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Final Rule: Equipment Acquired Under Public Assistance Programs

AT-82-12

Published: October 18, 1982
Information About:
State/Local Child Support Agencies
Topics:
Funding, Federal Financial Participation (FFP)
Types:
Policy, Action Transmittals (AT), Regulations

REGULATIONS

Action Transmittal

OCSE-AT-82-12

October 18, 1982

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

SUBJECT: Equipment Acquired Under Public Assistance Programs

These are final regulations issued by the Department of Health and Human Services which revise and consolidate existing regulations regarding Federal financial participation (FFP) in the cost of equipment under the HHS-supported public assistance programs (including title IV-D). The regulations also revise and consolidate existing regulations regarding the management and disposition of equipment under these programs.

The regulations revise the existing 45 CFR 304.24. The new §304.24:

(1) requires claims for FFP in the cost of equipment under the Child Support Enforcement program to be determined in accordance with 45 CFR Part 95, Subpart G; and

(2) makes reference to 45 CFR Part 95, Subpart G for the requirements regarding the management and disposition of equipment under the Child Support Enforcement program.

The revised regulation at 45 CFR 95.641:

(1) prescribes when the capitalization and depreciation provisions of 45 CFR Part 95, Subpart G do not apply to ADP equipment; and

(2) states that the equipment management and disposition provisions of 45 CFR Part 95, Subpart G apply to ADP equipment.

The new regulations at 45 CFR Part 95, Subpart G:

(1) define terms used in Subpart G;

(2) prescribe when a State agency may expense equipment, including ADP equipment;

(3) prescribe when equipment must be depreciated, and when exceptions apply for depreciation of equipment purchased under service agreements with other State agencies and under cost-type contracts;

(4) define the term "depreciate" for purposes of 45 CFR 95.705;

(5) prescribe when an item of equipment (including ADP equipment) is subject to the property rules in 45 CFR Part 74, Subpart 0;

(6) require the State agency with respect to equipment that is not subject to the property rules in 45 CFR Part 74, Subpart 0 to adequately manage the equipment, maintain records on the equipment, and take periodic physical inventories of the equipment.

(7) specify requirements which apply to the disposition of equipment that is not subject to the property rules in 45 CFR Part 74, Subpart 0.

In the attachment, references made to 45 CFR 205.160 and 1392.66 should be ignored since these regulations do not apply to the Child Support Enforcement program.

REGULATION REFERENCES: 45 CFR 304.24, 45 CFR 95.641 and 45 CFR Part 95, Subpart G.

SUPERSEDED MATERIAL: Proposed rulemaking, OCSE-AT-81-17, dated August 14, 1981.

INQUIRIES TO: OCSE Regional Representatives

Deputy Director

Office of Child Support

Enforcement

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Parts 95, 205, 304 and 1392

Equipment Acquired Under Public Assistance Programs

Agency: Department of Health and Human Services (HHS)

Action: Final Rule

SUMMARY: This rule revises and consolidates current HHS regulations concerning federal financial participation in the cost of equipment under HHS supported public assistance programs. The rule also revises and consolidates current regulations on the management and disposition of equipment under these programs.

The rule would permit State public assistance agencies to claim the cost of most of their equipment acquired at the time of purchase rather than depreciating the equipment over its useful life as required by the current regulations. This change would allow these agencies to claim Federal financial participation in the cost of the equipment at an earlier date than under the current regulations and would simplify the accounting requirements associated with the equipment.

EFFECTIVE DATE: October 21, 1982

FOR FURTHER INFORMATION CONTACT:

Edward M. Tracy, (202) 245-7411.

SUPPLEMENTARY INFORMATION: A Notice of Proposed Rulemaking was published in the Federal Register on July 24, 1981 at 46 FR 38280 inviting comments on a proposed revision to the Department's current regulations concerning Federal financial participation in the cost of equipment acquired under HHS supported public assistance programs. The regulation, Subpart G of 45 CFR Part 95, allows equipment costing $25,000 or less to be claimed in the period acquired. Public comments were invited for 60 days ending September 21, 1981. Comments were received from eleven State or local agencies and two medical care providers and were considered in the development of the final regulation.

All the comments to the Notice of Proposed Rulemaking were favorable and many suggested that the Department liberalize its requirements even further by eliminating all prior approval requirements. The following summarizes and discusses the major public comments in response to the Notice of Proposed Rulemaking:

1. Applicability.

Comment: The regulation does not indicate whether the undepreciated amount of equipment acquired prior to the effective date of the regulation can be claimed as of the effective date of this rule.

Response: Equipment acquired before the rule and not fully depreciated as of the effective date of the rule will continue to be subject to the established depreciation schedule in effect prior to the rule.

2. Scope.

Comment: Two medical care providers, while supporting the concept, wanted to know if the rule was applicable to other than State public assistance agencies.

Response: The Notice of Proposed Rulemaking indicated that this Subpart applied to equipment purchased by State public assistance agencies, and under certain conditions, to other providers under contract with a State public assistance agency. Section 95.705(b) identifies these conditions. Specifically, equipment costing $25,000 or less may be claimed by a provider under a service agreement or cost-type contract with the State public assistance agency where the State agency (1) approves the specific purchase and agrees to accept its cost as a claim, and (2) the service agreement or cost-type contract requires the transfer of the equipment or its residual value to the State agency when the equipment is no longer needed to carry out the work under the service agreement or cost-type contract.

3. Relationship to the Food and Nutrition Service (FNS) Requirements.

Comment: To achieve the maximum benefit associated with simplification, the requirements of both the Department of Health & Human Services and the Department of Agriculture's FNS should be the same.

Response: We agree with the comment. Standardization and simplification of a State agency's system of accounting for depreciation requires a uniform approach by the Federal Government. HHS is working with the FNS to standardize these requirements.

Finally, the rule reflects several technical changes resulting from the review of the proposed rule, however, it does not contain any substantive changes. References to Parts 1393 and 1396 were eliminated since the Interim Final Block Grant rules issued on October 1, 1981 at 46 FR 48582 removed these two Parts.

The Department has determined that this is not a "major rule" as defined in Executive Order 12291. Because of the continuing nature of the programs affected, the proposed regulation is not expected to have a significant effect on costs in the long-term. There will probably be some additional costs during the transition period where some States convert from depreciation on newly acquired equipment to expensing of the equipment in the year of purchase. However, this is not expected to result in a substantial increase in the overall administrative costs of the programs since equipment is only a relatively small part of these costs, and because a number of States currently expense equipment purchases. Pursuant to the provisions of 5 USC Section 605(b), I hereby certify that this rule will not have a significant economic impact on a substantial number of small entities.

Dated: August 18, 1982

Richard S. Schweiker,

Secretary of Health and Human Services

List of Subjects

45 CFR Part 95

Claims, Computer Technology, Grant programs-health programs-social programs, Social Security.

45 CFR Part 205

Administrative practice and procedure, Aid to families with dependent children. Grant programs-social programs, Public assistance programs, Reporting requirements.

45 CFR Part 304

Child welfare, Grant programs-social programs.

45 CFR Part 1392

Aid to families with dependent children. Child welfare, Grant programs-social programs, Guam, Northern Mariana Islands, Puerto Rico, Virgin Islands, Volunteers.

Accordingly, a new Subpart G is added to 45 CFR Part 95, and 45 CFR Parts 205, 304 and 1392 are amended as follows:

PART 205-GENERAL

ADMINISTRATION-PUBLIC

ASSISTANCE PROGRAMS

A. 45 CFR 205.160 is revised to read as follows:

205.160 Equipment-Federal financial participation.

Claims for Federal financial participation in the cost of equipment for the cash assistance programs under Titles I, IV-A, X, XIV, XVI[AABD] and for the separate administrative unit established under Section 402(a)(19)(G) of the Social Security Act are to be determined in accordance with Subpart G or 45 CFR Part 95. Requirements concerning the management and disposition of equipment under these Titles are also prescribed in Subpart G of 45 CFR Part 95.

PART 304-FEDERAL FINANCIAL

PARTICIPATION

B. 45 CFR 304.24 is revised to read as follows:

304.24 Equipment-Federal financial participation.

Claims for Federal financial participation in the cost of equipment under the Child Support Enforcement Program are to be determined in accordance with Subpart G of 45 CFR Part 95. Requirements concerning the management and disposition of equipment under the Child Support Enforcement Program are also prescribed in Subpart G of 45 CFR Part 95.

PART 1392-SERVICE PROGRAM FOR

FAMILIES AND CHILDREN; TITLE IV:

PARTS A AND B OF SOCIAL

SECURITY ACT

C. 45 CFR 1392.66 for the Title IV-B Child Welfare Services Program and the Title IV-A Services Program in the Territories is revised to read as follows:

§ 1392.66 Equipment-Federal financial participation.

Claims for Federal financial participation in the cost of equipment, under the Child Welfare Services Program and the Services Program in the Territories are to be determined in accordance with Subpart G of 45 CFR Part 95. Requirements concerning the management and disposition of equipment under these programs are also prescribed in Subpart G of 45 CFR Part 95.

PART 95-GENERAL

ADMINISTRATION-GRANT

PROGRAMS (PUBLIC ASSISTANCE

AND MEDICAL ASSISTANCE)

F. 45 CFR 95.641 is revised to read as follows:

§ 95.641 Exemption from Subpart G of this part

The capitalization and depreciation provisions of Subpart G of this Part do not apply to ADP equipment provided the Department approves the ADP equipment purchase and approves the claiming of the equipment costs in the period acquired. The equipment management and equipment disposition provisions of Subpart G of this Part do apply to ADP equipment.

G. 45 CFR Part 95 is amended by adding a new Subpart G to read as follows:

Subpart G-Equipment Acquired Under Public Assistance Programs

Sec.

95.701 Purpose and scope of subpart.

95.703 Definitions.

95.705 Equipment costs-Federal financial participation.

95.707 Equipment Management and disposition.

Authority: Sec. 1102.49 Stat. 647, 42 U.S.C. 1302.

Subpart G-Equipment Acquired

Under Public Assistance Programs.

§ 95.701 Purpose and scope of subpart.

(a) This subpart prescribes requirements concerning the computation of claims for Federal financial participation in the cost of equipment under public assistance programs. This Subpart also prescribes requirements for the management and disposition of equipment whose costs are claimed for Federal financial participation under these programs.

(b) This subpart applies to equipment purchased by State agencies (as defined in § 95.703) and to equipment purchased under service agreements with other State agencies and under cost-type contracts.

§ 95.703 Definitions.

As used in this subpart: "Acquisition cost" of an item of purchased equipment means the net invoice price of the equipment, including the cost of modifications, attachments, accessories, or auxiliary apparatus necessary to make the equipment usable for the purpose for which it was acquired. Other charges such as the cost of installation, transportation, taxes, duty or protective intransit insurance shall be included in or excluded from the unit acquisition cost in accordance with the regular accounting practices of the organization purchasing the equipment. If the item is acquired by trading in another item and paying an additional amount, "acquisition cost" means the amount received for trade-in plus the additional outlay.

"Equipment" means an article of tangible personal property that has a useful life of more than two years and an acquisition cost of $500 or more. Any recipient may use its own definition of equipment, if its definition would at least include all items of equipment as defined here.

"Public Assistance Programs" means programs authorized by Titles I, IV-A, IV-B, IV-C, IV-D, IV-E, X, XIV, XVI[AABD] and XIX of the Social Security Act, and programs authorized by the Immigration and Nationality Act as amended by the Refugee Act of 1980 (Pub. L. 96-212).

"State" means the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, the Northern Mariana Islands and Guam.

"State Agency" means the State agency administering a public assistance program(s). This term includes local government public assistance agencies which administer public assistance programs under a State supervised system and the State agencies which supervise the local agencies.

§ 95.705 Equipment costs-Federal financial participation.

(a) General rule. In computing claims for Federal financial participation, equipment having a unit acquisition cost of $25,000 or less may be claimed in the period acquired or depreciated, at the option of the State agency. Equipment having a unit acquisition cost of more than $25,000 shall be depreciated. For purposes of this section, the term "depreciate" also includes use allowances computed in accordance with the cost principles prescribed in Subpart Q of 45 CFR Part 74.

(b) Exceptions. (1) Equipment purchased under service agreements with other State agencies and under cost-type contracts shall be depreciated. However, equipment having a unit acquisition cost of $25,000 or less may be claimed in the period acquired if (a) the State agency approved the specific purchase and the claiming of the cost of the item, and (b) the contract or service agreement requires that the equipment or its residual value be transferred to the State agency when the equipment is no longer needed to carry out the work under the contract or service agreement.

(2) Reimbursement for ADP equipment having an acquisition cost in excess of $25,000 and subject to Subpart F of this Part must be depreciated over its useful life unless otherwise specifically provided for by the Department. ADP equipment not subject to Subpart F is subject to the requirements of this Subpart.

§ 95.707 Equipment management and disposition.

(a) An item of equipment is subject to the property rules in Subpart O of 45 CFR Part 74 if the total cost of the item was claimed in the period acquired and if the item was accepted for Federal financial participation as a direct cost under a single program or program activity. These rules also apply to ADP equipment where the State agency was permitted under Subpart F of this part to claim the total cost of the equipment in the period acquired.

(b) Other items of equipment whose costs are claimed for Federal financial participation (i.e., equipment that is capitalized and depreciated or is claimed in the period acquired and charged to more than one program) are not subject to the specific requirements in Subpart O of 45 CFR Part 74. However, the State agency is responsible for adequately managing the equipment, maintaining records on the equipment, and taking periodic physical inventories. Physical inventories may be made on the basis of statistical sampling. The following requirements apply to the disposition of this equipment:

(1) If the cost of the equipment was claimed in the period acquired and the equipment is later sold, the proceeds of the sale shall be credited to current expenditures in approximate proportion to the distribution of the equipment's cost.

(2) If the cost of the equipment was claimed in the period acquired and the equipment is later transferred to an activity which is not involved in the performance of programs currently or previously funded by the Federal Government, an amount equal to the fair market value of the Equipment on the date of the transfer shall be credited to current expenditures in approximate proportion to the distribution of the equipment's costs.

(3) If the cost of the equipment was claimed in the period acquired and the equipment is later traded in on other equipment, claims for Federal financial participation in the costs of replacement equipment shall be limited to additional outlay.

(4) If the equipment was depreciated, any gain or loss on the disposition of the equipment shall be treated as a decrease or an increase to the depreciation expense of the period in which the disposition takes place. This provision does not apply to equipment whose costs were claimed for Federal financial participation through use allowances.