< Back to Search

Final Rule: Bonding of Employees and Handling of Cash Receipts in the Child Support Program

AT-79-04

Published: June 15, 1979
Information About:
State/Local Child Support Agencies
Topics:
Case Management, Collections/Distribution/State Disbursement Unit (SDU), Federal Reporting, State Plan
Types:
Policy, Action Transmittals (AT), Regulations

Bonding of Employees and Handling of Cash Receipts in Child Support Enforcement Program

REGULATION

ACTION TRANSMITTAL OCSE-AT-79-04

June 15, 1979

TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS

SUBJECT:Bonding of Employees and Handling of Cash Receipts in the Child Support Enforcement Program.

ATTACHMENT:Final regulations which amend 45 CFR Part 302 to implement Sections 454(14) and (15) of the Social Security Act.

1) New regulation 45 CFR 302.19 which requires bonding of State, local and other employees who receive, disburse, handle or have access to cash.

2) New regulation 45 CFR 302.20 which requires States to maintain methods of administration designed to assure that persons responsible for handling cash receipts do not participate in accounting or operating functions which would permit them to conceal in the accounting records misuse of cash receipts. The regulation provides an exception to the separation requirement for sparsely populated areas where the hiring of unreasonable numbers of additional staff would otherwise be necessary.

REGULATION REFERENCE: 45 CFR 302.19 and 302.20

EFFECTIVE DATE: July 16, 1979

ACTION REQUIRED: Make necessary amendments to the Title IV-D State plan.

PLAN MATERIAL: Preprinted State plan amendments will be forthcoming.

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Office of Child Support Enforcement

45 CFR Part 302

Child Support Enforcement Program; State Plan Requirements; Bonding of Employees and Handling of Cash Receipts

AGENCY: Office and Child Support Enforcement (OCSE), Department of Health, Education, and Welfare.

ACTION: Final Rule.

SUMMARY: These regulations add two new State plan requirements to the Child Support Enforcement Program. The first requires bonding of State or local employees who receive, handle or have access to cash. The second requires States to maintain methods of administration which prohibit the same person from being responsible for both the cash handling function and the accounting function in the Child Support Enforcement program. This is known as the separation of functions requirement. These regulations also provide that programs in sparsely populated areas do not have to meet the separation of functions requirement if HEW's Regional Child Support Enforcement Office waives the requirement.

EFFECTIVE DATE: July 16, 1979.

FOR FURTHER INFORMATION CONTACT: Steve Henigson, 301-443-5303.

SUPPLEMENTARY INFORMATION: Statutory basis. Section 502 of Pub. L. 95-30 enacted May 23, 1977, amends the Social Security Act to add a new State plan requirement (section 454(14)) which requires the Secretary to establish, and the States to comply with bonding requirements "for employees who receive, disburse, handle, or have access to cash * * *."

Section 502 also adds a second new State plan requirement (section 454(15)) which requires the State to "maintain methods of administration which are designed to assure that persons responsible for handling cash receipts shall not participate in accounting or operating functions which would permit them to conceal in the accounting records the misuse of cash receipts * * *."

Public Participation. Interested persons were afforded an opportunity to participate in the development of the regulation by a Notice of Proposed Rulemaking published in the Federal Register on April 5, 1978 (43 FR 14323) and due consideration has been given to all comments received in response to the Notice.

We received 10 responses to the bonding portion of the Notice (45 CFR 302.19) from State welfare and child support agencies, and one each from a State Attorney General, a District Attorney, and the Office of Management and Budget. Three State child support enforcement agencies commented on the separationportion of the Notice. These comments and the Department's response to them are discussed below.

Minimum bond requirement. The Notice proposed that the required bond be not less than $10,000 or 15 percent of the maximum amount of money to which the employee has access on an annual basis, whichever is larger. A number of child support enforcement agencies expressed concern over the size of the bond, indicating that the minimum size requirement would impose a considerable expense upon States which have a centralized collection and accounting system.

One State welfare agency suggested that the minimum size of the bond be reduced to $2,000 and an exception be provided for sparsely populated areas. The Office of Management and Budget and a State welfare agency pointed out that a minimum bond need not be required since the State IV-D agency is liable in any case for loss of child support collections.

Because of these objections, in the final regulation the Department has deleted the minimum bond size requirement. The final regulation places full responsibility upon the State to establish a bonding program that will adequately protect the State IV-D program from loss. The Department believes that since the States would ultimately be liable for any loss it is in their interest to provide adequate bonding protection.

Self-bonding. While the proposed rule specifically provided for State self-bonding systems, no provision was made for a self-insured political subdivision to meet the bonding requirement. The final regulation would permit such an arrangement provided the locality's self-insurance program was acceptable to the State IV-D agency.

Requirements on courts and law enforcement officials. Several comments concerned the authority of the State IV-D agency to impose bonding requirements upon court and law enforcement officials operating under cooperative agreements. Similar questions were raised concerning the separation requirements. The Social Security Act makes both of these requirements State plan provisions. It may be necessary for the State to amend its cooperative agreements and purchase of service agreements in order to insure conformity with the new requirements.

Separation requirement. One State IV-D agency objected to the separation requirement which prohibits an individual from handling cash receipts and participating in the accounting function because in that State in many instances, the collection and disbursement of child support are performed by the same individual. We believe it was Congress' intent that, in a properly managed IV-D program, the same individual not perform the accounting and cash receipt functions. The exception for sparsely populated areas will preclude the hiring of additional staff in areas granted a waiver.

To insure that the legislative requirement will be fulfilled by all agencies participating in the IV-D program, the final regulation specifies that the separation requirement is applicable in situations where the collection and accounting functions are being performed under purchase of service or cooperative agreements.

In response to a suggestion from a State IV-D agency the final regulation specifies that methods of administration used to separate the cash handling and accounting function must follow generally recognized accounting standards. The Department believes this will help insure that child support collections cannot be misused.

45 CFR Part 302 is amended by adding new §§ 302.19 and 302.20 to read as follows:

§ 302.19 Bonding of employees.

The State plan shall provide that the following requirements and criteria to bond employees are in effect.

(a) IV-D Responsibility--The IV-D agency will insure that every person, who has access to or control over funds collected under the child support enforcement program, is covered by a bond against loss resulting from employee dishonesty.

(b) Scope.--The requirement in paragraph (a) of this section applies to every person who, as a regular part of his or her employment, receives, disburses, handles or has access to child support collections, which includes:

(1) IV-D agency employees and employees of any other State or local agency to which IV-D functions have been delegated.

(2) Employees of a court or law enforcement official performing under a cooperative agreement with the IV-D agency.

(3) Employees of any private or governmental entity from which the IV-D agency purchases services.

(c) Bond.--The bond will be for an amount which the State IV-D agency deems adequate to indemnify the State IV-D program for loss resulting from employee dishonesty.

(d) Self-bonding System.--A State or political subdivision may comply with the requirement in paragraph (a) of this section:

(1) By means of a self-bonding system established under State law or,

(2) In the case of a political subdivision, by means of a self-bonding system approved by the State IV-D agency.

(e) IV-D liability.--The requirements of this section do not reduce or limit the ultimate liability of the IV-D agency for losses of child support collections from the State's IV-D program.

§ 302.20 Separation of cash handling and accounting functions.

The State plan shall provide that the following requirements and criteria separate the cash handling and accounting functions are in effect.

(a) IV-D responsibility. - The IV-D agency will maintain methods of administration designed to assure that persons responsible for handling cash receipts of child support do not participate in accounting or operating functions which would permit them to conceal in the accounting records the misuse of child support receipts. Such methods of administration shall follow generally recognized accounting standards.

(b) Scope. - The requirement in paragraph (a) of this section applies to persons who participate in the collection,accounting or operating functions which include:

(1) IV-D agency employees and employees of any other State or local agency to which IV-D functions have been delegated.

(2) Employees of a court or law enforcement official performing under a cooperative agreement with the IV-D agency.

(3) Employees of any private or governmental entity from which the IV-D agency purchases services.

(c) Exception. - The Regional Office may grant a waiver to sparsely populated geographical areas, where the requirements in paragraph (a) of this section would necessitate the hiring of unreasonable numbers of additional staff. The IV-D agency must document such administrative infeasibility and provide an alternative system of controls that reasonably insures that child support collections will not be misused.

[Sec. 1102, 49 Stat. 647 [42 U.S.C. 1302].]

[Catalog of Federal Domestic Assistance Program No. 13679, Child Support Enforcement Program.]

Note: The Office of Child Support Enforcement has determined that this document does not require preparation of a Regulatory Analysis as described by Executive Order 12044.

Dated: April 9, 1979.

Stanford C. Ross,

Director, Office of Child Support Enforcement

Approved: May 10, 1979

Hale Champion.

Acting Secretary,

Health, Education, and Welfare