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Reduction in Federal Financial Participation Rates for the Child Support Enforcement Program

AT-95-03

Published: February 17, 1995
Information About:
State/Local Child Support Agencies
Topics:
Funding, Federal Financial Participation (FFP), State Systems
Types:
Policy, Action Transmittals (AT)

ACTION TRANSMITTAL

OCSE-AT-95-03

February 17, 1995    

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


SUBJECT:       Reduction in Federal Financial Participation (FFP)
               Rates for the Child Support Enforcement Program
               Under Title IV-D of the Social Security Act (Act)


BACKGROUND:    Under Section 455(a)(1)(B) of the Act, States are
               currently entitled to Federal funding at the
               "enhanced" 90 percent FFP rate for expenditures
               for the  planning, design, development,
               implementation and operation of an approved Child
               Support Enforcement System (CSES).

               Under Section 123(c) of Public Law 100-485, the
               "Family Support Act of 1988," dated October 13,
               1988, this provision of the Act is repealed to
               eliminate the enhanced FFP rate for these
               expenditures and substitute the "regular" 66
               percent FFP rate.

               (Federal funding will continue to be available at
               the 90 percent FFP rate for laboratory costs
               associated with the process of paternity
               determination.)

EFFECTIVE
DATE:          The 90 percent FFP rate for CSES expenditures is
               repealed as of September 30, 1995.  For all CSES
               expenditures made on or after October 1, 1995
               (other than holdback payments discussed as
               "Special Circumstances," below), Federal funding
               is only available at the 66 percent FFP rate.

SPECIAL
CIRCUMSTANCES: System Certification and Holdback Payments.     In
               accordance with the provisions of 45 CFR 307.5(a),
               "By October 1, 1995, each State must have in
               effect an operational computerized support
               enforcement system, which is certified."  To be
               fully certified, a system must be in compliance
               with all the requirements of 45 CFR 307.10 and
               must have successfully passed a certification
               review conducted by the Office of Child Support
               Enforcement (OCSE) under the provisions of 45 CFR
               307.25. 

               Since we anticipate that many States will not
               request certification reviews until just before
               the deadline, OCSE will be unable to conduct these
               reviews in all States that have a "certifiable"
               operational system in effect by the October 1,
               1995 deadline.  When, under the terms of its
               contract with systems developers and others, a
               State "holds back" a portion of the contracted
               price pending completion and formal certification
               of the entire project, any delay in the
               certification process will necessarily delay the
               final payment of these "holdback" amounts.

               Cash Accounting.     Under the provisions of 45
               CFR 304.25(a), States are required to maintain a
               cash accounting system for the maintenance of
               financial records under the Child Support
               Enforcement Program.  As stated in this
               regulation, this provides that "(e)xpenditures are
               considered to be made on the date which the cash
               disbursements occur...."   

               Given the delays that  may occur in the
               certification process, many "holdback payments"
               will ultimately be paid to the respective
               contractors after September 30, 1995, the last day
               that Federal funding will be available at the 90
               percent FFP rate.  In accordance with the cash
               accounting requirements outlined above, payments
               made after that date would no longer be eligible
               for Federal funding at the 90 percent FFP rate.

               Deviations.     Under Federal regulations at 45
               CFR 304.25, "(d)ifferent rules may be applied...
               for particular classes of expenditures only upon
               justification by the State to (OCSE) and approval
               (by OCSE)." 

               In accordance with these regulations, any State
               that has in effect an operational statewide
               comprehensive computerized support enforcement
               system and has requested a "Federal Level 2
               Certification" prior to October 1, 1995, may
               submit a request that it be permitted to deviate
               from the standard treatment of expenditures to
               preserve its claim to Federal funding at the 90
               percent FFP rate.  To permit these requests to be
               processed, they must be received by this agency no
               later than August 31, 1995.  Each request must
               include the State's rationale for the request and
               the full amount for which the request is being
               submitted.  The use of certified mail with a
               return receipt is recommended to establish the
               mailing and receipt dates.

               The request must be signed by the individual
               responsible for submitting the State's quarterly
               expenditure reports and should be sent to:

                    Administration for Children and Families
                    c/o Director, Office of
                           Information Systems Management
                    370 L'Enfant Promenade, S.W.
                    Washington, D.C. 20447

               A copy should also be sent to the appropriate
               Regional Administrator.

               Escrow Accounts.     To preserve its claim for
               Federal funding at the 90 percent FFP rate, the
               State must establish an escrow account with a
               third party at the time the request for deviation
               is submitted.  The amount deposited to this
               account should equal the 10 percent State share of
               the payments being held back pending system
               certification, as specified in the State's
               contract.  If the State's deviation request is
               approved, the holdback payments, when made to the
               vendor, will remain eligible for Federal funding
               at the 90 percent FFP rate, using the amount in
               the escrow account as the State share of these
               payments.  Any non-holdback payments anticipated
               to be made to the vendor later than September 30,
               1995 under the terms of the contract should not be
               deposited in this account and will not be
               considered for the enhanced FFP rate.

               Financial Reporting.     Deposits made to an
               escrow account will not be considered expenditures
               for Federal reporting purposes.  Upon
               notification that a State's Child Support
               Enforcement System is certified,  the entire
               holdback payment should be claimed as "prior
               quarter increasing adjustments" at that time.
               These claims will remain eligible for Federal
               funding at the 90 percent FFP rate.  Additional
               Federal funding at the 90 percent FFP rate will
               not be available to correct system deficiencies
               identified by the State or by a Federal
               certification review, including deficiencies
               concerning contract deliverables, if such
               corrections are made after September 30, 1995.

OTHER
PROVISIONS:    Prior Quarter Adjustments.     For the purposes of
               determining the applicable FFP rate for those
               expenditures affected by this change, the date the
               expenditure is made (or the quarter to which the
               expenditure is allocated) is the controlling
               factor.  Any expenditure made prior to October 1,
               1995, but claimed later than that date will remain
               eligible for Federal funding at the 90 percent FFP
               rate.

               Timely Filing.     The reduction in FFP rates does
               not alter the requirement under Section 1132 of
               the Social Security Act (45 CFR Part 95, Subpart
               A) that claims be filed within two years of the
               last day of the quarter in which the expenditure
               was made.  The determination of the appropriate
               FFP rate for these claims is governed by the
               guidelines discussed above.  Any claim found to
               meet the criteria for an exception to the two-year
               deadline, will remain eligible for Federal funding
               at the 90 percent FFP rate regardless of when that
               claim is filed.

               Depreciation Claims.     Claims filed in
               accordance with a multi-quarter depreciation
               schedule are eligible for FFP at the rate
               applicable to the quarter to which the
               depreciation is allocated.  Depreciation claims
               applicable to quarters beginning prior to October
               1, 1995 will continue to be eligible for FFP at
               the higher rate; depreciation claims applicable to
               quarters beginning on or after October 1, 1995,
               will be eligible for FFP only at the 66 percent
               rate. 

               (Example:  ADP equipment purchased in accordance
               with an approved plan in July 1992 is to be
               depreciated over a five-year period, from July
               1992 through June 1997.  The portion of the
               depreciation allocated to and claimed for quarters
               beginning July 1992 and ending September 1995 will
               be eligible for Federal funding at the 90 percent
               FFP rate; the portion of the depreciation
               allocated to and claimed for quarters beginning
               October 1995 and ending June 1997 will be eligible
               for Federal funding at the 66 percent FFP rate.)

ACTION
REQUIRED:      For expenditure reports submitted for fiscal
               quarters beginning on or after October 1, 1995,
               the "Federal Share of Expenditures" reported on
               Part 1 of Form OCSE-131, the "Child Support
               Enforcement Program Financial Report" must be
               calculated using the new FFP rate:

               Line 10 ("Total Federal Share of Expenditures").
               Equal to: Line 8 x the Enhanced FFP Rate plus (Sum
               of Lines 5 + 6 + 7 + 9) x the Regular FFP Rate.

INQUIRIES:     Direct inquiries to the appropriate ACF Regional
               Administrator.





                     /s/                            /s/         
               David Gray Ross               Norman L. Thompson
               Deputy Director               Director
               Office of Child Support       Office of
               Enforcement                   Financial Management