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NPRM: Revision of Child Support Enforcement Program and Audit Regulations

AT-93-12

Published: September 9, 1993
Information About:
State/Local Child Support Agencies
Topics:
Program Audit
Types:
Policy, Action Transmittals (AT), Regulations

ACTION TRANSMITTAL

OCSE-AT-93-12

September 9, 1993

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

SUBJECT:Proposed Rule - Revision of Child Support Enforcement Program and Audit Regulations

ATTACHMENT:This proposed rule would: (1) amend 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 Social Security Act (the Act); (2) specify 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 (P.L. 100-485); and (3) redefine substantial compliance to place greater focus on performance and streamline Part 305 by removing unnecessary sections. This proposed regulation would be effective for audits conducted for periods beginning subsequent to publication of the final rule.

COMMENT PERIOD:Consideration will be given to written comments received by November 8, 1993. Address comments to: Deputy Director, Office of Child Support Enforcement, Department of Health and Human Services, 370 L'Enfant Promenade, S.W., Washington, D.C. 20447, Attention: Director, Policy and Planning Division.

REGULATION REFERENCE:45 CFR Parts 301 and 305

INQUIRIES TO: ACF Regional Administrators

Robert C. Harris

Acting Deputy Director

Office of Child Support Enforcement

4150-04

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

Office of Child Support Enforcement

45 CFR Parts 301 and 305

Child Support Enforcement Program; Revision of Child Support Enforcement Program and Audit Regulations

RIN - 0970-AA74

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

ACTION: Notice of proposed rulemaking.

SUMMARY: OCSE is proposing to amend 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 Social Security Act (the Act). This regulation would specify 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 (P.L. 100-485). This proposal also redefines substantial compliance to place greater focus on performance and streamlines Part 305 by removing unnecessary sections. This proposed regulation would be effective for audits conducted for periods beginning subsequent to publication of the final rule.

DATE: Consideration will be given to written comments and suggestions received by November 8, 1993.

ADDRESS: Address comments to: Deputy Director, Office of Child Support Enforcement, Department of Health and Human Services, Mail Stop OCSE/PPD, 4th floor, 370 L'Enfant Promenade, S.W., Washington, D.C. 20447. Comments will be available for public inspection Monday through Friday, 8:30 a.m. to 5:00 p.m. in the Department's office at the above address.

FOR FURTHER INFORMATION CONTACT: Lourdes Henry on (202) 401-5440 or FTS 8-441-5440.

SUPPLEMENTARY INFORMATION

PAPERWORK REDUCTION ACT

This rule does not require any information collection activities and, therefore, no approvals are necessary under the Paperwork Reduction Act.

BACKGROUND

As a result of the enactment of the Child Support Enforcement Amendments of 1984, (Pub. L. 98-378), OCSE published final audit regulations on October 1, 1985, which affected the audits of State IV-D programs beginning in FY 1984. Section 9 of Pub. L. 98-378 and the implementing regulations require that OCSE conduct an audit 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 l nor more than 5 percent 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.

In order to be found to have an effective program in substantial compliance with the requirements of title IV-D of the Act, a State must meet the State plan requirements contained in 45 CFR Part 302. Under current regulations, there are separate audit criteria in Part 305 for each of the State plan requirements in Part 302. Currently, 29 criteria are listed in õ305.20 (which include numerous related subcriteria) which encompass the requirements of part 302 which are procedural in nature. These procedural criteria must be met for a finding of substantial compliance. In addition, the regulations list 23 criteria (which include numerous related subcriteria) which encompass the requirements in Part 302 which are related to the provision of services. These criteria must be met in 75 percent of the cases reviewed for a finding of substantial compliance. Finally, to be found in substantial compliance, a State must pass performance indicators specified in õ305.98 with an aggregate score of at least 70.

On January 31, 1989, OCSE published a Notice of Proposed Rulemaking (54 FR 4841) (hereinafter referred to as the January 31 proposed rule) which would have consolidated the current audit criteria by grouping them by major program function. Thus, instead of auditing each criterion separately, we proposed that two or more criteria would be grouped under one performance standard for evaluation. In addition, because we stated in the audit regulations published October 1, 1985 (50 FR 40120), that additional performance indicator components measuring paternity establishment and cost avoidance would be added to the performance measurement portion of the audit, those indicator components were included in the January 31 proposed regulation. In conjunction with the additional indicator components, we proposed a revised scoring system for State performance on the performance indicator components.

We only finalized those aspects of the January 31 proposed rule which establish the time periods covered by audits or follow-up reviews. That final rule, published March 8, 1990 (55 FR 8465), responded to comments received on the particular portions of the proposed regulation which were finalized. It indicated that we would review the rest of the comments when a new proposed regulation was developed.

The March 8 final rule specifies that: 1) the audit covers a period comprised of any 12 consecutive months; 2) follow-up reviews cover the first three-month period beginning after the corrective action period; and 3) for States operating under corrective action with respect to performance indicators, follow-up reviews cover the first full four quarters following the corrective action period.

On August 4, 1989, another final rule, Standards for Program Operations, was published (54 FR 32284) which implements the requirements of sections 121 and 122 of P.L. 100-485. Specifically, the 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 by October 1, 1990.

With regard to other Family Support Act requirements, on May 15, 1991, a final rule was published which implemented the requirements of P.L. 100-485 governing $50 pass-through payments, mandatory support guidelines, mandatory genetic testing, paternity establishment and laboratory testing (56 FR 22335). The requirements of P.L. 100-485 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). 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 P.L. 100-485, and the necessary changes to program regulations, we have re-examined the audit process and regulations and have developed the current proposal. In developing this proposal, we considered the impact of the new requirements on States and our experience with the audit process to date. We also reviewed the comments on the January 31 proposal.

In addition, 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 increase

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+< 37us 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 are proposing to redefine substantial compliance to focus on certain criteria: (1) service-related criteria that a siqnificant number of States have failed to comply with in the past; and, (2) new or newly revised criteria. By eliminating certain administrative or procedural criteria and focusing on service-related criteria to the extent possible, we believe we can move toward 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 audit resolution and tracking system, as well as the established audit process, to review State compliance.

This proposed rule also: specifies how audits would evaluate State compliance with the new standards for program operations as well as other new requirements mandated by P.L. 100-485 by setting forth new and revised audit criteria and processes; combines related requirements into groupings; and streamlines Part 305 by removing unnecessary sections. The requirements in this proposed rule would be effective for audits conducted for periods beginning subsequent to publication of the final rule.

In response to the standards and timeframes set forth in the final rule, Standards for Program Operations, a number of commenters asked that States not be subject to a determination of substantial compliance with the program standards as a result of an audit until there has been a period of evaluation of State performance with respect to the standards. In addition, the preponderance of commenters indicated that they could not meet the timeframes without Statewide and comprehensive automated information management systems and asked that the requirements not be effective until October 1, 1995, when States are required by the Family Support Act of 1988 to have operational automated support enforcement systems in place. A number of commenters requested that we change the current audit standard of 75 percent compliance with program requirements to begin with a lower percentage of compliance for the new requirements which became effective October 1, 1990, and increase the percentage of cases which must be processed for substantial compliance determinations between fiscal years 1991 and 1995.

As stated in the preamble to the standards for program operations final rule, Congress intended, by requiring the Secretary topublish final regulations within 10 months of the effective date of P.L. 100-485, that the effective date of the regulation should not be inordinately delayed. We believe that most States should have been able to meet the new standards and timeframes by October 1, 1990, and will evaluate State implementation of these standards. However, States will not be subject to findings of substantial noncompliance and penalties for failure to meet these requirements and timeframes until after final audit regulations are published. Since States will not be penalized for substantial noncompliance with the program standards requirements until after final audit regulations are published, adequate time will have passed to allow all States to meet program standards. Nevertheless, given the deficiencies in the delivery of support enforcement services that necessitated the setting of program standards in the first instance, States should already be focusing their efforts to meet these standards. In developing the Standards for Program Operations, OCSE consulted with a work group composed of representatives of organizations representing Governors, State welfare administrators and State child support enforcement directors prior to issuing the proposed regulation. We received comments from more than 150 commenters representing States, localities, advocacy groups and private individuals. These comments were taken into consideration in drafting the final regulation. In response to the comments suggesting that we lower the percentage rate of compliance, we believe that the 75 percent standard has proven to be a reasonable standard. We also believe it is essential to maintain the standard to ensure that States work all cases and provide all necessary services in accordance with the new program standards.

STATUTORY AUTHORITY

These proposed regulations are published under the authority of sections 1102, 402(a)(27), 452(a)(4), 452(g), and 403(h) of the Act. Section 1102 authorizes the Secretary of HHS 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 the 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). Section 452(g) of the Act, added by section 111(a) of P.L. 100-485, sets forth the requirements governing paternity establishment percentages which States must meet to be found to comply substantially with the requirements of Title IV-D. Finally, section 403(h) provides for the imposition of an audit penalty of not less than one nor more than five 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.

REGULATORY PROVISIONS

OCSE proposes to amend Part 305 in several ways: by revising the evaluation criteria to reflect new requirements in 45 CFR Parts 302 and 303, including those governing standards for program operations, mandatory guidelines, immediate wage withholding, review and adjustment of support orders, and other provisions of P.L. 100-485; by eliminating duplicative regulations from Part 305; and by redefining criteria that States must meet to be determined to be in substantial compliance.

General definitions - õ301.1

For consistency with the changes to Part 305, this proposed rule would move the definition of "procedures" in õ305.1(b) and place it in alphabetical order in õ301.1.

Scope of Part 305 - õ305.0

Current regulations at õ305.0 describe 45 CFR Part 305 section by section: Sections 305.10 through 305.13 describe the audit; õ305.20 defines an effective program for purposes of an audit; õõ305.21 through 305.57 and õ305.98 set forth the audit criteria used to determine program effectiveness including performance indicators; õ305.99 governs the notice and corrective action period; and õ305.100 governs the imposition of a penalty.

We believe õõ305.21 through 305.57 are unnecessary and serve no substantive purpose because these regulations merely cross-reference and/or restate the requirements in the corresponding State plan regulations in Part 302 and related program requirements in Part 303. Accordingly, we propose to delete õõ305.21 through 305.57 and, revise õ305.20 which lists administrative criteria States must meet and service related criteria for which States must have and use procedures required in a specified percentage of the cases reviewed for each criterion. In addition, õ305.20 would cross reference relevant State plan and program regulations contained in Parts 302 and 303 and make other changes described below.

Accordingly, õ305.0 would be revised to state: Sections 305.10 through 305.13 describe the audit; õ305.20 sets forth audit criteria and subcriteria the Office will use to determine program effectiveness and defines an effective program for purposes of an audit; õ305.97 sets forth the paternity establishment percentage requirements; õ305.98 sets forth the performance indicators OCSE will use to determine State IV-D program effectiveness; õ305.99 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 õ305.100 provides for the imposition of a penalty if a State is found by the Secretary not to have had an effective program and has failed to take corrective action and achieve substantial compliance within the period prescribed by the Secretary.

Definitions -- õ305.1

As discussed above, the definition of "procedures" in õ305.1(b) would be moved to õ301.1. Section 305.1 would continue to provide that the definitions found in õ301.1 apply to Part 305.

Timinq and Scope of the Audit -- õ305.10

For consistency with the changes proposed elsewhere in Part 305, õ305.10(a) would be revised to state that the audit of each State's program will be a comprehensive review using the criteria prescribed in õõ305.20, 305.97 and 305.98. As a technical change, the name "Standards for Audit of Governmental Organizations, Programs, Activities, and Functions" in paragraph (c)(2) would be changed to "Government Auditing Standards."

State Comments -- õ305.12

Current regulations at õ305.12(a) provide for informing the IV-D agency during the audit entrance conference of those political subdivisions of the State that will be audited and making preliminary arrangements for personnel and information to be made available. We propose to replace this provision with more general language indicating that any necessary arrangements for conducting the audit will be made at the audit entrance conference. States will be informed, either in the letter States receive from OCSE in the quarter preceding commencement of the audit or at the entrance conference, of all information necessary to prepare for the audit. No change in current practice, or information provided to the States, is intended or anticipated as a result of this proposed change.

Effective Support Enforcement -- õ305.20

Current õ305.20 sets forth the criteria which are used to measure State compliance with the requirements of title IV-D of the Act. Section 305.20(a) lists selected criteria and related subcriteria which must be met or under which the procedures involved must be used in at least 75 percent of the cases reviewed for audits conducted for fiscal year 1984. Additional criteria and related subcriteria as well as performance indicators incorporated into the audit of State child support programs for audit periods subsequent to FY 1984 because of changes in title IV-D of the Act and implementing program regulations are listed in õõ305.20(b), (c) and (d). In total, the regulations list 29 criteria which must be met and 23 criteria where the required procedures must be used in 75 percent of the cases reviewed.

1. Revised definition of substantial compliance. We are proposing to completely revise õ305.20 by redefining the criteria that States must meet to be determined to be in substantial compliance. As part of this revision, õ305.20 would be changed to address new regulatory requirements including non-AFDCMedicaid and former AFDC cases, program standards and timeframes requirements, and other new program requirements under P.L. 100-485 (i.e., mandatory guidelines, review and adjustment of support orders, monthly notice of support collections, mandatory genetic testing, and immediate wage withholding).

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. Our goal in revising the audit regulations is to redefine 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. Focusing on these criteria would eliminate many of the administrative or procedural criteria that are currently 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 audit resolution and tracking system, as well as the established penalty process, to review State compliance.

a. Ten percent materiality test. First, we propose including in the determination of substantial compliance criteria that, based on past audits, many States have failed. Specifically, we looked at the results of FY 1984 through FY 1987 audits, and calculated the number of States that had failed each existing criterion compared to the number of audit reports issued since that criterion became effective. We propose including in the determination of substantial compliance those criteria which, in general, more than 10 percent of the States had failed during that period.

The 10 percent cutoff point is consistent with the auditing concept of "materiality." According to auditing theory, the audit should be able to detect errors and conditions that materially affect the ability of the child support program achieve desired results and benefits. Ten percent is commonly used as a benchmark for materiality. In this case, we believe that if less than 10 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 revised), it would not be deleted.

More than 10 percent of States failed the following criteria: Reports and maintenance of records; separation of cash handlingand accounting functions; establishing paternity; distribution; individuals not otherwise eligible; State parent locator service; support obligations; notice of collection of assigned support; Federal 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 10 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 therefore cannot be judged by the 10 percent materiality rule. We propose to consider all of these requirements in the determination of whether a State's IV-D program is in substantial compliance. Also, there have been regulatory revisions to several pre-existing requirements (e.g., interstate, non-AFDC, and medical support requirements), and we propose to retain 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 stemming from the Family Support Act 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, õ302.32; distribution of support collections, õ302.51; notice of collection of assigned support, õ302.54; guidelines for setting child support awards, õ302.56; establishment of cases and maintenance of case records, õ303.2; location of absent parents, õ303.3; establishment of support obligations, õ303.4; establishment of paternity, õ303.5; enforcement of support obligations, õ303.6; State income tax refund offset, õ303.6; provision of services in interstate IV-D cases, õ303.7; review and adjustment of support obligations, õ303.8 (as amended at 57 FR 61559 on December 28, 1992); case closure, õ303.11; securing medical support information, õ303.30; securing and enforcing medical support obligations, õ303.31; procedures for wage or income withholding, õ303.100, and expedited process under õ303.101.

We would like to emphasize that States are required to meet all Federal requirements contained in program regulations, whether or not the requirements are included under õ305.20. Auditors may still examine requirements that are not contained in õ305.20, but would issue management recommendations, instead of findings of substantial noncompliance, for failure to meet program requirements not included under õ305.20. Implementation of management recommendations should help States to improve their performance. In addition, compliance with all program requirements will continue to be monitored by OCSE Regional Offices 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 also propose streamlining the audit regulations by grouping related requirements under certain criteria (e.g., collection and distribution of support payments, enforcement, etc). 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. The proposed paragraph õ305.20(a) would require that, for audit periods beginning after publication of this regulation as a final rule, 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 õ305.20(a)(1), the State must meet the requirements under the following criteria:

(1) Statewide Operations, õ302.10;

(2) Reports and Maintenance of Records, õ302.15(a);

(3) Separation of cash handling and accounting functions, õ302.20; and

(4) Notice of Collection of Assigned Support, õ302.54.

b. Service-related criteria.

i. 90 percent standard for case opening and closure. In response to the Notice of Proposed Rulemaking on Standards for Program Operations, commenters applauded the addition of new timeframes and requirements in the areas of case opening, the application process and case closure. Many commenters pointed out that because these areas are crucial to the success of the child support enforcement process, allowing States to fail to take appropriate action in up to 25 percent of the cases (through application of the 75 percent audit standard) reviewed was excessive. Alternative percentages of compliance suggested ranged from 90 to 98 percent of the cases reviewed.

We agree that unless applications are provided and accepted in a timely manner and cases are opened and maintained appropriately, IV-D services cannot be provided. Furthermore, with regard to the new case closure criteria, it is essential that only those cases in 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. Therefore, we propose to require that, in order to be determined to be in substantial compliance, States must have and use the procedures for establishment of cases and maintenance of case records and case closure at õõ303.2 and 303.11, which were effective

October 1, 1990, in at least 90 percent of the cases reviewed for each criterion. We specifically request comments regarding this proposal.

To reflect the changes discussed above, proposed õ305.20(a)(2) would provide that, for audits conducted for any period beginning after publication of this regulation as a final rule, 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 and Maintenance of Case Records, õ303.2; and

(2) Case Closure, õ303.11.

Under the case closure criteria, auditors would evaluate cases closed during the audit period to determine compliance with the requirements of õ303.11. States are not required to close cases, however, and should an unworkable case be left open, it would not count against the State during an audit.

ii. 75 percent standard for providing services. Proposed õ305.20(a)(3) would provide that, for audit periods beginning after publication of this regulation as a final rule, 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 õ302.32(b) and (f); distribution of support collections under õ302.51; and distribution of support collected in title IV-E foster care maintenance cases under õ302.52;

(2) Services to Individuals not Receiving AFDC or Title IV-E Foster Care Assistance, õ302.33(a);

(3) Establishment of Support Orders, including: Location of absent parents under õ303.3; guidelines for setting child support awards under õ302.56; and establishment of support obligations under õ303.4(d) and (e);

(4) Establishment of Paternity, including: Location of absent parents under õ303.3; and establishment of paternity under õ303.5(a);

(5) Enforcement of Support Obligations, including, in all appropriate cases: Location of absent parents under õ303.3; enforcement of support obligations under õ303.6, including submitting once a year all appropriate cases in accordance with õ303.6(c)(3) to State and Federal income tax refund offset; and wage withholding under õ303.100. In cases in which wage withholding cannot be implemented or is not available and theabsent 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 tax refund offset, in accordance with State laws and procedures and applicable State guidelines developed under õ302.70(b) of this chapter;

(6) Provision of Services in Interstate IV-D Cases, including õ303.7(a), (b), and (c);

(7) Review and Adjustment of Support Obligations, including: Location of absent parents under õ303.3; guidelines for setting child support awards under õ302.56; and review and adjustment of support obligations under õ303.8 (as amended at 57 FR 61559 on December 28, 1992); and

(8) Medical Support, including: Location of absent parents under õ303.3; securing medical support information under õ303.30; and securing and enforcing medical support obligations under õ303.31.

Under this proposal, location is not listed as a separate criterion but is included under the paternity establishment, support order establishment, review and adjustment, medical support, and enforcement criteria because the location function is not an end in itself and is often the initial step in providing these program services. We do not believe that this places less emphasis on the location function. On the contrary, it will emphasize the need to exhaust location sources in order to proceed with the necessary services in the case. Moreover, it is illustrative of the transition to a more results-oriented audit.

Thus, if a case requires support obligation services and the absent parent's whereabouts are unknown, the State must meet the applicable location requirements at õ303.3 and the requirements for support obligation establishment at õõ303.4(d) and (e) 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 note 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. We would like specific comments regarding the potential effect of evaluating locate as a component of other services rather than as a specific service.

If a support obligation cannot be established because the alleged father is not located, even though the State met all other location requirements (i.e., checked all 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 locatethe absent or putative 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.

We would also like to clarify that States must meet the medical support requirements in õõ303.30 and 303.31, and are subject to an audit under Part 305 of State performance with respect to those requirements, irrespective of any optional cooperative agreement with a State Medicaid agency under 45 CFR Part 306.

Under current audit procedures, enforcement is evaluated in three ways: (1) An overall enforcement criterion under which a State must identify and contact a delinquent obligor and take any enforcement action; (2) a combined enforcement criterion under which a State, in accordance with State guidelines/criteria, must implement liens against real and personal property, withholding of unemployment compensation, State tax refund offset, and posting security, bond, or other guarantee to secure payment of overdue support; and, (3) individual criteria under which enforcement techniques (e.g., wage withholding, Federal tax offset) are evaluated separately. According to the second way of evaluating enforcement, a State must use all appropriate enforcement techniques, in accordance with guidelines and procedures developed under õ302.70 or criteria established in õ302.65(c)(3), in order to get credit, for purposes of substantial compliance, in a case. The third way of evaluating enforcement considers whether a State is taking all appropriate actions in accordance with Federal regulations and State statutes and procedures. Thus, these different ways of evaluating enforcement may require concurrent application of several enforcement techniques.

We are proposing that, in order to get credit for enforcement in a case, a State must implement wage withholding and Federal and State income tax refund offset, if appropriate; and, if wage withholding is not available or appropriate, attempt to use at least one other enforcement technique. Under this proposal, 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 õ303.6(c)(3), to State and Federal income tax refund offset. States must take these actions in all appropriate cases, in accordance with õ303.6. Section 303.6(c)(3) requires annual submittal to tax offset of all cases which meet the certification requirements under õ303.102 and State guidelines developed under õ302.70(b) for State income tax refund offset, and which meet the certification requirements under õ303.72 for Federal income tax refund offset.

Cases exist in which wage withholding is not available or appropriate because, for example: the absent parent is self employed, unemployed, or does not have a source of income subject to withholding; or the employer/absent parent cannot be located. In these cases some other enforcement technique, in addition to Federal and State tax refund offset, must be used. States have discretion with respect to the use of other enforcement techniques (beside wage withholding and Federal and State tax refund offset) as long as there is compliance with Federal regulations, State procedures, and guidelines developed by the State under õ302.70(b) which outline when it is inappropriate to use an enforcement technique.

Under this proposal, in cases where wage withholding cannot be implemented or is unavailable, States will be given credit, for audit purposes, for taking or attempting an enforcement action if they do any one of the following in accordance with õ303.6: impose a lien against real and personal property under õ303.103; require the obligor to post security, bond, or other guarantee to secure payment of overdue support under õ303.104; make information available to consumer credit reporting agencies under õ303.105; withhold unemployment compensation under õ302.65; or request full collection services by the Secretary of the Treasury under õ303.71. 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 State laws and procedures.

This proposal would emphasize the use of wage withholding and tax refund offset, which are often the most effective enforcement techniques while ensuring that more difficult cases, those where wage withholding and/or tax offset cannot be utilized, are not ignored. Furthermore, it should ensure that at least one enforcement action is taken in each case during the audit period, without penalizing States for failing to implement several enforcement techniques concurrently.

iii. Credit for providing services. Proposed paragraph (a)(4) would indicate that, with respect to meeting the 75 percent standard under õ305.20(a)(3), for any audit period beginning after the date the final regulation is published:

(1) Notwithstanding timeframes for location and paternity establishment contained in õõ303.3(b)(3) and 303.5, if paternity establishment is needed in a particular case and paternity is established during the audit period, the State will be considered to have taken appropriate action to establish paternity in that case for audit purposes.

(2) Notwithstanding timeframes for location and support order establishment contained in õõ303.3(b)(3) and 303.4, if a support order needs to be established 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 to establish an order in that case for audit purposes.

(3) Notwithstanding timeframes for location and review and adjustment of support orders contained in õõ303.3(b)(3) and303.8, if a particular case has been reviewed and meets the conditions for adjustment under State laws and procedures in õ303.8, and the order is adjusted 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.

(4) Notwithstanding timeframes for location and wage withholding in õõ303.3(b)(3) 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.

(5) Notwithstanding timeframes for location and enforcement of support obligations in õõ303.3(b)(3) 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 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 proposed õ305.20(a)(3) for paternity establishment, support order establishment, support order adjustment, and enforcement of support obligations, as appropriate. Under proposed 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 location in õ303.3(b)(3) since, as mentioned earlier, we are proposing that location be evaluated as a part of other criteria.

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 timeframes are missed in a case if a successful result is achieved (paternity or a support order is established, an order is adjusted, wages are withheld, or a collection is made), since these results are the main goals of the child support enforcement program. We further believe that this position is responsive to the concerns of States that missing an interim timeframe, when a successful result is achieved in a case, may create a disincentive to work the case.

However, under this proposal, if 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 establishment only if paternity is established; support order establishment only if an order is established; wage withholding only if withholding is implemented and wages are withheld as aresult; and support order adjustment only if an order is adjusted.

We would like to emphasize that a State has to successfully complete an action in order to get credit in a case only if timeframes are not met in the case. If, in a case, a State complies with the requirements, including timeframes, in proposed õ305.20(a)(3), the State will get credit for taking an action in that case even if the action is not successful.

Enforcement is a major goal of the program. As a result, when enforcement timeframes are missed, we propose giving credits for wage withholding, or when 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 tax refund offset, which results in a collection received during the audit period. Wage withholding is subject to specific timeframes in õ303.100. State and Federal income tax refund offset, although also highly efficient and effective procedures, are not subject to similar case processing timeframes. Other enforcement techniques are subject to the general timeframe in õ303.6.

Since some enforcement techniques, such as liens and consumer credit reporting, do not immediately result in collections and it is difficult to determine when these actions have been successful in enforcing an order, we propose only to give credit when a collection is received as a result of use of the technique. In successful wage withholding cases, collections occur almost immediately, so it is easy to determine when it has been successfully completed.

With respect to paternity establishment, we are considering an option that would allow States that meet the paternity establishment percentage standard in the proposed õ305.97 to be exempt from the proposed paternity establishment audit criteria at õ305.20(a)(3)(iv) and (4)(i). We believe this option is consistent with a more results-oriented audit approach. However, the paternity establishment percentage standard and related data need to be tested and validated before we could implement this approach. In addition, we are concerned that timeliness is not addressed by the paternity establishment percentage standard. We would like specific comments on this approach including suggestions for incorporating a timeliness measure in the paternity establishment percentage standard.

We emphasize that all timeframes, including those for paternity establishment, 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 proposed õ305.20(a)(4) when the outcome is successful even if timeframes are missed in a case.

c. Expedited processes. Proposed paragraph (a)(5) would require that, for audit periods beginning after the date the final regulation is published, the State must meet the requirements for Expedited Processes under õ303.101(b) and (e) to be in substantial compliance. The compliance percentages contained in the expedited processes regulation necessitate separating it from the service-related category which is evaluated using a 75 percent standard.

d. Performance indicators. Proposed paragraph (a)(6) would continue to require that the State must meet the criteria referred to in õ305.98(c) of this part relating to the performance indicators prescribed in paragraph (a) of that section.

e. Paternity establishment standard. Proposed paragraph (b) would require that, for any fiscal year beginning on or after October 1, 1991, the State must meet the requirements for the paternity establishment percentage standards under õ305.97 of this part.

Paternity Establishment Percentage Standard -- õ305.97

Section III of the Family Support Act of 1988 amended section 452 of the Act by adding a new paternity establishment standard, Section 452(g), that States must meet for any fiscal year beginning on or after October 1, 1991.

To implement this requirement, we propose to add a new õ305.97 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.

Proposed õ305.97(a) would define, for purposes of this section, the terms: "Paternity establishment percentage", which means the number of children receiving services under title IV-A or IV-D of the Act who were born out of wedlock and for whom paternity has been established, divided by the total number of children receiving AFDC or IV-D services who were born out of wedlock; "Total number of children" to specify that it does not include any child who is a dependent child by reason of the death of a parent or any child with respect to whom an applicant or recipient is found to have good cause for refusing to cooperate under õ232.41 of this chapter; and "The applicable number of percentage points," which means three percentage points multiplied by the number of fiscal years between fiscal year 1989 and the fiscal year being evaluated.

As explained in program instructions OCSE-AT-88-20 (December 28, 1988), later amended by OCSE-AT-89-3 (March 6, 1989), each State was required to report the data necessary to calculate baseline data for the paternity establishment percentage as of December 31, 1988. This data will be used to measure State compliancewith the requirements in õ305.97(b). Thus, for all children in IV-D cases that were open on December 31, 1988, regardless of whether such cases received any IV-D services during 1988, or previously, the following information is required:

(1) The total number of children who were born out of wedlock; and

(2) The number of children who were born out of wedlock and for whom paternity has been established.

As noted in AT-90-12, it is permissible to count a child for whom paternity must be established even though the child was not born out of wedlock.

Failure of a State to report acceptable baseline data could result in a finding of non-compliance since appropriate information will not be available to determine whether the State met the statutory standard. As set forth in section 111 of P.L. 100-485, the Secretary will include in the existing annual report to the Congress this data and future data upon which the paternity establishment percentages for States for a given fiscal year are based.

Section 111 also specifies that the Secretary may modify the requirements to take into account such additional variables as the Secretary identifies that affect the ability of a State to meet the requirements. We did not do so in this proposal because we have insufficient experience and data to identify any variables. Should such variables be identified in the future, we would consider modifications to the requirements.

Proposed õ305.97(b) would set forth the paternity establishment percentage standard that States must meet for any fiscal year beginning on or after October 1, 1991. A State would be found not to have complied substantially unless its paternity establishment percentage for such fiscal year equals or exceeds, on the last day of the fiscal year: (1) 50 percent; (2) the paternity establishment percentage of the State for fiscal year 1988 (the baseline data calculated as of December 31, 1988), increased by the applicable number of percentage points; or (3) the paternity establishment percentage determined with respect to all States for such fiscal year.

In order to determine the reliability of the data used to compute the performance indicators under õ305.98, OCSE auditors evaluate the States' expenditure and collection reporting systems, as well as the reporting systems for paternity data used to compute the paternity establishment standard. If the auditors determine that the system(s) is unreliable, it may result in a penalty under the administrative criterion Reports and Maintenance of Records, õ302.15(a).

Performance Indicators -- õ305.98

The performance indicators were developed in 1983 as a way to help evaluate State IV-D program performance. The indicators in current regulations evaluate the cost effectiveness of State IV-D programs and the reimbursement rate of assistance payments made to those receiving AFDC for reasons other than unemployment in two-parent families. Currently, an accounts receivable indicator is specified but not included in the scoring system. The performance indicators do not address IV-D functions such as paternity establishment and do not take into account the welfare cost avoidance value of the child support enforcement program.

We now believe it is necessary to delay any revisions to performance indicators until such time as more refined indicators can be devised and States have been given time to implement the requirements of P.L. 100-485, specifically, the new standards for program operations. Furthermore, given the fact that the standards for program operations will enable us to more effectively evaluate State IV-D program performance, we are committed to studying the entire subject of performance indicators to determine which output measures will be the most meaningful reflection of IV-D program performance.

The only change we propose to make to õ305.98 at this time is to revise õ305.98(d) to state that the performance indicator scoring system will be described and updated periodically by the Office (i.e., OCSE). We are deleting the current requirement which states that we will describe and update the scoring system every two years to allow for the flexibility and time necessary to thoroughly review the current system. We will publish any changes to the scoring system in the Federal Register for public comment in advance of their effective date.

Notice and Corrective Action Period -- õ305.99

Current paragraph (b)(2) provides that the notice of substantial noncompliance identify any audit criteria listed in õ305.20(a)(2), (b)(2) or (c)(2) that the State met only marginally (that is, in 75 to 80 percent of the cases reviewed). Proposed paragraph (b)(2) would provide that the notice of substantial noncompliance identify any audit criteria listed in õ305.20(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 õ305.20(a)(2), (b)(2) or (c)(2) with õ305.20(a)(3). Also the definition of marginally-met is changed for consistency with the proposed changes to õ305.20.

REGULATORY FLEXIBILITY ANALYSIS

The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the Regulatory Flexibility Act (Pub. Law 96-354), that this regulation will not result in a significant impact on a substantial number of small entities. The primary impact is onState governments which are not considered small entities under the Act.

REGULATORY IMPACT ANALYSIS

The Secretary has determined, in accordance with Executive Order 12291 that this rule does not constitute a "major" rule. A major rule is one that is likely to result in:

(1) An annual effect on the economy of $100 million or more;

(2) A major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or

(3) Significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign based enterprises in domestic or export markets.

This proposed rule will have little or no net economic effect, because it will not change the requirements of State Child Support Enforcement programs or the penalties which may be levied against programs which fail to substantially comply with the requirements. The net effect here is not on actual State program practices but rather, on how these practices will be evaluated.

LISTS OF SUBJECTS

45 CFR Part 301

Child Support, Grant programs/social programs.

45 CFR Part 305

Accounting, Child support, Grant programs/social programs and Reporting and recordkeeping requirements.

(Catalog of Federal Domestic Assistance Program No. 93.023, Child Support Enforcement Program)

Dated:June 9, 1993.

Laurence J. Love

Acting Assistant Secretary

for Children and Families

Approved:July 23, 1993

Donna E. Shalala

Secretary

For the reasons set out in the preamble, we propose to amend 45 CFR Parts 301 and 305 as follows:

The authority citation for Part 301 continues to read as set forth below:

Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1301, and 1302.

2. Section 301.1 is amended by adding in alphabetical order the definition of "Procedures."

õ 301.1 General definitions.

* * * * *

Procedures means a written set of instructions which describe in detail the step by step actions to be taken by child support enforcement personnel in the performance of a specific function under the State's IV-D plan. The IV-D agency may issue general instructions on one or more functions, and delegate responsibility for the detailed procedures to the office, agency, or political subdivision actually performing the function.

* * * * *

3. The authority citation for Part 305 is revised to read as set forth below:

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

4. Section 305.0 is revised to read as follows:

õ305.0 Scope.

This part implements the requirements in sections 452(a)(4) and 403(h) of the Act for an audit, at least once every three years, of the effectiveness of State Child Support Enforcement programs under title IV-D and for a possible reduction in Federal reimbursement for a State's title IV-A program pursuant to sections 403(h) and 404(d) of the Act. Sections 305.10 through 305.13 describe the audit. Section 305.20 sets forth audit criteria and subcriteria the Office will use to determine program effectiveness and defines an effective program for purposes of an audit. Section 305.97 sets forth paternity establishment percentage requirements. Section 305.98 sets forth the performance indicators the Office will use to determine State IV-D program effectiveness. Section 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. Section 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.

5. Section 305.1 is revised to read as follows:

õ305.1 Definitions.

The definitions found in õ301.1 of this chapter are also applicable to this part.

6. Section 305.1O is amended by revising the last sentence of paragraph (a) and paragraph (c)(2) to read as follows:

õ305.10 Timing and scope of audit.

(a) * * * The audit of each State's program will be a comprehensive review using the criteria prescribed in õõ305.20, 305.97 and 305.98 of this part.

* * * * *

(c) * * *

(2) Use the audit standards promulgated by the Comptroller General of the United States in "Government Auditing Standards."

* * * * *

7. Section 305.12 is amended by revising paragraph (a) to read as follows:

õ305.12 State comments.

(a) Prior to the start of the actual audit, the Office will hold an audit entrance conference with the IV-D agency.

At that conference the Office will explain how the audit will be performed and make any necessary arrangements.

* * * * *

8. Section 305.20 is revised to read as follows:

õ305.20 Effective support enforcement program.

For the purposes of this part and section 403(h) of the Act, in order to be found to have an effective program in substantial compliance with the requirements of title IV-D of the Act:

(a) For any audit period which begins after (INSERT DATE FINAL RULE IS PUBLISHED), a State must meet the IV-D State plan requirements contained in Part 302 of this chapter measured as follows:

(1) The State must meet the requirements under the following criteria:

(i) Statewide Operations, õ302.10;

(ii) Reports and Maintenance of Records, õ302.15(a);

(iii) Separation of cash handling and accounting functions, õ302.20; and

(iv) Notice of Collection of Assigned Support, õ302.54.

(2) The State must have and use procedures required under the following criteria in at least 90 percent of the cases reviewed for each criterion:

(i) Establishment of Cases and Maintenance of Case Records, õ303.2; and

(ii) Case Closure, õ303.11.

(3) The State must have and use procedures required under the following criteria in at least 75 percent of the cases reviewed for each criterion:

(i) Collection and Distribution of Support Payments, including: Collection and distribution of support payments by the IV-D agency under õ302.32(b) and (f); distribution of support collections under õ302.51; and distribution of support collected in title IV-E foster care maintenance cases under õ302.52;

(ii) Services to Individuals not Receiving AFDC or Title IV-E Foster Care Assistance, õ302.33(a);

(iii) Establishment of Support Orders, including: Location of absent parents under õ303.3; guidelines for setting child support awards under õ302.56; and establishment of support obligations under õ303.4(d) and (e);

(iv) Establishment of Paternity, including: Location of absent parents under õ303.3; and establishment of paternity under õ303.5(a);

(v) Enforcement of Support Obligations, including, in all appropriate cases: Location of absent parents under õ303.3; enforcement of support obligations under õ303.6, including submitting once a year all appropriate cases in accordance with õ303.6(c)(3) to State and Federal income tax refund offset; and wage withholding under õ303.100. In cases in which wage withholding cannot be implemented or is not available and the absent 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 tax refund offset, in accordance with State laws and procedures and applicable State guidelines developed under õ302.70(b) of this chapter;

(vi) Provision of Services in Interstate IV-D Cases, including õ303.7(a), (b) and (c);

(vii) Review and Adjustment of Support Obligations, including: Location of absent parents under õ303.3; guidelines for setting child support awards under õ302.56; and review and adjustment of support obligations under õ303.8; and

(viii) Medical Support, including: Location of absent parents under õ303.3; securing medical support information under õ303.30; and securing and enforcing medical support obligations under õ303.31.

(4) With respect to the 75 percent standard in õ305.20(a)(3):

(i) Notwithstanding timeframes for location and paternity establishment contained in õõ303.3(b)(3) and 303.5, if paternity establishment is needed in a particular case and paternity is established during the audit period, the State will be considered to have taken appropriate action in that case for audit purposes.

(ii) Notwithstanding timeframes for location and support order establishment contained in õõ303.3(b)(3) and õ303.4, 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.

(iii) Notwithstanding timeframes for location and review and adjustment of support orders contained in õõ303.3(b)(3) and 303.8, if a particular case has been reviewed and meets the conditions for adjustment under State laws and procedures and õ303.8, and the order is adjusted 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.

(iv) Notwithstanding timeframes for location and wage withholding in õõ303.3(b)(3) and 303.100, if wage withholding is appropriate in a particular case and wage withholding is implemented and wages are withheld during the audit period, the State will be considered to have taken appropriate action in that case for audit purposes.

(v) Notwithstanding timeframes for location and enforcement of support obligations in õõ303.3(b)(3) 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 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.

(5) The State must meet the requirements for Expedited Processes under õ303.101(b) and (e).

(6) The State must meet the criteria referred to in õ305.98(c) of this part relating to the performance indicators prescribed in õ 305.98(a).

(b) For any fiscal year beginning on or after October 1, 1991, the State must meet the requirements for the paternity establishment percentage standards under õ305.97 of this part.

õõ 305.21--305.57 [Removed and Reserved]

9. Section 305.21 through 305.57 are removed and reserved.

10. A new õ305.97 is added to read as follows:

õ305.97 Paternity Establishment Percentage Standard.

(a) Definition. When used in this section:

Applicable number of percentage points means three percentage points multiplied by the number of fiscal years between fiscal year 1989 and the fiscal year being evaluated.

Paternity establishment percentage means the number of children receiving services under title IV-A or IV-D of the Act who were born out of wedlock and for whom paternity has been established, divided by the total number of children receiving services under title IV-A or IV-D of the Act who were born out of wedlock.

Total number of children does not include any child who is a dependent child by reason of the death of a parent or any child with respect to whom an applicant or recipient is found to have good cause for refusing to cooperate under õ232.41 of this chapter.

(b) For purposes of this part and section 403(h) of the Act, in order to be found to have an effective program in substantial compliance with the requirements of title IV-D of the Act, a State must, for any fiscal year beginning on or after October 1, 1991, have a paternity establishment percentage which equals or exceeds, on the last day of the fiscal year:

(1) 50 percent;

(2) the paternity establishment percentage of the State for fiscal year 1988 (baseline data calculated as of December 31, 1988), increased by the applicable number of percentage points; or (3) the paternity establishment percentage determined with respect to all States for such fiscal year.

11. Section 305.98 is amended by revising paragraph (d) to read as follows:

õ305.98 Performance indicators and audit criteria.

* * * * *

(d) The scoring system provided in paragraph (c) of this section will be described and updated periodically by the Officein instructions.

12. Section 305.99 is amended by revising paragraph (b)(2) to read as follows:

õ305.99 Notice and corrective action period.

* * * * *

(b) * * *

(2) Identify any audit criteria listed in õ305.20(a)(3) of this part that the State met only marginally [that is, in 75 to 80 percent of cases reviewed for criteria in õ305.20(a)(3)];

* * * * *

[FR Doc. 93-21595 Filed 9-8-93;8:45 am]

Billing Code 4150-04-M