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Final Rule: Cooperative Arrangements

AT-89-14

Published: July 21, 1989
Information About:
State/Local Child Support Agencies
Topics:
Federal Reporting
Types:
Policy, Action Transmittals (AT), Regulations
Tags:
Cooperative Agreement

Cooperative Arrangements

FINAL REGULATIONS

ACTION TRANSMITTAL

OCSE-AT-89-14

July 21, 1989

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

SUBJECT: Cooperative Arrangements

ATTACHMENT: Attached are final regulations which set forth six provisions that must be contained in all cooperative arrangements between IV-D agencies and courts an law enforcement officials. The regulations also require that cooperative arrangements meet these criteria in order to be eligible for Federal financial participation. These requirements will be defective October 1, 1989, for all new cooperative arrangements, and October 1, 1990, for cooperative arrangements that are in effect before October 1, 1989.

REGULATION

REFERENCE: 45 CFR Parts 302.34, 303.107,304.21 and 305.34.

SUPERSEDED

MATERIAL: OCSE-AT-88-16, dated October 19, 1988.

INQUIRIES TO: OCSE Regional Representatives

_________________________

Robert C. Harris

Associate Deputy Director

4150-04

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Support Enforcement

45 CFR Parts 302, 303, 304 and 305

Child Support Enforcement Program:

Cooperative Arrangements

AGENCY: Office of Child Support Enforcement (OCSE), HHS

ACTION: Final Rule

SUMMARY: This document contains six provisions that must be contained in all cooperative arrangements between child support enforcement (IV-D) agencies and courts and law enforcement officials. It also requires that cooperative arrangements meet these criteria in order to be eligible for Federal financial participation.

EFFECTIVE DATE: July 19, 1989.

FOR FURTHER INFORMATION CONTACT: Andrew J. Hagan, Policy Branch, OCSE (202) 252-5375.

SUPPLEMENTAL INFORMATION:

PAPERWORK REDUCTION ACT

Public reporting burden for the collection of information requirements at 45 CFR 302.34 (reporting) and 302.34 and 305.34 (recordkeeping) is estimated to average 43 and 240 minutes per response respectively, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. A notice will be published in the Federal Register when OMB approves these information collection requirements under 3507 of the Paperwork Reduction Act.

BACKGROUND

IV-D agencies enter into cooperative arrangements to obtain the assistance of courts and law enforcement officials in carrying out the functions of the IV-D program: the location of absent parents, the establishment of paternity and support obligations and the collection and enforcement of those obligations.

Under the prior regulation at 45 CFR 302.34, cooperative arrangements had to be in the form of a written agreement and had to meet certain criteria. These criteria included providing courts and law enforcement officials with pertinent information needed in locating absent parents, establishing paternity and securing support, including the immediate transfer of the information obtained from the State IV-A agency, pursuant to 45CFR 235.70. Cooperative arrangements also had to provide for assistance to the IV-D agency in carrying out the program and may have related to any other matters of common concern. Cooperative arrangements may have included provisions for the investigation and prosecution of fraud directly related to paternity and child and spousal support and provisions to reimburse courts and law enforcement officials for their assistance.

In May of 1980, OCSE issued a publication that addressed the major considerations and elements of a cooperative arrangement as part of its "Techniques for Effective Management of Program Operations (TEMPO)" series. The TEMPO publication was updated in March, 1988, in a publication titled "Improved Program Performance Through Professionally Managed Cooperative Agreements." Both contain specific recommendations and sample language for use in the development of effective cooperative arrangements. However, it appears that many States have not used the publications' recommendations when entering into cooperative arrangements and program performance may have been affected as a result.

Program audits and Regional Office reports indicate that some States do not ensure that the functions delegated under cooperative arrangements are carried out properly, efficiently and effectively. Since one third of all child support workers are employed through cooperative arrangements, we believe that greater accountability and control are necessary for arrangements between State IV-D agencies and other entities. Therefore, this rule includes additional specifications for cooperative arrangements as a condition for Federal financial participation in the costs incurred under those arrangements.

Two separate reviews were conducted on cooperative arrangements--in 1984 and again in late 1987. In the initial 1984 review, we compiled information and recommendations on the identification of problem areas and suggestions for improvements in the quality of cooperative arrangements. Copies of cooperative arrangements in effect in 1984 were obtained. In late 1987, we analyzed arrangements made in the period after the initial review to determine if awareness of the problem and new informational tools for improving performance under cooperative arrangements were sufficient to improve the quality of the cooperative arrangements negotiated since 1984. That analysis indicated no measurable improvement in the quality of the cooperative arrangements.

Because there has been little voluntary improvement and strengthening of cooperative arrangements to ensure accountability and efficient and effective operation of the IV-D program, we believe more specific requirements based on those elements of cooperative arrangements recommended in the 1980 and 1988 publications are essential. These requirements will improve the accountability of agencies providing IV-D services under cooperative arrangements and increase program cost effectiveness by ensuring that the delegated or contracted functions are carried out efficiently and effectively.

The requirements are effective October 1, 1989 for new arrangements and October 1, 1990 for arrangements existing prior to October 1, 1989. The delayed effective date for existing cooperative arrangements will allow States adequate time to renegotiate existing agreements to ensure compliance with these requirements.

STATUTORY AUTHORITY:

This rule is published under the authority of section 1102 of the Social Security Act (the Act) which requires the Secretary to publish regulations that may be necessary for the efficient administration of the functions for which he is responsible under the Act.

Section 454(7) of the Act requires that each State plan for child and spousal support must "provide for entering into cooperative arrangements with appropriate courts and law enforcement officials (A) to assist the agency in administering the plan, including the entering into of financial arrangements with such courts and officials in order to assure optimum results under such program, and (B) with respect to any other matters of common concern to such courts or officials and the agency administering the plan."

REGULATORY PROVISIONS:

45 CFR 302.34 - State plan requirement.

Prior regulations at 45 CFR 302.34 required States to enter into written agreements for cooperative arrangements with appropriate courts and law enforcement officials to provide certain services in carrying out the functions of the Child Support Enforcement program.

This regulation redesignates this section in its entirety as paragraph (a), and makes minor editorial changes to the language.

New paragraph (b) requires that all cooperative arrangements, entered into on or after October 1, 1989, contain the provisions required under the new 45 CFR 303.107, and that cooperative arrangements existing prior to October 1, 1989, contain the provisions required under the new 45 CFR 303.107 by October 1, 1990.

45 CFR 303.107 - Requirements for cooperative arrangements.

This regulation adds a new §303.107 entitled "Requirements for cooperative arrangements." This section specifies certain information which States must include in all cooperative arrangements with courts and law enforcement officials, in addition to the criteria required under §302.34, as follows:

1.§303.107(a): Arrangements must contain a clear description of the specific duties, functions and responsibilities of each party.

Any arrangement must clearly describe the duties, functions and responsibilities of each of the parties. The selection and definition of the duties, functions and responsibilities depends upon the identity, resources and skills of the parties involved. Once identified, those responsibilities must be clearly stated to avoid confusion by either party. In other words, the arrangement must specify clearly what will be done and who will do it. Since the State IV-D agency has the responsibility, under 45 CFR 303.20(b)(2), to evaluate the quality, efficiency, effectiveness, and scope of services provided under the plan, the State IV-D agency must monitor cooperative arrangements to ensure effective implementation of the terms of the arrangement and to identify any problems that may affect the delivery of services promised under the arrangement.

2.§303.107(b): Arrangements must specify clear and definite standards of performance which meet Federal requirements.

An arrangement must specify clear and precise performance standards by which the terms of the arrangement and quality of services provided under the arrangement are measured. All arrangements should contain standards of performance that are measurable, consistent with Federal requirements, and acceptable to each party. These standards should be related specifically to the duties outlined.

The arrangements should contain both qualitative and quantifiable performance standards. Some examples of qualitative standards are accuracy and thoroughness. Examples of quantifiable standards are: how many specific actions must be taken; what time frame is allowable for completion of a task, for example, paternity establishment; what collection levels must be maintained; or what ratio of costs to collections must be achieved. Reimbursement for services should be conditioned upon meeting the standards, as discussed further under financial arrangements.

Any performance standards contained in Federal regulations governing areas covered under cooperative arrangements must be met by the party who has entered into the arrangement with the IV-D agency.

Because the IV-D agency remains responsible for the implementation of the program, it must also retain authority for the interpretation of this material. Since program success depends upon mutual cooperation, there should be a common effort to develop reasonable standards which are ambitious, attainable and consistent with Federal requirements.

3.§303.107(c): Arrangements must specify that the parties will comply with title IV-D of the Act, implementing regulations and any other applicable Federal regulations and requirements.

To ensure that all IV-D functions are performed in accordance with approved State plans and all relevant Federal requirements, the rule requires all arrangements to specify that applicable Federal requirements will be met by the parties to the arrangement. The State should ensure that key Federal and State laws or regulations that apply to the services and actions provided under the arrangement are available to the parties.

4.§303.107(d): Arrangements must specify the financial arrangements including budget estimates, covered expenditures, methods of determining costs, procedures for billing the IV-D agency and any relevant Federal and State reimbursement requirements and limitations.

The financial section of the arrangement establishes the resources necessary to accomplish program objectives. In addition, the financial section not only controls expenditures but also ensures the propriety of those expenditures. Therefore, the rule requires all arrangements to specify in detail the financial terms under which the parties will carry out the arrangement.

We strongly encourage States to link funding to performance in the terms and conditions of their cooperative arrangements. This link can be both positive and negative, e.g., increased funding for better performance and passing on any audit or other penalties sustained by the State as an outgrowth of inadequate performance under the agreement. Ideally, States should negotiate terms that would allow them to pass on to the other parties to the arrangement the impact of those parties' performance.

We also suggest that arrangements contain detailed financial arrangements such as:

(1)The proportion in which expenditures are divided between the parties, e.g., State/county matching rate;

(2)If indirect costs are to be included in the arrangement, a statement on the computation of those indirect costs, including whether or not:

(A) A fixed rate is to be used and, if so, what that rate will be; or

(B) An estimate is to be used and, if so, how it is to be determined and how and when a final rate will be set; or

(C) A "lump sum" amount is to be negotiated each year;

(3)The base costs to which the indirect rate will be applied to determine the amount of eligible indirect costs that can be claimed;

(4)The type or cost of equipment purchases that will require prior approval;

(5)The method and cost threshold of depreciation; and

(6) If applicable, the method for passing through an

appropriate share of the incentive payments to political subdivisions that participate in the costs of the program.

5.§303.107(e): Arrangements must specify the kind of records that must be maintained and the appropriate Federal, State and local reporting and safeguarding requirements.

In framing the requirements for record maintenance and reporting, the State must comply with State and Federal reporting and record keeping requirements. The State also has the right to require that the parties to an arrangement keep and present information in a format compatible with its needs. Local needs may require still other kinds of information to be reported or variations in the reporting format. Therefore, the regulation requires that the arrangement specifies whatever reports or records are needed to meet Federal, State and local requirements.

Confidentiality of records deserves separate treatment in arrangements. It is vital that case information be disclosed only to authorized individuals and only for authorized purposes. The arrangement should specify who is to have access to information in case records and for what purpose. Federal and State legislation and regulations are controlling. Federal regulations at 45 CFR 303.21 provide general guidance for the safeguarding of information. 45 CFR 303.70 requires agencies to take protective measures to safeguard personal information transmitted and received through the Federal Parent Locator Service. Additionally, States and localities which obtain certain address or asset information from the Internal Revenue Service are subject to the more stringent record keeping and safeguarding requirements of the Internal Revenue Code at 26 U.S.C. 6103(p)(4). Therefore, arrangements are required to specify that these requirements will be met.

6.§303.107(f): Arrangements must specify the dates on which the arrangement begins and ends, any conditions for revision or renewal, and the circumstances under which the arrangement may be terminated.

To ensure that an existing arrangement responds to current conditions and needs, the regulation requires that the arrangement contain dates signifying when it begins and ends. A State might wish to limit the time frame on arrangements to one or two years. In addition, to protect the State from inadequate and deficient services, all arrangements are required to contain provisions that specify the conditions for revision or renewal and the circumstances under which the arrangement can be terminated. Conditions for revision of the cooperative arrangement during its effective period should include revisions for incorporating revised IV-D program requirements or to address program budget revisions. We also suggest that the arrangement provide, at a minimum, for termination as a result of clear violations of Federal or State law or of the agreement itself, or for failure to take appropriate corrective action. States may also wish to include a provision for a monetary penalty to avoid termination of an arrangement. Such a penalty could be used to boost performance and as an alternative to outright termination of the arrangement.

We also encourage States to include in arrangements provisions for dispute resolution, corrective action and procedures for implementing any necessary corrective action to be used at the discretion of the State. This will enable parties to correct deficiencies when review indicates that they are not meeting the terms of the arrangement or are performing poorly with respect to the defined performance standards. If the State requires the court or law enforcement official to take corrective action, the corrective action period should be limited to a specified length of time. Although the period of time allowed for corrective action must be determined on a case-by-case basis, we suggest that States limit the corrective action period to three months since we believe that this time frame is generally sufficient to correct inadequate performance or other noted problems. Because there may be situations in which a State believes immediate termination is the best solution, corrective action may not be appropriate in all cases of poor performance.

45 CFR 304.21 - Federal financial participation.

Prior regulations at 45 CFR 304.21 stated the conditions that had to exist to make Federal financial participation available for costs incurred under cooperative arrangements.

This regulation makes minor editorial changes to the title of this section for purposes of consistency with §302.34 and adds a new paragraph (b)(6).

The new paragraph (b)(6) requires that all cooperative arrangements contain the provisions in the new 45 CFR 303.107 as a condition for Federal financial participation. Regional office staff will evaluate any of these arrangements when necessary to ensure compliance with the new cooperative arrangement standards. If the review by Regional staff finds a cooperative arrangement is not in compliance with the requirements of 45 CFR 303.107, Federal financial participation will not be available for the costs associated with such arrangement until a determination is made that the cooperative arrangement meets the standards.

45 CFR 305.34 - Audit requirements.

Prior regulations at 45 CFR 305.34 required that States enter into written cooperative arrangements with appropriate courts and law enforcement officials when necessary for the purpose of carrying out the functions of the IV-D program. This regulation adds a new sentence to require that all cooperative arrangements conform to the requirements at §303.107.

RESPONSE TO COMMMENTS

We received 24 comments in response to the Notice of Proposed Rulemaking published in the Federal Register on October 5, 1988, (53 FR 39110). Commenters included State and local child support agencies and State and local courts. One advocacy group submitted comments.

Section 302.34 State plan requirement

We received several comments concerning changes to 45 CFR 302.34, the State plan requirement that States enter into cooperative arrangements with appropriate courts and law enforcement officials.

1. Comment: One commenter recommended that the regulations clarify whether, in the case of a State-supervised, county-operated IV-D program, the local IV-D agencies may enter into cooperative arrangements with the local courts and law enforcement officials.

Response: Section 303.20(b) requires the State IV-D agency to have an organizational structure and sufficient staff to fulfill certain functions at the State level, including formal evaluation of the quality, efficiency, effectiveness, and scope of services provided under the plan and the financial control of the operation of the plan. Section 303.20(d) specifies that the State-level functions of formal evaluation of the quality, efficiency, effectiveness, and scope of services and the financial control of the operation of the plan may not be delegated by the State IV-D agency.

Section 302.12(a)(2) specifies that the IV-D agency, except as provided in section 303.20, need not perform all the functions of the IV-D program so long that it insures that all these functions are being carried out properly, efficiently, and effectively. Therefore, the regulations at section 302.34 continue to permit both State and local IV-D agencies to enter into cooperative arrangements with appropriate courts and law enforcement officials.

We strongly encourage States to exercise more authority over cooperative arrangements by centralizing the cooperative arrangement function, or by mandating State IV-D review of locally developed cooperative arrangements, and by developing other mechanisms which enhance the State's control and oversight.

2. Comment: One commenter asked whether the new requirement that cooperative arrangements must meet the requirements of 45 CFR 303.107 applies only to those cooperative arrangements under which the court or law enforcement officials receive Federal funding under the IV-D program.

Response: Federal requirements regarding cooperative arrangements apply to any cooperative arrangement between State IV-D agencies and courts or law enforcement officials whether or not the courts or law enforcement officials receive Federal funding under the IV-D program.

3. Comment: One commenter asked if the cooperative arrangement requirements apply only to cooperative arrangements that the State IV-D agency has with courts and law enforcement officials or whether the requirements also apply to cooperative arrangements with other agencies (e.g., welfare departments, vital statistics recorders, data processing agencies).

Response: Section 454(7) of the Act addresses only cooperative arrangements with courts and law enforcement officials to assist in the administration of the State plan. Therefore, States are not required to include the cooperative arrangement criteria under §303.107 in cooperative arrangements with other agencies. However, these criteria are basic elements of any contractual arrangement and including them in any cooperative arrangement will improve the accountability and performance of those involved in IV-D activities.

4. Comment: One commenter suggested that 90 percent Federal funding should be available for the costs associated with the monitoring and enforcing of cooperative arrangements by IV-D agency staff.

Response: Section 455 of the Act does not authorize enhanced Federal funding for staff to monitor and enforce cooperative arrangements.

Section 303.107 Requirements for Cooperative Arrangements

Section 303.107(a): Arrangements must contain a clear description of the specific duties, functions and responsibilities of each party.

Comment: Several commenters asked whether the more detailed criteria required in 45 CFR 303.107 would necessarily result in more effective, efficient and cost-effective cooperative arrangements. One commenter suggested that the Federal audits are already an effective monitoring mechanism to identify deficiencies in cooperative arrangements.

Response: As discussed earlier, audits and program reviews indicate to us that some States do not ensure that the functions delegated under cooperative arrangements are carried out properly, efficiently and effectively. There has been little voluntary effort to strengthen cooperative arrangements, under which nearly one third of all child support enforcement workers are employed, despite the need to ensure accountability and efficient and effective operation of the IV-D program. Further, these new requirements are basic elements of administering cooperative arrangements or any contractual arrangement, i.e., clearly delineated responsibilities and expectations as conditions for reimbursement. They will also focus sorely-needed attention on improving performance under cooperative arrangements.

The purpose of the Federal audit is to evaluate the State IV-D program's substantial compliance with the title IV-D requirements. The audit does not substitute for the State's responsibility, under §303.20, to monitor the quality, efficiency, effectiveness, and scope of services provided under the IV-D program. A State that monitors services provided under cooperative arrangements will ensure that IV-D services are administered effectively and efficiently, rather than risk financial penalties as a result of a Federal audit that determines IV-D requirements are not being met. For these reasons, we believe it is essential to include specific criteria for cooperative arrangements under the IV-D program in Federal regulations.

Section 303.107(b): Arrangements must specify clear and definite standards of performance which meet Federal requirements.

1. Comment: Four commenters suggested that we specify quantitative and qualitative standards for specific performance, including time limits, number of actions per caseload and staffing levels per caseload. One commenter requested that national standards, with possible consideration of regional adjustments, be established. Some commenters requested we delay cooperative arrangement requirements until Federal performance standards regulations currently under development have been finalized.

Response: Soon after the October 5, 1988 publication of these regulations in proposed form, the President signed the Family Support Act of 1988 (Pub. L. 100-485) on October 13, 1988. Section 121 of Pub. L. 100-485 revised section 452 of the Act to require the Secretary to develop, by August 1, 1989, regulations that establish time limits for State IV-D agencies in accepting and responding to requests for IV-D services. The regulations being developed in response to section 121 will establish specific performance standards for a State's IV-D program. Any entity providing services under the IV-D program, whether services are provided by the IV-D agency directly or under cooperative arrangement, must meet those standards. Until those revised standards are effective, cooperative arrangement standards of performance must be consistent with existing Federal program standards under 45 CFR Parts 302 and 303. Once revised standards are effective, which should coincide with the effective dates of the requirements in this final rule on all cooperative arrangements, the State must ensure that performance standards included under a cooperative arrangement are revised to be consistent with Federal requirements.

2. Comment: Several commenters expressed concern that the IV-D agencies may require courts and law enforcement officials to meet higher performance standards than are required of the IV-D agencies themselves.

Response: Cooperative arrangements must specify clear and definite standards of performance which meet Federal requirements. However, the terms and conditions of the arrangement are negotiable as long as they are consistent with Federal requirements. Therefore, IV-D agencies may negotiate cooperative arrangements which have higher standards of performance than those mandated in Federal regulations.

3. Comment: Several commenters believe that the regulations do not consider cooperative arrangements to be cooperative partnerships between IV-D agencies and courts and law enforcement officials with negotiation and accommodation by each side. Others supported the additional requirements.

Response: We agree that cooperative arrangements should be reached by a process of negotiation rather than being dictated by one of the parties. However, the State IV-D agency cannot agree to a cooperative arrangement which contains provisions that are inconsistent with Federal requirements.

4. Comment: One commenter asked if a State should withhold reimbursement under a cooperative arrangement for failure to meet the standards of performance.

Response: As discussed previously, we strongly encourage States to link funding to performance in the terms and conditions of their cooperative arrangements. States currently face financial consequences in the form of audit penalties for failing to meet program requirements and in the future the possibility of penalties under the program will be linked to compliance with Federal performance standards published as a result of Pub. L. 100-485. Therefore, States may wish to pass these financial consequences on to those under cooperative arrangement. By the same token, States may wish to provide additional financial incentives for performing in an exemplary manner as the States themselves receive incentives based on their performance under the program.

5. Comment: One commenter requested that the unit cost concept it uses be allowed to be incorporated into the performance standards specified in the cooperative arrangements. Under that concept, a unit of activity to be performed and the cost for that activity are identified. Under the State's proposal, the unit of service additionally would include acceptable timeframes for completion of the activity. If the unit of activity is not completed properly and within the specified timeframe, reimbursement would be withheld.

Response: States may use such a concept as a performance standard in cooperative arrangements as long as the Federal performance standards are met or exceeded.

Section 303.107(c): Arrangements must specify that the parties will comply with title IV-D of the Act, implementing regulations and any other applicable Federal regulations and requirements.

Comment: One commenter requested that the requirements referenced in §303.107(c) be spelled out and that States be given the opportunity to comment on them prior to implementation of §303.107(c).

Response: Since the inception of the IV-D program, State IV-D agencies have been responsible, under §302.12(a)(3), for ensuring that child support enforcement services were provided under the State's IV-D plan in accordance with Federal requirements. Those requirements are set forth in title IV-D of the Act and implementing regulations at 45 CFR Parts 301 through 307. States and others are given the opportunity to comment on proposed regulations when they are published, as was the case with §303.107. This new requirement merely reiterates that those under cooperative arrangement must provide services in accordance with Federal requirements as they should have been doing already.

Section 303.107(d): Arrangements must specify the financial arrangements including budget estimates, covered expenditures, methods of determining costs, procedures for billing the IV-D agency and any relevant Federal and State reimbursement requirements and limitations.

1. Comment: Two commenters requested that OCSE require, rather than just encourage, that financial incentives be passed through by the IV-D agency to those under cooperative arrangement.

Response: Section 454(22) of the Act, and 45 CFR 303.52(d), specify that the State shall determine the appropriate share of incentive payments each political subdivision participating in the costs of the IV-D program should receive. There is no statutory requirement that incentives be paid to those under cooperative arrangement with the IV-D agency unless those under cooperative arrangement meet the definition of a political subdivision and are participating in the costs of the program. A political subdivision is defined in 45 CFR 303.52(a) as "a legal entity of the State as defined by the State, including a legal entity of the political subdivision so defined, such as a Prosecuting or District Attorney or a Friend of the Court."

States are given much discretion to determine the best way to fund their IV-D programs, including how to use incentives paid to the State. While we strongly encourage States to pay incentives to reward exceptional performance in providing services, we believe Congress intended that States should determine how best to reward performance.

2. Comment: Another commenter suggested that audit penalties and disallowances, as well as incentives, should also be passed along by the IV-D agency to the courts and law enforcement officials under cooperative arrangements so that the courts and law enforcement officials will experience the rewards and punishments that result from their performance.

Response: We agree that cooperative arrangements should provide rewards and penalties for performance as part of the specification of financial arrangements in the cooperative arrangement. However, as indicated in the prior response to comment, States are allowed much flexibility to determine the specifics of operating their IV-D programs, including their cooperative arrangements. Our relationship is with the State, and the State is responsible for operating its program in a way that meets Federal requirements. How the State decides to accomplish that responsibility, including the specifics of its relationship with local agencies or those under cooperative arrangement is left largely to the State, within the constraints of Federal law and regulations.

3. Comment: One commenter requested that incentives be extended to all collections under cooperative arrangements, including non-AFDC collections beyond the AFDC incentive ceiling and medical support collections.

Response: Section 458 of the Act and 45 CFR 303.52(b) specify the formula for providing incentive payments to States. There is no Federal statutory or regulatory prohibition on States using their own funds to provide additional incentives to their political subdivisions or to those under cooperative arrangement for meeting or exceeding performance standards established in the cooperative arrangements. In fact, we have always encouraged States to do so, particularly with respect to providing incentives for cost avoidance as a result of families remaining self-sufficient as a result of child support collections or health insurance coverage.

4. Comment: Some commenters were concerned that failure to meet the Federal requirements with respect to cooperative arrangements could result not only in the loss of Federal funding for the costs incurred under cooperative arrangement but also could jeopardize funding of the entire State's IV-D program for failure to meet State plan requirements.

Response: After the effective dates (October 1, 1989 for new cooperative arrangements, and October 1, 1990 for cooperative arrangements entered into prior to October 1, 1989), the State plan must certify that the criteria contained in 45 CFR 303.107are contained in all cooperative arrangements. The commenter is correct that failure of a State to certify that cooperative arrangements meet Federal requirements in §303.107 could result in disapproval of the IV-D State plan and loss of all Federal funding of the IV-D program and that failure of cooperative arrangements to meet these requirements could result in audit penalties. Since nearly a third of all child support workers are employed through cooperative arrangements, we believe these requirements are essential for proper control of activities under the IV-D plan.

5. Comment: One commenter requested clarification of whether reference to the methods of determining costs in cooperative arrangements is permissible or whether actual cost regulations must be included in the cooperative arrangement.

Response: The cooperative arrangement may refer to another document containing the specific method of determining costs or other financial arrangement details, providing that such referenced documents are provided to the court or law enforcement official working under the cooperative arrangement.

6. Comment: One commenter suggested that only cooperative arrangements with annual expenditures above a specified dollar amount (e.g., $100,000) should be required to meet the criteria in 45 CFR 303.107.

Response: We believe that the need for accountability and enunciation of clear responsibilities under a cooperative arrangement is necessary under all circumstances. Any cooperative arrangement should ensure that the State receives appropriate services and value for its expenditures.

7. Comment: One commenter wanted cooperative arrangements to refer to Statewide application fees and recovery of cost policy to avoid separate fees and charges by counties.

Response: Federal law and regulations do not prohibit States from charging fees other than those authorized in regulations. Accordingly, we do not have the authority to limit charging of fees to those specified in Federal regulations if fees are charged in all child support enforcement cases in the State regardless of whether or not they are IV-D cases. Such fees must be reported as program income if the charging entity is under cooperative arrangement. However, we urge States to make non-AFDC cost recovery requirements under §302.33 and program income requirements under §304.50 clear in any cooperative arrangements with courts and law enforcement officials.

Section 303.107(e): Arrangements must specify the kind of records that must be maintained and the appropriate Federal, State and local reporting and safeguarding requirements.

Comment: One court expressed concern that record keeping requirements in the cooperative arrangement regulations might become burdensome or interfere with the actual delivery of the legal services, and would also have the potential for violating the attorney-client privilege.

Response: The recordkeeping requirements referenced in 45 CFR 303.107(e) are not being added by this regulation. State IV-D agencies, and courts and law enforcement officials under cooperative arrangements with the State IV-D agencies, have always been responsible for adequate recordkeeping and reporting and the safeguarding of confidential information, under section 454(10) of the Act and 45 CFR 302.15 and 303.21. This new regulation merely clarifies that courts and law enforcement officials under cooperative arrangement with the State must meet the appropriate recordkeeping, reporting and safeguarding requirements that the State IV-D agencies are required to meet.

Section 303.107(f): Arrangements must specify the dates on which the arrangement begins and ends, any conditions for revision or renewal, and the circumstances under which the arrangement may be terminated.

1. Comment: Some commenters recommended we require States to limit the cooperative arrangement timeframes to one or two years. Another commmenter wanted a one-year maximum, while others suggested longer timeframes (e.g., until the term of office ends for the official operating under the cooperative arrangement).

Response: We believe States should determine the length of cooperative arrangements. Timeframes of one or two years for cooperative arrangements will help ensure maximum performance and avoid complacency because of an extended effective period. Close supervision and frequent re-evaluation of the terms of the cooperative arrangement are essential to ensure that the goals of the program, Federal expectations and requirements, and the needs of children continue to be met.

2. Comment: Two commenters recommended that States allow corrective action periods of three to six months. Another commenter recommended 12 months for corrective action since a major deficiency could take that long to correct.

Response: The length of allowed time for corrective action should be determined on a case-by-case basis. However, it should be noted that since, under the requirements of 45 CFR 302.10(c)(2), the State IV-D agency has the responsibility for oversight of IV-D operations performed by other agencies and offices, a major deficiency should not occur if proper oversight is exercised.

3. Comment: Other commenters have recommended that cooperative arrangements contain specific provisions for revising the cooperative arrangement during the timeframe it is in effect (e.g., budget revisions, revisions necessary to ensure compliance with revised requirements) and for resolution of disputes between the parties.

Response: We agree that cooperative arrangements should specify conditions for revising the cooperative arrangement during the timeframe it is in effect, for example, to ensure compliance with changing Federal or State requirements. Therefore, we have revised 45 CFR 303.107(f) to specify that States must ensure that all cooperative arrangements specify any conditions for revision.

We also encourage, although we have not required, States to include provisions in cooperative arrangements for the resolution of disputes short of termination. Under appropriate circumstances, the parties to a cooperative arrangement which may be ambiguous or subject to different interpretations should discuss and attempt to resolve disputes and, if warranted, renegotiate the cooperative arrangement rather than terminate the arrangement. However, careful drafting of cooperative arrangements and discussion of the meaning of all terms and conditions should minimize disputes once an arrangement is signed.

Section 304.21 Federal financial participation

We received several comments addressing the requirements of the new paragraph 45 CFR 304.21(b)(6) that all cooperative arrangements contain the provisions in the new 45 CFR 303.107 as a condition of receiving Federal financial participation.

Comment: One commenter requested clarification as to the effective date of the provision that Federal funding is not available for cooperative arrangements which do not meet the requirements of 45 CFR 303.107.

Response: The effective date for the revision to 45 CFR 304.21(b)(6) is the same as for the rest of this revised regulation. Federal funding is only available for new cooperative arrangements, entered into on or after October 1, 1989, that contain the provisions of 45 CFR 303.107. For cooperative arrangements operating prior to October 1, 1989, States have until October 1, 1990 to comply with the requirement that their existing cooperative arrangements also contain the provisions of 45 CFR 303.107. After the appropriate effective date, if a cooperative arrangement is found not to contain the criteria required in 45 CFR 303.107, no Federal funding is available for costs incurred under the cooperative arrangement until a determination is made that the cooperative arrangement complies with the requirements of §303.107.

Section 305.34 Audit requirements

We had one comment concerning the addition of a new sentence in 45 CFR 305.34 requiring that all cooperative arrangements conform to the requirements at the new 45 CFR 303.107.

Comment: One commenter requested that OCSE provide States with model cooperative arrangement language, as specific as possible and acceptable to auditors as meeting the requirements.

Response: Specific terms and conditions of the cooperative arrangement should be negotiated with the individual provider to best meet the needs of the State. There are two OCSE publications, issued in May, 1980 and March, 1988, discussed earlier in this document, which contain specific recommendations and sample language for the development of effective cooperative arrangements.

REGULATORY FLEXIBILITY ANALYSIS

Under the Regulatory Flexibility Act of 1980 (P. L. 96-354), we are required to prepare a regulatory flexibility analysis for those rules which have a significant economic impact on a substantial number of small entities. The principle impact of this regulation is on State IV-D agencies which are required to revise only those existing cooperative arrangements which do not meet the new requirements. This regulation could potentially save money for both the Federal Government and the States by controlling amounts spent on and ensuring adequate performance under cooperative arrangements.

States enter into cooperative arrangements to obtain the assistance of courts and law enforcement officials in carrying out the functions of the IV-D program: the location of absent parents, the establishment of paternity, the establishment of support obligations, and the enforcement and collection of those obligations.

Federal regulations at 45 CFR 304.21 provide that Federal financial participation, at the applicable matching rate, is available for the costs of cooperative arrangements. The intent of this regulation is to specify certain conditions all cooperative arrangements must meet to increase the effectiveness of the IV-D program and to ensure that States get what they pay for.

This regulation strengthens the prior regulation and may result in initial additional costs when States renegotiate and revise their existing cooperative arrangements. However, we believe that the renegotiated arrangements will result in services being provided at a substantial net savings to State and Federal governments due to the increased specificity and effectiveness of such arrangements. States will be in a better position to ensure effective operation of the program by controlling the performance of those under cooperative arrangements.

Therefore, these regulations would not have a significant economic impact on a substantial number of small entities and a regulatory flexibility analysis is not required.

REGULATORY IMPACT ANALYSIS

The Secretary has determined, in accordance with Executive Order 12291 that this rule does not constitute a "major" rule for the following reasons:

(1) The annual effect on the economy is less than $100 million;

(2) This rule will not result in a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; and

(3) This rule will not result in significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or export markets.

As discussed above, this regulation will result in net savings for State and Federal governments because of improved performance of services specified under cooperative arrangements, and improved accountability under those arrangements.

FEDERALISM IMPACT ANALYSIS

Executive Order 12612 requires Federal agencies, in formulating and implementing policies and regulations, to assess the impact of these on federalism. For those rules that have a significant effect on the roles, rights, and responsibilities between the States and the Federal government, a federalism impact analysis is required.

There is one federalism issue we have identified in this analysis that may affect the institutional relationship between the States and the Federal government. This relates to the addition of the six provisions which are required in all cooperative arrangements.

The six provisions as submitted in this regulation are designed to improve the accountability of courts and law enforcement officials providing IV-D services under cooperative arrangements to the State. These new provisions will strengthen the State's authority by ensuring that delegated or contracted functions are carried out as the State intended and by delineating the consequences of a subgrantee's failure to meet their responsibilities. The Federal government holds States accountable for program services and the States need the authority to hold those actually providing those services accountable. These six new provisions are in no way intended to preempt State law. They are minimal standards which should be part of any contract.

LIST OF SUBJECTS

45 CFR Part 302

Child support

Grant programs--social programs

Reporting and recordkeeping requirements

Unemployment compensation

45 CFR 303

Child support

Grant programs--social programs

Reporting and recordkeeping requirements

45 CFR 304

Child welfare

Federal financial participation

Grant programs--social programs

Reporting and recordkeeping requirements

45 CFR 305

Accounting

Child support

Grant programs--social programs

Reporting and recordkeeping requirements

(Catalog of Federal Domestic Assistance Program No. 13.783, Child Support Enforcement Program)

Dated: _______________

______________________________

Acting Director

Office of Child Support Enforcement

Approved: _____________

______________________________

Secretary

For the reasons set out in the preamble, Title 45 Chapter III of the Code of Federal Regulations is amended as follows:

PART 302 - [AMENDED]

1. The authority citation for Part 302 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p) and 1396(k).

2. Section 302.34 is revised to read as follows:

§302.34 Cooperative arrangements.

(a) The State plan shall provide that the State will enter into written agreements for cooperative arrangements with appropriate courts and law enforcement officials. Such arrangements may be entered into with a single official covering more than one court, official, or agency, if the single official has the legal authority to enter into arrangements on behalf of the courts, officials, or agencies. Such arrangements shall contain provisions for providing courts and law enforcement officials with pertinent information needed in locating absent parents, establishing paternity and securing support, including the immediate transfer of the information obtained under §235.70 of this title to the court or law enforcement official, to the extent that such information is relevant to the duties to be performed pursuant to the arrangement. They shall also provide for assistance to the IV-D agency in carrying out the program, and may relate to any other matters of common concern. Under matters of common concern, such arrangements may include provisions for the investigation and prosecution of fraud directly related to paternity and child and spousal support, and provisions to reimburse courts and law enforcement officials for their assistance.

(b) Cooperative arrangements entered into on or after October 1, 1989 must meet the criteria prescribed under §303.107 of this chapter. Cooperative arrangements existing prior to October 1, 1989 must meet the criteria prescribed under §303.107 of this chapter by October 1, 1990.

PART 303 - [AMENDED]

3. The authority citation for Part 303 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 667, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

4. Part 303 is amended by adding §303.107 to read as follows:

§303.107 Requirements for cooperative arrangements.

The State must ensure that all cooperative arrangements:

(a) Contain a clear description of the specific duties, functions and responsibilities of each party;

(b) Specify clear and definite standards of performance which meet Federal requirements;

(c) Specify that the parties will comply with title IV-D of the Act, implementing Federal regulations and any other applicable Federal regulations and requirements;

(d) Specify the financial arrangements including budget estimates, covered expenditures, methods of determining costs, procedures for billing the IV-D agency, and any relevant Federal and State reimbursement requirements and limitations;

(e) Specify the kind of records that must be maintained and the appropriate Federal, State and local reporting and safeguarding requirements; and

(f) Specify the dates on which the arrangement begins and ends, any conditions for revision or renewal, and the circumstances under which the arrangement may be terminated.

PART 304 - [AMENDED]

5. The authority citation for Part 304 continues to read as follows:

Authority: 42 U.S.C. 651 through 654, 657, 660, 1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396(k).

6. Section 304.21 is amended by revising the heading, replacing the period at the end of paragraph (b)(5) with "; and" and adding a new paragraph (b)(6) to read as follows:

§304.21 Federal financial participation in the costs of cooperative arrangements with courts and law enforcement officials.

* * * * *

(b) * * *

(6) Costs of cooperative arrangements that do not meet the requirements of §303.107 of this chapter.

* * * * *

PART 305 - [AMENDED]

8. The authority citation for Part 305 continues to read as follows:

Authority: 42 U.S.C. 603(h), 604(d), 652(a)(1) and (4), and 1302.

9. Section 305.34 is amended by adding a sentence to the end of the current language to read as follows:

§305.34 Cooperative arrangements.

The cooperative arrangements must meet the requirements at§303.107 of this chapter.

[FR Doc. 89-16786 Filed 7-18-89; 8:45]

BILLING CODE 4150-04-M