Child Support Enforcement Program Audit - NPRM

ACTION TRANSMITTAL

OCSE-AT-89-02

February 10, 1989

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

SUBJECT:  Child Support Enforcement Program Audit

ATTACHMENT:  Attached are proposed regulations which are intended to improve and expedite the current process for auditing State and local IV-D programs by consolidating the criteria evaluated during the course of an audit and making other changes to the current requirements to allow flexibility in the audit approach. These changes are being proposed in order to simplify the current audit process, to ensure the initiation of audits as close as possible to the time period audited, and to shorten the elapsed from audit initiation to issuance of a final report.

REGULATION REFERENCE:  45 CFR Part 305

COMMENT PERIOD:  Consideration will be given to comments received by April 3, 1989. Address comments to: Director, Office of Child Support Enforcement, Department of Health and Human Services, 370 L'Enfant Promenade, S.W., Washington, D.C. 20447, Attention: Director, Policy and Planning Division.

INQUIRIES TO:  OCSE Regional Representatives.

______________________________

Wayne A. Stanton

Director

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Support Enforcement

45 CFR Part 305

Child Support Enforcement Program

Audit

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

ACTION: Notice of proposed rulemaking.

SUMMARY: OCSE is proposing to amend the child Support Enforcement program regulations governing the audit of State Child Support Enforcement (IV-D) Programs and the imposition of financial penalties for failure to substantially comply with the requirements of title IV-D of the Social Security Act (the Act). This proposal would improve and expedite the current process for auditing State and local IV-D programs by consolidating the criteria evaluated during the course of an audit and making other changes to the current requirements to allow flexibility in the audit approach. These changes are being proposed in order to simplify the current audit process by incorporating lessons learned since promulgation of the existing audit regulations, to ensure the initiation of audits as close as possible shorten the elapsed time form audit initiation to issuance of a final report. For a detailed discussion of the changes, see SUPPLEMENTARY INFORMATION.

DATE: Consideration will be given to written comments and suggestions received by April 3, 1989.

ADDRESS: Address comments to: Associate Deputy Director, Office of child Support Enforcement, Department of Health and Human Services, 370 L'Enfant Promenade, SW., Washington, DC 20447. Comments will be available for public inspection Monday through Friday, 8:30 a.m. to 5:00 p.m. in the Department's office at the above address.

FOR FURTHER INFORMATION CONTACT: Betsy Matheson, (202) 252-5362.

SUPPLEMENTARY INFORMATION:

Background

As a result of the enactment of Pub.L. 98-378, the "Child Support Enforcement Amendments of 1984," OCSE published final audit regulations on October 1, 1985, which affect the audits of State IV-D programs for FY 1984 and beyond. Section 9 of Pub.L. 98-378, and the implementing regulations, require that OCSE conduct an audit of the effectiveness of State Child Support Enforcement programs at least once every three years; require that OCSE use a substantial compliance standard to determine whether each State has an effective IV-D program; provide that any State found not to have an effective IV-D program in substantial compliance with the requirements of title IV-D of the Act be given an opportunity to take the corrective action necessary to achieve substantial compliance with those requirements; provide for the use of a graduated penalty of not less than 1 nor more than 5 percent of a State's Aid to Families with Dependent Children (AFDC) program funds if a State is not in substantial compliance; and specify the period of time during which a penalty is effective.

In order to be found to have an effective program in substantial compliance with the requirements of title IV-D of the Act, a State must meet the State plan requirements contained in 45 CFR Part 302. Under current regulations, there are separate audit criteria for each of the State plan requirements. The current regulations list 30 criteria (which include numerous related subcriteria) governing procedural requirements relating to the administration of the IV-D program which are evaluated to determine compliance with the State plan requirements. These procedural criteria must be fully met for a finding of substantial compliance. In addition, the regulations list 26 functional, or service-related, criteria which include numerous related subcriteria for purposes of evaluating State performance.

The required procedures under these service-related criteria must be used in 75 percent of the cases reviewed for the State's program to be found in substantial compliance. In accordance with the statute, a State's failure to fully comply with any of the audit criteria will result in a finding that the State failed to substantially comply with title IV-D requirements unless such finding is of a technical nature which does not adversely affect the performance of the State IV-D program.

OCSE auditors have followed this audit process in conducting audits beginning with FY 1984. The experience gained clearly indicates that a more efficient and more expeditious approach to the audit of State IV-D programs is necessary. The average audit under the current approach has taken 21 months, from the end of the period to be audited to issuance of the final report. One contributory factor has been the numerous requirements which must be individually evaluated. Combined with the statutory requirement for a triennial audit and the allowance for a corrective action period of up to one year, the current approach is unwieldy at best and postpones engaging the attention of State and local program administrators, and the accomplishment of remedial action to correct deficiencies noted, until much too long after the close of the time period subject to audit. We have found that in order to comply with the statutory requirement for a triennial audit, auditors must occasionally go back into a State to conduct a new audit even before that State has completed corrective action indicated by the prior audit.

OCSE has already taken administrative steps to ease this process but they do not go far enough in alleviating the problems. After extensive evaluation and analysis of operational experience encompassing better than three years, OCSE has determined that the regulatory changes proposed herein are necessary. The proposed rule will consolidate the current audit criteria by major program function. Thus, instead of auditing each criterion separately, two or more will be grouped under one performance standard for evaluation. This will allow the objective of the audit to be met in a less complex, more expeditious manner while maintaining the reliability and integrity of the audit. In addition, in the audit regulations published October 1, 1985 (50 FR 40120), we stated that additional performance indicator components measuring paternity establishment and cost avoidance would be added to the performance measurement portion of the audit. Those indicator components are included in this proposed regulation. To correspond with the additional indicator components, we are proposing a revised scoring system. We are also strengthening the standard by which we judge State performance on the three current performance indicator components which measure AFDC and non-AFDC cost effectiveness and AFDC cost recovery. The current standard for those performance indicator components was based on State performance during fiscal year 1983. We believe the proposed standard takes into consideration the significant improvements that have been made in the operation of State programs since fiscal year 1983 as a result of changes made in response to the "Child Support Enforcement Amendments of 1984".

This proposed rule is to be an interim step in perfecting the audit approach. We anticipate further revising the audit process at such time as standards for the provision of program services currently under development are implemented in final regulatory form. Therefore, these proposed rules present the most practical solution for immediate improvement of the audit process.

Statutory Authority

These proposed regulations are published under the authority of sections 1102, 4O2(a)(27), 452(a)(4) and 403(h) of the Act. Section 1102 authorizes the Secretary of HHS to publish regulations not inconsistent with the Act which may be necessary to efficiently administer the Secretary's functions under the Act. Section 402(a)(27) requires each State to operate a child support program in substantial compliance with the title IV-D State plan and section 452(a)(4) requires the audit of each State IV-D program to assure compliance with title IV-D requirements at least once every three years (or not less often than annually in the case of any State which is being penalized or is operating under a corrective action plan). Finally, section 403(h) provides for the imposition of an audit penalty of not less than one nor more than five percent of a State's AFDC funding for any State which fails to substantially comply with title IV-D requirements, with an allowance for a corrective action period.

Regulatory Provisions

OCSE proposes to revise Part 305 of the current regulations governing the audit of State child support programs to provide flexibility in the timing of the audits; to streamline the evaluation criteria through consolidation of related criteria and elimination of duplicative and extraneous subcriteria; and to make other changes to strengthen and improve the audit process.

Audit Period

The current regulations at § 305.11 require audits of State child support programs to be conducted on a fiscal year basis. To provide greater flexibility in scheduling the audits and follow-up reviews, we propose to replace the current requirement that the audit cover the period of October 1 through September 30, of each fiscal year audited with a requirement that the audit cover a period comprised of not more than 12 nor less than three consecutive months. In addition, we propose to revise the current requirement that the follow-up review conducted in States operating under corrective action plans with respect to State plan criteria cover the first full quarter after the corrective action period with a requirement that such audits cover the first three-month period after the corrective action period. With respect to the performance indicator, the follow-up review would cover the first full Federal fiscal year following the date on which the penalty notice was issued.

We propose to make a technical correction to the last sentence of this paragraph by replacing the provision that the audit may cover a shorter period at State request with the provision that the audit may, at State request, be conducted prior to the end of the one-year period prescribed under section 305.1O(b).

State Comments

Current regulations at § 305.12(a) include a provision for informing the IV-D agency during the audit entrance conference of those political subdivisions of the State that will be audited. We propose to replace this provision with more general language indicating that any necessary arrangements for conducting the audit will be made at the audit entrance conference.

State Cooperation

States are required to cooperate with OCSE in the conduct of Federal audits by providing such records and documentation as requested, under current regulations at § 305.13(a). Paragraph (b) of the current regulation provides that a State's failure to comply with the requirement for cooperation may necessitate a finding that the State has failed to comply with the particular criterion being audited.

The requirement for State cooperation has taken on increased importance because of program instructions (OCSE-AT-87-7), issued August 31,1987, which made procedural changes relating to the preparation for State IV-D program audits. Under OCSE-AT-87-7,OCSE instituted a centralized audit approach whereby, effective for all program results audits and follow-up reviews initiated after October 1,1987, States must provide a complete and accurate listing of all active and inactive IV-D cases. The IV-D case listing is used as a universe from which to randomly select case files for review. OCSE-AT-87-7 also requires States to submit, to a central location(s), copies of complete case files and related documentation for all sample cases selected for review.

State cooperation in the preparation for an audit, including compliance with the requirements of OCSE-AT-87-7, is essential for OCSE auditors to determine whether the State has an effective IV-D program which is in substantial compliance with Federal requirements. Therefore, we propose to revise paragraph (b) to indicate that failure to comply with the requirement for State cooperation in the conduct of the audit will necessitate a finding that the State has failed to substantially comply with title IV-D requirements. Such a finding could result in imposition of the audit penalty. Reference to the revised § 305.13(b) would be added to the list of criteria at § 305.20(a) which must be fully met as a condition of substantial compliance.

Effective Support Enforcement Program

Current regulations at § 305.20 provide the criteria which are evaluated to measure State compliance with the IV-D State plan requirements contained in part 302. Regulations at § 305.20(a) list selected criteria and related subcriteria that must be fully met or under which the procedures involved must be used in at least 75 percent of the cases reviewed for audits conducted in fiscal year 1984. Additional criteria and related subcriteria incorporated into the audit of State child support programs for audit periods subsequent to FY 1984 because of changes in title IV-D of the Act are listed in § 305.20 (b), (c), and (d). In total, the regulations list operational criteria which mast be fully met and 26 functional criteria where the required procedures must be used in 75 percent of the cases reviewed. Each of the 30 ? operational criteria must be reviewed separately and each of the 26 functional criteria must be reviewed and evaluated separately.

Experience from audits conducted using the above substantial compliance criteria revealed that the current audit process is cumbersome and inordinately time-consuming. Many of the criteria evaluated overlap, resulting in unnecessary, duplicative efforts and unavoidable delays in conducting the audits and issuing the findings.

Operational and Functional Criteria

To streamline and expedite the audit process, consistent with reliability and audit integrity, we are proposing to replace the current contents of § 305.20 (a) through (d) with new paragraphs (a), (b) and (c).

I. Operational Criteria

Paragraph (a) would list operational criteria which States must fully meet for audits conducted for any period beginning after publication of this regulation in final form. Operational criteria and related subcriteria are, with the exception of Expedited Processes, requirements which are procedural in nature.

The ten operational criteria proposed are:

(1) State Cooperation, under which the requirement for cooperating with the Office in the conduct of an audit under § 305.13 would be evaluated;

(2) Statewide Operation, under which the requirement for uniform statewide operation of the IV-D program under § 305.21 (a) and (c), publicizing child support enforcement services under § 305.44 and entering into cooperative arrangements under

§ 305.34 would be evaluated;

(3) Single and Separate Organizational Unit, under which the requirement for a single and separate unit to administer the State IV-D plan under § 305.23 would be evaluated;

(4) Reports and Maintenance of Records, under which the requirements for maintaining records, case files and required reports under § 305.35 (a), (b), and (c) would be evaluated;

(5) Financial Accountability, under which the following requirements would be evaluated as appropriate: collection and reporting of interest and all appropriate fees (including those provided under § 303.69(e), § 303.72(i), § 303.100(d)(2)(iii) and (e)(3), § 303.102(f), § 303.105(c), § 305.31(b), § 305.33(b),

§ 305.48(b)(3), and § 305.55); fiscal policies and accountability under § 305.36; bonding of employees under § 305.37; separation of cash handling and accounting functions under § 305.38; and payment of incentives under § 305.46;

(6) Medical Support, under which the requirement for furnishing information to the State Medicaid Agency under § 305.56(b) would be evaluated;

(7) Child Support Guidelines, under which the requirement for guidelines under § 305.47 would be evaluated;

(8) Expedited Processes, under which the requirement to have and use an expedited process system for processing support orders under § 305.50 would be evaluated;

(9) Interstate Cooperation, under which the requirements for cooperation with other States under § 305.32 (a) and (f) through (h) would be evaluated; and

(10) Continuation of Services, under which the requirement for providing services to former AFDC families under § 305.31(c) would be evaluated.

II. Functional Criteria

The proposed paragraph § 305.20(b) would provide functional criteria, under which, beginning with audits conducted for any period beginning after publication of this regulation as a final rule, as a condition for a finding of substantial compliance, States must use the required procedures for the criterion in at least 75 percent of the cases reviewed which required such service. Functional criteria and related subcriteria are service-oriented requirements which are evaluated through case review. Because separate efficiency rates are computed for each functional criterion, for any case reviewed, a State could receive credit for taking appropriate action under certain criteria and fail other criteria in which it took no action.

The five functional criteria proposed are:

(1) Paternity, under which the following requirements would be evaluated, as appropriate: The requirement for having and using procedures for obtaining the identity of the putative father and establishing paternity under § 305.24 (a) and (b), interstate paternity establishment under § 305.32(c) and providing location services under § 305.33(c);

(2) Support Obligations, under which the following requirements would be evaluated, as appropriate: establishment of a support order under § 305.25 (a) and (b), interstate cooperation in establishing a support order under § 305.32(d), location services under §305.33(c), establishing a medical support order under § 305.56(a) and prohibition from retroactive modification of chid support arrearages under § 305.57;

(3) Enforcement, under which the following requirements would be evaluated: providing enforcement services under § 305.26 (a, (b), and (c), interstate enforcement services under § 305.32(e), location services under § 305.33(c), spousal support enforcement under § 305.42, medical support enforcement under § 305.56(a) and making information available to consumer reporting agencies under § 305.54 and, when appropriate, use of one or more of the specialized enforcement techniques (withholding of unemployment compensation benefits under § 305.39 (b), (c), (d), and (e), Federal income tax refund offset under § 305.40, State income tax refund offset under § 305.51, imposition of liens under § 305.52, and posting security, bond or guarantee of support under § 305.53);

(4) Collection/Distribution, under which the following requirements could be evaluated, as appropriate: Support payments to the IV-D agency under § 305.27 (a), (b),and (c), distribution of support payments under § 305.28, payments to the family under § 305.29, collecting and forwarding interstate collections under § 305.32(e), recovery of direct payments under § 305.41, annual notice of collection of assigned support under § 305.45(a), and payment of support through the IV-D agency or other entity under § 305.48 (a) and (b) (1) and (2);

(5) Wage or income withholding, under which the requirements for carrying-out a program for withholding under § 305.49 would be evaluated.

Under this proposal, location, interstate cooperation and medical support enforcement functions are included under each separate functional criterion, i.e., paternity establishment, support order establishment and enforcement. In addition, provision of services to non-AFDC families are reviewed under each functional criterion.

Although wage withholding is an enforcement technique, we have made it a separate functional criterion because while States have discretion with respect to the use of other enforcement techniques as long as there is compliance with Federal regulations, State written procedures and State guidelines, wage withholding must be implemented in all cases which meet the conditions for withholding. Therefore, if case circumstances meet the requirements for implementation of wage withholding and the State implements wage withholding for the case in accordance with Federal requirements, the State would meet the functional audit criterion for Wage Withholding in that case. However, if the case circumstances also met the State's guidelines for use of State tax refund offset but the case was not submitted, the State would not meet the functional audit criterion for Enforcement in that case. On the other hand, if the State's guidelines for posting security, bond or other guarantee of support indicate that it is inappropriate to post security, etc., if the case is under wage withholding, the State would not fail the Enforcement criterion in that case if it failed to post security bond or other guarantee of support, in accordance with those guidelines. Therefore, while wage withholding must be implemented in all cases which meet the conditions for withholding in order to meet the Wage Withholding criterion, States must use the enforcement techniques included under the Enforcement criterion only when appropriate as determined by Federal regulations, State written procedures and State guidelines.

The rationale for deleting, retaining or consolidating the current criteria and related subcriteria is discussed in detail under each specific State plan requirement at § 305.21 through § 305.56.

The new paragraph (c) would require the criteria referred to in proposed § 305.98 (e) and (f) relating to the performance indicator in proposed paragraph (d) of that section to be fully met beginning with the fiscal year beginning after publication of the final rule.

State Plan Requirements

1. Statewide Operation

Current regulations at § 305.21 (a) through (d) provide four subcriteria evaluated to determine compliance with the State plan requirement for Statewide Operation under § 302.10.

We propose to delete paragraph (b) of the current regulations which requires that the State establish and utilize methods of informing staff of State policies, standards, procedures and instructions. This requirement is integral to the current requirement at paragraph (a) which provides for the uniform administration of the plan throughout the State and paragraph (d) which requires that the service and functions required by the plan are made available throughout the State.

In addition, under current regulations only the provision of paragraph (d) is a substantial compliance subcriterion. Under the proposed rule, paragraph (a) would also be a substantial compliance subcriterion under a separate criterion evaluating Statewide Operation under § 305.20(a). This is an important evaluation criterion which should be strengthened because compliance problems with this State plan requirement can lead to widespread service deficiencies.

2. State Financial Participation

Current regulations at § 305.22 provide subcriteria evaluated to determine compliance with the State plan requirement for State financial participation under § 302.11. We propose to make a technical change to paragraph (a) by deleting the specific percentage of program administrative costs representing the State share. We believe that inclusion of these percentages is superfluous as paragraph (a) requires the State to incur the applicable share of program costs. In addition, we propose to consolidate the current requirement at paragraph (b) regarding the nature of the funding of the State share of costs with the requirement at paragraph (a).

Under current regulations, subcriteria included under paragraph (a) and (b) of § 305.22 must be fully met under a separate operational criterion at § 305.20 for a substantial compliance finding. Under the proposed regulation § 305.22 would no longer be included as a substantial compliance criterion because State financial participation is routinely evaluated under the financial management function and problems of compliance are rarely identified.

3. Single and Separate Organizational Unit

Existing regulations at § 305.23 provide three subcriteria evaluated to determine compliance with the State plan requirement for a single and separate organizational unit to administer the plan found at § 302.12.

The first of these subcriteria, found at paragraph (a), requires that a State must have a unit which is responsible and accountable for the operation of the IV-D plan and no other program or activity. We propose to revise this provision by deleting the prohibition from operating other programs or activities. This change is being sought to allow the IV-D agency to track and monitor support payments for non-IV-D cases as authorized under § 302.57, and to take into consideration activities which are related to the enforcement of child support but which do not fall under the realm of the State plan. Such activities are allowable provided the State has a system for adequately allocating the costs of activities performed outside the State plan.

In addition, we are proposing to delete the current requirement specified under paragraph (c) for having staff perform the used functions, as the requirements under paragraphs (a) and (b) for a single and separate organizational unit to administer the IV-D plan inherently include having personnel perform the necessary activities.

The criterion for a single and separate organizational unit is being retained under the operational criteria which must be fully met in order to achieve a finding of substantial compliance at § 305.20(a).

4. Establishing Paternity

Current regulations at § 305.24 include seven subcriteria evaluated to measure State compliance with the State plan requirement for establishing paternity under § 302.31 (a) and

§ 302.33.

Under the proposed regulation only the subcriteria currently included under § 305.24 (a) and (b) would be retained.

The current paragraph (c)requires States to utilize procedures to establish the paternity of any child born out of wedlock whose paternity has not been previously established. We propose to delete this requirement because it is already covered under paragraph (b) which requires States to have and utilize written procedures to establish the paternity of any child at least until the child's 18th birthday.

Under the current paragraph (d), States must identify and list laboratories which perform acceptable tests and provide such lists to courts, law enforcement officials and the public. Current paragraph (e) requires the identification of State statutes for establishing paternity. Paragraph (f) requires attorneys to be available to work paternity cases and paragraph (g) requires the availability of additional personnel. We are proposing to delete these requirements for purposes of the audit because compliance problems with these subcriteria would be revealed in the evaluation of the State's actual performance in establishing paternity.

To correspond with these changes we are also proposing to delete the corresponding operational subcriteria which must be fully met for a substantial compliance finding at § 305.20 under the current audit. Paragraphs (a) and (b) of the proposed regulation would remain functional subcriteria under the separate criterion evaluating paternity at the proposed § 305.20(b).

5. Support Obligations

Current regulations at § 305.25 provide subcriteria evaluated to determine State compliance with the State plan requirement to establish support obligations found under § 302.50 and § 302.53.

Regulations at § 305.25(a) require States to establish and utilize procedures for establishing a child support obligation for any child: (1) With respect to whom there is an assignment under AFDC or Foster Care, or with respect to whom there is an application for services, and (2) who has not previously had a legally enforceable support obligation established. We propose to delete subparagraph (a) (1) to provide consistency with other requirements in Part 305 and because, unless otherwise stated, the requirements in part 305 apply to the review of all IV-D cases. We also propose to delete subparagraph (a) (2) because States should modify existing orders under appropriate circumstances and the present rule could be construed as implying that such action was not required once an order was established.

In addition, we are proposing to delete § 305.25(c) and (d) as both paragraphs prescribe staffing requirements which are not necessary because the requirement to establish support obligations inherently includes having the staff available to perform the necessary functions.

Regulations at § 305.25 (a) and (b) will remain functional subcriteria under the criterion evaluating Support Obligation at § 305.20 (b), wherein a State must take appropriate action to establish a support obligation in at least 75 percent of the cases reviewed. Additional subcriteria to evaluate the location function with respect to cases requiring support order establishment, establishment of medical support orders, establishment of support orders with respect to interstate case and prohibition from retroactive modification of child support arrearage will be added to the criterion evaluating Support Obligations at § 305.20(b). Under current regulations, these requirements are evaluated separately.

6. Enforcement of Support Obligation

Current regulations at § 305.26 provide the subcriteria evaluated to determine compliance with the State plan requirement for enforcing support obligations under § 302.31(b).

Under the current regulations at § 305.26(c), States are required to have identified and established written procedures to enforce support obligations. We propose to revise § 305.26(c) to require States to have established and be utilizing written procedures to enforce support obligations because the requirement to establish written procedures assumes that they must first be identified. In addition, adding the requirement for utilization of procedures would provide consistency with the wording of other criteria under Part 305. We would also delete § 305.26(e), which requires that appropriate action be taken using the State's procedures.

We are also proposing to delete paragraphs (f) and (g) under § 305.26. Both represent staffing requirements which are already implied under the functional requirements to enforce support obligations at (a), (b), and (c).

To correspond with these changes, we are proposing to delete the current operational subcriteria at § 305.26 (c) and (d) which must be fully met under § 305.20 for a substantial compliance finding with respect to the State plan requirement for enforcing support obligations. The proposed paragraph (c) would become a functional subcriterion along with paragraphs (a) and (b) under the operational criterion evaluating Enforcement. Additional subcriteria under the proposed Enforcement criterion at

§ 305.20(b) would be added to address the use of certain enforcement techniques and enforcement services pertaining to interstate, medical-support and spousal support orders. Under the current regulations each of these services is a separate evaluation criterion.

7. Support Payments to the IV-D Agency

Current regulations at §305.27 provide subcriteria evaluated to determine compliance with the State plan requirement of support payments to the IV-D agency under §302.32.

Current regulations at §305.27 (a) and (b) require States to have established and use procedures for the receipt of support payments by the IV-D agency with respect to cases where there is an AFDC or Foster Care assignment of support rights and with respect to cases when a non-AFDC application has been made, respectively. We propose to delete from paragraph (a) all that follows the word agency, which provides that the requirement applies to AFDC and Foster Care cases, and to delete paragraph (h) in its entirety, which provides that the requirement applies to non-AFDC cases except as provided under subparagraphs (1) and (2). We are proposing this change for consistency with other requirements in Part 305 and because, unless otherwise stated, the requirements in Part 305 apply to the review of all IV-D cases. In addition the exceptions to the requirement for receipt of non-AFDC child support payments under (b) (1) and (2), which allow direct payments to the family if the State does not recover costs and if the State has an approved system for reporting the collections, respectively, are outdated. State IV-D agencies must have and utilize procedures for the receipt of child support collections made on behalf of all IV-D cases (emphasis added). Paragraphs (c) and (d) would be redesignated as paragraphs (b) and (c), respectively.

In addition, paragraph (e), which requires staff to perform these functions, would be deleted because the requirement to utilize procedures inherently includes having staff perform the necessary functions.

Under the revised regulation, paragraphs (a), (b), and (c) would be included as functional subcriteria under the criterion evaluating Collection/Distribution at §305.20 (b). Paragraphs (a), (b), and (d) are currently evaluated under a separate criterion of support payments to the IV-D agency.

8. Distribution of Support Payments

Regulations at § 305.28 provide subcriteria evaluated to determine compliance with the State plan requirement for distributing child support collections under § 302.51, § 302.52, and § 302.32.

Current requirements at § 305.28(a) require States to have written procedures which if properly applied would result in proper distribution. Paragraph (b) of these regulations requires that States make distribution in accordance with the procedures established. We propose to revise paragraph (a) to require States to have and utilize procedures for the distribution of collections in accordance with regulations. This would be consistent with other audit evaluation criteria included under Part 305 and would consolidate two separate subcriteria. Accordingly, paragraph (b) would be deleted.

We are also proposing to delete the requirement at paragraph (c) which requires the State to have personnel distributing support collections. The requirement to utilize procedures for distributing collections inherently includes a requirement that staff perform the necessary functions.

We propose to delete the operational criterion of § 305.28 which must be fully met under the current § 305.20 as a condition of a substantial compliance finding. Because casework will reveal compliance problems, the procedural requirement is not necessary. Section 305.28 become a functional subcriterion under the criterion evaluating Collection/Distribution at § 305.20(b) as proposed, wherein support payments must be properly collected and distributed in at least 75 percent of the cases reviewed. Under the current regulation this is a single evaluation criterion which is evaluated separately.

9. Payments to the Family

Current regulations at §305.29 provide subcriteria evaluated to determine compliance with the State plan requirements for distributing payments to the family under §302.32 and §302.51. Current requirements at §305.29 would remain unchanged. However, for purposes of evaluating substantial compliance under §305.20, the criterion would be consolidated as a functional subcriterion under the criterion evaluating Collection/Distribution wherein support must be properly collected and distributed in at least 75 percent of the cases reviewed. Under current regulations this criterion is evaluated separately.

10. Individuals Not Otherwise Eligible

Current regulations at §305.31 provide subcriteria evaluated to determine compliance with the State plan requirement for providing services to individuals not otherwise eligible (non-AFDC applicants) under §302.33.

Under the current paragraph (b), States must have established and be utilizing written procedures for providing all appropriate services under the State plan to non-AFDC applicants including locating absent parents, establishing paternity and securing support. We propose to delete this evaluation subcriterion as the provision of appropriate services for non-AFDC families is included under each specific service and need not be re-evaluated under a separate criterion. Paragraph (c) would accordingly be redesignated as paragraph (b).

We are proposing to add a new paragraph (c) to require that States have and utilize written procedures for providing appropriate title IV-D services to former AFDC fannies in accordance with § 302.51(e). This change would also be reflected in the introductory sentence by adding reference to § 302.51(e) following the reference to § 302.33. We are proposing this change because the requirement for continuing to provide services to former AFDC families is more appropriately evaluated under the requirement for non-AFDC services than under the requirement for distribution where it is currently evaluated.

In addition, we are proposing to delete the current requirement at paragraph (d), which requires that personnel perform support enforcement services for non-AFDC families. The requirement for States to provide such services inherently includes having personnel perform the required functions.

Under the current regulations at § 305.20, paragraphs (a), (b), and (c) of § 305.31 are functional subcriteria under a separate criterion for providing services to individuals not otherwise eligible. We propose to delete the separate review of services to individuals not otherwise eligible because each subcriterion is currently reviewed under the appropriate criterion: Paternity; Support Obligation; Enforcement; Collection/Distribution; Wage or Income Withholding; and Expedited Processes.

The requirement for the collection of fees and recovery of costs under the newly designated paragraph (b) would be reviewed under the proposed criterion at § 305.20 (a) evaluating Financial Accountability. Paragraph (c) as proposed, would become a separate operational criterion evaluating Continuation of Services under the proposed § 305.20 (a).

11. Provision of Services in Interstate IV-D Cases

Current regulations at §305.32 provide subcriteria evaluated to determine compliance with the State plan requirement for interstate cooperation under §302.36.

We propose to amend these regulations by deleting paragraphs (i) and (j). Both requirements pertain to staffing requirements which are inherent in utilizing the required procedures.

Under the current regulations at §305.20, paragraphs (a) through (h) of §305.32 are functional subcriteria under a separate criterion for providing services in interstate cases, wherein the required procedures must be utilized in at least 75 percent of the cases reviewed for a substantial compliance finding. We propose to delete the current separate functional criterion for providing interstate services and consolidate the subcriteria at §305.32 (c), (d), and (e) with the applicable service-related criterion under §305.20(b): Paternity, Support Obligation, Enforcement and Collection/ Distribution. In addition, we propose to add a new operational criterion under §305.20(a) which would require that a State fully meet the requirements of paragraphs §305.32 (a) and (f) through (h) in order to be found in substantial compliance.

The requirement at §305.32(b) for locating absent parents in interstate cases has not been included as a subcriterion as the locate requirements under §305.33 apply to interstate and intrastate cases and would, under the proposed regulation, be added to each of the service-related criteria.

12. State Parent Locator Services: (PLS)

Current regulations at §305.33 provide subcriteria measured to determine compliance with the State plan requirement for a parent locator service under §305.35.

Current regulations at § 305.33(a) require States to have and utilize a central PLS office as required by § 302.35(a). Regulations at paragraph (e) further provide that States have procedures for accepting applications to use the PLS from authorized persons. We propose to delete paragraph (e) and to consolidate those requirements under paragraph (a) to provide that States must have and be utilizing a State PLS as required by §302.35(a) and (c).

Paragraph (b) of the current regulations requires a State to identify and utilize major local data sources. Current paragraph (c) requires the State to identify and utilize major State data sources. Current paragraph (d) requires use of the Federal PLS when necessary. We propose to delete all three paragraphs because the requirements are included under current paragraph (g) which requires the State to use the names and identifying information of absent parents, the State and local locate data sources and the Federal PLS in an attempt to determine the whereabouts of the absent parent. Current paragraphs (f) and (g) would be redesignated as paragraphs (b) and (c), respectively. We propose to insert in proposed paragraph (c), after State and local locate data sources, the phrase, "such as those listed in §303.3 of this chapter."

In addition, we propose to delete current paragraph (h) which provides staffing requirements because the requirement to use procedures and take action inherently includes a requirement to have personnel performing the required functions.

Under current regulations the requirements at paragraph (e) must be fully met under §305.20 to substantiate a finding of substantial compliance. The current requirements at paragraph (a) and (c) are reviewed under a separate functional requirement wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete both the operational and functional criteria for the State PLS from § 305.20 because the location function, except with respect to a minimal number of cases, is the initial step to providing all other major program services, i.e., paternity establishment, support order establishment and enforcement. Therefore, cases requiring absent parent location will be evaluated under the major service required for the case. Thus, if a case required paternity services and the absent parent's whereabouts were unknown, the State must take all appropriate action to locate the absent parent. If the State did not take appropriate action to locate the absent parent and establish paternity, this would be counted against the State in computing the efficiency rate for paternity establishment. The requirement under the proposed paragraph (b) for collecting necessary fees would be reviewed under the proposed criterion at §305.20(a) for evaluating Financial Accountability.

13. Cooperative Arrangements

Regulations at §305.34 require as a measure of compliance with the State plan requirement for cooperative arrangements under §302.34, that a State must enter into written cooperative agreements with appropriate courts and officials when necessary to provide required services. This proposed rule would not change this evaluation criterion for management purposes but would delete it at a separate operational criterion which must be fully met under §305.20. We propose to consolidate this requirement as a subcriterion under the operational criterion evaluating Statewide Operation under the proposed §305.20(a).

14. Reports and Maintenance of Records

Regulations at §305.35 provide subcriteria evaluated to determine compliance with the State plan requirement for reports and maintenance of records under §302.15.

We propose to add a new paragraph (b) to require States to utilize procedures for establishing and maintaining case file records containing all information pertaining to the case, in accordance with §303.2. We are proposing this change because the establishment of a case file at intake and the proper documentation and maintenance of case file records is essential to providing appropriate services. In addition, unless a case is properly documented, auditors will not be able to identify what services are needed or what action has been taken. It is, therefore, in the State's best interest to ensure that all relevant information is included in the case file.

We propose to delete § 305.35(c), the requirement that the State have personnel performing the necessary functions, as the requirement to utilize procedures and maintain case files inherently includes that personnel perform the necessary functions.

In addition, the new paragraph (b) would be added, along with the requirements of paragraphs (a) and (c), as operational subcriteria under the operational criterion evaluating Reports and Maintenance of Records at § 305.20(a) which must be fully met as a condition of a substantial compliance finding.

15. Fiscal Policies and Accountability

Current regulations at § 305.36 provide subcriteria evaluated to determine compliance with the State plan requirement for fiscal policies and accountability under § 302.14.

We propose to delete § 305.36(b), the requirement that the State have personnel performing the functions specified in this section, as the requirement in paragraph (a), that the State establish and utilize an accounting system, assumes that the State will have personnel performing the required functions.

In addition, we propose to delete the operational criterion for fiscal policies under § 305.20 and to consolidate the requirement as a subcriterion under the new criterion evaluating Financial Accountability at § 305.20(a), as proposed.

16. Bonding of Employees

Regulations at § 305.37 provide subcriteria evaluated to determine compliance with the State plan requirement for bonding of employees under § 302.19. Paragraph (a) requires written procedures for ensuring that all appropriate personnel are covered by a bond and paragraph (b) requires that the State have written procedures for obtaining a bond in an adequate amount. Paragraph (c) requires the State to use the procedures referred to in paragraphs (a) and (b).

We propose to delete the requirements under paragraphs (a) and (b) for written procedures and to consolidate the requirements of paragraphs (a), (b), and (c) into one paragraph under § 305.37. The revised § 305.37 would require States to ensure that every person who has access to or control over funds collected under the program is covered by a bond in an amount the State deems adequate to identify the State IV-D program for loss resulting from employee dishonesty. We are proposing this change because the emphasis should be on whether employees were covered by a bond not on the State's procedures to do so.

In addition, we are proposing to delete the separate criterion for bonding of employees at § 305.20 and add the requirement as an operational subcriterion under the proposed criterion evaluating Financial Accountability at 305.20(a).

17. Separation of Cash Handling and Accounting Functions

Regulations at § 305.38 provide subcriteria evaluated to determine compliance with the State plan requirement for the separation of cash handling and accounting functions under § 302.20.

Under paragraph (a), States are required to have written procedures designed to assure (1) the separation of cash handling and accounting functions and (2) use of generally accepted accounting procedures. Paragraph (b) provides that the requirement under paragraph (a) does not apply to States which have been granted waivers under § 302.20(c) and paragraph (c) requires States to use the written procedures specified in paragraph (a).

We propose to revise § 305.38 to delete the requirement for written procedures under paragraph (a)(1), to delete paragraph (a)(2) in its entirety and to consolidate the remaining requirements under one paragraph. As revised, § 305.38 would require States to ensure that persons responsible for handling cash receipts of support do not participate in accounting or operating functions which would permit them to conceal the misuse of support payments except with respect to sparsely populated geographic areas granted a waiver under § 302.20(c) of this chapter. We are proposing this change because the emphasis should be placed on the actual separation of cash handling and accounting functions and not on the State's written procedures to do so.

In addition, we are proposing to delete the separate criterion for separation of cash handling and accounting functions at § 305.20 and add the requirement at § 305.38 as an operational subcriterion under the criterion evaluating Financial Accountability.

18. Withholding of Unemployment Compensation

Regulations at § 305.39 provide subcriteria evaluated to determine compliance with the State plan requirement for the withholding of unemployment compensation under § 302.65.

We propose to amend § 305.39 (b) through (h) by adding at each paragraph the requirement to use the procedures required.Under the current regulation, paragraph (i) requires the use of all procedures specified under § 305.39. However, because we propose to review only paragraphs (b), (c), (d) and (e) for purposes of determining substantial compliance under § 305.20, separate requirements for utilizing procedures are necessary in each paragraph. To correspond with this change paragraph (i) would be deleted.

In addition, we are proposing to delete § 305.39(j) which requires that staff perform the activities described throughout § 305.39 because the use of staff is inherent in the requirement to use procedures.

Under current regulations, requirements at § 305.39 (a) through (h) are operational subcriteria which must be in fully met under

§ 305.20 as a condition of substantial compliance. We are proposing to delete the operational criteria because review of the State's actual use of withholding procedures under the functional criteria is a better measure of State compliance than a review of their written procedures. Current regulations at § 305.20 provide a separate functional criterion for evaluation of the requirements in § 305.39 (a) through (h). We are proposing to delete the separate criterion and to include the subcriteria at § 305.39(b),(c),(d) and (e) under the proposed criterion evaluating Enforcement at § 305.20(b). We are only including these subcriteria because the remaining requirements are either not conducive to evaluation based on case file review or are of a technical nature.

19.Federal Tax Refund Offset

Regulations at § 305.40 provide subcriteria evaluated to determine compliance with the State plan requirement for Federal tax refund offset under § 3O2.60.

We propose to revise § 305.40 to consolidate the requirements of paragraphs (a) and (b) to provide that States must have and utilize procedures for the withholding of past-due support from Federal tax refunds. Under current regulations paragraph (b) requires use of the procedures required under paragraph (a). Because procedures are not in and of themselves a substantive measure of State performance, we believe that the criteria should be consolidated.

Paragraph (c) requires States to have personnel performing the functions required under § 305.40. We are proposing to delete this subcriterion as the requirement to utilize procedures inherently entails having personnel perform the necessary functions.

Under current regulations at § 305.20, the requirement to have written procedures providing for Federal tax refund offset is a separate operational criterion which must be fully met as a condition of substantial compliance. We are proposing to delete the operational criterion because the functional criterion to use the required procedures is a better measure of State performance and will disclose procedural deficiencies. The functional criterion which is currently evaluated separately would become a subcriterion under the proposed criterion evaluating Enforcementat § 305.20(b).

20. Recovery of Direct Payments

Regulations at § 305.41 provide subcriteria evaluated to determine compliance with the State plan requirement for recovery of direct payments under § 302.31(a).

We propose to revise § 305.41 by consolidating the requirement to have written procedures for the recovery of direct payments at paragraph (a) with the requirement at paragraph (b) to use such procedures. Because procedures are not in and of themselves a substantive measure of State performance, we believe the requirement need not be stated and reviewed independently.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions as the requirement to use procedures inherently includes having personnel perform the necessary activities.

Under the current regulations at § 305.20, the requirement to have written procedures for the recovery of direct payments is a separate operational criterion which must be fully met as a condition of substantial compliance. The requirement to use procedures is a separate functional criterion wherein the required procedures must be used in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional subcriterion would disclose any procedural deficiencies. The requirement for using procedures would become a functional subcriterion under the criterion evaluating Collection/Distribution at § 305.20(b).

21. Spousal Support

Regulations at § 305.42 provide subcriteria evaluated to determine compliance with the State plan requirement for the collection of spousal support contained under § 302.31(a).

We propose to revise § 305.42 by consolidating the requirement to have written procedures for the collections of spousal support under paragraph (a) with the requirement at paragraph (b) to use such procedures. As the main emphasis in determining compliance is the actual provision of spousal support services, we believe the procedural requirement need not be stated or reviewed independently.

ln addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions as the requirement to use procedures inherently includes having personnel perform the necessary activities.

Under § 305.20, the requirement to have written procedures for enforcing spousal support is a separate operational criterion which must be fully met as a condition of a substantial compliance finding. The requirement to use such procedures is a separate functional criterion wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional standard will disclose procedural deficiencies and is indicative of State compliance. The requirement to use procedures for enforce spousal support orders would become a functional subcriterion under the new criterion evaluating Enforcement.

22. 90 Percent Federal Financial Participation (FFP) for Computerized Enforcement Systems

Under current regulations at § 305.43, a computerized system eligible for enhanced Federal funding must meet the requirements in § 307.10. This is currently a separate operational criterion at § 305.20 which must be fully met as a condition of a finding of substantial compliance. We propose to delete § 305.43 from the list of operational criterion which must be fully met under

§ 305.20 because the certification procedures entailed in receiving such funding ensure compliance with the procedural requirements of § 307.10.

23. Publicizing the Availability of Services

Regulations at § 305.44 provide subcriteria evaluated to determine compliance with the State plan requirement for publicizing the availability of child support enforcement services under § 302.30. Currently this requirement is included as a separate operational criterion under § 305.20 which must be fully met as a condition of substantial compliance. We propose to delete the separate criterion for reviewing compliance with this requirement and to include it instead as a subcriterion under the criterion evaluating Statewide Operation as proposed under

§ 305.20(a). While we believe that this is an important requirement, we do not believe the substance of § 305.44 is a significant indicator of compliance and compliance with statutory requirement can be adequately assessed under the criterion evaluating Statewide Operation.

We propose to make a technical correction to § 305.44 by replacing the period at the end of the introductory phrase with a colon.

24. Notice of Collection of Assigned Support

Regulations at § 305.45 provide subcriteria evaluated to determine compliance with the State plan requirement for providing notice of collection of assigned support under § 3O2.54.

We propose to revise § 305.45 by consolidating the requirement to have procedures for providing notice under paragraph (a) with the requirement at paragraph (b) to use such procedures. Because procedures are not in and of themselves a substantive measure of State performance, we believe the requirement need not be stated or reviewed independently.

Section 305.45(a)(1) requires States to send an annual notice of the amounts of support collected during the past year to individuals who have assigned their rights to support under

§ 232.11. We propose to clarify this requirement by prefacing it with the clause, "with respect to those cases where there is a support order or, in the absence of an order, voluntary support payments have been made." This change is proposed to clarify that,while such notices must be sent even if no support was collected pursuant to a support order, a notice need not be sent if a support order has not been established and voluntary payments have not been made.

We also propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions, as the requirement to use procedures inherently includes having personnel perform the necessary activities.

Under the current regulations at § 305.20, the requirement to have written procedures for providing notice is a separate operational criterion which must be fully met as a condition of substantial compliance. We propose to delete the operational criterion as casework reviewed under the functional criterion is a better measure of State compliance and would disclose procedural deficiencies. The requirement for sending the notice under

§ 305.45(a) would become a functional subcriterion under the criterion evaluating Collection/Distribution as proposed under § 305.20(b). It is currently reviewed as a separate functional criterion.

25. Incentive Payments to States and Political Subdivisions

Regulations at § 302.46 provide subcriteria evaluated to determine compliance with the State plan requirement for incentive payments to States and political subdivisions under § 305.55.

We propose to revise § 305.46 by consolidating the requirement to have written procedures for passing State incentives down to political subdivisions at paragraph (a) with the requirement at paragraph (b) to use such procedures. As procedures are not in and of themselves a substantive measure of compliance, we believe the requirement need not be stated and reviewed independently.

We also propose to delete the contents of § 305.46(a)(2) which require the State to have procedures to consider the efficiency and effectiveness of political subdivisions in determining the amount of the incentive payable. We are proposing this change as the requirement is already embraced by paragraph (a)(1) which requires that incentive payments to political subdivisions be made as determined by the State in accordance with § 303.52(d). Regulations at §303.52(d) provide that the determination of the amount of incentives payable to political subdivisions should be based on such subdivision's efficiency and effectiveness.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions because the requirement to use procedures inherently includes having staff perform the necessary activities.

Under current regulations at § 305.20, the requirement to have written procedures for passing incentives payments through to political subdivisions is a separate operational criterion which must be fully met as a condition of substantial compliance. In addition, the requirement to use such procedures is a separate functional subcriterion under § 305.20. We propose to delete the functional criterion because the current incentive structure is not conducive to review under the 75 percent standard. Instead we propose to review the requirement at § 305.46 to utilize procedures for the pass-through of incentive payments as a subcriterion under the proposed operational criterion evaluating Financial Accountability.

26. Payment of Support Through the IV-D Agency or Other Entity

Regulations at § 305.48 provide subcriteria evaluated to determine compliance with the optional State plan requirement for payment of support through the IV-D agency or other entity under

§ 302.57.

We propose to revise §305.48 by deleting the requirement to use procedures at paragraph (c) and adding to paragraphs (a) and (b) the requirement to use the required written procedures providing for payment of support through the IV-D agency or other entity. We are proposing this change as procedures are not in and of themselves a substantive measure of State performance and need not be reviewed individually.

In addition, we propose to delete the current requirement under paragraph (d) for having personnel perform the specified functions as the requirement to utilize procedures inherently includes having personnel perform the necessary activities.

Under the current regulations at § 305.20, the requirements at paragraph (a) and (b) are operational criteria which must be met as a condition of substantial compliance. The requirement to use such procedures is a separate functional criterion wherein the required procedures must be used in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional subcriterion disclose any procedural deficiencies. The separate functional criterion for utilizing procedures would, with the exception of paragraph (b)(3), become subcriteria under the proposed criterion evaluating Collection/Distribution at § 305.20(b). The requirement for collecting fees under the proposed paragraph (b)(3) would be reviewed under the proposed criterion evaluating Financial Accountability at § 305.20(a).

27. Wage or Income Withholding

Regulations at § 305.49 provide subcriteria evaluated to determine compliance with the State plan requirement for wage or income withholding under § 3O2.7O(a)(1).

We propose to revise § 305.49 by consolidating the requirement to have written procedures for carrying-out a program of withholding at paragraph (a) with the requirement at paragraph (b) to utilize such procedures. We are proposing this change because procedures are not in and of themselves a substantive measure of State performance and need not be reviewed separately.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified function as the requirement for using procedure inherently includes having staff perform the necessary functions.

Under the current regulations at § 305.20, the requirement to have written procedures providing for wage or income withholding at § 305.49(a) is a separate operational criterion which must be fully met as a condition of substantial compliance and the requirement under paragraph (b) to utilize such procedures is a separate functional criterion wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional criterion will disclose any procedural deficiencies. The separate functional criterion for utilizing procedures for wage or income withholding would be retained under § 305.20(b).

28. Expedited Processes

Regulations at § 305.50 provide subcriteria evaluated to determine compliance with the State plan requirement for expedited process under § 305.70(a)(2).

We propose to revise § 305.50 by consolidating the requirement to have written procedures providing for an expedited process with the requirement at paragraph (b) to use such procedures. We are proposing this change because such procedures are not in and of themselves a substantive measure of State performance and need not be stated and reviewed separately.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions as the requirement to utilize procedures inherently includes having personnel perform the necessary activities.

The requirement for having an expedited process system will remain a separate operational criterion under § 305.20 which must be fully met as a condition of substantial compliance.

29. State Income Tax Refund Offset

Regulations at § 305.51 provide subcriteria evaluated to determine compliance with the State plan requirement for collection of overdue support by State income tax refund offset under § 302.70(a)(3).

We propose to revise § 305.51 by consolidating the requirement at paragraph (a) to have written procedures for State tax offset with the requirement under paragraph (b) to utilize such procedures. We are proposing this change because procedures are not in and of themselves a substantive measure of State performance and need not be stated or reviewed separately. In addition, we propose to delete from paragraph (a) all that follows the word "refunds," which provides that the requirement applies to AFDC, Non-AFDC and Foster Care cases. We are proposing this change for consistency with other requirements in Part 305 and because, unless otherwise stated, the requirements in Part 305 apply to the review of all IV-D cases.

We propose to delete paragraph (c) of § 305.51 which requires that personnel perform the specified functions because the requirement to utilize procedures inherently entails having personnel perform the necessary functions.

Under current regulations at § 305.20, the requirement to have written procedures providing for the offset of State tax refunds for collection of overdue support is a separate operational criterion which must be fully met to substantiate a finding of substantial compliance. The requirement to utilize those procedures is a separate functional criterion which must be met in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional criterion will uncover any procedural deficiencies. The functional criterion, which is currently evaluated separately, would become a subcriterion under the proposed criterion evaluating Enforcement at § 305.20(b).

30. Imposition of Liens

Regulations at § 305.52 provide subcriteria evaluated to determine compliance with the State plan requirement for the imposition of liens against real and personal property under

§ 302.70(a) (4).

We propose to revise § 305.52 by consolidating the requirement at paragraph (a) to have procedures for the imposition of liens against real and personal property with the requirement at paragraph (b) to utilize such procedures. We are proposing this change because the major emphasis in determining State performance is the actual provision of services not the availability of written procedures.

In addition, we propose to delete paragraph (c) which requires the State to have personnel performing the specified functions. The requirement for utilizing procedures inherently includes having personnel perform the required functions.

Under current regulations at § 305.20, the requirement to have written procedures for the imposition of liens against property is a separate operational criterion which must be fully met to substantiate a finding of substantial compliance. The requirement to utilize those procedures is a separate functional criterion wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional criterion is a better measure of State compliance and will uncover any procedural deficiencies. The functional criterion which is currently evaluated separately would become a subcriterion under the proposed criterion evaluating Enforcement.

31. Posting Security, Bond or Guarantee

Regulations at § 305.53 provide subcriteria evaluated to determine compliance with the State plan requirement for posting security, bond or guarantee to secure payment of overdue support under § 302.70(a)(6).

We propose to revise § 305.53 by consolidating the requirement at paragraph (a) to have written procedures requiring an absent parent to give security, post a bond or give other guarantee to secure support with the requirement at paragraph (b) to use such procedures. We are proposing this change because such procedures are not in and of themselves a substantive measure of State performance and need not be stated and reviewed separately.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions because the requirement to utilize procedures for posting bonds or giving guarantee of support inherently includes having personnel perform the necessary activities.

Under the current regulations at § 305.20 the requirement to have written procedures providing for posting bonds or securing guarantees of support at § 305.53(a) is a separate operational criterion which must be fully met as a condition of substantial compliance and the requirement under paragraph (b) to use such procedures is a separate functional criterion wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional criterion will reveal the existence of any procedural deficiencies. The separate functional criterion for utilizing procedures would be consolidated as a subcriterion under the proposed criterion evaluating Enforcement.

32. Making Information Available to Consumer Reporting Agencies

Regulations at § 305.54 provide subcriteria evaluated to determine compliance with the State plan requirement for making information available to consumer reporting agencies under

§ 302.70(a)(7).

We propose to revise § 305.54 by consolidating the requirement at paragraph (a) to have written procedures for making information regarding the amount of overdue support owed by an absent parent to consumer reporting agencies with the requirement at paragraph (b) to use such procedures. We are proposing this change because such procedures are not in and of themselves a substantive measure of State performance and need not be elated and reviewed separately.

In addition we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions as the requirement to utilize such procedures inherently includes having personnel perform the necessary activities. Under current regulations at §305.20, the requirement to have procedures for informing consumer credit agencies of overdue support is a separate operational criterion which must be fully met as a condition of substantial compliance and the requirement under paragraph (b) to utilize such procedures is a separate functional criterion where the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete the operational criterion as casework reviewed under the functional criterion for utilizing procedures would reveal any procedural deficiencies. The separate functional criterion for utilizing procedures for informing consumer credit agencies of overdue support could be consolidated under the proposed functional criterion evaluating Enforcement.

33. Late Payment Fees

Regulations at § 305.55 provide subcriteria evaluated to determine compliance with the optional State plan provision for imposing late payment fees on absent parents who owe overdue support under § 302.75.

We propose to revise § 305.55 by consolidating the requirement at paragraph (a) to have written procedures providing for applying late payment fees uniformly throughout the State with the requirement at paragraph (b) to use such procedure. We are proposing this change as procedures are not in and of themselves a substantive measure of State performance and need not be stated and reviewed separately.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions as the requirement to utilize procedures inherently includes having personnel perform the necessary activities.

Under current regulations at §305.20 the requirement to have written procedures for imposing late payment fees at §305.55 is a separate operational criterion which must be fully met as a condition of substantial compliance and the requirement to utilize such procedures is a separate functional criterion wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to delete the functional criterion because systemic review under the operational criterion evaluating Financial Accountability under §305.20(a) as proposed, would better identify widespread deficiencies in this area.

34. Medical Support Enforcement

Regulations § 305.56 provide subcriteria evaluated to determine compliance with the State plan requirement for medical support enforcement under §302.80.

We propose to revise §305.56 by consolidating the requirement at paragraph (a) to have written procedures to secure medical support information and secure and enforce medical support obligations with the requirement at paragraph (b) to use such procedures. We are proposing this change as such procedures are not in and of themselves a substantive measure of State performance and need not be stated and reviewed separately.

In addition, we propose to delete the current requirement under paragraph (c) for having personnel perform the specified functions as the requirement to utilize procedures inherently includes having personnel perform the necessary activities.

We propose to add a new paragraph (b) which would require States to have and utilize written procedures for notifying the State Medicaid agency when a new or modified order for support includes medical support and for providing the information referred to at §306.50(a) to the State Medicaid agency. We are proposing this change as the current criteria do not adequately measure State compliance with the requirements at §§305.50 and 306.51 for providing information to and communicating with the State Medicaid agency.

Under current regulations at §305.20 the requirement for having written procedures providing for medical support enforcement is a separate operational subcriterion which must be fully met as a condition of substantial compliance. The requirement to utilize such procedures is a separate functional criterion wherein the required procedures must be utilized in 75 percent of the cases reviewed. We propose to replace the operational criterion currently reviewed for medical support enforcement at §305.20(a) with the new subcriteria found under the proposed criteria evaluating and establishing an Obligation and Enforcement under 305.20(b).

35. Prohibition From Retroactive Modification of Child Support Arrearages

Although regulations prohibiting the retroactive modification of child support arrearages at proposed § 305.57 have not been published in final yet, they will be by the time this proposal is published in final (see 52 FR 34689, September 14, 1987). Therefore, we are including reference to § 305.57 in this proposed regulation. Under proposed § 305.57, States must have written procedures prohibiting the retroactive modification of child support arrearages. We propose to include this requirement as a functional subcriterion under the criterion evaluating Support Obligations as proposed under § 305.20(b). We are proposing to add this as a substantial compliance subcriterion because it is an important state plan requirement.

Performance Indicator. Regulations at § 305.98(a) provide three performance indicator components which were effective beginning with the fiscal year 1986 audit period. Paragraph (b) provides four additional indicator components which were effective beginning with the fiscal year 1988 audit period. We propose to revise § 305.98 by redesignating current paragraph (d) as paragraph (f) and adding a new paragraph (d) which would include the performance indicator components in paragraphs (a) and (b) and add new performance indicator components. The proposed performance indicator set forth in paragraph (d) would be effective beginning with the Federal fiscal year beginning after publication of these regulations in final form. We also propose to clarify in proposed paragraph (d) whether or not interstate collections are included in the collection amounts and that collections of a fiscal year will be used for purposes for computing the indicator components.

The first of the two proposed indicator components provided under § 305.98(d)(8) would be referred to as the Paternity Establishment Indicator and is calculated by dividing the total number of paternities established by the IV-D agency during a fiscal year by the total number of births to unmarried women in the State during the calendar year 2 years earlier (as reported to the National Center for Health Statistics). For example, the number of paternities for FY 1989 would be divided by the number of births to unmarried women for calendar year 1987. The number of births to unmarried women is not a perfect measure of the number of IV-D cases in which paternity must be established. Clearly not all unmarried women will seek services from the IV-D agencies within two years following the birth. Some will come immediately. Some will come at a later date. Some will never apply for services. Nevertheless, we believe that it is the best indicator of the demand for paternity services that currently exists. Further, no State is required to establish paternity in all or even a majority of these cases. To achieve a passing score, a State need only establish a number of paternities equivalent to 25 percent of the births to unmarried women. To achieve the maximum score, a State need only establish a number of paternities equivalent to 55 percent of the births to unmarried women.

We believe this indicator component is the best measure, of the degree to which States are establishing paternity in cases that require such services, given available data. However, we are committed to obtain data on the number of children in IV-D cases born out of wedlock and on the number of these children for whom paternity has been established. Further, once this data is available, we intend to substitute it in this indicator component. The new ratio would be equivalent to the Paternity Establishment Percentage as defined in Section 111 of the Family Support Act of 1988. This percentage is, for each State, the number of children in IV-D cases who are born out of wedlock for whom paternity has been established divided by the number of children in IV-D cases who are born out of wedlock. A child who is receiving AFDC by reason of the death of a parent, or a child with respect to whom a mother is found to have good cause for refusing to cooperate in establishing or collecting support, is excluded from this equation.

We note that, unlike the other indicator components which focus either on AFDC or non-AFDC services, the paternity indicator component is a cross-cutting indicator component in which AFDC and non-AFDC paternities count equally. In 1985, there were 828,000 births to married women. A majority of these women do not go on AFDC immediately. From this perspective, we might expect that there could be more non-AFDC than AFDC paternity establishments. However, in the past there have not been a large number of non-AFDC paternity establishments. But this is changing. Non-AFDC paternity establishments have increased 125 percent in the four years from 1983 to 1987. Non-AFDC paternities now comprise over 17 percent of all paternities established under the IV-D program (up from only 10 percent in 1983). In the future we expect that percentage to continue to increase.

The second additional indicator component proposed under

§ 305.98(d)(9) would be referred to as the Cost Avoidance Indicator and is calculated by multiplying the non-AFDC collections in a fiscal year (excluding collections made on behalf of other States) by 20 percent and dividing the result by the total IV-A assistance payments (excluding payment to families with unemployed parents) plus the amount of food stamps and Medicaid payments for these same families for the same fiscal year. The term cost avoidance refers to the financial savings to the taxpayer that occur when a family leaves public assistance, stays off assistance in the first instance or has their assistance reduced due to child support collections.

This proposed indicator component is based on recently completed research, performed by Advanced Sciences, Inc. Although this research was limited in scope and based on all female-headed households (not just IV-D cases) it found that the cost avoidance associated with child support collections was considerable. It was estimated that there was $1 in AFDC, food stamp and Medicaid costs avoided for every $5 in child support collections realized for families not receiving AFDC. In other words, there is 20 cents in cost avoidance for every dollar of child support collected by the IV-D agency on behalf of non-welfare families. The proposed indicator component would take into account the amount of cost avoidance in a State relative to the cash and medical assistance and food stamps paid in the State.

Although the research upon which this indicator component is based is a significant step forward in establishing actual welfare cost avoidance attributable to non-AFDC collections, it is not the definitive work on cost avoidance. Although problems remain in defining cost avoidance measure, we propose to include this indicator component at this time in order to give States the benefit of their efforts to increase cost avoidance and will improve and revise this measure over time.

Ideally, a cost avoidance indicator component would measure only those cases in which the child support enforcement services actually made the difference between a family receiving and not receiving AFDC, Medicaid and food stamps. Unfortunately, it would require extensive data collection to make this decision on a State by State basis. Instead we propose to use the average amount of cost avoidance per dollar of child support collected. We have set the standards for this indicator component so that States with very large non-AFDC caseloads do not receive excessive credit and so that States with smaller non-AFDC caseloads are not penalized. A State can achieve a passing score by achieving a level of cost avoidance equal to only 1.5 percent of food stamp and Medicaid payments in the State.

In order to integrate the two additional indicator components proposed with the seven indicator components currently in the regulation, we are proposing under paragraph (e) a new scoring system which would be effective along with the new performance indicator, beginning with the Federal fiscal year beginning after publication of this regulation in final form. The proposed scoring system retains the 100-point scoring system the equal weight for AFDC and non-AFDC indicator components and the requirement that States achieve a minimum score of 70. Under the proposed system, up to 20 points each would be given for the Paternity Establishment, the AFDC Recovery Rate, and the Cost Avoidance indicator components. Up to 10 points each would be given for the AFDC and non-AFDC Cost effectiveness indicator components. Finally up to 4 points each would be given for the four Accounts Receivable indicator components (for a total of 20 points). In all, up to 40 points would be given for AFDC related indicator components up to 40 points for non-AFDC related indicator components and up to 20 points for the cross-cutting paternity establishment indicator component. The tables in proposed § 305.98(e)(1) (i) through (ix) show the scores which would be applied for different levels of performance on each performance indicator component.

The tables in subparagraphs (e)(1)(i) through (ix) are based on a computer simulation which showed the results which were obtained for alternative scoring systems. In developing the scoring tables, we looked at the performance of each State relative to the other States and relative to the national averages. Our purpose was not to develop scoring tables which were impossible to meet or to develop scoring tables which every State currently met. Rather our purpose was to develop individual scoring tables which were clearly achievable, which accurately reflected a minimum level of acceptable performance on each indicator component and which when taken together would define a minimum level of acceptable performance. We believe that the scoring tables, individually and taken together, meet these criteria. We note that a State need not attain a passing score on every indicator component. A State can make up, to a certain extent, its poor performance on one indicator component with above average performance on other indicator components.

Proposed paragraph (e)(2) provides that a State's total score must equal or exceed 70 and includes three examples of the scores typical States would receive under the proposed scoring system. The average score for the States which submitted complete data in fiscal year 1987 was 70. We believe that the proposed scoring system is a clear measure of the overall effectiveness of State child support enforcement programs and that a minimum score of 70 is clearly achievable for an effective IV-D program.

Using FY 1987 data for simulation purposes, 21 jurisdictions score 70 or more. Of the remainder, 24 score between 50 and 69, meaning that they can realize a passing grade with, in many instances, little effort. Further, 5 of the 9 other failing jurisdictions are hampered by missing data, for which they get a zero score.

Table 1 shows the individual scores on each performance indicator component and the total audit score a State would receive in fiscal year 1989 if it were to achieve the fiscal year 1987 national average on each of the performance indicator components.

TABLE 1

Performance Indicator FY 1987

national Audit

average score __________________________________________________________________

1. AFDC cost effectiveness (CE) ratio $1.38 7

2. Non-AFDC CE ratio $2.61 7

3. AFDC recovery rate *9.2 14

4. AFDC current accounts receivable *39.2 4

5. Non-AFDC current accounts receivable *55.0 4

6. AFDC past due accounts receivable * 6.7 3

7. Non-AFDC past due accounts receivable *9.8 3

8. Paternity establishment *32.5 14

9. Cost avoidance *1.7 14

Total audit score 70

__________________________________________________________________

*percent

Table 2 shows the total audit scores which each State would receive if the proposed scoring system were applied to fiscal year 1987 data. Note that States marked with an asterisk are States for which complete fiscal year 1987 data were not available. When data were not available on any particular performance indicator component, the States were given no points for that indicator component.

TABLE 2

State Total Audit Score

__________________________________________________________________

Alabama 79

Alaska 65

Arizona* 52

Arkansas 76

California 56

Colorado 51

Connecticut 79

Delaware* 71

D.C.* 28

Florida 56

Georgia 72

Guam* 32

Hawaii* 55

Idaho 82

Illinois* 51

Indiana* 58

Iowa 79

Kansas* 52

Kentucky 54

Louisiana 53

Maine 66

Maryland 58

Massachusetts 75

Michigan 92

Minnesota 83

Mississippi 50

Missouri 79

Montana 40

Nebraska 60

Nevada 69

New Hampshire 76

New Jersey 87

New Mexico* 29

New York 49

North Carolina 85

North Dakota 79

Ohio 71

Oklahoma* 38

Oregon 80

Pennsylvania 85

Puerto Rico* 50

Rhode Island 61

South Carolina 64

South Dakota 67

Tennessee* 73

Texas 33

Utah 75

Vermont 62

Virgin Islands* 48

Virginia* 53

Washington* 63

West Virginia 35

Wisconsin* 74

Wyoming* 52

__________________________________________________________________

Data used to compute the performance indicator components related to accounts receivable have been required to be reported to OCSE since FY 1986. Reporting by the States to date has been incomplete and, in some cases, clearly inaccurate. For instance, there have been substantial discrepancies between collections reported on the OCSE-56 and the same collections reported on the OCSE 41. In addition, some States have reported identical data year after year. For purposes of assigning score values to the accounts receivable performance indicator components or to any other performance indicator component, a zero value will be assigned when a State fails to report data required or when the data a State reports is clearly erroneous on its face. Accuracy and reliability of data reported and used to construct the performance indicator will be evaluated as part of the complete audit conducted of all States which fail to achieve a passing score on the performance indicator. An estimate, if possible, will be made as part of the audit for any performance indicator component which received a zero score as the result of no data reported or reported data that on its face is found to be erroneous.

The new performance indicator components as well as the proposed scoring system would be effective for the fiscal year beginning after publication of these proposed relations as final regulations, allowing even more time for program improvement. States have had ample time to implement requirements that have been in effect since the inception of the program in 1975 as well as those enacted as part of the 1984 Child Support Enforcement Amendments. In addition, it should be noted that States have already shown improvement under the current performance indicator components. When first published using FY 1983 data, the current scoring system showed 18 States as failing the 70 percent standard. However, experience for FY 1986, the initial year of applicability, indicated only three failures. Further, because child support data processing systems funded at enhanced matching rates or otherwise, wIll be operational in increasing numbers of States, program performance and reporting capabilities will improve. Again, we feel any State with an effective program should be able to meet the 70 percent standard.

In addition, we propose to revise current paragraph (d) (which would be redesignated as paragraph (f) by replacing the provision that a performance indicator scoring system will be described and updated by regulation every two years with a provision that the performance indicator scoring system will be described and updated by the Office in instructions.

The scoring system will be updated from time to time as necessitated by changing expectations. Changes in the scoring system will reflect progress made by the States in improving program performance. Scoring system revisions will be based on the actual performance of States with respect to indicator components. A passing score of 70 points will be retained. We will make any changes to the scoring system available to States for comment and will publish any changes in the Federal Register in advance of their effective date.

Notice and Corrective Action Period

We propose to make a technical change to § 305.99(b)(2) by replacing the reference to § 305.20 (a)(2), (b)(2) or (c)(2) with § 305.20(b). This change consistent with the proposed changes to § 305.20.

In addition we propose to amend paragraph (d)(1] to make a connection by replacing the word "maintain" where it appears, with the word "maintained." For clarity, we propose to add at the beginning of paragraph (d)(2), "during, the corrective action period," Finally, in paragraph (d)(3), we propose to replace "quarter" with "three-month period"; to insert "first full" before "fiscal" where it first appears; and, to delete the word "fiscal" where it last appears. These changes are being proposed to correspond with the changes proposed to section § 305.11, Audit period.

Penalty for Failure to Have an Effective Program

We propose to make a technical correction to § 305.100(d) by replacing the word "and" where it appears after the word "notice" and before the word "maintain" with the word "or"

Paperwork Reduction Act

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

Regulatory Impact Analysis

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

(l) An annual effect on the economy of $l00 million or more:

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

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

The Executive Order requires that, for major rules, we prepare a regulatory impact analysis which describes the potential benefits and costs of the rule, together with the potential benefits and costs of any alternative approaches. This proposed rule will have little or no net economic effect, because it will not change the requirements of State child Support Enforcement programs or the penalties which may be levied against programs which fail to substantially comply with the requirements. The net effect here is not on actual State program practices but rather, on how these practices will be evaluated. The number of States failing the audit is not expected to increase under this proposed rule, even with the inclusion of the proposed performance indicator components. The performance indicator is just one aspect of the program audit and, if a State were to fail to meet the performance indicator, it is likely that it would fail other aspects of the audit as well.

Under the Regulatory Flexibility Act of 1980 (Pub. L. 96-354), we are required to prepare a regulatory flexibility analysis for those rules which will have a significant economic impact on a substantial number of small entities. This proposed rule will not have a significant economic impact on a substantial number of small entities and, therefore, a regulatory flexibility analysis is not required. The only expected economic impact is comparatively small Federal savings as a result of reduced manhours per State audit.

List of Subjects in CFR part 305

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

(Catalog of Federal Domestic Assistance Program No. 13.783, Child Support Enforcement Program)

Dated June 7, 1988.

Wayne Stanton.

Director, Office of Child Support

Enforcement.

Approved: December 16, 1988.

Otis R. Bowen,

Secretary

For the reasons set out in the preamble, 45 CFR Part 305 is proposed to be amended as follows:

PART 305-[AMENDED]

1. The authority citation for Part 305 continues to read as set forth below:

Authority: 42 U.S.C. 603(h), 604(d), 651(a)(1) and (4), and 1302.

2. Section 305.11 is revised to read as follows:

§305.11 Audit period.

The audit will cover a period comprised of not more than 12 nor less than three consecutive months. When the State Is operating under a corrective action plan, the review will cover the first three-month period beginning after the corrective action period. When the State fails to meet audit criteria related to the performance indicator, the review will cover the first full fiscal year following the date on which a determination was made that performance was not in substantial compliance. The audit may, at State request, be conducted prior to the end of the one-year period prescribed under § 305.10(b) of this part when the State is being penalized under § 305.100 of this part.

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

§305.12 State comments.

(a) Prior to the start of the actual audit, the Office will hold an audit entrance conference with the IV-D agency. At that conference the Office will explain how the audit will be performed and make any necessary arrangements.

* * * * *

4. Section 305.13 is amended by revising paragraph (b) to read as follows:

§305.13 State cooperation in annual audit.

* * * * *

(b) Failure to comply with the requirements of this section will necessitate a finding that the State has failed to substantially comply.

5. Section 305.20 is revised to read as follows:

§305.20 Effective support enforcement program.

For the purposes of this part and section 403(h) of the Act, in order to be found to have an effective program in substantial compliance with the requirements of title IV-D of the Act, a State must meet the lV-D State plan requirements contained in Part 302 of this chapter measured as follows:

(a) For audits conducted for any period beginning after (insert Date Final Regulation is Published) the following audit criteria must be fully met:

(1) State cooperation. (45 CFR 305.l3)

(2) Statewide operation. (45 CFR 305.21(a) and (c), 305.34 and 305.44)

(3) Single and separate organizational unit (45 CFR 305.23)

(4) Reports and maintenance of records, (45 CFR 305.35)

(5) Financial accountability. (45 CFR 305.36, 305.37, 305.38, 305.46 and collection and reporting of fees and interest (including as appropriate, those provided under 45 CFR 303.69(e), 303.72(i), 303.100(d)(1)(iii) and (e)(3), 303.102(f), 303.105(c), 305.31(b), 305.33(b), 305.48(b)(3), and 305.55)).

(6) Medical support.(45 CFR 305.56(b)).

(7) Child support guidelines. (45 CFR 305.47)

(8) Expedited processes. (45 CFR 305.50)

(9) Interstate cooperation (45 CFR 305.32(a) and (f) through (h))

(10) Continuation of services. (45 CFR 305.31(c))

(b) For audits conducted for any period beginning after (insert Date Final Regulation is Published), the procedures required by the following audit criteria must be used in 75 percent of the cases reviewed for each criterion:

(1) Establishing paternity. (45 CFR 305.24, 305.32(c) and 305.33(c)

(2) Support obligations. (45 CFR 305.25, 305.32(d), 305.33(c), 305.56(a) and 305.57)

(3) Enforcement of support obligations. (Providing enforcement services under 45 CFR 305.26(a), (b) and (c), 350.32(e), 305.33(c), 305.42, 305.54, 305.56(a) and, when appropriate, use of one or more the specialized enforcement techniques under 45 CFR 305.39(b), (c), (d), and (e), 350.40, 305.51, 305.52 and 305.53).

(4) Collection/Distribution.(45 CFR 305.27, 305.28, 305.29, 305.32(e), 305.41, 305.45(a) and 305.48(a) and (1) and (2)).

(5) Wage or income withholding. (45 CFR 305.49)

(c) Beginning in (Insert Fiscal Year Beginning After Publication of Final Regulation), the criteria referred to in

§ 305.96(e) and (f) of this part relating to the performance indicator prescribed in paragraph (d) of that section must be met.

§305.21 (Amended)

6. Section 305.21 is amended by removing paragraph (b) and redesignating paragraphs (c) and (d) as paragraphs (b) and (c).

7. Section 305.22 is revised to read as follows:

§ 305.22 State financial participation.

For the purposes of this part, in order to be found to be in compliance with the State plan requirement for State financial participation (45 CFR 302.11), a state must participate financially by incurring the applicable State share of the program's administrative costs with funds which are appropriated to the IV-D agency or transferred to the IV-D agency, or certified by the contributing public agency as representing expenditures under the State's IV-D plan.

8. Section 305.23 is amended by revising paragraph (a) and (b) and removing paragraph (c) to read as follows:

§ 305.23 Single and separate organizational unit.

* * * * *

(a) Is responsible and accountable for the operation of the IV-D plan; and

(b) is responsible for securing compliance with requirements of the IV-D plan delegated to any other State or local agency or official performed under cooperative agreement or purchase of service agreement.

§ 305.24 [Amended]

9. Section 305.245 is amended by adding the word "and" after the semicolon in paragraph (a) and removing paragraphs (c) through (g).

§ 305.25 [Amended]

10. Section 305.25 is amended by replacing the colon at the end of paragraph (a) with "; and", removing subparagraphs (a)(1) and (2), removing paragraphs (c) and (d) and changing the semicolon to a period at the end of paragraph (b).

§ 305.26 [Amended]

11. Section 305.26 is amended by removing "identified and" and adding "and be utilizing" after "established" in the beginning of paragraph (c), adding the word "and" after the semicolon at the end of paragraph (c), replacing the semicolon at the end of paragraph (d) with a period and removing paragraphs (e) through (g).

12. Section 305.27 is amended by revising paragraph (a), removing paragraphs (b) and (e), and redesignating and revising paragraphs (c) and (d) as paragraphs (b) and (c), respectively, to read as follows:

§ 306.27 Support payments to the IV-D agency.

** * * * *

(a) Have established and be utilizing written procedures for the receipt of support payments by the IV-D agency;

(b) Have established and be utilizing written procedures to identify support payments that are not being received by the IV-D agency and to take corrective action; and

(c) Have established and be utilizing written procedures that meet the requirements of § 302.32(b) of this chapter for informing the State's IV-A agency of the amounts of collection so that the family's continued eligibility for assistance payments can be determined.

13. Section 305.28 is revised to read as follows:

§ 305.28 Distribution of support payment.

For the purposes of this part, in order to be found to be in compliance with the State plan requirements for distribution of support collections (45 CFR 302.51, 302.52 and 302.32), a State must have and utilize written procedures which, if properly applied, would result in a distribution of support collections which is in accordance with §§ 302.51, 302.52 and 302.32 of this chapter.

14. Section 305.31 is revised to read as follows:

§ 305.31 Individuals not otherwise eligible

For the purposes of this part, in order to be found to be in compliance with the State plan requirement for providing support enforcement services to individuals not otherwise eligible (45 CFR 302.33 and 302.51(e)), a State must;

(a) Have established and be utilizing written procedures for accepting signed, written applications on a Statewide basis for support services from individuals not otherwise eligible under

§ 302.31 of this chapter.

(b) Have established and be utilizing written procedures for collection of any fees and recovery of any costs authorized by the State's plan; and

(c) Have established and be utilizing procedures for providing services to former AFDC recipients in accordance with § 302.51(e) of this chapter.

§ 305.32 [Amended]

15. Section 305.32 is amended by adding the word "and" at the end of paragraph (g), replacing the semicolon with a period at the end of paragraph (h) and removing paragraphs (i) and (j).

16. Section 305.33 is amended by revising paragraph (a), removing paragraph (b) through (e), redesignating and revising paragraph (f) as paragraph (b), and redesignating paragraph (g) as paragraph (c) and revising it to read as follows:

§ 305.33 State parent locator service

(a) Have established and be utilizing a central State PLS office as required by § 302.35(a) and (c) of this chapter;

(b) Have established and be utilizing written procedures for collecting any fees required by § 303.70(e)(2) of this chapter and the State's plan; and

(c) Have established and be using the names and other identifying information of absent parents, the State and local locate data sources, such as those listed in § 303.3 of this chapter, and the Federal PLS, in an attempt to determine the actual whereabouts of the absent parent, or determine that the whereabouts of the absent parent cannot be ascertained.

17. Section 305.35 is amended by removing paragraph (c), redesignating and revising paragraph (b) as paragraph (c) and adding a new paragraph to read as follows:

§305.35 Reports and maintenance of records.

* * * * *

(b) Have established and be utilizing procedures for establishing and maintaining case file records containing all information pertaining to the case, in accordance with § 303.2; and

(c) Have established and be utilizing a system for insuring that reports required by the Secretary are provided when due, and are accurate and complete.

18. Section 305.36 is revised to read as follows:

§305.36 Fiscal policies and accountability.

For the purposes of this part in order to be found in compliance with the State plan requirement for fiscal policies and accountability (45 CFR 302.14), a State must have established and be maintaining and utilizing an accounting system and supporting fiscal records that assure that claims for Federal funds are in accord with applicable Federal regulations and instructions issued by the Office.

19. Section 305.37 is revised to read as follows:

§305.37 Bonding of employees.

For the purposes of this part, to be found in compliance with the State plan requirement for bonding of employees (45 CFR 302.19), a State must ensure that every person, including the individuals prescribed in § 302.19(b) of this chapter, who, as a regular part of his or her employment, receives, disburses, handles or has access to or control over funds collected under the Child Support Enforcement program is covered by a bond in an amount which the State IV-D agency deems adequate to indemnify the State IV-D program for loss resulting from employee dishonesty.

20. Section 305.38 is revised to read as follows:

§305.38 Separation of cash handling and accounting functions.

For the purposes of this part, to be found in compliance with the State plan requirement for the separation of cash handling and accounting functions (45 CFR 302.20), a State must ensure that persons, including the individuals specified in § 301.20(b) of this chapter, responsible for handling cash receipts of support do not participate in accounting of operating functions which would permit them to conceal in the accounting records the misuse of support receipts, except with respect to sparsely populated geographic areas within the State granted a waiver under § 302.20(c) of this chapter by the Regional Office.

§305.39 [Amended]

21. Section 305.39 is amended by adding the words "and utilize" after the word "Have" in paragraphs (b) through (h), removing paragraphs (i) and (j), replacing the semicolon at the end of paragraph (g) with ", and" and replacing the semicolon at the end of paragraph (h) with a period.

22. Section 305.40 is revised to read as follows:

§ 305.40 Federal tax refund offset.

For the purpose of this part, to be found in compliance with the State plan requirement for Federal tax refund offset (45 CFR 302.60, a State must have and utilize written procedures to obtain payment of past-due support from Federal tax refunds in accordance with section 464 of the Act and § 303.72 of this chapter and regulations of the Internal Revenue Service at 26 CFR 301.6402-5.

23. Section 305.41 is revised to read as follows:

§305.41 Recovery of direct payments.

For the purposes of this part, to be found in compliance with the State plan requirement for recovery of direct payments (45 CFR 301.31(a)), a State must have and utilize written procedures to:

(a) Notify the IV-A agency whenever a determination is made that directly received payments have been retained, if the State elects the IV-A recovery method: or

(b) Recover retained direct support payments in accordance with the standards in § 303.80 of this chapter if the State elects the IV-D recovery method.

24. Section 305.42 is revised to read as follows:

§305.42 Spousal support.

For the purposes of this part, to be found in compliance with the State plan provision for the collection of spousal support (45 CFR 301.31(a)), a State must have and utilize written procedures for the collection of spousal support from a legally liable person when:

(a) A support order has been established for the spouse:

(b) The spouse or former spouse is living with the child(ren) for whom the individual is liable for child support: and

(c) The support order established for the child(ren) is being enforced under the IV-D plan.

§305.44 [Amended].

25. Section 305.44 is amended by replacing the period at the end of the introductory language with a colon.

26. Section 305.45 is revised to read as follows:

§305.45 Notice of collection of assigned support.

For the purposes of this part, to be found in compliance with the State plan requirement for providing notice of collection of assigned support (45 CFR 302.54), a State must have and utilize written procedures for:

(a) Sending, at least annually, with respect to those cases where there is a support order, or, in the absence of an order, voluntary support payments have been made, a notice of the amount of support payments collected during the past year to individuals who have assigned rights to support under § 232.11 of this title:

(b) Listing separately in the notice support payments collected from each absent parent when more than one absent parent owes support to the family: and

(c) Indicating in the notice the amount of support collected which was paid to the family.

27. Section 305.46 is revised to read as follows:

§305.46 Incentive payments to State and political subdivisions.

For the purposes of this part, to be found in compliance with the State plan requirement for incentive payments to States and political subdivisions (45 CFR 302.55) the State must have and utilize written procedures to require that if one or more political subdivisions of the State participate in the costs of carrying out the activities under the State plan during any period, each such subdivision shall be paid an appropriate share of any incentive payments made to the State for such period, as determined by the State in accordance with § 303.52(d) of this chapter.

§305.48 [Amended]

28. Section 305.48 is amended by adding "and utilize" after the word "Have" in paragraphs (a) and (b), adding "and" after the semicolon at the end of paragraph (a), replacing the semicolon with a period at the end of paragraph (b)(3) and removing paragraphs (c) and (d).

29. Section 305.49 is revised to read as follows:

§305.49 Wage or income withholding.

For the purposes of this part, to be found in compliance with the State plan requirement for wage or income withholding (45 CFR 302.70(a)(1)), a State must have and utilize written procedures for carrying out a program of withholding in accordance with §303.100 of this chapter.

30. Section 305.50 is revised to read as follows:

§305.50 Expedited processes.

For the purposes of this part, to be found in compliance with the State plan requirement for expedited processes (45 CFR 302.70(a)(2)), a State must have and utilize written expedited processes to establish and enforce child support obligations having the same force and effect as those established through full judicial process in accordance with §303.101 of this chapter.

31. Section 305.51 is revised read as follows:

§305.51 Collection of overdue support by State income tax refund offset.

For the purposes of this part, to be found in compliance with the State plan requirement for collection of overdue support by State income tax refund offset (45 CFR 302.70(a)(3)), a State must have and utilize written procedures for obtaining overdue support from State income tax refunds in accordance with §303.102 of the chapter.

32. Section 303.52 is revised to read as

follows:

§305.52 Imposition of liens against real and personal property.

For the purposes of this part, to be found is compliance with the State plan requirement for the imposition of liens against real and personal property (45 CFR 302.70(a)(4)), a State must have and utilize written procedures for the imposition of liens against the real and personal property of absent parents who owe overdue support in accordance with §303.103 of this chapter.

33. Section 305.53 is revised to read as follows:

§305.53 Posting security, bond or guarantee to secure payment of overdue support.

For the purposes of this part, to be found in compliance with the State plan requirement for posting security, bond or guarantee to secure payment of overdue support (45 CFR 302.70(a)(6)), a State must have and utilize written procedures which require that an absent parent give security, post a bond or give some other guarantee to secure payment of support in accordance with

§ 303.104 of this chapter.

34. Section 305.54 is revised to read as follows:

§305.54 Making information available to consumer reporting agencies.

For the purposes of this part, to be found in compliance with the State plan requirement for making information available to consumer reporting agencies (45 CFR 302.70(a)(7)), a State must have and utilize written procedures for making information regarding the amount of overdue support owed by an absent parent available to consumer reporting agencies in accordance with

§ 303.105 of this chapter.

35. Section 305.55 is revised to read as follow:

§305.55 Imposition of late payment fees on absent parents who owe overdue support.

For the purposes of this part, to be found in compliance with the optional State plan provision for imposing late payment fees on absent parents who owe overdue support (45 CFR 302.75), a State must have and utilize written procedures for uniformly applying the late payment fee in accordance with § 302.75 of this chapter.

36. Section 305.56 is revised to read as follows:

§305.56 Medical support enforcement.

For the purposes of this part, to be found in compliance with the State plan requirement for medical support enforcement (45 CFR 302.80), a State must:

(a) Have and utilize written procedures to secure medical support information and secure and enforce medical support obligations in accordance with 45 CFR Part 306 Subpart B of this chapter; and

(b) Have and utilize written procedures for notifying the State Medicaid agency when a new or modified order for support includes medical support and for providing the information referred to at § 306.50(a) to the State Medicaid agency when available.

37. Section 305.98 is amended by revising paragraph (d) and redesignating it as paragraphs(f) and adding new paragraphs (d) and (e) to read as follows:

§305.98 Performance indicator and audit criteria.

* * * * *

(d) Beginning in (Insert Fiscal Year Beginning After Publication of Final Regulation), the Office will use the following performance indicator components in determining whether each State has an effective IV-D program:

(1) AFDC IV-D collections for a fiscal year (including collections made on behalf of other States) divided by total IV-D expenditures for the same fiscal year (less laboratory cost incurred in determining paternity at State option);

(2) Non-AFDC IV-D collections for a fiscal year (including collections made on behalf of other States) divided by total IV-D expenditures for the same fiscal year (less laboratory cost incurred in determining paternity at State option);

(3) AFDC IV-D collections for a fiscal year (excluding collections made on behalf of other States) divided by IV-A assistance payments for the same fiscal year (less payments to unemployed parents);

(4) AFDC IV-D collections for a fiscal year (including collections made on behalf of other States) on support due for the same fiscal year divided by total support due for the same fiscal year;

(5) Non-AFDC IV-D collections for a fiscal year (including collections made on behalf of other States) on support due for the same fiscal year divided by total non-AFDC support due for the same fiscal year;

(6) AFDC IV-D collections for a fiscal year (including collections made on behalf of other States) on support due for prior periods divided by total AFDC support due for the same prior periods;

(7) Non-AFDC IV-D collections for a fiscal year (including collections made on behalf of other States) on support due for prior periods divided by total non-AFDC support due for the same prior periods;

(8) The number of paternities established by the State during a fiscal year divided by the total number or births to unmarried women in the State for the calendar year two years prior to the fiscal year (for example, the number of paternities established by the State during FY 1988 (October 1985--September 30, 1988) divided by the total number of births to unmarried women in the State for calendar year 1984 (January 1--December 30, 1984)); and

(9) Non-AFDC IV-D collections for a fiscal year (excluding collections made on behalf of other States) multiplied .2 and divided by the total IV-A assistance payments (less payments to unemployed parents) plus Food Stamps and Medicaid payments to the same families for the same fiscal year.

(e) Beginning in [insert fiscal year beginning after publication of final regulation), the Office shall use the following procedures and audit criteria to measure State performance;

(1) The ratio for each of the performance indicator components in paragraph (d) of this section will be evaluated on the basis of the scores in the tables in paragraphs (e)(1)(i) through (ix) of this section. The tables show the scores the States will receive for different levels of performance.

(i) The ratio provided under paragraph (d)(1) measuring AFDC cost effectiveness.

Level of performance Score

Less than $.20 0

At least $.20 but less than $.40 1

At least $.40 but less than $.60 2

At least $.60 but less than $.80 3

At least $.80 but less than $1.00 4

At least $1.00 but less than $1.20 5

At least $1.20 but less than $1.30 6

At least $1.30 but less than $1.40 7

At least $1.40 but less than $1.50 8

At least $1.50 but less than $1.60 9

$1.60 or more 10

(ii) The ratio provided under paragraph (d)(2) measuring non-AFDC cost effectiveness.

Level of performance: Score

Less than $.20 0

At least $.20 but less than $.60 1

At least $.60 but less than $1.00 2

At least $1.00 but less than $1.40 3

At least $1.40 but less than $1.80 4

At least $1.80 but less than $2.10 5

At least $2.10 but less than $2.40 6

At least $2.40 but less than $2.70 7

At least $2.70 but less than $3.00 8

At least $3.00 but less than $3.30 9

$3.30 or more 10

(iii) The percentage provided under paragraph (d)(3) measuring AFDC recovery.

Level of performance (in percent): Score

Less than 3% 0

At least 3% but less than 4% 2

At least 4% but less than 5% 4

At least 5% but less than 6% 6

At least 6% but less than 7% 8

At least 7% but less than 8% 10

At least 8% but less than 9% 12

At least 9% but less than 10% 14

At least 10% but less than 12% 16

At least 12% but less than 14% 18

14% or more 20

(iv) The percentage provided under paragraph (d)(4) measuring AFDC current accounts receivable.

Level of performance Score

Less than 5% 0

At least 5% but less than 15% 1

At least 15% but less than 25% 2

At least 25% but less than 35% 3

At least 35% but less than 45% 4

45% or more 5

(v) The percentage provided under paragraph (d)(5) measuring non-AFDC current accounts receivable.

Level of performance Score

Less than 20% 0

At least 20% but less than 30% 1

At least 30% but less than 40% 2

At least 40% but less than 50% 3

At least 50% but less than 60% 4

60% or more 5

(vi) The percentage provided under paragraph (d)(6) measuring AFDC past due accounts receivable.

Level of performance Score

Less than 2% 0

At least 2% but less than 4% 1

At least 4% but less than 6% 2

At least 6% but less than 8% 3

At least 8% but less than 10% 4

10% or more 5

(vii) The percentage provided under paragraph (d)(7) measuring non-AFDC past due accounts receivable.

Level of performance: Score

Less than 4% 0

At least 4% but less than 6% 1

At least 6% but less than 8% 2

At least 8% but less than 10% 3

At least 10% but less than 12% 4

12% or more 5

(viii) The percentage provided under paragraph (d)(8) measuring paternity establishment.

Level of performance: Score

Less than 2% 0

At least 2% but less than 4% 2

At least 4% but less than 8% 4

At least 8% but less than 12% 6

At least 12% but less than 16% 8

At least 16% but less than 20% 10

At least 20% but less than 25% 12

At least 25% but less than 35% 14

At least 35% but less than 45% 16

At least 45% but less than 55% 18

55% or more 20

(ix) The percentage provided under paragraph (d)(9) measuring cost avoidance.

Level of performance: Score

Less than .25% 0

At least .25% but less than .5% 4

At least .5% but less than .75% 6

At least .75% but less than 1.0% 8

At least 1.0% but less than 1.25% 10

At least 1.25% but less than 1.5% 12

At least 1.5% but less than 2.0% 14

At least 2.0% but less than 3.0% 16

At least 3.0% but less than 4.0% 18

4.0% or more 20

(2) To be found to meet the audit criteria, a State's total score must equal or exceed 70.

Examples. The following tables show how typical States would be judged under the performance indicator components listed in paragraphs (d)(1) through (9).

STATE A

_________________________________________________________________

Level of Score

Indicator Performance

_________________________________________________________________

1. AFDC cost effectiveness (CE)ratio $1.15 5

2. Non-AFDC CE ratio $1.45 4

3. AFDC recovery rate *21 20

4. AFDC current accounts receivable *26 3

5. Non-AFDC current accounts receivable *25 1

6. AFDC past due accounts receivable *11 5

7. Non-AFDC past due accounts receivable *20 5

8. Paternity indicator *46 18

9. Cost avoidance indicator *5.5 20

Total audit score (points) . . . . . . . . . . . . 82

_________________________________________________________________

*Percent

STATE B

________________________________________________________________

Level of

Indicator Performance Score

_________________________________________________________________

1. AFDC CE ratio $2.65 20

2. Non-AFDC CE ratio $2.75 8

3. AFDC recovery rate *7.5 10

4. AFDC current accounts receivable *27 3

5. Non-AFDC current accounts receivable *42 3

6. AFDC past due accounts receivable *6.5 3

7. Non-AFDC past due accounts receivable *9 3

8. Paternity indicator *56 20

9. Cost avoidance indicator *1.2 10

Total audit score (points) . . . . . . . . . . . . .70

_________________________________________________________________

*Percent

STATE C

_________________________________________________________________

Level of

Indicator Performance Score

_________________________________________________________________

1. AFDC CE ratio $0.85 4

2. Non-AFDC CE ratio $2.45 7

3. AFDC recovery rate *5.5 6

4. AFDC current accounts receivable *38 4

5. Non-AFDC current accounts receivable *59 4

6. AFDC past due accounts receivable *5 2

7. Non-AFDC past due accounts receivable *9 3

8. Paternity indicator *10 6

9. Cost avoidance indicator *3.5 18

Total audit score (points) . . . . . . . . . . . . 54

__________________________________________________________________

*Percent

In the above examples, State A would meet the audit criterion because it received a total audit score of 82; State B would also meet the audit criterion because it had a total audit score of 70; State C would not meet the audit criterion because it had achieved a score of only 54.

(f) The scoring system provided in paragraph (e) of this section will be described and updated periodically by the Office in instructions.

38. Section 305.99 is amended by revising paragraph (b)(2). and paragraphs (d)(1), (2) and (3) to read as follows:

§305.99 Notice and corrective action period.

(a) * * *

(b) * * *

(2) Identify any audit criteria listed in § 305.20(b) of this part that the State met only marginally (that is, in 75 to 80 percent of the cases reviewed):

* * * * *

(d) * * *

(1) The State has achieved substantial compliance with the unmet criteria cited in the notice and maintained substantial compliance with any marginally-met criteria cited in the notice:

(2) During the corrective action period, the State is not implementing its corrective action plan; or

(3) The State has implemented its corrective action plan but has failed to achieve substantial compliance with the unmet criteria cited in the notice and maintain substantial compliance with any marginally-met criteria cited in the notice. For State plan-related criteria, this determination will be made as of the first full three-month period after the corrective action period. For performance related criteria, this determination will be made as of the first full fiscal year following the year in which a determination was made that performance was not in substantial compliance.

* * * * *

§ 305.100 (Amended)

39. Section 305.100 is amended by replacing the word "and" with the word "or" in paragraph (d).

[FR Doc. 89-1605 filed 1-30-89; 8:45 am]

Billing code 4150-04-M