Policy Clarification Relating to Automated Child Support Enforcement Systems
October 9, 1990
TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS APPROVED UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS
SUBJECT:Policy Clarification Relating to Automated Child Support Enforcement Systems (CSES).
BACKGROUND:Congress, in the Conference Report to the Family Support Act of 1988 (Report number 100-998), on page 100, indicated that concerns have been raised about the present rules and processes for approving advance planning documents (APDs) submitted by the States. Congress, accordingly, directed the Secretary of the Department of Health and Human Services (DHHS) to review these rules and processes to determine whether changes are warranted. In response to this directive, the Office of Child Support Enforcement (OCSE) through the Department, clarified definitions and provided guidance on procedures and documentation for the approval of APDs through the issuance of revisions to 45 CFR Part 95, Subpart F (Automated Data Processing Equipment and Services; Conditions for Federal Financial Participation). These revisions were published in final form in the Federal Register on February 7, 1990, 55 FR 4364.
To help identify additional State specific CSES concerns, the Federal Office of Child Support Enforcement (OCSE) convened a work group which included State title IV-D representatives. As a result of the work group input, OCSE will address in a soon to be published Notice of Proposed Rulemaking (NPRM), several concerns relating to hardware depreciation, level of automation, electronic data exchange, and auditability of a CSES. This NPRM will also include necessary changes to 45 CFR Parts 302 and 307 to implement Section 123 of Public Law (P.L.) 100-485 (the Family Support Act of 1988). However, for the most part, the work group and OCSE determined that what was needed was a formal written document which set out clearly the policies which have evolved or changed since the issuance of the guide for automated systems for child support enforcement and other related Action Transmittals (AT's).
CONTENT:This AT sets forth Federal policy in the most frequently misunderstood areas of automated system projects and clarifies areas where States have frequently encountered problems and difficulties in interpreting Federal regulations relating to those projects. This guidance will become part of the OCSE guideline document for automated systems.
The issues covered by this AT are as follows:
A.Acquiring a system through transfer of other States' title IV-D systems.
B.Automated features beyond regulatory requirements.
C.Cost allocation for equipment and systems.
D.Depreciation of hardware/unit acquisition cost.
E.FFP rate for specific activities associated with system development projects.
F.Free and open competition/organizational conflict of interest.
G.Hardware installation during development of new systems.
H.Interim software development during development of a new system.
I.Personal computers (PC) as part of a CSES.
K.Replacement systems and/or restart projects.
M.Timely response by OCSE.
INQUIRIES TO:OCSE Central Office
Jo Anne B. Barnhart
In 1987, the Office of Child Support Enforcement revised its guideline document entitled "AUTOMATED SYSTEMS FOR CHILD SUPPORT ENFORCEMENT: A Guide for States Seeking Enhanced Funding", hereinafter called the Guide, to address most system issues. Since that time advances in systems technology and changes in installation strategy or development projects have raised concerns and issues which need clarification. The following clarifications are intended to provide States with the OCSE policy decisions for CSES projects.
II. FEDERAL POLICY ISSUES
A.Acquiring a System Through Transfer of Other States' Title IV-D Systems
Based on 45 CFR 307.30(a)(4) the Office of Child Support Enforcement established the policy that all States must transfer another State or county system. This sharing of technology among States has decreased the installation timeframe for automated CSES' and reduced the risk of system failure due to poor system design or inadequate planning. States still need to plan their systems by establishing functional requirements which may differ to varying degrees from other States. A review of other State systems will assist the State in establishing these requirements.
While States may express a preference for the operating characteristics of a particular State CSES, most States will utilize contractor resources to effect a transfer. In these instances, States should advertise for bids based on the functional capability of a system to meet requirements. However, alternative proposals should be considered. If the State IV-D agency has hardware in place or plans to operate the system on a State central data processing facility, the Request for Proposal (RFP) should include the related hardware and operating system configuration.
A State may not identify a single system for transfer in the RFP since this would place a restriction on free and open competition by not allowing contractors to propose systems they feel meet State requirements. If a State intends to transfer, modify and install a system utilizing in-house staff and existing hardware, the procurement standards of 45 CFR Part 74, Appendix G pertaining to free and open competition for the system acquisition do not apply. However, in these instances, States are encouraged to review multiple State systems in order to select the system for transfer that best fits the requirements identified in the planning phase of the State project.
B.Automated Features Beyond Specified Certification Requirements
To become certified, a State's CSES must meet the functional requirements set forth in 45 CFR 307.10. In some instances, a State may elect to use state-of the-art automation approaches that provide capability beyond the requirements specified in the Guide for certification. For example, to provide better service a State may consider the inclusion of one or more of the following features in its system:
(1)Audio response systems for compliance with mandatory notice of collection in AFDC cases and to respond to requests for information concerning collections and tax offset.
(2)Automated features to assist with electronic funds transfer for wage withholding and interstate case processing.
(3)Remittance processors for electronic capture and recording of checks.
OCSE's policy on providing enhanced funding for these automated features to the statewide system is based on the following:
(1)The feature must be cost beneficial.
(2)The feature must be integrated as part of the statewide system.
(3) The feature must be operational statewide.
(4)The feature must be installed and maintained under the State IV-D agency control.
C. Cost Allocation for Equipment and Systems
Federal regulations at 45 CFR Part 95, Subpart E mandate that all States develop and maintain an approved cost allocation plan to identify, measure and allocate all State agency costs incurred in support of all programs administered or supervised by the State agency. While this assures the equitable distribution of funding among Federal funding sources, many States have expressed concern that because of the structure of title IV-D organizations and the need for these organizations to share hardware and software within the State, cost allocation must be clearly defined. This is particularly applicable in those States in which a Court system performs title IV-D functions under a cooperativeagreement or in accordance with State law, or a State central data processing unit is utilized to operate a title IV-D system. To clarify our position on Federal funding in these situations, the following will apply:
(1)A State APD may request approval for hardware used by a contracting agency (e.g. County Attorney, Court) for operation of the title IV-D program which will also be used for activities not governed by title IV-D.
(2)Federal funding may be authorized for the percentage of the development, hardware, and system maintenance cost that pertains to the title IV-D functions performed by the system.
(3)State IV-D agencies must include the cost allocation methodology authorized by the DHHS Cost Allocation Division in its APD, and in cases under the prior approval thresholds established at 45 CFR Part 95, Subpart F, costs must be allocated for ongoing operational costs.
(4)Federal funding may be authorized for the cost of installing and implementing security features necessary to safeguard child support records and data files.
(5)For application development, the State IV-D agency must assess the costs of developing applications software which pertain to non-IV-D activities to assure that the IV-D share is equitable.
(6)For hardware acquisitions, the cost allocation must be based on the average percentage of time the hardware will be used for IV-D and non-IV-D activities.
(7)For development and operations, the court or other agency performing title IV-D services must have a cooperative or service agreement, and this must be included as part of the State's approved cost allocation plan.
(8)The percentage of cost charged to title IV-D agency is normally based on an average of the equipment's use for title IV-D case processing.
In States where the IV-D agency acquires resources from a central data processing (CDP) facility, costs at the applicable matching rate for equipment must be charged in accordance with an approved cost allocation plan normally based on the percentage of use by each agency utilizing the equipment. The cost allocation plan mustbe approved by the DHHS Cost Allocation Division. Equipment acquired for, or dedicated solely for the use of title IV-D case processing, may be charged 100 percent to title IV-D at the applicable Federal financial participation (FFP) rate. We view this as unlikely in most instances and would normally expect that equipment acquired to support a central data processing unit will be cost allocated among the agencies utilizing the equipment.
Equipment and services acquired to support the organizations described above are subject to the prior approval thresholds set forth in 45 CFR Part 95, Subpart F.
D. Depreciation of Hardware/Unit Acquisition Cost
In accordance with 45 CFR Part 95, Subpart G, it has been the policy of the DHHS to require States to capitalize and depreciate, over its useful life cycle, all hardware having a unit acquisition cost in excess of $25,000. Under the provision of 45 CFR 95.641, the State may request an exemption to the depreciation provision of Subpart G. Accordingly, our policy with regard to State requests for waiver of the depreciation provision of 45 CFR 95.705 is as follows:
(1)Unit acquisition cost refers to the aggregate cost for the total hardware acquisition for a child support enforcement system (e.g. 100 work stations provided at $2,000 each will have a unit acquisition cost of $200,000).
(2)We will consider a request for waiver of hardware depreciation when: (1) costs are minimal, and thus would not create a significant deviation from the Federal OCSE budget projection; and (2) the State shows clearly that expensing in the quarter acquired is in the best interests of the State and Federal government.
E.Federal Financial Participation Rate for Specific Activities Associated with System Development Projects
With the following exceptions, Federal policy governing allowable enhanced funding for comprehensive, statewide system development projects is outlined in the "Allowable Costs" section of the Guide:
(1)Maintenance costs of hardware is funded at the regular FFP rate.
(2)For file conversion, our policy is to pay conversion software development, computer processing andrelated personnel costs at the enhanced matching rate for initial conversion of an automated data base to the statewide system. This will include data entry and computer processing costs for error correction. Cost for staff to perform file review and data clean-up is not funded at the enhanced matching rate.
(3)For training in the use of the CSES, enhanced funding will be provided for trainer costs only. All costs related to trainees will be at the regular matching rate.
F.Free and Open Competition./Organizational Conflict of Interest
Federal regulations at 45 CFR Part 74, Appendix G mandate that all procurement transactions, regardless of whether by sealed bids or by negotiation and without regard to dollar value shall be conducted in a manner that provides maximum free and open competition. In this context, States should be alert to organizational conflicts of interest or noncompetitive practices that may restrict or eliminate competition. States have a responsibility not only to comply with Federal regulations mandating free and open competition, but also to be perceived by the vendor community as conducting procurement fairly, openly, and without prejudice.
In most cases, States acquire child support enforcement systems in two phases. The first phase (planning) usually includes contractor assistance to develop and define functional requirements for the purpose of issuing a RFP to transfer an existing system.
If a contractor is utilized in establishing these requirements, some States also use the contractor to write the RFP and/or manage the CSES project. In other cases, State staff prepare the RFP. Regardless, the functional requirements become an integral part of the system specifications and are included in the RFP. Therefore, in order to ensure objective contractor performance and eliminate the appearance of unfair competitive advantage, contractors who assist the State during planning to develop or draft specifications, requirements, statements of work, invitations for bid and/or other RFPs should be excluded from competing for subsequent phases of system installation projects, or being included as a sub-contractor, for such projects. To preclude delays, misunderstandings and protests, all State solicitations for contractor services to assist with the planning phase of system projects should contain a clause making this point clear to prospective bidders. Moreover, the second phase solicitation notice shouldstate that a contractor who participated in the requirements definition may not bid on the transfer/development effort.
States must also ensure, when developing procurement actions, that the solicitation is based upon a clear, thorough, and accurate description of the State's technical and functional requirements. Such descriptions may not contain features which unduly restrict competition by identifying a specific system for transfer, or containing specifications that only a single system can meet.
For hardware acquisitions, we recognize that the State must consider already operational systems which share hardware. However, the State must also conduct a comparative cost analysis to determine the most cost effective approach for meeting all needs. The results of such cost analysis must be included in the State's request for approval of such procurement.
G. Hardware Installation During Development of New Systems
Hardware eligible for enhanced Federal funding during the early stages of the development phase is limited to that which is necessary for the purpose of project definition, project management, prototyping, and for defining and describing performance and technical specifications. During this early development phase, large acquisitions of computer hardware, operating system software, and communication lines and equipment may not be charged to the project.
In general, hardware expenditures during the development phase are expected to be incurred in one central development site; however, OCSE recognizes that system performance testing may be more effective at pilot sites. Therefore, OCSE will approve Federal funding at the enhanced matching rate for equipment at one to three pilot locations, depending upon the composition of a State's caseload and/or organizational structure.
All other hardware delivery should be phased-in or delayed to coincide with the system implementation schedule, and the State must begin amortizing and depreciating the cost of hardware over its useful life cycle when the hardware is delivered. If hardware is acquired early for any reason, the State may not claim FFP for expenditures unless the acquisition is approved on an exception basis by OCSE, or until the hardware is being used for child support case processing. For hardware acquired prior to the implementation of a statewide system, the following guideline applies:
(1)If hardware is stored prior to its use, the State must pay the entire cost of the equipment and storage during the period of storage.
(2)If the early acquisition and use of hardware is approved for conversion preparation activities, the State may claim depreciation at the regular matching FFP rate.
(3)This Office will reimburse States at the enhanced FFP rate for hardware not earlier than 90 days prior to the implementation of a statewide CSES.
H.Interim Software Development During Development of a New System
Federal regulations at 45 CFR 307.15(b)(1) require that the statewide, comprehensive CSES funded at enhanced FFP, be the sole systems effort being undertaken by the State. However, during the development and implementation process, OCSE recognizes that in certain instances, current systems in operation in the State may have to be modified to accommodate Federal regulatory changes until the statewide CSE system is operational. Under such circumstances, a County or State may be required to modify its already operational system, or develop an interim system, to allow the State to meet Federal requirements.
The conditions under which OCSE will grant approval of Federal funding at the regular matching rate for interim systems activity are:
(1)The proposed development or modification is essential to implement mandatory Federal regulations relating to the title IV-D program.
(2)The County and/or State agree to use the statewide system when it is implemented; funding for the interim CSES will cease when the statewide system is operational.
(3)The County and/or State must document the cost benefit for development or modification of an interim CSES, and that development must be completed prior to the implementation of the statewide CSES.
(4)That cases converted to a new interim system can be easily converted to the statewide system.
If a major hardware acquisition is associated with the system modification, the hardware must be utilized by the State system when the State system is operational.
I. Personal Computers (PCs) as Part of a CSES
Many States developing systems with enhanced FFP are proposing the use of personal computers as intelligent terminals. This will give States the capabilities of a terminal tied into a statewide child support data base, as well as stand-alone capabilities of a microcomputer, thus eliminating the need for separate work stations at the same location to perform these functions. Personal computers in a child support enforcement organization provide the capability for both case workers and legal staff to create legal documents needed for case establishment and enforcement activity.
We recognize this need but we are also aware that PCs are often desired and utilized in order to meet certain administrative activities not associated with child support enforcement case processing for the statewide comprehensive CSES. We do not believe it appropriate to fund routine and/or normal administrative operations at the enhanced matching rate; thus we require States to allocate PC costs between the regular and enhanced matching rate. To accomplish this, the State, in its APD for system funding, must project a percentage of time the PC will be used for CSES case processing activity for reimbursement at the enhanced FFP rate under 45 CFR 307.30 and the percentage of time the PC will be used for other administrative activities for reimbursement at the regular FFP rate under 45 CFR 304.20.
J. Replacement Hardware
Many States have found that hardware currently utilized to operate a CSES is: (1) obsolete in that the useful life cycle has been exceeded; (2) reaching a capacity level beyond which effective and efficient operation can be performed; or (3) not appropriate to the State's organizational structure or workload requirements. In these cases, new hardware technology and telecommunications upgrade will improve program operations to allow for better service at reduced cost. In such situations States may request approval to acquire replacement hardware or upgrade current hardware. Our policy in these instances is to consider all requests provided that the procurement is reasonable, cost beneficial, and hardware will be acquired through competitive bidding.
Federal funding for replacement hardware will be at the enhanced FFP rate for systems that are certified. Replacement hardware acquired before certification will be funded at the regular FFP rate until such systems are certified. Hardware currently in place in States, if no longer used for case processing activity, must bedisposed of in accordance with the provisions outlined in 45 CFR Part 95, Subpart G.
K. Replacement Systems and/or Restart Projects
The automated CSES provisions of the Family Support Act of 1988 require States to have statewide automated CSES that meet all title IV-D requirements. Given this, States must consider whether the system they are now using, and/or a project underway, will meet the requirements and be in an operational status by September 30, 1995.
A State may currently have an operational CSES which does not meet all requirements of the CSE program because either (1) the State did not exercise the option to include, in the CSES, the mandatory requirements of the child support amendments of 1984; (2) the State developed the CSES using regular matching rate Federal funding, and therefore, did not attempt to meet the statewide comprehensive requirements; (3) the State implemented the CSES in segments and all or part of the system is obsolete from both a programmatic and technical perspective, (e.g. the system is a batch oriented tracking system and does not automatically trigger wage withholding); or (4) because of extensive document generation associated with the requirements for Court notification and the need to have automated interface with credit bureaus, medical support agencies and tax offset intercept agencies, States often patch and modify their old systems.
When it will not be feasible or possible to again enhance an existing CSES to meet new program requirements of the Family Support Act of 1988, our policy on providing Federal funding will be as follows: A State will be required to review all program requirements and compare these against the capabilities of the existing system to determine if the State should replace the obsolete system with a system in which all features of the program are automated, and where all components within the State use the same application software. A State With an obsolete system must analyze the cost of enhancing their existing CSES versus the transfer of a replacement system. Consideration must be given to how the system will cover all political subdivisions of the State operating the CSE program and how the State will have an operational CSES which meets all title IV-D requirements not later than September 30, 1995.
Based on the particular situation, Federal funding for all or part of these replacement systems may be authorized at the enhanced matching FFP rate. In order to determine the appropriateness of approving enhancedFFP, the State's APD must provide justification for the need of a replacement system, describe the plan to enhance or transfer a system, and report the cost benefit OCSE gained from the original system. OCSE will then conduct an on-site review of the State's CSES to determine if the enhanced funding approved to date has been expended appropriately, and whether a cost-benefit has been achieved. The State's proposed replacement plan will also be considered as part of the project.
In instances where a State does not complete a CSES because of faulty project planning or because of circumstances beyond the State's control, we will conduct a close-out review under the provisions of 45 CFR 307.30(d) and 307.40 to determine the amount of Federal funding that must be recouped for the failed project. A determination will be made as to the funding level for the State to restart the automation project.
L. System Certification
In order to receive operational funds at the enhanced matching rate for equipment, States installing a statewide automated CSES must meet certification requirements outlined in the Guide. To assist States in meeting this objective, we have implemented an optional two-level system certification process. In the past, some States, especially those using contractor assistance to transfer another State's CSES, have asked that OCSE review the system during the pilot test phase to help the State determine if it meets Federal certification requirements. Consequently, this review was labeled as a level 1 or functional certification review. The level 2, or full certification review would be achieved at the time the State became operational statewide with the functionally approved system. Because level 1 certification is optional, a State may elect to convert cases and proceed from pilot to statewide implementation without level 1 approval. We do, however, recommend that States take advantage of the two-level certification process since it can lead to the early identification of system deficiencies and provides for the early identification of potential donor systems for transfer. Our policy for level l and level 2 system certification is as follows:
(1)Level 1 certification. States may request certification when an automated CSES is installed and operational in a pilot or multiple pilot locations. If a mandatory function of the automated CSES, (e.g. Medicaid interface or a security procedure) is not being performed during pilot operation, the State must be able to demonstrate that the system has the capability to perform thefunction. In addition, the State should be able to provide at a minimum, system design, program documentation, user training and operational manuals. Functional certification will normally be based on the use of live data; however, test data may be used at the option of this Office.
(2)Level 2 certification. States should submit requests for certification upon the completion of statewide installation of the functionally comprehensive CSES in all political subdivisions and agencies involved in child support enforcement within the State. The system must meet all functional requirements and be fully operational and include all active and inactive AFDC, non-AFDC, medical support, foster care and interstate cases. The State must have completed and provided to this Office, all required system documentation. All system security, privacy, backup and recovery procedures must be in place. Certification will enable the State to claim hardware costs for the operation of the system at the enhanced FFP rate. States not meeting certification requirements will be required to take corrective action, as specified by this Office in the certification review report, to receive Federal funding for future systems activities.
(3)Conditional certification. States may be granted a conditional certification at either level if the system meets all functional requirements but does not include a Federally mandated change that occurred late in the system development cycle, or if OCSE finds discrepancies which are minor in nature and easily correctable. A conditional certification allows States to receive enhanced funding to continue with statewide conversion and installation or operation of a CSES while at the same time making corrections to the system.
M. Timely Responses by OCSE
Federal regulations at 45 CFR 95.611(d) specify that States shall receive an FFP determination decision for all actions submitted for approval under õ95.611(b) within 30 days, or be notified by the Department or appropriate Federal agency regarding the status of their request. Normally, when an action is approvable, States receive written notice within the specified timeframe. In some cases, when incomplete documentation is received for an enhanced funding project, and/or where the nature of the action is complex, we are unable to meet the 30-day timeframe. In the past when inadequate documentation prevented a FFP determination, rather thansend a negative letter, we worked informally with the State to ensure acceptance of the document. Consequently, States did not receive written notice from OCSE even though they had received confirmation from the Department that a document had been received and referred to the appropriate office for review, with the promise that the State would receive a response within 30 days. We thought these delays were acceptable because we maintained contact with the State by telephone or through meetings. Regardless, States have informed us that this process created some problems and asked that we address this situation. In response, we have established the following new communication procedure in these very important efforts:
(1)At the time of notification from the Department's receipting Office, the State will receive the official due date for completing the review.
(2)Every effort will be made to complete the review and respond to the State by that date.
(3)If a scheduled date cannot be met, the State will receive a letter from OCSE giving a general explanation, (e.g., awaiting additional documentation), as to why the response is delayed and a revised review completion date will be given.
Although no regulatory mandate exists for OCSE responses on APD compliance reviews, system certification reviews, and/or financial close-out reviews, we recognize the need for prompt reporting to the States. These Federal responses are essential for States to continue claiming enhanced funding for continued system development, and/or equipment cost. Our new policy will be to provide States with written reports within 45 days after completing the applicable review. Should unusual conditions or complex issues with State CSES projects preclude this date from being met, States will be advised of the nature of the difficulty in writing and be provided an expected completion date for the review report.