Action Transmittal AT-94-06 - 3Paternity Establishment and Revision of CSE Audit Regulations Part 3 - Response to Comments - Audit
Paternity Establishment and Revision of CSE Audit Regulations (continued)
2. Audit Provisions.
In response to the Notice of Proposed Rulemaking published September 9, 1993,
in the FEDERAL REGISTER (58 FR 47417), OCSE received over 30 comments from
State and local child support agencies and advocacy organizations. An
overwhelming number of these commenters expressed their endorsement of, and
appreciation for, OCSE's efforts to simplify audit regulatory provisions by
consolidating and eliminating restatements of other provisions.
Many commended the transition to a more results-oriented, outcome-focused
process for conducting audits of State program performance. Following is a
summary of the comments received and our responses:
Timing and Scope of the Audit - 305.10
One comment was received regarding this provision, essentially indicating
support for OCSE's use of government auditing standards as promulgated by the
Comptroller General of the United States.
State Comments - 305.12
1. Comment: Several commenters expressed concern that not advising States of
information needed to conduct the audit until the time of the entrance
conference will result in delay. They suggested that notice of such
information requirements should be supplied in advance of the entrance
conference. One commenter requested additional lead time to prepare for an
audit. Another commenter urged that regulations be consistent with current
audit practices relating to advance notice so as to allow States a sufficient
Response: Written notice of an impending audit and information needed to
perform the audit will be given to States, as is currently done, at least one
quarter prior to the entrance conference. Changes to 305.12 only relate to
the entrance conference, at which time auditors will explain how the audit
will be performed and make any necessary arrangements for the field work of
conducting the audit. Providing notice of the scheduling of an audit one
quarter in advance of its commencement is consistent with long-standing
government auditing standards.
2. Comment: One commenter requested that interim audit reports be published
closer in time to the conclusion of the field work enabling States to be more
responsive in identifying and rectifying deficiencies.
Response: OCSE is working to improve its performance in this area. In
addition, any State, at any time, may request an oral briefing of the status
of an audit-in-progress of its IV-D program. Furthermore, the changes made by
this regulation to streamline and consolidate the approach to the audit should
also expedite the process of issuing reports. Also, this process will be
expedited as more States give the area audit offices access, via modems or
terminals, to their automated systems and improvements are made to systems
tools used to conduct audits in automated environments.
Effective Support Enforcement Program - 305.20
1. Revised Definition of Substantial Compliance.
a. Ten percent materiality test.
1. Comment: Several commenters questioned the use of a ten percent
materiality standard in determining criteria which are included in a
determination of substantial compliance. A few suggested alternative tests
reflecting other percentages. One commenter suggested that any criterion that
does not further the goal of conducting a results-oriented analysis should be
eliminated. Two commenters expressed concern that application of the ten
percent materiality test should be limited to initial audit results,
indicating that application to follow-up audit findings could potentially
increase the scope of criteria which are included in a determination of
Response: The materiality concept is a widely-accepted practice in the
auditing profession. Materiality is defined as the relative importance or
relevance of an item included in, or omitted from, the analysis of operations.
Generally, a benchmark of ten percent, or a more stringent level (e.g., five
percent) is used to quantify materiality. Among the qualitative factors which
affect materiality are newness of the activity or changes in its condition,
results of prior operations, level and extent of review or other form of
independent oversight, adequacy of internal controls for ensuring compliance
with laws and regulations, and public perceptions and political sensitivity of
the areas under audit.
In the context of the child support program, the test was administered against
findings for which a penalty was imposed in past triennial and annual State
program results/performance measurements audits, but not to follow-up audits
conducted to determine whether a State has come into substantial compliance
following a corrective action period.
2. Comment: Three commenters requested that the ten percent materiality test
should be applied subjectively to individual States to recognize prior State
performance in the application of the test. Another commenter recommended a
"tiered" approach through which audit criteria are categorized in assigned
priority levels based on their significance to effective and efficient IV-D
Response: Audits are designed to be objective so that all States are audited
in relation to a consistent standard. The overall approach to the audit of
State child support enforcement programs, as specified in this regulation, is
an interim step under current law. Further revision and expansion of the
results-orientation to the evaluation of State IV-D programs will be addressed
as part of the President's Welfare Reform bill.
3. Comment: One commenter questioned the frequency under which OCSE will
apply the ten percent materiality test in order to revise or update the
criteria to be evaluated in an audit.
Response: The ten percent materiality test was first applied to initial and
annual audit reports issued as of September 1990 using the prior audit
regulations. Subsequent reapplication for audit reports issued through
November 26, 1993 produced consistent findings and confirmed earlier results
as to the incidence of failure across 30 program criteria, all of which bear
directly on the effectiveness of IV-D program operations. As we continue to
revise the audit process, we will reapply the materiality test and make
necessary changes when deemed appropriate.
4. Comment: One commenter contended that because the ten percent materiality
test, by its nature, focuses on areas of noncompliance, States' strengths,
best practices, and effective management techniques are not identified. The
commenter urged that such strengths should be emphasized as part of the audit.
Another commenter proposed that OCSE clarify that any criteria excluded from
substantial compliance evaluation can still be evaluated and be included in
management recommendations furnished to the State as part of the audit
findings. Another commenter, concurring with the use of management
recommendations, suggested that such recommendations should incorporate best
practices of all States in order to assist in program improvement for
Response: Program audits are designed to determine whether State child
support enforcement programs operate in conformity with Federal law and
regulations. Auditors may still examine requirements that are not contained
in 305.20, but deficiencies would be noted in the Audit Report as management
recommendations. OCSE uses numerous other mechanisms to identify and share
exemplary practices among the States, including publications, presentations at
conferences, and provision of technical assistance (including assistance
extended through the ten ACF regional offices).
5. Comment: One commenter requested clarification as to the criteria which
will not be audited as a result of satisfying the ten percent materiality
Response: As a result of applying the ten percent materiality test to initial
and annual audit reports issued through November 26, 1993 using the prior
audit regulations, the following criteria were eliminated from consideration
for purposes of assessing substantial compliance: cooperative arrangements;
bonding of employees; procedures for making information available to consumer
reporting agencies; payments to the family; spousal support; payment of
support through the IV-D agency or other entity; single and separate
organizational unit; incentive payments to States and political subdivisions;
retroactive modification of child support arrearages; imposition of late
payment fees on non-custodial parents who owe overdue support; State financial
participation; fiscal policies and accountability; provision for withholding
in all child support orders (303.100(i)); 90 percent Federal financial
participation for computerized support enforcement systems; recovery of direct
payments; and publicizing the availability of support enforcement services.
b. New and newly-revised criteria.
1. Comment: One commenter asserted that new and newly-revised criteria
should only be added to the audit criteria after the passage of a substantial
period of time. The commenter contended that this approach would take into
account the lag time between enactment of Federal law and publication of final
regulations, and allow States time to come into compliance before being
audited. Another commenter presented just the opposite concern, arguing that
the practical effect of the audit standards will not apply for several years
in many States. This commenter urged OCSE to publish the final regulations as
quickly as possible and make the new audit standards applicable not only to
any audit conducted after the date of publication, but also any audit in
progress on the date of publication.
Response: The effective date of Federal statutory and regulatory requirements
cannot be ignored. We have reviewed State implementation of the standards for
program operations for management information and action, but not for penalty
purposes. Furthermore, auditing new or newly-revised program requirements
using related audit criteria ensures that expanded program mandates are being
correctly interpreted and expeditiously applied. With respect to requirements
under the Family Support Act, final regulations have already been published
and States will be audited under such regulations for audit periods that begin
on or after the date of publication of this final rule. Allowing any further
extension of time before audits of State compliance with these requirements
would be unwarranted. However, audits in progress as of the date of
publication of these rules will be governed by the audit standards that were
in effect at the start of the audit. These final rules will apply to audits
conducted for any periods which begin on or after publication of this rule.
2. Comment: Several commenters expressed concern that the streamlining of
audit regulations and grouping of criteria will negatively impact audit
results, giving the appearance of failing to meet a comprehensive criterion,
when in actuality the deficiency only relates to a weakness in a single area.
Response: By grouping criteria, OCSE will be better able to focus upon State
delivery of required program services rather than specific incremental steps
that occur in performing each program function. Grouping relates to the
manner in which OCSE evaluates States' performance, rather than to what is
evaluated. For a number of years, OCSE has evaluated several enforcement
techniques under the audit in this manner and determined that this is an
effective and efficient process. Under the regulation, a more streamlined
approach to conducting audits will improve the ability of OCSE and States to
more effectively and efficiently identify program deficiencies.
3. Comment: One commenter suggested that efforts by OCSE to limit the scope
of audits should be designed to ensure that audits can be conducted and
completed in less time and with fewer State resources. The commenter
expressed the belief that it was unclear whether the proposed new definition
of substantial compliance would, in fact, actually reduce the need for States
to dedicate substantial time and resources to the audit process.
Response: In order to reduce the scope of the audit to the maximum extent
possible, we have deleted from inclusion under the definition of substantial
compliance audit criteria that States failed to meet in 10 percent or less of
the initial and annual compliance audits conducted by OCSE under prior audit
regulations through November 26, 1993. Under this final rule, we will
continue to use criteria that did not meet this test in determining whether
the State is in substantial compliance with Federal requirements. In
addition, we will, for the first time, conduct audits that evaluate State
compliance with the provisions of the Family Support Act of 1988, including
standards for program operations, immediate wage withholding, and review and
adjustment of support orders.
Federal law mandates that OCSE conduct audits to determine State compliance
with Federal requirements, including the provisions of the Family Support Act
of 1988. Without revisions made by this regulation to eliminate scrutiny of
certain criteria, audits would certainly have taken longer than they currently
do, once the Family Support Act requirements were included in the audit. In
addition, States can reduce the burden of the audit and facilitate its
completion by allowing the area audit office to have on-line access to their
State automated systems and by maintaining appropriate records for sample
selection and audit purposes. This rule will streamline the audit and is a
significant step toward even more results-oriented measurements.
2. Criteria States Must Meet to be Determined to be in Substantial Compliance
a. Administrative criteria.
1. Comment: One commenter expressed concern that holding States to 100
percent compliance for Statewide operations, reports and maintenance of
records, separation of cash handling and accounting functions, and notice of
collection are unreasonable and should be lowered to account for unexpected
Response: We are not using a 100 percent compliance standard that involves
the review of individual cases. Instead, in auditing these four requirements,
OCSE will examine such functions through a review of the automated and/or
manual processes a State has in place for meeting these functional
requirements rather than the review of individual cases. As a result, the
audit will assess the State's overall compliance for meeting these areas.
2. Comment: Two commenters objected to evaluating State's compliance with
expedited process using a 100 percent standard as excessive and unreasonable.
One commenter requested postponement of the 100 percent standard until
expedited processes standards for paternity establishment, as required by
Federal law as a result of enactment of the OBRA '93, are developed.
Response: We agree with the comment that changes to the expedited processes
standard to incorporate paternity establishment should be timed to coincide
with these audit rules which apply to audits which begin on and after the date
these rules become effective. Therefore, this regulation includes changes to
303.101 to incorporate paternity establishment. These changes and when they
are effective have been discussed previously. The revised expedited processes
standard requires compliance in 90 percent, instead of 100 percent, of the
cases subject to the standard. Therefore, States are no longer required to
meet a 100 percent standard for expedited processes.
3. Comment: One commenter requested clarification of whether, for purposes
of evaluating a State's compliance with the requirement to provide monthly
notice of support payments collected to individuals who have assigned their
rights to support, the determination will be based upon whether the State has
a process in place for giving notice, or whether audits will focus on
determining whether 100 percent of the cases in which notices would be
required actually received notices. The commenter shared a concern that an
attempted notice that is returned as undeliverable could result in an error
finding, rendering the State out of compliance.
Response: A determination regarding a State's compliance with the
administrative criteria specified under 305.20(a)(1) will not be evaluated
through an individual case review method. Rather, compliance will be measured
on the basis of assessing whether the State has, and uses, an overall system
or process designed to meet the specific requirements.
b. Service-related criteria.
i. 90 percent standard for evaluating certain case opening requirements and
for evaluating case closure.
1. Comment: Several commenters objected to the proposed 90 percent standard
for review of establishment of cases under 303.2. They argued that the 90
percent criterion is arbitrary, unrealistic, and too stringent. One commenter
remarked that such a standard inappropriately emphasizes initiating services
in a case rather than delivering on-going services which are evaluated under a
lower standard. Some commenters stressed that application of a rigorous
higher standard at a time when States lack fully operational automated systems
is excessive and unwarranted.
Response: Case opening is crucial to the child support process. Unless
applications are provided promptly and accepted and processed in a timely
manner, necessary IV-D services cannot be provided. In addition, in its focus
on the need to create a government that works better and costs less, the
Report of the National Performance Review has brought the issue of customer
service to the forefront. We are committed to ensuring that the orientation
of the child support program is upon delivering needed services to the
customers of this program. Therefore, prompt response to a request for
services and opening of a case cannot be overemphasized. However, we
recognize that 303.2 contains both case opening and case processing
requirements. Program services or case processing requirements should be
evaluated using a consistent standard. Therefore, we limit the application of
the 90 percent standard to case opening requirements in 303.2(a) rather than
all the requirements of 303.2. Thus, requirements set forth in 303.2(b)
regarding the establishment of a case record and determination of necessary
action on a case will be evaluated under the 75 percent standard. In
addition, we will not evaluate the maintenance of case records requirements at
303.2(c) because they are similar to the reports and maintenance of records
requirements at 302.15(a) evaluated under the audit.
2. Comment: Another commenter suggested that auditors should look beyond
the details of case opening and closure requirements to determine if action
was taken on a case. They urged that if appropriate action was in fact taken,
but the State failed to comply with every requirement under "Establishment of
cases and maintenance of case records", the State should not be penalized.
For example, if a State opened a case and determined necessary action in 30
days rather than the required 20 calendar days, but the action was taken
within the audit period, the State should receive credit, without penalty, for
having taken appropriate action. The commenter urged OCSE to confirm that a
State will be considered to have complied with case establishment
requirements, even if the State failed to meet the five-day timeframe in
303.2(a)(2), or the 20-day timeframe in 303.2(b), provided that the State
took appropriate action on the case during the audit period.
Response: Under the final regulation, the 90 percent standard only applies to
requirements governing the establishment of a case under 303.2(a). We
believe that for providing applications and information and accepting
applications as filed on the day the application and fee are received, a 90
percent standard is reasonable. Therefore, the 5-working-day-timeframe for
sending an application in response to a written or telephone request, and
other case opening requirements, will be evaluated for all cases using the 90
As indicated above, the requirements in 303.2(b) regarding establishment of a
case record and determination of necessary action on a case will be evaluated
under the 75 percent standard. If the State failed to open a case and
determine the necessary action to be taken within the 20-calendar-day
timeframe under 303.2(b) but took necessary action (i.e., established a
support order) within the audit period, the State would receive credit.
3. Comment: One commenter indicated that a 90 percent standard for case
opening and closure is not unnecessarily restrictive, provided that
regulations do not propose a negative finding for failure to close a case that
could have been closed. Another commenter agreed that States should not be
penalized for keeping cases open even if the potential for success is low.
Response: Because case closure is permissive, if a State does not close a
case that meets one or more of the case closure criteria in 303.11, that case
will not be subject to audit. As we explained in response to comments in the
preamble to the final regulations governing Standards for Program Operations
[54 FR 32303], States may elect to establish criteria for closure that are
more stringent than those established under Federal rules.
4. Comment: One commenter asserted that use of a 90 percent standard to
evaluate case closure encourages States to leave cases open in an unworkable
status in order to avoid audit penalties. The commenter claimed that the
proposed 90 percent standard will allow a State which makes no effort to close
unworkable cases to pass the audit on case closure. They further contended
that a State which seeks to provide better services in workable cases by
closing the unworkable cases could fail the audit if the auditors disagree
with the agency's determination to close the case in more than one case out of
Response: The purpose of case closure criteria, and the basis for evaluating
case closure at a 90 percent standard is to ensure that States do not close
cases erroneously and inappropriately, which could result in denying
individuals the services to which they are entitled. It is important for
States to recognize that evaluation of a State's case closure process and
activities is premised on whether 90 percent of the cases that were in fact
closed were closed correctly (i.e., meeting one or more of the 12 enumerated
case closure criteria), rather than a determination that 90 percent of the
cases that could be closed were closed. We question whether a State would
keep unworkable cases open and on its automated system merely to avoid audit
scrutiny if a case is closed, especially given that Federal case closure
regulations are quite clear and precise.
5. Comment: One commenter requested that regulations should provide that a
case would not be found out of compliance if the State closed the case in
advance of expiration of the 60-day period following notice of proposed case
closure provided that if new information was obtained or a request to reopen
the case was received, the case would be reopened and worked.
Response: Before a case is closed, all of the requirements in 303.11 must be
met. Therefore, a State which adopts an approach such as that suggested by
the commenter would be found to be out of compliance with the requirement at
303.11(c) which specifies that closure cannot occur until the 60-day period
following notice to the custodial parent has elapsed.
6. Comment: Several commenters suggested that any standard higher than 75
percent should be gradually phased in. Two commenters urged that any higher
standard should be delayed until such time that States have certified
computerized support enforcement systems. One commenter asserted that not all
States have been audited under the 75 percent standard for the standards for
program operations which became effective October 1, 1990. They recommended
that OCSE gather some historical data in this area and evaluate State IV-D
performance under those standards before changing the standard.
Response: While automation of State child support enforcement programs will
enhance States' capabilities for delivering program services, the effective
dates of the Family Support Act requirements, including program standards,
were not conditioned upon States having computerized support enforcement
systems in place. The case opening and closure requirements, effective since
October 1, 1990, have never been evaluated using a 75 percent standard. This
final regulation will, for the first time, prescribe audit criteria for
evaluating case opening, closure and other program standards requirements.
The requirements to which the 90 percent standard apply are not dependent upon
automated case processing through a computerized support enforcement system,
but rather on IV-D caseworkers providing applications and information to
individuals and closing only unworkable cases. As previously stated, OCSE
believes that the 90 percent standard for these requirements is reasonable.
7. Comment: Several commenters advocated that a 90 percent compliance
standard be established for all criteria. One commenter noted that the 75
percent standard results in many cases remaining unworked, claiming that
States can circumvent requirements by simply taking some action in 75 percent
of the cases even if such actions are not substantive.
Response: This commenter's perception reflects a misunderstanding of Federal
title IV-D requirements which require States to take appropriate action in all
cases referred for and applying for program services. Requirements for
providing and accepting applications and closing cases are clear-cut,
definitive, and follow specific steps. They are in the nature of
administrative activities, distinguishable from activities connected with
providing services which are more complex and which permit greater flexibility
and discretion. Providing easy, prompt access to program services and closing
only unworkable cases are critical to ensuring that individuals receive
8. Comment: One commenter suggested that it would be more appropriate to
place opening and closure of cases in the category of administrative criteria
rather than in the category of service-related criteria.
Response: Because we believe it is critical to provide access to services,
case review rather than analysis of processes is important to determine that
the State, in fact, meets the requirements for case opening and closure.
Therefore, case opening and closure will be treated as service-related
criteria, for which auditing by the case analysis method will be utilized.
ii. 75 percent standard for providing services.
1. Comment: Two commenters indicated that the 75 percent standard for
providing services was too high. One commenter recommended that the 75
percent standard should be lowered, and phased-in gradually, because of the
current lack of automation capability. Several commenters recommended that
States should be held to a higher standard than 75 percent compliance,
suggesting that a higher standard should be gradually phased-in, in
conjunction with the automation requirements. Some recommended it should be
phased-in at 80 percent compliance in 1996; 85 percent in 1997; and 90 percent
in 1998. Another commenter suggested having a range of standards for
different criteria, but added that the acceptable range should never fall
below 75 percent.
Response: For over ten years, OCSE has used a 75 percent standard to
determine State compliance with Federal program requirements. The standard
has proven to be a reasonable expectation of the level of State performance in
providing program services. Therefore, we will continue to use the 75 percent
standard to evaluate the delivery of program services. Furthermore, under
longstanding program requirements, as well as those added by the Family
Support Act, comprehensive, statewide automation is not a prerequisite for
providing mandatory program services. In fact, most of the requirements
States must meet under the Family Support Act will have been effective for
over five years before an audit under these regulations will be conducted. We
believe that States will have had ample opportunity to implement these
requirements prior to being audited to determine compliance.
2. Comment: One commenter indicated concern that to achieve substantial
compliance on marginally-met criteria, the State must actually achieve a
rating of at least 81 percent.
Response: This is inaccurate. A State which achieves a compliance level of
between 75 and 80 percent for a particular function is considered to have
passed the audit and to be in substantial compliance for that function. While
such a finding is considered to be "marginal," the finding will not be a basis
for determining that the State is not in substantial compliance, and will be
referenced in the penalty notification only for the purpose of bringing to the
State's attention areas in which the State's performance is borderline.
States do not need to specifically address areas of marginal compliance as
part of their corrective action plan. Following corrective action, the
marginal compliance areas must fall below 75 percent before a State will be
considered to have failed that particular criterion.
3. Comment: One commenter requested clarification of the requirements for
review and adjustment. The commenter suggested that, if a review of an order
is properly and timely conducted, but the need to adjust the order is not
indicated, the action should be determined to be in compliance.
Response: If review of an order results in a determination that no adjustment
is appropriate, and the parties are properly notified of the results of such
review and provided an opportunity to challenge such finding, action will be
considered to have been taken for audit purposes.
Grouping of Locate Function within Other Service-Related Categories
1. Comment: Concerning the proposal to group "location of non-custodial
parents" under other functional components, several commenters favored listing
location as part of other criteria because in many cases, in order to proceed
on a case, location is an integral component of providing other functional
service criteria. Several commenters opposed grouping location with other
criteria, urging that it be retained as a separate identifiable criterion.
Response: The location function is not an end in itself but is, in fact,
often the initial step to providing all other major program services,
including paternity establishment, support order establishment, enforcement,
and review and adjustment of child support orders. Therefore, cases requiring
non-custodial parent location will be evaluated under the major service or
services required for the case. Thus, if a case requires paternity and
support order establishment services and the alleged father's whereabouts are
unknown, the State must take all appropriate action. If the State did not
take appropriate action to locate the alleged father, this would be counted
against the State in computing the efficiency rate for paternity and support
order establishment. We do not believe that incorporating location within the
functional service criteria underestimates or deemphasizes the importance of
the location function. On the contrary, it underscores the need to exhaust
location sources in order to proceed with necessary services for the case.
Moreover, it exemplifies the transition to a more results-oriented audit.
2. Comment: One commenter requested clarification about whether the need to
relocate an individual before a service (e.g., establishment, enforcement) can
be provided stops the applicable timeframe or permits the timeframe to be
reset from the date of relocation.
Response: When the State is providing a particular service, such as the
establishment of a paternity and/or support order, and determines that a
previously located alleged father needs to be relocated (for example, if
service of process efforts fail), the establishment timeframe would stop if
the State must return the case to the locate function. The 75-calendar-day
and quarterly location timeframes in 303.3(b)(3) and (5) would apply once
the case was returned to the locate function. After successful location of
the alleged father, the establishment timeframes would start over again. The
State's documentation of the events, services provided, and activities in a
case will be used in determining the audit criteria appropriate for evaluating
3. Comment: One commenter questioned whether a State must use some other
enforcement technique in addition to Federal and State income tax refund
offset in situations in which the non-custodial parent's address is located
but employment information or the location of assets is not known.
Response: States have discretion in determining and selecting what
enforcement technique, in addition to Federal and State income tax refund
offset, to use in particular cases in which wage withholding may not be
available or appropriate (e.g., self-employed). Not all enforcement
techniques require employment information or identification of assets (e.g.,
making information available to consumer reporting agencies). When the State
has located the absent parent's address, but employment information or assets
are unknown, the State must use an enforcement remedy in addition to Federal
and State income tax refund offset. The State may, for example, make
information available to consumer reporting agencies, or require an obligor to
post a bond or other guarantee to secure payment of overdue support.
4. Comment: One commenter also requested clarification of the definition of
location for purposes of the audit.
Response: States should continue to focus their location efforts toward
successfully ascertaining the whereabouts of obligated parents, their
employers, and their assets to take necessary action in the case, using all
appropriate sources in accordance with the requirements set forth in
303.3(b). However, in response to the request for a definition of location
for audit purposes, OCSE will determine that a State has met the requirements
for location if the State has, at a minimum, checked the following sources,
when necessary and appropriate (e.g., a State uses sequential sources until
the non-custodial parent is located), to ascertain information concerning the
location of the non-custodial parent, his/her employer, and/or the
non-custodial parent's assets: the custodial parent; Postal Service; State
employment security agency and unemployment data; the Department of Motor
Vehicles or the comparable State authority which issues driver's licenses and
registers vehicles; credit bureaus; and the Federal Parent Locator Service.
These sources were selected because of their proven level of effectiveness in
successfully identifying useful location information in most cases. We
believe that specification and use of these sources not only standardizes the
location process but provides clear guidance to States as to how their
location efforts will be evaluated under the audit.
5. Comment: Several commenters expressed concern that evaluation of non-AFDC
cases under 302.33 and interstate cases under 303.7 as independent
compliance criteria puts States in situations of double jeopardy. They
pointed out that evaluation under both non-AFDC and/or interstate case
criteria and under other audit criteria such as paternity establishment,
enforcement, or review and adjustment, for example, is actually counting any
deficiency twice (or more), thus causing the States to fail under two or more
separate criteria as a result of a single deficiency. They requested
reconsideration of the requirement that the non-AFDC and interstate case
criteria be evaluated separately.
Response: We agree with the commenter and have made the following changes to
the proposal. We have deleted the separate audit criteria for evaluating the
provision of service in interstate cases and added the provision of services
in interstate IV-D cases under 303.7(a), (b), and (c)(1) through (6) and (8)
through (10) to each of the service-related audit criteria at
305.20(a)(3)(ii), (iii), (iv) and (v). Under this final regulation, only
those 303.7 requirements that are unique to interstate cases, 303.7(a),
(b), and (c)(1) through (6) and (8) through (10), and do not involve functions
and services otherwise covered by criteria under 305.20 will be evaluated to
determine whether the State is in substantial compliance with the requirement
to provide appropriate interstate services. For example, in an interstate
support order establishment case, a State will be evaluated for order
establishment purposes under 305.20(a)(3)(ii) to determine whether it is in
substantial compliance with the order establishment provisions under
303.4(d), (e), and (f). The State will be evaluated for interstate purposes
under 305.20(a)(3)(ii) to determine whether it is in substantial compliance
with the interstate provisions unique to interstate cases, including the
failure to notify the initiating State in advance of the hearing of an order
establishment case under 303.7(c)(8). Therefore, any deficiency identified
will only be counted once.
Similarly, we have deleted the separate audit criteria for evaluating services
to non-AFDC, non-IV-E individuals and added services to non-AFDC and non-IV-E
individuals under 302.33(a)(1) through (4) to each of the service-related
audit criteria at 305.20(a)(3)(ii), (iii), (iv) and (v). Under this
regulation, only those aspects of 302.33 unique to non-AFDC IV-D cases, such
as acceptance of applications under 302.33(a)(1)(i), will be examined to
determine whether the State is in substantial compliance with requirements
unique to providing services to non-AFDC individuals. Determining whether the
State provided a particular necessary service, (e.g., enforcement) in a
non-AFDC IV-D case or in an interstate case, will be addressed under the
specific service category set forth under 305.20(a)(3)(ii), (iii), (iv), or
(v). The State will be evaluated under the same service category for purposes
of determining whether it is in substantial compliance with the services to
non-AFDC and non-IV-E provisions unique to non-AFDC cases. This will
eliminate "double jeopardy" as described by the commenter. In addition, this
is consistent with the movement of the audit to a more results-oriented
iii. Credit for providing services.
1. Comment: One commenter recommended that audit standards consider allowing
either an exception to or a tolling of the timeframes in cases in which
interim timeframes have been met but delays in achieving result were beyond
the control of the IV-D agency.
Response: States must provide necessary services within required timeframes
in 75 percent of the cases evaluated under each audit criterion. The 75
percent substantial compliance test allows a 25 percent margin for error into
which such cases could fall and not result in the State being penalized for
2. Comment: One commenter noted that credit is not available when the State
fails to meet the administrative criteria and the following service-related
criteria: collection and distribution of support payments; services to
individuals not receiving AFDC or title IV-E foster care assistance;
provisions of services in interstate cases; and medical support.
Response: We believe that, for audit purposes, a State should not be
penalized when timeframes are missed in a case if a successful result is
achieved (a support order is established or adjusted, or a collection is
made), since these results are the main goals of the child support enforcement
program. We further believe that this position is responsive to the
widely-shared goal of a more results-oriented approach to OCSE auditing and
States' concern that missing an interim timeframe, when a successful result is
achieved in a case, may create a disincentive to continue working the case.
In addition, as discussed previously, the provision of services in interstate
IV-D cases and services to non-AFDC, non-IV-E individuals is now evaluated
under other service-related criteria. Therefore, if the State misses an
interstate timeframe, but the appropriate service(s) included under
305.20(a)(4) is provided during the audit period, the State will be
considered to have taken appropriate action for audit purposes. However,
credit is not extended to all requirements since to do so would render
meaningless timeframes established to ensure effective and efficient delivery
of services. Furthermore, as previously explained, administrative criteria,
such as Statewide operations, reports and maintenance of records, and
separation of cash handling and accounting functions, are evaluated from an
overall process standpoint rather than a case analysis approach.
3. Comment: One commenter indicated support for the concept for providing
credit even though timeframes are missed; however, the commenter urged that
credit be given for actions attempted in the audit period although not
successfully completed, provided that there is a reasonable expectation that
the action will eventually be successful.
Response: We disagree with such an approach. It would be highly subjective
to predict or speculate about future success, in contrast to determining that
the successful result has in fact been achieved. Achieving national
consistency in applying such an auditing approach would also be a formidable,
if not impossible, task. Therefore, the allowance of credit (i.e., action for
audit purposes), for providing services despite a State's failure to
accomplish the function within the designated timeframes is limited to case(s)
in which successful results occur within the audit period. While we are
striving to develop a more results-oriented approach to evaluating States'
performance, we believe that following the commenter's suggestion would
undermine the integrity and objectivity of the audit process.
4. Comment: One commenter emphasized that it is essential that audit
criteria not only consider actions taken, but that such actions actually be
successful or closely related to a successful conclusion of the case. Another
commenter recommended that OCSE specify that a State will receive credit,
without penalty, for achieving a desired result even if the State did not meet
every location requirement.
Response: Currently, States are evaluated on whether they have taken the
appropriate action or actions needed in a case. The particular action or
actions that are warranted have been defined in Federal and State laws,
policies and operational procedures independent of the audit process. The
inclusion of program standards requirements within the audit criteria will
further ensure that States follow these established policies and procedures,
which are intended to facilitate achievement of a successful outcome.
Furthermore, in order to receive any credit for actions when intermediate
timeframes are missed, a State must actually achieve success within the audit
5. Comment: One commenter recommended that a State be given credit for audit
purposes even if the timeframes are not met if a child support order has been
reviewed and a determination has been made within the audit period that no
adjustment is appropriate. The commenter cited an example of a situation in
which the review was conducted but as a result a determination was made that
the order was presently in-line with guidelines and thus an adjustment not
warranted. The commenter objected to the proposal to grant credit when
timeframes are missed only if an adjustment was obtained.
Response: We agree with the commenter that, for audit purposes, the State
should be given credit when the timeframes are not met, but the State has
reviewed the child support order and determined that no adjustment is needed,
during the audit period. Therefore, the final regulation at 305.20(a)(4)(ii)
provides that notwithstanding timeframes for establishment of cases, provision
of services in interstate IV-D cases, location, and review and adjustment of
support orders contained in 303.2(b), 303.7(a), (b), (c)(4) through (6),
(8), and (9), 303.3(b)(3) and (5), and 303.8, if a particular case has been
reviewed and meets the conditions for adjustment under State law and
procedures and 303.8, and the order is adjusted, or a determination is made,
as the result of a review, that an adjustment is not needed, during the audit
period in accordance with the State's guidelines for setting child support
awards, the State will be considered to have taken appropriate action in that
case for audit purposes.
6. Comment: Numerous commenters expressed concern that, for purposes of
receiving credit for enforcement when timeframes are not met, the State must
have made a collection during the audit period. One commenter recommended
that States be given credit for the attempt to use at least one other
enforcement technique. Several commenters recommended that OCSE revise the
proposed regulations to clarify that States will be given credit, without
penalty, for taking or attempting a range of enforcement actions, even if no
collection results. One commenter indicated that under the proposed criteria,
cases with poor chances of success would be given priority, because the only
way a State would be given credit for working these cases would be to do so
within the timeframes. Another commenter argued that limiting credit when
enforcement timeframes are missed to only those situations in which a
collection is realized within the audit period, creates a timing issue if the
legal action was initiated late in the audit period and the collection it
generated was received after the audit period. One commenter asserted that it
is counter-productive to require States to take an enforcement action, only to
penalize the State when no collection is obtained during the audit period.
Another commenter contended that legitimate attempts at enforcement will not
receive credit, and recommended that audit compliance recognize a "State's
intent," even when it is unsuccessful.
Response: States are required to provide child support services in accordance
with Federal requirements, including standards for program operations
timeframes. Under these requirements, the State must provide all required
services so that children receive the support they need and deserve. The
State should provide the necessary services in a timely manner rather than
trying to anticipate what needs to be done to pass the audit. Under the new
rule, granting the State credit when timeframes are missed should be the
exception and not the norm. As long as all appropriate actions were taken
within the allotted timeframes, States will receive credit for working the
case even though no collection results from an enforcement action, or when the
collection is received after the close of the audit period. A State receives
credit for enforcement in situations in which the enforcement action was not
completed in a timely manner only if a collection is received within the audit
In an effort to focus more closely on measuring States' performance based on
results achieved, we have developed a mechanism whereby missing the timeframe
will not create a disincentive to following-through with necessary action.
Therefore, credit will be given to a State which achieves a successful result
in a case in which the action was taken outside the required timeframe.
Regarding enforcement actions accomplished outside the timeframes, we maintain
that the only reasonable and objective measurement of a State's accomplishment
which warrants the exception is the receipt of a collection within the audit
7. Comment: Another commenter requested guidance concerning how collections
can be linked to enforcement techniques where it is not possible to document
Response: A collection in a case in which enforcement action was taken,
although not within the timeframes, will be a basis for credit regardless of
whether that collection was a direct result of the specific remedy used.
8. Comment: Several commenters suggested that credit be allowed for
enforcement purposes if the State actually collects a significant proportion
(80 to 90 percent) of the required current support due in a case during the
Response: We believe that such an approach is unnecessary because we do not
require that all current support due be collected before a State receives
credit for enforcement. As long as some amount is collected as a result of
enforcement action within the audit period, credit will be allowed regardless
of whether timeframes are met or the full amount due is collected.
9. Comment: One commenter sought assurance that use of contempt proceedings
would be an acceptable enforcement technique in addition to Federal and State
income tax refund offset where wage withholding is not available or
Response: While contempt proceedings are not necessarily the best approach,
we recognize that in some States this remedy may be the only option under
certain circumstances. Therefore, the use of contempt or any other
enforcement action available under State law would suffice to meet the
substantial compliance requirement for enforcement when wage withholding is
not available or appropriate.
10. Comment: One commenter requested clarification that States may continue
to decide appropriate enforcement techniques in individual cases by using
guidelines developed by the State for determining when use of a particular
remedy would not be appropriate.
Response: The commenter is correct in that States will be evaluated in their
use of enforcement remedies which require consideration of State guidelines
for determining when use of a particular procedure (e.g., imposition of liens
on real and personal property) is inappropriate in a case.
11. Comment: One commenter questioned an example used in the preamble to the
proposed rule concerning the required use of alternate enforcement techniques
when wage withholding is not available or appropriate. They asked whether an
alternate remedy had to be used only in situations in which neither the
employer nor the non-custodial parent could be located, or if the requirement
applied even if one of the two (employer or the non-custodial parent) had been
Response: In cases in which wage withholding cannot be implemented or is not
available and the noncustodial parent has been located, States must use or
attempt to use at least one enforcement technique available under State law in
addition to Federal and State tax offset, in accordance with State laws and
procedures and applicable State guidelines developed under 302.70(b). Under
this provision, the State must use an alternative remedy when the noncustodial
parent has been located and wage withholding cannot be implemented (e.g., the
parent has no identified wages or the employer is unknown) or is not available
(e.g., the parent is self-employed).
12. Comment: One commenter questioned how a case would be evaluated when
action was taken but not within timeframes and a successful result did not
occur within the audit period. The commenter requested clarification of
whether the case would be excluded from the audit or considered an error.
They noted that when working a case, a State does not know the end result
until the action is concluded.
Response: If an action is taken outside of the prescribed timeframes and a
successful result is not achieved during the audit period, it would be
considered an error. Such cases would not be excluded from the evaluation.
If a State adheres to the timeframes in taking the appropriate action in a
case, the State will be credited with having taken an appropriate action.
Credit for actions when timeframes are missed will only be extended where a
successful result is achieved within the audit period.
c. Expedited processes.
1. Comment: One commenter requested further explanation of the mechanism for
evaluating the State's compliance with expedited processes. Another commenter
recommended that audit criteria for expedited processes be expanded to include
legitimate continued court hearings for obligors, as acceptable outcomes. The
commenter contended that this approach would limit the temptation to simply
request the court to enter a finding of contempt so the case can be dropped
until the next audit period.
Response: Prior to the issuance of this regulation, the expedited processes
requirements at 303.101(b)(2) required the State to meet a 100 percent
standard in one year. The corresponding audit regulation at 305.50 used the
same standard in determining whether the State was in substantial compliance
with Federal requirements. Under this regulation at 303.101(b)(2)(i), the
State must, for cases needing support order establishment regardless of
whether paternity has been established, establish a support order from the
date of service of process to the time of disposition as follows: (1) 75
percent in 6 months; and (2) 90 percent in 12 months. However, when the IV-D
agency uses long-arm jurisdiction, and disposition takes place within 12
months of locating the alleged father or noncustodial parent, the case may be
counted as a success within the 6-month tier of the timeframe, under
303.101(b)(2)(i) regardless of when disposition occurs. Under the new
corresponding audit regulation at 305.20(a)(5), we will evaluate State
compliance with expedited processes using the revised standards in
303.101(b)(2)(i) and (iii).
With respect to the enforcement actions such as contempt proceedings,
303.101(b)(2)(ii) would apply. It references
timeframes under 303.6(c)(2). Because State adherence to 303.6(c)(2)
timeframes will be evaluated under a 75 percent standard, the occurrence of
continuances in certain situations
which delay case processing beyond the timeframes could be condoned.
However, "taking" an enforcement action under 303.6(c)(2) requires that the
IV-D agency commence and complete appropriate enforcement action within the
timeframe. Therefore, a continuance is not an acceptable outcome for purposes
of meeting the expedited processes timeframes.
Paternity Establishment Percentage Standard -- Proposed 305.97
1. Comment: Several commenters pointed out that regulations should reflect
the standard contained in OBRA '93, not the Family Support Act standard. Two
commenters identified technical problems with the standard contained in OBRA
'93, and suggested that OCSE wait until the statute is amended before issuing
final regulations. One commenter suggested that the new standard, as revised
by OBRA '93, should be developed into a proposed rule and disseminated for
comment before final regulations are issued.
Response: The commenter is correct. The proposed rule contained the Family
Support Act standard rather than the OBRA '93 standard. Not only was the
standard revised by OBRA '93, but it was more recently changed by Pub. L.
103-432, a law signed by the President on October 31, 1994. Because of these
recent changes, we have not addressed in this regulation the paternity
establishment standard or audit criteria for evaluating the standard.
2. Comment: In the proposed rule (58 FR at 47423), we solicited comments
regarding an option that would have allowed States meeting the paternity
establishment percentage standard to be exempt from other paternity
establishment audit criteria, including timeframes. Most commenters supported
this results-oriented proposal. If this approach were taken, most commenters
did not think it would be necessary to incorporate a timeliness measure in the
paternity establishment percentage. One commenter suggested that the proposed
approach be extended to all audit criteria. Another commenter suggested
reversing the proposed approach by waiving the paternity establishment
percentage standard when a State meets other paternity establishment audit
Response: We appreciate commenters' views on this issue. However, we do not
believe this is the time to make such a change. As we stated in the proposed
rule, data reported incident to the paternity establishment percentage
standard need to be tested and validated before we can consider exempting
States that meet the paternity establishment percentage standard from meeting
other paternity establishment audit criteria. Since Congress has recently
changed the paternity establishment percentage standard, we will need to test
and validate the appropriate data.
As we stated in the notice of proposed rulemaking, we are also concerned that
timeliness of paternity case processing is addressed by other audit criteria,
but not by the paternity establishment percentage standard. No commenter
suggested a way of incorporating a timeliness measure in the paternity
establishment percentage standard.
It is premature to extend the proposed approach to all other audit criteria,
as one commenter suggested. Performance standards, similar to the paternity
establishment percentage, have not been developed for other audit criteria.
Finally, the proposed approach cannot be reversed--i.e., the paternity
establishment percentage standard cannot be waived if a State meets other
paternity establishment audit criteria. Federal law requires States to meet
the paternity establishment percentage standard in order to be determined to
be in substantial compliance with the Act.
In addition, under the President's Welfare Reform bill, audits conducted by
OCSE would not include the evaluation of State programs to determine State
compliance with specific Federal requirements. Under the bill, States would
conduct reviews to determine whether IV-D services are provided in accordance
with program requirements. OCSE audits would focus on determining the
reliability of State data including data use in the paternity establishment
percentage standard reported to the Federal Government. The evaluation of
State paternity activities, including the paternity standard, would no longer
be included under an OCSE audit.
Performance Indicators -- 305.98
1. Comment: One commenter expressed concern that the proposed changes to
305.98 concerning the description and periodic update of the scoring system
would permit OCSE to change the criteria in the future simply by issuing
program instructions. The commenter suggested that any changes to the
performance indicators criteria should be accomplished through the rulemaking
process, not through issuance of instructions. Another commenter requested
that the performance indicator ratio which requires comparison of the total
amount of assistance furnished in AFDC IV-D cases to the total amount of AFDC
collections in such cases should be rescinded, claiming that very few cases
are affected by this. Alternatively, the commenter urged that if the
criterion is retained, the related automation requirement should be delayed
until the effective date of the computerized support enforcement system
requirements in October 1995.
Response: The changes made to 305.98 are limited to replacing the previous
two-year frequency for updating the scoring system with updating, through the
rulemaking process, whenever OCSE determines that it is necessary and
appropriate. We believe the performance indicator which measures
reimbursement of AFDC assistance payments which has been used since FY 1986
continues to be an effective measure of State performance. States are
currently required to maintain data necessary to use this performance
Notice and Corrective Action Period -- 305.99
1. Comment: One commenter expressed concern about the treatment of
compliance rates between 75 percent and 80 percent "as marginal". They
contended that because if a State is only marginally complying with a
particular criteria, and the State fails to address the situation through
corrective action, such that a penalty may be imposed, in essence means that
the minimum compliance rate is actually 80 percent.
Response: As explained in the response to comments in the preamble to the
1985 final rule governing the audit process (50 FR at 40136), marginal
substantial compliance refers to the treatment--in the written notice to a
State found not to be in substantial compliance with one or more title IV-D
requirements-- of those functional State plan-related audit criteria which the
State met in only 75 to 80 percent of the cases reviewed.
The commenter's contention is inaccurate. A determination that a State is in
marginal compliance is not an indication of a deficiency upon which a penalty
may be based unless the State fails to maintain a level of substantial
compliance with respect to any marginally-met criteria cited in the penalty
notice. A finding of marginal substantial compliance serves to alert a State
to particular areas for which the State's performance is bordering upon
failure. It signals a need for improvement.
As we indicated in response to similar comments in the final rule promulgated
in 1985 (50 FR at 40131), although the audit criteria the State marginally met
cannot result in a finding of noncompliance or application of the penalty at
the time of the notice, the State must, during the corrective action period,
maintain substantial compliance in the areas cited in the notice as marginally
acceptable to avoid subsequently losing funds under the penalty. Federal
regulations require that the notice issued to the State concerning the audit
findings must indicate the functional audit criteria that the State met only
States for which a finding of a marginal substantial compliance is made with
respect to one or more criteria during an audit are encouraged, but are not
required, to address the concerns as part of their corrective action plan.
Any criteria for which the State has been found to be in marginal substantial
compliance are reexamined in conjunction with the follow-up review following
the corrective action period to ensure that the State has maintained a level
of substantial compliance (e.g., at least 75 percent). A State will not be
penalized if, as part of a follow-up review, the areas identified in the
previous audit as being in "marginal" substantial compliance remained
marginal. However, if the follow-up review findings reflect that a criterion
in marginal compliance slipped below 75 percent, a penalty could be imposed.
We encourage States to improve their performance in all areas addressed in the
1. Comment: Three commenters contended that the proposed effective date for
the audit rule changes is too lenient since States have had ample opportunity
to meet mandatory requirements under the Family Support Act of 1988. They
argued that States should be judged before publication of the final audit
regulation because they have had more than enough time to prepare for audits.
Response: Prior to the issuance of this final rule, OCSE had authority under
45 CFR Part 305 to evaluate State compliance with some of the requirements of
the Family Support Act of 1988, including wage withholding, $50 pass-through
payment, and the establishment of paternity until age 18. However, since we
did not have the authority to evaluate all Family Support Act requirements for
purposes of substantial compliance, the audit covered the provisions of the
Family Support Act in a general manner to determine whether the States had
implemented these requirements. Deficiencies identified were reported to the
appropriate State officials as management findings. In addition, our regional
offices conducted program reviews of State implementation of selected Family
Support Act provisions, shared their findings with State agencies, and
assisted in developing action steps to remedy any deficiencies identified.
Under this final rule, we have included audit criteria that will now enable us
to evaluate State compliance with all requirements of the Family Support Act.
State failure to prospectively achieve substantial compliance with these
requirements could result in imposition of the statutory audit penalty.
2. Comment: One commenter recommended that audit criteria be expanded to
include evaluations of State staffing standards designed to ensure that States
are adequately complying with Federal regulations governing minimum
organizational and staffing requirements. Another commenter requested that
OCSE mandate caseload per worker ratios.
Response: In response to comments in the preamble to the final rule governing
Standards for Program Operations (54 FR 32306), we responded to similar
concerns on staffing standards and resource allocation. We expressed our
belief that States and localities should establish specific resource or
staffing standards. We clarified that the Federal regulatory requirement has
never been quantified as a national standard. We explained that while we
believe that it is highly beneficial for IV-D programs to establish such
standards, OCSE has not established universal standards because of the various
factors unique to each State's or locality's operations. OCSE will continue
to provide technical assistance and disseminate relevant information
pertaining to resource or staffing standards.
Because the issue of staffing standards has been articulated as a critical,
and growing, concern for IV-D agencies, OCSE has issued a program improvement
grant to develop a methodology for establishing staffing standards. Under the
project awarded to the State of Virginia, the State operations contractor will
streamline current operations through an operational analysis. The contractor
will also develop a staffing standards methodology which will be applied to
the streamlined operations. The project period is October 1993 to September
1996. Relevant information will be shared with other States on an ongoing
basis. Furthermore, the President's Welfare Reform bill would require the
Secretary to study and report to Congress on the staffing of each State's
child support enforcement program.
3. Comment: One commenter expressed concern about the efficacy of Federal
audits, noting that there is considerable disparity between State internal
audit results and Federal audit findings.
Response: The variances between a State's internal audit and OCSE audit
findings in the situation described by the commenter is attributable to the
fact that the State audit is using its own State-developed methodology and
criteria in evaluating the child support program during a given period of
time. The timeframe, requirements assessed, and the methodology employed may
all be different than that of a Federal audit. Audits conducted by OCSE use
the methodology described in the audit guide, which is available to States,
and the criteria set forth in the audit regulations in 45 CFR Part 305 in
evaluating a State's IV-D program. In addition, OCSE audits build upon the
results of audits conducted by States under the Single Audit Act which avoid
duplicative audit activity.
4. Comment: Some commenters contended that changes to the audit requirements
during the time States are engaged in major efforts to automate their programs
is disruptive to those efforts. One commenter advocated that implementation
deadlines for the new rules should be delayed. The commenter stated that the
penalty should be replaced with something more reasonable. Another commenter
urged that the audit guide should be released at the same time as Federal
regulations are published, and that it should describe the process and parts
to be emphasized, so that States can implement their programs in the
appropriate way and avoid costly revisions to their systems.
Response: States are required to meet all Federal requirements set
forth in law and regulations governing the IV-D program as a condition of
having an approved State plan and continued eligibility for Federal financial
participation in their programs. Audits of State performance are mandated by
Federal law as a primary means to ensure that States, in fact, carry out these
responsibilities. The OCSE audit guides are designed, developed, and
disseminated to assist States. However, Federal law and regulations, not
audit guides, are the bases upon which child support program audits are
conducted, penalties imposed, and States held accountable.
In enacting the explicit effective dates for various requirements under the
Family Support Act of 1988, Congress did not intend for States to delay action
to conform their laws and procedures to the requirements until such time as
they had established a computerized support enforcement system. States have
known about the Family Support Act requirements for more than five years, and
have had 90 percent Federal funding for developing systems available for 13
years. Congress did not intend that States should be held harmless for their
program deficiencies during the development of their automated systems.
Furthermore, the audit process is not the sole means through which State
program development and compliance is determined. OCSE uses program reviews,
the State Plan approval process, the audit resolution and tracking system, as
well as the established audit process, to review State compliance.
5. Comment: One commenter submitted that audit samples should include paying
cases, arguing that without such cases, States are only measured on their
failures to monitor cases. They contended that audit findings may be skewed
if such cases are eliminated from consideration in evaluating the State's
Response: Audit samples selected during the audit include all types of IV-D
cases, including paying cases. In evaluating a State's performance through
the audit process, cases that need enforcement or other action, including
cases in paying status during the audit period, are examined to determine
whether such action was taken appropriately in accordance with Federal and
State program requirements, including relevant timeframes. If a State has
taken the necessary action required by the particular case circumstances,
credit will be given. Cases in paying status that did not require any action
during the audit period will be examined as to whether collection and
distribution requirements were met.
6. Comment: One commenter contended that the proposal continues to
stress process over product and imposes a single set of inflexible standards
with arbitrary passing scores upon the 54 diverse State programs. The
commenter urged that the OCSE and the IV-D system would be better served by
moving toward a system of negotiated rulemaking nationally and a
performance-based audit approach tailored to State programs.
Response: In the national performance review as well as in Presidential
Executive Order No. 12866, Federal agencies are strongly encouraged to utilize
negotiated rulemaking. The Department is fully committed to this, as well as
to our ongoing efforts to design a mechanism to evaluate States based on the
results of their efforts. In addition, under the President's Welfare Reform
bill, audits conducted by OCSE would not include the evaluation of State
programs to determine State compliance with Federal requirements. Under the
proposal, the State will conduct reviews to determine whether IV-D services
were provided in accordance with program requirements. OCSE audits would
focus on determining the reliability of State data reported to the Federal
7. Comment: In response to OCSE's certification in the proposed rule
concerning regulatory flexibility analysis, one commenter suggested that the
proposed regulations impact a substantial number of small entities inasmuch as
most States rely on cooperative agreements with political subdivisions to
attain program compliance objectives.
Response: This regulation is applicable to Federal audits of State government
programs. State governments, upon which these regulations will primarily
impact, are not considered small entities under the Regulatory Flexibility