NOTICE: This file contains text of the Code of Federal Regulations as of October 1, 1992. This text may be used and distributed freely. Please remember, however, that the Office of the Federal Register provides these electronic files for informational purposes only. The printed Federal Register and Code of Federal Regulations continue to be the official version of these regulations.

PART 200 -- [RESERVED]

PART 201 -- GRANTS TO STATES FOR PUBLIC ASSISTANCE PROGRAMS

Sec.

201.0 Scope and applicability.

201.1 General definitions. Subpart A -- Approval of State Plans and Certification of Grants

201.2 General.

201.3 Approval of State plans and amendments.

201.4 Administrative review of certain administrative decisions.

201.5 Grants.

201.6 Withholding of payment; reduction of Federal financial participation in the costs of social services and training.

201.7 Judicial review. Subpart B -- Review and Audits

201.10 Review of State and local administration.

201.11 Personnel merit system review.

201.12 Public assistance audits. 201.13 Action on audit and review findings.

201.14 Reconsideration under section 1116(d) of the Act.

201.15 Deferral of claims for Federal financial participation.

201.66 Repayment of Federal funds by installments.

201.67 Treatment of uncashed or cancelled checks. Authority: 42 U.S.C. 303, 603, 1203, 1301, 1302, 1316, 1353 and 1383 (note). Source: 35 FR 12180, July 29, 1970, unless otherwise noted. Editorial Note: Nomenclature changes affecting this part appear at 53 FR 36579, Sept. 21, 1988.

201.0 Scope and applicability. Titles I, X, XIV and XVI (as in effect without regard to section 301 of the Social Security Amendments of 1972) shall continue to apply to Puerto Rico, the Virgin Islands, and Guam. The term State as used in such titles means Puerto Rico, the Virgin Islands, and Guam.

[39 FR 8326, Mar. 5, 1974]

201.1 General definitions. When used in this chapter, unless the context otherwise indicates:

(a) Act means the Social Security Act, and titles referred to are titles of that Act;

(b) Department means the Department of Health and Human Services;

(c) Administrator means the Administrator, Family Support Administration:

(d) Secretary means the Secretary of Health and Human Services;

(e) Administration means the Family Support Administration;

(f) Regional Administrator means the Regional Administrator of the Family Support Administration;

(g) State means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa. The term ``State'' with respect to American Samoa applies to the programs set forth in title IV - A and IV - F of the Act.

(h) State agency means the State agency administering or supervising the administration of the State plan or plans under title I, IV - A, IV - F, X, or XVI (AABD) of the Act.

(i) The terms regional office and central office refer to the regional offices and the central office of the Family Support Administration, respectively.

[35 FR 12180, July 29, 1970, as amended at 39 FR 34543, Sept. 26, 1974; 53 FR 36578, Sept. 21, 1988; 57 FR 30425, July 9, 1992]

Subpart A -- Approval of State Plans and Certification of Grants

201.2 General. The State plan is a comprehensive statement submitted by the State agency describing the nature and scope of its program and giving assurance that it will be administered in conformity with the specific requirements stipulated in the pertinent title of the Act, the regulations in Subtitle A and this chapter of this title, and other applicable official issuances of the Department. The State plan contains all information necessary for the Administration to determine whether the plan can be approved, as a basis for Federal financial participation in the State program. [35 FR 12180, July 29, 1970, as amended at 53 FR 36578, Sept. 21, 1988]

201.3 Approval of State plans and amendments. The State plan consists of written documents furnished by the State to cover each of its programs under the Act: Old-age assistance (title I); aid and services to needy families with children (part A of title IV); aid to the blind (title X); aid to the permanently and totally disabled (title XIV); or aid to the aged, blind or disabled (title XVI). The State may submit the common material on more than one program as an integrated plan. However, it must identify the provisions pertinent to each title since a separate plan must be approved for each public assistance title. A plan submitted under title XVI encompasses, under a single plan, the programs otherwise covered by three separate plans under titles I, X, and XIV. After approval of the original plan by the Administration, all relevant changes, required by new statutes, rules, regulations, interpretations, and court decisions, are required to be submitted currently so that the Administration may determine whether the plan continues to meet Federal requirements and policies.

(a) Submittal. State plans and revisions of the plans are submitted first to the State governor or his designee for review in accordance with 204.1 of this chapter, and then to the regional office. The States are encouraged to obtain consultation of the regional staff when a plan is in process of preparation or revision.

(b) Review. Staff in the regional offices are responsible for review of State plans and amendments. They also initiate discussion with the State agency on clarification of significant aspects of the plan which come to their attention in the course of this review. State plan material on which the regional staff has questions concerning the application of Federal policy is referred with recommendations as required to the central office for technical assistance. Comments and suggestions, including those of consultants in specified areas, may be prepared by the central office for use by the regional staff in negotiations with the State agency.

(c) Action. The Regional Administrator, exercised delegated authority to take affirmative action on State plans and amendments thereto on the basis of policy statements or precedents previously approved by the Administrator. The Administrator retains authority for determining that proposed plan material is not approvable, or that a previously approved plan no longer meets the requirements for approval, except that a final determination of disapproval may not be made without prior consultation and discussion by the Administrator with the Secretary. The Regional Administrator, or the Administrator formally notifies the State agency of the actions taken on State plans or revisions.

(d) Basis for approval. Determinations as to whether State plans (including plan amendments and administrative practice under the plans) originally meet or continue to meet, the requirements for approval are based on relevant Federal statutes and regulations. Guidelines are furnished to assist in the interpretation of the regulations.

(e) Prompt approval of State plans. Pursuant to section 1116 of the Act, the determination as to whether a State plan submitted for approval conforms to the requirements for approval under the Act and regulations issued pursuant thereto shall be made promptly and not later than the 90th day following the date on which the plan submittal is received in the regional office, unless the Regional Administrator, has secured from the State agency a written agreement to extend that period.

(f) Prompt approval of plan amendments. Any amendment of an approved State plan may, at the option of the State, be considered as a submission of a new State plan. If the State requests that such amendment be so considered the determination as to its conformity with the requirements for approval shall be made promptly and not later than the 90th day following the date on which such a request is received in the regional office with respect to an amendment that has been received in such office, unless the Regional Administrator, has secured from the State agency a written agreement to extend that period. In absence of request by a State that an amendment of an approved State plan shall be considered as a submission of a new State plan, the procedures under 201.6 (a) and (b) shall be applicable.

(g) Effective date. The effective date of a new plan may not be earlier than the first day of the calendar quarter in which an approvable plan is submitted, and with respect to expenditures for assistance under such plan, may not be earlier than the first day on which the plan is in operation on a statewide basis. The same applies with respect to plan amendments that provide additional assistance or services to persons eligible under the approved plan or that make new groups eligible for assistance or services provided under the approved plan. For other plan amendments the effective date shall be as specified in other sections of this chapter.

[35 FR 12180, July 29, 1970, as amended at 39 FR 34542, Sept. 26, 1974; 42 FR 43977, Sept. 1, 1977; 53 FR 36579, Sept. 21, 1988]

201.4 Administrative review of certain administrative decisions. Pursuant to section 1116 of the Act, any State dissatisfied with a determination of the Administrator pursuant to 201.3 (e) or (f) with respect to any plan or amendment may, within 60 days after the date of receipt of notification of such determination, file a petition with the Regional Administrator, asking the Administrator for reconsideration of the issue of whether such plan or amendment conforms to the requirements for approval under the Act and pertinent Federal requirements. Within 30 days after receipt of such a petition, the Administrator shall notify the State of the time and place at which the hearing for the purpose of reconsidering such issue will be held. Such hearing shall be held not less than 30 days nor more than 60 days after the date notice of such hearing is furnished to the State, unless the Administrator and the State agree in writing on another time. For hearing procedures, see Part 213 of this chapter. A determination affirming, modifying, or reversing the Administrator's original decision will be made within 60 days of the conclusion of the hearing. Action pursuant to an initial determination by the Administrator described in such 201.3 (e) or (f) that a plan or amendment is not approvable shall not be stayed pending the reconsideration, but in the event that the Administrator subsequently determines that his original decision was incorrect he shall certify restitution forthwith in a lump sum of any funds incorrectly withheld or otherwise denied.

[35 FR 12180, July 29, 1970, as amended at 42 FR 43977, Sept. 1, 1977; 53 FR 36579, Sept. 21, 1988]

201.5 Grants. To States with approved plans, grants are made each quarter for expenditures under the plan for assistance, services, training and administration. The determination as to the amount of a grant to be made to a State is based upon documents submitted by the State agency containing information required under the Act and such other pertinent facts, including title IV - A the appropriate Federal share of child support collections made by the State, as may be found necessary.

(a) Form and manner of submittal. (1) Time and place: The estimates for public assistance grants for each quarterly period must be forwarded to the regional office 45 days prior to the period of the estimate. They include a certification of State funds available and a justification statement in support of the estimates. A statement of quarterly expenditures and any necessary supporting schedules must be forwarded to the Department of Health and Human Services, Family Support Administration, not later than 30 days after the end of the quarter.

(2) Description of forms: ``State Agency Expenditure Projection -- Quarterly Projection by Program'' represents the State agency's estimate of the total amount and the Federal share of expenditures for assistance, services, training, and administration to be made during the quarter for each of the public assistance programs under the Act. From these estimates the State and Federal shares of the total expenditures are computed. The State's computed share of total estimated expenditures is the amount of State and local funds necessary for the quarter. The Federal share is the basis for the funds to be advanced for the quarter. The State agency must also certify, on this form or otherwise, the amount of State funds (exclusive of any balance of advances received from the Federal Government) actually on hand and available for expenditure; this certification must be signed by the executive officer of the State agency submitting the estimate or a person officially designated by him, or by a fiscal officer of the State if required by State law or regulation. (A form ``Certificate of Availability of State Funds for Assistance and Administration during Quarter'' is available for submitting this information, but its use is optional.) If the amount of State funds (or State and local funds if localities participate in the program), shown as available for expenditures is not sufficient to cover the State's proportionate share of the amount estimated to be expended, the certification must contain a statement showing the source from which the amount of the deficiency is expected to be derived and the time when this amount is expected to be made available.

(3) The State agency must also submit a quarterly statement of expenditures for each of the public assistance programs under the Act. This is an accounting statement of the disposition of the Federal funds granted for past periods and provides the basis for making the adjustments necessary when the State's estimate for any prior quarter was greater or less than the amount the State actually expended in that quarter. The statement of expenditures also shows the share of the Federal Government in any recoupment, from whatever source, including for title IV - A the appropriate share of child support collections made by the State, of expenditures claimed in a prior period, and also in expenditures not properly subject to Federal financial participation which are acknowledged by the State agency, including the share of the Federal Government for uncashed and cancelled checks as described at 45 CFR 201.67 and replacement checks as described at 45 CFR 201.70 in this part, or which have been revealed in the course of an audit.

(b) Review. The State's estimates are analyzed by the regional office staff and are forwarded with recommendations as required to the central office. The central office reviews the State's estimate, other relevant information, and any adjustments to be made for prior periods, and computes the grant.

(c) Grant award. The grant award computation form shows, by program, the amount of the estimate for the ensuing quarter, and the amounts by which the estimate is reduced or increased because of over- or under-estimate for the prior quarter and for other adjustments. This form is transmitted to the State agency to draw the amount of the grant award, as needed, to meet the Federal share of disbursements. The draw is through a commercial bank and the Federal Reserve system against a continuing letter of credit certified to the Secretary of the Treasury in favor of the State payee. A copy of the grant award notice is sent to the State Central Information Reception Agency in accord with section 201 of the Intergovernmental Cooperation Act of 1968.

(d) Letter of credit payment system. The letter of credit system for payment of advances of Federal funds was established pursuant to Treasury Department regulations (Circular No. 1075), published in the Federal Register on July 11, 1967 (32 FR 10201). The HEW ``Instructions to Recipient Organizations for Use of Letter of Credit'' was transmitted to all grantees by memorandum from the Assistant Secretary-Comptroller on January 15, 1968.

(e) General administrative requirements. With the following exceptions, the provisions of part 74 of this title, establishing uniform administrative requirements and cost principles, shall apply to all grants made to States under this part:

45 CFR Part 74 Subpart G -- Matching and Cost Sharing.

Subpart I -- Financial Reporting Requirements.

[35 FR 12180, July 29, 1970, as amended at 38 FR 26320, Sept. 19, 1973; 46 FR 48003, Sept. 30, 1981; 53 FR 24269, June 28, 1988; 53 FR 36579, Sept. 21, 1988]

201.6 Withholding of payment; reduction of Federal financial participation in the costs of social services and training.

(a) When withheld. Further payments to a State are withheld in whole or in part if the Administrator, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of an approved plan, finds:

(1) That the plan no longer complies with the provisions of section 2, 402, 1002, 1402, or 1602 of the Act; or

(2) That in the administration of the plan there is failure to comply substantially with any such provision.

A question of noncompliance of a State plan may arise from an unapprovable change in the approved State plan, the failure of the State to change its approved plan to conform to a new Federal requirement for approval of State plans, or the failure of the State in practice to comply with a Federal requirement, whether or not its State plan has been amended to conform to such requirement.

(b) When the rate of Federal financial participation is reduced. Under title I, X, XIV, or XVI (AABD) of the Act, Federal financial participation in the costs of social services and training approved at the rate of 75 per centum is reduced to 50 per centum if the Administrator, after reasonable notice and opportunity for a hearing to the State agency, finds:

(1) That the plan provision under such title for prescribed services no longer complies with the Federal requirements with respect to such prescribed services; or

(2) That in the administration of the plan there is a failure to comply substantially with such plan provision. (c) Information discussions. Hearings with respect to matters under paragraph (a) or (b) of this section are generally not called, however, until after reasonable effort has been made by the Administration to resolve the questions involved by conference and discussion with State officials. Formal notification of the date and place of hearing does not foreclose further negotiations with State officials.

(d) Conduct of hearings. For hearing procedures, see part 213 of this chapter.

(e) Notification of withholding. If the Administrator makes a finding of noncompliance with respect to a matter under paragraph (a) of this section, the State agency is notified that further payments will not be made to the State (or, in his discretion, that payments will be limited to categories under or parts of the plan not affected by such failure), until the Administrator is satisfied that there will no longer be any such failure to comply. Until he is so satisfied, no further payments will be made to the State (or will be limited to categories under or parts of the plan not affected by such failure).

(f) Notification of reduction in the rate of Federal financial participation. If the Administrator makes a finding of noncompliance with respect to a matter under paragraph (b) of this section, the State agency is notified that further payments will be made to the State at the rate of 50 per centum of the costs of services and training, until the Administrator is satisfied that there will no longer be any failure to comply. [35 FR 12180, July 29, 1970, as amended at 39 FR 34542, Sept. 26, 1974; 53 FR 36579, Sept. 21, 1988]

201.7 Judicial review. Any State dissatisfied with a final determination of the Secretary pursuant to 201.4 or 201.6(a) may, within 60 days after it has been notified of such determination, file with the U.S. Court of Appeals for the circuit in which such State is located a petition for review of such determination. After a copy of the petition is transmitted by the clerk of the court to the Secretary, the Secretary thereupon shall file in the court the record of proceedings upon which such determination was based as provided in section 2112 of title 28, United States Code. The court is bound by the Secretary's findings of fact, if supported by substantial evidence. The court has jurisdiction to affirm the Secretary's decision, or set it aside in whole or in part, or, for good cause, to remand the case for additional evidence. If the case is remanded, the Secretary may thereupon make new or modified findings of fact, and may modify his previous determination. The Secretary shall certify to the court the transcript and record of the further proceedings. The judgment of the court is subject to review by the Supreme Court of the United States upon certiorari or certification as provided in 28 U.S.C. 1254.

Subpart B -- Review and Audits

201.10 Review of State and local administration.

(a) In order to provide a basis for determining that State agencies are adhering to Federal requirements and to the substantive legal and administrative provisions of their approved plans, the Administration conducts a review of State and local public assistance administration. This review includes analysis of procedures and policies of State and local agencies and examination of case records of individual recipients.

(b) Each State agency is required to carry out a continuing quality control program primarily covering determination of eligibility in statistically selected samples of individual cases. The Service conducts a continuing observation of these State systems.

(c) Adherence to other Federal requirements set forth in the pertinent titles of the Act and the regulations in this title is evaluated through review of selected case records and aspects of agency operations.

[35 FR 12180, July 29, 1970, as amended at 53 FR 36579, Sept. 21, 1988]

201.11 Personnel merit system review. A personnel merit system review is carried out by the Office of State Merit Systems of the Office of the Assistant Secretary for Administration of the Department. The purpose of the review is to evaluate the effectiveness of the State merit system relating to the public assistance programs and to determine whether there is compliance with Federal requirements in the administration of the merit system plan. See Part 70 of this title.

201.12 Public assistance audits.

(a) Annually, or at such frequencies as are considered necessary and appropriate, the operations of the State agency are audited by representatives of the Audit Agency of the Department. Such audits are made to determine whether the State agency is being operated in a manner that:

(1) Encourages prudent use of program funds, and

(2) Provides a reasonable degree of assurance that funds are being properly expended, and for the purposes for which appropriated and provided for under the related Act and State plan, including State laws and regulations.

(b) Reports of these audits are released by the Audit Agency simultaneously to program officials of the Department, and to the cognizant State officials. These audit reports relate the opinion of the Audit Agency on the practices reviewed and the allowability of costs audited at the State agency. Final determinations as to actions required on all matters reported are made by cognizant officials of the Department.

201.13 Action on audit and review findings.

(a) If the audit results in no exceptions, the State agency is advised by letter of this result. The general course for the disposition of proposed exceptions resulting from audits involves the submittal of details of these exceptions to the State agency which then has an opportunity to concur in the proposed exceptions or to assemble and submit additional facts for purposes of clearance. Provision is made for the State agency to appeal proposed audit exceptions in which it has not concurred and which have not been deleted on the basis of clearance material. After consideration of a State agency's appeal by the Administrator, the Administration advises the State agency of any expenditures in which the Federal Government may not participate and requests it to include the amount as adjustments in a subsequent statement of expenditures. Expenditures in which it is found the Federal Government may not participate and which are not properly adjusted through the State's claim will be deducted from subsequent grants made to the State agency.

(b) If the Federal or State reviews reveal serious problems with respect to compliance with any Federal requirement, the State agency is required to correct its practice so that there will be no recurrence of the problem in the future.

[35 FR 12180, July 29, 1970, as amended at 53 FR 36579, Sept. 21, 1988]

201.14 Reconsideration under section 1116(d) of the Act.

(a) Applicability. This section applies to any disallowance of any item or class of items for which FFP is claimed under title I, IV, X, XIV, XVI(AABD), or XX of the Act, with respect to which reconsideration was requested prior to March 6, 1978, unless the State by filing a written notice to that effect with the Executive Secretary, Departmental Grant Appeals Board (with proof of service on the head of the constituent agency), within 30 days after mailing of the confirmation of the disallowance by the agency head, elects to have the reconsideration governed by 45 CFR Part 16.

(1) Reduction of the Federal share of assistance payments under title IV - A, for failure to certify WIN registrants (section 402(e) of the Act);

(2) Reduction by one per centum of the quarterly amount payable to a State for all expenditures under title IV - A for failure, in certain cases, to carry out the provisions of section 402(a)(15) of the Act which require the offering of and arrangement for the provision of family planning services (section 402(f) of the Act);

(3) -- (5) [Reserved]

(6) Any other decision pursuant to sections 3, 403, 422, 455, 1003, 1403, 1603, or 2003, of the Act.

(b) Notice of disallowance determination.(1) When the Regional Administrator, determines that a State claim for FFP in expenditures for a particular item or class of items is not allowable, he shall promptly issue a disallowance letter to the State.

(2) This disallowance letter shall include where appropriate:

(i) The date or dates on which the State's claim for FFP was made;

(ii) The time period during which the expenditures in question were made or claimed to have been made;

(iii) The date and amount of any payment or notice of deferral;

(iv) A statement of the amount of FFP claimed, allowed, and disallowed and the manner in which these amounts were calculated;

(v) Findings of fact on which the disallowance determination is based or a reference to other documents previously or contemporaneously furnished to the State (such as a report of a financial review or audit) which contain the findings of fact on which the disallowance determination is based;

(vi) Pertinent citations to the law, regulations, guides and instructions supporting the action taken; and

(vii) Notice of the State's right to request reconsideration of the disallowance under this section and the time within such request must be made.

(c) Request for reconsideration. (1) To obtain reconsideration of a disallowance of an item or class of items for FFP, a State shall, within 30 days of the date of the disallowance letter, request reconsideration by the Administrator, with copy to the Regional Administrator, and enclose a copy of the disallowance letter.

(2) The request for reconsideration must be accompanied by a brief statement of the issues in dispute, including an explanation of the State's position with respect to each issue.

(d) Reconsideration procedures. (1) The Administrator will promptly acknowledge receipt of a State's request for reconsideration.

(2) Upon receipt of a copy of the request for reconsideration, the Regional Administrator, shall, within 30 days of the request, provide to the Administrator a complete record of all material which he believes to have a bearing on the reconsideration, including any reports of audit or review which were the basis for his decision.

(3) The Administrator shall promptly forward to the State a list of all items currently in the record, including those received from the Regional Administrator, or with respect to the medical assistance program under title XIX, Regional Medicaid Director and make available for examination, inspection and copying any such items not previously received by the State.

(4) Within 60 days from the date of the Administrator's transmittal to the State under paragraph (d)(3) of this section, the State shall submit in writing to the Administrator any new relevant evidence, documentation, or argument and shall simultaneously submit a copy thereof to the Regional Administrator, or with respect to the medical assistance program under title XIX, Regional Medicaid Director.

(5) The Regional Administrator, or with respect to the medical assistance program under title XIX, Regional Medicaid Director shall, within 60 days of submittal by the State, submit to the Administrator (with a copy to the State) an analysis of the issues relevant to the disallowance including: (i) A restatement of the findings on which the disallowance was based; (ii) A response to each issue raised by the State with respect to such findings; (iii) A response to any other issues raised by the State, providing additional documentation when necessary; and (iv) Any additional documentation which he deems relevant.

(6) The State may respond to the material submitted by the Regional Administrator, or with respect to the medical assistance program under title XIX, Regional Medicaid Director by submitting to the Administrator within 15 days any supplemental material the State wishes to have entered into the record.

(7) At the time of submitting any additional material pursuant to paragraph (d)(4), the State may obtain, upon request to him, a conference with the Administrator, during which it may discuss with the Administrator its position on the issues. The State may, at its own expense, have such conference transcribed; the transcript shall become part of the administrative record.

(8) In reconsidering the disallowance, the Administrator may request any additional information or documents necessary to his decision.

(9) New relevant evidence received into the record by the Administrator pursuant to paragraph (d)(8) of this section which is not received from, or previously otherwise made available to, the State shall promptly be made available to the State for examination, inspection, and copying and the State will be given appropriate additional time for comment.

(10) All documents, reports, correspondence, and other materials considered by the Administrator in reaching his decision shall constitute the record of the reconsideration proceedings.

(11) After consideration of such record and the laws and regulations pertinent to the issues in question, the Administrator shall issue a written decision, based on the administrative record, which summarizes the facts and cites the regulations or statutes that support the decision. The decision shall constitute final administrative action on the matter and shall be promptly mailed to the head of the State agency.

(12) Either the state or the Regional Administrator, or with respect to the medical assistance program under title XIX, Regional Medicaid Director may request from the Administrator, for good cause, an extension of any of the time limits specified in this section.

(13) No section of this regulation shall be interpreted as waiving the Department's right to assert any provision or exemption in the Freedom of Information Act.

(e) Implementation of the decision. If the decision requires an adjustment in the Federal share, either upward or downward, this will be reflected in subsequent grant awards.

(f) For purposes of this section, the Administrator includes the Deputy Administrator, except that whichever official conducts the conference requested pursuant to paragraph (d)(7) of this section will also issue the final administrative decision pursuant to paragraph (d)(11) of this section.

Appendix -- Reconsideration of Disallowances Under Section 1116(d) of the Social Security Act

transfer of functions

Under the authority of Reorganization Plan No. 1 of 1953, and pursuant to the authorities vested in me as Secretary of Health amd Human Services, I hereby order that, with respect to reconsiderations of disallowances imposed under titles I, IV, VI, X, XIV, XVI (AABD), XIX and XX of the Social Security Act, 42 U.S.C. 301 et seq., 601 et seq., 801 et seq., 1201 et seq., 1351 et seq., 1381 et seq. (AABD), 1396 et seq. and 1397 et seq., all references to ``Administrator'' appearing in 45 CFR 201.14 shall be deemed to read ``Chairman, Departmental Grant Appeals Board'' and all references to ``Deputy Administrator'' appearing therein shall be deemed to refer to one or more members of the Departmental Grant Appeals Board, designated by the Chairman to decide a reconsideration. States which have previously had or requested a conference pursuant to 45 CFR 201.14(d)(7) will be entitled to a conference with the Chairman of the Departmental Grant Appeals Board acting (as provided above) as successor to the Administrator of the Social and Rehabilitation Service (SRS), or with a member or members of the Board designated by the Chairman to decide the matter, acting as successor to the Deputy Administrator of SRS. The Chairman may, at his option, utilize a Grant Appeals Panel, designated pursuant to 45 CFR 516.4(b), to decide the matter, and may supplement the 201.14 procedures by utilizing the procedures of 45 CFR Part 16 including the authority provided in 45 CFR 16.51 to waive or modify any procedural provision upon a determination that no party will be prejudiced and that the ends of justice will be served.

[40 FR 34592, Aug. 18, 1975; 40 FR 44326, Sept. 26, 1975, as amended at 41 FR 42205, Sept. 27, 1976; 42 FR 43977, Sept. 1, 1977; 42 FR 51583, Sept. 29, 1977; 43 FR 9266, Mar. 6, 1978; 51 FR 9202, Mar. 18, 1986; 53 FR 36579, Sept. 21, 1988]

201.15 Deferral of claims for Federal financial participation.

(a) Scope. Except as otherwise provided, this section applies to all claims for Federal financial participation submitted by States pursuant to titles I, IV, X, XIV, XVI (AABD), of the Social Security Act.

(b) Definitions.

(1) Deferral Action means the process of suspending payment with respect to a claim within the scope of paragraph (a) of this section, pending the receipt and analysis of further information relating to the allowability of the claim, under the procedures specified in this section.

(2) Deferred claim means a claim within the scope of paragraph (a) of this section upon which a deferral action has been taken. (c) Procedures. (1) A claim or any portion of a claim for reimbursement for expenditures reported on the Quarterly Statement of Expenditures shall be deferred only when the Regional Administrator believes the claim or a specific portion of the claim is of questionable allowability. The deferral action will be taken within 60 days after receipt of a Quarterly Statement of Expenditures prepared in accordance with instructions issued by the Administration. (2) When deferral action is taken on a claim, the Regional Administrator or the Administrator will within 15 days send written notice to the State identifying the type and amount of the claim and the reason for deferral. In the written notice of the deferral action, the Regional Administrator or the Administrator will request the State to make available for inspection all documents and materials which the Regional office then believes necessary to determine the allowability of the claim.

(3) Within 60 days of receipt of the notice of deferral action described in paragraph (c)(2) of this section the State shall make available to the Regional office, in readily reviewable form, all requested documents and materials, or when necessary, shall identify those documents and items of information which are not available. If the State requires additional time to make the documents and material available, it shall upon request be given an additional 60 days.

(4) The Regional office will normally initiate the review within 30 days of the date that materials become available for review.

(5) If the Regional Administrator finds that the documents and materials are not in readily reviewable form or that supplemental information is required, he will promptly notify the State. The State will have 15 days from the date of notification to complete the action requested. If the Regional Commissioner or the Administrator finds that the documents necessary to determine the allowability of the claim are not made available within the allowed time limits, or that the documents are not made available in readily reviewable form, he shall promptly disallow the claim.

(6) The Regional Administrator or the Administrator will have 90 days after all documentation is available in readily reviewable form to determine the allowability of the deferred claim. If he is unable to complete the review within the time period the claim will be paid subject to a later determination of allowability.

(7) It is the responsibility of the State agency to establish the allowability of a deferred claim.

(8) The Regional Office or the Administrator will notify the State in writing of the decision on the allowability of the deferred claim.

(9) If a deferred claim is disallowed, the Regional Administrator or the Administrator shall advise the State of its right to reconsideration pursuant to 201.14.

(10) A decision to pay a deferred claim shall not preclude a subsequent disallowance as a result of an audit exception or financial management review. If a subsequent disallowance should occur, the State, upon request shall be granted reconsideration pursuant to 201.14.

[41 FR 7104, Feb. 17, 1976, as amended at 42 FR 51583, Sept. 29, 1977; 47 FR 7669, Feb. 22, 1982; 53 FR 36579, Sept. 21, 1988]

201.66 Repayment of Federal funds by installments.

(a) Basic Conditions. When a State has been reimbursed Federal funds for expenditures claimed under titles I, IV - A, X, XIV, XVI (AABD) which are later determined to be unallowable for Federal financial participation, the State may make repayment of such Federal funds in installments provided:

(1) The amount of the repayment exceeds 2\1/2\ percent of the estimated annual State share for the program in which the unallowable expenditure occurred as set forth in paragraph (b) of this section; and

(2) The State has notified the Regional Administrator in writing of its intent to make installment repayments. Such notice must be given prior to the time repayment of the total was otherwise due.

(b) Criteria governing installment repayments. (1) The number of quarters over which the repayment of the total unallowable expenditures will be made will be determined by the percentage the total of such repayment is of the estimated State share of the annual expenditures for the specific program against which the recovery is made, as follows: * * * TABLE START * * * @h1Total repayment amount as percentage of State share of annual expenditures for the specific program@h1Number of quarters to make repayment 2.5 pct. or less....... 1 Greater than 2.5, but not greater than 5....... 2 Greater than 5, but not greater than 7.5....... 3 Greater than 7.5, but not greater than 10....... 4 Greater than 10, but not greater than 15....... 5 Greater than 15, but not greater than 20 - ....... 6 Greater than 20 but not greater than 25....... 7 Greater than 25, but not greater than 30....... 8 Greater than 30, but not greater than 47.5....... 9 Greater than 47.5, but not greater than 65....... 10 Greater than 65, but not greater than 82.5....... 11 Greater than 82.5, but not greater than 100....... 12 * * * TABLE END * * * The quarterly repayment amounts for each of the quarters in the repayment schedule shall not be less than the following percentages of the estimated State share of the annual expenditures for the program against which the recovery is made. * * * TABLE START * * * @h1For each of the following quarters@h1Repayment installment may not be less than these percentages 1 to 4....... 2.5 5 to 8....... 5.0 9 to 12....... 17.5 * * * TABLE END * * * If the State chooses to repay amounts representing higher percentages during the early quarters, any corresponding reduction in required minimum percentages would be applied first to the last scheduled payment, then to the next to the last payment, and so forth as necessary.

(2) The latest State Agency Statement of Financial Plan for AFDC submitted by the State shall be used to estimate the State's share of annual expenditures for the specific program in which the unallowable expenditures occurred. That estimated share shall be the sum of the State's share of the estimates (as shown on the latest State Agency Statement of Financial Plan for AFDC) for four quarters, beginning with the quarter in which the first installment is to be paid.

(3) In the case of a program terminated by law or by the State, the actual State share -- rather than the estimate -- shall be used for determining whether the amount of the repayment exceeds 2\1/2\% of the annual State share for the program. The annual State share in these cases will be determined using payments computable for Federal funding as reported for the program by the State on its Quarterly Statement of Expenditures reports submitted for the last four quarters preceding the date on which the program was terminated.

(4) Repayment shall be accomplished through adjustment in the quarterly grants over the period covered by the repayment schedule.

(5) The amount of the repayment for purpose of paragraphs (a) and (b) of this section may not include any amount previously approved for installment repayment.

(6) The repayment schedule may be extended beyond 12 quarterly installments if the total repayment amount exceeds 100% of the estimated State share of annual expenditures. In these circumstances, the criteria in paragraphs (b) (1) and (2) or (3) of this section, as appropriate, shall be followed for repayment of the amount equal to 100% of the annual State share. The remaining amount of the repayment shall be in quarterly amounts not less than those for the 9th through 12th quarters.

(7) The amount of a retroactive claim to be paid a State will be offset against any amounts to be, or already being, repaid by the State in installments, under the same title of the Social Security Act. Under this provision the State may choose to: (i) Suspend payments until the retroactive claim due the State has, in fact, been offset; or (ii) Continue payments until the reduced amount of its debt (remaining after the offset), has been paid in full. This second option would result in a shorter payment period. A retroactive claim for the purpose of this regulation is a claim applicable to any period ending 12 months or more prior to the beginning of the quarter in which the payment is to be made by the Administration.

[42 FR 28884, June 6, 1977, as amended at 47 FR 7669, Feb. 22, 1982; 52 FR 273, Jan. 5, 1987; 53 FR 36579, Sept. 21, 1988]

201.67 Treatment of uncashed or cancelled checks.

(a) Purpose. This section provides the rules to ensure that States refund the Federal portion of uncashed or cancelled (voided) checks under titles I, IV - A, X, XIV, and XVI (AABD).

(b) Definitions. As used in this section -- Check means a check or warrant that the State or local agency uses to make a payment. Cancelled (voided) check means a check issued by the State agency or local agency which prior to its being cashed is cancelled (voided) by State or local agency action, thus preventing disbursement of funds. Uncashed check means a check issued by the State agency or local agency which has not been cashed by the payee.

(c) Refund of Federal financial participation (FFP) for uncashed checks -- (1) General provisions. If a check remains uncashed beyond a period of 180 days from the date it was issued, i.e., the date of the check, it will no longer be regarded as an amount expended because no funds have actually been disbursed. If the State agency has claimed and received FFP for the amount of the uncashed check, it must refund the amount of FFP received.

(2) Report of refund. At the end of each calendar quarter, the State agency must identify those checks which remain uncashed beyond a period of 180 days after issuance. The State agency must report on the Quarterly Statement of Expenditures for that quarter all FFP that it received for uncashed checks. Once reported on the Quarterly Statement of Expenditures for a quarter, an uncashed check is not to be reported on a subsequent Quarterly Statement of Expenditures. If an uncashed check is cashed after the refund is made, the State agency may submit a new claim for FFP.

(d) Refund of FFP for cancelled (voided) checks -- (1) General provisions. If the State agency has claimed and received FFP for the amount of a cancelled (voided) check, it must refund the amount of FFP received.

(2) Report of refund. At the end of each calendar quarter, the State agency must identify those checks which were cancelled (voided). The State agency must report on the Quarterly Statement of Expenditures for that quarter all FFP received by the State agency for these checks. Once reported on the Quarterly Statement of Expenditures for a quarter, a cancelled (voided) check is not to be reported on a subsequent Quarterly Statement of Expenditures.

[50 FR 37661, Sept. 17, 1985]

201.70 Treatment of replacement checks.

(a) Purpose. This section provides the rules to ensure State do not claim Federal financial participation (FFP) for replacement checks under titles I, VI - A, X, XIV XVI (AABD) except under the circumstances specified in paragraph (c) of this section.

(b) Definitions. As used in this section -- ``Check'' means a check or warrant that the State or local agency uses to make a payment. ``Replacement check'' means a check issued by the State or local agency to replace an earlier check.

(c) Claiming of FFP for replacement checks. The State agency may not claim FFP for the amount of a replacement check unless: (1) It makes no claim for FFP for the earlier check; (2) The earlier check has been cancelled (voided) and FFP refunded, where claimed, pursuant to 45 CFR 201.67(d); or (3) The earlier check has been cashed and FFP has been refunded. The State agency shall report the amount of the refund of FFP for the earlier check on the Quarterly Statement of Expenditures for the quarter no later than the quarter in which the replacement check is issued.

[53 FR 24269, June 28, 1988]

PART 204 -- GENERAL ADMINISTRATION -- STATE PLANS AND GRANT APPEALS

Sec. 204.1 Submittal of State plans for Governor's review.

204.2 State plans -- format.

204.3 Responsibilities of the State.

204.4 Grant appeals. Authority: 42 U.S.C. 602(a)(44) and 1302 and sections 1, 5, 6, and 7 of Reorganization Plan No. 1 of 1953, 67 Stat. 631. Editorial Note: Nomenclature changes affecting this part appear at 53 FR 36579, Sept. 21, 1988.

204.1 Submittal of State plans for Governor's review. A State plan under title I, IV - A, IV - B, X, XIV, XVI(AABD) of the Social Security Act, section 101 of the Rehabilitation Act of 1973, or title I of the Mental Retardation Facilities and Community Mental Health Centers Construction Act, must be submitted to the State Governor for his review and comments, and the State plan must provide that the Governor will be given opportunity to review State plan amendments and long-range program planning projections or other periodic reports thereon. This requirement does not apply to periodic statistical or budget and other fiscal reports. Under this requirement, the Office of the Governor will be afforded a specified period in which to review the material. Any comments made will be transmitted to the Family Support Administration with the documents. (Sec. 1102, 49 Stat. 647 (42 U.S.C. 1302))

[39 FR 34542, Sept. 26, 1974, as amended at 53 FR 36579, Sept. 21, 1988]

204.2 State plans -- format. State plans for Federally-assisted programs for which the Family Support Administration has responsibility must be submitted to the Administration in the format and containing the information prescribed by the Administration, and within time limits set in implementing instructions issued by the Administration. Such time limits will be adequate for proper preparation of plans and submittal in accordance with the requirements for State Governors' review (see204.1 of this chapter). (Sec. 1102, 49 Stat. 647, 42 U.S.C. 1302; sec. 7(b), 68 Stat. 658, 29 U.S.C. 37(b); sec. 139, 84 Stat. 1323, 42 U.S.C. 2677(b)) [38 FR 16872, June 27, 1973, as amended at 53 FR 36579, Sept. 21, 1988]

204.3 Responsibilities of the State. The State agency shall be responsible for assuring that the benefits and services available under titles IV - A, IV - D, and IV - F are furnished in an integrated manner.

[57 FR 30425, July 9, 1992]

204.4 Grant appeals.

(a) Scope. This section applies to certain determinations (as set forth in Part 16, Appendix A, section C of this title), made with respect to direct, discretionary project grants awarded by the Family Support Administration, and such other grants or grant programs as the Administrator, with the approval of the Secretary, may designate. The statutory authority for current grant programs to which this section applies appears in the appendix to this section. This section is also applicable to determinations with respect to grants which were made under authority which has expired or been repealed since the grants were made, even though such authority does not appear in the appendix.

(b) Submission. (1) A grantee who has received notification, as described in 16.3(b) and (c) of this title, of a determination described in Part 16, Appendix A, section C of this title, may request reconsideration by informing the Grants Appeals Officer as identified in the final adverse determination or otherwise designated by the Administrator, Family Support Administration, Washington, DC 20201 of the grantee's intent to contest the determination. The grantee's request for reconsideration must be postmarked no later than 30 days after the postmark date of the written notification of such determination, except when the Grant Appeals Officer grants an extension of time for good cause.

(2) Although the request need not follow any prescribed form, it shall clearly identify the question or questions in dispute and contain a full statement of the grantee's position with respect to such question or questions, and the pertinent facts and reasons in support of such position. The grantee shall attach to his submission a copy of the agency notification specified in 16.3(b) of this title.

(c) Action by the Administration on requests for reconsideration. (1) Upon receipt of such an application the Grant Appeals Officer will inform the grantee that: (i) His request is under review, and (ii) If no decision is received within 90 days of the postmark date of the grantee's request for reconsideration, the determination may be appealed to the Departmental Grant Appeals Board.

(2) The Grant Appeals Officer will reconsider the determination appealed from, considering any material submitted by the grantee and any other material necessary.

(3) If the response to the grantee is adverse to the grantee's position, the response will include notification of the grantee's right to appeal to the Departmental Grant Appeals Board. Appendix This section is issued under sections 1, 5, 6, and 7 of Reorganization Plan No. 1 of 1953, 18 FR 2053, 67 Stat. 631 and is applicable to programs carried out under the following authorities: (1) Section 222(a) and (b) of the Social Security Amendments of 1972 (Pub. L. 92 - 603). (2) Section 426 of the Social Security Act (42 U.S.C. 262). (3) Section 707 of the Social Security Act (42 U.S.C. 907). (4) Section 1110 of the Social Security Act (42 U.S.C. 1310). (5) Section 1115 of the Social Security Act (42 U.S.C. 1315). (Secs. 1, 5, 6, 7 Reorganization Plan No. 1 of 1953, 67 Stat. 631)

[40 FR 51443, Nov. 5, 1975, as amended at 53 FR 36579, Sept. 21, 1988]

PART 205 -- GENERAL ADMINISTRATION -- PUBLIC ASSISTANCE PROGRAMS

Sec. 205.5 Plan amendments.

205.10 Hearings.

205.25 Eligibility of supplemental security income beneficiaries for food stamps or surplus commodities.

205.30 Methods of administration.

205.32 Procedures for issuance of replacement checks.

205.35 Mechanized claims processing and information retrieval systems; definitions.

205.36 State plan requirements.

205.37 Responsibilities of the Family Support Administration (FSA).

205.38 Federal financial participation (FFP) for establishing a statewide mechanized system.

205.40 Quality control system.

205.42 Reduction in Federal financial participation (FFP) for incorrect payments made by States from October 1980 through September 1984.

205.43 Increase in Federal financial participation (FFP) for States with low error rates.

205.44 Reduction in Federal financial participation (FFP) for incorrect payments made by States after September 1984.

205.45 Federal financial participation in relation to State emergency welfare preparedness.

205.50 Safeguarding information for the financial assistance programs.

205.51 Income and eligibility verification requirements.

205.52 Furnishing of social security numbers.

205.55 Requirements for requesting and furnishing eligibility and income information.

205.56 Requirements governing the use of income and eligibility information.

207.57 Maintenance of a machine readable file; requests for income and eligibility information.

205.58 Income and eligibility information; specific agreements required between the State agency and the agency supplying the information.

205.60 Reports and maintenance of records.

205.62 Delay of effective date.

205.70 Availability of agency program manuals.

205.80 Evaluation of the Work Incentive Demonstration Program.

205.100 Single State agency.

205.101 Organization for administration.

205.120 Statewide operation.

205.130 State financial participation.

205.146 Specific limitations on Federal financial participation under title IV - A.

205.150 Cost allocation.

205.160 Non-expendable personal property.

205.170 State standards for office space, equipment, and facilities.

205.190 Standard-setting authority for institutions. Authority: 42 U.S.C. 602, 603, 606, 607, 611, 1302, 1306(a), 1320b - 7. Editorial Note: Nomenclature changes affecting this part appear at 53 FR 36579, Sept. 21, 1988.

205.5 Plan amendments.

(a) State plan requirements. A State plan under title I, IV - A, X, XIV, or XVI (AABD) of the Social Security Act must provide that the plan will be amended whenever necessary to reflect new or revised Federal statutes or regulations, or material change in any phase of State law, organization, policy or State agency operation.

(b) Federal financial participation. Except where otherwise provided, Federal financial participation is available in the additional expenditures resulting from an amended provision of the State plan as of the first day of the calendar quarter in which an approvable amendment is submitted or the date on which the amended provision becomes effective in the State, whichever is later.

[39 FR 34542, Dec. 26, 1974, as amended at 53 FR 36579, Sept. 21, 1988]

§205.10 Hearings.

(a) State plan requirements. A State plan under title I, IV - A, X, XIV, or XVI(AABD) of the Social Security Act shall provide for a system of hearings under which:

(1) The single State agency responsible for the program shall be responsible for fulfillment of hearing provisions which shall provide for:

(i) A hearing before the State agency, or

(ii) An evidentiary hearing at the local level with a right of appeal to a State agency hearing. Where a State agency adopts a system of evidentiary hearings with an appeal to a State agency hearing, it may, in some political subdivisions, permit local evidentiary hearings, and in others, provide for a single hearing before the State agency. Under this requirement hearings shall meet the due process standards set forth in the U.S. Supreme Court decision in Goldberg v. Kelly, 397 U.S. 254 (1970) and the standards set forth in this section.

(2) Hearing procedures shall be issued and publicized by the State agency. Such procedures shall provide for a face-to-face hearing or, at State option, a hearing by telephone when the applicant or recipient also agrees. Under this provision, the State shall assure that the applicant or recipient is afforded all rights as specified in this section, whether the hearing is face-to-face or by telephone;

(3) Every applicant or recipient shall be informed in writing at the time of application and at the time of any action affecting his claim:

(i) Of his right to a hearing, as provided in paragraph (a)(5) of this section;

(ii) Of the method by which he may obtain a hearing;

(iii) That he may be represented by an authorized representative, such as legal counsel, relative, friend, or other spokesman, or he may represent himself.

(4) In cases of intended action to discontinue, terminate, suspend or reduce assistance or to change the manner or form of payment to a protective, vendor, or two-party payment under 234.60:

(i) The State or local agency shall give timely and adequate notice, except as provided for in paragraphs (a)(4)(ii), (iii), or (iv) of this section. Under this requirement: (A) Timely means that the notice is mailed at least 10 days before the date of action, that is, the date upon which the action would become effective; (B) Adequate means a written notice that includes a statement of what action the agency intends to take, the reasons for the intended agency action, the specific regulations supporting such action, explanation of the individual's right to request an evidentiary hearing (if provided) and a State agency hearing, the circumstances under which assistance is continued if a hearing is requested, and if the agency action is upheld, that such assistance must be repaid under title IV - A, and must also be repaid under titles I, X, XIV or XVI (AABD) if the State plan provides for recovery of such payments.

(ii) The agency may dispense with timely notice but shall send adequate notice not later than the date of action when: (A) The agency has factual information confirming the death of a recipient or of the AFDC payee when there is no relative available to serve as new payee;

(B) The agency receives a clear written statement signed by a recipient that he no longer wishes assistance, or that gives information which requires termination or reduction of assistance, and the recipient has indicated, in writing, that he understands that this must be the consequence of supplying such information;

(C) The recipient has been admitted or committed to an institution, and further payments to that individual do not qualify for Federal financial participation under the State plan;

(D) The recipient has been placed in skilled nursing care, intermediate care or long-term hospitalization;

(E) The claimant's whereabouts are unknown and agency mail directed to him has been returned by the post office indicating no known forwarding address. The claimant's check must, however, be made available to him if his whereabouts become known during the payment period covered by a returned check;

(F) A recipient has been accepted for assistance in a new jurisdiction and that fact has been established by the jurisdiction previously providing assistance;

(G) An AFDC child is removed from the home as a result of a judicial determination, or voluntarily placed in foster care by his legal guardian;

(H) For AFDC, the agency takes action because of information the recipient furnished in a monthly report or because the recipient has failed to submit a complete or a timely monthly report without good cause. (See 233.37);

(I) A special allowance granted for a specific period is terminated and the recipient has been informed in writing at the time of initiation that the allowance shall automatically terminate at the end of the specified period;

(J) The agency has made a presumption of mismanagement as a result of a recipient's nonpayment of rent and provides for post hearings in such circumstances;

(K) An individual's payment is suspended or reduced for failure to meet a payment after performance obligation as set forth at 233.101(b)(2)(iv) (B) or (C) of this chapter. In addition to the contents set forth in paragraph (a)(4)(i)(B) of this section, the adequate notice must advise the individual of the right to have assistance immediately reinstated retroactive to the date of action at the previous month's level pending the hearing decision if he or she makes a request for a hearing and reinstatement within 10 days after the date of the notice.

(iii) When changes in either State or Federal law require automatic grant adjustments for classes of recipients, timely notice of such grant adjustments shall be given which shall be ``adequate'' if it includes a statement of the intended action, the reasons for such intended action, a statement of the specific change in law requiring such action and a statement of the circumstances under which a hearing may be obtained and assistance continued.

(iv) When the agency obtains facts indicating that assistance should be discontinued, suspended, terminated, or reduced because of the probable fraud of the recipient, and, where possible, such facts have been verified through collateral sources, notice of such grant adjustment shall be timely if mailed at least five (5) days before action would become effective.

(5) An opportunity for a hearing shall be granted to any applicant who requests a hearing because his or her claim for financial assistance (including a request for supplemental payments under § §233.23 and 233.27) is denied, or is not acted upon with reasonable promptness, and to any recipient who is aggrieved by any agency action resulting in suspension, reduction, discontinuance, or termination of assistance, or determination that a protective, vendor, or two-party payment should be made or continued. A hearing need not be granted when either State or Federal law requires automatic grant adjustments for classes of recipients unless the reason for an individual appeal is incorrect grant computation.

(i) A request for a hearing is defined as a clear expression by the claimant (or his authorized representative acting for him), to the effect that he wants the opportunity to present his case to higher authority. The State may require that such request be in written form in order to be effective;

(ii) The freedom to make such a request shall not be limited or interfered with in any way. The agency may assist the claimant to submit and process his request;

(iii) The claimant shall be provided reasonable time, not to exceed 90 days, in which to appeal an agency action;

(iv) Agencies may respond to a series of individual requests for hearing by conducting a single group hearing. Agencies may consolidate only cases in which the sole issue involved is one of State or Federal law or policy or changes in State or Federal law. In all group hearings, the policies governing hearings must be followed. Thus, each individual claimant shall be permitted to present his own case or be represented by his authorized representative;

(v) The agency may deny or dismiss a request for a hearing where it has been withdrawn by the claimant in writing, where the sole issue is one of State or Federal law requiring automatic grant adjustments for classes of recipients, where a decision has been rendered after a WIN hearing before the manpower agency that a participant has, without good cause, refused to accept employment or participate in the WIN program, or has failed to request such a hearing after notice of intended action for such refusal, or where it is abandoned. Abandonment may be deemed to have occurred if the claimant, without good cause therefor, fails to appear by himself or by authorized representative at the hearing scheduled for such claimant.

(6) If the recipient requests a hearing within the timely notice period:

(i) Assistance shall not be suspended, reduced, discontinued or terminated (but is subject to recovery by the agency if its action is sustained), until a decision is rendered after a hearing, unless:

(A) A determination is made at the hearing that the sole issue is one of State or Federal law or policy, or change in State or Federal law and not one of incorrect grant computation;

(B) A change affecting the recipient's grant occurs while the hearing decision is pending and the recipient fails to request a hearing after notice of the change;

(C) The recipient specifically requests that he or she not receive continued assistance pending a hearing decision; or

(D) The agency has made a presumption of mismanagement as a result of a recipient's nonpayment of rent and provides for the opportunity for a hearing after the manner or form of payment has been changed for such cases in accordance with §234.60 (a)(2) and (a)(11).

(ii) The agency shall promptly inform the claimant in writing if assistance is to be discontinued pending the hearing decision; and

(iii) In any case where the decision of an evidentiary hearing is adverse to the claimant, he shall be informed of and afforded the right to make a written request, within 15 days of the mailing of the notification of such adverse decision, for a State agency hearing and of his right to request a de novo hearing. Unless a de novo hearing is specifically requested by the appellant, the State agency hearing may consist of a review by the State agency hearing officer of the record of the evidentiary hearing to determine whether the decision of the evidentiary hearing officer was supported by substantial evidence in the record. Assistance shall not be continued after an adverse decision to the claimant at the evidentiary hearing.

(7) A State may provide that a hearing request made after the date of action (but during a period not in excess of 10 days following such date) shall result in reinstatement of assistance to be continued until the hearing decision, unless

(i) the recipient specifically requests that continued assistance not be paid pending the hearing decision; or

(ii) at the hearing it is determined that the sole issue is one of State or Federal law or policy. In any case where action was taken without timely notice, if the recipient requests a hearing within 10 days of the mailing of the notice of the action, and the agency determines that the action resulted from other than the application of State or Federal law or policy or a change in State or Federal law, assistance shall be reinstated and continued until a decision is rendered after the hearing, unless the recipient specifically requests that continued assistance not be paid pending the hearing decision.

(8) The hearing shall be conducted at a reasonable time, date, and place, and adequate preliminary written notice shall be given.

(9) Hearings shall be conducted by an impartial official (officials) or designee of the agency. Under this requirement, the hearing official (officials) or designee shall not have been directly involved in the initial determination of the action in question.

(10) When the hearing involves medical issues such as those concerning a diagnosis, an examining physician's report, or a medical review team's decision, a medical assessment other than that of the person or persons involved in making the original decision shall be obtained at agency expense and made part of the record if the hearing officer considers it necessary.

(11) In respect to title IV - C, when the appeal has been taken on the basis of a disputed WIN registration requirement, exemption determination or finding of failure to appear for an appraisal interview, a representative of the local WIN manpower agency shall, where appropriate, participate in the conduct of the hearing.

(12) The hearing shall include consideration of:

(i) An agency action, or failure to act with reasonable promptness, on a claim for financial assistance, which includes undue delay in reaching a decision on eligibility or in making a payment, refusal to consider a request for or undue delay in making an adjustment in payment, and discontinuance, termination or reduction of such assistance;

(ii) Agency decision regarding:

(A) Eligibility for financial assistance in both initial and subsequent determinations,

(B) Amount of financial assistance or change in payments,

(C) The manner or form of payment, including restricted or protective payments, even though no Federal financial participation is claimed.

(13) The claimant, or his representative, shall have adequate opportunity:

(i) To examine the contents of his case file and all documents and records to be used by the agency at the hearing at a reasonable time before the date of the hearing as well as during the hearing;

(ii) At his option, to present his case himself or with the aid of an authorized representative;

(iii) To bring witnesses;

(iv) To establish all pertinent facts and circumstances; (v) To advance any arguments without undue interference;

(vi) To question or refute any testimony or evidence, including opportunity to confront and cross-examine adverse witnesses.

(14) Recommendations or decisions of the hearing officer or panel shall be based exclusively on evidence and other material introduced at the hearing. The transcript or recording of testimony and exhibits, or an official report containing the substance of what transpired at the hearing, together with all papers and requests filed in the proceeding, and the recommendation or decision of the hearing officer or panel shall constitute the exclusive record and shall be available to the claimant at a place accessible to him or his representative at a reasonable time.

(15) Decisions by the hearing authority shall:

(i) In the event of an evidentiary hearing, consist of a memorandum decision summarizing the facts and identifying the regulations supporting the decision;

(ii) In the event of a State agency de novo hearing, specify the reasons for the decision and identify the supporting evidence and regulations. Under this requirement no persons who participated in the local decision being appealed shall participate in a final administrative decision on such a case.

(16) Prompt, definitive, and final administrative action shall be taken within 90 days from the date of the request for a hearing.

(17) The claimant shall be notified of the decision in writing and, to the extent it is available to him, of his right to appeal to State agency hearing or judicial review.

(18) When the hearing decision is favorable to the claimant, or when the agency decides in favor of the claimant prior to the hearing, the agency shall promptly make corrective payments retroactively to the date the incorrect action was taken.

(19) All State agency hearing decisions shall be accessible to the public (subject to provisions of safeguarding public assistance information).

(b) Federal financial participation.

Federal financial participation is available for the following items:

(1) Payments of assistance continued pending a hearing decision.

(2) Payments of assistance made to carry out hearing decisions, or to take corrective action after an appeal but prior to hearing, or to extend the benefit of a hearing decision or court order to others in the same situation as those directly affected by the decision or order. Such payments may be retroactive in accordance with applicable Federal policies on corrective payments.

(3) Payments of assistance within the scope of Federally aided public assistance programs made in accordance with a court order.

(4) Administrative costs incurred by the agency for:

(i) Providing transportation for the claimant, his representative and witnesses to and from the place of the hearing;

(ii) Meeting other expenditures incurred by the claimant in connection with the hearing;

(iii) Carrying out the hearing procedures, including expenses of obtaining an additional medical assessment.

[38 FR 22007, Aug. 15, 1973, as amended at 44 FR 17941, Mar. 23, 1979; 45 FR 20480, Mar. 28, 1980; 47 FR 5673, Feb. 5, 1982; 47 FR 47827, Oct 28, 1982; 51 FR 9202, Mar. 18, 1986; 53 FR 36579, Sept. 21, 1988; 57 FR 30425, July 9, 1992]

§205.25 Eligibility of supplemental security income beneficiaries for food stamps or surplus commodities.

(a) In respect to any individual who is receiving supplemental security income benefits under Title XVI of the Social Security Act, the State agency shall make the following determinations:

(1) The amount of assistance such individual would have been entitled to receive for any month under the appropriate State plan in effect for December 1973, under Title I, X, XIV, or XVI, and for such purpose such individual shall be deemed to be aged, blind, or permanently and totally disabled, as the case may be, under the provisions of such plan.

(2) The bonus value of the food stamps (according to the Food Stamp Schedule effective for July 1973) such individual would have been entitled to receive for such month, assuming the individual were receiving the assistance determined under paragraph (a)(1) of this section.

(3) The amount of benefits such individual is receiving for such month under Title XVI, plus supplementary payments as defined in section 1616(a) of the Social Security Act and payments pursuant to section 212 of Pub. L. 93 - 66, if any.

(b) If the amount determined in paragraph (a)(1) of this section plus the amount determined in paragraph (a)(2) of this section exceeds the amount determined in paragraph (a)(3) of this section, such individual shall be eligible to participate in the food stamp program established by the Food Stamp Act of 1964 or surplus commodities distribution programs established by the Secretary of Agriculture pursuant to section 416 of the Agricultural Act of 1949, section 32 of Pub. L. 74 - 320, or any other law, in accordance with regulations and procedures established by the Secretary of Agriculture.

(c) For purposes of paragraph (a)(3) of this section, the State agency shall obtain the amount of the title XVI payment and the amount of any Federally administered State supplementary payment from the Social Security Administration.

(d) The State agency shall redetermine the eligibility of individuals to participate in the food stamp or surplus commodities distribution programs hereunder at such times as the Secretary of Agriculture requires re-certification for such stamps or commodities.

[38 FR 34324, Dec. 13, 1973]

§205.30 Methods of administration. State plan requirements: A State plan for financial assistance under title I, IV - A, X, XIV or XVI (AABD) of the Social Security Act must provide for such methods of administration as are found by the Secretary to be necessary for the proper and efficient operation of the plan.

[45 FR 56684, Aug. 25, 1980] §205.32 Procedures for issuance of replacement checks.

(a) State plan requirements.

A State plan under title IV - A of the Social Security Act shall provide that

(1) procedures are in effect to ensure that no undue delays occur in issuing a replacement check; and

(2) when applicable, prior to the issuance of a replacement check, the State agency must:

(i) Issue a stop payment order on the original AFDC check through appropriate banking procedures; and

(ii) Require recipients to execute a signed statement attesting to the nonreceipt, loss, or theft of the original FDC check. However, if obtaining such a statement from the recipient will cause the issuance of the check to be unduly delayed, the statement may be obtained within a reasonable time after the check is issued.

(b) State option.

A State plan may provide that as a condition for issuance of a replacement check, a recipient is required to report a lost or stolen AFDC check to the police or other appropriate authorities. Under this provision, the State agency may require that the recipient verify that a report was made to the police or other appropriate authorities and, if so, the agency will establish procedures for such verification.

[51 FR 9203, Mar. 18, 1986]

§205.35 Mechanized claims processing and information retrieval systems; definitions.

Section 205.35 through 205.38 contain State plan requirements for an automated statewide management information system, conditions for FFP and responsibilities of the Family Support Administration (FSA). For purposes of §§205.35 through 205.38:

(a) A mechanized claims processing and information retrieval system, hereafter referred to as an automated application processing and information retrieval system (APIRS), or the system, means a system of software and hardware used:

(1) To introduce, control and account for data items in providing public assistance under the Aid to Families with Dependent Children (AFDC) State plan; and

(2) To retrieve and produce utilization and management information about such aid and services as required by the single State agency and Federal government for program administration and audit purposes.

(b) Planning means: (1) The preliminary project activity to determine the requirements necessitating the project, the activities to be undertaken, and the resources required to complete the project;

(2) The preparation of an APD;

(3) The preparation of a detailed project plan describing when and how the computer system will be designed and developed; and

(4) The preparation of a detailed implementation plan describing specific training, testing, and conversion plans to install the computer system.

(c) The following terms are defined at 45 CFR part 95, subpart F, §95.605: Annually updated advance automatic data processing planning document; Design or System Design; Development; Initial advance automatic data processing planning document; Installation; Operation; and Software.

[51 FR 45330, Dec. 18, 1986, as amended at 53 FR 36579, Sept. 21, 1988; 55 FR 4379, Feb. 7, 1990]

§205.36 State plan requirements.

A State plan under title IV - A of the Social Security Act shall, at the option of the State, provide for the establishment and operation, in accordance with an (initial and annually updated) advance automatic data processing planning document approved by SSA, of an automated statewide management information system designed effectively and efficiently, to assist management in the administration of an approved AFDC State plan. The submission process to amend the State plan is explained in §201.3. This system must be designed:

(a) To automatically control and account for --

(1) All the factors in the total eligibility determination process under the plan for aid, including but not limited to:

(i) Identifiable correlation factors (such as social security numbers, names, dates of birth, home addresses, and mailing addresses (including postal ZIP codes), of all applicants and recipients of AFDC and the relative with whom any child who is an applicant or recipient is living)).

(A) To assure sufficient compatibility among the systems of different jurisdictions, and

(B) To permit periodic screening to determine whether an individual is or has been receiving benefits from more than one jurisdiction.

(ii) Checking records of applicants and recipients of such aid on a periodic basis with other agencies, both intra and inter-state, for eligibility determination, verification and payment as required by other provisions of the Social Security Act.

(2) The costs, quality, and delivery of funds and services furnished to applicants for and recipients of such aid.

(b) To notify the appropriate State officials of child support, food stamp, social service, and medical assistance programs approved under title XIX whenever a case/recipient for aid and services becomes ineligible or the amount of aid or services is changed.

(c) To provide for security against unauthorized access to, or use of, the data in the system.

[51 FR 13006, Apr. 17, 1986]

§205.37 Responsibilities of the Family Support Administration (FSA). (a) FSA shall not approve the initial and annually updated advance automatic data processing planning document unless the document, when implemented, will carry out the requirements of the law and the objectives of title IV - A (AFDC) Automated Application Processing and Information Retrieval System Guide. The initial advance automatic data processing planning document must include: (1) A requirements analysis, including consideration of the program mission, functions, organization, services, constraints and current support relating to such system; (2) A description of the proposed statewide management system, including the description of information flows, input data formats, output reports and uses; (3) The security and interface requirements to be employed in such statewide management system; (4) A description of the projected resource requirements including staff and other needs; and the resources available or expected to be available to meet these requirements; (5) A cost benefit analysis of alternative systems designs, data processing services and equipment in terms of qualitative and quantitative measures. The alternative systems considered should include the advantages of the proposed system over the alternatives and should indicate the period of time the system will be operated to justify the funds invested. OFA certified systems that are already in place in other States must be included in the alternatives to be considered and evaluated; (6) A plan for distribution of costs, containing the basis for rates, both direct and indirect, to be in effect under such a statewide management system; (7) An implementation plan with charts of development events, testing description, proposed acceptance criteria, and backup and fallback procedures to handle possible failure of a system; and (8) Evidence that the State's system will be compatible with those of the FSA to facilitate the exchange of data between the State and Federal system. (b) FSA shall on a continuing basis, review, assess, and inspect the planning, design, and operation of, statewide management information systems, with a view to determining whether, and to what extent, these systems meet and continue to meet the requirements under these regulations. (c) If FSA finds that any statewide management information system referred to in 205.38 fails to comply substantially with criteria, requirements, and other undertakings prescribed by the approved advance automatic data processing planning document, approval of such document shall be suspended. The State will be given written notice of the suspension. The notice of suspension will state the reason for the suspension, whether the suspended system complies with the criteria for 50 percent FFP under 45 CFR Part 95, the actions required for future Federal funding, and the effective date of the suspension. The suspension shall be effective as of the date that the system failed to comply substantially with the approved APD. The suspension shall remain in effect until FSA makes a determination that such system complies with prescribed criteria, requirements, and other undertakings for future Federal funding. Should a State cease development of their approved system, either by voluntary withdrawal or as a result of Federal suspension, all Federal incentive funds invested to date that exceed the normal administrative FFP rate (50 percent) will be subject to recoupment. (d) FSA shall provide technical assistance to States as is deemed necessary to assist States to plan, design, develop, or install and provide for the security of the management information systems. (e) Approvals of the systems by FSA under the provisions of this section will be undertaken only as a result of State applications for increased matching. The requirements of 45 CFR part 95, subpart E and subpart F apply. [51 FR 13006, Apr. 17, 1986, as amended at 53 FR 36579, Sept. 21, 1988; 55 FR 4379, Feb. 7, 1990; 56 FR 1493, Jan. 15, 1991] 205.38 Federal financial participation (FFP) for establishing a statewide mechanized system. (a) Effective July 1, 1981, FFP is available at 90 percent of expenditures incurred for planning, design, development or installation of a statewide automated application processing and information retrieval system which are consistent with an approved ADP. The 90 percent FFP includes the purchase or rental of computer equipment and software directly required for and used in the operation of this system. (b) FSA will approve the system provided the following conditions are met -- (1) FSA determines that the system is likely to provide more efficient, economical, and effective administration of the AFDC program. (2) The system is compatible with the claims processing and information retrieval systems used in the administration of State plans approved under title XIX, and State programs where there is FFP under title XX. (3) The system meets the requirements referred to in 205.36. (4) The system meets criteria established in the title IV - A (AFDC) Automated Application Processing and Information Retrieval System Guide issued by FSA and which provides specific standard requirements for major functions, such as automated eligibility determination, grant computation, verification, referral, management control, compability, and data security. (5) The State agency certifies that -- (i) The State will have all ownership rights in software or modifications thereof and associated documentation designed or developed with 90 percent FFP under this section, except that the Department of Health and Human Services reserves a royalty-free, nonexclusive, and irrevocable license to reproduce, publish, or otherwise use, and to authorize others to use for Federal government purposes, such software, modifications, and documentation; (ii) Methods and procedures for properly charging the cost of all systems whether acquired from public or private sources shall be in accordance with Federal regulations in Part 74 of this title and the applicable FSA title IV - A (AFDC) Automated Application Processing and Information Retrieval System Guide; (iii) The complete system planned, designed, developed, installed, and hardware acquired, with FFP under these regulations will be used for a period of time which is consistent with the advance planning document as approved, or which FSA determines is sufficient to justify the Federal funds invested; (iv) Information in the system will be safeguarded in accordance with applicable Federal law; and (v) Access to the system in all of its aspects, including design, development, and operation, including work performed by any source, and including cost records of contractors and subcontractors, shall be made available to the Federal Government by the State at intervals deemed necessary by FSA to determine whether the conditions for approval are being met and to determine its efficiency, economy and effectiveness. (c) If FSA suspends approval, as described in 205.37, of the advance automated data processing planning document and/or system, FFP at the higher matching rate shall not be allowed for any costs incurred, until such time as the conditions for approval are met. Should the State fail to correct the deficiencies which led to the suspension within 90 days of the date of notification of suspension or within a longer period of time agreed to by both the State and FSA, all Federal incentive funds invested to date that exceed the normal administrative FFP rate (50 percent) will be disallowed. (d) Should a State voluntarily withdraw its approved APD and cease development of the approved system, all Federal incentive funds invested to date that exceed the normal administrative FFP rate (50 percent) will be disallowed. (e) Once a State is certified as having met the requirements referred to in 205.36 incentive funding will not be allowable for enhancements or other modifications unless these modifications are authorized by the Office of Family Assistance as a result of Federal legislative or regulatory change. [51 FR 13007, Apr. 17, 1986, as amended at 53 FR 36579, Sept. 21, 1988] 205.40 Quality control system. (a) Definitions. For purposes of this section, notwithstanding any other regulations in this chapter: (1) Assistance unit means all individuals whose needs, income, and resources are considered in determining eligibility for, and the amount of, an assistance payment for which Federal financial participation is claimed under this chapter. (2) Case error, for active cases, means an overpayment, underpayment, or payment to ineligibiles, as defined in this section; for negative case actions, means that the reason given by the agency for that action was incorrect. (For exceptions and special provisions, see paragraph (c) of this section.) (3) Payment to ineligibles means a financial assistance payment received by or for an assistance unit, for the review month, when that assistance unit was not eligible for any part of the payment under permissible State practice in effect on the first day of the review month, even though the State agency had not made a finding of ineligibility under 206.10(a)(5) of this chapter. (4) Overpayment means a financial assistance payment received by or for an assistance unit, for the review month, which exceeds by at least $5.00 the amount for which that unit was eligible under permissible State practice in effect on the first day of the review month. (5) Underpayment means a financial assistance payment received by or for an assistance unit for the review month which is at least $5.00 less than the amount for which that assistance unit under permissible State practice was eligible in effect on the first day of the review month. (6) Review month means the specific calendar or fiscal month for which the assistance payment under review is received. (7) Assistance payment means a single payment (or two successive payments, in States that pay on a semi-monthly basis), received for a specific calendar or fiscal month. (8) Permissible State practice means State written policy instructions that are consistent with the State plan or with plan amendments which have been submitted to, but have not been acted upon by the Department. In all instances where written instructions are not consistent with the State plan or proposed plan amendments, permissible State practice means the provisions of the State plan. (9) Negative case action means an action to deny an application for assistance or to otherwise dispose of that application without a determination of eligibility (for instance, because the application was withdrawn or abandoned), or to terminate assistance. (10) Disposed of case means that a decision was made on the eligibility and payment status of a case under review or that the case was dropped or listed in error. (11) Edited review findings means that the findings on the review schedule have been screened to insure the data are both accurate and internally consistent. (b) State plan requirements. A State plan under title IV - A or I, X, XIV or XVI (AABD) of the Social Security Act must provide for a continuing system of quality control for assuring that assistance is furnished in accordance with permissible State practice as defined in paragraph (a) of this section. Under this requirement: (1) The State agency shall operate the quality control system in accordance with policies and procedures prescribed in the Quality Control Manuals issued by the Department. Specifically: (i) It shall apply the prescribed sampling and methods and schedules. (ii) It shall conduct field investigations, including a personal interview in all cases which fall within the sample of active cases, and as necessary for cases in the negative case action sample. (iii) It shall provide the resources and methods necessary to analyze the findings of the system. (iv) It shall take appropriate corrective action on improperly authorized or denied assistance and on the causes of improper actions. (v) It shall assure access by HHS staff to State and local records relating to public assistance, to recipients, and to third parties, including information available under 205.55. (2) The State agency shall submit to the Department, in such form and at such times as it prescribes: (i) A description of the State agency's sampling plan for active cases and for negative case actions, which is to be submitted to the Department no later than 60 days before the start of each sample period unless there has been no change in the State's sampling plan and it continues to meet Federal sampling requirements. Where the State choose to reduce its active case sample below the standard sample size but not below the minimum sample size specified in the Quality Control Manual, the State must provide the Department with a statement, as part of its sampling plan, accepting the reliability of the reduced sample size and agreeing not to challenge the resulting AFDC and Medicaid error rates based on the size of the sample. (ii)Edited review findings for the State agency's disposed of active case and negative case actions. The State shall input these findings into the computer terminal provided by the Federal government, and transmit the data to a designated host computer. For State agencies that do not have a terminal provided by the Federal government, the State agency shall submit the review findings in a format specified by the Department. The State agency shall dispose of and submit review findings in the following time frames:'' (A) Ninety percent or all but five cases of the cases selected in the active case sample each month, and ninety percent or all but five cases of the cases selected in the negative case sample each month, within 75 days after the end of the sample month; (B) Ninety-five percent or all but five cases selected in the active and negative case samples within 95 days after the end of each sample month; and (C) One hundred percent of the cases selected in the active and negative case samples within 120 days after the end of each sample month. (iii) On a monthly basis, the edited review findings for the sample cases disposed of in the preceding month. (iv) Original case record, i.e., the local agency record and the State QC file, legible copies of case records, or specified information contained in case records, by mail, within ten days of the State's receipt of a request for such information. The Department may grant exceptions to these requirements in limited cases. (v) The following corrective action material: (A) Corrective action plans for reducing case error rates for ineligibility, overpayments, underpayments, improper denials and terminations by February 15 of each year. (B) A progress report on the status of implemented corrective actions, an evaluation of their effectiveness and any new initiatives based on current error rate data since the last annual corrective action plan by August 15 of each year. (vi) Other data and reports that the Administrator requests. (3) The State agency may submit an alternate completion plan for the Administrator's approval if the State is unable to meet the requirements of paragraph (b)(2)(ii) of this section either as a result of circumstances of a permanent or recurring nature or as a result of the occurrence of an unforeseen event during the sample period. Until the Administrator approves an alternate completion plan, the State must continue to comply with the requirements of paragraph (b)(2)(ii) of this section. (i) Alternate sample case completion plan based on permanent or recurring events. (A) The Administrator may approve an alternate completion plan where: The State's sample population is dispersed over such great distances that conducting the required number of field interviews needed to meet the requirements of paragraph (b)(2)(ii) of this section is cost prohibitive; or the State's usual weather conditions or geography make significant numbers of the sample population inaccessible or difficult to contact during certain times of the year making it a hardship for the State to comply with the requirements of paragraph (b)(2)(ii) of this section; (B) The alternate completion plan request must contain supporting evidence and data which justify the need for an alternate completion plan including a description of the population dispersal or population inaccessibility problems within the State and the reason(s) why the State cannot comply with the requirements of paragraph (b)(2)(ii) of this section; (C) The alternative completion plan request must contain details on the agency's proposed schedule for completing the sample cases including: The sample period(s) to be covered by the plan; the revised completion dates and completion percentages; and a revised schedule for the submission of the sample case edited review findings. The alternate completion plan request must be submitted no later than 60 days before the start of the first sample period covered by the plan; and (D) Even if the alternate plan is approved, the agency must submit edited review findings on all cases selected in the sample period within 120 days after the end of each sample month in the period. (ii) Temporary alternate completion plan based on unforseen events. (A) The Administrator may approve an alternate completion plan for a particular sample period where unforseen events occur which temporarily prevent the State from meeting the requirements of paragraph (b)(2)(ii) of this section. These events can include, but are not limited to -- floods, earthquakes, computer breakdowns, snowstorms, labor disputes, etc. (B) The temporary alternate plan request must: Briefly describe the event(s) requiring the implementation of the temporary alternate plan; the period the revised schedule will be in effect; the revised completion dates; the revised completion percentages; and the revised schedule for submission of sample case edited review findings; (C) A temporary alternate plan may allow the State agency to submit the edited review findings on its sample cases at later dates than specified in paragraph (b)(2)(ii) of this section. (c) Special provisions applicable to changes in circumstances. (1) An overpayment, underpayment, or payment of ineligibiles that is related to a change in circumstances shall be counted as a case error if: (i) The changes are incorrectly reflected in the review month payment; or (ii) The change occurred in or before the second month prior to the review month and is not reflected in the review month payment. (2) An overpayment, underpayment, or payment to ineligibles that is related to a change in circumstances shall not be counted as a case error if: (i) The payment continues unadjusted because a hearing was requested; or (ii) The change occurred in the review month or the month immediately preceding the review month. (3) For purposes of this paragraph (c): (i) A hearing decision is considered a change in circumstances; (ii) The fact that the agency has complied with the requirements for redetermination of eligibility (see 206.10(a)(9) of this chapter) or for timely action on information from the State's Income and Eligibility Verification System (IEVS) (see 205.56(a)(1)) has no bearing on, and does not relieve the State agency of its responsibility for, the determination of erroneous payments or its liability for such payments; and (iii) When the overpayment, underpayment, or payment to ineligibles is the result of several changes in circumstances, each change will be evaluated as to its impact on the final determination of case error. [42 FR 37207, July 20, 1977, as amended at 43 FR 2631, Jan. 18, 1978; 47 FR 46510, Oct. 19, 1982; 47 FR 57942, Dec. 29, 1982; 48 FR 15629, Apr. 12, 1983; 49 FR 38285, Sept. 28, 1984; 51 FR 7214, Feb. 28, 1986; 51 FR 9203, Mar. 18, 1986; 53 FR 36579, Sept. 21, 1988] 205.42 Reduction in Federal financial participation (FFP) for incorrect payments made by States from October 1980 through September 1984. (a) Purpose and applicability. This section provides the rules we will use from October 1980 through September 1984. to determine whether we will reduce the amount of Federal matching funds (Federal financial participation or FFP) we give to a State, and, if so, the amount of the reduction. We will reduce the amount of our matching funds if a State makes more incorrect payments in its AFDC program than allowed under the rules in this section. These rules apply to all States which have AFDC programs. (b) Definitions. For the purposes of this section: Annual assessment period means the 12-month period October 1 through September 30. Base period means the April through September 1978 quality control system review period. Incorrect payments means payments to people who are ineligible for a payment and overpayments to eligible people. National standard means a four percent payment error rate for the period October 1982 through September 1983 for all States; a four percent payment error rate for Guam, Puerto Rico and the Virgin Islands and a three percent payment error rate for the other States for the period October 1983 through September 1984. Payment error rate means the dollar amount of incorrect payments a State has made expressed as a percentage of the State's total payments. We, us or our means the Department or the Family Support Administration as appropriate. (c) General. In these rules we are establishing a national standard for incorrect payments in the AFDC programs. This standard will be used to measure performance of the States in each annual assessment period from October 1980 through September 1984. A State whose payment error rate is below the national standard in the base period must not go above the standard, without risking reduction in Federal matching funds. A State whose payment error rate is above the standard must reduce its error rate to the national standard or to the State's target error rate established under these rules. (d) How we establish acceptable levels for State performance using the national standard -- (1) Target error rates for States above the national standard in the base period. (i) Each State with a base period payment error rate in excess of 4 percent must reduce its payment error rate to 4 percent by the October 1982 through September 1983 annual assessment period in 3 equal increments for each October through September annual assessment period beginning with the October 1980 through September 1981 period. Each State other than Guam, Puerto Rico and the Virgin Islands must meet a three percent standard for the annual assessment period October 1983 - September 1984. (ii) We will establish each State's target error rate for the October 1980 through September 1981 annual assessment period by multiplying one-third times the amount by which the State's base period payment error rate exceeds 4 percent; this product is then subtracted from the State's base period payment error rate. To establish the target error rate for the October 1981 through September 1982 annual assessment period, we will multiply two-thirds times the amount by which the State's base period payment error rate exceeds 4 percent; this product is then subtracted from the State's base period payment error rate. For annual assessment periods after September 30, 1982, the State must meet the national standard. Example: The State's payment error rate during the base period is 10 percent. Therefore, the amount by which the State's payment error rate exceeds the 4 percent national standard is 6 percent (or 10 minus 4). The State must reduce this 6 percent by one-third, or 2 percent (8 percent target error rate) for the October 1980 through September 1981 annual assessment period. For the October 1981 through September 1982 annual assessment period, the State's target error rate would be 6 percent. For annual assessment periods after September 30, 1982, the State must meet the national standard. (2) States that have achieved the national standard. States that achieved the four percent national standard in the base period must maintain that standard during the October 1980 - September 1981 and the October 1981 - September 1982 assessment periods and must meet the appropriate national standard thereafter. (e) Information we will use. We will use the information provided by the Federal/State quality control system. This system measures the dollar amount of incorrect payments for every 6-month period. (April through September and October through March). A State's payment error rate for the annual assessment period will be the sum of the weighted payment error rates in the State for the two corresponding 6-month sample periods. The weights will be established as a percentage of the total annual payments that occur in each of the 6-month periods. If a State fails to complete a valid and reliable sample for any 6-month sample period, we will assign to the State an error rate based on the weighted average of the State's payment error rate for the last three sample periods, a Federal sample, an audit, or a Federal subsample. (f) If a State fails to meet the established rate. If a State does not meet the national standard or its target error rate for any 12 month annual assessment period, we will reduce our matching funds to the State to those 12 months, unless the State can show that it made a good faith effort to meet the target rate. We will reduce our matching funds by the amount we would not have paid if the State had reached its goal (the national standard or the target error rate). If a State uses the regular Federal percentage for FFP and has an average monthly payment per recipient of more than $32 in a 6-month sample period, an adjustment will be made to the State's error rate for purposes of determining the amount of reduction in our matching funds. Example: The State's target payment error rate was 8 percent. During the first 6-month sample period the actual payment error rate was 10 percent and the total payments made during that 6-month period were $20 million. During the second 6-month sample period, the payment error rate was 9 percent and total payments were $30 million. The total payments in the annual assessment period were $50 million. The weight applied to the payment error rate for the first 6-month period would be 0.4 ($20 million divided by $50 million) and the weight applied to the payment error rate for the second 6-month period would be 0.6 ($30 million divided by $50 million). Therefore the payment error rate for the annual assessment period would be 9.4 percent or 4 percent (10% x 0.4 for the first 6 months) plus 5.4% (9% x 0.6 for the second 6 months). Since the target error rate was 8 percent and the payment error rate was 9.4 percent, we will reduce our matching funds by 1.4 percent of the Federal share of the dollars the State paid under its AFDC program. (g) When we will reduce a disallowance because a State has made a good faith effort. (1) We will notify a State that we are going to reduce (or disallow) matching funds because the State did not meet the national standard or the target error rate established for the State. The State will have 65 days from the date on this notification to show that it made a good faith effort to meet the established error rate target. If we find that the State did not meet the national standard or the target error rate despite a good faith effort, we will reduce the funds being disallowed in whole or in part as we find appropriate under the circumstances shown by the State. A finding that a State did not meet the target error rate despite a good faith effort will be limited to extraordinary circumstances. (2) Some examples of circumstances under which we may find that a State did not meet the target error rate despite a good faith effort are: (i) Disasters such as fire, flood or civil disorders, that: (A) Require the diversion of significant personnel normally assigned to AFDC eligibility administration, or (B) Destroyed or delayed access to significant records needed to make or maintain accurate eligibility determinations; (ii) Strikes of State staff or other government or private personnel necessary to the determination of eligibility or processing of case changes; (iii) Sudden and unanticipated workload changes which result from changes in Federal law and regulations, or rapid, unpredictable caseload growth in excess of, for example, 15 percent for a 6-month period; (iv) State actions resulting from incorrect written policy interpretation to the State by a Federal official reasonably assumed to be in a position to provide such interpretation; and (v) The State timely developed and implemented a corrective action plan reasonably designed to meet the target error rate but the target error rate was not met. In evaluating whether the State has indeed made a good faith effort in these circumstances, we will consider the following factors: (A) Demonstrated commitment by top management to the error reduction program e.g., priorities and goals clearly enunciated to staff, accountability for performance, availability of resources; (B) Sufficiency and quality of systems designed to reduce errors that are operational in the State, e.g., BENDEX, IDEX, monthly reporting, retrospective budgeting, error prone profiles, local agency monitoring systems, computer clearances; (C) Use of effective system and procedures for the statistical and program analysis of QC and related data, e.g., statistical tests, tabulations and cross-tabulations, error prone profiles, corrective action committees, special studies; and (D) Effective management and execution of the correction action process, e.g., assignment of responsibilities, milestones for completing tasks, completion of tasks, monitoring of progress. (3) The failure of a State to act upon necessary legislative changes or to obtain budget authorization for needed resources is not a basis for finding that a State failed to meet the target error rate despite a good faith effort. (h) Disallowances subject to appeal. If a State does not agree with our decision to reduce (disallow) FFP, it can appeal to us within 45 days from the date of our decision. The regular procedures for appeal of disallowance will apply, including review by the Grant Appeals Board (see 45 CFR Part 16). [45 FR 6333, Jan. 25, 1980; 49 FR 38286, Sept. 28, 1984; 50 FR 11698, Mar. 25, 1985, as amended at 53 FR 36580, Sept. 21, 1988] 205.43 Increase in Federal financial participation (FFP) for States with low error rates. (a) Purpose. (1) This section provides the rules we will use to determine whether we will increase the amount of Federal matching funds (Federal financial participation or FFP) we give to a State and, if so, the amount of the increase. Basically, we will increase the amount of matching funds to States with low error rates in their AFDC program as allowed under rules in this section. These rules apply to all States which have an AFDC program through March 31, 1983; however, these rules will only apply to the Commonwealth of Puerto Rico, the Virgin Islands, and Guam thereafter. (2) We will use the data from the quality control system (see 205.40) in each State and the Federal monitoring system in determining the amount of incorrect payments and payments that should have been made. The quality control (QC) system provides data on incorrect payments and nonpayments for every sample. (b) Definitions. For purposes of this section: Assistance payment error rate means the combined dollar amounts of a State's incorrect payments to ineligible families receiving assistance and overpayments and underpayments to eligible families receiving assistance, expressed as a percentage of the State's total payments. Dollar error rate means the error rate obtained by combining the assistance payment error rate for ineligible, overpaid and underpaid cases with an estimated nonpayment error rate that results from incorrect terminations and denials. Erroneous excess payments means the total of erroneous payments to ineligible families receiving assistance and overpayments to eligible families receiving assistance. Nonpayment error rate means the estimated dollar amounts of