pub. L. 96-272. The Act uses the word "payable" rather than "paid". However, it is clear that Congress intended to allow only actual payments or timely claims that may be paid if funds are available, with one exception, which is discussed below. The clear purpose of the first allotment, for which the base amount is the foundation, is to limit FFP to the Fiscal Year 1978 payments but allow an annual increase (ten percent per year, compounded) for inflation (Sec. 1356.80(e)). The exception mentioned above and the second category of maintenance payments included in the regulation is the Youakim Children. On February 22, 1979, the Supreme Court of the United States in Miller vs. Youakim 440 U.S. 125 (1979), ruled that children whose foster care was provided by relatives who met the requirements of Section 408 of the Act (for AFDC-FC) were entitled to be paid at the FC rate rather than the AFDC rate, which is generally lower. The ruling was not applied retroactively (except in the case of the individuals bringing the lawsuit). Therefore, the thirteen States that had been paying AFDC rates to relatives were not required to make increased retroactive payments to recipients eligible for AFDC-FC during Fiscal Year 1978. However, those States have been required to make foster care payments to eligible recipients after the case was decided.

In effect then, the court required thirteen States to increase their AFDC-FC payments to one class of recipients. Congress wanted to make the ceiling fair to those States and to avoid a potentially costly burden to those States. Therefore, the proposed regulation (Sec. 1356.80(e)) specifically includes the Youakim Children, where a State by law, regulations or policy did not make foster care payments in FY 1978. The expenditures that would have been made on their behalf are included in the base amount for Fiscal Year 1978, even though they were not paid at the AFDC-FC rate in FY 1978. Section 474(b)(4)(C) of the Act includes administrative and training expenditures in the base amount:

"administrative expenditures attributable to the provision of such aid [payments under Section 408] as determined by the Secretary."

We have provided three procedures for attributing those administrative expenditures, for inclusion in the base amount. First, any State which can document actual administrative expenditures for FY 1978 AFDC-Foster Care may report them to the Department for inclusion in the base amount. Second, in the regulation we have adopted a formula for administrative expenditures based on actual costs per AFDC case, and the number of foster care cases for whom payments were made, as described in the maintenance payments portion of the allotment. In order to allow for the changed nature of the foster care program, from a payments program to a goal-oriented program to return children home, we have specified the functions which may be attributed to administrative expenditures for the cases included in the maintenance payments section even if not claimed or paid under title IV-A. Those functions are the costs of conducting eligibility determination and redetermination, quality control, fair hearings, agency activities related to judicial determination, placement, case review, case management, case supervision, rate- setting, recruitment of foster care homes and institutions, licensing and a proportionate share of general related agency overhead. The third procedure available to States is to provide the Department with a report specifying the administrative costs associated with the payments for foster care maintenance for the functions specified above for a period of at least 3 calendar months of fiscal year 1981. That amount is reduced for inflation since FY 1978 (using the Implicit Price Deflator for State and Local Government Purchases calculated by the Department of Commerce for each State). The amount is adjusted for an annual amount and reduced by 50 per cent (the FFP rate in administrative expenditures). Reports must be submitted no later than 30 days after the end of fiscal year 1981.

In effect, this method permits States to use actual FY 1981 costs, which may be higher for AFDC foster care than for AFDC, as a substitution for the second procedure. We invite comment on all three procedures. For the attributable training expenditures as a part of the base amount (fiscal year 1978), the same explanation generally holds true except that the third procedure is not available because of the small amount of funds that would be included. No actual fiscal year AFDC-FC training claims have been submitted (or were required to be submitted) to the Department separate from other AFDC training claims, but States may now send that information (Sec.1356.80(e)(l)(iii)(c).

Alternatively, the Secretary has determined that attributable training expenditures for each State should be: the ratio of AFDC-Foster Care to all AFDC cases for FY 1978, multiplied by the total AFDC training expenditures for FY 1978, multiplied by the Federal share of these expenditures (75%). All data used are State-by-State data. We have also specified in the regulation that the actual claims for maintenance payments must meet the following conditions: they must be allowable, supported by documentation and submitted under the time constraints of Section 306 of Pub. L. 96-272. Reports must also be for allowable costs and supported by documentation. They must be submitted to the appropriate ACYF regional office no later than 45 days after the end of the second quarter of Fiscal Year 1981, except for the reports in the third procedure for attributing administrative expenditures. The regulations (at Section 1356.80(e)(1)(iii)(E) allow the inclusion of claims or reports in which the State and the Secretary have a dispute to remain as a part of the computed base amount until the Department has resolved the dispute by final administrative action. For the second method of determining the State's allotment, the State's allotment is $100 million times a percentage equal to the State's population under 18 compared to the U.S. population under 18 (fifty States and District of Columbia) (Sec. 1356.80(e)(2). For the third method of determining the State's allotment (Sec. 1356.80(f)(3)), the base amount determined under the first method is used. If for a fiscal year, the average monthly number of children in the State's foster care program under IV-E in the State is less than the comparable national average both in FY 78 and in each of Fiscal Years 1982-84 the State's base amount (FY 78) is increased by the percentage of AFDC-FC increase (in the average monthly number of children) up to a maximum (ten percent per year compounded over FY 78, beginning with 33.1% for FY 81). The child count for these calculations includes the same Youakim children discussed under the base amount maintenance payments. The Commissioner, as the Secretary's designee, will publish interim allotments established under the third method within six months after the beginning of the fiscal year, and final allotments not later than nine months after the end of that same fiscal year (Sec. 1356.80(f)(3)(vi)). The State must make a choice and notify the Commissioner of the selected option no later than 45 days after the end of second quarter of the fiscal year. This choice is necessary in order to insure States that payments can be made to them in a timely fashion for AFDC-FC and for IV-B.

Transfer of Funds.

Section 474(c) of the Act permits States to transfer unexpended funds within a State's foster care allotment under title IV-E to title IV-B, provided the State's allotment was determined on the basis of either the first or second method described in paragraphs (1) or (2) of Section 1356.80(f). To transfer an amount which added to the title IV-B allotment would exceed the share the State would have been entitled to had the IV-B appropriation exceeded $141 million, the State must comply with the protections of Section 427(a) of the Act (Sec. 1357.30(a)), concerning inventory, a case review system, an information system and services to return children to their families or have them adopted. If the title IV-B appropriation for two earlier consecutive years has equaled $266 million, the State must meet the requirements of Section 1357.30(b) in order to transfer any funds to IV-B. Even if the IV-B appropriations do not reach the "trigger" levels specified in Section 474(b) and no limitation is in effect on the Foster Care allotments, A State may transfer unused funds under the allotment amount to title IV-B for child welfare services. States must meet the same requirements as when the limitations are in place. In addition, the amount that can be transferred is limited by the difference between the funds received under title IV-B (Section 420) and the amount of the IV-B allotment that would have been available had the IV-B appropriation been equal to or greater than the amount necessary to make the foster care allotments mandatory. Funds transferred to title IV-B must be obligated for expenditures in title IV-B within the same fiscal year for which they were first made available. Requests for transfer of the funds must be made 45 days before the end of the third quarter of the fiscal year. IV. Title IV-B--Child Welfare Services The Child Welfare Services Program has been a part of the Social Security Act since the Act's inception. In 1968 Congress transferred the program to title IV, Part B of the Act [Section 420-425 of the Act]. Historically, title IV-B has provided Federal grants to establish, extend and strengthen child welfare services in the States. Grants are made to State agencies on the basis of a plan developed jointly by the ACYF Children's Bureau and the State agency. The amended Act reaffirms this partnership between the Federal and State governments for the provision of child welfare services by the State. Under title IV-B, formula grants are allocated to the States for providing and improving child welfare services to children and their families in need of services, without regard to income (Sec. 1357.20(b)). In recent years States have used approximately 70-80% of IV-B funds for foster care maintenance payments. Other services including adoption, day care and protective services to abused and neglected children have also been provided with the IV-B funds.

Availability of Services in All Political Subdivisions.

The existing requirement that child welfare services be available in all political subdivisions of the State by July 1, 1975 has been replaced by the requirement that the State Plan "contain a description of the steps which the State will take to provide child welfare services and to make progress in: (Sec. 1357.20(c)(4)): (a) covering additional political subdivisions; (b) reaching additional children in need of services; and (c) expanding and strengthening the range of existing services and developing new types of services" The emphasis in this proposed regulation is to continue to make progress toward the ultimate goal of making comprehensive, quality child welfare services available on a Statewide basis.

The Single State Agency and Single Organizational Unit.

The proposed regulation (Sec. 1357.20) paraphrases Pub. L. 96-272 (Sec. 422(b)(1) and specifies responsibility of the unit chief for the policy development and program operation of the title IV-B Child Welfare Service program. The change embodied in the proposed regulation is not significantly different from the current requirement.

Description of Services.

The proposed regulation (Sec. 1357.20) requires a description of all child welfare services to be provided, the geographic areas in which they are available and what is being done to expand, improve and strengthen those services or provide new ones. As part of ensuring a rational planning and priority setting process, the States are asked to describe the basis for determining services to be added or expanded and how these new services are related to extending the services and reaching additional children in need of services. These conditions replace the former "Statewideness" provision contained in the old regulation.

Description of The Staff Development and Training Plan.

The proposed regulation (Sec. 1357.20(c)(5)) requires that the State agency staff development and training plan include, at a minimum, the manner of allocating resources, assessing the need for training, procedures for evaluation of plan implementation and the agency's plans for use of paraprofessionals and volunteers. These activities have been identified as necessary to a rational and well thought out plan. The State agency's staff development and training plan will supplement the training plan required by title XX submitted to the Regional Administrator of the Office of Human Development Services. The State agency's entire IV-B staff development and training plan need not be submitted to ACYF, but it must be available for review by Federal staff. Only the description required by the Long Range Strategy must be submitted (Sec. 1357.40(a)(2)(ii)(C)).

Advisory Committee.

The current IV-B requirement mandating advisory committees (45 CFR 1392.4) has been in effect for many years. Nothing in the Act amended by Pub. L. 96-272 is in direct conflict with the requirement. The statutory basis remains the same under the statute as amended by Pub. L. 96-272. Pursuant to the Secretary's responsibilities for joint development, and his/her general rulemaking authority under Section 1102 of the Act, public participation has been required in the development of the child welfare services plan (Sec. 1357.20(c)(8)). The Department has a continuing and strong commitment to involve the public in the child welfare service program. Most States have established these committees. The viability and success of the Federal regulation development and implementation depend on the input, involvement and investment of the States and other public and private constituencies as demonstrated in the meetings, publication, comment period and regional hearings. Similar involvement must also occur at the state and local levels. These Committees will form the partnership and assure the resources for the states to accomplish the Congressional intent of Pub. L. 96-272. Through involvement of public and private agencies and citizens, the mandates of this new law can be fully realized at the local, service delivery and community levels.

General Requirements Common to Social Service Programs.

Fair hearings, safeguarding information, access to program manuals and issuances, and adherence to the merit system of personnel administration are also required in the proposed regulation. The changes in these provisions do not represent a substantive departure from present policy (Sec. 1357.20(c)). For a full discussion of these provisions see Section II, B. of the Supplemental Information.

Requirements for State Eligibility for Additional Payments To help finance the services required and to encourage changes in the foster care system, Congress provided in Pub. L. 96-272 (Sec. 427 of the Act) that in any year in which the title IV-B appropriation exceeded $141M, a State can not receive its share of title IV-B funds in excess of that $141M unless it has implemented the following procedures and protections.

Conduct an inventory of all children who have been in foster care more than 6 months, make determinations about the necessity and appropriateness of their placements, and provide a report to the Secretary (Sec. 1357.30(a)(3));

Have a Statewide information system capable of tracking every child who is in foster care or who had received care within the preceding 12 months (Sec. 1357.30(a)(4));

Have a case review system for each foster child under the State's supervision (Sec. 1356.40(d)); and

Have a service program designed to return children to their own home or to achieve another permanent placement at the earliest possible time (Sec. 1357.40(A)(5)).

Inventory.--The Inventory (Sec. 1357.30(a)(3)) is a key element in requiring States to help reunify children in foster care with their parents. It impels States to establish basic information about the status of each child in foster care and to develop a plan for that child based on a case review. The Inventory required in the Act, as implemented by the proposed regulation, serves to establish an accounting of children in foster care so that their status may be reviewed and actions taken to facilitate their return home as quickly as possible. For children who cannot be returned home, alternative services leading to permanence for the child must then become the goal. While the proposed regulation (Sec. 1357.30(a)(3)) specifies the content of the Inventory, the States are given latitude to determine the procedures. The Inventory should be perceived as a source of initial data on which to construct the case review program and to provide baseline data for the Statewide information system. The determination of whether a State has completed the inventory is based upon a one-time report with specified content which summarizes the respective data (Sec. 1357.30(a)(3)(v)). This report provides an accounting of children in foster care and an indication that the inventory has been completed.

Statewide Information System.--The Statewide information system (Sec. 1357.30(a)(4)) is critical to the successful management of a child welfare program. The regulation which applies to the information system is framed to leave the States maximum flexibility in the design, configuration and technical features of the State system's hardware and software. In addition, flexibility in systems design is encouraged to accommodate the information required to satisfy the law. This includes essential information requirements (Sec. 1357.30(a)(4)(ii) (c) and (D)), State and local agency information needs for monitoring and evaluation (Sec. 1357.20(c)(10)), and audit functions (Sec. 1357.20(c)(9)). The information requirements are also intended to assist the States in complying with the reporting requirements of joint planning, the IV-B and IV-E State plans, fiscal documents and records, and the Federal Child Welfare Reporting System. Included in the System is the intended use of the Child Welfare Dictionary of Common Usage which will establish nationwide definitions of important terms and elements. The System including the "Dictionary", is currently being field tested in eight States, California, Florida, Maryland, Ohio, Vermont, North Dakota, Mississippi and Oklahoma. The System's documentation carefully specifies the data elements, definitions and reporting format that the Department will need, and proposes to require to meet the Congressional reporting mandates of Sections 471(a)(6), 476 of the Act and Section 102(e) of Pub. L. 96-272. While the field test is underway, the Department will concurrently request OMB clearance for nationwide implementation of the System, including the Dictionary. The requirements for information evolving from the Pub. L. 96-272 are consistent with the data that the States use in the daily operation of their case tracking and management systems. The Department has been sensitive to State reporting requirements and the burden which they impose. In specifying the national reporting and evaluation requirements, only data elements essential to Federal planning, Congressional reporting and administrative functions have been included in order to minimize the burden.

Case Review System.--The case review system is discussed in the IV-E portion of this Supplementary Information.

Program of Reunification Services.--Pub. L. 96-272 (Sec. 427(a)(2)(C)) requires that States implement and operate a service program to help children, where appropriate, return to families from which they have been removed or be placed for adoption or legal guardianship. To meet the reunification service requirement in the law, the regulation requires States to implement a program of services designed to unify children with their families. That program of services must contain day care services, homemaker or caretaker services, family or individual counseling for parent(s) and child (Sec. 1357.30(a)(5)(i)(A)) and other reunification services the state identifies as necessary and appropriate (Sec. 1357.30(a)(5)(i)(B)). The Department has required only those services it considers essential to accomplish the goals of the law--to reunite children and families. The three mandated reunification services are basic components of a support system to the family and child, following separation from and preparatory to return to the home. The specific focus and context of the services will be influenced by the circumstances under which the child was removed from the home.

The services should represent the remedial response to the problems identified in the case plan. The selection of the three mandated reunification services was based on the findings of the National Study of Social Services to Children and Their Families (Shyne and Schroeder, 1978), which listed five of the primary reasons for children and families receiving social services, including foster care: neglect of the child, unwillingness to care for the child, abandonment, emotional problems of the parent, and abuse of the child. Homemaker and Caretaker, Day Care, and Individual and Family Counseling are the services most likely to effect change in the home situation and lead to the return home of the child. Homemaker services are those services which provide a qualified person to assist families with children in home maintenance and management in order to strengthen, support, supplement and restore parental capacity to care for the children. An emergency caretaker provides care and supervision of a child in his or her own home at times when supervision is lacking because parent(s) are either temporarily absent or temporarily incapacitated. Day Care is the means for providing protection, care, and developmental experiences for children who parents need help in making child care arrangements for reasons other than employment, education or training and for children with special needs (e.g., disadvantaged, mentally retarded or emotionally disturbed children).

Individual and family counseling provide help in the identification and resolution of problems related to personal functioning, social interaction, family stability and environmental factors. As described, the services are the core of agency support to families which allow reunification while reducing the risk of neglect, abuse, etc. and reinforcing the family's own strengths. The Department considered requiring the provision of other services in addition to these services. The Department decided to make the provision of additional services optional (Sec. 1357.30(a)(5)(i)(B)) to give a State flexibility in tailoring its child welfare services program to the precise needs of its local constituencies under title IV-B. The States must have a program of essential services available for children in need. The Department does not intend to require that a program containing these core services be established in each political subdivision. The test of compliance with this provision is that the required services are available and readily accessible to each child and family in need of these services. Under title IV-E, the law requires that by October 1, 1983, States make reasonable efforts to prevent the placement or eliminate the need for placement of the child and to make it possible for the child to return to his home (Sec. 471(a)(15) of the Act). This provision emphasizes the need for appropriate services to reach the child and family. This approach has been adopted under title IV-B. While requiring the establishment of a program of essential services, the Department is ultimately concerned that the relevant services reach the child and family in need. States can meet the requirement by ensuring that essential services are available and readily accessible to each child and family in need. The proposed regulations require that written guidelines be prepared to assist the caseworker in providing the reunification and preplacement preventive services (Sec. 1357.30(a)(5)(i)(C) and (b)(3)(iii)).

These guidelines are intended to assist the worker to make appropriate case assessments, to determine appropriate service, and to assure that decisions serve the best interests of the child and family. The proposed regulation also requires States to have a program of services designed to facilitate adoption or legal guardianship (Sec. 1357.30 (a)(5)(ii)). The Adoption services provision is structured similarly to the reunification services program in that the State must implement and operate a program of required essential services comprised of legal services and adoption services (Sec. 1357.30(a)(5)(ii) (A) and (B)). In addition, the State program must contain other activities identified by the Agency as necessary and appropriate for permanent placement through adoption (Sec.1357.30(a)(5)(ii)(c)). The State must also provide written guidelines to assist the caseworker in developing and implementing an appropriate plan for adoptive placement of the child (Sec. 1357.30(a)(5)(ii)(D)). The required services must be available to each child and family in need of these services. In addition, Section 427(b) of the Act requires that if title IV-B funds are appropriated at the maximum of $266 million for two consecutive years, the title IV-B allocation for that State would be reduced to its share of $56.5 million, unless the State has implemented the required preplacement preventive services program in addition to the above described procedures and protections. The preplacement preventive services program (Sec. 1357.30(b)(3)) must contain the following essential services: twenty-four hour emergency caretaker and homemaker services; day care; crisis counseling; individual and family counseling; emergency shelters; procedures and arrangements for access to available emergency financial assistance; and arrangements for provision of temporary care to provide respite to the family for a brief period (Sec. 1357.30(b)(3)(i)). In addition, the State must provide other services which it identifies as necessary and appropriate (Sec. 1357.30(b)(3)(ii)). The proposed regulation requires that there must be documentation in the case plan of efforts to prevent the need for removal from the home and a statement of why such efforts have failed (Sec. 1357.30(b)(4)). The required services must be available and accessible to all children and families in need. Based on information available, the Department believes that the establishment of a program of preplacement preventive services is both cost-effective and essential to achieving the goals of the law.

State agencies currently operate programs to prevent removal from the home similar to those required in the regulation. Between 1961 and 1977 the number of children in placement increased from 181,000 to 530,000 even though the total number of children decreased by one million over the same period. Permanency planning programs regularly find that about one-third of the children in long term foster care can, in fact, be returned to their own parent(s) usually after some services are provided to the family. These findings strongly suggest that earlier preplacement services to the families were not provided or were seriously deficient. In a related effort, Davidson County Social Services, Nashville, Tennessee found that a system of Comprehensive Emergency Services operating 24 hours a day reduced the number of children placed in the various types of substitute care by almost 50% over a three year period. The Department has incorporated most of the elements of that system in this proposed regulation. There were also decreases in the number of repeat cases of child abuse and neglect, and in the reporting of delinquency among the older children.

More recent prevention projects also report various degrees of success. All programs report that their efforts are cost-effective. The proposed regulation also requires that written guidelines be prepared to assist the caseworker in providing the preplacement preventive services (Sec. 1357.30(b)(4)(iv)). These guidelines are intended to assist the worker to make appropriate case assessments, to determine appropriate services, and to assure that decisions serve the best interests of the child and family. In addition, the proposed regulation requires that each case plan contain documentation of efforts made to prevent the need for placement and a statement as to why such efforts failed to prevent the child's removal from the home. The Department believes it is important to emphasize that reunification and preplacement services be available and readily accessible to all children and families in need.

As proposed for reunification services, the Department has avoided imposing the more comprehensive and stringent requirement that these required services be established in every political subdivision because States must be permitted to exercise discretion in allocating essential services in a way that best matches demand with resources available. However, these required services must be readily accessible to the child and family in need. For the first time, FFP in the costs of voluntary foster care placements (Sec. 1356.50(a)) is available when all provisions contained in Section 427 of the Act are in place and operative. Section 427 requirements include the Inventory, the Statewide information system, the case review system, reunification services program and preplacement preventive services program. The specificity in this regulation for each of the required procedures and protections provides clarity and gives direction to the States in knowing what is expected of them and gives direction to the Department in reviewing and approving requests from those States that apply for funds above $141M under title IV-B, the transfer of funds from title IV-E to title IV-B or reimbursement for the costs of voluntary placements of children in foster care.

To claim its share of funds appropriated under title IV-B when available funds are greater than $141M or to transfer money from IV-E to IV-B, a state must request the additional funds or transfer of funds and must certify that it has implemented the procedures and protections under Sec. 1357.30(a) of the proposed regulation. To claim FFP in payments made for children voluntarily placed in foster care, the state must certify that it meets the provisions of Sec. 1356.50 (Voluntary Placements). A State's eligibility for funds under this Part will be determined by review of State policies, procedures and practices and a sample review of case records.

Development of State Child Welfare Services Plan Title IV-B requires that a State Child Welfare Services Plan be developed jointly by the Secretary and the State agency. For the past several years the State plans in effect were those developed in 1969. Since 1969, States have been submitting amendments to their plans (the last in 1975), and an annual budget that has been the basis for awarding the grants. In order to make the State plan and the planning process more relevant to the legislation the proposed guidelines for State plan development were revised and published in the Federal Register on February 22, 1980 (45 FR 12049) have been revised and will be republished.

The joint planning format consists of the following sections:

Assurances--The Assurances constitute the State Agency's commitment to meet the basic requirements of the law and regulations. They are submitted only once, unless otherwise required by the Commissioner of ACYF.

Long Range Strategy--In the Long Range Strategy, the State develops the goals for establishing, strengthening, extending and otherwise improving its child welfare services program over a period of two or three years. The Strategy is jointly developed by the State agency and the Children's Bureau. It must be submitted by the State agency to the ACYF Regional Office every two or three years at the State's option. The Long Range Strategy consists of two discrete sections, the needs analysis and the long range goals and objectives. These two processes are interdependent. The needs analysis includes identification of needs and setting priorities among needs. Meeting the more important of these needs is a fundamental consideration in establishing the State's long range goals. The objectives are specific, measurable, short range activities necessary to achieve the goals.

Annual Operating Plan--The Annual Operating Plan is the yearly update of the State Child Welfare Services Plan. It will report the current status of the long range goals and objectives, indicate changed and new initiatives, and present an Annual Summary of Child Welfare Services.

Annual Budget Request--The Annual Budget

Request is prepared by the State agency and submitted with the Annual Operating Plan. IV-B funds are disbursed quarterly based on this annual submission. The guidelines and this regulation require that any Assurances which the State is not meeting must be included as goals and/or objectives in the Long Range Strategy section of the Child Welfare Services Plan. There are other Assurances which require the State to include certain information in its State plan, such as the description of services to be provided, geographic areas of availability, staff development and training plans and steps to be taken to improve and expand services. The intent of the joint planning process, however, is for the States and Federal Government to work together to analyze the needs of children, youth and families, to plan and ultimately to accomplish initiatives and activities which respond to these needs and which may transcend the minimal requirements of law, regulation and good practice. The Long Range Strategy is that part of the plan in which these initiatives and activities are developed and set forth in measurable goals and objectives

The goals and objectives of the Long Range Strategy, therefore, belong in two categories:

those goals and objectives which address the Assurances as State Plan Requirements and whose implementation are essential to the continued compliance by the State with the law and regulations; and

goals and objectives designed to further expand, extend and strengthen the child welfare services program in the State but whose implementation, while a concern of the Children's Bureau, will not be monitored with a view to compliance. The proposed regulation includes a provision that expressly applies 45 CFR Part 74 termination procedures in a case of State noncompliance with the State plan requirements. It is anticipated that the Department will not invoke this authority unless the issue cannot be resolved through the joint planning process.

Payments to Indian Tribal Organizations

Pub. L. 96-272 gives the Secretary discretion to decide whether a program of direct grants to Indian tribal organizations should be established, which Indian tribal organizations should be funded directly, and under what circumstances direct payments should be made. The Department believes that direct funding of Indian tribes will strengthen the tribal child welfare services programs consistent with the goals and requirements of Pub. L. 96-272. In the legislative history to Pub. L. 96-272 (Congressional Record, June 13, 1980, S. 6944), Senator Cranston indicated that direct funding was included in the legislation because jurisdictional and other problems sometimes caused Indian communities to be left out of social service programs funded through State agencies. The proposed rule will permit tribes meeting the eligibility requirements to apply directly to the Federal government for their share of the IV-B funds (totaling approximately $1.08 million for all tribes). Tribes not applying for direct grants may continue to apply to the State for their share of IV-B funds. The Department believes that eligible Indian tribes should receive their proportionate share of the IV-B allocation, that the principle is important and is affirmed by the Indian Self-Determination Act (Pub. L. 93-638) and other Federal programs. The Department recognizes that many tribes may choose not to apply for direct funding for various reasons.

For example, the tribe may consider the money available too small to warrant application; the tribe may have established a productive IV-B program relationship with the State; or the tribe may determine that fewer services are available under direct grants than under a State's regular IV-B program. The Department is also aware that direct funding may cause preliminary adjustments in the working relationships between States and tribes. (However, States will not be relieved of their responsibility under other Federal programs and under the Constitution to serve Indians in a non- discriminatory manner.) The decision to permit funding of eligible Indian tribes was reached after weighing these and other factors, and ultimately determining that Indian tribes should have the right to apply for their own IV- B funds. In determining which Indian tribal organization will be eligible for direct funding, the Department decided to make the option of applying for direct funding available to those Indian tribal organizations which have contracted under Pub. L. 93-638 (Indian Self-Determination Act) for child welfare services provided under 25 U.S.C. 13 (25 CFR 20).

This proposed regulation addresses the concern expressed about the lack of services to Indians by permitting direct funding to Indian tribal organizations that have established the need for child welfare services and have taken advantage of the opportunity for direct management and operation of child welfare services. Under this approach, direct grants will be added to existing, ongoing Indian child welfare programs operated by the tribes. The IV-B funds will be linked to the major Indian Federal social services program, will support Indian self- determination, and will complement the provisions of the Indian Child Welfare Act of 1978 (Pub. L. 95-608). This is important since IV-B funds alone are insufficient for an Indian tribe to establish and operate a basic child welfare services program. Aggregating funds from different Federal sources to intensify their impact is consistent with the thrust of the IV-B law which promotes progressive, comprehensive, quality child welfare services to children and families.

The Department considered other options for determining tribal eligibility to receive direct grants. One option, relating eligibility to a minimum number of children in each tribe, was rejected as arbitrary and lacking in programmatic justification. A second option established eligibility criteria based on management capability and adherence to specific IV-B requirements. This option was rejected as duplicative of the developmental and capacity-building resources currently available through other programs such as title II of the Indian Child Welfare Act (Pub. L. 95-608) and the Native American Programs Act of 1974 (Pub. L. 93-644 as amended). In determining the amount of direct funding that would be available to an Indian tribal organization eligible under this provision, in the interests of equity, the Secretary, will apply a formula similar to the one used to calculate State title IV-B allotments. This formula takes into consideration the Indian tribe's resident population under 21 and its per capita income. Because current per capita income figures for Indian tribes are not available and most Indian tribes have very low per capita income similar to the Territories, a maximum allotment percentage of 70.0 per centum, the same per centum used for the territorial IV-B allotments, has been used. For the balance of a State's population, excluding tribal population, the per capita income is estimated to be slightly higher than the State's average per capita income for the entire population. This results in an allotment percentage of 46.7 per centum for the balance of the State excluding the Indian tribes. Using these allotment percentages to calculate an Indian tribal organization's allotment results in an amount which bears approximately the same ratio to the total State's IV-B allotment as the product of 1.5 and the proportion of the Indian tribe's resident population under 21 bears to the State's total population under 21. This provision does not affect funding under titles IV-A, IV-E and XX of the Social Security Act. Other funding allocation options were considered and rejected as unsupportable by the intent of the law. The Department has proposed to begin direct funding in the first quarter of Fiscal Year 1982. Implementation of this provision must follow publication of this proposed rule in final form. The 1982 FY date will give eligible tribes, who choose to apply, the necessary lead time to develop child welfare plans. Each eligible Indian tribal organization or consortium applying for direct IV- B grants will be required to submit a child welfare services plan that has been developed jointly by Federal and Indian tribal organization representatives.

Although the requirements in the jointly developed plan for Indian tribal organizations will differ slightly from the requirements in the State plan, the tribal organization's plan will foster the improvements in services envisioned in, and consistent with, the requirements in the law. The plan which can be in effect for two or three years must contain the following elements: assurances that the specific requirements of the regulations are met; a long range strategy which calls for a needs analysis and goals and objectives designed to meet unmet needs; an annual operating plan; and, an annual budget request. If eligible Indian tribal organizations applying for direct funds wish to receive their share of additional IV-B funds above $141 million, they must meet the requirements under Section 427 of the Act (Sec. 1357.30) which relate to children who have been in foster care under the responsibility of the tribe. The requirements under IV-B and additionally those related to eligibility for funds above $141 million are discussed more fully under the IV-B section of this Supplemental Information.

Fiscal Requirements

This section of the regulation (Sec. 1357.50) sets forth the procedures for determining each State's allotment percentage and the process for reallotment. It details the change in FFP rate from the existing individual State rate (33 1/3 % to 66 2/3 %) to 75% for each State. The section on allowable costs gives numerous examples of how title IV-B funds may be spent, but the list is not inclusive. The regulation also lists the limitation on expenditures: FFP in expenditures for foster care maintenance, day care because of employment of the parent or adoption assistance may not exceed the FY 1979 State allotment. The funds expended to meet the requirements of Section 427 (a) and (b) of the Act may definitely be charged to title IV-B. Some of them, such as case reviews for children on behalf of whom foster care payments are made under title IV-E, may be charged as IV-E administrative expenditures.

Provision for Advance Funding Beginning in FY 1981, Congress is to approve the title IV-B appropriation one fiscal year in advance of the issuance of allocations to the States. Knowledge of the IV-B appropriation level a year in advance will provide States budget development lead time and will facilitate child welfare services planning. This is an important provision because it is one of the two conditions necessary for the IV-E and IV-A foster care maintenance ceiling to go into effect. The other condition necessary to trigger this ceiling is that the IV-B appropriation equal or exceed the levels specified in Pub. L. 96-272; namely: $163.55 million in FY 81; $220 million in FY 82 and $266 million in FY 83 and FY 84.

Maintenance of Effort

During each phase of its delibe