[Code of Federal Regulations]
[Title 45, Volume 4]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 45CFR1355.36]

[Page 326-328]
 
                        TITLE 45--PUBLIC WELFARE
 
CHAPTER XIII--OFFICE OF HUMAN DEVELOPMENT SERVICES, DEPARTMENT OF HEALTH 
                           AND HUMAN SERVICES
 
PART 1355--GENERAL--Table of Contents
 
Sec. 1355.36  Withholding Federal funds due to failure to achieve substantial conformity or failure to successfully complete a program improvement plan.

    (a) For the purposes of this section:
    (1) The term ``title IV-B funds'' refers to the State's combined 
allocation of title IV-B subpart 1 and subpart 2 funds; and
    (2) The term ``title IV-E funds'' refers to the State's 
reimbursement for administrative costs for the foster care program under 
title IV-E.
    (b) Determination of the amount of Federal funds to be withheld. ACF 
will determine the amount of the State title IV-B and IV-E funds to be 
withheld due to a finding that the State is not operating in substantial 
conformity, as follows:
    (1) A State will have the opportunity to develop and complete a 
program improvement plan prior to any withholding of funds.
    (2) Title IV-B and IV-E funds will not be withheld from a State if 
the determination of nonconformity was caused by the State's correct use 
of formal written statements of Federal law or policy provided the State 
by DHHS.
    (3) A portion of the State's title IV-B and IV-E funds will be 
withheld by ACF for the year under review and for each succeeding year 
until the State either successfully completes a program improvement plan 
or is found to be operating in substantial conformity.
    (4) The amount of title IV-B and title IV-E funds subject to 
withholding due to a determination that a State is not operating in 
substantial conformity is based on a pool of funds defined as follows:
    (i) The State's allotment of title IV-B funds for each of the years 
to which the withholding applies; and
    (ii) An amount equivalent to 10 percent of the State's Federal 
claims for title IV-E foster care administrative costs for each of the 
years to which withholding applies;
    (5) The amount of funds to be withheld from the pool in paragraph 
(b)(4) of this section will be computed as follows:
    (i) Except as provided for in paragraphs (b)(7) and (b)(8) of this 
section, an amount equivalent to one percent of the funds described in 
paragraph (b)(4) of this section for each of the years to which 
withholding applies will be withheld for each of the seven outcomes 
listed in Sec. 1355.34(b)(1) of this part that is determined not to be 
in substantial conformity; and
    (ii) Except as provided for in paragraphs (b)(7) and (b)(8) of this 
section, an amount equivalent to one percent of the funds described in 
paragraph (b)(4) of this section for each of the years to which 
withholding applies will be withheld for each of the seven systemic 
factors listed in Sec. 1355.34(c) of this part that is determined not to 
be in substantial conformity.
    (6) Except as provided for in paragraphs (b)(7), (b)(8), and (e)(4) 
of this section, in the event the State is determined to be in 
nonconformity on each of the seven outcomes and each of the seven 
systemic factors subject to review, the maximum amount of title IV-B and 
title IV-E funds to be withheld due to the State's failure to comply is 
14 percent per year of the funds described in paragraph (b)(4) of this 
section for each year.

[[Page 327]]

    (7) States determined not to be in substantial conformity that fail 
to correct the areas of nonconformity through the successful completion 
of a program improvement plan, and are determined to be in nonconformity 
on the second full review following the first full review in which a 
determination of nonconformity was made will be subject to increased 
withholding as follows:
    (i) The amount of funds described in paragraph (b)(5) of this 
section will increase to two percent for each of the seven outcomes and 
each of the seven systemic factors that continues in nonconformity since 
the immediately preceding child and family services review;
    (ii) The increased withholding of funds for areas of continuous 
nonconformity is subject to the provisions of paragraphs (c), (d), and 
(e) of this section;
    (iii) The maximum amount of title IV-B and title IV-E funds to be 
withheld due to the State's failure to comply on the second full review 
following the first full review in which the determination of 
nonconformity was made is 28 percent of the funds described in paragraph 
(b)(4) of this section for each year to which the withholding of funds 
applies.
    (8) States determined not to be in substantial conformity that fail 
to correct the areas of nonconformity through the successful completion 
of a program improvement plan, and are determined to be in nonconformity 
on the third and any subsequent full reviews following the first full 
review in which a determination of nonconformity was made will be 
subject to increased withholding as follows:
    (i) The amount of funds described in paragraph (b)(5) of this 
section will increase to three percent for each of the seven outcomes 
and each of the seven systemic factors that continues in nonconformity 
since the immediately preceding child and family services review;
    (ii) The increased withholding of funds for areas of continuous 
nonconformity is subject to the provisions of paragraphs (c), (d), and 
(e) of this section;
    (iii) The maximum amount of title IV-B and title IV-E funds to be 
withheld due to the State's failure to comply on the third and any 
subsequent full reviews following the first full review in which the 
determination of nonconformity was made is 42 percent of the funds 
described in paragraph (b)(4) of this section for each year to which the 
withholding of funds applies.
    (c) Suspension of withholding.
    (1) For States determined not to be operating in substantial 
conformity, ACF will suspend the withholding of the State title IV-B and 
title IV-E funds during the time that a program improvement plan is in 
effect, provided that:
    (i) The program improvement plan conforms to the provisions of 
Sec. 1355.35 of this part; and
    (ii) The State is actively implementing the provisions of the 
program improvement plan.
    (2) Suspension of the withholding of funds is limited to three years 
following each review, or the amount of time approved for implementation 
of the program improvement plan, whichever is less.
    (d) Terminating the withholding of funds. For States determined not 
to be in substantial conformity, ACF will terminate the withholding of 
the State's title IV-B and title IV-E funds related to the nonconformity 
upon determination by the State and ACF that the State has achieved 
substantial conformity or has successfully completed a program 
improvement plan. ACF will rescind the withholding of the portion of 
title IV-B and title IV-E funds related to specific goals or action 
steps as of the date at the end of the quarter in which they were 
determined to have been achieved.
    (e) Withholding of funds.
    (1) States determined not to be in substantial conformity that fail 
to successfully complete a program improvement plan will be notified by 
ACF of this final determination of nonconformity in writing within 10 
business days after the relevant completion date specified in the plan, 
and advised of the amount of title IV-B and title IV-E funds which are 
to be withheld.
    (2) Title IV-B and title IV-E funds will be withheld based on the 
following:

[[Page 328]]

    (i) If the State fails to submit status reports in accordance with 
Sec. 1355.35(d)(4), or if such reports indicate that the State is not 
making satisfactory progress toward achieving goals or actions steps, 
funds will be withheld at that time for a period beginning October 1 of 
the fiscal year for which the determination of nonconformity was made 
and ending on the specified completion date for the affected goal or 
action step.
    (ii) Funds related to goals and action steps that have not been 
achieved by the specified completion date will be withheld at that time 
for a period beginning October 1 of the fiscal year for which the 
determination of nonconformity was made and ending on the completion 
date of the affected goal or action step; and
    (iii) The withholding of funds commensurate with the level of 
nonconformity at the end of the program improvement plan will begin at 
the latest completion date specified in the program improvement plan and 
will continue until a subsequent full review determines the State to be 
in substantial conformity or the State successfully completes a program 
improvement plan developed as a result of that subsequent full review.
    (3) When the date the State is determined to be in substantial 
conformity or to have successfully completed a program improvement plan 
falls within a specific quarter, the amount of funds to be withheld will 
be computed to the end of that quarter.
    (4) A State agency that refuses to participate in the development or 
implementation of a program improvement plan, as required by ACF, will 
be subject to the maximum increased withholding of 42 percent of its 
title IV-B and title IV-E funds, as described in paragraph (b)(8) of 
this section, for each year or portion thereof to which the withholding 
of funds applies.
    (5) The State agency will be liable for interest on the amount of 
funds withheld by the Department, in accordance with the provisions of 
45 CFR 30.13.

[65 FR 4081, Jan. 25, 2000, as amended at 66 FR 58675, Nov. 23, 2001]