[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: 45CFR1356.71]

[Page 367-370]
 
                        TITLE 45--PUBLIC WELFARE
 
CHAPTER XIII--OFFICE OF HUMAN DEVELOPMENT SERVICES, DEPARTMENT OF HEALTH 
                           AND HUMAN SERVICES
 
PART 1356--REQUIREMENTS APPLICABLE TO TITLE IV-E--Table of Contents
 
Sec. 1356.71  Federal review of the eligibility of children in foster care and the eligibility of foster care providers in title IV-E programs.

    (a) Purpose, scope and overview of the process.
    (1) This section sets forth requirements governing Federal reviews 
of State compliance with the title IV-E eligibility provisions as they 
apply to children and foster care providers under paragraphs (a) and (b) 
of section 472 of the Act.
    (2) The requirements of this section apply to State agencies that 
receive Federal payments for foster care under title IV-E of the Act.
    (3) The review process begins with a primary review of foster care 
cases for the title IV-E eligibility requirements.
    (i) States in substantial compliance. States determined to be in 
substantial compliance based on the primary review will be subject to 
another review in three years.
    (ii) States not in substantial compliance. States that are 
determined not to be in substantial compliance based on the primary 
review will develop and implement a program improvement plan designed to 
correct the areas of noncompliance. A secondary review will be conducted 
after the completion of the program improvement plan. A subsequent 
primary review will be held three years from the date of the secondary 
review.
    (b) Composition of review team and preliminary activities preceding 
an on-site review.
    (1) The review team must be composed of representatives of the State 
agency, and ACF's Regional and Central Offices.
    (2) The State must provide ACF with the complete payment history for 
each of the sample and oversample cases prior to the on-site review.
    (c) Sampling guidance and conduct of review.
    (1) The list of sampling units in the target population (i.e., the 
sampling frame) will be drawn by ACF statistical staff from the Adoption 
and Foster Care Analysis and Reporting System (AFCARS) data which are 
transmitted by the State agency to ACF. The sampling frame will consist 
of cases of children who were eligible for foster care maintenance 
payments during the reporting period reflected in a State's most recent 
AFCARS data submission. For the initial primary review, if these data 
are not available or are deficient, an alternative sampling frame, 
consistent with one AFCARS six-month reporting period, will be selected 
by ACF in conjunction with the State agency.
    (2) A sample of 80 cases (plus a 10 percent oversample of eight 
cases) from the title IV-E foster care program will be selected for the 
primary review utilizing probability sampling methodologies. Usually, 
the chosen methodology will be simple random sampling, but other 
probability samples may be utilized, when necessary and appropriate.
    (3) Cases from the oversample will be substituted and reviewed for 
each of the original sample of 80 cases which is found to be in error.
    (4) At the completion of the primary review, the review team will 
determine the number of ineligible cases. When the total number of 
ineligible cases does not exceed eight, ACF can conclude with a 
probability of 88 percent that in a population of 1000 or more cases the 
population ineligibility case error rate is less than 15 percent and the 
State will be considered in substantial compliance. For primary reviews 
held subsequent to the initial primary reviews, the acceptable 
population ineligibility case error rate threshold will be reduced from 
less than 15 percent (eight or fewer ineligible cases) to less than 10 
percent (four or fewer ineligible cases)). A State agency which meets 
this standard is considered to be in ``substantial compliance'' (see 
paragraph (h) of this section). A disallowance will be assessed for the 
ineligible cases for the period of time the cases are ineligible.
    (5) A State which has been determined to be in ``noncompliance'' 
(i.e., not in substantial compliance) will be required to develop a 
program improvement plan according to the specifications discussed in 
paragraph (i) of this section, as well as undergo a secondary review. 
For the secondary review, a sample of 150 cases (plus a 10 percent 
oversample of 15 cases) will be drawn

[[Page 368]]

from the most recent AFCARS submission. Usually, the chosen methodology 
will be simple random sampling, but other probability samples may be 
utilized, when necessary and appropriate. Cases from the oversample will 
be substituted and reviewed for each of the original sample of 150 cases 
which is found to be in error.
    (6) At the completion of the secondary review, the review team will 
calculate both the sample case ineligibility and dollar error rates for 
the cases determined ineligible during the review. An extrapolated 
disallowance equal to the lower limit of a 90 percent confidence 
interval for the population total dollars in error for the amount of 
time corresponding to the AFCARS reporting period will be assessed if 
both the child/provider (case) ineligibility and dollar error rates 
exceed 10 percent. If neither, or only one, of the error rates exceeds 
10 percent, a disallowance will be assessed for the ineligible cases for 
the period of time the cases are ineligible.
    (d) Requirements subject to review. States will be reviewed against 
the requirements of title IV-E of the Act regarding:
    (1) The eligibility of the children on whose behalf the foster care 
maintenance payments are made (section 472(a)(1)-(4) of the Act) to 
include:
    (i) Judicial determinations regarding ``reasonable efforts'' and 
``contrary to the welfare'' in accordance with Sec. 1356.21(b) and (c), 
respectively;
    (ii) Voluntary placement agreements in accordance with Sec. 1356.22;
    (iii) Responsibility for placement and care vested with the State 
agency;
    (iv) Placement in a licensed foster family home or child care 
institution; and,
    (v) eligibility for AFDC under such State plan as it was in effect 
on July 16, 1996.
    (2) Allowable payments made to foster care providers who comport 
with sections 471(a)(10), 471(a)(20), 472(b) and (c) of the Act and 
Sec. 1356.30.
    (e) Review instrument. A title IV-E foster care eligibility review 
checklist will be used when conducting the eligibility review.
    (f) Eligibility determination--child. The case record of the child 
must contain sufficient documentation to verify a child's eligibility in 
accordance with paragraph (d)(1) of this section, in order to 
substantiate payments made on the child's behalf.
    (g) Eligibility determination--provider.
    (1) For each case being reviewed, the State agency must make 
available a licensing file which contains the licensing history, 
including a copy of the certificate of licensure/approval or letter of 
approval, for each of the providers in the following categories:
    (i) Public child care institutions with 25 children or less in 
residence;
    (ii) Private child care institutions;
    (iii) Group homes; and
    (iv) Foster family homes, including relative homes.
    (2) The licensing file must contain documentation that the State has 
complied with the safety requirements for foster and adoptive placements 
in accordance with Sec. 1356.30.
    (3) If the licensing file does not contain sufficient information to 
support a child's placement in a licensed facility, the State agency may 
provide supplemental information from other sources (e.g., a 
computerized database).
    (h) Standards of compliance.
    (1) Disallowances will be taken, and plans for program improvement 
required, based on the extent to which a State is not in substantial 
compliance with recipient or provider eligibility provisions of title 
IV-E, or applicable regulations in 45 CFR parts 1355 and 1356.
    (2) Substantial compliance and noncompliance are defined as follows:
    (i) Substantial compliance--For the primary review (of the sample of 
80 cases), no more than eight of the title IV-E cases reviewed may be 
determined to be ineligible. (This critical number of allowable 
``errors,'' i.e., ineligible cases, is reduced to four errors or less in 
primary reviews held subsequent to the initial primary review). For the 
secondary review (if required), substantial compliance means either the 
case ineligibility or dollar error rate does not exceed 10 percent.
    (ii) Noncompliance--means not in substantial compliance. For the 
primary review (of the sample of 80 cases), nine

[[Page 369]]

or more of the title IV-E cases reviewed must be determined to be 
ineligible. (This critical number of allowable ``errors,'' i.e., 
ineligible cases, is reduced to five or more in primary reviews 
subsequent to the initial primary review). For the secondary review (if 
required), noncompliance means both the case ineligibility and dollar 
error rates exceed 10 percent.
    (3) ACF will notify the State in writing within 30 calendar days 
after the completion of the review of whether the State is, or is not, 
operating in substantial compliance.
    (4) States which are determined to be in substantial compliance must 
undergo a subsequent review after a minimum of three years.
    (i) Program improvement plans.
    (1) States which are determined to be in noncompliance with 
recipient or provider eligibility provisions of title IV-E, or 
applicable regulations in 45 CFR Parts 1355 and 1356, will develop a 
program improvement plan designed to correct the areas determined not to 
be in substantial compliance. The program improvement plan will:
    (i) Be developed jointly by State and Federal staff;
    (ii) Identify the areas in which the State's program is not in 
substantial compliance;
    (iii) Not extend beyond one year. A State will have a maximum of one 
year in which to implement and complete the provisions of the program 
improvement plan unless State legislative action is required. In such 
instances, an extension may be granted with the State and ACF 
negotiating the terms and length of such extension that shall not exceed 
the last day of the first legislative session after the date of the 
program improvement plan; and
    (iv) Include:
    (A) Specific goals;
    (B) The action steps required to correct each identified weakness or 
deficiency; and,
    (C) a date by which each of the action steps is to be completed.
    (2) States determined not to be in substantial compliance as a 
result of a primary review must submit the program improvement plan to 
ACF for approval within 90 calendar days from the date the State 
receives written notification that it is not in substantial compliance. 
This deadline may be extended an additional 30 calendar days when a 
State agency submits additional documentation to ACF in support of cases 
determined to be ineligible as a result of the on-site eligibility 
review.
    (3) The ACF Regional Office will intermittently review, in 
conjunction with the State agency, the State's progress in completing 
the prescribed action steps in the program improvement plan.
    (4) If a State agency does not submit an approvable program 
improvement plan in accordance with the provisions of paragraphs (i)(1) 
and (2) of this section, ACF will move to a secondary review in 
accordance with paragraph (c) of this section.
    (j) Disallowance of funds. The amount of funds to be disallowed will 
be determined by the extent to which a State is not in substantial 
compliance with recipient or provider eligibility provisions of title 
IV-E, or applicable regulations in 45 CFR parts 1355 and 1356.
    (1) States which are in found to be in substantial compliance during 
the primary or secondary review will have disallowances (if any) 
determined on the basis of individual cases reviewed and found to be in 
error. The amount of disallowance will be computed on the basis of 
payments associated with ineligible cases for the entire period of time 
that each case has been ineligible.
    (2) States which are found to be in noncompliance during the primary 
review will have disallowances determined on the basis of individual 
cases reviewed and found to be in error, and must implement a program 
improvement plan in accordance with the provisions contained within it. 
A secondary review will be conducted no later than during the AFCARS 
reporting period which immediately follows the program improvement plan 
completion date on a sample of 150 cases drawn from the State's most 
recent AFCARS data. If both the case ineligibility and dollar error 
rates exceed 10 percent, the State is not in compliance and an 
additional disallowance will be determined based on extrapolation from 
the sample to the universe of claims paid for the duration of the

[[Page 370]]

AFCARS reporting period (i.e., all title IV-E funds expended for a case 
during the quarter(s) that case is ineligible, including administrative 
costs). If either the case ineligibility or dollar rate does not exceed 
10 percent, the amount of disallowance will be computed on the basis of 
payments associated with ineligible cases for the entire period of time 
the case has been determined to be ineligible.
    (3) The State agency will be liable for interest on the amount of 
funds disallowed by the Department, in accordance with the provisions of 
45 CFR 30.13.
    (4) States may appeal any disallowance actions taken by ACF to the 
HHS Departmental Appeals Board in accordance with regulations at 45 CFR 
Part 16.

[65 FR 4091, Jan. 25, 2000, as amended at 66 FR 58677, Nov. 23, 2001]