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Final Rule: Paternity Establishment and Revision of Child Support Audit Regulations

AT-94-06

Published: December 23, 1994
Information About:
State/Local Child Support Agencies
Topics:
Case Management, Paternity Establishment, Program Audit
Types:
Policy, Action Transmittals (AT), Regulations

ACTION TRANSMITTAL
OCSE-AT-94-06
December 23, 1994

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

SUBJECT: Final Rule - Paternity Establishment and Revision of Child
                  Support Enforcement Program and Audit Regulations

ATTACHMENT: Attached is a final rule, published in the Federal Register
                  on December 23, 1994 (59 FR page 66204) that contains
                  provisions regarding both paternity establishment and the
                  audit.

                  The paternity establishment provisions implement the
                  requirements of section 13721 of the Omnibus Budget
                  Reconciliation Act of 1993 (OBRA '93) signed by the
                  President on August 10, 1993, which amends title IV-D of the
                  Social Security Act (the Act).

                  The provisions require States to adopt laws and procedures
                  for a simple civil process for the voluntary acknowledgment
                  of paternity, including early paternity establishment
                  programs in hospitals.  Under these requirements, a
                  voluntary acknowledgment must create a presumption of
                  paternity and be a basis for seeking a child support order. 
                  For paternity cases that remain contested, the new statutory
                  provisions require States to adopt a variety of procedures
                  designed to streamline the paternity establishment process. 
                  These include the use of default orders, a presumption of
                  paternity based on genetic test results, conditions for
                  admission of genetic test results as evidence, and expedited
                  decision-making processes for IV-D paternity cases.

                  In addition, this final regulation amends the Child Support
                  Enforcement program regulations governing the audit of State
                  Child Support Enforcement (IV-D) programs and the imposition
                  of financial penalties for failure to substantially comply
                  with the requirements of title IV-D of the Act. This
                  regulation specifies how audits will evaluate State
                  compliance with the requirements set forth in title IV-D of
                  the Act and Federal regulations, including requirements
                  resulting from the Family Support Act of 1988 and section
                  13721 of OBRA '93. This final regulation also redefines
                  substantial compliance to place greater focus on performance
                  and streamlines Part 305 by removing unnecessary sections.

REGULATION
REFERENCE:        45 CFR Parts 301, 302, 303, 304 and 305

EFFECTIVE
DATE:        The statutory requirements for paternity establishment
                  provisions are effective on the later of: (1) October 1,
                  1993, or (2) upon enactment by the State legislature of all
                  required laws necessary to conform to the requirements.
                  However, in no event shall the statutory requirements be
                  effective later than the first day of the first calendar
                  quarter beginning after the close of the first regular
                  session of the State legislature that begins after August
                  10, 1993.

                  In the case of a State that has a two-year legislative
                  session, each year of such session shall be deemed to be a
                  separate session of the State legislature. A regular session
                  is any session other than a special session, including a
                  session designated for budget issues. The paternity
                  establishment provisions of these regulations are effective
                  on and after December 23, 1994, or the statutory effective
                  date as described above, whichever occurs later.

                  The requirements in this final regulation are effective for
                  audits conducted for periods on or after December 23, 1994.

INQUIRIES
TO:               ACF Regional Administrators

                                         


                                          David Gray Ross
                                          Deputy Director
                                          Office of Child Support
                                            Enforcement

Enclosure


                    DEPARTMENT OF HEALTH AND HUMAN SERVICES
                   Administration for Children and Families
                   45 CFR Parts 301, 302, 303, 304 and 305
                                 RIN-0970-AB40

Child Support Enforcement Program:  Paternity Establishment and
Revision of Child Support Enforcement Program and Audit Regulations

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

ACTION:  Final rule.

SUMMARY:  This final rule contains provisions regarding both  paternity
establishment and the audit.  The paternity establishment provisions implement
the requirements of section 13721 of the Omnibus Budget Reconciliation Act of
1993 (OBRA '93) signed by the President on August 10, 1993, which amends title
IV-D of the Social Security Act (the Act).  These provisions require States to
adopt procedures for a simple civil process for the voluntary acknowledgment
of paternity, including early paternity establishment programs in hospitals. 
For paternity cases that remain contested, the statutory provisions require
States to adopt a variety of procedures designed to streamline the paternity
establishment process.  These include the use of default orders, a presumption
of paternity based on genetic test results, conditions for admission of
genetic test results as evidence, and expedited decision-making processes for
paternity cases in which title IV-D services are being provided. 
                                      
In addition, this final regulation amends the Child Support Enforcement
program regulations governing the audit of State Child Support Enforcement
(IV-D) programs and the imposition of financial penalties for failure to
substantially comply with the requirements of title IV-D of the Act.  This
regulation specifies how audits will evaluate State compliance with the
requirements set forth in title IV-D of the Act and Federal regulations,
including requirements resulting from the Family Support Act of 1988 and
section 13721 of OBRA '93.  This final regulation also redefines substantial
compliance to place greater focus on performance and streamlines Part 305 by
removing unnecessary sections. 

EFFECTIVE DATE:  December 23, 1994.  For applicability provisions, see
SUPPLEMENTARY INFORMATION Section.

FOR FURTHER INFORMATION CONTACT:  Policy Branch, OCSE, specifically:  Andrew
Williams, (202) 401-1467 regarding paternity establishment provisions; Marilyn
R. Cohen, (202) 401-5366 regarding expedited processes; and Lourdes Henry,
(202) 401-5440 regarding the audit regulations.

SUPPLEMENTARY INFORMATION:
Applicability Provisions

1.  Paternity Establishment Provisions.  The paternity establishment
provisions of these regulations are applicable on and after December 23, 1994,
or the statutory effective date as described below, whichever occurs later. 
The Federal law provides that the statutory requirements are effective on the
later of:  (1) October 1, 1993, or (2) enactment by the State legislature of
all required laws necessary to conform to the requirements.  However, in no
event shall the statutory requirements be effective later than the first day
of the first calendar quarter beginning after the close of the first regular
session of the State legislature that begins after August 10, 1993.  In the
case of a State that has a two-year legislative session, each year of such
session shall be deemed to be a separate regular session of the State
legislature.   

2.  Audit Provisions.  The effective date for the applicability of the audit
provisions is audits conducted for periods beginning on or after December 23,
1994.

Paperwork Reduction Act

The information collection requirement regarding submittal of the State plan
preprint page for the new paternity requirements was approved by the Office of
Management and Budget under OMB control number 0970-0017.  Otherwise, this
rule does not require information collection activities and, therefore, no
additional approvals are necessary under the Paperwork Reduction Act. 

Statutory Authority

1.  Paternity Establishment Provisions.  This final rule is published under
the authority of section 466(a) of the Social Security Act (the Act), as
amended by the Omnibus Budget Reconciliation Act of 1993 (OBRA '93) (Pub. L.
103-66).  Section 466(a)(2), as amended, eliminates the State option for
including paternity establishment in expedited processes, thereby requiring
States to include paternity establishment in expedited processes.  Subsection
466(a)(5)(C) requires States to have laws and procedures for a simple civil
process for voluntarily acknowledging paternity under which the State must
provide that the rights and responsibilities of acknowledging paternity are
explained and ensure that due process safeguards are afforded.  Such
procedures must include a hospital-based program for the voluntary
acknowledgment of paternity during the period immediately before or after the
birth of a child.  Subsection 466(a)(5)(D) requires States to have laws and
procedures under which the voluntary acknowledgment of paternity creates a
rebuttable, or at the option of the State, conclusive presumption of
paternity, and under which such voluntary acknowledgment is admissible as
evidence of paternity.  Subsection 466(a)(5)(E) requires States to have laws
and procedures under which the voluntary acknowledgment of paternity must be
recognized as a basis for seeking a support order without requiring any
further proceedings to establish paternity. 

Subsection 466(a)(5)(F) requires States to have laws and procedures which
provide that (i) any objection to genetic test results must be made in writing
within a specified number of days before any hearing at which such results may
be introduced into evidence, and (ii) if no objection is made, the test
results are admissible as evidence of paternity without the need for
foundation testimony or other proof of authenticity or accuracy.  Subsection
466(a)(5)(G) requires States to have laws and procedures which create a
rebuttable or, at the option of the State, conclusive presumption of paternity
upon genetic testing results indicating a threshold probability of the alleged
father being the father of the child. 

Subsection 466(a)(5)(H) requires States to have laws and procedures requiring
a default order to be entered in a paternity case upon a showing of service of
process on the defendant and any additional showing required by State law. 
Section 466(a)(11) requires States to have laws and procedures under which the
State must give full faith and credit to a determination of paternity made by
any other State, whether established through voluntary acknowledgment or
through administrative or judicial processes.  These final regulations are
also published under the general authority of section 1102 of the Act, which
requires the Secretary to publish regulations that may be necessary for the
efficient administration of the functions for which she is responsible under
the Act.

2.  Audit Provisions.  This final regulation is published under the authority
of sections 1102, 402(a)(27), 452(a)(4), and 403(h) of the Act.  Section 1102
authorizes the Secretary to publish regulations not inconsistent with the Act
which may be necessary to efficiently administer the Secretary's functions
under the Act.  Section 402(a)(27) requires each State to operate a child
support program in substantial compliance with the title IV-D State plan. 
Section 452(a)(4) requires an audit of each State IV-D program to assure
compliance with title IV-D requirements at least once every three years (or
not less often than annually in the case of any State which is being
penalized, or is operating under a corrective action plan).  Finally, section
403(h) provides for the imposition of an audit penalty of not less than 1 nor
more than 5 percent of a State's AFDC funding for any State which fails to
substantially comply with title IV-D requirements within the period of time
the Secretary determines to be appropriate for corrective action.

Background

This final rule contains regulations that:  (1) implement the paternity
establishment provisions of OBRA '93, and (2) revise the child support
enforcement audit regulations.  The proposed audit rule was published
September 9, 1993 (58 FR 47417), and the proposed paternity rule on November
29, 1993 (58 FR 62599), each with 60-day public comment periods.  These two
proposed regulations overlapped in some areas.  In particular, the "credit for
providing services" portion of the proposed audit regulation was affected by
changes to expedited process requirements made by the proposed paternity
regulation.  Furthermore, changes to paternity establishment requirements made
by the proposed paternity regulation impacted which paternity requirements
would be audited under the audit regulation.  Because the two proposed
regulations were at similar stages of the regulatory process and because they
overlapped in certain areas, we decided to combine them in this final
regulation. 

1.  Paternity Establishment Provisions.  Paternity establishment is a
necessary first step in the child support enforcement process in cases where a
child is born out-of-wedlock.  In addition to child support, paternity
establishment may result in other financial benefits for the child, including
Social Security dependents' benefits, pension benefits, veterans' benefits,
and possible rights of inheritance.  Furthermore, paternity establishment may
give children social and psychological advantages and a sense of family
heritage, be a first step in creating a psychological and social bond between
father and child, and provide important medical history information.

The Federal government has long recognized the importance of paternity
establishment.  In 1975, by enactment of Title IV-D of the Social Security
Act, Congress required States to establish public child support enforcement
agencies and to provide paternity establishment services.  The Child Support
Enforcement Amendments of 1984 (Pub. L. 98-378) required States to permit
paternity to be established until a child's 18th birthday.  The Family Support
Act of 1988 (Pub. L. 100-485) contained several provisions designed to improve
paternity establishment:  a performance standard, timeframes for case
processing, enhanced funding (90 percent Federal financial participation) for
genetic testing, a requirement that States compel all parties in a contested
paternity case to submit to genetic testing upon the request of a party, a
requirement that States compel each parent to provide his or her social
security number as part of the birth certificate issuance process, and a
clarification of the expansion of the requirement permitting paternity
establishment to 18 years of age.

Partly as a result of these Federal efforts, the number of paternities
established each year by the IV-D program has increased substantially from
about 270,000 in FY 1987 to more than 553,000 in FY 1993--an increase of over
100 percent in just six years.  However, the percentage of children born
out-of-wedlock also continues to increase.  In 1991, almost 30 percent of
American children, over 1.2 million children, were born to unmarried mothers. 
Currently, as reported by State agencies, paternity is only established for
about one-sixth of the children who need it per year.  Even in cases where
paternity is established, the process is often lengthy and adversarial in
nature. 

Therefore, the President and Congress decided to further reform the system
through changes to title IV-D in the OBRA '93.  The Administration proposed
the new paternity requirements as an initial step in the President's efforts
to improve the child support enforcement program.  While this rule is based on
existing law, it serves as a foundation for additional reforms proposed by the
President's Welfare Reform bill. 

The amended statute and these implementing regulations are intended to
increase both the number of paternities established for children born
out-of-wedlock and the timeliness with which paternity establishment is
accomplished.  In particular, these provisions will increase the number of
paternities established by voluntary acknowledgment.  However, some cases will
remain contested, and these reforms should expedite the process for resolving
those cases as well.

Many of these reforms are based on innovative State practices and
recommendations of the U.S. Commission on Interstate Child Support.  Congress
created the Interstate Commission as part of the Family Support Act of 1988 to
recommend ways of improving the interstate establishment and enforcement of
child support awards.  In 1992, the Commission issued its comprehensive final
report to the Congress which contained numerous recommendations, including
recommendations for improving paternity establishment in both interstate and
intrastate cases.

Because Congress added the newly-mandated practices to section 466(a) of the
Act, they are requirements which States must meet as a condition of State plan
approval under section 454(20) of the Act.  These regulations add the new
State plan requirements to 45 CFR 302.70.  Each State's title IV-D plan must
be approved for the State to receive Federal financial participation in the
operation of its Child Support Enforcement program.

2.  Audit Provisions.  As a result of the enactment of the Child Support
Enforcement Amendments of 1984, OCSE published final audit regulations on
October 1, 1985, which governed the audits of State IV-D programs beginning in
FY 1984.  Section 452(a)(4) of the Act and implementing regulations require
that OCSE conduct audits of the effectiveness of State Child Support
Enforcement programs at least once every three years; specify that OCSE use a
substantial compliance standard to determine whether each State has an
effective IV-D program; provide that any State found not to have an effective
IV-D program in substantial compliance with the requirements of title IV-D of
the Act be given an opportunity to submit a corrective action plan and, upon
approval by OCSE, to take the corrective action necessary to achieve
substantial compliance with those requirements; provide for the use of a
graduated penalty of not less than 1 nor more than 5 percent of the Federal
share of a State's Aid to Families with Dependent Children (AFDC) program
funds if a State is not in substantial compliance; and specify the period of
time during which a penalty is effective.

On August 4, 1989, a final rule, Standards for Program Operations, was
published (54 FR 32284) to implement the requirements of sections 121 and 122
of the Family Support Act.  Specifically, this final rule revised 45 CFR Parts
302 and 303 to specify standards for processing child support enforcement
cases and timeframes for distributing child support collections under title
IV-D of the Act.  States were required to meet these standards beginning
October 1, 1990.

With regard to other Family Support Act requirements, on
May 15, 1991, a final rule was published which implemented the requirements
governing $50 pass-through payments, guidelines for setting child support
awards, mandatory genetic testing, paternity establishment and laboratory
testing (56 FR 22335).  The requirements governing immediate wage withholding,
review and adjustment of support obligations and monthly notice of support
collections were published on July 10, 1992 (57 FR 30658).  A final rule was
published on November 19, 1992 (57 FR 54515) to clarify timeframes for
processing child support collections.  Additional review and adjustment
requirements were published December 28, 1992 (57 FR 61559).

As a result of the passage of time, the child support provisions of the Family
Support Act and OBRA '93, and the necessary changes to program regulations, we
reexamined the audit process and regulations and developed this final
regulation.  In doing so, we considered the impact of the new requirements on
States and our experience with the audit process to date.  We considered
comments received in response to our notice of proposed rulemaking published
September 9, 1993 (58 FR 47417).

Furthermore, we considered the concerns that many States and other groups have
expressed about the current audit process.  First, there is a concern that the
scope, complexity, and length of the audit is expanding.  OCSE audits cover
numerous criteria and sub-criteria.  The child support provisions of the
Family Support Act of 1988 add to the complexity of the support enforcement
program, and hence the audit process, by significantly expanding the number of
criteria to be reviewed.  Partly as a result of this growing scope and
complexity, it takes an increasingly greater amount of time and effort to
conduct audits.  This may cause delays in obtaining results and in performing
audits in other States.  In addition, although service delivery is already the
primary focus of the audit (i.e., the 75 percent case action standard), there
is a concern that the audit should focus more on outcomes and results. 
Focusing more on outcomes and results, including the timeliness of providing
services, would allow the audit to better measure State program performance.

In response to concerns about the expanding scope of the audit, we have
redefined substantial compliance to focus on certain criteria:  (1)
service-related criteria that a significant number of States have failed to
comply with in the past; and (2) new or newly-revised criteria.  Eliminating
certain administrative or procedural criteria and focusing on service-related
criteria to the extent possible will produce a more results-oriented audit. 
The audit process is not the sole means through which State program
development and compliance is determined.  OCSE uses program reviews, the
State plan approval process, the program audit process, and the audit
resolution and tracking system to review and monitor State compliance and
performance.

This final regulation also specifies how audits would evaluate State
compliance with the standards for program operations as well as other
requirements mandated by the Family Support Act of 1988 and paternity
establishment requirements of OBRA '93 by setting forth new and revised audit
criteria and processes.  The rule combines related requirements into
groupings, and streamlines Part 305 by removing unnecessary sections.  The
requirements in this final regulation are effective for audits conducted for
periods beginning on or after December 23, 1994.


Description of Regulatory Provisions

1.  Paternity Establishment Provisions.

Required State Laws -- Section 302.70(a)

Section 466(a) of the Act requires a State to have laws that require the use
of these new paternity procedures.  Consistent with the rules implementing the
Family Support Act requirements, a State may comply by issuing regulations,
procedures, or court rules, instead of enacting laws, if they have the same
force and effect under State law on the parties to whom they apply.

To simplify the regulatory language, we have deleted effective dates of IV-D
State plan requirements previously listed in 302.70(a). 

Simple Civil Process for Voluntarily Acknowledging Paternity--Sections
302.70(a)(5)(iii) and 303.5(a)

This rule implements the requirements of new section 466(a)(5)(C) of the Act
by amending 302.70(a)(5) to add new paragraph (iii).  This provision requires
each State to have laws and procedures for a simple civil process for
voluntarily acknowledging paternity.  Under such process, the State must
provide that the
rights and responsibilities of acknowledging paternity are explained and
ensure that due process safeguards are afforded.    
The statute requires that the voluntary acknowledgment procedures include
hospital-based programs.  However, because the statute includes hospital-based
programs as part of a broader requirement for voluntary acknowledgment
procedures, we believe Congress intended these procedures to encompass more
than just hospital-based programs.  Therefore, new 302.70(a)(5)(iii)(B)
requires that the procedures include a process for voluntarily acknowledging
paternity outside of hospitals. 

IV-D Agency Activity.  To reflect the newly-mandated procedures for the
voluntary acknowledgment of paternity, 303.5(a) requires, for all cases
referred to the IV-D agency or applying for services under 302.33 in which
paternity has not been established, the IV-D agency must, as appropriate: (1)
provide an alleged father the opportunity to voluntarily acknowledge
paternity, in accordance with 302.70(a)(5)(iii), and (2) attempt to establish
paternity by legal process under State law.  (The IV-D agency is not required
to take additional action to establish paternity if, under State law, the
acknowledgment itself establishes paternity).


Hospital-Based Paternity Establishment Programs--Sections 301.1,
302.70(a)(5)(iii)(A), 303.5(g) and (h), 304.20(b)(2), and 304.23(d)

In enacting OBRA '93, the President and Congress recognized the importance of
establishing a child's paternity as close to the time of birth as possible, by
requiring hospital-based programs for obtaining voluntary acknowledgments. 
New 302.70(a)(5)(iii)(A) implements section 466(a)(5)(C) of the Act by
requiring each State to have laws, regulations, and/or binding procedures for
a hospital-based program for the voluntary acknowledgment of paternity during
the period immediately before or after the birth of a child.  At a minimum,
new 302.70(a)(5)(iii)(A) requires State law, regulation, and/or binding
procedure to compel all public and private birthing hospitals to participate
in hospital-based programs, as defined in 303.5(g)(2).  [However, under
302.70(d), a State may apply for an exemption from enacting a law,
regulation, or procedure providing for a hospital-based program, if the State
can assure that a hospital-based program otherwise meeting Federal
requirements is implemented in every birthing hospital in the State by January
1, 1995 (or later if Federal law governing the effective date allows) without
the necessity of enacting binding laws or regulations].  We define "birthing
hospital" at 301.1 as a hospital that has an obstetric care unit or that
provides obstetric services, or a birthing center associated with a hospital. 

Section 303.5(g) describes the State's responsibilities in implementing the
hospital-based program.  To accommodate divergent State practices, the State
as a whole, rather than the IV-D agency in particular, is responsible for
meeting the hospital-based program requirements at 303.5(g).  This approach
in no way relieves the State of the responsibility to meet Federal
requirements as a condition of IV-D State plan approval.

Section 303.5(g)(1) requires the State to establish, in cooperation with
hospitals, a hospital-based program in every public and private birthing
hospital.  States must have laws, regulations, and/or binding procedures in
place on October 1, 1993 (or if legislation is required, the beginning of the
first calendar quarter after the close of the first regular session of the
State legislature that began after August 10, 1993).  The programs must be
operational in birthing hospitals statewide no later than January 1, 1995
(unless Federal law governing the effective date gives the State additional
time; i.e., unless the State's first regular legislative session beginning
after August 10, 1993 precludes enactment by January 1, 1995). 
       
Elements of a Hospital-Based Program.  Section 303.5(g)(2) defines a
hospital-based program by listing the services and functions such a program
must, at a minimum, provide during the period immediately before or after the
birth of a child to an unmarried woman in the hospital.  These services are
based on information provided by States that previously implemented
hospital-based programs.  The State must ensure, in cooperation with the
hospitals, that the program performs all of these functions.

Each hospital-based program must provide voluntary acknowledgment
services to unmarried mothers and alleged fathers.  The program must provide
services regardless of the child's public assistance status or whether an
application has been filed for IV-D child support services.

Under 303.5(g)(2)(i), a hospital-based program provides to both the mother
and alleged father, if he is present in the hospital:  (A) written materials
about paternity establishment, (B) the forms necessary to voluntarily
acknowledge paternity, (C) a written description of the rights and
responsibilities of acknowledging paternity, and (D) the opportunity to speak
with staff, either by telephone or in person, who are trained to clarify
information and answer questions about paternity establishment.  In a case
where the alleged father is not present at the hospital, the hospital-based
program should provide to the unmarried mother the services described in
303.5(g)(2)(i). 

Under 303.5(g)(2)(ii), a hospital-based program provides the unmarried mother
and alleged father, if he is present, the opportunity to voluntarily
acknowledge paternity in the hospital.  A hospital-based program, under
303.5(g)(2)(iii), must afford due process safeguards, as required by State
law and procedure. 

Under 303.5(g)(2)(iv), a hospital-based program must forward completed
acknowledgments or copies to the entity designated under 303.5(g)(8).  This
will ensure that the IV-D agency has access to and can use the acknowledgments
in cases that become IV-D cases. 

Under 303.5(g)(3), a hospital-based program need not provide services related
to acknowledging paternity in cases where the mother or alleged father is a
minor or a legal action (e.g., adoption) is already pending, if provision of
such services is precluded by State law. 

Under 303.5(g)(4), the State must require that a voluntary acknowledgment
obtained through a hospital-based program be signed by both parents, and that
the parents' signatures be authenticated by a notary or witness(es).

Section 303.5(g)(5) requires the State to provide to all public and private
birthing hospitals in the State written materials about paternity
establishment, forms necessary to voluntarily acknowledge paternity, and
copies of a written description of the rights and responsibilities of
acknowledging paternity.  Hospital-based programs will then distribute these
materials and forms to unmarried mothers and alleged fathers in accordance
with 303.5(g)(2)(i).  While not a requirement, States may also wish to
provide applications for, and materials relating to, IV-D services to
hospitals for distribution to maternity patients or other interested parties.

Section 303.5(g)(6) requires the State to provide staff training, guidance,
and written instructions regarding the voluntary acknowledgment of paternity
as necessary to operate the hospital-based program.  Section 303.5(g)(7)
requires the State to assess each birthing hospital's program on at least an
annual basis.

Section 303.5(g)(8) requires the State to designate an entity to which
hospital-based programs must forward completed voluntary acknowledgments or
copies.  Under State procedures, this entity must be responsible for promptly
recording identifying information about the acknowledgments with a statewide
database, and the IV-D agency must have timely access to whatever identifying
information and documentation it needs to determine in accordance with
303.5(h) if an acknowledgment has been recorded and to seek a support order
on the basis of a recorded acknowledgment in accordance with 303.4(f).  Under
303.5(h), in IV-D cases needing paternity establishment, the IV-D agency must
determine if identifying information about a voluntary acknowledgment has been
recorded in the statewide database, in accordance with 303.5(g)(8).

FFP Availability for Hospital-Based Programs.  This regulation expands Federal
financial participation (FFP) availability for certain costs associated with
hospital-based programs.  Under
304.20(b)(2)(vi), FFP is available for payments of up to $20 to birthing
hospitals and other entities that provide prenatal or birthing services for
each voluntary acknowledgment obtained pursuant to an agreement with the IV-D
agency.  Section 304.20(b)(2)(vii) makes FFP available for the costs of
developing written and audiovisual materials about paternity establishment and
forms necessary to voluntarily acknowledge paternity and providing such
materials to birthing hospitals and other entities that provide prenatal or
birthing services.  Section 304.20(b)(2)(viii) makes FFP available for
reasonable and essential short-term training regarding voluntary
acknowledgment of paternity associated with a State's hospital-based program
as defined by 303.5(g)(2).  This rule also modifies 304.23(d), which limits
the availability of FFP for training to specific circumstances, to allow for
FFP as provided for in 304.20(b)(2)(viii).   

Effect of Voluntary Acknowledgment:  Presumption of Paternity; Admissible as
Evidence--Section 302.70(a)(5)(iv)

This rule implements the requirements of section 466(a)(5)(D) of the Act by
adding 302.70(a)(5)(iv).  This provision requires each State to have laws and
procedures under which the voluntary acknowledgment of paternity creates a
rebuttable or, at the option of the State, conclusive presumption of
paternity, and under which such voluntary acknowledgment is admissible as
evidence of paternity.  It is designed to ensure that voluntary
acknowledgments are meaningful and used to expedite paternity establishment in
every State.

A rebuttable presumption shifts the burden of proof to the presumed father to
disprove a paternity allegation.  A conclusive presumption has the same effect
as a judgment for paternity.  Even if a State chooses to adopt a conclusive
presumption, it may provide for conditions under which the presumption, like a
judgment, can be challenged and potentially overturned (e.g., in cases where
there is evidence that the acknowledgment was obtained by fraud or coercion,
or where signatures were forged).

Conditions for Admission of Genetic Test Results as Evidence--Section
302.70(a)(5)(v)

In recent years, scientific advancements in genetic testing have
revolutionized the paternity determination process in contested cases. 
Genetic tests can not only produce exclusionary evidence eliminating a man
from consideration as the biological father, but can also provide convincing
evidence reflecting the high probability that a particular man is the alleged
father (inclusionary results), leaving little or no doubt as to whether an
alleged father is actually the biological father.  Statutory or case law in
virtually all States provides that genetic test results are admissible as
evidence.  However, in some States, the process for admitting such evidence
can be cumbersome.

Section 302.70(a)(5)(v), which implements section 466(a)(5)(F) of the Act,
should improve the process for admitting test results in legal proceedings. 
It requires each State to have laws and procedures which provide that any
objection to genetic testing results must be made in writing within a
specified number of days before any hearing at which such results may be
introduced into evidence.  Further, laws and procedures must specify that if
no objection is made, a written report of the test results is admissible as
evidence of paternity without the need for foundation testimony or other proof
of authenticity or accuracy.

Presumption of Paternity Based on Genetic Test Results--Section
302.70(a)(5)(vi)

Section 466(a)(5)(G) of the Act and implementing regulation
at 302.70(a)(5)(vi) require each State to have laws and procedures which
create a rebuttable or, at the option of the State, conclusive presumption of
paternity based on genetic testing results which indicate a threshold
probability of the alleged father being the father of the child.  A
presumption of paternity should expedite paternity resolution. 

Voluntary Acknowledgment is Basis for Seeking Support Order--Sections
302.70(a)(5)(vii) and 303.4(f) 

We are implementing section 466(a)(5)(E) of the Act by adding
302.70(a)(5)(vii).  This provision requires each State to have laws and
procedures under which a voluntary acknowledgment must be recognized as a
basis for seeking a support order without requiring any further proceedings to
establish paternity.  
As a result, filing a petition seeking a support order and
information-gathering necessary for support order establishment should begin
in a IV-D case as soon as a voluntary acknowledgment is obtained.  This should
help ensure that the child receives financial support at the earliest possible
date. 

To reflect that a voluntary acknowledgment must serve as sufficient basis to
seek establishment of a support order, we amended 303.4 by adding paragraph
(f).  Section 303.4(f) requires the IV-D agency, in cases where a support
order has not been established, to seek a support order based on a voluntary
acknowledgment in accordance with 302.70(a)(5)(vii).  Therefore, the IV-D
agency must gather information and establish support administratively, by
consent, or by filing a petition for support order establishment upon receipt
of a voluntary acknowledgment of paternity.

Default Orders--Sections 302.70(a)(5)(viii) and 303.5(f)

We have implemented the requirements of new section 466(a)(5)(H) of the Act by
adding 302.70(a)(5)(viii).  Under this provision, each State must have laws
and procedures requiring that a default order be entered in a paternity case
upon a showing that process has been served on the defendant in accordance
with State law, that the defendant has failed to respond to service in
accordance with State procedures, and any additional showing required by State
law.  State law must require, not simply allow, tribunals, upon proper motion,
to enter default orders under these conditions. 

To reflect the new default order requirement, we added
303.5(f).  It requires the IV-D agency to seek entry of a default order by
the court or administrative authority in a paternity case by showing that
process has been served on the defendant, that the defendant has failed to
respond to service in accordance with State procedures, and any additional
showing required by State law, in accordance with 302.70(a)(5)(viii). 

Full Faith and Credit for Paternity Determinations--Section 302.70(a)(11)

We implemented the requirements of section 466(a)(11) of the Act by adding
302.70(a)(11).  This provision requires each State to have laws and
procedures under which the State must give full faith and credit to a
determination of paternity made by any other State, whether established
through voluntary acknowledgment or through administrative or judicial
processes. 

This provision should improve interstate processing since a State, upon
receiving a paternity determination made by another State, must recognize such
determination and move forward with the next step (e.g., support order
establishment or enforcement) without questioning or reopening the paternity
issue.
  
Expedited Processes for Paternity Establishment--Sections 302.70(a)(2),
303.4(d), and 303.101

The Child Support Enforcement Amendments of 1984 (Pub. L.
98-378) required States to have an expedited process within their judicial or
administrative systems for obtaining and enforcing child support orders.  At
the option of the State, the expedited processes could also include actions
for establishment of paternity.  Expedited process timeframes, established by
regulation, have been effective in prompting States to adopt expedited
administrative and quasi-judicial processes for establishing and enforcing
support orders.  Prior to enactment of OBRA '93, according to the IV-D State
plans, 19 States had also opted to extend expedited processes to paternity
establishment.  However, in many jurisdictions the paternity establishment
process, particularly in contested cases, is still protracted. 

To address this problem, OBRA '93 amended section 466(a)(2) of the Act to
mandate use of expedited processes for establishing paternity.  We have
implemented this new provision by revising
302.70(a)(2) to require each State to have laws and procedures for expedited
processes to establish paternity, in addition to the previously-mandated
expedited processes for establishing and enforcing child support orders.

As specified in section 466(a)(2) of the Act, expedited processes are defined
in Federal regulations.  The provision of the Act regarding expedited
processes for support order establishment and enforcement was previously
implemented by 303.101.  This rule amends these regulations to require
expedited processes for paternity establishment.  It also deletes
303.101(b)(3), which gave States the option of including paternity
establishment in their expedited processes, since use of an expedited process
for handling paternity cases is now mandatory. 

As with the expedited processes for support order establishment and
enforcement, under expedited paternity establishment processes both intrastate
and interstate cases must be included as required by 303.101(b)(1).

Paternity and Support Establishment Timeframe.  The regulatory definition of
expedited process is based on timeframes--States must process IV-D cases
within specified timeframes in order to be determined to be operating an
expedited process.  Because OBRA '93 mandates the expansion of expedited
processes to include paternity establishment, and because the regulatory
definition of expedited process is based on timeframes, we reexamined
previously-existing expedited process and program standard timeframes.

Although paternity establishment was not included in expedited process prior
to enactment of OBRA '93, there were two timeframes governing paternity
establishment under standards for program operations (see chart below). 
First, former 303.5(a)(1) was a "front-end" timeframe governing IV-D agency
activity.  It allowed the IV-D agency 90 calendar days, from the date of
locating the alleged father, to file for paternity establishment or serve
process (or document unsuccessful efforts), whichever occurred later in
accordance with State procedures.  Second, former
303.5(a)(2) was a "back-end" timeframe governing court or administrative
agency activity.  It allowed one year, from successful service of process or
the child becoming six months of age, to establish paternity or exclude the
alleged father.

There were also two sets of timeframes for support order establishment. 
First, there was a "front-end" timeframe at former 303.4(d) for IV-D agency
activity.  It allowed the IV-D agency 90 calendar days, from establishing
paternity or locating the obligor, to establish a support order (by consent)
or complete service of process necessary to commence proceedings to establish
a support order (or document unsuccessful efforts).  Second, there were
expedited process timeframes for support order establishment at previous
303.101(b)(2) governing activity within a State's quasi-judicial or
administrative agency.  Expedited process timeframes were designed to ensure
that cases were adjudicated expeditiously in the State's court or
administrative system.  Under the previous definition of expedited process, a
State's process or combination of processes was considered "expedited" when
the State completed support order establishment from service of process to
disposition in 90 percent of all cases in 3 months, 98 percent in 6 months,
and 100 percent in 12 months.  These timeframes also applied to enforcement
actions.
 
_________________________________________________________________
Former Timeframes for Paternity and Order Establishment



Action     Reg Cite     Starting Point  Time Period       Ending Point
Needed

Establish
Paternity  303.5(a)(1)  Locate          90 calendar days  File for paternity or
                                                          SOP, whichever later
           303.5(a)(2)  SOP or child's   1 year           Paternity established or
                        sixth month                        man excluded


Establish  303.4(d)     Paternity estab-  90 calendar days  Support order established
Support                 lishment or Locate                    or SOP                                       SOP

           303.101(b)(2) Service of process 90% in 3 months  Support Order established/
                               cess         98% in 6 months     recorded or action
                                            100% in 1 Year      dismissed
                                                                                                                                      ed
SOP = Service of process; if agency is unable to serve process, it must
document unsuccessful efforts.
_________________________________________________________________


This rule replaces the timeframes for paternity and support order
establishment at 303.4(d), 303.5(a)(1), 303.5(a)(2), and 303.101(b)(2) with
two new timeframes (see chart below) at
303.4(d) and 303.101(b)(2)(i).  Both of the new timeframes apply to IV-D
cases needing support order establishment, regardless of whether paternity has
been established.      
_________________________________________________________________

New Timeframes for Establishment of Support Order and, if Necessary, Paternity



Action Needed     Reg Cite   Starting Point   Time Period       Ending
                                                                 Point


Establish Support 303.4(d)   Locate          90 calendar     Support order
  Order and, if                                days          established or SOP
  Necessary Paternity                                                                                                                     SOP

                  303.101    Service of       75% in 6 months  Support order
                  (b)(2)(i)     Process       90% in 12 months  established/
                                                                recorded or
                                                                action dismissed
  SOP = Service of process; if agency is unable to serve process, it must
  document unsuccessful efforts.

_________________________________________________________________

The new "front-end" timeframe at 303.4(d) requires the
IV-D agency, within 90 calendar days of locating the alleged father or
noncustodial parent, to establish a support order or complete service of
process necessary to commence proceedings to establish a support order and, if
necessary, paternity [or document unsuccessful attempts to serve process, in
accordance with the State's guidelines defining diligent efforts under
303.3(c)].

In addition, a State must meet the new "back-end" timeframe at
303.101(b)(2)(i) in order to have an expedited process for paternity
establishment and support order establishment.  This timeframe requires that
actions to establish support orders be completed from the date of service of
process to the time of disposition within the following timeframes:  (A) 75
percent in 6 months; and (B) 90 percent in 12 months. 

We define "disposition" in regulation at 303.101(b)(2)(iv) as the date on
which a support order is officially established and/or recorded or the action
is dismissed.  This definition codifies policy previously stated at
OCSE-AT-88-19.  However, we have changed the word "obligation" (contained in
previous policy and the proposed rule) to "order", at the suggestion of a
commenter.  Parents have the obligation to support their children from the
time of birth; the establishment or recording of a child support order should
be used to measure case disposition.

Under 303.101(b)(2)(iii), for purposes of the expedited process timeframe for
paternity and support order establishment, in cases where the IV-D agency uses
long-arm jurisdiction and disposition occurs within 12 months of the date of
service of process, the case may be counted as successful within the 6 month
tier of the timeframe, regardless of when disposition occurs within the 12
months.  Crediting the State's efforts to keep the proceeding as a one-State
case in this way should encourage States to rely upon long-arm jurisdiction to
the greatest extent possible.  
  
Unlike the previous paternity establishment timeframe at former
303.5(a)(2), the new expedited process timeframe begins with service of
process, regardless of the age of the child.

Enforcement Timeframes.  The expedited process timeframe at
303.101(b)(2)(i) does not apply to enforcement.  Instead,
303.101(b)(2)(ii) specifies that in IV-D cases where a support order has been
established, actions to enforce the support order must be taken within the
timeframes specified in 303.6(c)(2) and 303.100.  States will be required to
meet the existing timeframe at 303.6(c)(2) for all enforcement actions other
than income withholding and State/Federal income tax refund offset.  The
timeframe at 303.6(c)(2) requires enforcement action within no more than 30
calendar days (if service of process is not needed) or 60 calendar days (if
service of process is needed) of identifying a delinquency or other
support-related noncompliance, or location of the absent parent, whichever is
later.  States will also be required to meet the existing timeframes at
303.100 in income withholding cases.

Judges as Presiding Officers.  By deleting the phrase "and under which the
presiding officer is not a judge of the court" in  former 303.101(a), we have
eliminated the requirement which precluded using a judge as a presiding
officer in carrying out expedited processes.  With this change, expedited
processes are now defined in 303.101(a) as administrative or expedited
judicial processes, or both, which increase effectiveness and meet processing
timeframes. 

Other Changes.  We amended the safeguards required under
303.101(c) to include paternity establishment as well as support order
establishment and enforcement.  We revised 303.101(c)(1) to require that
paternities as well as support orders established via expedited process, by
means other than judicial process, must have the same effect under State law
as paternities and orders established by full judicial process within the
State.  We also revised 303.101(c)(3) to require that the parties be provided
a copy of the voluntary acknowledgment of paternity, paternity determination,
and/or support order.  The remaining safeguards are unchanged except that they
now also apply to expedited paternity processes:  the due process rights of
the parties involved must be protected as required by 303.101(c)(2); there
must be written procedures for ensuring the qualification of presiding
officers as required by 303.101(c)(4); recommendations of presiding officers
may be ratified by a judge as allowed by 303.101(c)(5); and action taken may
be reviewed under the State's generally applicable judicial procedures as
provided by 303.101(c)(6).

We amended the functions of presiding officers in 303.101(d) to cover
paternity establishment as well as support order establishment and
enforcement.  Section 303.101(d)(2) requires presiding officers to evaluate
evidence and make recommendations to establish paternity as well as to
establish and enforce orders.  Section 303.101(d)(3) requires presiding
officers to accept voluntary acknowledgments of paternity, in addition to
voluntary acknowledgments of support liability and stipulated agreements
setting the amount of support to be paid. 

Presiding officers will continue to have authority to enter default orders. 
However, we amended this requirement at
303.101(d)(4) to reflect the language of the default order provision in new
302.70(a)(5)(viii) and 303.5(f).  As amended, 303.101(d)(4) requires that
the functions of presiding officers include entering default orders upon
showing that process has been served on the defendant in accordance with State
law, that the defendant has failed to respond to service in accordance with
State procedures, and any additional showing required by State law.  This
default order provision applies to paternity as well as support order
establishment cases.  We also added a new function for presiding officers in
paternity cases at 303.101(d)(5)--ordering genetic tests in contested
paternity cases in accordance with 303.5(d)(1). 

Furthermore, we amended 303.101(e) regarding exemptions from expedited
process to recognize that expedited process now includes paternity
establishment.  Under the amended provision, a State is able to request an
exemption from any of the expedited process requirements for a political
subdivision on the basis of the effectiveness and timeliness of paternity
establishment, support order issuance or enforcement within the political
subdivision in accordance with the provisions of 302.70(d).

2.  Audit Provisions.  This final regulation amends Part 305 in several ways: 
by revising the evaluation criteria to reflect requirements in 45 CFR Parts
302 and 303 in effect prior to the Family Support Act that the States often
had not substantially complied with in the past; by adding criteria to reflect
the enactment of the Family Support Act of 1988 including those governing
standards for program operations, guidelines for setting child support awards,
immediate wage withholding, and review and adjustment of child support orders;
by eliminating duplicative regulations from Part 305; by adding evaluation
criteria to reflect the paternity establishment provisions of the OBRA '93;
and, by redefining criteria that States must meet to be determined to be in
substantial compliance.

General definitions -  301.1

For consistency with the changes to Part 305, the definition of "procedures"
is removed from 305.1(b) and placed in alphabetical order in 301.1.

Scope of Part 305 - 305.0

Regulations at 305.0 describe 45 CFR Part 305 section by section.  Sections
305.10 through 305.13 describe the audit; 305.20 defines an effective program
for purposes of an audit;  305.98 sets forth performance indicators; 305.99
governs the notice and corrective action period; and 305.100 governs the
imposition of a penalty. 

Previously, sections 305.21 through 305.57 set forth criteria 
used to determine program effectiveness.  However, 305.21 through 305.57
merely cross-referenced and/or restated the requirements in the corresponding
State plan regulations in Part 302 and related program requirements in Part
303.  Accordingly, we have removed 305.21 through 305.57 and, revised
305.20 which lists administrative criteria States must meet and
service-related criteria for which States must have and use required
procedures in a specified percentage of the cases reviewed for each criterion. 
In addition, we have revised 305.20 to permit the States, when timeframes are
not met, to receive credit when the necessary service is provided during the
audit period.  Also, 305.20 cross-references relevant State plan and program
regulations contained in Parts 302 and 303.

Accordingly, 305.0 is revised to state:  Sections 305.10 through 305.13
describe the audit; 305.20 sets forth audit criteria and subcriteria OCSE
will use to determine program effectiveness and defines an effective program
for purposes of an audit; 305.98 sets forth the performance indicators OCSE
will use to determine State IV-D program effectiveness; 305.99 provides for
the issuance of a notice and corrective action period if a State is found by
the Secretary not to have an effective IV-D program; and 305.100 provides for
the imposition of a penalty if a State is found by the Secretary not to have
had an effective program and to have failed to take corrective action and
achieve substantial compliance within the period prescribed by the Secretary.

Definitions --  305.1

As previously discussed, the definition of "procedures" in 305.1(b) was moved
to 301.1.  Section 305.1 continues to provide that the definitions found in
301.1 apply to Part 305.

Timing and Scope of the Audit --  305.10

For consistency with the changes made elsewhere in Part 305, 305.10(a) is
revised to state that the audit of each State's program will be a
comprehensive review using the criteria prescribed in 305.20 and 305.98.  As
a technical change, the title "Standards for Audit of Governmental
Organizations, Programs, Activities, and Functions" in paragraph (c)(2) is
changed to "Government Auditing Standards."

State Comments -- 305.12

Previous regulations at 305.12(a) provided for informing the IV-D agency
during the audit entrance conference of those political subdivisions of the
State that would be audited and making preliminary arrangements for personnel
and information to be made available.  We replaced this provision with more
general language indicating that any necessary arrangements for conducting the
audit will be made at the audit entrance conference.  However, no change in
current practice, or in the information provided to States, is intended or
anticipated as a result of this change.  States will continue to be notified
in the letter they receive from OCSE in the quarter preceding commencement of
the audit of all information necessary to prepare for the audit.

Effective Support Enforcement --  305.20

Previous regulations at 305.20 set forth the criteria which are used to
measure State compliance with the requirements of title IV-D of the Act. 

1.                Revised definition of substantial compliance.  Section
305.20 redefines the criteria that States must meet to be determined to be in
substantial compliance.  As part of this final rule, 305.20 is changed to
address regulatory requirements including non-AFDC Medicaid and former AFDC
cases, program standards and timeframes requirements, other program
requirements under Pub. L. 100-485 (e.g., guidelines for setting child support
awards, review and adjustment of child support orders, monthly notice of
support collections, mandatory genetic testing, and immediate wage
withholding) and paternity establishment requirements under OBRA '93.

While program regulations specify how States must operate
IV-D programs to be in compliance with State plan requirements and what
program expenditures may qualify for Federal funding, audit regulations
specify those requirements which must be met in order for a State to be
determined to be in substantial compliance with the requirements of title IV-D
of the Act and to avoid fiscal penalties.  We have redefined substantial
compliance to focus on certain criteria:  (1) service-related criteria with
which a significant number of States have failed to comply in the past; and
(2) new or newly-revised criteria.  Focusing on these criteria eliminates many
of the administrative or procedural criteria which were previously part of
substantial compliance determinations and which are currently being met,
thereby making the audit more results-oriented.  As previously stated, the
audit process is not the sole means through which State program development
and compliance is determined.  OCSE uses program reviews, the State plan
approval process, the program audit process, and the audit resolution and
tracking system to review and monitor State compliance and performance.

a.  Ten percent materiality test.  First, the determination of substantial
compliance includes criteria that, based on past audits, many States have
failed.  In selecting these criteria, we specifically examined initial and
annual audits conducted under the prior audit regulations, and determined the
number of States that had failed each existing criterion compared to the
number of audit reports issued since that criterion became effective. 
Therefore, the determination of substantial compliance includes examination of
those criteria which, in general, more than ten percent of the States had
failed during that period.

The ten percent test is consistent with the auditing concept of "materiality."
According to auditing theory, an audit should be able to detect errors and
conditions that materially affect the ability of the child support program to
achieve desired results and benefits.  Ten percent is commonly used as a
benchmark for materiality.  In this case, we believe that if less than ten
percent of States are failing a given criterion, we can omit that criterion
from the determination of substantial compliance without materially affecting
the audit's conclusions about the child support program in the State. 
However, if a specific criterion meets the other test for inclusion in
substantial compliance (e.g., it is new or newly-revised), it is not deleted.

More than ten percent of the States failed the following criteria:  Reports
and maintenance of records; separation of cash handling and accounting
functions; establishing paternity; distribution; services to individuals not
receiving AFDC or title IV-E foster care assistance; State parent locator
service; support obligations; notice of collection of assigned support;
Federal income tax refund offset; withholding of unemployment compensation;
wage or income withholding; imposition of liens against real and personal
property; posting security, bond or guarantee to secure payment of overdue
support; and medical support enforcement.

b.  New and newly-revised criteria.  After applying the ten percent
materiality test to existing audit criteria, we turned to new requirements
(for the most part, based on the Family Support Act of 1988) that have not
been audited in the past and which, therefore, cannot be judged by the ten
percent materiality rule.  All of these requirements will be evaluated in the
determination of whether a State's IV-D program is in substantial compliance. 
Additionally, because there have been regulatory revisions to several other
pre-existing requirements [e.g., provision of services in interstate IV-D
cases, services to individuals not receiving AFDC or title IV-E foster care
assistance, and medical support requirements], we retained these revised
criteria in the determination of substantial compliance. 

Based on past experience with State implementation of new or
significantly-changed program requirements, we believe that States' activities
related to requirements mandated by the Family Support Act and the OBRA '93
and revised, pre-existing requirements must be audited to ensure State
compliance.  These criteria are:  collection and distribution of support
payments by the IV-D agency, 302.32; distribution of support collections,
302.51; notice of collection of assigned support, 302.54; guidelines for
setting child support awards, 302.56; establishment of cases and maintenance
of case records, 303.2; location of non-custodial parents, 303.3;
establishment of support obligations, 303.4; establishment of paternity,
303.5; enforcement of support obligations, 303.6; State income tax refund
offset, 303.6; provision of services in interstate IV-D cases, 303.7; review
and adjustment of support obligations, 303.8; case closure, 303.11; securing
medical support information, 303.30; securing and enforcing medical support
obligations, 303.31; procedures for wage or income withholding, 303.100, and
expedited processes, under 303.101.

We emphasize that States are required to meet all Federal requirements
contained in program regulations, whether or not the requirements are included
under 305.20.  Auditors may still examine requirements that are not contained
in 305.20, but would issue management recommendations, instead of findings of
substantial noncompliance, for failure to meet program requirements not
included under 305.20.  Implementation of management recommendations should
help States to improve their performance.  In addition, compliance with all
program requirements will continue to be monitored by Regional Offices of the
Administration for Children and Families through program and financial reviews
and the State plan approval process.

In addition to narrowing the number of criteria contained in the determination
of substantial compliance, we have streamlined the audit regulations by
grouping related requirements under certain criteria (e.g., wage or income
withholding under enforcement).  Grouping is merely a way to evaluate related
requirements and will allow audit results to be reported in a more timely
manner.  States must still meet the requirements of each specific regulation
cited.

2.  Criteria States must meet to be determined to be in substantial
compliance.  Paragraph 305.20(a) requires that, for audit periods beginning
on or after December 23, 1994, a State must meet the IV-D State plan
requirements contained in Part 302 of this chapter measured as set forth in
paragraph (a). 

a. Administrative criteria.  Under 305.20(a)(1), the State must meet the
requirements under the following criteria:

(1) Statewide Operations, 302.10;

(2) Reports and Maintenance of Records, 302.15(a);

(3) Separation of cash handling and accounting functions, 302.20; and

(4) Notice of Collection of Assigned Support, 302.54.

b.                Service-related criteria.

i.  90 percent standard for case opening and closure.  Unless applications are
provided upon request and accepted in a timely manner and cases are opened and
maintained appropriately, needed IV-D services cannot be provided. 
Furthermore, with regard to case closure criteria, it is essential that only
those cases for which there is no reasonable expectation of establishing
paternity, obtaining a support order, or collecting child support, either now
or in the future, are closed. 

In response to our request for comments regarding the 90 percent standard
proposed in the September 9, 1993 proposed rule, we received many insightful
comments, which are set forth later in this preamble.  In reviewing comments
to the proposed rule, we agree that all program services should be evaluated
using a consistent standard (75 percent), and are limiting the application of
the 90 percent standard to case opening requirements in 303.2(a) and case
closure requirements in 303.11.  The requirements at 303.2(b) regarding the
standard, and the requirements at 303.2(a) regarding the opening of a case
will be evaluated using the 90 percent standard establishment of a case record
and determination of necessary action on the case will be evaluated using the
75 percent.  Therefore, we require that, in order to be determined to be in
substantial compliance, States must have and use the procedures for providing
applications and information and accepting applications set forth in 303.2(a)
and case closure requirements at 303.11, which were effective October 1,
1990, in at least 90 percent of the cases reviewed for each criterion.

To reflect the changes discussed above, 305.20(a)(2) provides that, for
audits conducted for any period beginning on or after December 23, 1994, to be
determined to be in substantial compliance, the State must have and use
procedures required under the following criteria in at least 90 percent of the
cases reviewed for each criterion:

(1) Establishment of Cases, 303.2(a); and

(2) Case Closure, 303.11.

Under the case closure criteria, auditors will evaluate cases closed during
the audit period to determine compliance with the requirements of 303.11.  It
is important to recognize that States will be evaluated to determine whether
closure of cases was appropriate.  As explained in response to comments in the
final rule governing Standards for Program Operations [54 FR at 32303], States
are not required to close cases, however, and should a case which meets the
criteria for case closure be left open, it would not count against the State
for the purpose of determining compliance.

ii.  75 percent standard for providing services.  Section 305.20(a)(3)
provides that, for audit periods beginning on or after December 23, 1994, to
be determined to be in substantial compliance, the State must have and use
procedures required under the following criteria in at least 75 percent of the
cases reviewed for each criterion:

(1) Collection and Distribution of Support Payments, including:  Collection
and distribution of support payments by the IV-D agency under 302.32(b) and
(f); distribution of support collections under 302.51; and distribution of
support collected in title IV-E foster care maintenance cases under 302.52;

(2) Establishment of paternity and support orders, including:  establishment
of a case under 303.2(b); services to individuals not receiving AFDC or title
IV-E foster care assistance, under 302.33(a)(1) through (4); provision of
services in interstate IV-D cases under 303.7(a), (b), and (c)(1) through
(6), and (8) through (10); location of non-custodial parents under 303.3;
establishment of paternity under 303.5(a) and (f); guidelines for setting
child support awards under 302.56; and establishment of support obligations
under 303.4(d), (e) and (f);

(3) Enforcement of support obligations, including, in all appropriate cases: 
establishment of a case under 303.2(b); services to individuals not receiving
AFDC or title IV-E foster care assistance, under 302.33(a)(1) through (4);
provision of services in interstate IV-D cases under 303.7(a), (b), and
(c)(1) through (6), and (8) through (10); location of non-custodial parents
under 303.3; enforcement of support obligations under 303.6, including
submitting once a year all appropriate cases in accordance with 303.6(c)(3)
to State and Federal income tax refund offset; and wage withholding under
303.100.  In cases in which wage withholding cannot be implemented or is not
available and the non-custodial parent has been located, States must use or
attempt to use at least one enforcement technique available under State law in
addition to Federal and State income tax refund offset, in accordance with
State laws and procedures and applicable State guidelines developed under
302.70(b) of this chapter;

(4) Review and adjustment of child support orders, including:  establishment
of a case under 303.2(b); services to individuals not receiving AFDC or title
IV-E foster care assistance, under 302.33(a)(1) through (4); provision of
services in interstate IV-D cases under 303.7(a), (b), and (c)(1) through
(6), and (8) through (10); location of non-custodial parents under 303.3;
guidelines for setting child support awards under 302.56; and review and
adjustment of support obligations under 303.8; and

(5) Medical support, including:  establishment of a case under 303.2(b);
services to individuals not receiving AFDC or title IV-E foster care
assistance, under 302.33(a)(1) through (4); provision of services in
interstate IV-D cases under 303.7(a), (b), and (c)(1) through (6), and  (8)
through (10); location of non-custodial parents under 303.3; securing medical
support information under 303.30; and securing and enforcing medical support
obligations under 303.31.

In this final regulation, we have established a standard for expedited
processes at 303.101(b)(2)(i) and (iii), and corresponding audit criteria at
305.20(a)(5) to measure the establishment of a support order and, when
necessary, the establishment of paternity.  These changes reflect the
paternity establishment provisions of the OBRA '93.  Since States that need to
establish paternity and a support order often complete both activities at
about the same time, and the new expedited processes standard covers both
activities, we have combined into a single grouping the audit criteria we will
use to evaluate State compliance with Federal requirements for establishment
of an order and paternity establishment under the 75 percent audit standard. 
We believe that this change will further streamline the audit process.

Location Evaluated as Part of Services Provided.  Under this final regulation,
location is not listed as a separate criterion but is included under the
paternity and support order establishment, enforcement, review and adjustment,
and medical support criteria.  The location function is not an end in itself,
but an essential component of delivering program services.  We do not believe
that this diminishes the significance of the location function.  On the
contrary, it underscores the need to use all appropriate location sources in
order to proceed with delivering the necessary services in the case. 
Moreover, it is illustrative of the transition to a more results-oriented,
outcome-focused audit.

Thus, if a case requires establishment of a support obligation and the
non-custodial parent's whereabouts are unknown, the State must meet the
applicable location requirements at 303.3 and, if the non-custodial parent
has been successfully located, the requirements for support obligation
establishment at 303.4(d), (e), and (f) and 302.56 in any case reviewed for
purposes of the audit.  If the State does not meet the location requirements
in a case requiring support obligation establishment, it would be counted
against the State in computing the efficiency rate for support obligation
establishment and the audit findings would reflect that the State failed to
substantially comply with the support obligation establishment requirements
due, at least in part, to a failure to meet the location requirements.  In
response to our request for specific comments regarding the potential effect
of evaluating locate as a component of other services rather than as a
specific service, we received valuable  and constructive input, which is
described more extensively in the Response to Comments section later in this
preamble.

If a support obligation cannot be established because the parent from whom
support is sought is not located, even though the State met all other location
requirements (i.e., checked all appropriate sources and repeated location
attempts) this would not be counted against the State.  There is, currently, a
perceived misunderstanding that States must obtain a successful outcome in a
case in order to receive credit for having worked that case.  We would like to
clarify that if a State meets all Federal requirements, including timeframes,
with respect to a particular case but cannot locate the non-custodial parent
or alleged father, for example, the State would not be penalized for failure
to provide the necessary service.  Instead, we would credit the State with
taking appropriate action.

Interstate and Non-AFDC Services as Part of Services Provided.
Under this final regulation, the provision of services in interstate cases,
and services to individuals not receiving AFDC or title IV-E foster care are
included under the paternity and support order establishment, enforcement,
review and adjustment, and medical support criteria.  It is long-standing
Federal policy that all appropriate services should be provided in all cases
regardless of type (non-AFDC IV-D; interstate IV-D).  Therefore, we believe
that all types of IV-D cases (i.e., AFDC, title IV-E foster care, non-AFDC,
and interstate) should be evaluated in a similar manner.  In addition, the
requirements unique to interstate and non-AFDC cases are not an end in
themselves, but an essential component of delivering program services for such
cases.  Furthermore, these changes are illustrative of a transition to a more
results-oriented outcome-focused audit.

Under this approach, States will still be held accountable for meeting
requirements that are unique to interstate cases, 303.7(a), (b), (c)(1)
through (6) and (8) through (10), as well as functions and services otherwise
covered by criteria under 305.20 to determine whether the State is in
substantial compliance with the requirement to provide appropriate services in
an interstate case.  Similarly, States will still be held accountable for
meeting those aspects of 302.33 unique to non-AFDC IV-D cases [i.e.,
302.33(a)(1) through (4)] to determine whether the State is in substantial
compliance with requirements to provide services to non-AFDC individuals. 
These changes are also addressed in the response to comments section of this
preamble. 

Enforcement.  Under this final regulation, use of some enforcement techniques
would be mandatory in all appropriate cases in accordance with Federal
requirements, i.e., wage withholding and submitting once a year all cases, in
accordance with 303.6(c)(3), to State and Federal income tax refund offset. 
States must take these actions in all appropriate cases, in accordance with
303.6.  Section 303.6(c)(3) requires annual submittal for income tax refund
offset of all cases which meet the certification requirements under 303.102
and State guidelines developed under 302.70(b) for State income tax refund
offset, and which meet the certification requirements under 303.72 for
Federal income tax refund offset.

Cases exist in which wage withholding is not available or appropriate because,
for example, the obligated parent is self- employed, unemployed, or does not
have a source of income subject to withholding; or the obligor and/or employer
cannot be located.  In these cases, if the non-custodial parent has been
successfully located, some other enforcement technique, in addition to Federal
and State income tax refund offset, must be used.  States have discretion with
respect to the use of other enforcement techniques (besides wage withholding
and Federal and State income tax refund offset) as long as there is compliance
with Federal regulations, State procedures, and guidelines developed by the
State under 302.70(b) which outline when it is inappropriate to use an
enforcement technique.

Under this final regulation, for cases in which wage withholding cannot be
implemented or is unavailable, States will receive credit, for audit purposes,
for taking or attempting an enforcement action if they do any one of the
following in accordance with 303.6:  impose a lien against real and personal
property under 303.103; require the obligor to post security, bond, or other
guarantee to secure payment of overdue support under 303.104; make
information available to consumer credit reporting agencies under 303.105;
withhold unemployment compensation under 302.65; or request full collection
services by the Secretary of the Treasury under 303.71.  A State will also
receive credit for enforcement if it takes an enforcement action that is not
specifically listed above, if the action is consistent with Federal or State
laws and procedures.

This final regulation emphasizes the use of wage withholding and income tax
refund offset, which are often the most effective enforcement techniques, yet
ensures that more difficult cases in which wage withholding cannot be
utilized, are not ignored.  For those cases in which wage withholding is not
implemented, it ensures that at least one enforcement action is taken in each
case during the audit period.  States are encouraged to implement several
enforcement techniques concurrently, although they will not be penalized for
failure to do so.

iii.  Credit for providing services.       Paragraph (a)(4) indicates that,
with respect to meeting the 75 percent standard under 305.20(a)(3), for any
audit period beginning on or after December 23, 1994:

(1)  Notwithstanding timeframes for establishment of cases in 303.2(b);
provision of services in interstate IV-D cases under 303.7(a), (b), and
(c)(4) through (6), (8) and (9); location and support order establishment
under 303.3(b)(3) and (5), and 303.4(d), if a support order needs to be
established in a case and an order is established during the audit period in
accordance with the State's guidelines for setting child support awards, the
State will be considered to have taken appropriate action in that case for
audit purposes.

(2) Notwithstanding timeframes for establishment of cases in 303.2(b);
provision of services in interstate IV-D cases under 303.7(a), (b), and
(c)(4) through (6), (8) and (9); location and review and adjustment of support
orders contained in 303.3(b)(3) and (5), and 303.8, if a particular case has
been reviewed and meets the conditions for adjustment under State laws and
procedures in 303.8, and the order is adjusted, or a determination is made,
as a result of a review that an adjustment is not appropriate, during the
audit period in accordance with the State's guidelines for setting child
support awards, the State will be considered to have taken appropriate action
for review and adjustment of orders in that case for audit purposes.

(3) Notwithstanding timeframes for establishment of cases in 303.2(b);
provision of services in interstate IV-D cases under 303.7(a), (b), and
(c)(4) through (6), (8) and (9); location and wage withholding in
303.3(b)(3) and (5), and 303.100, if wage withholding is appropriate and
implemented in a particular case, and wages are withheld during the audit
period, the State will be considered to have taken appropriate action in that
case for audit purposes.

(4) Notwithstanding timeframes for establishment of cases in 303.2(b);
provision of services in interstate IV-D cases under 303.7(a), (b), and
(c)(4) through (6), (8) and (9); location and enforcement of support
obligations in 303.3(b)(3) and (5), and 303.6, if wage withholding is not
appropriate in a particular case, and the State uses at least one enforcement
technique available under State law in addition to Federal and State income
tax refund offset, which results in a collection received during the audit
period, the State will be considered to have taken appropriate action in the
case for audit purposes.

When a State is considered to have taken an appropriate action in a case for
audit purposes, as stated above, the case would count towards meeting the 75
percent standard in 305.20(a)(3) for paternity and support order
establishment, review and adjustment of support orders, and enforcement of
support obligations, as appropriate.  Under paragraph (a)(4), a State would
receive credit in such an instance for taking an action in a case even if
relevant timeframes are missed.  These timeframes include the timeframe for
establishment of cases under 303.2(b); timeframes for location in
303.3(b)(3) and (5); and timeframes for provision of services in interstate
IV-D cases under 303.7(a), (b), and (c)(4) through (6), (8) and (9).

These credits are another indication of the transition to a more
results-oriented audit.  We believe that, for audit purposes, a State should
not be penalized when intermediate timeframes are missed in a case if a
successful result is achieved within the audit period (i.e., paternity and a
support order are established, an order is adjusted or determined to be not
needed, wages are withheld, or a collection is made), since these results are
the primary goals of the child support enforcement program.  Furthermore, we
believe that this position is responsive to the concerns of States that
missing an interim timeframe may create a disincentive to work the case
through to completion of the action.

However, under this final regulation, if interim timeframes are not met in a
case, States would only get credit for taking an appropriate action if the
action is successfully completed, not simply attempted, within the audit
period.  For example, if timeframes are missed in a case, a State can get
credit for: paternity and order establishment, only if paternity (if needed)
and a support order are established; wage withholding, only if withholding is
implemented and wages are withheld as a result; and support order adjustment,
only if the order is adjusted or determined to not require adjustment. 
concede

We emphasize that a State has to successfully complete an action in order to
receive credit in a case only if timeframes are not met in the case.  If, in a
particular case, a State complies with the requirements, including the
timeframes, the State will get credit for taking an action in that case even
if the action is not successful.

Collection of unpaid support through enforcement is a major goal of the
program.  As a result, when enforcement timeframes are missed, the State will
be credited for wage withholding, or, if wage withholding is not appropriate
in a given case, the use of some other appropriate enforcement technique
available under State law, in addition to the Federal and State income tax
refund offset, if such action results in a collection during the audit period.  
Wage withholding is subject to specific timeframes in 303.100.  State and
Federal income tax refund offset, also a highly efficient and effective
procedure, are not subject to similar case processing timeframes.  Other
enforcement techniques are subject to the general timeframe in 303.6.

Since some enforcement techniques, such as liens and consumer  credit
reporting, may not immediately result in collections and because it is
difficult to determine when and if these actions have been successful in
collecting support, States will only be credited when a collection is
received.  In successful wage withholding cases, collections usually occur
almost immediately, so it is easy to determine when it has been successfully
completed.

We emphasize that all timeframes, including those for paternity and support
order establishment, review and adjustment, and wage withholding, are still
Federal requirements that States must meet.  However, as described above,
States may receive credit for taking an action under 305.20(a)(4) when the
outcome is successful even if timeframes are missed in a case.

c.  Expedited processes.  Paragraph (a)(5) requires that, for audit periods
beginning on and after December 23, 1994, the State must meet the requirements
for Expedited Processes under 303.101 to be in substantial compliance.  Prior
to the issuance of this final rule, the compliance percentages contained in
the expedited processes regulation were used to evaluate State performance
rather than the 75 percent audit standard.  The new compliance percentages
contained in the expedited processes regulation revised in this final rule
will be evaluated in the same manner.  Therefore, the evaluation of the
expedited processes compliance percentages discussed earlier in this preamble
will continue to be separated from the service-related category which is
evaluated using a 75 percent standard.  

d.  Performance indicators.  Paragraph (a)(6) continues to require that the
State must meet the criteria referred to in 305.98(c) of this part relating
to the performance indicators prescribed in paragraph (a) of that section.

Paternity Establishment Percentage Standard -- Proposed 305.97

Section III of the Family Support Act of 1988 amended section 452 of the Act
by adding a new paternity establishment standard, at subsection (g), that
States must meet for any fiscal year beginning on or after October 1, 1991. 
In the proposed rule, we proposed to add a new 305.97, titled Paternity
Establishment Percentage Standard, which would set forth the requirements
States must meet in order to be determined to be in substantial compliance
with title IV-D of the Act.  However, because of recent statutory changes to
the standard, it will be dealt with separately and is not included in this
final rule.  As part of the OBRA '93 (Pub. L. 103-66), Congress revised the
paternity establishment standard, including the description of data needed to
calculate the ratio.  Subsequently, Congress enacted Pub. L. 103-432 which
included technical amendments that corrected the description of the terms of
the standard. 

Performance Indicators -- 305.98

Section 305.98(c) is revised to indicate that OCSE continues to use the
procedures and audit criteria in that paragraph to measure State performance. 
Paragraph (d) is revised to state that the performance indicator scoring
system will be described and updated periodically by the Office (i.e., OCSE). 
We will publish any changes to the scoring system in the FEDERAL REGISTER in
advance of their effective date.

Notice and Corrective Action Period -- 305.99

Former 305.99(b)(2) provided that the notice of substantial noncompliance
identify any audit criteria listed in 305.20(a)(2), (b)(2) or (c)(2) that
the State met only marginally (that is, in 75 to 80 percent of the cases
reviewed).  Revised 305.99(b)(2) provides that the notice of substantial
noncompliance identify any audit criteria listed in 305.20(a)(3) of this part
that the State met only marginally [that is, in 75 to 80 percent of cases
reviewed for criteria in (a)(3)].  This change replaces the reference to
305.20(a)(2), (b)(2) or (c)(2) with 305.20(a)(3).