[Federal Register: September 5, 2007 (Volume 72, Number 171)]
[Rules and Regulations]
[Page 50889-50900]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05se07-7]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Part 98
RIN 0970-AC29
Child Care and Development Fund Error Rate Reporting
AGENCY: Administration for Children and Families (ACF), HHS.
ACTION: Final rule.
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SUMMARY: This final rule revises the Child Care and Development Fund
(CCDF) regulations to provide for the reporting of error rates in the
expenditure of CCDF grant funds by the fifty States, the District of
Columbia and Puerto Rico. The error rate reports will serve to
implement provisions of the Improper Payments Information Act of 2002
(IPIA) and the President's Management Agenda (PMA)'s goal of
``Eliminating Improper Payments.''
DATES: Effective October 1, 2007.
FOR FURTHER INFORMATION CONTACT: Cheryl Vincent, Child Care Program
Specialist, Child Care Bureau, 1250 Maryland Ave., SW., 8th Floor,
Washington, DC 20024, telephone (202) 205-0750, e-mail
cheryl.vincent@acf.hhs.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Child Care and Development Fund
B. Summary of the Statutory and Administrative Directives To
Measure Improper Payments
C. Error Rate Methodology
D. Notice of Proposed Rulemaking
II. Statutory Authority
III. Summary of Existing Regulations
IV. Provisions of Final Rule
A. Consultation With States, Territories and Other Organizations
B. Discussion of Comments
C. Changes Made in Final Rule
V. Regulatory Impact Analyses
A. Executive Order 12866
B. Regulatory Flexibility Analysis
C. Assessment of the Impact on Family Well-Being
D. Paperwork Reduction Act
E. Unfunded Mandates Reform Act of 1995
F. Congressional Review
G. Executive Order 13132
I. Background
This final rule adds a new subpart to the Child Care and
Development Fund (CCDF) regulations that requires States, the District
of Columbia and Puerto Rico to employ a case review process in
calculating CCDF error rates in accordance with an error rate
methodology established by the Secretary of Health and Human Services
(the Secretary). This methodology is specified in this rule and
associated information collection forms and instructions. The final
rule requires States, the District of Columbia and Puerto Rico to
report specified information regarding errors to the Department of
Health and Human Services. A discussion of comments received in
response to the publication of a Notice of Proposed Rulemaking (NPRM)
on March 2, 2007 (72 FR 9491) may be found below in the preamble. This
final rule is not substantively different from the NPRM; however, minor
technical changes have been made to address concerns raised by some
commenters.
A. Child Care and Development Fund (CCDF)
CCDF provides Federal funds to States, Territories, Indian Tribes
and tribal organizations for the purpose of assisting low-income
families, including families receiving or transitioning from the
Temporary Assistance for Needy Families program (TANF), in the purchase
of child care services, thereby allowing parents to work or attend job
training or an educational program. States and Territories also must
spend no less than four percent of their CCDF allotment on expenditures
to improve the quality and availability of child care. CCDF is provided
to States, Territories and Tribes--there is no provision for direct
funding to individual families or providers.
Federal law establishes eligibility criteria for families receiving
CCDF assistance; however, States and Territories administering CCDF
funds may impose more restrictive eligibility standards. Regulations
governing CCDF are codified in 45 CFR parts 98 and 99, and the Federal
definition of a child's eligibility for child care services is set
forth in 45 CFR 98.20. This description includes eligibility
requirements related to a child's age, a child's special needs or
protective services status, family
[[Page 50890]]
income and parent's work, training or educational activity. Lead
Agencies of the CCDF Program, which are the State, territorial or
tribal entities to which CCDF grants are awarded and that are
accountable for the use of the funds provided, have established
policies and procedures that vary considerably across and even within
jurisdictions, including, but not limited to, stricter income limits,
special eligibility or priority for families receiving TANF and
eligibility that differs for a child with special needs. All clients
seeking child care assistance supported by CCDF funds must undergo an
eligibility determination process when they initially apply, and all
Lead Agencies have defined a process for verifying information
submitted in the application. Eligibility determination affects many
other aspects of the program, including provider payment rates,
authorized hours of care and a family's co-payment responsibility.
Section 658E of the Child Care and Development Block Grant (CCDBG)
Act (42 U.S.C. 9858c) and 45 CFR 98.52 limit expenditures by States and
Territories for the costs of administering the CCDF program to no more
than five percent of the State's or Territory's aggregate expenditures
from a fiscal year's allotment of CCDF funds. Various costs that are
considered an integral part of service delivery are excluded from the
five percent administrative cap, including eligibility determination
and redetermination and the establishment and maintenance of
computerized child care information systems.
B. Summary of the Statutory and Administrative Directives To Measure
Improper Payments
The Improper Payments Information Act of 2002 (IPIA) (31 U.S.C.
3321 note) requires Federal agencies to identify programs that are
vulnerable to improper payments and to estimate annually the amount of
underpayments and overpayments made by these programs. An improper
payment, as defined by the IPIA, is any payment that should not have
been made or that was made in an incorrect amount under statutory,
contractual, administrative or other legally applicable requirement.
Incorrect amounts are overpayments and underpayments (including
inappropriate denials of payment or service). An improper payment
includes any payment that was made to an ineligible recipient or for an
ineligible service. Improper payments also are duplicate payments,
payments for services not received and payments that do not account for
credit for applicable discounts.
According to the IPIA, Federal agencies must report on the actions
they are taking to reduce improper payments if the estimated amount of
improper payments for an activity or program exceeds $10 million and
2.5 percent of program payments. CCDF has been identified by the Office
of Management and Budget (OMB) as a program susceptible to significant
erroneous payments and for which improper payment information is
required to be reported under the IPIA. This report must include a
discussion of the causes of improper payments, what actions Federal
agencies have taken to correct those causes and the results achieved.
Federal agencies also must state whether they have the information
systems and other infrastructure needed to reduce improper payments
and, if not, what resources they have requested in their budget
submissions. Finally, Federal agencies must report on what steps they
have taken to hold managers accountable for reducing improper payments.
The IPIA may be downloaded at: http://thomas.loc.gov/cgi-bin/bdquery/z?d107:HR04878:TOM:/bss/d107query.html
.
The Executive Branch also has worked to address the improper
payments issue. The President's Management Agenda (PMA)'s goal of
``Eliminating Improper Payments'' promises to establish a baseline of
the extent of improper payments and to work with agencies to set goals
to reduce improper payments for each program. The anticipated result of
this effort is greater accuracy in benefit and assistance programs,
which will enable programs to serve additional eligible recipients. The
PMA may be downloaded at: http://www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf
.
The modifications in this final rule are designed to meet the
requirements of the IPIA as well as to meet the PMA's goal of
``Eliminating Improper Payments.''
C. Error Rate Methodology
The methodology that is implemented in this final rule is based on
a methodology the Child Care Bureau developed and field-tested in 2005
in partnership with four States that volunteered to participate in a
pilot study (Arkansas, Colorado, Illinois and Ohio). This methodology
focused on administrative error associated with client eligibility and
improper authorizations for payment. At the conclusion of the pilot, it
was determined that a version of the tested methodology would be an
appropriate tool for calculating error rates related to client
eligibility. A pilot study of additional States (Florida, Kansas, New
Jersey, Oregon, and West Virginia) was completed in 2007. The final
reports on the error rate methodology pilots may be downloaded
electronically at: http://www.acf.hhs.gov/programs/ccb/ccdf/ipi/ipi.htm
.
Although this final rule is broad enough to encompass reporting on
all types of errors, the initial methodology and reporting requirements
will focus on administrative errors associated with client eligibility
and improper authorizations for payment, as described in more detail in
the preamble and accompanying information collection forms and
instructions associated with the rule (please refer to the section
discussing the Paperwork Reduction Act below).
During the initial information collection, States, the District of
Columbia, and Puerto Rico will evaluate both the frequency with which
errors occurred and the amount of improper authorization for payment.
ACF will use the improper authorization for payment error rates and
amounts for each State, the District of Columbia, and Puerto Rico to
compute a national improper authorizations for payment rate and amount
that will be annually reported in the HHS' Performance and
Accountability Report (PAR) beginning with the Fiscal Year 2008 PAR.
We will use a three-year rotational cycle to measure improper
authorizations for payment in CCDF programs in the States, the District
of Columbia, and Puerto Rico. Out of this group, we have selected 18 to
measure in the first year of each cycle and 17 to measure in each of
the remaining two years. The result is that each State, the District of
Columbia, and Puerto Rico will be measured once, and only once, every
three years. This rotation allows jurisdictions to plan for the reviews
because they know in advance in which year they will be measured.
States, the District of Columbia, and Puerto Rico have been randomly
assigned using the following methodology. First, each entity was
stratified by the 10 ACF regions, with the regions randomly ordered.
Then within region each group was sorted by caseload, from the most
cases to the least cases. Every third State (including the District of
Columbia and Puerto Rico) on the list was selected, using a random
start number between one and three the first year. After removing those
selected for the first year from the frame, a second random start was
drawn between one and two and every other State (including the District
of Columbia and Puerto Rico, if they remained) was selected for the
second
[[Page 50891]]
year. The third year includes those not selected in year one or year
two. This sampling approach yielded a mix of county-administered and
State-administered programs and programs serving both large and small
numbers of children each year. A list of States (including the District
of Columbia and Puerto Rico) assigned to each review year can be found
in the information collection instructions.
D. Notice of Proposed Rulemaking
A Notice of Proposed Rulemaking (NPRM) was published in the Federal
Register on Friday, March 2, 2007 (72 FR 9491) with a 60-day public
comment period. As discussed later in this preamble, we received
comments from 19 entities, including State child care administrators,
national child care advocacy groups, and other organizations.
II. Statutory Authority
This regulation is being issued under the authority granted to the
Secretary by Section 658I of the CCDBG Act (42 U.S.C. 9858g) and in
accordance with the IPIA (31 U.S.C. 3321 note).
III. Summary of the Existing Regulations
Under CCDF regulations, ACF employs several methods to gather the
information from States, the District of Columbia, and Territories
needed to comply with the statutory requirements of the CCDBG Act and
to efficiently oversee the administration of the CCDF program. States
and Territories must submit plans every two years detailing their
intentions for implementing programs under 45 CFR 98.17. Pursuant to 45
CFR 98.70, States and Territories also must collect monthly case-level
reports (which may be submitted monthly or quarterly) and submit annual
aggregated reports on services provided through all CCDF grant funds.
Finally, States and Territories are required to submit quarterly
reports on estimates and expenditures in conjunction with 45 CFR 98.65.
45 CFR 98.65(a) requires Lead Agencies to have an audit conducted
after the close of each program period in accordance with OMB Circular
A-133 and the Single Audit Act Amendments of 1996 and 45 CFR 98.67(c)
requires Lead Agencies to have fiscal control and accounting procedures
sufficient to establish that funds have been expended appropriately.
Further, the regulations at 45 CFR 98.66 provide that ``[a]ny
expenditures not made in accordance with the Act, the implementing
regulations, or the approved Plan, will be subject to disallowance.''
However, prior to this final rule statute and regulations governing
CCDF did not require States and Territories to systematically measure
or report on errors committed in the administration of CCDF funds.
IV. Provisions of Final Rule
While retaining the provisions governing CCDF Lead Agency audits,
financial reporting requirements, and fiscal requirements (located in
45 CFR 98.65 and 45 CFR 98.67), this final rule adds a new Subpart K--
Error Rate Reporting to require CCDF Lead Agencies of the fifty States,
the District of Columbia and Puerto Rico to measure, calculate and
report error rates to the Department of Health and Human Services. This
reporting must be in accordance with an error rate methodology
established by the Secretary, as summarized in this final rule and
detailed in the associated information collection forms and
instructions. States, the District of Columbia and Puerto Rico are
required to report specified information regarding errors every three
years and to report on strategies for reducing the error rate. The rule
also requires States, the District of Columbia and Puerto Rico to set
target error rates for the next cycle. The first cohort of States
(including Puerto Rico) subject to the final regulations will need to
complete their reviews and submit their data to ACF on or before June
30, 2008.
Requirements under Subpart K apply only to the fifty States, the
District of Columbia and Puerto Rico. American Samoa, the U.S. Virgin
Islands, the Commonwealth of the Northern Mariana Islands, Guam and the
Tribes are exempted from the requirements of this rule. We do not
believe that the benefits of the error rate data obtained from these
exempted Territories and Tribes justify the costs of compliance with
the regulation, which would require a much greater portion of child
care resources relative to the States, the District of Columbia and
Puerto Rico. However, we encourage exempted Territories and Tribes to
comply voluntarily with the requirements of the rule or to create their
own methods and strategies for identifying and reducing improper
payments. Additionally, should funding and provision of services change
in these exempted Tribes and Territories, we will consider removing the
exemption through the notice and comment rulemaking process.
Under Section 98.100(b) in the final rule, States, the District of
Columbia and Puerto Rico are required to prepare a report calculating
``error rates.'' At this time--and consistent with our initial focus on
client eligibility errors--we are operationalizing these requirements
by asking States, the District of Columbia, and Puerto Rico to measure
only administrative errors in eligibility determination and improper
authorizations for payments to subsidy recipients rather than improper
payments made to subsidy recipients.
As stated in the proposed rule and detailed in the associated
information collection forms and instructions, the initial error rate
methodology includes: (1) Sample Selection: A sample of 271 (or 276)
cases will be selected by each State using a sampling frame based on
the child population served by eligibility offices for each month of
the designated Federal Fiscal Year to achieve a 90% confidence level +/
- 5%; (2) Record Review Worksheet: A template of a record review
worksheet will be customized by each State so its worksheet conforms to
the specifics of State policies and procedures. The worksheet captures
the detail for each element of eligibility, the benefit calculation as
documented by the agency, the amount of the subsidy authorized, and any
resulting errors; (3) Case Review: State reviewers will conduct case
record reviews and collect key pieces of information, including
administrative errors occurring during the review month, cause of
improper authorization for payment, total amount of improper
authorizations for payment during the review month, and total amount of
authorizations during the review month; (4) Error Measures Calculation:
States, the District of Columbia, and Puerto Rico will prepare a report
calculating percentage of cases with an error, percentage of cases with
an improper authorization for payment (expressed as the total number of
cases with an improper authorization for payment as compared to the
total number of cases), percentage of improper authorizations for
payment (expressed as the total amount of improper authorizations for
payment compared to the total dollar amount of authorizations made),
average amount of improper authorization for payment, and the estimated
annual amount of improper authorizations for payment; (5) Federal
Oversight and Monitoring, and Ongoing Technical Assistance: The Child
Care Bureau will provide ongoing oversight, monitoring, and technical
assistance.
Under CCDF regulations at 45 CFR 98.52, Lead Agencies are
prohibited from spending more than five percent of the aggregate CCDF
funds expended by the Lead Agency from each fiscal year's allotment for
administrative activities. Section 658E(c)(3)(C) of the CCDBG Act
[[Page 50892]]
(42 U.S.C. 9858c(c)(3)(C)) and the accompanying Conference Report (H.R.
Conf. Rep. 104-725) specify that the costs of providing direct services
are to be excluded from any definition of administrative costs. The
Conference Report specifically identified eligibility determination and
redetermination, reviews and supervision of child care placements and
establishment and maintenance of computerized child care information
systems as ``integral part[s] of service delivery'' that ``should not
be considered administrative costs.'' Therefore, provided the focus of
the error rate calculations and reports continue to focus on client
eligibility, costs to Lead Agencies of conducting case reviews and
preparing error rate reports shall be considered a part of service
delivery and excluded from administrative costs subject to the five
percent administrative cap. Further, any costs incurred by a Lead
Agency in complying with this regulation that are directed toward
establishing or improving child care information systems also shall be
excluded from administrative costs subject to the five percent
administrative cap.
Should an improper payment related to specific cases that were
included in the sample during the case review process be identified,
these funds are subject to existing disallowance procedures for
misspent funds as set forth at 45 CFR 98.66 of CCDF regulations.
Extrapolations of estimated improper payments derived from random
sampling of total cases are not subject to disallowance.
Pursuant to CCDF regulations at 45 CFR 98.60(i), a Lead Agency is
required to recover child care payments that are the result of fraud.
The Lead Agency has discretion as to whether to recover misspent funds
that were not the result of fraud, such as in cases of administrative
error. Improperly spent funds are subject to disallowance regardless of
whether the State pursues recovery.
In the event that improper payments identified through the case
review process are recovered, 45 CFR 98.60(g) provides that such
payments shall (1) If received by the Lead Agency during the applicable
obligation period (described in 45 CFR 98.60(d) & (e)), be used for
activities specified in the Lead Agency's approved plan and must be
obligated by the end of the obligation period; or (2) if received after
the end of the applicable obligation period, be returned to the Federal
government.
Section 658F(a) of the CCDBG Act (42 U.S.C. 9858d(a)) makes clear
that CCDF funding is not an entitlement to any child care provider or
recipient of child care services. As a result, detection of an
underpayment in any specific case during the error rate review process
does not create an entitlement to that individual to a particular
service or benefit. Nothing in this final rule should be construed to
create a right requiring the States, the District of Columbia or Puerto
Rico to remedy any individual, even if a payment error in the form of
an underpayment has been made.
A. Consultation With States, Territories and Other Organizations
The Child Care Bureau has consulted with States, the District of
Columbia and Territories since 2003 on different approaches to
addressing improper payments and has field tested an error rate
methodology in nine volunteer pilot States. Through quarterly
conference calls, workshops at annual State Administrators Meetings and
an Improper Payments survey, the Child Care Bureau has engaged States
and Territories in conversations about strategies to identify, measure,
prevent, reduce and collect improper payments. The Child Care Bureau
also has been in contact with national organizations such as the
American Public Human Services Association, the National Association
for Program Information and Performance Measurement and the United
Council on Welfare Fraud through conferences, meetings and conference
calls regarding strategies to address improper payments.
B. Discussion of Comments
In response to the proposed rule, comments were received from 19
State child care administrators, national child care advocacy groups,
and other organizations as follows.
National Error Rate Does Not Reflect Block Grant Flexibility
Comment: Several commenters questioned the practical application of
a uniform national error rate to a block grant program, given the
differences in programmatic activity that result from the flexibility
inherent in CCDF. Commenters felt it would not be appropriate to
establish a national error rate, since CCDF eligibility requirements
vary greatly across States meaning that the difficulty of achieving
accuracy in determining client eligibility varies from State to State.
Commenters recommended that the final rule be limited to review of
Federal requirements to reflect a true national error rate.
Response: We acknowledge concerns about establishing a national
error measure for the CCDF program, and understand that States differ
greatly in their eligibility requirements which may lead to a wide
range of error rates. A principle goal of CCDF set forth in Section
658A of the Child Care and Development Block Grant (CCDBG) Act of 1990,
as amended (42 U.S.C. 9858, et seq.), is to ``Allow each State maximum
flexibility in developing child care programs and policies that best
suit the needs of children and parents within such State.'' As a
result, there is significant variation in how CCDF is implemented
across the country.
However, the methodology focuses on administrative error associated
with client eligibility and improper authorizations for payment. A
principal reason for focusing on client eligibility is that, while the
methods used to determine initial and ongoing client eligibility are
not uniform across States, Territories and Tribes, all States,
Territories and Tribes must have procedures in place for parents to
apply for child care services and some system to initially determine
and periodically re-determine eligibility. Also, determining client
eligibility is the first step in the child care subsidy process and
therefore affects the administration of the entire program.
The primary purpose of this final rule is to improve State
administration of the CCDF program. We believe that the State error
measures will be useful for improving overall program integrity and
that it will help inform program administrators about which quality
control or other initiatives will be most effective in reducing error
rates and improper authorizations for payment in their own programs. At
the same time, the Improper Payments Information Act (IPIA) requires a
national-level measure of improper payments, which will provide a
broader perspective of the CCDF program as it is administered across
States.
Finally, we do not believe limiting the rule to only Federal
requirements would be useful for the purpose of identifying and
reducing improper payments. Federal law establishes broad eligibility
criteria for families receiving CCDF assistance; however, States,
Territories, and Tribes administering CCDF funds may impose more
restrictive eligibility standards. States must describe the basis for
determining family eligibility in their CCDF Plan and are responsible
for ensuring that the program complies with the approved Plan and all
Federal requirements. States are accountable for properly implementing
the eligibility policies and procedures they have in place.
[[Page 50893]]
Short Implementation Timeframe
Comment: A number of commenters expressed concerns about the short
implementation timeframe for the proposed rule. Commenters felt that
States included in the first cycle of the review process would not have
adequate lead time to secure funding from their State legislatures,
hire and train staff, prepare and enhance their automated systems, and
ensure access to archived records.
Response: The Improper Payments Information Act (IPIA) requires
Federal agencies to submit estimates of improper payments to Congress
in accordance with guidance prescribed by the Office of Management and
Budget (OMB). The timeframe included in the rule is based on the
requirement that HHS report a national improper authorizations for
payment rate and amount for the CCDF program in the HHS Performance and
Accountability Report (PAR) beginning with the Fiscal Year 2008 PAR. We
recognize that the timeframe is expedited and will present challenges
for some States. The Child Care Bureau intends to assist States by
providing significant technical assistance and training to help them
implement the error rate review process within the prescribed timeline.
Comment: Three commenters noted that under the proposed timeframe
some States will be participating simultaneously in Medicaid's Payment
Error Rate Measurement Project (PERM) and the CCDF error rate reporting
cycle. Commenters felt that concurrent operation of these projects
would create an extraordinary work burden, and asked that States not be
subject to error rate reporting by multiple Federal agencies within the
same year.
Response: States were randomly selected to participate in a three-
year rotational cycle to arrive at a valid nationally representative
improper authorizations for payment rate and amount for child care. The
sampling approach yielded a mix of county-administered and State-
administered programs and programs serving both large and small numbers
of children each year. Selectively excluding States would undermine
this methodology. The rotational cycle also allows jurisdictions to
plan for future reviews because they know in advance in which year they
will be measured.
Negative Fiscal Impact on States
Comment: Several commenters argued that the proposed rule would
have a wide range of negative fiscal and operational impacts on States
and that the additional costs of conducting the proposed activities
would compromise the amount of funding available for program services.
Response: This final rule aims to identify and reduce errors and
improper payments in the administration of CCDF funds, thus ensuring
that the program is operated as efficiently and fairly as possible.
Because States, Territories, and Tribes receive a fixed allotment of
CCDF funds regardless of the number of children served, fewer improper
payments translates into more funds for use in assisting eligible low-
income families in purchasing child care services, providing
comprehensive consumer education to parents and the public and
improving the quality and availability of child care. In addition, we
have tried to minimize the fiscal impact of conducting reviews by
limiting the frequency of reporting to every three years and by
allowing for sampling of cases as part of the review of case records.
Comment: Several commenters felt that the annual burden estimate
included in the proposed rule did not reflect the full implementation
cost of conducting the error rate review. Commenter's cited additional
travel and mailing costs, staff hiring and training, updating automated
computer systems, and costs associated with accessing hard copy records
for the review process. Commenters found the estimated cost in the NPRM
of approximately $150,000 for a single jurisdiction to conduct its case
reviews and prepare the required reports to be insufficient. One
commenter cited that travel costs alone would exceed the federally
estimated cost. Commenters estimated the full implementation cost as
ranging from 40 percent higher to as much as four times the proposed
$150,000.
Response: We agreed with these comments and have revised the annual
burden estimates for conducting the error rate case review and
preparing the three required reports in compliance with the final rule.
The cost estimate analysis was increased to reflect comments that costs
of preparation, training, programming automated systems, and other
support activities associated with the information collection forms
were underestimated in the proposed rule. States vary greatly in their
systems and personnel capacity and the burden of implementing the final
rule may disproportionately impact some States more than others. The
revised annual burden estimates account for these differences among
States and reflect average burden. However, as States implement this
methodology, we encourage all States to keep track of the burden
associated with these reporting requirements--in terms of both time and
monetary cost--and to provide us comments through the Paperwork
Reduction Act information collection process so that we can update our
estimates if necessary.
Distinction Between Improper Payments and Improper Authorizations for
Payment
Comment: Several commenters questioned the inconsistency between
the information collection forms and instructions and the regulatory
language in the proposed rule, which distinguished between improper
authorizations for payment and an actual improper payment. Commenters
noted that the forms and instructions require States to report on the
``improper authorizations for payment,'' while the definition of
``improper payment'' given in Section 98.100(d) of the rule defines
improper payment as an actual payment. Commenters noted that the broad
language of the proposed rule would allow for the imposition of more
extensive review and reporting requirements than discussed in the
preamble and included in the information collection forms and
instructions. Commenters recommended that we amend the rule to define
``improper payment'' consistently with the forms and instructions.
Response: This deviation between the rule and information
collection forms and instructions is intentional. The terms ``error''
and ``improper payment'' have purposefully been defined broadly enough
in the final rule to encompass reporting on all possible types of
errors and improper payments, and are consistent with the definitions
used in the Improper Payments Information Act (IPIA). Section 98.100
paragraph (c) defines the term ``error'' and paragraph (d) defines the
term ``improper payment.'' The important distinction between the two
terms is that every improper payment is the result of an error however,
not every error results in an improper payment. Error is defined as any
violation or misapplication of statutory, contractual, administrative,
or other legally applicable requirements governing the administration
of CCDF grant funds, regardless of whether such violations result in an
improper payment. An improper payment is defined to mean any payment of
CCDF grant funds that should not have been made or that was made in an
incorrect amount (including overpayments and underpayments) under
statutory, contractual, administrative or other legally applicable
requirements governing the administration of CCDF grant funds,
including any payment of
[[Page 50894]]
CCDF grant funds to an ineligible recipient, any payment of CCDF grant
funds for an ineligible service, any duplicate payment of CCDF grants
funds and payments of CCDF grant funds for services not received.
At this time, we are implementing this rule narrowly, collecting
data from States on improper authorizations for payment due to
administrative error in client eligibility determination because we
believe that improper authorizations for payment are closely related to
improper payments. The forms and instructions related to the regulation
deal only with these errors. (Note: More information on the forms and
instructions that accompany this regulation can be found in the
Regulatory Impact Analysis--Paperwork Reduction Act section of this
rule.)
Eligibility determination and payment authorization are the first
steps in the child care subsidy process and errors made at this stage
are likely to affect the administration of the entire program. However,
the regulatory language in the final rule provides flexibility to allow
for changing or expanding the error rate methodology if future
circumstances warrant doing so. Should we decide to revise or broaden
the examination of ``error'' and ``improper payment'' we would provide
advance notice and an opportunity for public comment through the
information collection process.
Comment: Several commenters asked that we clearly differentiate
between administrative errors and errors involving the independent
verification of eligibility and authorization data elements. Commenters
recommended that we amend the language in the proposed rule limiting
improper authorizations for payment-- ``based on an administrative
misapplication of statutory or other legally applicable requirements.''
Response: We believe that the review of administrative errors in
eligibility determination should be based on policies States have in
place. If a State has established an eligibility verification policy
that requires caseworkers to independently verify eligibility through a
phone call or otherwise, then this should be documented and supported
in the case record. The error rate record review process itself does
not require reviewers to independently verify eligibility or other
authorization data elements.
Comment: A few commenters were concerned that the initial error
rate methodology's focus on eligibility determination and authorization
for payment does not mirror administrative procedures for many States
in which clients are deemed eligible for CCDF and authorized for a
range of services and a subsidy rate, but then choose a particular
service from that range and receive actual payment based on the
appropriate applied subsidy.
Response: We acknowledge that State policies regarding eligibility
determination and subsidy payment vary in the extent to which they are
interrelated. As long as the client's eligibility and authorization for
payment is correctly determined there is no error. If the authorized
payment range properly reflects the client's eligibility status and
need for care there is no improper authorization for payment. The
initial error rate methodology is focused on client eligibility, and
authorization to receive a subsidy is indicative of whether the
eligibility determination process was properly conducted. Further, we
received comments from a number of States indicating that their
administrative procedures do align with the error rate methodology.
These commenters said that there was not a distinction between an
authorization for payment and actual payment in their processing of
claims for service, and thus there would be little additional value to
expanding the measurement of improper payments beyond improper
authorizations for payment.
Multiple and Combined Funding Sources for Child Care
Comment: Several commenters requested that the proposed rule apply
only to those cases reported on the ACF-801 reporting form to define
the sample population as only those cases paid for with CCDF and pooled
funds. Commenters were concerned that purely State-funded child care
services also would be accountable to the proposed rule.
Response: This final rule applies to all child care cases served
with CCDF grant funds, including Federal Discretionary Funds (which
includes any funds transferred from the Temporary Assistance for Needy
Families Block Grant), Mandatory and Matching Funds and State Matching
and Maintenance-of-Effort (MOE) Funds. In States that cannot separately
report on cases served with CCDF funds only, the rule applies to cases
served by all child care funds pooled with CCDF. For many States, this
will correspond to those cases reported on the ACF-801 reporting form.
Comment: One commenter suggested that we allow States that pool
CCDF and non-CCDF funds to use the percentage of total CCDF
expenditures to calculate an estimated amount of CCDF funds used to
provide child care subsidies impacted in the sample.
Response: We recognize that many States do not serve children
exclusively with CCDF funds. Many States combine CCDF and non-CCDF
funds to serve the child care needs of their State--referred to as
``pooling'' funds--and may be unable to isolate those cases served only
by CCDF funds. We have modified the information collection forms and
instructions to allow States that pool child care funds (and
correspondingly draw their sample for the error rate review from the
universe of cases served by these combined funds) to multiply the total
pooled child care funds by a percentage that reflects the proportion of
these funds that are CCDF funds (also referred to as a ``pooling
factor'') when calculating the total estimated amount of annual
improper authorizations for payment. This will more accurately reflect
the amount of improperly spent CCDF funds in those States that combine
CCDF with non-CCDF funds to provide child care services.
Anticipated Problems With Sampling Methodology and Record Review
Comment: Some commenters thought that the proposed sampling frame
would be a burden for States with smaller caseloads and suggested the
sample size be determined based on the universe of cases in a
particular State.
Response: Under Sec. 98.101, Case Review Methodology, the error
reports required by this final rule must be based on comprehensive
reviews of case records conducted in accordance with the methodology
detailed in this final rule and associated information collection forms
and instructions. In determining which case records to review, States,
the District of Columbia, and Puerto Rico must select a random sample
of 271 (or 276) child records to achieve the calculation of an
estimated annual amount of improper authorizations for payment with a
90 percent confidence interval of +/-5.0 percent. We believe this
sampling frame will achieve statistically valid data with the desired
confidence levels. Sampling the same number of cases, regardless of
caseload size, standardizes the methodology across States and reflects
accepted practice for achieving the required precision.
Comment: Several commenters opposed the requirement to draw the
sample of cases from 12 monthly sampling frames and suggested that
States be allowed to choose a particular month from which to draw the
sample for the error rate review.
Response: We believe the sampling methodology included in the rule
[[Page 50895]]
reduces the risk of bias in annual estimates associated with selection
of the sample in particular months and accounts for variation that may
occur throughout the year. If States were to review less than twelve
months for the sampling frame, the resulting error rate would not be
representative of the entire year.
Comment: A few commenters pointed out that some States do not have
statewide data systems, particularly States that are county-
administered, or do not have a system advanced enough to support the
sampling methodology in the proposed rule. Commenters recommended that
States be given flexibility to define the case review process based on
the availability of data and case file information systems that exist
in each State.
Response: A standard sampling methodology is necessary to ensure
integrity and promote uniformity across States--particularly since
State results will be used to calculate a national measure for improper
payments. We understand automated systems capacity varies across States
and that some States may have more difficulty in obtaining their sample
and associated case records. For this reason we have increased the
burden estimate associated with the information collection forms to
reflect additional costs faced by States to implement the sampling
methodology.
Comment: A number of commenters thought that accessing hard copy
case records to conduct the record review process would require State
staff to travel long distances in order to pick-up and/or review
records or would require the case records to be mailed to the review
location and require substantial postal costs. Commenters felt that
there should be consideration in the proposed rule allowing for
incomplete reviews due to inability to locate case records.
Response: We recognize that States have different recordkeeping
procedures and may face additional costs to locate records for the
review. As previously stated, we have tried to build these costs into
the revised annual burden estimate in the final rule. The sampling
process requires States to select at least three alternate replacement
cases that can be used in the event a case cannot be reviewed for some
valid reason.
Comment: Several commenters were unclear about the unit of
measurement for drawing the sample. Section 98.101(a) of the proposed
rule refers to both ``case records'' and ``child records.'' Commenters
recommended the rule and information collection forms and instructions
allow States flexibility to define the term ``case'' to be a child or a
family.
Response: For initial implementation of the error rate methodology
we intend for the error rate review to apply to child records and this
is stated in the information collection forms and instructions. States
do not have the flexibility to determine whether the case record should
be based on the child or the family. However, consistent with the
broader intent of the final rule, the regulatory language at 98.101(a)
continues to use the more inclusive term ``case record'' to allow for
future adjustments of the error rate methodology. The reference to
``child record'' also included at 98.101(a) has been changed to ``case
record'' to eliminate any confusion.
Disallowance and Recovery of Funds
Comment: Many commenters did not understand the reference to
disallowed funds in the proposed rule, given that the preamble and the
information collection forms and instructions clearly stated the focus
of the review to be on improper authorizations for payment. Commenters
were further concerned that interest would be owed to the Federal
government on disallowances. Commenters thought that as long as the
case review is limited to improper authorizations for payment it would
be incorrect to assume that an improper payment in the amount of the
authorization resulted, meaning States would be unjustifiably
penalized.
Response: In order for child care subsidies to be received by
eligible recipients, States need to accurately authorize payment for
child care services. It is our assumption that an improper
authorization for payment will result in an improper payment which will
be subject to a disallowance. However, if a State can demonstrate that
an authorized improper payment was not actually made, that dollar
amount would not be disallowed. Any actual improper payments related to
specific cases in the sample are subject to disallowance in accordance
with procedures set forth in 45 CFR 98.66 of the CCDF regulations.
Section 98.66(3)(j) states that disallowances are subject to interest
from the date of notification of the disallowance. When an improper
authorization for payment is identified during the case record review
process, the ACF regional office will work with the State to determine
if an improper payment was made and the amount of the disallowance, if
appropriate, using its customary procedures.
Comment: A few commenters pointed out that if the proposed error
rate reporting cycle concludes after the grant year for which an
obligation is paid to a recipient, States that recover payments may be
acting after the obligation period, and thus must return the money to
the Federal government. Commenters recommended that any payments
recouped through the proposed rule be committed to program reinvestment
and error rate reduction efforts.
Response: Pursuant to CCDF regulations at 45 CFR 98.60(i), a Lead
Agency is required to recover child care payments that are the result
of fraud. The Lead Agency has discretion as to whether to recover
misspent funds that were not the result of fraud, such as in cases of
administrative error. Improperly spent funds are subject to
disallowance regardless of whether the State pursues recovery.
In the event that improper payments identified through the case
review process are recovered, 45 CFR 98.60(g) provides that such
payments shall (1) If received by the Lead Agency during the applicable
obligation period (described in 45 CFR 98.60(d) & (e)), be used for
activities specified in the Lead Agency's approved plan and must be
obligated by the end of the obligation period; or (2) if received after
the end of the applicable obligation period, be returned to the Federal
government.
States may act to recover improper payments as soon as they are
identified and need not wait until the end of the Federal error rate
reporting cycle.
We do not have statutory authority to waive requirements related to
funds that are recovered by Lead Agencies or mandated obligation and
liquidation periods.
Penalties or Incentives Associated With Error Rates
Comment: Two commenters asked whether a State would be penalized if
a certain error rate is found or if incentives would be offered for
high performing States.
Response: While States are subject to disallowances for any
identified improper payments (as they would be for any expenditures not
made in accordance with CCDF regulations or the approved Plan
identified outside of the error rate review process), there will not be
penalties or incentives based on State error rates. We view the State
error rate to be primarily useful for the States to inform quality
control initiatives and improve program integrity. An incentive for
States to decrease error rates and improper authorizations for payment
is the increased availability of funds to serve CCDF eligible families.
[[Page 50896]]
Rule Undermines Existing State Efforts
Comment: Two commenters believed the focus in the proposed rule on
client eligibility determination would be counterproductive for States
that have existing strategies with proven results in reducing improper
payments. Commenters felt the proposed rule might decrease focus in
some States on errors in CCDF provider payments.
Response: We support existing State efforts to reduce improper
payments and improve program integrity. States should continue to look
at all aspects and areas in which there is risk for an improper payment
to be made. We recognize that States are at different places in terms
of approaches and initiatives to address program integrity. A section
in the CCDF State Plan Pre-Print gives States an opportunity to provide
descriptions and information related to these initiatives. We look
forward to working with States to ensure that this final rule will
complement, not supersede or complicate, existing State efforts.
Comment: A number of commenters thought that establishing a State
baseline error rate and setting future target rates does not recognize
the present actions of States to limit their exposure to incorrect
eligibility authorizations. Commenters thought that States with more
stringent standards for reducing administrative errors in client
eligibility determination may be given an incentive to reduce their
current efforts in order to establish more feasible future target
rates.
Response: Section 98.102 of the final rule, Content of Error Rate
Reports, addresses submission of baseline reports and standard reports.
Under paragraph (a), in the initial cycle, States, the District of
Columbia and Puerto Rico are required to submit a baseline report
listing baseline error rate information and targets for the next cycle,
as well as information about causes of, and strategies to address,
error and information about their information technology systems. Under
proposed paragraph (b), in subsequent cycles, States, the District of
Columbia and Puerto Rico must submit a standard report that, in
addition to updating the information provided in the baseline report,
enables States, the District of Columbia and Puerto Rico to examine
their ability to meet previously submitted targets, set future targets,
and describe strategies to reduce their error rates.
Establishing a baseline error rate and setting future target rates
is essential for measuring progress and improvement over time. Each
State will have the ability to set its future targets based on their
specific circumstances, including prior efforts to control improper
payments. Additionally, the reported State error and improper
authorizations for payment rates are not tied to any penalties. The
State baseline and target setting should be used to inform existing
prevention efforts and improve or validate their effectiveness.
We have deleted the parenthetical language at Section 98.102(a)(6)
stating that targets for errors and improper payments must be lower
than the most recent estimated error rates. We made this change
recognizing that it is possible for a State to achieve a zero error
rate thereby making the requirement obsolete.
We continue to expect States to set ambitious targets for reducing
improper payments for each reporting cycle. As is described in the
accompanying forms and instructions, State targets should anticipate
continuous improvement. We intend this rule to be written broadly to
accommodate any future efforts to revise or change the error rate
reporting methodology. We believe it is more practical to add guidance
on setting future target rates to the information collection forms and
instructions rather than include it in the regulatory language.
Combining Overauthorizations and Underauthorizations
Comment: One commenter noted that the proposed rule requires States
to report a combined ``improper authorizations'' figure that sums
overauthorizations and underauthorizations together. The commenter
thought that reporting only a combined figure could be misleading and
mask the underlying source of the error. The commenter recommended that
we require States to report separate figures for overauthorizations and
underauthorizations along with a combined figure, and clarify in the
instructions what amount of actual improper payments States are to base
an anticipated recovery amount on.
Response: We agree with the comment and have changed the
information collection forms and instructions to require States to
separately report overauthorizations, underauthorizations, and the
total combined figure. We also have clarified that States should base
their expected recovery amounts on overauthorization amounts only.
Allowing a Threshold for Improper Authorizations
Comment: One commenter argued that factors affecting authorized
payment levels could fluctuate from month to month, and States have
discretion to determine the magnitude of changes that must be reported
and applied in calculating CCDF benefits. The commenter felt that,
similarly, small fluctuations in a clients' financial status should not
be considered in the calculation of the number and percentage of cases
with an improper authorization for payment. The commenter recommended
clarifying the regulation to stipulate that changes in circumstances
that do not need to be reported by clients will not be counted against
the States as administrative errors.
Response: The initial methodology for the error rate review process
is developed according to State-established policies and procedures in
place to determine client eligibility for CCDF and to authorize
payments. The process examines administrative error based on
information in the case record that is available to the State. If a
State does not require a client to report small changes in financial
status this would not violate State policy and it would not be
considered an error or improper authorization for payment, provided
that the small change in financial status did not result in a violation
of Federal income requirements, which cannot be waived.
C. Changes Made in Final Rule
As discussed above, three technical changes are made to the final
rule in response to public comment. First, the annual burden estimate
associated with the accompanying information collection forms and
instructions has been increased to reflect public comments regarding
additional costs of the error rate reporting review associated with
staff, travel, accessing records, and automated systems. Secondly, the
word ``child''after Sec. 98.101(a) has been replaced with the word
``case''to provide consistency in the terms used to refer to
``record''in the regulation. Lastly, we have deleted the parenthetical
language at Section 98.102(a)(6) stating that targets for errors and
improper payments must be lower then the most recent estimated error
rates. We intend this rule to be written broadly and believe it is more
practical to add guidance on setting future target rates to the
information collection forms and instructions rather than include it in
the rule itself.
V. Regulatory Impact Analyses
A. Executive Order 12866
Executive Order 12866 requires that regulations be drafted to
ensure that
[[Page 50897]]
they are consistent with the priorities and principles set forth in
Executive Order 12866. The Department has determined that this final
rule is consistent with these priorities and principles.
Executive Order 12866 encourages agencies, as appropriate, to
provide the public with meaningful participation in the regulatory
process. As described earlier, the Child Care Bureau has consulted with
States, the District of Columbia, and Territories on numerous occasions
since 2003 concerning different approaches to addressing improper
payments and has field tested an error rate methodology in nine
volunteer pilot States. Specifically, through quarterly conference
calls, workshops at annual State Administrators Meetings and an
Improper Payments survey, the Child Care Bureau has engaged States and
Territories in conversations about strategies to identify, measure,
prevent, reduce and collect improper payments. The Child Care Bureau
also has been in contact with national organizations such as the
American Public Human Services Association, the National Association
for Program Information and Performance Measurement and the United
Council on Welfare Fraud through conferences, meetings and conference
calls regarding strategies to address improper payments. In addition,
we have provided a 60-day public comment period and have responded to
comments in this final rule.
This rule is considered a ``significant regulatory action'' as
defined under Executive Order 12866 and therefore has been reviewed by
the Office of Management and Budget. Specifically, the rule raises
``novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order.''
B. Regulatory Flexibility Analysis
The Regulatory Flexibility Act (RFA) (5 U.S.C. Ch. 6) requires the
Federal government to anticipate and reduce the impact of rules and
paperwork requirements on small businesses and other small entities.
Small entities are defined in the RFA to include small businesses,
small non-profit organizations and small governmental entities. This
rule will affect only the 50 States, the District of Columbia and
Puerto Rico. Therefore, the Secretary certifies that this rule will not
have a significant impact on small entities.
C. Assessment of the Impact on Family Well-Being
We certify that we have made an assessment of this final rule's
impact on the well-being of families, as required under Section 654 of
the Treasury and General Appropriations Act of 1999. This final rule
aims to identify and reduce errors in the administration of CCDF funds,
thus ensuring that the program is operated as efficiently and fairly as
possible. Because States receive a fixed allotment of CCDF funds
regardless of the number of children served, fewer improper payments
translates into more funds for use in assisting low-income families in
purchasing child care services, providing comprehensive consumer
education to parents and the public and improving the quality and
availability of child care.
D. Paperwork Reduction Act
The final rule requires States, the District of Columbia and Puerto
Rico to compile information regarding errors made in the administration
of CCDF funds using an error rate methodology established by the
Secretary and detailed in this rule and information collection forms
and instructions. Towards this end, this rule will require States, the
District of Columbia and Puerto Rico to submit reports to the
Department on their findings.
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR
1320) requires that the Office of Management and Budget (OMB) approve
all collections of information by a Federal agency from the public
before they can be implemented. Respondents are not required to respond
to any collection of information unless it displays a current valid OMB
control number.
The information collections in this rule, described below, are
being reviewed by OMB and will not be effective until they have
received OMB approval. Once they have received OMB approval, ACF will
publish a notice in the Federal Register and make them available on the
Child Care Bureau's Web page on Addressing Improper Payments at: http://www.acf.hhs.gov/programs/ccb/ccdf/ipi/ipi.htm
.
Title: Child Care and Development Fund: Error Rate Report for
States, the District of Columbia and Puerto Rico.
Description: States, the District of Columbia and Puerto Rico must
prepare and submit to the Department reports of errors occurring in the
administration of CCDF grant funds. They will be required to report the
percentage of cases with an error; the percentage of cases with an
improper authorization for payment; the percentage of improper
authorizations for payment; the average improper authorization for
payment amount; and the estimated annual amount of improper
authorizations for payment. The report also will provide strategies for
reducing the error rates and allow States, the District of Columbia and
Puerto Rico to set target error rates for the next cycle.
Respondents: The fifty States, the District of Columbia and Puerto
Rico.
Changes in Estimate of Burden
The annual burden in the proposed rule was estimated to be $150,000
per respondent. This estimate included the cost of drawing the sample
of cases from 12 monthly sampling frames, training staff, conducting
record reviews, compiling data, calculating error rates and preparing
the final report. In estimating burden, we used information based on
the error rate pilots and an estimation of the amount of time and cost
required to complete various tasks associated with each of the three
reporting forms: (1) The Record Review Worksheet, (2) the Data Entry
Form, and (3) the State Improper Authorizations for Payment Report. In
response to public comments, we have recalculated the burden estimate
associated with each of these forms. The final rule increases the total
cost estimate for case reviews and preparing the required reports to
approximately $180,000 per respondent.
In the proposed rule the total burden hours associated with the
Record Review Worksheet included sampling, preparation and training,
and record review. We have increased the burden associated with the
preparation and training component of this estimate to account for
additional costs of mailing hard copy records, traveling to sites where
records are maintained, or costs to enhance automated systems to access
case records. Additionally, we have increased the burden associated
with the record review component for completion of the Record Review
Worksheet. Based on public comment we felt the original estimate did
not adequately reflect the burden of implementing quality control
activities associated with completion of this form.
In the proposed rule, the burden hours associated with the Data
Entry Form primarily included the costs of consolidating information.
The burden estimate associated with this form has been increased to
account for public comment regarding costs of writing computer programs
and making enhancements to automated systems to consolidate large
quantities of data,
[[Page 50898]]
which were not considered in the original estimate.
Finally, in the proposed rule the burden hours associated with the
State Improper Authorizations for Payment Report included the
calculation of the findings and discussion of findings and report
preparation. The burden estimate for completion of these two tasks
associated with this form was not changed. However, we have added an
additional component necessary for completion of this report, which was
not previously considered. This component is the calculation of the
total amount of authorizations for payment during the review period
needed to compute the final error measure. The burden hours associated
with completion of this report increased with the addition of this
task.
The original burden estimate in the proposed rule did not account
for States in which aggregate information on total amount of authorized
payments was not readily available. Obtaining aggregate authorizations
for payment information increases burden for States in which normal
reporting requirements involve aggregate payments or total
expenditures, not authorizations for payment. These States will
experience increased burden for completion of this report if they are
to generate the total for calculation of the required error measure.
While it is important to account for the additional burden associated
with this task, we continue to believe that reviewing authorizations
for payment, rather than actual payments, is less burdensome for States
when reviewing individual case records. We believe the benefits of
focusing the individual record reviews on authorizations for payments
outweighs any additional costs we have added here for completing the
aggregated State Improper Authorizations for Payment Report. However,
we encourage all States to keep track of the burden associated with
these reporting requirements--in terms of both time and monetary cost--
and to provide us comments through the Paperwork Reduction Act
information collection process so that we can accurately account for
the burden and more precisely determine the benefits and costs of these
requirements.
Recalculated Annual Burden Estimates for Final Rule
----------------------------------------------------------------------------------------------------------------
Average burden hours per Total burden hours
Number of Yearly submittal -------------------------
Instrument or requirement respondents* submittals --------------------------
NPRM Final rule NPRM Final rule
----------------------------------------------------------------------------------------------------------------
Record Review Worksheet..... 17.33 **271 13.74 15.43 64,562 72,478
Data Entry Form............. 17.33 **271 .14 .17 652 815
State Improper Payments 17.33 1 367 627 6360 10,864
Report.....................
-----------------------------------------------------------------------------------
Estimated Total Annual .............. .............. ........... ........... 71,574 84,157
Burden Hours...........
----------------------------------------------------------------------------------------------------------------
* States, the District of Columbia and Puerto Rico will compile and submit error rate reports in staggered three-
year cycles.
** These burden estimates are based on a review of 271 cases, which is estimated to be the amount needed to meet
the sampling requirements of the rule.
E. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that a covered agency prepare a budgetary impact statement
before promulgating a rule that includes any Federal mandate that may
result in the expenditure by State, local and tribal governments, in
the aggregate, or by the private sector, of $100 million or more in any
one year.
The total annual cost burden of having 17.33 respondents, the
average number required in any year, to conduct error rate case reviews
and prepare the required reports would be approximately $3.1 million.
Thus, this final rule will not result in the expenditure by State,
territorial, local and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year.
F. Congressional Review
This final rule is not a major rule as defined in 5 U.S.C. 804.
G. Executive Order 13132
Executive Order 13132 guarantees ``the division of governmental
responsibilities between the national government and the States that
was intended by the Framers of the Constitution, to ensure that the
principles of federalism established by the Framers guide the executive
departments and agencies in the formulation and implementation of
policies, and to further the policies of the Unfunded Mandates Reform
Act.''
The Secretary certifies that this final rule does not have a
substantial direct effect on States, on the relationship between the
Federal government and the States, or on the distribution of power and
responsibilities among the various levels of government. This final
rule does not preempt State law and does not impose unfunded mandates.
This final rule does not contain regulatory policies with
federalism implications that would require specific consultations with
State or local elected officials.
List of Subjects in 45 Part 98
Administrative practice and procedure, Day care, Grant programs,
Reporting and recordkeeping requirements.
(Catalogue of Federal Domestic Assistance Programs: 93.575, Child
Care and Development Block Grant; 93.596, Child Care Mandatory and
Matching Funds)
Dated: June 22, 2007.
Daniel C. Schneider,
Acting Assistant Secretary for Children and Families.
Approved: July 19, 2007.
Michael O. Leavitt,
Secretary, Department of Health and Human Services.
0
For the reasons set forth in the preamble, the Administration for
Children and Families amends part 98 of title 45 of the Code of Federal
Regulations as follows:
PART 98--CHILD CARE AND DEVELOPMENT FUND
0
1. The authority for part 98 continues to read:
Authority: 42 U.S.C. 618, 9858.
0
2. Amend 45 CFR part 98 to add Subpart K to read as follows:
Subpart K--Error Rate Reporting
Sec.
98.100 Error Rate Report.
98.101 Case Review Methodology.
98.102 Content of Error Rate Reports.
[[Page 50899]]
Subpart K--Error Rate Reporting
Sec. 98.100 Error Rate Report.
(a) Applicability--The requirements of this subpart apply to the
fifty States, the District of Columbia and Puerto Rico.
(b) Generally--States, the District of Columbia and Puerto Rico
shall calculate, prepare and submit to the Department, a report of
errors occurring in the administration of CCDF grant funds, at times
and in a manner specified by the Secretary in instructions. States, the
District of Columbia and Puerto Rico must use this report to calculate
their error rates, which is defined as the percentage of cases with an
error (expressed as the total number of cases with an error compared to
the total number of cases); the percentage of cases with an improper
payment (expressed as the total number of cases with an improper
payment compared to the total number of cases); the percentage of
improper payments (expressed as the total amount of improper payments
in the sample compared to the total dollar amount of payments made in
the sample); the average amount of improper payment; and the estimated
annual amount of improper payments. The report also will provide
strategies for reducing their error rates and allow States, the
District of Columbia and Puerto Rico to set target error rates for the
next cycle.
(c) Error Defined--For purposes of this subpart, an ``error'' shall
mean any violation or misapplication of statutory, contractual,
administrative, or other legally applicable requirements governing the
administration of CCDF grant funds, regardless of whether such
violation results in an improper payment.
(d) Improper Payment Defined--For purposes of this subpart,
``improper payment.''
(1) Means any payment of CCDF grant funds that should not have been
made or that was made in an incorrect amount (including overpayments
and underpayments) under statutory, contractual, administrative, or
other legally applicable requirements governing the administration of
CCDF grant funds; and
(2) Includes any payment of CCDF grant funds to an ineligible
recipient, any payment of CCDF grant funds for an ineligible service,
any duplicate payment of CCDF grant funds and payments of CCDF grant
funds for services not received.
(e) Costs of Preparing the Error Rate Report--Provided the error
rate calculations and reports focus on client eligibility, expenses
incurred by the States, the District of Columbia and Puerto Rico in
complying with this rule, including preparation of required reports,
shall be considered a cost of direct service related to eligibility
determination and therefore is not subject to the five percent
limitation on CCDF administrative costs pursuant to Section 98.52(a).
Sec. 98.101 Case Review Methodology.
(a) Case Reviews and Sampling--In preparing the error reports
required by this subpart, States, the District of Columbia and Puerto
Rico shall conduct comprehensive reviews of case records using a
methodology established by the Secretary. For purposes of the case
reviews, States, the District of Columbia and Puerto Rico shall select
a random sample of case records which is estimated to achieve the
calculation of an estimated annual amount of improper payments with a
90 percent confidence interval of +/-5.0 percent.
(b) Methodology and Forms--States, the District of Columbia and
Puerto Rico must prepare and submit forms issued by the Secretary,
following the accompanying instructions setting forth the methodology
to be used in conducting case reviews and calculating the error rates.
(c) Reporting Frequency and Cycle--States, the District of Columbia
and Puerto Rico shall conduct case reviews and submit error rate
reports to the Department according to a staggered three-year cycle
established by the Secretary such that each State, the District of
Columbia, and Puerto Rico will be selected once, and only once, in
every three years.
(d) Access to Federal Staff--States, the District of Columbia and
Puerto Rico must provide access to Federal staff to participate and
provide oversight in case reviews and error rate calculations,
including access to forms related to determining error rates.
(e) Record Retention--Records pertinent to the case reviews and
submission of error rate reports shall be retained for a period of five
years from the date of submission of the applicable error rate report
or, if the error rate report was revised, from the date of submission
of the revision. Records must be made available to Federal staff upon
request.
Sec. 98.102 Content of Error Rate Reports.
(a) Baseline Submission Report--At a minimum, States, the District
of Columbia and Puerto Rico shall submit an initial error rate report
to the Department, as required in Sec. 98.100, which includes the
following information on errors and resulting improper payments
occurring in the administration of CCDF grant funds, including Federal
Discretionary Funds (which includes any funds transferred from the TANF
Block Grant), Mandatory and Matching Funds and State Matching and
Maintenance-of-Effort (MOE Funds):
(1) Percentage of cases with an error (regardless of whether such
error resulted in an over or under payment), expressed as the total
number of cases in the sample with an error compared to the total
number of cases in the sample;
(2) Percentage of cases with an improper payment (both over and
under payments), expressed as the total number of cases in the sample
with an improper payment compared to the total number of cases in the
sample;
(3) Percentage of improper payments (both over and under payments),
expressed as the total dollar amount of improper payments in the sample
compared to the total dollar amount of payments made in the sample;
(4) Average amount of improper payments (gross over and under
payments, divided by the total number of cases in the sample that had
an improper payment (both over and under payments));
(5) Estimated annual amount of improper payments (which is a
projection of the results from the sample to the universe of cases
statewide during the 12-month review period) calculated by multiplying
the percentage of improper payments by the total dollar amount of child
care payments that the State, the District of Columbia or Puerto Rico
paid during the 12-month review period
(6) For each category of data listed above, targets for errors and
improper payments in the next reporting cycle;
(7) Summary of methodology used to arrive at estimate, including
fieldwork preparation, sample generation, record review and error rate
computation processes;
(8) Discussion of the causes of improper payments identified and
actions that will be taken to correct those causes in order to reduce
the error rates;
(9) Description of the information systems and other infrastructure
that assist the State, the District of Columbia and Puerto Rico in
identifying and reducing improper payments, or if the State, the
District of Columbia or Puerto Rico does not have these tools, a
description of actions that will be taken to acquire the necessary
information systems and other infrastructure; and
(10) Such other information as specified by the Secretary.
[[Page 50900]]
(b) Standard Report--At a minimum, the State, the District of
Columbia and Puerto Rico shall submit an error rate report to the
Department, as required in Sec. 98.100, made subsequent to the
baseline submission report as set forth in Sec. 98.102(a) which
includes the following information on errors and resulting improper
payments occurring in the administration of CCDF grant funds, including
Federal Discretionary Funds (which includes any funds transferred from
the TANF Block Grant), Mandatory and Matching Funds and State Matching
and Maintenance-of-Effort (MOE Funds):
(1) All the information reported in the baseline submission, as set
forth in Sec. 98.102(a), updated for the current cycle;
(2) For each category of data listed in Sec. 98.102(a)(1) through
(5), States, the District of Columbia and Puerto Rico must include data
and targets from the prior cycle in addition to data from the current
cycle and targets for the next cycle;
(3) Description of whether the State, the District of Columbia or
Puerto Rico met error rate targets set in the prior cycle and, if not,
an explanation of why not;
(4) Discussion of the causes of improper payments identified in the
prior cycle and actions that were taken to correct those causes, in
addition to a discussion on the causes of improper payments identified
in the current cycle and actions that will be taken to correct those
causes in order to reduce the error rates; and
(5) Such other information as specified by the Secretary.
[FR Doc. 07-4308 Filed 8-29-07; 3:01 pm]
BILLING CODE 4184-01-P