[Federal Register Volume 63, Number 160 (Wednesday, August 19, 1998)]
[Rules and Regulations]
[Pages 44401-44407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22277]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 307

RIN 0970-AB71


Automated Data Processing Funding Limitation for Child Support 
Enforcement Systems

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

ACTION: Final rule.

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SUMMARY: The Federal share of funding available at an 80 percent 
matching rate for child support enforcement automated systems changes 
resulting from the Personal Responsibility and Work Opportunity 
Reconciliation Act is limited to a total of $400,000,000 for fiscal 
years 1996 through 2001. This rule responds to the requirement that the 
Secretary of Health and Human Services issue regulations which specify 
a formula for allocating this sum among the States, Territories and 
eligible systems.

EFFECTIVE DATE: This rule is effective August 19, 1998.

FOR FURTHER INFORMATION CONTACT: Robin Rushton, (202) 690-1244.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    This rule does not require information collection activities and, 
therefore, no approvals are necessary under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3507(d)). In a separate transmittal, however, the 
Administration for Children and Families submitted for approval the 
information collection activities under 45 CFR Sec. 307.15 which is 
referenced in this rule.

Statutory Authority

    These regulations are published under the authority of the Social 
Security Act (the Act), as amended by the Personal Responsibility and 
Work Opportunity Reconciliation Act (PRWORA; P.L. 104-193) and Section 
5555 of the Balanced Budget Act of 1997 [P.L. 105-33]. Section 344(b) 
of P.L. 104-193 amends section 455(a) of the Act to provide enhanced 
Federal matching for approved development and implementation costs of 
automated child support enforcement systems.
    Section 344(b)(2) of PRWORA establishes a temporary limitation on 
payments under the special Federal matching rate of 80 percent. The 
Secretary of Health and Human Services may not pay more than 
$400,000,000 in the aggregate for approved systems development and 
implementation costs in fiscal years 1996 through 2001. Under this 
section the Secretary is also required to prescribe in regulation a 
formula for allocating the available $400,000,000 among the States. 
According to section 344(b)(2)(C) the formula for allocating the 
specified funds among the States shall take into account the relative 
size of State IV-D caseloads and the level of automation required to 
meet the IV-D automated data processing requirements. Section 5555 of 
The Balanced Budget Act of 1997 amends the requirements in this section 
of PRWORA to include certain systems in the allocation formula.

Regulatory Provisions

Background

    With the enactment of the Family Support Act of 1988 (P.L. 100-
485), States were required to have an operational child support 
enforcement system, certified by the Office of Child Support 
Enforcement (OCSE) as meeting the requirements specified in that 
statute and implementing regulations, no later than October 1, 1995. 
(P.L. 104-85 subsequently extended this deadline to October 1, 1997.) 
PRWORA specifies new requirements in section 454A of the Act which must 
be included in a State child support enforcement system no later than 
October 1, 2000. The new automation requirements require State systems 
to perform functions including: controlling and accounting of Federal, 
State and local funds to carry out the child support enforcement 
program; maintaining data necessary to meet Federal reporting 
requirements; maintaining data on State performance for calculation of 
performance indicators; safeguarding of the integrity and security of 
data in the automated system; developing a State case registry; 
performing data matches; and providing expedited administrative 
procedures. (PRWORA requires the establishment of State New Hire and 
State Disbursement Units but does not require them to be an integrated 
part of the Statewide automated child support system.)
    For fiscal years 1996 through 2001, the Department of Health and 
Human Services (HHS) will reimburse 80 percent of approved State 
expenditures for development and implementation of automated systems 
which meet the requirements of section 454(16) of the Act as in effect 
on September 30, 1996 (i.e., Family Support Act requirements which must 
be completed by October 1, 1997), the amended section 454(16), and new 
section 454A of the Act. The Federal share of reimbursement to States 
is limited to an aggregate total of $400,000,000. Once a State reaches 
its allocated share of the $400,000,000, Federal funding remains 
available at the 66 percent rate for additional approved expenditures 
incurred in developing and implementing child support enforcement 
systems. Child Support Enforcement Action Transmittal 96-10 (OCSE-AT-
96-10) provides instructions for submitting claims for Federal 
reimbursement at the 80 percent rate.
    PRWORA requires the Secretary of Health and Human Services to issue 
regulations which specify a formula for allocating the $400,000,000 
available at 80 percent FFP among the States and Territories. The 
Balanced Budget Act Amendments add specified systems to the entities 
included in the formula. The allocation formula must take into account 
the relative size of State and systems IV-D (child support enforcement) 
caseloads and the level of automation needed to meet title IV-D 
automated data processing requirements.
    Accordingly, we published a proposed rule in the Federal Register 
on March 2, 1998 [63 FR 10173] in which we revised 45 CFR Part 307 to 
include conforming changes and to add Sec. 307.31. In response to the 
notice of proposed rulemaking we received nine letters containing ten 
comments from nine State agencies. Six of these were letters of support 
which commended the fairness of the allocation formula. We clarified 
the preamble discussion of the allocation formula to respond to 
comments raised in the other three letters.
    These clarifications are included in the following sections which 
describe the regulatory provisions. A discussion of all the comments 
received and our response follows in the preamble under the Response to 
Comments section.

Conditions that must be met for 80 percent Federal financial 
participation

    P.L. 104-193 provides enhanced funds to complete development of 
child support enforcement systems which meet the requirements of both 
the

[[Page 44402]]

Family Support Act and PRWORA. From this we conclude that no change in 
the conditions for receipt of funds was anticipated by Congress. Thus, 
45 CFR Sec. 307.31 retains the same conditions for receipt of funds at 
80 percent FFP which appear at Sec. 307.30(a), (b), (c), and (d) and 
apply to claims for FFP at the 90 percent rate.
    Throughout this rule we use ``State'' as the inclusive term for 
States, Territories and approved systems as described in 42 U.S.C. 
Sec. 655(a)(3)(B)(iii) [section 455(a)(3)(B)(iii) of the Act] as added 
to the Act by section 5555 of the Balanced Budget Act of 1997 (Pub. L. 
105-33). The technical amendments to section 455(a)(3)(B) of the Act 
changed the entities included in the allocation formula by adding 
``system'' to States and Territories.
    For purposes of this rule, a system eligible for enhanced funding 
is a system approved by the Secretary to receive funding at the 90 
percent rate for the purpose of developing a system that meets the 
requirements of section 454(16) of the Act (42 U.S.C. Sec. 654(16)) (as 
in effect on and after September 30, 1995) and section 454A of the Act 
(42 U.S.C. Sec. 654A), including a system that received funding for 
this purpose pursuant to a waiver under section 1115(a) of the Act (42 
U.S.C. Sec. 1315(a)). We believe that the Los Angeles County child 
support enforcement system is the only non-State system which meets 
these requirements.
    Therefore, Sec. 307.31(a) provides that until September 30, 2001, 
Federal financial participation (FFP) is available at the 80 percent 
rate for expenditures for the planning, design, development, 
installation, or enhancement of a child support enforcement system 
meeting the requirements described in Secs. 307.5 and 307.10. To 
receive Federal reimbursement: (1) a State must have an approved 
advance planning document (APD); (2) the system must meet the 
requirements of Sec. 307.10; (3) OCSE must determine that the 
expenditures are consistent with the APD; (4) OCSE must also determine 
that the computerized support enforcement system is designed 
effectively and efficiently and will improve the management and 
administration of the State IV-D plan; (5) the State IV-D agency must 
agree in writing to use the system for a period of time which is 
consistent with the APD approved by OCSE; and (6) the State or local 
government must have ownership rights in any software, software 
modifications and associated documentation that is designed, developed, 
installed or enhanced with Federal funds.
    In Sec. 307.31(b) the requirements for FFP at the 80 percent rate 
in the costs of hardware and proprietary software are the same as the 
requirements at the 90 percent rate. Until September 30, 2001, FFP at 
the 80 percent rate is available in expenditures for the rental or 
purchase of hardware for the planning, design, development, 
installation, or enhancement of a computerized support enforcement 
system as described in Sec. 307.10. FFP at the 80 percent rate is 
available until September 30, 2001, for the rental or purchase of 
proprietary operating/vendor software necessary for the operation of 
hardware during the planning, design, development, installation, 
enhancement or operation of a child support enforcement system in 
accordance with the OCSE guideline entitled ``Automated Systems for 
Child Support Enforcement: A Guide for States.'' FFP at the 80 percent 
rate is not available, however, for proprietary application software 
developed specifically for a computerized support enforcement system.
    With Sec. 307.31(c), the Department of Health and Human Services 
continues to reserve a royalty-free, non-exclusive and irrevocable 
license to reproduce, publish or otherwise use, and to authorize others 
to use for Federal government purposes, software, software 
modifications, and documentation developed under Sec. 307.10. This 
license permits the Department to authorize the use of software, 
software modifications and documentation developed under Sec. 307.10 in 
another project or activity funded by the Federal government. (See also 
45 CFR 95.617.)
    Section 307.31(d) reiterates the consequences of suspension of the 
APD. If OCSE suspends approval of an APD during the planning, design, 
development, installation, enhancement or operation of the system, FFP 
is disallowed as of the date the State failed to comply substantially 
with the approved APD. FFP at the 80 percent and applicable matching 
rates is not available for any expenditure incurred under the APD after 
the date of the suspension until the date OCSE determines that the 
State has taken the actions specified in the notice of suspension. OCSE 
will notify the State in writing upon making such a determination.
    Note that for conformance, we added to Sec. 307.40(a) of the 
regulation a reference to ``Sec. 307.31(d).''
    As required in section 344(a)(3) of PRWORA, the Administration for 
Children and Families developed Federal regulations for the 
implementation of the child support enforcement systems requirements 
mandated by section 454A of the Social Security Act and listed in the 
background section above. We issued proposed rules on March 25, 1998 
[63 FR 14462] which will revise 45 CFR Part 307 to reflect these 
requirements.
    In addition, ACF drafted revisions to the existing OCSE 
publication, ``Automated Systems for Child Support Enforcement: A Guide 
for States.'' By action transmittal (OCSE-AT-98-13) OCSE distributed 
the new and revised child support enforcement system functional 
requirements to the States. Currently, OCSE is reviewing comments by 
the States before issuing a final document.

Limitation on Payments to States

    Section 344(b)(2) of PRWORA limits the Federal share of payments at 
the 80 percent rate to $400,000,000 over fiscal years 1996 through 
2001. Section 307.31(e) therefore provides that FFP at the 80 percent 
rate may not exceed $400,000,000 in the aggregate for fiscal years 1996 
through 2001.
    We include the amount of the funding limitation in the regulation 
because it caps the funds available to each State at the special 
matching rate. The statute requires an allocation of the available 
$400,000,000 based on a formula established by the Secretary, HHS.
    State implementation of all automated systems requirements enacted 
with the Family Support Act of 1988 was to be accomplished by October 
1, 1997. Subsequent requirements enacted with or before PRWORA must be 
met by October 1, 2000. For fiscal years 1996 through 2001, the FFP 
rate for the provisions of this section is 80 percent. Although system 
implementation must be completed no later than October 1, 2000, Federal 
funds at the 80 percent FFP rate remain available through September 30, 
2001, to accommodate contractually mandated ``holdback'' payments and 
other system implementation-related expenses.
    As indicated above, FFP at the 80 percent rate is available only 
for expenditures made by a State on or before September 30, 2001, for 
system development and implementation activities which meet all 
statutory and regulatory requirements. Under section 1132 of the Act 
and Federal regulations at 45 CFR Part 95, Subpart A, States have two 
years from the end of a quarter in which an expenditure is made to file 
a claim for Federal funding for that cost. Therefore, approved system 
implementation expenditures made in 2001 may be claimed for Federal

[[Page 44403]]

funding at the 80 percent FFP rate as late as 2003.

Allocation Formula

    Section 344(b)(2)(C) of PRWORA requires the Secretary to allocate 
by formula the $400,000,000 available at the 80 percent FFP rate. This 
section specifies that the formula take into account the relative size 
of State IV-D caseloads and the level of automation needed to meet 
applicable automatic data processing requirements. The legislative 
history does not elaborate on the meaning of these factors.
    The allocation formula described in this section is the product of 
consultation with a wide range of stakeholders. We sought information 
from child support enforcement systems experts, financial experts, 
economists, State IV-D directors, and national associations. Before 
drafting regulations we asked States to suggest approaches for 
allocating the available Federal share of the funds. In a number of 
open forums we sought suggestions for the allocation formula. An 
internal working group considered the information from States, reviewed 
the suggestions, then developed the allocation formula.
    Simply stated, the formula first allots a base amount of $2,000,000 
to each State to take into account the level of automation needed to 
meet the automated data processing requirements of title IV-D. The 
formula, then, allots an additional amount to States based on both 
their reported IV-D caseload and their potential caseload based on 
Census data on children living with one parent.
    As indicated earlier, we use ``State'' as the inclusive term for 
States, Territories and systems described in 42 U.S.C. 
655(a)(3)(B)(iii) [455(a)(3)(B)(iii) of the Act] as amended by section 
5555 of the Balanced Budget Act of 1997. The technical amendments to 
section 455(a)(3)(B) of the Act changed the entities included in the 
allocation formula by adding ``system'' to States. As noted earlier, we 
believe that the Los Angeles County child support enforcement system is 
the only non-State system which meets the requirements specified in 
section 455(a)(3)(B)(iii) of the Act.
    Before considering a base level of funding, we examined several 
approaches for taking into account States' level of automation. First, 
we contemplated allocating funds based on the certification status of a 
State's child support enforcement automated system. However, we were 
advised of several flaws in this approach: it does not reflect current 
automation needs; it could reward States that are behind schedule and 
not certified for Family Support Act standards by giving them a larger 
allocation to meet PRWORA requirements and complete their statewide 
automated systems; and, it could advantage States with certified but 
obsolete systems. We then considered establishing a ranking system 
based on dollars invested in systems to date. This approach is 
problematic because it penalizes States that were early developers of 
child support enforcement systems and it does not address the new 
requirements. We also considered grading States' systems on a set of 
criteria, but we came to believe that this was an overly complex 
approach with numerous and subjective variables.
    As an alternative, several States suggested that the formula 
allocate a base amount to each State to take into account the level of 
automation. This is the approach we take in the following formula. The 
majority of comments received in response to the notice of proposed 
rulemaking commended this method for its fairness to States.
    Using a funding base and then varying the allocation by current and 
potential caseload reflects the flexibility States have, and have had, 
in designing their systems. Each State develops its system to meet its 
particular needs. Thus, each State's system development plan takes into 
account factors such as: caseload size; organization (county 
administered, state administered, court involvement); State and local 
business practices for case processing and management; the process for 
setting and enforcing orders (court or administrative process); 
responsiveness and capacity of its contractors; State planning process; 
availability of State funding and resources.
    However, a number of areas common to all State systems will need 
additional investment in order to meet the new PRWORA requirements. 
Primarily, the increased systems costs are associated with changes in 
distribution, performance indicators, reporting, interfaces and case 
management, the State Case Registry and wage withholding activities on 
non-IV-D cases. All States must perform these functions regardless of 
the caseload size or State population. With each State required to 
perform a core set of systems functions, it is reasonable to allocate a 
base amount to each State.
    A base level of funding for each State takes into account the level 
of automation by recognizing that all States have similar costs for 
planning, design, programming and development regardless of the size of 
their caseloads. A minimum amount is provided to each State to ensure 
support for a State's development effort. In order to treat States 
fairly in determining this minimum level of funding, we looked to our 
experience with basic project costs (e.g., planning, design, 
programming, and development). We believe a base amount of $2,000,000 
per State fairly represents the start-up costs which are common to all 
States. Table 2 in Appendix A shows the distribution of the base amount 
to each State, Territory and Los Angeles County.
    States suggested various percentages of the available funds which 
should be set aside to distribute as equal base amounts to each State. 
Obviously, as the portion of the funds designated for the base amount 
increases, the portion available to distribute based on relative 
caseload size decreases. Changes in the portion set aside for minimum 
funding to each State could advantage or disadvantage some States 
(e.g., allocating a larger percentage of funds to a base amount 
advantages States with small caseloads). Allocating a minimum of 
$2,000,000 to each State accounts for a little over one-quarter of the 
$400,000,000 available from federal funds. As discussed in the 
following paragraphs, our proposal for taking into account the relative 
size of State IV-D caseloads in the allocation formula also considers 
the scope of changes that States must make in their child support 
enforcement systems to meet PRWORA requirements. Therefore, we believe 
that using one-quarter of the available funds for the base amount is 
reasonable.
    In addition to the base level of funding which takes into account 
States' levels of automation, the allocation formula's calculation of 
relative caseload size also addresses the changes that States must make 
in their child support enforcement systems in order to meet PRWORA 
requirements. Section 311 of PRWORA mandates that child support 
enforcement systems include information on all new and modified child 
support orders in the State as of October 1, 1998 as well as 
information on all cases receiving services under title IV-D. 
Effectively, this increases the potential child support enforcement 
caseload maintained on a State's automated system to include almost all 
children in a State who are not living with both parents. Since the 
majority of States must increase their automated systems capacity 
because of this expanding caseload, the use of a census factor based on 
the size of the child population not living with both parents helps 
take into account the need for additional capacity building.
    With this in mind, the formula allocates the remaining funds, after 
the base amount is assigned to each State,

[[Page 44404]]

by an Allocation Factor. A Caseload Factor and a Census Factor are 
averaged to yield the Allocation Factor. Table 1 shows by State the 
calculation of the Allocation Factor from caseload and census data.
    The State of California supplied us with caseload and census 
information for Los Angeles County which had been agreed to by the 
County. This information indicated that the County should receive 25.04 
percent of the amount allocated to the State. We applied that 
information to California's share of the ``Allocated Remainder'' shown 
in Table 2 of the proposed rule, i.e., $32,153,986. That resulted in a 
division of this amount between the State and Los Angeles County, with 
$24,101,956 allocated to the State and $8,052,030 allocated to the 
County. Those figures are reflected in Table 2 of this final rule.
    The Caseload Factor is the ratio of the six-year average IV-D 
caseload as reported by a State to the OCSE for fiscal years 1990-1995 
to the total six-year average caseload in all States for the same 
period. States differ in the percentage of total child support cases 
which receive IV-D services and thus, are included in the IV-D system. 
For example, some States routinely include all court-ordered support 
cases in the child support enforcement system. In addition, all States 
have some duplication in their caseload count due to interstate cases. 
To compensate for counting variations, we propose averaging the 
caseloads as reported by States for fiscal years 1990-1995. We 
considered using shorter periods for averaging, (e.g., 2 years, 4 
years) but we decided on the period from 1990-1995 because it minimizes 
variations in each State's reported caseload.
    The Census Factor is the ratio of the number of children in a State 
with one parent living elsewhere as reported in the 1992 Current 
Population Survey-Child Support Supplement to the total number of such 
children in all States. We use census data on children with one parent 
living elsewhere because this represents the maximum number of children 
living in the State who could potentially receive services from the IV-
D program.

    Note: It is also the same data set required by statute to 
determine the allotments for the Access and Visitation Grants which 
the OCSE will issue to the States under section 391 of PRWORA.

    Therefore, Sec. 307.31(f) provides that payments to individual 
States will be equal to the sum of a $2,000,000 base amount and an 
additional amount as determined by the Allocation Factor. The 
Allocation Factor is an average of the Caseload and Census Factors 
which yields the percentage that is used to calculate a State's 
allocation of the $400,000,000 (less the amounts set aside for the 
base).
    Table 1 shows by State the Caseload Factors and the Census Factors 
and the calculation of the Allocation Factor. Table 2 displays the 
amount each State would be allotted from the $400,000,000 under the 
allocation formula. The tables are printed in Attachment A at the end 
of this rule.

Response to Comments

    We received a total of 10 comments on the proposed rule published 
in the Federal Register March 2, 1998 [63 FR 10173] from State 
agencies. Specific comments and our response follows.

General Comments

    1. Comment: Six commenters expressed support for the allocation 
formula as set forth in the notice of proposed rulemaking. These 
commenters described the formula for distributing the limited funds for 
enhancing State child support enforcement systems as ``fair and 
equitable.''
    Response: We agree. The allocation formula reflects the suggestions 
from States of all sizes.
    2. Comment: One commenter objected to allocating a base amount to 
each State. This commenter questioned the rationale for setting a base 
level of funding.
    Response: We believe that allocation of a base level of funding is 
a sound approach. Several commenters wrote in support of a base level 
of funding.
    A number of areas common to all State systems will need additional 
investment in order to meet PRWORA requirements, such as distribution, 
performance indicators, reporting, and State case registry. A base 
level of funding recognizes that all States, regardless of their 
caseload size, have similar costs for planning, design, programming and 
development.
    PRWORA requires the Secretary to develop an allocation formula 
which takes into account the level of automation. The combined elements 
of the formula take into account the variation in States' approaches to 
automation. The base acknowledges that all State child support systems 
must perform the same functionalities and have the same capabilities. 
While caseload size and potential caseload factors acknowledge that 
other components of *the child support system, such as training, 
conversion and processing time are affected by the scale of the 
project.
    3. Comment: A commenter suggested that the allocation formula 
should give more weight to large States.
    Response: The allocation formula uses two factors derived from 
State population: child support caseload and census data for children 
with one parent living elsewhere. By using these factors the formula 
does give more weight to States with large populations.
    4. Comment: A commenter recommended deleting the census factor from 
the allocation formula because it penalizes States whose overall 
birthrate is declining.
    Response: These data sets--average IV-D caseload as reported by 
States (Caseload Factor) and number of children with one parent living 
elsewhere (Census Factor)--are logical factors to include in the 
allocation formula. They consider the population served currently and 
anticipate the growth. Together, these factors are an approximate 
measure of the capacity need of a State's child support system.
    5. Comment: A commenter questioned the apparent rounding of the 
census, caseload, and allocation factors.
    Response: We did not use rounded numbers in calculating the 
allocations. We used numbers to 10 decimal places in the underlying 
calculations. For clarity and simplicity in the tables, we display 
rounded numbers.

Regulatory Impact Analysis

    Executive Order 12866 requires that regulations be reviewed to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
rule is consistent with these priorities and principles.

Regulatory Flexibility Analysis

    Consistent with the Regulatory Flexibility Act (P.L. 96-354) which 
requires the Federal Government to anticipate and reduce the impact of 
rules and paperwork requirements on small business and other small 
entities, the Secretary certifies that this rule has no significant 
effect on a substantial number of small entities. The primary impact of 
this regulation is on State governments. State governments are not 
considered small entities under the Act. Therefore, a regulatory 
flexibility analysis is not required.

Unfunded Mandates Act

    The Department has determined that this rule is not a significant 
regulatory action within the meaning of the Unfunded Mandates Reform 
Act of 1995 (P.L. 104-4).

[[Page 44405]]

Congressional Review of Regulations

    This final rule is not a ``major'' rule as defined in Chapter 8 of 
5 U.S.C.

List of Subjects in 45 CFR Part 307

    Child support, Computer technology, Grant programs--social 
programs.

(Catalog of Federal Domestic Assistance Program No. 93.023, Child 
Support Enforcement Program.)

    Dated: July 10, 1998.
Olivia A. Golden,
Assistant Secretary for Children and Families.

    Approved: August 12, 1998.
Donna E. Shalala,
Secretary, Department of Health and Human Services.

    For the reasons set forth in the preamble, 45 CFR Part 307 is 
amended as follows:

PART 307--COMPUTERIZED SUPPORT ENFORCEMENT SYSTEMS (AMENDED)

    1. The authority citation for Part 307 is revised to read as 
follows:

    Authority: 42 U.S.C. 652 through 658, 664, 666 through 669A, and 
1302.
    2.-3. A new section 307.31 is added to read as follows:


Sec. 307.31  Federal financial participation at the 80 percent rate for 
computerized support enforcement systems.

    (a) Conditions that must be met for 80 percent FFP. Until September 
30, 2001, Federal financial participation is available at the 80 
percent rate to States, Territories and systems defined in 42 U.S.C. 
655(a)(3)(B)(iii) [455(a)(3)(B)(iii) of the Act] (hereafter referred to 
as ``States'') for expenditures for the planning, design, development, 
installation, or enhancement of a computerized support enforcement 
system meeting the requirements as described in Secs. 307.5 and 307.10 
or 42 U.S.C. Sec. 654(16) [454(16) of the Act], if:
    (1) The Office has approved an APD in accordance with Sec. 307.15;
    (2) The Office determines that the system meets the requirements 
specified in Sec. 307.10, or 42 U.S.C. 654(16) [454(16) of the Act];
    (3) The Office determines that the expenditures incurred are 
consistent with the approved APD;
    (4) The Office determines that the computerized support enforcement 
system is designed effectively and efficiently and will improve the 
management and administration of the State IV-D plan;
    (5) The State IV-D agency agrees in writing to use the system for a 
period of time which is consistent with the APD approved by the Office; 
and
    (6) The State or local government has ownership rights in software, 
software modifications and associated documentation that is designed, 
developed, installed or enhanced under this section subject to the 
Department of Health and Human Services license specified in paragraph 
(c) of this section.
    (b) Federal financial participation in the costs of hardware and 
proprietary software.
    (1) Until September 30, 2001, FFP at the 80 percent rate is 
available for expenditures for the rental or purchase of hardware for 
the planning, design, development, installation, or enhancement of a 
computerized support enforcement system as described in Sec. 307.10 or 
42 U.S.C. 654(16) [454(16) of the Act].
    (2) Until September 30, 2001, FFP at the 80 percent rate is 
available for the rental or purchase of proprietary operating/vendor 
software necessary for the operation of hardware during the planning, 
design, development, installation, enhancement or operation of a 
computerized support enforcement system in accordance with the OCSE 
guideline entitled ``Automated Systems for Child Support Enforcement: A 
Guide for States.'' FFP at the 80 percent rate is not available for 
proprietary application software developed specifically for a 
computerized support enforcement system. (See Sec. 307.35 regarding 
reimbursement at the applicable matching rate.)
    (c) HHS rights to software. The Department of Health and Human 
Services reserves a royalty-free, non-exclusive and irrevocable license 
to reproduce, publish or otherwise use, and to authorize others to use 
for Federal government purposes, software, software modifications, and 
documentation developed under Sec. 307.10 or 42 U.S.C. 654(16) [454(16) 
of the Act]. This license would permit the Department to authorize the 
use of software, software modifications and documentation developed 
under Sec. 307.10 or 42 U.S.C. 654(16) [454(16) of the Act] in another 
project or activity funded by the Federal government.
    (d) Consequences of suspension of the APD. If the Office suspends 
approval of an APD in accordance with Sec. 307.40 during the planning, 
design, development, installation, enhancement or operation of the 
system:
    (1) The Office shall disallow FFP as of the date the State failed 
to comply substantially with the approved APD; and
    (2) FFP at the 80 percent and applicable matching rates is not 
available in any expenditure incurred under the APD after the date of 
the suspension until the date the Office determines that the State has 
taken the actions specified in the notice of suspension described in 
Sec. 307.40(a). The Office will notify the State in writing upon making 
such a determination.
    (e) Limitation on 80 percent funding. Federal financial 
participation at the 80 percent rate may not exceed $400,000,000 in the 
aggregate for fiscal years 1996 through 2001.
    (f) Allocation formula. Payments at the 80 percent rate to 
individual States, Territories and systems defined in 42 U.S.C. 
655(a)(3)(B)(iii) [455(a)(3)(B)(iii) of the Act] (hereafter referred to 
as ``States'') will be equal to the sum of:
    (1) A base amount of $2,000,000; and
    (2) An additional amount defined as the Allocation Factor computed 
as follows:
    (i) Allocation Factor--an average of the Caseload and Census 
Factors which yields the percentage that is used to calculate a State's 
allocation of the funds available, less amounts set aside pursuant to 
paragraph (f)(1) of this section.
    (ii) Caseload Factor--a ratio of the six-year average IV-D caseload 
as reported by a State for fiscal years 1990 through 1995 to the total 
six-year average IV-D caseload in all States for the same period;
    (iii) Census Factor--a ratio of the number of children in a State 
with one parent living elsewhere as reported in the 1992 Current 
Population Survey--Child Support Supplement to the total number of such 
children in all States.
    4. In Sec. 307.40 paragraph (a) is amended by removing the 
paragraph designation (1) and by adding ``and Sec. 307.31(d)'' at the 
end of the last sentence. The addition reads as follows:


Sec. 307.40  Suspension of approval of advance planning documents for 
computerized support enforcement systems.

    (a) * * * Federal funding will be disallowed as described in 
Sec. 307.30(d) and Sec. 307.31(d).
* * * * *
    Note: The following Tables will not appear in the Code of 
Federal Regulations.

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[FR Doc. 98-22277 Filed 8-18-98; 8:45 am]
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