[Federal Register Volume 63, Number 181 (Friday, September 18, 1998)]
[Proposed Rules]
[Pages 50058-50098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24944]



[[Page 50057]]

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Part IV





Department of Health and Human Services





_______________________________________________________________________



Administration for Children and Families



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45 CFR Parts 1355 and 1356



Title IV-E Foster Care Eligibility Reviews and Child and Family 
Services State Plan Reviews; Proposed Rule

  Federal Register / Vol. 63, No. 181 / Friday, September 18, 1998 / 
Proposed Rules  

[[Page 50058]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 1355 and 1356

RIN 0970-AA97


Title IV-E Foster Care Eligibility Reviews and Child and Family 
Services State Plan Reviews

AGENCY: Administration on Children, Youth and Families (ACYF), 
Administration for Children and Families (ACF), Department of Health 
and Human Services (DHHS).

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Administration for Children and Families is proposing to 
amend the current regulations for Child and Family Services by adding 
new requirements governing the review of a State's conformity with its 
State plan under titles IV-B and IV-E of the Social Security Act (the 
Act). This Notice of Proposed Rulemaking (NPRM) implements the 
provisions of the Social Security Act Amendments of 1994 (Pub. L. 103-
432), the Multiethnic Placement Act (MEPA) as amended by Pub. L. 104-
188, and certain provisions of the Adoption and Safe Families Act 
(ASFA) of 1997 (Pub. L. 105-89).
    In addition, this NPRM proposes to set forth regulations that 
clarify certain eligibility criteria that govern the title IV-E foster 
care eligibility reviews which the Administration on Children, Youth 
and Families conducts to ensure a State agency's compliance with 
statutory requirements under the Act.
    The publication of a Notice of Proposed Rulemaking often engenders 
confusion in the field regarding its applicability to existing policy. 
The existing regulations and policy remain in full force and effect. 
Regulations published in the final rule will be effective prospectively 
from the date of publication and have no bearing on the application of 
policy that was in effect prior to the publication of the final rule.

DATES: In order to be considered, written comments on this proposed 
rule must be received on or before December 17, 1998.

ADDRESSES: Please address comments to Carol W. Williams, Associate 
Commissioner, Children's Bureau, Administration on Children, Youth and 
Families, 330 C Street, SW, Washington, DC 20447. Comments will be 
accepted electronically at http://www.acf.dhhs.gov/hypernews. Comments 
will not be accepted by telephone or fax.
    Beginning 14 days after the close of the comment period, comments 
will be available for public inspection in Room 2068, 330 C Street, SW, 
Washington, DC, Monday through Friday, between the hours of 9:00 a.m. 
and 4:00 p.m.
    In order to ensure that public comments have maximum effect in 
developing the final rule, please cite the section and paragraph number 
of the proposed regulation that relates to each comment. Comments that 
concern information collection requirements must be sent to the Office 
of Management and Budget at the address listed in the Paperwork 
Reduction Act section of this preamble. A copy of these comments also 
may be sent to the Department representative cited above.

FOR FURTHER INFORMATION CONTACT: Kathleen McHugh, Director of Policy, 
Children's Bureau, Administration on Children, Youth and Families, 
(202) 401-5789.

SUPPLEMENTARY INFORMATION: The preamble to this Notice of Proposed 
Rulemaking (NPRM) is organized as follows:

I. Summary of Proposed Review Processes
II. Introduction to the title IV-E eligibility and child and family 
service reviews
    A. Key features of the new reviews
    B. Consultation with the field and pilot reviews
    C. Reinventing the review process
III. Background
    A. Legislative history
    B. Interrelationship of titles IV-B and IV-E
IV. Overview of title IV-E eligibility reviews
    A. Development of the reviews
    B. Summary of the title IV-E eligibility review process
V. Overview of child and family service reviews
    A. Development of the reviews
    B. Summary of the child and family service reviews
VI. Interethnic Adoption Provisions of the Small Business Job 
Protection Act of 1996 and the Multiethnic Placement Act of 1994
VII. Welfare reform legislation and title IV-E eligibility
VIII. The Adoption and Safe Families Act of 1997
IX. Strategy for Regulating the Adoption and Safe Families Act of 
1997
X. Section-by-section discussion of the NPRM
XI. Impact analysis

I. Summary of Proposed Review Processes

    This Notice of Proposed Rulemaking (NPRM) presents a revised 
framework for reviews of Federally-assisted child and family services 
and for reviews of related eligibility determinations for Federally-
assisted foster care programs. The revised review procedures for these 
programs were developed in response to concerns expressed by the 
Congress and the States regarding the effectiveness of the current 
review procedures and the benefits to the States relative to the 
efforts required of them. ACF had begun revising the review procedures 
when Congress, through the Social Security Amendments of 1994 (Pub. L. 
103-432), mandated changes in the Federal monitoring of State child and 
family service programs funded under titles IV-B and IV-E. This 
legislation directed the Department of Health and Human Services, in 
consultation with State agencies, to promulgate regulations for child 
and family service programs which will:
     Determine whether these programs are in substantial 
conformity with applicable State plan requirements and Federal 
regulations;
     Develop a timetable for conformity reviews; and
     Specify the State plan requirements subject to review, and 
the criteria to be used in determining a State's substantial conformity 
with these requirements.
    Since ACF was already revising its approach to monitoring 
eligibility requirements for title IV-E foster care maintenance 
payments at the time the legislation was enacted, we have also included 
the proposed title IV-E eligibility review process in this NPRM. While 
Pub. L. 103-432 also permits a program improvement process for 
compliance issues associated with the Adoption and Foster Care Analysis 
and Reporting System (AFCARS), we intend to propose an AFCARS program 
improvement protocol in a separate NPRM.
    The revised review processes, including the instruments used in the 
reviews, grew out of extensive consultation with interested groups, 
individuals and experts in the field of child welfare and related 
areas. A series of focus groups related to the child and family service 
reviews was conducted with representatives of State programs and 
national organizations, as well as with family and child advocates. 
Review teams consisting primarily of Federal and State agency staff 
have conducted 20 pilot reviews of child and family services and foster 
care programs using the proposed processes. We have taken seriously the 
comments and suggestions received during the consultations, focus 
groups and pilot reviews and have incorporated them in the development 
and refining of the new monitoring approaches that are proposed in this 
NPRM.
    The revised review framework reflects the basic purposes of 
publicly-supported child and family services: to

[[Page 50059]]

assure safety for all children; to assure permanent, nurturing homes 
for these children; and to enhance the well-being of children and their 
families. In support of these goals, this proposal is designed to 
achieve the following objectives:
     Reviews of child and family services programs will focus 
on the results these programs achieve. In the past, review procedures 
have focused almost entirely on review of the accuracy and completeness 
of case files and other records to determine that required legal 
processes and protections were being carried out. This proposal 
provides for reviews that determine that child welfare practices, 
procedures and requirements are achieving desired outcomes for children 
and families. Reviews to assure eligibility for Federally-assisted 
foster care will not only address conformity with key requirements, but 
will assist States in improving their systems, thereby enhancing their 
capacity to serve children needing foster care placements.
     The revised framework for conducting reviews of both child 
and family services and eligibility for Federal foster care payments 
will promote partnerships between States and the Federal government. It 
will strengthen Federal-State collaboration in achieving improvements 
in child welfare systems. Joint reviews, with peer involvement, will 
identify strengths and weaknesses, define corrective actions, and make 
it possible to craft specific technical assistance plans that support 
program improvements.
     This proposed revision will promote greater public support 
and collaboration for child and family services within each State. The 
proposal for participation of interested and committed individuals and 
organizations in the State self-assessment process, in the conduct of 
on-site reviews, and in the development and evaluation of program 
improvement plans will accommodate broader perspectives on the degree 
to which the desired results are being achieved and encourage greater 
commitment within the State to address areas where improvements are 
needed.
     The revised approach will shift the focus of reviews to 
program improvement and away from financial penalties imposed on those 
States that do not ``pass'' their reviews. States that do not achieve 
expected results in areas related to child safety, permanency and well-
being may have a portion of their Federal funds withheld, but only if 
the State's program improvement plan does not effectively correct the 
identified problem(s).
     The proposed new framework for reviews will be 
comprehensive. It will address not only foster care and adoption but 
the full range of child and family services, including family 
preservation and support services, child protective services, and 
independent living services.
     The revised review procedures will generate a significant 
amount of useful information on the State's child welfare system, 
enabling policy makers, program managers, Federal program officials, 
and concerned citizens to understand better the full range of issues 
related to the State's child and family services. The dynamic process--
involving interviews with children, parents, judges, social workers, 
foster parents, and other major service providers--will yield findings 
of higher quality which will lead to improved outcomes in a way that 
the previous reviews of case files could not.

II. Introduction to the Title IV-E Eligibility and Child and Family 
Service Reviews

A. Key Features of the New Reviews

    Both of the proposed review processes reflect significant 
departures from the existing reviews. We have intentionally proposed 
measures that will reduce the burden on States while balancing the need 
to review for protections that are critical to the safety and well-
being of a vulnerable population of children and families. Wherever the 
statute has permitted flexibility, we have attempted to reduce our 
reliance on the paperwork and documentation requirements that 
characterized prior reviews in favor of a more comprehensive 
examination of the results of a State's efforts to alleviate the 
problems of families and children. While the two procedures have unique 
features and concerns, some key features are common to both:
     The procedures have moved from a focus on total compliance 
with statutory requirements to a determination of ``substantial 
conformity'' or ``substantial compliance'' in an effort to avoid 
penalizing States whose systems are generally performing well;
     Both proposed processes now include a stage where program 
improvement measures will be undertaken to correct areas of 
nonconformity and noncompliance and strengthen State programs;
     Both reviews provide opportunities for States to receive 
technical assistance from the Federal government in implementing 
program improvement plans;
     The reviews operationalize partnership concepts through 
joint Federal/State participation in the on-site reviews and in 
developing and evaluating program improvement plans;
     The reviews rely on existing sources of data, such as the 
Adoption and Foster Care Analysis and Reporting System (AFCARS) and the 
National Child Abuse and Neglect Data System (NCANDS), for information 
needed in the reviews, rather than requiring States to duplicate 
efforts in data collection and submissions;
     Both reviews propose to focus attention on recent 
practices in an effort to evaluate fairly the current status of child 
and family services in the States;
     The proposed regulations include various provisions for 
flexibility and individualizing the reviews to States.

B. Consultation With the Field and Pilot Reviews

    ACF has sought extensive consultation from the child welfare field 
in a variety of ways. Experts in the field and representatives of 
legal, advocacy, educational and research institutions provided 
information to the teams on issues related to both reviews. A series of 
focus groups related to the child and family service reviews was 
conducted with representatives of State programs, national 
organizations, family and child advocates, National Resource Centers, 
child welfare experts and others. Drafts of instruments and procedures 
were reviewed by similar individuals and organizations throughout the 
developmental process. On-site review teams, composed primarily of 
Federal and State agency staff, conducted 10 full child and family 
service pilot reviews and two partial pilots in fiscal years 1995 
through 1997 using the proposed process. Pilots of the title IV-E 
eligibility reviews were conducted in 12 States during fiscal years 
1995 through 1998.

C. Reinventing the Review Process

    In 1994, the Administration for Children and Families commissioned 
a team to develop recommendations for reinventing the review process 
across the range of child and family services programs. Later, two 
separate teams were established in the Administration on Children, 
Youth and Families' Children's Bureau to identify ways that the Federal 
process of reviewing State programs could be redesigned or 
restructured.
    In commissioning two teams to reinvent the review process, the ACF 
leadership recognized that both the section 427 reviews and the title 
IV-E eligibility reviews had led to a number

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of improvements in child and family services, including written case 
plans as a routine component of child welfare casework, periodic 
judicial and administrative reviews of children in foster care, 
increased capacity among States to identify and track children in 
foster care, and an increased focus on permanency planning for children 
in foster care. Other contributions included the establishment of 
procedural protections for vulnerable children against remaining in 
unsafe homes or in non-permanent placements, increased involvement of 
the courts in making judicial determinations about removals of children 
from their homes and the need to continue foster care placements, and 
enhanced stewardship by ensuring that Federal funds were expended in 
accordance with statutory requirements.
    Along with these accomplishments, the ACF also recognized the 
validity of a number of criticisms about the reviews. Because the 
reviews relied heavily on case documentation and process, States that 
provided and documented all the required protections were able to pass 
compliance reviews without necessarily having practices and procedures 
in place culminating in satisfactory outcomes for the children and 
families served by the State. On the other hand, States that might be 
achieving desirable outcomes, but whose case record documentation did 
not reflect all of the required protections, were penalized through the 
loss of incentive funds.
    Additionally, the reviews focused only on foster care services and 
adoption assistance rather than on the full range of child and family 
services; therefore, they did not promote the development and 
integration of a continuum of services needed by many of the families 
and children served by State agencies. The absence of regulations 
governing both review processes also complicated the goal of consistent 
application of policies and review procedures across the States.
    In June 1994, the Office of Inspector General, Department of Health 
and Human Services, reported the findings of a study of oversight of 
State child welfare programs that confirmed our concerns. The report 
was based on information obtained from interviews with State child 
welfare officials in 13 States, and other sources. It addressed a 
number of issues about previous section 427 and title IV-E eligibility 
reviews, including the following: review reports had not been issued in 
a timely fashion; ACF had not provided sufficient technical assistance 
to States; severe problems that were identified in successful lawsuits 
against States had not surfaced during a review, and reviews focused 
more on case record content than how well children were served. The 
report delivered a clear message from State officials that the existing 
review processes were not adequately meeting their needs and should be 
revised substantially.
    At the same time that ACF was taking steps to reinvent its review 
processes, Pub. L. 103-432, the Social Security Act Amendments of 1994, 
was signed by the President on October 31, 1994. The Conference 
Committee report for the Social Security Act Amendments of 1994 
outlined Congressional concerns with ACF review practices. It pointed 
out that the review process did little to address quality of care for 
children; that compliance criteria needed to be written clearly and 
uniformly; and that review standards needed to be developed in a more 
open setting which encouraged discussion and participation among 
affected parties. The concerns of State officials, ACF and Congress 
presented a clear case for reinventing the review process and form the 
basis for the strategies proposed in this NPRM.

III. Background

A. Legislative History

    The review structures for section 427 and title IV-E have been in 
place since the early 1980s. They were authorized by the Adoption 
Assistance and Child Welfare Act (Pub. L. 96-272), passed by Congress 
in 1980, which amended sections of title IV-B and provided for 
mandatory Federal reviews of State foster care services under section 
427 of the Act. The statute also established Part E of title IV of the 
Social Security Act, ``Federal Payments for Foster Care and Adoption 
Assistance.'' The foster care component of the Aid to Families with 
Dependent Children (AFDC) program, which had been an integral part of 
the AFDC program under title IV-A of the Act, was transferred to the 
new title IV-E, effective October 1, 1982.
    The creation of title IV-E and amendments to title IV-B reflected 
the perception of Congress and most State child welfare administrators 
that the public child welfare agencies responsible for dependent and 
neglected children had become holding systems for children living away 
from their parents. Congress intended that Pub. L. 96-272 would 
mitigate the need for the placement of children into foster care and 
encourage greater efforts by State agencies to find permanent homes for 
children--either by making it possible for them to return to their own 
families or by placing them in adoptive homes. The goals of Pub. L. 96-
272 have not yet been fully realized, however, as evidenced by 
continued increases in the numbers of children entering foster care, 
increasing lengths of stay in care, and growing concerns about the 
safety, permanency and well-being of children served by public 
agencies.
    In August 1993, under the Omnibus Budget Reconciliation Act of 1993 
(Pub. L. 103-66), Congress again amended title IV-B, creating two 
subparts and extending the range of child and family services funded 
under title IV-B to include specific family preservation and family 
support services designed to strengthen and support families and 
children in their own homes, as well as children in out-of-home care. 
Later, through the Social Security Amendments of 1994, Congress 
repealed section 427 of the Act and amended section 422 of the Act to 
include, as State plan assurances, the protections formerly required in 
section 427. As a result, ACF is no longer conducting ``427'' reviews 
to confirm whether (or not) a State is eligible to receive additional 
title IV-B, subpart 1 funds. In addition to mandating the Secretary, 
DHHS, to promulgate regulations for reviews of State child and family 
service programs, the amendments to the Act also required the 
Department to make technical assistance available to the States, and 
afforded States the opportunity to develop and implement corrective 
action plans designed to ameliorate areas of nonconformity before 
Federal funds are withheld due to the nonconformity.
    In 1994, Congress passed the Multiethnic Placement Act, Pub. L. 
103-382, (MEPA) to address excessive lengths of stay in foster care 
experienced by children of minority heritage. One factor contributing 
to these excessive lengths of stay in foster care was State agencies' 
attempts to place children of minority heritage in foster and adoptive 
homes of similar racial or ethnic background. The MEPA forbids the 
delay or denial of a foster or adoptive placement solely on the basis 
of the race, color, or national origin of the prospective foster 
parent, adoptive parent, or child involved. At the same time, Congress 
added a title IV-B State plan requirement, section 422(b)(9), which 
compels States to make diligent efforts to recruit and retain 
prospective foster and adoptive parents who reflect the racial and 
ethnic diversity of the children in the State for whom foster and 
adoptive homes are needed. The MEPA, in section 553, permitted States 
to consider the cultural, ethnic, or racial background of the child and 
the capacity of the prospective foster or

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adoptive parent to meet the needs of a child of such background as one 
of a number of factors in making foster and adoptive placements. In 
1996, through section 1808, ``Removal of Barriers to Interethnic 
Adoptions'' (Section 1808), of the Small Business Job Protection Act 
(Pub. L. 104-188), Congress repealed section 553 of MEPA, believing 
that the ``permissible consideration'' language therein was being used 
to obfuscate the intent of MEPA. Section 1808 amended title IV-E by 
adding a State plan requirement, section 471(a)(18), which prohibits 
the delay or denial of a foster or adoptive placement based on the 
race, color, or national origin of the prospective foster parent, 
adoptive parent, or child involved. Section 1808 also dictates a 
penalty structure and corrective action planning for any State that 
violates section 471(a)(18) of the Act.
    On November 19,1997, President Clinton signed the first child 
welfare reform legislation since Pub. L. 96-272 in 1980. The Adoption 
and Safe Families Act (ASFA) seeks to provide States the necessary 
tools and incentives to achieve the original goals of Pub. L. 96-272: 
safety; permanency; and child and family well-being. The impetus for 
the ASFA was a general dissatisfaction with the performance of the 
child welfare system in achieving these goals for children and 
families. This dissatisfaction came as a result of:
    (1) A number of high profile child deaths across the country, the 
occurrence of which was often attributable to confusion and 
misinterpretation over the reasonable efforts provision. This confusion 
stems from the notion that there is a lack of clarity about the 
relationship between reasonable efforts and child safety;
    (2) growth in the foster care caseload. We are now slightly in 
excess of a half-million children in foster care on any one day. This 
number has almost doubled since the mid-eighties. More children are 
coming into foster care each year than are exiting;
    (3) increased costs of foster care; and,
    (4) a need for greater emphasis on individual responsibility by 
parents and accountability by States for moving children to permanency 
in a timely manner.
    The ASFA seeks to strengthen the child welfare system's response to 
children's need for safety and permanency at every point along its 
continuum of care. In this NPRM, we propose regulations for those 
provisions in the ASFA which strengthen the child welfare system's 
response to safety and certain provisions which address permanency.

B. Interrelationship of Titles IV-B and IV-E

    Titles IV-B and IV-E are closely related parts of the Act. Each 
title provides funds to States to serve large numbers of children and 
families who are among the most vulnerable to harm and separation in 
our society. The two programs help finance services to the almost 
3,000,000 children who are reported annually as alleged victims of 
maltreatment (data from 1994 NCANDS), and the approximately 469,000 
children who are in foster care placements on a given day (estimates 
from 1994 Voluntary Cooperative Information System (VCIS)/AFCARS).
    Title IV-B, subpart 1 makes funds available to States for services 
directed toward protecting children, strengthening families, preventing 
unnecessary separation of parents and children, providing care and 
services to children and families when separation occurs, and working 
with parents and children to reunify families or achieve an alternate 
permanent plan for the child. Subpart 2 initially provided funding for 
family preservation and family support services. Under the ASFA, 
subpart 2 funds must now also be used to provide time-limited 
reunification services and services to promote and support adoption.
    Title IV-E foster care funds enable States to provide foster care 
for children who were or would have been eligible for assistance (Aid 
to Families With Dependent Children) under a State's approved title IV-
A plan (as in effect on July 16, 1996) but for their removal from home. 
The Act includes requirements which define the circumstances under 
which a State shall make foster care maintenance payments (section 
472(a)), and mandates a child's placement in an approved or licensed 
facility (section 472(b)). The eligibility review is focused on these 
requirements, so that ACF can verify that children in foster care for 
whom Federal financial participation is being claimed (or can be 
claimed) are eligible and are being placed with eligible foster care 
providers.
    Titles IV-E and IV-B are linked not only by common goals but by 
numerous cross-references to detailed protections or safeguards for 
children in foster care, e.g., a case review system which includes 
periodic case reviews and permanency hearings. Further, while title IV-
E requires that reasonable efforts be made to prevent removal of 
children from their homes when it is safe to do so, to safely reunify 
children in foster care with their families, and to make and finalize 
permanent placements for children who cannot return home, the services 
needed to provide reasonable efforts are not funded by title IV-E, but 
are made available in many circumstances through title IV-B and other 
sources of State and Federal funds. While title IV-B requires States to 
deliver child welfare services in order to be eligible for Federal 
funds, title IV-E tests both the eligibility of each child on whose 
behalf a payment is made and the eligibility of the foster home or 
child-care institution in which the child is placed.

IV. Overview of Title IV-E Eligibility Reviews

A. Development of the Reviews

    The title IV-E eligibility review process proposed in this NPRM 
reflects a number of important lessons learned in the pilot reviews, 
including the following:
     Pilot reviews conducted jointly by a team of Federal and 
State staff fostered working partnerships and assisted the States in 
identifying strategies for corrective action where indicated in the 
reviews and increased the knowledge of State staff on eligibility 
requirements for title IV-E foster care maintenance payments.
     Examining a sub-sample of non-IV-E cases during the 
reviews, along with the IV-E cases, increased the potential for States 
to receive Federal funding to which they are entitled by statute and 
demonstrated the fairness of the reviews to States.
     The emphasis on program improvement planning in the 
reviews led to specific recommendations for improving title IV-E error 
rates and the quality of services to children in such critical areas as 
foster home licensing and services to prevent removal of children from 
their families and reunify children in foster care with their families.
     Examination of cases involving more recent foster care 
entries linked the reviews and potential disallowances to current 
practices and policies that impact both eligibility for services and 
the quality of services provided, rather than focusing on older 
practices inherent to the previous reviews.
    The revised title IV-E review strategy incorporates these important 
lessons learned from the pilots, while ensuring compliance with key 
requirements of the statute regarding eligibility for funds. The 
requirements are designed to enhance child safety, permanency and well-
being, and they provide a specific framework for reviewing State 
compliance through the title IV-E eligibility reviews.

[[Page 50062]]

    We believe that the proposed changes to the review process will 
produce results which are more meaningful and helpful to States which 
undergo a title IV-E eligibility review with the intention of improving 
their State systems. Additional changes in the title IV-E eligibility 
review process are included in the section-by-section discussion of the 
NPRM.

B. Summary of the Title IV-E Eligibility Review Process

    We are proposing to conduct title IV-E eligibility reviews in 
States at three-year intervals. The review process includes an initial 
review of foster care cases for the title IV-E eligibility requirements 
defined in the statute. States determined to be in substantial 
compliance based on the review will not be subject to another review 
for three years. States that are determined not to be in compliance 
will develop and implement a program improvement plan designed to 
correct the areas of non-compliance, and a follow-up review will be 
conducted after completion of the program improvement plan.
    The reviews will be conducted by a joint team of Federal and State 
staff in order to promote working partnerships through the review 
process. In contrast to prior reviews, the sample for the reviews will 
be drawn from the AFCARS data base, reducing the burden on the State to 
select the sample.
    The threshold error rate for a determination of non-compliance is 
proposed at 15 percent in the first round of reviews following 
publication of the final rule, and 10 percent for subsequent years. 
States with error rates within the threshold will receive disallowances 
only on the ineligible cases. Further, if the number of ineligible 
cases in the review that follows the program improvement plan is within 
the threshold, disallowances will be assessed only on those cases. If 
the number exceeds the threshold in the review following the program 
improvement plan, disallowances will be extrapolated to the universe.

V. Overview of Child and Family Service Reviews

A. Development of the Reviews

    The child and family service reviews proposed in this NPRM are the 
result of extensive piloting and consultation. Among the chief lessons 
learned from the developmental process are the following:
     Reviewing for outcomes, as opposed to procedural 
indicators alone, is more likely to lead to improvements in State 
programs;
     Three outcome areas of safety, permanency, and child and 
family well-being were identified and agreed upon as the areas in which 
almost all outcomes associated with Federally-funded child and family 
services fit;
     Reviewing for documentation alone in case records is 
insufficient for evaluating outcomes and the quality of services;
     The pilots indicated that a smaller sample of cases 
reviewed more intensely yielded more information about outcomes than 
larger samples that involved only case record reviews;
     The pilots indicated that State self-assessment is a 
viable approach for identifying programmatic strengths and needs, for 
building on the community planning process begun through implementation 
of the Child and Family Services Plan (CFSP) planning requirements, and 
for enhancing Federal/State partnerships (The final rule on Foster Care 
Maintenance Payments, Adoption Assistance, and Child and Family 
Services published November 18, 1996, contains the requirements 
governing the CFSP (61 FR 58632).);
     The review process is an effective means of assisting 
States in examining the effects of practice innovations and technical 
assistance and refining the indicators used to measure progress over 
time; and,
     A review team that includes State representatives from 
outside the State agency helps broaden the perspective of the review, 
supports locally-based partnerships between the State agency and the 
communities it serves, increases the likelihood that the review will be 
relevant to all populations served by the agency, and helps identify 
training needs in the State.
    With these lessons in mind, our primary goal in revising the 
reviews for child and family services is to assist States in improving 
outcomes for children and families by identifying the strengths and 
needs within State programs and those areas where technical assistance 
can lead to program improvements. Supporting goals include: (1) 
reviewing for the actual outcomes of services as well as the procedures 
that support desirable outcomes; and (2) using the reviews to promote 
the integration of the range of Federally-funded child and family 
services programs.
    In developing the NPRM, we have followed the statutory requirements 
closely when the statute has provided specific parameters for the 
reviews. Where we were required to make decisions about issues, such as 
the State plan requirements subject to review and the criteria for 
determining substantial conformity, we have focused on the emphasis the 
statute places on program improvements. We have integrated the proposed 
review requirements with other requirements related to data collection 
and the CFSPs in order to reduce the burdens on States whenever 
possible. Finally, in emphasizing the importance of outcomes over 
procedure, we are proposing a review process that States can adapt to 
their ongoing self-evaluation and integrate into their own quality 
assurance efforts, apart from periodic Federal reviews.
    We chose not to emphasize the penalty structure associated with the 
child and family services reviews. Rather, we have designed a review 
process that will lead to meaningful improvements in the outcomes of 
services delivered to children and families and will strengthen State 
and Federal collaboration. We have purposefully crafted the regulation 
to encourage States to make the necessary program improvements.

B. Summary of the Child and Family Service Reviews

    We are proposing to review State programs in two areas: (1) 
outcomes for children and families in the areas of safety, permanency, 
and child and family well-being; and (2) systemic factors that directly 
impact the State's capacity to deliver services leading to improved 
outcomes.
    The process we are proposing includes two stages: a State self-
assessment and an on-site review. The State self-assessment will be 
completed by the State members of the review team, including staff of 
the State agency and community representatives, in collaboration with 
ACF Regional Offices. In the second phase, a representative team of 
Federal, State and community reviewers will review a small ``discovery 
sample'' of cases selected randomly and stratified by type of cases, 
based on the findings of the self-assessment. The reviews will examine 
cases which reflect a wide range of services provided by the State, 
e.g., child protective services, out-of-home and in-home services, but 
more emphasis will be placed on those cases reflecting State-specific 
issues identified in the self-assessment. Information on each case will 
be gathered from the case records as well as interviews with the 
children, parents, social worker, foster parent and service providers 
in the case. Systemic issues will be reviewed on-site, primarily 
through interviews with State and community stakeholders from within 
and outside the State agency.

[[Page 50063]]

    As explained in the section-by-section discussion of the preamble, 
we are proposing to make ``substantial conformity'' determinations for 
each outcome and systemic factor reviewed, rather than an overall 
determination of conformity for the State's entire title IV-B and IV-E 
program. To be determined to be in ``substantial conformity,'' each 
outcome reviewed on-site must be rated ``substantially achieved'' in at 
least 90% of the cases examined in the first review, and 95% in the 
subsequent reviews. To be determined to be in ``substantial 
conformity'' for the systemic factors reviewed, each factor must be 
operating in accordance with applicable statutory requirements. Federal 
funds may be withheld from States that are determined to be in 
nonconformity. However, States first will be required to implement 
program improvement plans to correct areas of nonconformity and, if the 
plans are implemented successfully, funds will not be withheld.
    We propose that States determined to be operating in substantial 
conformity be reviewed at five-year intervals and States not in 
substantial conformity be reviewed at three-year intervals.

VI. Interethnic Adoption Provisions of the Small Business Job 
Protection Act of 1996 and the Multiethnic Placement Act of 1994

    On August 20, 1996, President Clinton signed the Small Business Job 
Protection Act of 1996. Section 1808 of this Act (section 1808), 
``Removal of Barriers to Interethnic Adoption,'' repeals and replaces 
the nondiscrimination provision of the Multiethnic Placement Act of 
1994 (MEPA). Section 1808 prohibits denial of or delay in the placement 
of a child for adoption or foster care on the basis of race, color, or 
national origin of the adoptive parent, foster parent, or child 
involved. It also prohibits denying to any person the opportunity to 
become an adoptive or foster parent, on the basis of the race, color, 
or national origin of the person or child involved. This provision 
became a new title IV-E State plan requirement, section 471(a)(18) of 
the Act, effective January 1, 1997. Noncompliance with section 
471(a)(18) constitutes a violation of title IV-E as well as a violation 
of title VI of the Civil Rights Act of 1964.
    The diligent recruitment requirement at section 422(b)(9) of the 
Act in no way mitigates the prohibition on denial or delay of placement 
based on race, color or national origin. However, the statute is clear 
that the section 1808 prohibitions against delaying or denying 
placement based on race, color, or national origin have no effect on 
the application of the Indian Child Welfare Act of 1978.
    In implementing the provisions of section 1808, we will identify 
potential violations during the conduct of child and family services 
reviews. We will refer cases so identified, as well as cases brought to 
our attention by any other means, to the Department's Office for Civil 
Rights (OCR) for investigation. Based on the OCR investigation in any 
such case, we will determine whether a violation of section 471(a)(18) 
has occurred. Under section 474(d) of the Act, States and other 
entities receiving title IV-E funding are subject to financial 
penalties and corrective action for such violations.

VII. Welfare Reform Legislation and Title IV-E Eligibility

    On August 22, 1996, the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (PRWORA) was signed into law 
(Pub. L. 104-193). This law repealed the Aid to Families with Dependent 
Children (AFDC) program and replaced it with the Temporary Assistance 
for Needy Families (TANF) block grant. This change has implications for 
the title IV-E foster care program since title IV-E eligibility is 
predicated, in part, on the child's eligibility for AFDC. The PRWORA, 
as amended by the Balanced Budget Act of 1997 (Pub. L. 105-33), 
requires States to apply the AFDC eligibility requirements that were in 
effect in the State on July 16, 1996, when determining whether children 
are financially eligible for Federal foster care. Consistent with this 
approach, we continue to use references which predate the passage of 
TANF, but are to be applied as they were in effect on July 16, 1996.

VIII. The Adoption and Safe Families Act of 1997

    On November 19, 1997, the President signed into law the Adoption 
and Safe Families Act (ASFA) of 1997, Pub. L. 105-89. This legislation, 
passed by the Congress with overwhelming bipartisan support, represents 
an important landmark in Federal child welfare law. Its passage affords 
us an unprecedented opportunity to build on the reforms of the child 
welfare system that have begun in recent years in order to make the 
system more responsive to the multiple, and often complex, needs of 
children and families. The Adoption and Safe Families Act embodies a 
number of key principles that must be considered in order to implement 
the law:
     The safety of children is the paramount concern that must 
guide all child welfare services. The new law requires that child 
safety be the paramount concern when making service provision, 
placement and permanency planning decisions. The law reaffirms the 
importance of making reasonable efforts to preserve and reunify 
families, but also now clarifies instances in which States are not 
required to make efforts to keep children with their parents, when 
doing so places children's safety in jeopardy.
     Foster care is a temporary setting and not a place for 
children to grow up. To ensure that the system respects a child's 
developmental needs and sense of time, the law includes provisions that 
shorten the time frame for making permanency planning decisions, and 
that establish a time frame for initiating proceedings to terminate 
parental rights. The law also strongly promotes the timely adoption of 
children who cannot return safely to their own homes.
     Permanency planning efforts for children should begin as 
soon as a child enters foster care and should be expedited by the 
provision of services to families. The enactment of a legal framework 
requiring permanency decisions to be made more promptly heightens the 
importance of providing quality services as quickly as possible to 
enable families in crisis to address problems. It is only when timely 
and intensive services are provided to families that agencies and 
courts can make informed decisions about parents' ability to protect 
and care for their children.
     The child welfare system must focus on results and 
accountability. The law is clear that it is no longer enough to ensure 
that procedural safeguards are met. It is critical that child welfare 
services lead to positive results. The law contains a number of tools 
for focusing attention on results, including an annual report on State 
performance; the creation of an adoption incentive payment for States, 
designed to support the President's goal of doubling the annual number 
of children who are adopted or permanently placed by the year 2002; and 
a requirement to study and make recommendations regarding additional 
performance-based financial incentives in child welfare.
    We are proposing regulations in this NPRM for the following 
provisions in the ASFA:
     Section 471(a)(15) of the Act regarding reasonable 
efforts;
     Section 471(a)(20) of the Act regarding criminal records 
checks;
     Section 475(1)(E) of the Act regarding documentation of 
the State's

[[Page 50064]]

efforts to make and finalize a child's placement when the permanency 
goal is adoption, guardianship, or some other permanent arrangement;
     Section 475(5)(C) of the Act regarding permanency 
hearings;
     Section 475(5)(E) of the Act regarding requirements to 
file or join a petition to terminate parental rights.
     Section 475(5)(F) of the Act regarding the date a child 
has entered foster care; and,
     Section 475(5)(G) of the Act regarding notice of reviews 
and hearings and an opportunity to be heard for foster parents, 
relative caregivers, and preadoptive parents.
    The proposed title IV-E review only monitors eligibility for foster 
care maintenance payments. Therefore, those provisions in the ASFA 
which amend title IV-B, subpart 2, and the Adoption Assistance program 
will be regulated in a subsequent NPRM. We will propose regulations for 
the following ASFA provisions in the next NPRM:
     Title IV-B, subpart 2 of the Act regarding the Promoting 
Safe and Stable Families program;
     Section 471(a)(21) of the Act regarding health insurance 
coverage for children with special needs for whom an adoption 
assistance agreement is in effect; and,
     Section 473(a)(2)(C) of the Act regarding a child's 
continued title IV-E eligibility for adoption assistance in cases where 
an adoption disrupts or the adoptive parent(s) die.
    ACF does not intend to issue regulations to implement the adoption 
incentive bonuses at section 473A of the Act because of the time-
limited nature of the provision. Rather, we have provided guidance 
through policy issuance.

IX. Strategy for Regulating the Adoption and Safe Families Act of 
1997

    We have decided to regulate the provisions of ASFA and other recent 
statutory amendments through two NPRMs. This, the first NPRM, transmits 
ACF's proposed review systems for child and family services and title 
IV-E eligibility, proposes an enforcement strategy for the statutory 
prohibitions regarding race preference in foster and adoptive 
placements, and addresses those provisions in the ASFA related to the 
foster care maintenance program. The second NPRM will propose 
codification of the remaining ASFA amendments to the Social Security 
Act. Clarification and interpretation required by the field to 
implement the time sensitive provisions in the ASFA will be addressed 
by policy issuances prior to codification in a final rule.
    We considered issuing a single comprehensive NPRM which would 
encompass technical and programmatic changes to titles IV-B and IV-E 
and the review processes, but rejected that approach in favor of the 
alternative strategy for the following reasons:
    (1) ACF is required by statute to promulgate regulations to 
implement State plan compliance reviews. After extensive consultation 
with the field to develop these proposed review procedures and several 
years of pilot testing, it is critical that the field receive guidance 
on the proposed review processes without further delay;
    (2) The proposed review processes can easily accommodate revisions 
to program operation and policy; and,
    (3) ACF has a statutory obligation to enforce the provisions of 
section 471(a)(18) of the Act.
    Soon after the enactment of the ASFA, we held focus groups in 
Washington, DC and in each of the 10 Federal regions to obtain input 
from the field on the implementation of the new law. We learned a great 
deal about the provisions in the law that require clarification and 
guidance. The section-by-section discussion in the preamble offers 
guidance on the intent of the ASFA and its implementation.
    We want to be very clear about the effective dates in the ASFA. The 
provisions in the ASFA were effective on the date of enactment, 
November 19, 1997, except for those provisions which require action on 
the part of the State legislature. The ASFA establishes a delayed 
effective date (the first day of the calendar quarter following the 
first legislative session which follows the enactment of the ASFA) for 
States that must pass legislation to implement certain provisions. 
States may not wait until final regulations are promulgated to come 
into compliance with the ASFA provisions. States must adhere to the 
effective dates in the statute.

X. Section-by-Section Discussion of the NPRM

A. Child and Family Service Reviews

Part 1355--General

Section 1355.20  Definitions

    We have amended 45 CFR 1355.20 to include definitions of new terms 
relevant to monitoring, including full review, partial review, and 
State self-assessment. We have added a definition of the National Child 
Abuse and Neglect Data System, since the term is not defined in other 
regulations (See Part X.B. for other definitional revisions in 
Sec. 1355.20.)

Section 1355.31  Elements of the Review System

    Section 1355.31 is added to specify the scope of the reviews 
covered in the NPRM.

Section 1355.32  Timetable for the Reviews

    This section specifies the review timetable for the initial and 
subsequent reviews as required by Section 1123A of the Social Security 
Act.
    In paragraph (a), we are proposing a six-month period following 
publication of the final rule and prior to the commencement of Child 
and Family Service reviews so that States can become knowledgeable 
about the review process before the initial reviews begin in each 
State. The extended time period proposed for completing the initial 
reviews takes into account that: (1) States will need time to become 
familiar with and prepare for these new reviews; and (2) the ACF 
Regional Offices must schedule these reviews in all of the States 
within each region, in conjunction with separate scheduling for the 
newly revised title IV-E eligibility reviews. We learned from our pilot 
reviews that approximately six months is required to prepare for and 
conduct a review that examines the quality of services and outcomes.
    In paragraph (b), we describe the timetable for reviews following 
the initial review, in accord with the statutory requirement for less 
frequent reviews of States that are determined to be in substantial 
conformity. We propose that full reviews be conducted at five-year 
intervals in States found to be in substantial conformity. We also 
propose that the State self-assessment portion of the review be 
completed three years after a review in which a State is found to be in 
substantial conformity.
    In addition, we propose that reviews for States determined not to 
be in substantial conformity occur at three-year intervals. This 
proposal is based on the recognition that many States have technical 
assistance needs that will extend beyond a year or two in order for 
them to implement program improvement plans designed to correct the 
areas of nonconformity in their child and family services program.
    In paragraph (c), we implement the provision at section 
1123A(b)(1)(C) of the Act regarding the reinstatement of more frequent 
reviews of States and also provide examples of information that might 
indicate that the State is not operating in substantial conformity. We 
propose that when information is received suggesting the possibility of

[[Page 50065]]

nonconformity, ACF will conduct detailed inquiries prior to initiating 
an unscheduled review. We do not wish to pursue more frequent reviews 
than are necessary and will conduct detailed inquiries prior to 
initiating an unscheduled review. If the State, however, does not 
provide the additional information requested, we will proceed with a 
review. When a full review is not deemed necessary or appropriate, we 
propose that a targeted partial review be conducted of the areas 
indicated to be in nonconformity.

Section 1355.33  Procedures for the Review.

    In paragraph (a), we propose a two-phase review process and suggest 
that the joint State-Federal review team have multiple representation, 
including individuals and organizations outside the State agency with 
whom the State was required to consult in developing its State plan 
(external members). Federal review team members will consist primarily 
of staff from ACF, but may also include staff from other agencies 
within HHS, including the Office for Civil Rights (OCR).
    We received positive feedback from participants in the pilot 
reviews that this approach encourages Federal-State collaboration 
during the review, as well as during the development and implementation 
of program improvement plans. We found that a team with a more diverse 
composition:
     Had a broader perspective of the extent to which outcomes 
were being achieved, and was more comprehensive in its identification 
of areas needing improvement within a State;
     Would be better able to integrate the proposed review 
process with the CFSP planning process by including the external 
representatives in both processes and building on the existing 
consultation requirements in place;
     Satisfied a repeatedly expressed need on the part of the 
focus group participants for a broad base of community involvement in 
the new review process, including representatives other than staff of 
the State agency; and
     May lead to increased opportunities for technical 
assistance from those involved in identifying the State's strengths and 
needs.
    In paragraph (b), we describe the proposed State self-assessment 
process which is based on data, provided by ACF to the States in report 
format, from their own most recent submissions to the AFCARS and NCANDS 
systems. State review team members will review and analyze the data to 
evaluate the strengths and needs of the child and family services 
systems in the State. ACF will conduct an independent analysis of the 
AFCARS and NCANDS data and provide consultation to the State during the 
development of the self-assessment to ensure that it is complete and 
accurate. In promoting the principles of State flexibility and program 
improvement through the reviews, the analysis of the self-assessment 
will provide the focus for the on-site review by identifying particular 
aspects of State programs that need further review. This approach is 
proposed as an alternative to conducting standard reviews on similar 
populations in every State, absent any recognition of individual State 
needs. State self-assessments were used successfully to structure the 
on-site reviews around specific outcome areas, service areas, and 
systemic issues. We think this approach will promote a more efficient 
use of State and Federal resources.
    In paragraph (c), we describe the proposed on-site review process. 
The proposal that the on-site review be focused in specified geographic 
locations in the State, including the State's largest city, reflects an 
approach used in all of the pilots. It provided members of the review 
team opportunities to speak to local stakeholders and conduct face-to-
face interviews with children and families, service providers, foster 
families and staff from various localities. Because the nation's large 
metropolitan areas are often characterized by complex social and 
organizational issues that affect large numbers of children and 
families, we propose that each State's largest metropolitan area be one 
of the locations selected for an on-site review.
    In paragraph (c)(3), we propose that ACF has final approval if 
consensus cannot be reached regarding the selection of programmatic 
areas of emphasis for the on-site reviews and the geographic locations 
in which the on-site review will occur. However, our experience from 
the pilot reviews suggests that, in most cases, the State and ACF will 
reach consensus.
    The proposed approach of using various sources of information to 
determine substantial conformity with the outcomes and systemic factors 
is also based on the pilot reviews. The comparative experiences in the 
pilots revealed that the reviews yield findings of greater quality and 
higher accuracy when they include case reviews and interviews rather 
than rely solely on the case records.
    The on-site review, by design, is qualitatively focused, reflecting 
our belief that a small sample that examines outcomes thoroughly will 
best promote the State/Federal partnerships and collaboration necessary 
to achieve program improvements through the reviews. We propose that 
the sample of cases be randomly selected and that the sampling plan be 
approved by the ACF designated official in order to achieve an 
objectively selected sample. We have not prescribed a specific number 
of cases to be included in the sample, since the number will vary by 
State, depending upon the size of the State and the areas under review. 
However, we propose to select a relatively small sample, that is, 30-50 
cases, and conduct an intense review, including interviews with the 
relevant parties in each case.
    In some pilot States, we used both the old review method of merely 
reading case records and the proposed method of reading case records 
and conducting interviews with families and other relevant parties. In 
those pilot States where both the old and the proposed review methods 
were deployed simultaneously, the review teams reported that the 
proposed method provided a more accurate measure of the status of 
outcomes in the States. Conducting interviews with families and other 
relevant parties resulted in a more balanced approach by the review 
team when considering the State's success in achieving outcomes for 
families.
    In paragraph (d), we propose that partial reviews be jointly 
planned and conducted by the State and ACF. Partial reviews will be 
targeted to the nature of the concern.
    We believe the stated emphasis on program improvement will best be 
served through timely feedback to the States on the review findings. 
Therefore, in paragraph (e), we propose a time frame of 30 calendar 
days in which to notify the State of ACF's determination as to whether 
the State is operating in substantial conformity. However, the letter 
of notification will not include a detailed report of the review. 
Rather, it will summarize and confirm the findings of the review, many 
of which will have been assembled and reported to the State at the 
conclusion of the on-site review. We propose that the substance of 
findings related to a determination of nonconformity be expounded upon 
and developed in the context of the program improvement plan, which 
will then serve as a guide to the State in achieving substantial 
conformity (see section 1355.35).

Section 1355.34  Criteria for Determining Substantial Conformity

    This section describes the criteria which will be used to determine 
a

[[Page 50066]]

State's degree of conformity with specified State plan requirements for 
each outcome and systemic factor of the State's service delivery system 
that undergoes review.
    We propose to base conformity on the specific outcomes and systemic 
factors reviewed, rather than on the State program as a whole. 
Accordingly, we have limited the State plan requirements subject to 
review to those requirements related specifically to outcomes and the 
delivery of improved services. We are, in effect, proposing that 
conformity with these requirements constitutes ``substantial 
conformity,'' rather than reviewing for and requiring some percentage 
of compliance with all of the title IV-B and IV-E State plan 
requirements. Also, making determinations of substantial conformity 
based on specific outcomes and systemic factors will permit States to 
take advantage of technical assistance opportunities to focus on those 
aspects of their programs needing improvement.
    In paragraphs (a)(1) and (2), we propose to determine the State's 
substantial conformity with applicable CFSP requirements based on: (1) 
the achievement of the seven outcomes specified in paragraph (b); and 
(2) the functioning of seven core systemic factors directly related to 
the State's capacity to deliver services leading to improved outcomes, 
as specified in paragraph (c). In paragraph (a)(3), we propose that a 
review and analysis of the aggregate data in the State self-assessment 
should be consistent with, and support, the findings of the on-site 
review. Significant discrepancies between the aggregate data and the 
on-site review findings may be a contributing factor in determining 
that a State is not in substantial conformity.
    In paragraph (b)(1), we link substantial conformity to the outcomes 
for children and families, and list the seven outcomes that are subject 
to review. These outcomes were derived from discussions with numerous 
focus groups, consultation with experts in the field, and from an 
extensive review of the literature on the outcomes for children and 
families served by the programs under review. The pilot reviews have 
demonstrated them to be appropriate outcomes to measure.
    In paragraph (b)(2), we propose that a State's level of achievement 
(i.e., ``substantially achieved,'' ``partially achieved,'' or ``not 
achieved'') with regard to each outcome, as determined by the review 
team, reflect the extent to which a State has implemented the CFSP 
requirements and assurances subject to review. We have specified those 
CFSP requirements that are directly related to the outcomes that will 
undergo review, including the new title IV-B State plan requirement to 
make effective use of cross-jurisdictional resources to place children 
in adoptive homes.
    While the requirement at section 471(a)(18) of the Act has a direct 
impact on permanency for the children affected, we have proposed only 
to use the child and family services review as a mechanism for 
identifying potential section 471(a)(18) compliance issues rather than 
as a mechanism to determine compliance with this provision, hence its 
exclusion from this paragraph. The statutory requirements for enforcing 
section 471(a)(18) necessitate a different approach from that taken in 
the child and family services review. However, the self-assessment and 
the instruments for the on-site portion of the review will include 
questions designed to probe for potential section 471(a)(18) compliance 
issues. Once identified through a child and family services review, or 
otherwise, potential noncompliance with section 471(a)(18) will be 
addressed through the process proposed at section 1355.38.
    In paragraph (b)(2)(vii), the proposed review of the title IV-E 
requirement regarding reasonable efforts is not a duplication of the 
review of reasonable efforts determinations performed in the title IV-E 
foster care eligibility reviews. We are not proposing to review for 
reasonable efforts determinations in court orders or other court 
documentation, but for the actual services provided to prevent 
removals, facilitate reunification, or, in conformance with the ASFA, 
to make and finalize alternate permanent placements. This State plan 
requirement clearly supports two of the outcomes proposed for review: 
(1) children are, first and foremost, protected from abuse and neglect, 
and are safely maintained in their homes whenever possible; and (2) 
children have permanency and stability in their living situations.
    In paragraph (b)(3), we propose that in order for a State to be 
determined to be in substantial conformity, each outcome to be examined 
must be rated as ``substantially achieved'' in at least 90 percent of 
the cases reviewed on-site in the initial review and 95 percent in 
subsequent reviews. For example, if 40 cases are reviewed as part of an 
initial on-site review, each outcome must have been ``substantially 
achieved'' for at least 36 (90%) of these cases as determined by the 
review team. The rationale for the phased-in standard of outcome 
achievement is that States will need time to focus their resources on 
program improvements and the new approach to the reviews and may not be 
able to conform to a 95 percent standard initially. However, given the 
goal of the proposed review process to support practice improvements 
over time, we believe a 95 percent standard better reflects the ongoing 
quality of outcomes we are promoting.
    The on-site review instruments are designed to guide reviewers in 
determining the degree of outcome achievement. Specific items in the 
on-site review instruments are indexed to each outcome. These items 
will be examined collectively from a case-specific qualitative level in 
determining if each outcome has been or is being achieved at a 
satisfactory level, that is, ``substantially achieved.'' We have 
published the items indexed to the outcomes at Attachment A, at the end 
of this preamble, in order to give States a more specific idea of what 
is reviewed during the on-site process. We do intend to publish the 
self-assessment and on-site review instruments in meeting Paperwork 
Reduction Act requirements. These documents provide detail regarding 
the information to be collected and reviewed. We want to be clear, 
however, that the items will not be published as part of the final rule 
because they are subject to change as we learn more about how 
particular issues affect outcomes for children and families.
    In the pilot reviews, we invested considerable effort in preparing 
reviewers to collect and consider the information needed to make 
decisions about outcome achievement. In addition, we assembled a cross-
section of representatives from within and outside the State agency and 
made numerous revisions to the instrument to increase the likelihood of 
objective conclusions. We propose to require that conclusions about 
outcomes be made on the basis of several perspectives, including those 
of the children, parents, social worker and service providers involved 
in the cases reviewed, in order to provide us with more comprehensive 
information about each case undergoing review.
    We believe that the proposed review of outcomes is necessary to 
achieve the goal of improved services. In each of the pilots, reviewers 
were able to apply the criteria to the outcomes in a manner that led to 
decisions considered by the review team to be valid. Further, the 
compilation of findings around outcomes by the review team was 
generally consistent with the State agency's perception of the 
strengths and needs of its programs which, we think,

[[Page 50067]]

adds further validity to the approach we are proposing.
    In paragraph (c), we propose also to link substantial conformity to 
a State's implementation of those CFSP requirements clearly related to 
delivering child welfare services which lead to improved outcomes, in 
addition to the review of the actual outcomes. We have identified the 
seven core systemic factors that we propose to examine, along with the 
specific criteria that will be reviewed to determine if each systemic 
factor is operating in substantial conformity. The factors we have 
chosen to examine emerged from a much longer list that was refined over 
the course of the pilot reviews. The systemic factors to be reviewed 
are those that seemed to most critically influence agency capacity at 
both the State and local levels.
    The nature of the systemic factors and criteria for determining 
substantial conformity does not accommodate measurement at an interval 
level, e.g., percentage of achievement. We are, therefore, proposing 
that the review team apply specific criteria associated with each 
factor and determine whether the State is operating in substantial 
conformity with the CFSP requirements related to each factor. In 
paragraphs (c)(1) through (7), we have identified the components of 
each systemic factor that will be examined. The factors include: (1) 
The Statewide information system; (2) the case review system (which 
incorporates the new requirements in the ASFA for permanency hearings, 
termination of parental rights, and notice of hearings for foster and 
preadoptive parents); (3) the quality assurance system (which includes 
the new State plan requirement to establish and maintain quality 
standards for children in foster care); (4) training; (5) service array 
(including the new services that must be provided under title IV-B 
subpart 2, i.e., time limited reunification services and post-legal 
adoption services); (6) agency responsiveness to the community; and (7) 
foster/adoptive parent licensing, recruitment, and retention (which 
includes the new State plan requirements for criminal record checks and 
plans for effective use of cross-jurisdictional resources for making 
adoptive placements).
    Since these factors relate to systemic issues within State 
agencies, the degree to which they are operating in substantial 
conformity with CFSP requirements is a decision made with input from 
the entire review team. The decision will be based on information 
contained in the State self-assessment, as well as interviews with a 
broad cross-section of internal and external stakeholders at the State 
and local levels. In proposing the criteria to evaluate each systemic 
factor, we have worked to stay within the limits of the statutory and 
regulatory language related to the factors.
    With regard to the case review system required in section 422 and 
defined in section 475 of the Act, we will not base substantial 
conformity on the documentation of these requirements for individual 
children as was the practice in previous section 427 reviews. Rather, 
the extent to which the State has in place a case review system that 
effectively promotes desirable safety, permanency, and well-being 
outcomes for the children and families served by the State will 
determine the degree of conformity.
    We propose in paragraph (d) that the review instruments be provided 
to all States when the final rule becomes effective. This will ensure 
that States are aware of the methodology that will be used to make 
determinations related to outcome achievement and the functionality of 
systemic factors. We are particularly interested in comments regarding 
the most effective method for keeping States informed of the content of 
the review instruments.

Section 1355.35  Program Improvement Plans

    This section describes the requirements for developing, 
implementing and reviewing State program improvement plans and for 
providing technical assistance to States in implementing the program 
improvement plans. It implements the requirement in section 1123A(b)(4) 
of the Act that States found not to be in substantial conformity be 
afforded the opportunity to develop and implement a corrective action 
plan. We are proposing the term ``program improvement plan'' as an 
alternative to corrective action plan, believing that it better 
reflects the principles of program improvement and State/Federal 
partnerships that we are attempting to cultivate through the reviews.
    In paragraph (a)(1) we propose to require that the program 
improvement plan be developed jointly between the State and HHS, 
consistent with other regulatory requirements that the State plan be 
developed jointly, and in keeping with the desire to promote State and 
Federal partnerships through the reviews.
    In paragraphs (a) (2) through (5), we describe the required content 
of the program improvement plans, specifically that the plans address 
the areas of nonconformity and identify the activities, time frames, 
technical assistance and evaluations needed to achieve substantial 
conformity.
    In paragraph (b), we propose the option of a voluntary program 
improvement plan for States that meet the criteria for substantial 
conformity but yet have areas where program improvements are needed, 
and we describe the requirements for such voluntary plans.
    In paragraph (c)(1), we propose that a State's program improvement 
plan be approved in accordance with section 1123A(b)(4)(A) of the Act. 
In addition, we propose that a State submit its plan for approval 
within 60 days following receipt of the written notice of nonconformity 
so that a State found to be in nonconformity may receive prompt 
assistance in achieving program improvements.
    In paragraph (c)(2), ACF will approve the plan if it meets the 
requirements for program improvement plans described in this section. 
If the plan does not meet the requirements and is not approved, we 
propose in paragraph (c)(3) that the State be given 30 additional days 
to revise and re-submit the plan for approval. If the State does not 
re-submit the plan, or if the re-submitted plan continues to fail to 
meet the requirements and cannot be approved, we propose in paragraph 
(c)(4) to initiate withholding of funds in accordance with the 
provisions of Sec. 1355.36 of this part. We believe that reasonable 
time frames must govern the submission of approvable program 
improvement plans, and would appreciate comments as to whether the time 
frame for the joint development of the program improvement plan is 
adequate as proposed.
    In paragraph (d), we are proposing that program improvement plans 
be approved for time periods of up to two years, depending upon the 
level of nonconformity. We do not expect all program improvements to 
take two years to implement and expect States to address areas of 
nonconformity expeditiously. States will be required to prioritize 
areas needing improvement that pose risks to child safety and complete 
the appropriate action steps within a time frame to be determined in 
consideration with the level of risk. We do recognize, however, that, 
in some circumstances, it will be impossible for the State to address 
the areas needing improvement within the two year time frame, even with 
technical assistance. In such situations we are, thus, proposing a 
three-year period of time as the maximum implementation period for the 
plans, consistent with the time frame for the ongoing full reviews.

[[Page 50068]]

    In paragraph (e), we propose procedures for evaluating the 
implementation of program improvement plans. We propose that the State 
members of the review team and the ACF Regional Office determine the 
appropriate intervals for evaluating the plans, since the content of 
each plan and the needs of individual States will vary significantly. 
Our proposal that the evaluations occur no less frequently than 
annually is an effort to: (1) assure that delays in evaluation do not 
prevent the State from correcting the areas of nonconformity in a 
timely manner; (2) integrate the implementation of the plans with the 
joint planning process between the State and ACF; and (3) reduce the 
burden on States by using the existing annual CFSP progress review and 
update as the vehicle for evaluating the plans, rather than create an 
additional process.
    In paragraph (e)(3), we address evaluation of individual components 
of the program improvement plans. We are proposing that the areas of 
nonconformity be addressed individually when evaluating the plans, so 
that once they are determined to be complete they will not require 
further evaluation.
    In paragraph (e)(4), we propose the option for the State and ACF to 
renegotiate the terms of the program improvement plans, as needed. This 
is based on the fact that changes in approach may be needed during the 
implementation of a plan, and we want to provide that flexibility for 
the States.
    In paragraph (f), we elaborate on the proposal that States 
integrate their program improvement plans with CFSP planning and 
implementation.
    To the extent that ACF has the resources and funds available, it 
shall make technical assistance available to improve the outcomes or 
other factors that are outlined in a State's program improvement plan.
    Our goals in this section and in the withholding section (45 CFR 
1355.36) include: providing timely feedback on the findings of the 
review to the State, based on joint planning, collaboration and 
agreement on the strengths and needs of the program; avoiding the 
``review and penalize'' approach used in prior reviews; and focusing 
the period following the review on program improvement. In the pilot 
reviews, we found that the final reports of the reviews, prepared by 
ACF in collaboration with the State and the review team, required (at a 
minimum) several months to complete and delayed the development of 
program improvement plans well beyond the completion of the actual 
review. We, therefore, have proposed that ACF develop a concise, 
focused report of findings within 30 days of the review. This method 
allows us to expeditiously engage the State in developing a program 
improvement plan that addresses the mutually agreed upon areas of 
nonconformity. We have proposed that program improvement plans be 
developed within 60 days of ACF issuing a written confirmation to the 
State of the findings of the review.

Section 1355.36  Withholding Federal Funds Due to Failure To Conform 
Following the Completion of a State's Program Improvement Plan

    This section describes the process for withholding funds due to the 
failure of the State to meet the criteria for substantial conformity. 
We have addressed statutory requirements by specifying the methods used 
to determine the amount of Federal funds to be withheld due to a 
State's failure to comply substantially, and the conditions under which 
the funds will be withheld. In reviewing this section, the reader 
should note that the withholding of funds is suspended during the 
implementation period of a program improvement plan. Following the 
completion of the program improvement plan, the amount of funds which 
will be withheld and collected in arrears is the amount identified in 
conjunction with those areas of nonconformity that remain uncorrected.
    In paragraphs (a)(1) and (2), we define the pool of funds to which 
any penalties should apply. Inasmuch as section 1123A(a) of the Act 
requires that the Secretary review a State's conformity with State plan 
requirements of both titles IV-B and IV-E, we have deemed it 
appropriate and consistent to propose that funds under each of these 
titles be subject to withholding. This approach is further supported by 
the close linkages we see between both titles, for example, in the 
areas of protections for children, the recruitment of foster and 
adoptive families, and the development of training strategies. While 
greater emphasis is placed on title IV-B State plan requirements in the 
reviews of State child and family services programs, the requirements 
within the two titles are sufficiently intertwined so as to justify a 
pool of both title IV-B and title IV-E funds. However, in recognition 
of this greater emphasis, we believe that it is appropriate that the 
pool of funds subject to withholding be comprised of a State's total 
title IV-B allocation. Since a smaller number of title IV-E State plan 
requirements have been included as part of these reviews, we are 
proposing that the pool of title IV-E funds subject to withholding be 
limited to a State's claims for title IV-E foster care administrative 
costs, and not include foster care maintenance payments.
    In paragraph (b)(1), we propose that withholding funds based on a 
determination that a State is not operating in substantial conformity 
be delayed until the State has the opportunity to develop and implement 
a program improvement plan.
    In paragraph (b)(2), we propose that funds not be withheld from a 
State if the determination of nonconformity is caused by the State's 
correct use of formal statements of Federal law or policy provided by 
DHHS.
    In (b)(3), we are proposing that withholding apply to the year 
under review and each succeeding year until the failure to conform ends 
through the successful completion of the program improvement plan, or 
until a subsequent review determines that the State is operating in 
substantial conformity. The amount of funds subject to withholding that 
we are proposing is relatively modest for a single year. We therefore 
believe that for potential withholding to serve as an incentive for 
program improvements, it must be applied over the entire period of 
nonconformity.
    In (b)(4) we address the statutory requirement that the amount of 
funds withheld must be proportionate to the extent of nonconformity. In 
paragraph (b)(4)(i), we define the pool of funds from which any funds 
shall be withheld due to nonconformity. The pool includes the State's 
entire title IV-B allocation, subparts 1 and 2, for the years to which 
the withholding applies, plus an amount equivalent to 10 percent of the 
State's Federal claims for title IV-E foster care administrative costs 
(exclusive of training costs matched at 75 percent) for the years to 
which the withholding applies. Only 10 percent of the title IV-E foster 
care administrative claims is proposed since a smaller number of the 
State plan requirements subject to review are specifically title IV-E 
related.
    In paragraphs (b)(4)(ii) and (iii), we are proposing that equal 
weight be given to each of the seven core outcomes, described in 
Sec. 1355.34(b)(2) of this part, and the seven core systemic factors, 
described in Sec. 1355.34(c)(2) of this part, in determining 
substantial conformity. We propose that the amount of funds subject to 
withholding for each outcome and systemic factor be one percent of the 
pool of the State title IV-B allocation and title IV-E foster care 
administrative costs. We propose that funds be withheld only for those

[[Page 50069]]

particular outcomes and systemic factors that are determined not to be 
in substantial conformity, whether as a result of a full or partial 
review. Therefore, States determined not to be operating in substantial 
conformity based on only one outcome would be subject to a one percent 
withholding, and States with greater degrees of nonconformity would be 
subject to proportionately higher withholding.
    We think that our proposal for withholding provides a sufficient 
penalty to serve as an incentive for program improvements as needed, 
but does not withhold so much as to prohibit States from making 
improvements or delivering services. Our definition of the pools of 
funds to which penalties will apply is consistent with the extent to 
which we will be reviewing State plan requirements for programs 
administered under both funding sources. We anticipate that the maximum 
penalty proposed for States determined not to be in substantial 
conformity on all of the outcomes and systemic factors reviewed will be 
less than penalties imposed under the section 427 reviews, on a year-
by-year basis. This is primarily due to our expectation that the 
development and implementation of a program improvement plan, along 
with the provision of technical assistance, will result in significant 
progress by the State in achieving substantial conformity. This 
proposal is consistent with our intent to de-emphasize penalties in 
favor of efforts to improve services. We particularly invite comments 
on this issue.
    In paragraph (b)(5), we propose the maximum amount of funds to be 
withheld if the State cannot achieve substantial conformity through the 
implementation of a program improvement plan.
    In paragraph (c), consistent with section 1123A(b)(4)(C) of the 
Act, we propose that the amount of funds withheld not be deducted from 
a State's allocation during the implementation period of the program 
improvement plan, provided the plan conforms to the requirements in the 
final rule.
    The statute also requires that the Secretary rescind the 
withholding of funds if the State's failure to conform is resolved by 
successful completion of a corrective action plan. We have addressed 
this requirement in paragraph (d), and also propose that the Secretary 
not withhold any portion of funds that applies to individual outcomes 
or systemic factors that are brought into substantial conformity 
through partial completion of the program improvement plan.
    In paragraph (e)(1), we propose that the statutory requirement that 
ACF notify the State no later than 10 days following a final 
determination of substantial failure to conform be interpreted as 10 
business days. Although each State will be notified of whether it is, 
or is not, operating in substantial conformity following the on-site 
review, this earlier determination shall not be considered final for 
States which are determined not to be in conformity. These States will 
be notified of the final determination following the successful or 
unsuccessful completion of a program improvement plan.
    In paragraph (e)(2), we clarify when and under what circumstances 
the actual withholding of funds will occur. The decision to withhold 
funds from a State will be directly related to its progress in 
implementing a program improvement plan. At the completion of the 
program improvement plan, the amount of funds associated with any 
remaining areas of nonconformity will be withheld by the Department for 
the time period beginning with the year under review in which the 
initial determination of nonconformity was made to the date of the 
final determination of nonconformity, and from that date forward until 
substantial conformity is achieved. In paragraph (e)(3), we propose 
that the amount of funds withheld be computed to the end of the quarter 
in which substantial conformity is achieved.
    In paragraph (e)(4), we propose the penalty structure for States 
that fail to participate in the development of a program improvement 
plan, or in the implementation of a plan, as required by ACF.

Section 1355.37  Opportunity for Public Inspection of Review Reports 
and Materials

    In this section, consistent with the requirements for State plans 
at 45 CFR 1355.21(c), we propose that the State make reports and 
materials related to the child and family services reviews available 
for public inspection. We think it is critical that States obtain the 
broadest public involvement in the implementation of child welfare 
programs. We are particularly interested in comments regarding the 
method of dissemination of these materials in order to accomplish this 
goal.

Section 1355.38  Enforcement of Section 471(a)(18) of the Act Regarding 
the Removal of Barriers to Interethnic Adoption

    In this section, we implement the provisions of sections 474(d)(1) 
and (2) of the Act. Section 474(d) contains enforcement provisions 
applicable to section 471(a)(18) of the Act, which requires the removal 
of barriers to interethnic adoption. We have chosen to codify the 
section 1808 enforcement procedures in regulations in conjunction with 
the 1123A review process because the statute specifically identifies 
the 1123A review process as a mechanism for assuring State compliance 
with section 471(a)(18) of the Act. While the 1123A review process is 
an appropriate mechanism for detecting possible violations of section 
471(a)(18) of the Act, the corrective action and penalty structure 
required by section 474(d) of the Act does not fit within the 
``substantial conformity'' standard by which other title IV-B and title 
IV-E State plan requirements are measured in the 1123A review process. 
Therefore, ACF has developed a separate process for addressing 
violations of section 471(a)(18), once identified.
    After considering a number of options, we determined that 
implementing section 474(d) of the Act requires collaboration with OCR 
because it has significant expertise in investigating alleged civil 
rights violations. Moreover, a State's noncompliance with section 
471(a)(18) of the Act is also a violation of title VI of the Civil 
Rights Act of 1964. OCR and ACF will collaborate throughout the process 
of bringing the State into compliance with section 471(a)(18) of the 
Act which includes consultation during the development, approval, 
implementation, and evaluation of corrective action plans.
    In paragraph (a)(1), we propose that ACF refer all cases involving 
potential violations of section 471(a)(18) of the Act to OCR for 
investigation. Such cases may come to our attention during the course 
of a child and family services review or by other means, such as a 
letter of complaint. Violations based on a court finding will not be 
referred to OCR for investigation. Rather, ACF will invoke the 
appropriate penalty and corrective action procedures described in the 
regulation.
    In paragraph (a)(2), we propose that after OCR completes its 
investigative procedure, it will make its file available to ACF, which 
will then make a determination, based on the OCR file, whether there 
has been a violation of section 471(a)(18). In paragraphs (a)(2)(i) and 
(a)(2)(ii), consistent with statutory language, we propose that a 
violation of section 471(a)(18) occurs with respect to a person if the 
agency delays or denies placement based on race, color, or national 
origin. In paragraph (a)(2)(iii), we have included as a violation of

[[Page 50070]]

section 471(a)(18) of the Act a State's maintenance of any statute, 
regulation, policy, procedure, or practice that would result in the 
delay or denial of placement based on race, color, or national origin. 
The statute requires immediate penalties for violations with respect to 
a person while providing States the opportunity to implement corrective 
action to avoid penalties in unspecified circumstances. Logically, 
circumstances in which States should first have an opportunity for 
corrective action prior to receiving a penalty include those that have 
the potential to cause a violation of section 471(a)(18) with respect 
to a person.
    In paragraph (a)(3), we propose that ACF provide written 
notification to the State or entity of its determination regarding 
alleged section 471(a)(18) violations.
    In paragraph (a)(4), we propose that if ACF determines that no 
violation has occurred, it will take no further action. However, if ACF 
determines that a violation has occurred, it will invoke the 
enforcement process outlined in section 474(d) of the Act, which 
includes penalties and corrective action. Penalties will be issued in 
the form of disallowances and will thus be appealable to the 
Departmental Appeals Board (DAB) under the procedures prescribed in 45 
CFR Part 16.
    In paragraph (a)(5), we make clear that the implementation of 
section 471(a)(18) is to have no impact on the State's compliance with 
the requirements of the Indian Child Welfare Act of 1978.
    In paragraph (b)(1), we explain that, in accordance with section 
474(d)(1) of the Act, an immediate penalty will be levied against a 
State found to be in violation of section 471(a)(18) with respect to a 
person or as the result of a court finding (see paragraph (g)(4) of the 
proposed regulation and the corresponding preamble language). The 
penalty will be imposed for the fiscal quarter in which the State 
receives notification from ACF that it is in violation of section 
471(a)(18), and for every subsequent quarter in that fiscal year, or 
until the State successfully completes a corrective action plan. While 
penalties resulting from violations of section 471(a)(18) are 
appealable to the DAB, States that voluntarily engage in corrective 
action may do so without prejudice during the appeal process in order 
to correct deficiencies and come into compliance expeditiously. If the 
violation occurs as a result of a court finding and the State is 
appealing the court's decision, ACF will notify the State that the 
violation has occurred and of the appropriate penalty structure, 
however, it will not impose the penalty until there is a final 
determination through the appeal process. The State may engage in a 
corrective action plan during the judicial appeal process if it so 
chooses.
    Paragraphs (b)(2) and (b)(3) describe the approval process for 
corrective action plans submitted in response to violations of section 
471(a)(18) with respect to a person or as the result of a court 
finding. Approval of such plans is at the sole discretion of ACF. We 
did not prescribe time lines for submission of corrective action plans. 
Clearly, it is in a State's best interest to come into compliance in a 
timely fashion in order to minimize the length of time the penalty is 
imposed.
    In paragraph (c)(1), we explain that any State with a statute, 
regulation, policy, procedure, or practice in place that, if applied, 
would likely result in a violation of section 471(a)(18) of the Act 
with respect to a person will be found in violation of section 
471(a)(18). In conformance with the statute, a State will have up to 
six months from the date it receives notification of the violation from 
ACF to implement a corrective action plan for complying with section 
471(a)(18). We chose to interpret the term ``implement'' to mean 
``begin'' rather than ``complete.'' We think this interpretation is 
consistent with Congress' intent to resolve noncompliance with section 
471(a)(18) in a timely fashion and affords States sufficient time to 
develop and implement corrective action. A State that fails to 
implement a corrective action plan within the six months allotted, will 
be assessed a penalty in accordance with section 474(d)(1) of the Act.
    Paragraphs (c)(2) and (c)(3) describe the approval process for 
corrective action plans submitted in response to violations of section 
471(a)(18) caused by a statute, regulation, policy, procedure, or 
practice that could result in a violation with respect to a person. 
Approval of such plans is at the sole discretion of ACF. We did not 
prescribe time lines for submission of corrective action plans, but 
note that it is in a State's best interest to submit the plan at the 
earliest possible date in order to effect implementation within the six 
months allotted.
    In paragraph (c)(4), we describe what constitutes ``implementing'' 
a corrective action plan. A corrective action plan will be considered 
``implemented'' when a State begins to carry out the action step(s) in 
the plan. ACF's approval of a corrective action plan is not considered 
implementation of the plan.
    In paragraph (c)(5), once the corrective action plan is 
implemented, we propose to levy a penalty against a State that fails to 
complete the corrective action plan within the time allotted in the 
plan. Although the statute does not specifically address the completion 
of corrective action plans, Congress clearly intended all States to 
comply with section 471(a)(18) of the Act. Therefore, States that fail 
to complete a corrective action plan within the time specified in the 
plan will be subjected to a penalty in accordance with section 
474(d)(1) of the Act.
    Subsection (d) proposes requirements for corrective action plans 
developed in response to a violation of section 471(a)(18).
    In paragraph (e), we propose that the evaluation of a State's 
corrective action plan be completed solely by HHS staff. We believe 
that a joint evaluation would be inappropriate when a State has been 
found to be in violation of this title IV-E State plan requirement. We 
propose to evaluate the State's corrective action plan within 30 
calendar days of the latest projected completion date specified in the 
plan. We think this is a sufficient amount of time since ACF can 
evaluate action steps as they are completed. Within the 30 days, ACF 
will determine if the State has completed the corrective action plan. 
If the corrective action plan has not been completed, ACF will 
calculate the amount of reduction in the State's title IV-E payment and 
notify the State agency accordingly.
    In paragraph (f), we define ``title IV-E funds'' as the Federal 
share of all expenditures made under title IV-E.
    Paragraph (g)(1) reiterates the circumstances in which a State's 
title IV-E funds may be reduced as the result of a violation of section 
471(a)(18): the delay or denial of a foster or adoptive placement based 
on race, color, or national origin; or, failure to implement or 
complete a corrective action plan of the type described in subsection 
(c).
    In paragraph (g)(2), in accordance with section 474(d)(1) of the 
Act, we propose to reduce the title IV-E funds of a State that has 
violated section 471(a)(18) with respect to a person for the fiscal 
quarter in which the State received notification of this violation and 
for each succeeding quarter that fiscal year or until the State 
completes a corrective action plan, whichever is sooner.
    In paragraph (g)(3), for States that fail to implement or complete 
a corrective action plan of the type described in subsection (c), we 
propose to reduce the State's title IV-E funds for the fiscal quarter 
in which the State received

[[Page 50071]]

notification of this violation. The reduction will continue for each 
succeeding quarter within that fiscal year or until the State completes 
the corrective action plan, whichever is sooner.
    In paragraph (g)(4), a State determined to be in violation of 
section 471(a)(18) on the basis of a court finding will have its title 
IV-E funds reduced in accordance with section 474(d)(1) for the fiscal 
quarter in which the court finding was made, and for each succeeding 
quarter within that fiscal year or until the State completes a 
corrective action plan, whichever is sooner.
    In paragraph (g)(5), we propose that a State determined not to be 
in compliance with section 471(a)(18) undergo a reduction in its title 
IV-E funds for a period not to exceed the four fiscal quarters in the 
fiscal year in which the State was notified of its noncompliance. 
Should the State fail to come into compliance with section 471(a)(18) 
of the Act during the fiscal year in which it was notified of its 
violation, ACF will treat the violation as a new finding at the 
beginning of the subsequent fiscal year and impose the penalty and 
corrective action process accordingly.
    In paragraph (h)(1), in accordance with section 474(d)(1) of the 
Act, we propose the penalty structure for States that violate section 
471(a)(18) with respect to a person or fail to implement or complete a 
corrective action plan of the type described in subsection (c).
    In paragraph (h)(2), we address the penalty structure for an entity 
that has received title IV-E funds from a State and has been determined 
to have violated section 471(a)(18) with respect to a person. We 
propose that all title IV-E funds received by that entity from a State 
agency for the quarter in which the entity receives a notification from 
ACF that it is in violation of section 471(a)(18) be remitted directly 
to the Secretary by the entity in accordance with section 474(d)(2) of 
the Act. The penalty against the entity will be calculated based on the 
State's documentation of expenditures.
    Pursuant to section 474(d)(1) of the Act, in paragraph (h)(3) we 
propose that the reduction of title IV-E funds due to a State's failure 
to conform to section 471(a)(18) shall not exceed five percent of that 
State's fiscal year title IV-E payment.
    In paragraph (h)(4), we propose holding States or entities liable 
for any interest accrued on the amount of funds reduced by the 
Department, in accordance with the provisions of 45 CFR 30.13.

Section 1355.39  Administrative and Judicial Review

    In this section, we implement the statutory provisions (section 
1123A(c)(2) and (3) of the Act) under which States may appeal decisions 
made by the Department with regard to determinations of substantial 
conformity and the subsequent withholding of funds. We propose that 
States be afforded the same opportunities for appeal upon being 
notified by ACF of a violation of section 471(a)(18) of the Act.
    In paragraph (c), we propose that no appeal be available to a State 
when it has been determined to be in violation of section 471(a)(18) of 
the Act based on a court finding.

B. Title IV-E Eligibility Reviews

Part 1355--General

Section 1355.20  Definitions

    1355.20 is being revised to define terms used throughout the 
proposed rule.
    The definition of child care institution is primarily a reiteration 
of the statutory definition at section 472(c)(2) of the Act.
    The definition of original foster care placement has been removed 
from Sec. 1356.21, moved to this section, and replaced with date the 
child enters foster care to comply with the ASFA. The date the child 
enters foster care determines when the case review system requirements 
in section 475 of the Act have to be met, such as: administrative 
reviews, permanency hearings, the new requirement for filing or joining 
a petition for termination of parental rights, and the requirements for 
providing ``time-limited reunification services'' funded under title 
IV-B, subpart 2. This term has no significance for claiming Federal 
financial participation for foster care maintenance payments. The rules 
for obtaining Federal reimbursement for foster care maintenance 
payments have not changed. This term should not be confused with the 
date the child is physically removed from home.
    We understand, through our consultation process, that there is a 
need for clarification of the ``judicial finding of child abuse or 
neglect'' language. We are interpreting this language as referring to 
the hearing at which the court finds that the child has been abused or 
neglected and gives placement and care responsibility to the State 
agency; this usually takes place at what we refer to as the ``full 
hearing.'' A finding of abuse or neglect does not occur at a shelter or 
emergency placement hearing where the State is given temporary custody 
of the child.
    We propose that the date the child entered foster care on the basis 
of a voluntary placement agreement be the date the agreement is signed 
by all relevant parties.
    We are proposing a revised definition of foster care which will 
change the term ``family foster homes'' to ``foster family homes'', so 
that it is consistent with the definition of ``foster family home'' in 
this section. It also clarifies the status of a child as being in 
foster care, even though an adoption subsidy payment has been made 
prior to the finalization of the adoption.
    The definition of foster care maintenance payments is derived from 
section 475(4)(A) of the Act. In this definition, we elaborate upon the 
meaning of ``daily supervision'' consistent with a policy 
interpretation issued by ACYF (ACYF-CB-PIQ-97-01). States may claim 
reimbursement under title IV-E foster care maintenance for child care 
provided to title IV-E eligible children during the foster parent's 
working hours while the child is not in school and in those situations 
when a foster parent must participate in activities that are beyond the 
scope of ``ordinary parental duties,'' but consistent with parenting a 
child in foster care. According to the legislative history of Public 
Law 96-272, `` *  *  * payments for the costs of providing care to 
foster children are not intended to include reimbursement in the nature 
of a salary for the exercise by the foster family parent of ordinary 
parental duties * * *'' Since foster care maintenance payments are not 
salaries, foster parents must often work outside the home; hence the 
interpretation that licensed child care that provides daily supervision 
during a foster parent's working hours when the child is not in school 
is an allowable expenditure under title IV-E. Examples of other 
allowable activities include licensed child care while the foster 
parent is attending foster parent training, case conferences, or case 
review hearings.
    States have requested clarification regarding disbursement of funds 
for allowable child care. States may include the cost of allowable 
child care in the basic foster care maintenance payment or may make a 
separate maintenance payment directly to the licensed provider. For 
example, if, in a particular foster family, both parents work, the 
State may include the cost of child care in the maintenance payment 
made to that family or may pay the licensed provider directly. 
Regardless of the payment method chosen, the State must be able to 
provide documentation to verify allowable expenditures.

[[Page 50072]]

    The definition of foster family home has been amended to clarify 
that the statute makes no distinction between approved and licensed 
foster homes. Consequently, approved foster homes must meet the same 
standards as licensed homes. To date, there has been confusion in the 
field regarding the statutory terminology of ``licensed or approved.'' 
Some States have interpreted this language to allow a type of two-
tiered system for approving foster family homes. This is an incorrect 
interpretation of the statute. The terms ``licensed'' and ``approved'' 
are treated equally in the statute. Irrespective of the terminology, 
licensure or approval for foster homes must be based on the same 
standards. This clarification does not repeal the policy at ACYF-PIQ-
85-11 which permits States to waive certain licensing requirements, 
such as square footage, for relative foster family homes.
    Provisional licensure or approval is insufficient for meeting title 
IV-E eligibility requirements. States may not claim reimbursement until 
final licensure or approval is granted. The State may, however, claim 
reimbursement back to the first of the month in which all title IV-E 
eligibility criteria are met.
    The definitions of full hearing and temporary custody proceeding 
are being added to clarify the meaning of these terms as used by ACF in 
these regulations.
    We have added a definition of legal guardianship which reiterates 
the statutory language found at new section 475(7) of the Act. In our 
initial consultations on the implementation of the ASFA, questions were 
raised regarding the applicability of this term to ``long-term foster 
care.'' The statute no longer recognizes long-term foster care as a 
permanency goal. A State is not precluded from establishing placement 
in a permanent foster family home as a permanency goal if it has a 
compelling reason to do so. However, placement in a permanent foster 
family home does not fall within the definition of ``legal 
guardianship,'' for the obvious reason that foster parents are not 
granted the rights associated with guardianship.
    The definition of permanency hearing recognizes the statutory 
changes in terminology, timing, and purpose of these hearings contained 
in the ASFA. Since the intent of the law, both prior and subsequent to 
the ASFA, is to provide judicial oversight for children whom a State 
has yet to place in a permanent setting, we propose to limit the court-
appointed or approved body for the conduct of permanency hearings to 
one which is not a part of or under the supervision or direction of the 
State agency. We also propose to exclude any hearings that do not 
provide parents and other interested parties an opportunity to be 
heard, as was the legislative intent (Congressional Record-Senate, 
August 3, 1979, S. 11710).
    In order to meet children's permanency needs and to create a child 
welfare system that is responsive to a child's sense of time, Congress 
moved the timing for the ``dispositional hearing'' to 12 months, 
renamed it the ``permanency hearing,'' and clarified its purpose to 
unequivocally establish that States must set and act on permanency 
plans for children in foster care without delay. In our early 
consultation with the field regarding the implementation of the ASFA, 
we repeatedly heard that it was critical that the field understand that 
permanency hearings must occur within 12 months of the child entering 
foster care, but may occur sooner if reunification is appropriate or it 
becomes clear that an alternate permanency plan must be established.
    During the focus groups, we also learned that the language at 
section 475(5)(C) is being misunderstood as requiring States to cease 
reunification efforts at the permanency hearing. The State is not 
obliged to set an alternate permanency plan at the permanency hearing 
if the child and family are not able to reunify at that time. However, 
the intent of the ASFA in shortening the time line for holding a 
permanency hearing was to place greater accountability and 
responsibility on parents for making their home ready and safe for the 
child's return. Congress understood that families often present very 
complicated issues that must be resolved prior to reunification. For 
example, parents dealing with substance abuse issues may require more 
than 12 months to resolve those issues. However, a parent must be 
complying with the established case plan, making significant measurable 
progress toward achieving the goals established in the case plan, and 
diligently working toward reunification in order to maintain it as the 
permanency plan at the permanency hearing. Moreover, the State and 
court must expect reunification to occur within a time frame that is 
consistent with the child's developmental needs. If this is not the 
situation, the State is obliged to establish and act on an alternate 
permanency plan for the child at the permanency hearing. Too often, 
reunification is retained as the permanency goal when a parent is 
negligent in complying with the requirements of the case plan until the 
months or weeks immediately prior to the permanency hearing. A parent's 
resumption of contact or overtures toward participating in the case 
plan in the months or weeks immediately preceding the permanency 
hearing are insufficient grounds for retaining reunification as the 
permanency plan. In such situations, the parent must demonstrate a 
genuine, sustainable investment in completing the requirements of the 
case plan in order to retain reunification as the permanency goal.
    The shortened time frames and increased accountability for parents 
makes it incumbent on the State to begin providing services to families 
as soon as it receives responsibility for the child's placement and 
care. Ideally, the State will begin delivering services to resolve 
those parental issues which lead to the removal as soon as the child is 
removed from home.
Part 1356--Requirements Applicable to Title IV-E

Section 1356.20(e)(4)  State Plan Document and Submission Requirements

    Effective October 16, 1994, the Assistant Secretary of ACF 
delegated the authority to the Commissioner, ACYF, to disapprove title 
IV-E State plans which provide for foster care and adoption assistance 
under section 471 of the Act. Accordingly, we have deleted the 
pertinent language in this NPRM to conform with the revised delegation.

Section 1356.21  Foster Care Maintenance Payments Program 
Implementation Requirements

    In this section, we have clarified certain existing policies and 
modified others which have a direct impact on determining the 
eligibility of children in the title IV-E foster care program. We have 
proposed additional foster care maintenance payment requirements, which 
are consistent with the law and intent of Congress, that will apply to 
States as they implement their title IV-E State plans.

Section 1356.21(a)

    This paragraph remains unchanged from the current regulation.

Section 1356.21(b)  Reasonable Efforts

    We are amending the language at this section of the regulation to 
implement the ASFA requirement that the State hold the child's health 
and safety as its paramount concern when making reasonable efforts. The 
reasonable efforts provision, as amended by the ASFA, has a threefold 
purpose:
    (1) To maintain the family unit and prevent the unnecessary removal 
a child

[[Page 50073]]

from his/her home, when it can be done so without jeopardizing the 
child's safety;
    (2) If temporary out-of-home placement is necessary to ensure the 
immediate safety of the child, to effect the expeditious reunification 
of the child and family when reunification is the appropriate 
permanency goal or plan; and,
    (3) When reunification is not appropriate or possible, to effect an 
alternate permanency goal in a timely manner.
    During our consultation with the field, some recommended that we 
define reasonable efforts in implementing the ASFA. We do not intend to 
define ``reasonable efforts.'' To do so would be a direct contradiction 
of the intent of the law. The statute requires that reasonable efforts 
determinations be made on a case-by-case basis. We think any regulatory 
definition would either limit the courts' ability to make 
determinations on a case-by-case basis or be so broad as to be 
ineffective. In the absence of a definition, courts may entertain 
actions such as the following in determining whether reasonable efforts 
were made:
     Would the child's health or safety have been compromised 
had the agency attempted to maintain him or her at home?
     Was the service plan customized to the individual needs of 
the family or was it a standard package of services?
     Did the agency provide services to ameliorate factors 
present in the child or parent, i.e., physical, emotional, or 
psychological, that would inhibit a parent's ability to maintain the 
child safely at home?
     Do limitations exist with respect to service availability, 
including transportation issues? If so, what efforts did the agency 
undertake to overcome these obstacles?
     Are the State agency's activities associated with making 
and finalizing an alternate permanent placement consistent with the 
permanency goal? For example, if the permanency goal is adoption, has 
the agency filed for termination of parental rights, listed the child 
on State and national adoption exchanges, or implemented child-specific 
recruitment activities?
    In order to strengthen the child welfare system's response to child 
safety, Congress provided a list of circumstances in which reasonable 
efforts are required. It also provided States the authority to identify 
a list of aggravated circumstances in which reasonable efforts are not 
required. Typically, State child welfare agencies and the courts 
encounter cases in which it is appropriate to make reasonable efforts 
to prevent a child's removal from home or to reunify the family. Quite 
frequently, though, States are faced with circumstances in which it is 
unclear how much effort is reasonable. At the initial stage of and 
throughout its involvement with a family, the child welfare agency 
assesses the family's needs and circumstances. The State agency should 
make reasonable efforts to prevent the child's removal from home or to 
reunify the family commensurate with the assessment . If the assessment 
indicates that it is not reasonable to prevent the child's removal or 
to reunify the family, the assessment itself satisfies the reasonable 
efforts requirement, if the court makes such a determination. In such 
cases, the court is not determining that reasonable efforts are not 
required. Rather, the court is determining that it is not reasonable to 
make efforts, beyond completing the assessment, to prevent the child's 
removal from home or to reunify the family.
    In proposing the application of the reasonable efforts requirements 
for title IV-E eligibility determinations, this proposed rule effects a 
significant change from existing policy. Under current ACF policy, 
either a judicial determination regarding the reasonable efforts made 
prior to the placement of a child or a determination to reunite the 
child and parents, but not both, has been required for Federal 
financial participation (FFP). Consistent with the statutory language 
at section 472(a)(1) of the Act, we propose that, in order to satisfy 
title IV-E eligibility requirements, there must be a judicial 
determination that: (1) Reasonable efforts were made to prevent a child 
from being removed from home; (2) reasonable efforts were made to 
reunify the child with his/her family if the removal could not be 
prevented; (3) if reasonable efforts were not made to prevent the 
child's removal from home or to reunify the child with his or her 
family, that reasonable efforts are/were not required; and (4) if the 
permanent plan for the child is adoption, guardianship, or some other 
permanent living arrangement other than reunification, that reasonable 
efforts were made to make and finalize that alternate permanent 
placement.

Section 1356.21(b)(1)  Judicial Determination of Reasonable Efforts To 
Prevent Removal in Non-emergency Situations

    We propose to clarify the requirement that judicial determinations 
of reasonable efforts to prevent removal in non-emergency situations 
must be made prior to the removal of the child from home. If the 
circumstances of the case were such that reasonable efforts were not 
required, there must be a judicial determination to that effect.

Section 1356.21(b)(2)  Judicial Determinations of Reasonable Efforts to 
Prevent Removal in Emergency Situations

    We propose new requirements regarding judicial determinations of 
reasonable efforts to prevent removal in emergency situations in order 
to take into account the fact that many children are removed from their 
homes in emergency circumstances, primarily because of safety issues.
    We are permitting State flexibility in the timing of this 
determination in emergency situations, up to a maximum of 60 days, 
recognizing that the initial proceeding leading to the removal may not 
have been a full hearing. Additionally, the agency may not have had 
time to prepare information regarding its reasonable efforts prior to 
the emergency proceeding, nor would the judge have had time to make a 
careful evaluation of such evidence. We think a 60-day period of time 
is sufficient for involved persons to perform the appropriate duties, 
while ensuring that a child is afforded the protection of the judicial 
determination within a reasonable amount of time, irrespective of the 
emergent circumstances leading to the removal.
    While we recognize that concern for the child's safety may preclude 
efforts to prevent removal, the court must make a reasonable efforts 
determination. Even when children are removed in emergency 
circumstances, the court must consider whether appropriate services 
were or should have been provided. When the court determines that it 
was reasonable for the agency to make no effort to provide services to 
prevent removal in light of the exigent circumstances discovered 
through the assessment of the family, such as the safety or protection 
of the child, there must be a judicial determination to that effect. 
If, at the time the court determines that reasonable efforts to prevent 
a child's removal from home were not required, the court also 
determines that reasonable efforts are not required to reunify the 
child with his or her family, there must be a separate judicial 
determination to that effect.

Section 1356.21(b)(3)  Judicial Determination of Reasonable Efforts to 
Reunify the Child and Family

    We are proposing that a judicial determination of reasonable 
efforts to

[[Page 50074]]

reunify be made at any time within a 12 month period following the date 
the child enters foster care when the case plan goal is reunification, 
and at least once every 12 months thereafter. Since the permanency 
hearing must be held over the same 12 month interval, States may want 
to consider seeking a judicial determination of reasonable efforts to 
reunify at that hearing. Moreover, making reasonable efforts to reunify 
the child and family affords the State the opportunity to assess the 
appropriateness of reunification as a case plan goal and determine an 
alternate permanency goal if necessary. Making reasonable efforts 
typically provides the State the evidence it needs to support a 
decision that an alternate permanency plan is appropriate. The State is 
not precluded from seeking this determination at an earlier point in 
time if it so chooses.
    If the judicial determination regarding reasonable efforts to 
reunify is not made within the proposed time frame, we propose that the 
child become ineligible once 12 months has elapsed since the date the 
child entered foster care or the most recent judicial determination of 
reasonable efforts to reunify was made, and until such time as the next 
reasonable efforts to reunify determination is made. We think this is 
consistent with statutory intent to ensure that a State is continuing 
to make reasonable efforts, subject to judicial review, to return a 
child home as soon as it is safe and appropriate to do so.
    If there is a judicial determination that reasonable efforts to 
reunify the child with his or her family are not required and the State 
has determined that it is not appropriate to attempt to reunify the 
child with his or her family, a permanency hearing must be held within 
30 days to establish an alternate permanent plan for the child. The 
alternate permanency plan may be established at the same time the court 
determines that reasonable efforts to reunify are not required.

Section 1356.21(b)(4)  Judicial Determination of Reasonable Efforts to 
Make and Finalize Placements When the Permanency Goal is Not 
Reunification

    We are proposing that the judicial determination regarding 
reasonable efforts to make and finalize a permanent placement be made 
within 12 months of the date the permanency goal of adoption, 
guardianship, or some other permanent living arrangement is 
established, and every 12 months thereafter. We considered requiring 
this type of reasonable efforts determination to occur every six months 
in response to the timeliness language in the statute but were 
concerned about the burden this would impose on the State agency and 
the courts. We would appreciate comments on the proposed time frame for 
making judicial determinations of reasonable efforts to make and 
finalize permanent placements.
    If a judicial determination regarding reasonable efforts to make 
and finalize a permanent placement is not made within the time frame 
proposed, the child becomes ineligible under title IV-E from the end of 
the twelfth month following the date the alternate permanency goal is 
established, or the date of the most recent judicial determination of 
reasonable efforts to make and finalize a permanent placement, and will 
remain so until such a determination is made.

Section 1356.21(b)(5)  Circumstances in Which Reasonable Efforts to 
Prevent a Removal or to Reunify a Child With His or Her Family Are Not 
Required

    In this paragraph, we propose that the court that has 
responsibility for hearing child welfare dependency cases must make the 
determination that reasonable efforts to prevent a child's removal from 
home or to reunify a child and family are not required. Depending on 
the circumstances, this determination may be based on the findings of 
another court or the findings of the court that is determining whether 
reasonable efforts are required.
    In subparagraph (i), the court that hears child welfare dependency 
cases may find that the child has been subjected to aggravated 
circumstances, if it has the authority to do so, and that reasonable 
efforts are not required because the statutory language at section 
471(a)(15)(D)(i) of the Act regarding aggravated circumstances does not 
require a criminal conviction.
    In subparagraph (ii), the court's determination that reasonable 
efforts are not required must be based on the findings of a criminal 
court. The statutory language at section 471(a)(15)(D)(ii) requires a 
criminal conviction of one of the felonies identified therein. In 
circumstances in which the criminal proceedings have not been completed 
or are under appeal, the court that hears child welfare dependency 
cases must determine whether reasonable efforts are required based on 
the developmental needs of the child and the length of time associated 
with completion of the criminal proceedings or the appeals process.
    In subparagraph (iii), when the determination that reasonable 
efforts are not required is based on a previous involuntary termination 
of parental rights, that determination is clearly based on the findings 
of another court decision.
    During our consultation process, we heard that States wanted to 
know if their laws must specifically use the ``aggravated 
circumstances'' language in the ASFA and if we plan to provide a 
definition of or parameters for defining ``aggravated circumstances.'' 
We do not think it is necessary or appropriate to be so prescriptive as 
to require States to adopt the specific ASFA language in identifying 
aggravated circumstances in which reasonable efforts are not required.
    The ASFA clearly provides States the authority to determine what 
``aggravated circumstances'' are. If a State already has laws that 
would serve to define aggravated circumstances, it would not need to 
amend or change those laws. We will not, therefore, define ``aggravated 
circumstances,'' nor will we provide examples beyond those in the 
statute.
    States have expressed concern that the language at section 
471(a)(15)(D) of the Act prohibits the State from making reasonable 
efforts in certain circumstances. This is an incorrect interpretation. 
The ASFA identifies when reasonable efforts are not required. The ASFA 
upholds the State agency's authority to make reasonable efforts to 
prevent a child's removal from home or to reunify a child with the 
family even in situations in which it is not required to do so, if the 
child's health and safety can be assured and it is in his/her best 
interests.

Section 1356.21(b)(6)  Concurrent Planning

    This paragraph reiterates the statutory provision at section 
471(a)(15)(F), affording States the option of making reasonable efforts 
to make and finalize an alternate permanent placement concurrently with 
reasonable efforts to reunify a child with his/her family. Concurrent 
planning can be an effective tool for expediting permanency, and 
Congress intended to offer it as such. However, since it may not be an 
appropriate approach for every child or family, States are not required 
to use concurrent planning and the decision to do so must be made on a 
case-by-case basis. We urge States to obtain technical assistance and 
provide appropriate training and supervision to agency workers prior to 
deploying a concurrent planning strategy.

Section 1356.21(b)(7)  Federal Parent Locator Service

    The ASFA amended section 453 of the Act to specifically provide for 
the

[[Page 50075]]

use of the Federal Parent Locator Service (FPLS) in expediting 
permanency. We have included the use of the FPLS in the reasonable 
efforts section of the regulation because Congress intended the FPLS to 
be used as a tool for locating absent parents early in the case 
planning process as a potential permanency option. Congress also 
intended the FPLS as a tool for the States in completing termination of 
parental rights proceedings.

Section 1356.21(c)(1)  Contrary to the Welfare Determination--Non-
emergency Situations

    We propose that in non-emergency situations the ``contrary to the 
welfare'' determination must be made prior to the removal of the child 
from home, and documented in the initial removal court order to enable 
the child to be eligible for title IV-E foster care. The ``contrary to 
the welfare'' determination is an important protection to safeguard the 
rights of the child and his/her parents and to ensure appropriate 
action by the State agency.

Section 1356.21(c)(2)  Contrary to the Welfare Determination--Emergency 
Situations

    With regard to emergency situations, we propose that the ``contrary 
to the welfare'' determination be included in the first court ruling 
(including a temporary custody order, whether or not there was a 
hearing) pertaining to removal.
    The ``contrary to the welfare'' determination requirement in 
section 472(a)(1) was a title IV-A provision dating back to 1961 which 
was carried over into the title IV-E program. Congress included this 
requirement in the belief that judicial oversight would prevent 
unnecessary removal of children from their homes. It relied on the 
courts to protect children and families, and to provide an important 
safeguard against potential inappropriate agency action. The purpose of 
the requirement is to minimize the number of children inappropriately 
placed in foster care, and increase efforts at keeping families 
together.
    We do not intend to second guess the States as to when an emergency 
exists and will, therefore, in the absence of contradictory 
information, presume that there is an emergency when a child is removed 
without a previously-issued court order (excluding those for previous 
removals of the child, or in-home supervision orders). However, the 
reasonable efforts determination must be made within a specified time 
thereafter.

Section 1356.21(d)  Documentation of Judicial Determinations

    We have proposed modification of current documentation requirements 
in paragraph (d) based on ACF's review of States' documentation of 
judicial determinations over the past years. Consistent with language 
in section 472(a)(1) of the Act, in paragraph (d)(1) we propose that 
the judicial determinations regarding ``contrary to the welfare'' and 
``reasonable efforts'' be stated specifically in the court orders 
identified in Sec. 1356.21, paragraphs (b) and (c) and must include the 
evidentiary basis for that determination. The judicial determinations 
themselves need not necessarily include the exact terms ``contrary to 
the welfare'' and ``reasonable efforts'', but must convey that the 
court has determined that reasonable efforts have been made or are/were 
not required (as described in section 471(a)(15) of the Act), and that 
it would be contrary to the welfare of a child to remain at home. A 
transcript of the court proceedings which verifies that the court 
considered the facts of the case and made a finding with respect to the 
reasonable efforts and contrary to the welfare requirements is the only 
other form of documentation that will be accepted.
    Given the fundamental importance of the protection of children as 
required by the Act, we propose in paragraph (d)(2) that affidavits and 
nunc pro tunc orders not be accepted as documentation of ``reasonable 
efforts'' or ``contrary to the welfare'' findings for eligibility 
purposes. Considering the large number of children for whom State 
agencies are responsible, and the large number of cases that go before 
the courts, affidavits or depositions created months or years after the 
fact cannot be considered as reliable evidence of prior compliance with 
Federal requirements. We believe that a prohibition on the use of 
affidavits and nunc pro tunc orders is necessary in order to assure 
children in foster care of the protections to which they are entitled 
in a timely fashion.
    In light of the significance of the judicial determinations, we are 
proposing in paragraph (d)(3) that explicit evidence be provided that 
the judge has made an individual determination which is to be stated in 
the court order and not merely incorporated by reference to a State 
law. We believe that judicial determinations should be as meaningful as 
possible, and should be child-specific in order to ensure that the 
circumstances of each child are reviewed individually. In the past, it 
has been our experience that State laws often permit removal of a child 
from home in a number of circumstances and not solely, for example, 
based on a determination that remaining in the home would be contrary 
to the child's welfare. When State law cites a number of circumstances 
under which a child may be removed, it is not possible for a reviewer 
to determine for which reason the judge authorized that removal. 
However, even if State law allows only one reason for removal which 
does meet Federal requirements, we are still proposing to require an 
explicit determination.

Section 1356.21(e)  Trial Home Visits

    We believe that six months is a reasonable period of time for 
States to determine the appropriateness of a child remaining at home or 
returning to foster care, absent a court order that extends or shortens 
the period of time. This is consistent with the statutory requirement 
for the status of the child to be reviewed every 6 months. During the 
period of time in which the child is on a trial home visit, no title 
IV-E foster care maintenance payments are made since she/he is not 
placed in a foster home or child care facility. However, administrative 
costs may be incurred on behalf of the child and claimed subsequently 
by the State agency. If the child is returned to foster care within the 
six month period, the placement is considered continuous and title IV-E 
foster care maintenance payments may resume, assuming all eligibility 
requirements continue to be met.

Section 1356.21(f)  Case Review System

    Paragraph (c) in this section of the current regulation has been 
re-designated paragraph (f).

Section 1356.21(g)  Case Plan Requirements

    Paragraph (d)(1)-(4) in this section of the current regulation has 
been re-designated paragraph (g)(1)-(4). In paragraph (g)(1), we 
propose that case plans be developed jointly with parents. We believe 
this language serves the goal of the ASFA to begin the permanency 
planning process and service delivery as soon as possible following a 
child's removal from home. If the parent is not able or willing to 
participate in the development of the case plan, it should be so noted 
in the plan. We have also amended paragraph (g)(3) to include the ASFA 
case plan requirement for States to include a discussion of the 
reasonable efforts made to make and finalize a permanent placement for 
the child in the case plan when the permanency goal is adoption or any 
other permanent arrangement. A State must document its

[[Page 50076]]

efforts to make and finalize permanent placements for all permanency 
goals. States should not interpret the statutory reference to adoption 
exchanges as meaning this provision only applies to adoptions. The 
statutory reference to the use of adoption exchanges was an example of 
the types of efforts a State should make to make and finalize permanent 
placements. Although placement in a permanent foster family home is not 
a preferred permanency goal, it can be an appropriate one for some 
children. Prior to establishing such a goal for a child, the State 
should exhaust all efforts to place that child in an adoptive home, 
with a legal guardian, or some other permanent arrangement outside the 
foster care system.

Section 1356.21(h)  Application of Permanency Hearing Requirements

    We have redesignated paragraph (e) as paragraph (h), revised it to 
recodify existing language, added four new provisions, and changed the 
name to permanency hearing, consistent with ASFA.
    In redesignated paragraph (h)(2), language has been added to 
clarify that the exception to the requirement for permanency hearings 
applies only to children placed in a court-specified long-term, 
permanent foster family home placement (not in an institution or other 
group living arrangement). We also propose that a permanency hearing be 
conducted within three months of any change in a court-sanctioned long-
term, permanent foster family care placement. Under the existing 
regulations, this exception also applies to children who were legally 
freed for adoption and placed in a preadoptive home. Consistent with 
the intent of the ASFA, children in such circumstances must be afforded 
the protection of permanency hearings until the adoption is finalized.
    In new paragraph (h)(3) we describe the requirement of amended 
section 471(a)(15)(E) of the Act to hold a permanency hearing within 30 
days of a judicial determination that reasonable efforts are not 
required. We have written the regulation to clarify that States need 
not hold a permanency hearing within 30 days if the court finds that 
reasonable efforts to prevent a child's removal from home are not 
required. A determination that reasonable efforts to prevent the 
child's removal are not required does not negate the State's obligation 
to make reasonable efforts to reunify the child. Only a judicial 
determination that reasonable efforts to reunify a child with his or 
her family are not required relieves the State of that obligation. 
Consequently, the permanency hearing must be held within 30 days of the 
determination that reasonable efforts to reunify the family are not 
required.
    The statute allows the State to set an alternate permanency goal of 
placement in a permanent foster family home only if it demonstrates to 
the court a compelling reason not to place the child in an adoptive 
home, with a relative, or with a legal guardian. In new paragraph 
(h)(4), we follow the statute in requiring the State to document, to 
the State court, the compelling reason for placement in a permanent 
foster family home.
    In new paragraph (h)(5) we clarify that if an administrative body, 
appointed or approved by a court, holds a permanency hearing, 
procedural safeguards extended to parents in court hearings must also 
be extended to the parents by the administrative body.

Section 1356.21(i)  Requirements for Filing a Petition to Terminate 
Parental Rights per Section 475(5)(E) of the Social Security Act

    In this section, we describe the new requirements at section 
475(5)(E) of the Act for termination of parental rights (TPR). Congress 
passed this provision to compel States to quickly move those children 
for whom adoption is the appropriate plan to permanency. It is not 
intended to create a pool of legal orphans. Misinterpretation of the 
reasonable efforts requirements and other factors have resulted in 
children remaining in foster care for extended periods of time while 
the State agency works to make the child's home safe for his or her 
return. Congress passed this provision to end children's languishing in 
foster care.
    In paragraph (i)(1), we follow the statute in describing under what 
conditions the State, through its authorized attorney, must file or 
join a petition for TPR in accordance with section 475(5)(E) of the 
Act.
    In subparagraph (i)(1)(i), we propose the requirements for filing 
or joining a petition to terminate parental rights when a child has 
been in foster care for 15 of the most recent 22 months. We are 
proposing that in such situations, the State must file the petition for 
TPR by the end of the fifteenth month. We think that 15 months is more 
than an adequate amount of time for States to assess whether 
reunification is possible and if adoption is the most appropriate 
permanent plan.
    In subparagraph (i)(1)(i)(A), in accordance with the statute, we 
propose that States must begin calculating when to file the petition 
for TPR beginning on the date the child enters foster care under 
section 475(5)(F).
    In subparagraph (i)(1)(i)(B), we propose that for the purpose of 
implementing the TPR provision for children with multiple foster care 
placement episodes within the 22 month period, the State must use a 
cumulative method of calculating 15 months in foster care. For example, 
a child enters foster care on January 15, 2001 and is discharged from 
foster care three months later on April 15, 2001. He remains home for 
six months and then enters foster care again on October 15, 2001. The 
State must apply the TPR requirement at section 475(5)(E) with respect 
to this child based on the date he entered foster care for the first 
foster care episode, or January 15, 2001. If this child remains in 
foster care for another 12 months, the State will be obliged to comply 
with section 475(5)(E) on October 15, 2002, because this child will 
have been in foster care for a cumulative total of 15 out of the 
previous 22 months. However, the time line for conducting case reviews, 
permanency hearings, and providing time-limited reunification services 
for the subsequent foster care episode must be based on the date the 
child entered foster care for that episode, October 15, 2001.
    If the child in the above scenario does not return to foster care 
until January 15, 2003, the State must begin calculating a new 15 out 
of 22 month period for applying section 475(5)(E), the other case 
review requirements, and providing time-limited reunification services 
as of January 15, 2003, because this most recent date of entry into 
foster care is more than 22 months after the date the child entered 
foster care during the prior episode.
    In subparagraph (i)(1)(i)(C), we propose that the State not count 
time spent on trial home visits or runaway episodes when calculating 15 
out of 22 months.
    Finally, in subparagraph (i)(1)(i)(D), we propose that States need 
only apply section 475(5)(E) to a child once. If, when a child reaches 
15 months in foster care, the State does not file a petition for TPR 
because one of the exceptions applies, or the State does file such a 
petition but the court does not sustain that petition, the State does 
not need to begin calculating another 15 out of 22 months in foster 
care for that child. We think the requirements at sections 
471(a)(15)(C) and (E) and 475(1)(E) of the Act regarding reasonable 
efforts to make and finalize alternate permanency placements and the 
requirements at section 475(5)(C) of the Act regarding permanency 
hearings

[[Page 50077]]

provide children sufficient protections with respect to achieving 
permanency, thereby removing the need to require multiple applications 
of section 475(5)(E) of the Act. However, this does not preclude the 
State from filing, or the court from ordering, a petition for TPR upon 
later review if the permanency plan has not been achieved.
    In subparagraph (i)(1)(ii), we propose that, once a court of 
competent jurisdiction (this could be the court that has responsibility 
for hearing child welfare dependency cases) determines that a child is 
an abandoned infant, the State has up to 60 days to file a petition for 
termination of parental rights. We chose 60 days because this time 
frame allows the State ample time to hold a permanency hearing, if 
adoption is not established as the permanency goal at the hearing in 
which the child is determined to be an abandoned infant, and to 
complete the necessary procedures associated with filing a petition for 
termination of parental rights. States have asked if we intend to 
provide a definition of or parameters for the definition of ``abandoned 
infant.'' The statute specifically provides that authority to the 
States. If a State already has a statutory definition of 
``abandonment,'' it is not necessary to enact statutory language 
specific to abandoned infants.
    In subparagraph (i)(1)(iii), we propose that the State agency file 
a petition to terminate parental rights within 60 days of a judicial 
determination that reasonable efforts to reunify the child and family 
are not required because the parent has been found by a court of 
competent jurisdiction to have committed one of the felonies listed at 
paragraph (b)(5)(ii). We believe that 60 days from the judicial 
determination that reasonable efforts to reunify the family are not 
required is ample time for the State to hold a permanency hearing, if 
adoption is not established as the permanency goal at the time the 
court determines that reasonable efforts are not required, and to 
complete the necessary procedures for filing a petition to terminate 
parental rights. We have attempted to interpret the requirements for 
filing a petition for TPR when the parent has committed certain 
felonies based on how we think these circumstances will present 
themselves in actual practice situations and to demonstrate the 
relationship between sections 471(a)(15)(D) and (E) of the Act and 
section 475(5)(E) of the Act. The following examples illustrate how the 
foregoing procedure would operate:
    (1) A parent with two children has been convicted of one of the 
felonies enumerated at paragraph (b)(5)(ii) with respect to the older 
child. The State agency petitions the court for jurisdiction of the 
younger child and recommends that it not be required to make reasonable 
efforts to reunify the younger child with the parent because of the 
criminal conviction against the parent with respect to the older child, 
and it does not believe the parent can be rehabilitated. The court 
determines, in accordance with section 471(a)(15)(D) of the Act, that 
reasonable efforts to reunify the younger child with the parent are not 
required. In accordance with section 471(a)(15)(E) of the Act, the 
State must hold a permanency hearing within 30 days of the judicial 
determination that reasonable efforts to reunify the parent and child 
are not required. If adoption becomes the permanency goal, the State 
then has 30 days from the permanency hearing to file a petition to 
terminate parental rights.
    (2) A parent is convicted of one of the felonies listed in 
paragraph (b)(5)(ii), serves his/her sentence and is released from 
prison, and subsequently comes to the attention of the State agency due 
to neglect. The State agency petitions the court for jurisdiction of 
the child and recommends a permanency plan of reunification because it 
believes the parent can be rehabilitated. The court's approval of 
reunification as the permanency plan is the compelling reason for the 
State not to file a petition to terminate parental rights in accordance 
with section 475(5)(E) of the Act. The State would then be obliged to 
hold a permanency hearing within 12 months of the child's entry into 
foster care.
    In paragraph (i)(2), we follow the statute in identifying the 
exceptions to section 475(5)(E) of the Act. The decision to seek 
termination of parental rights is one of the most difficult to confront 
social workers and State agencies. Section 475(5)(E) of the Act is 
intended to be a catalyst for making critical assessments of and 
decisions regarding the viability and probability of reunification and 
for expediting the adoption process when it is clear that reunification 
can not occur and adoption is the appropriate plan. Congress did 
recognize that, despite a family's diligent efforts, 15 months may be 
an inadequate amount of time to make the home safe for the child's 
return. Therefore, it stipulated three exceptions to section 475(5)(E).
    In paragraph (i)(2)(i), we propose that the State may exercise its 
statutory option to not apply section 475(5)(E) of the Act when a child 
is placed with a relative.
    In paragraph (i)(2)(ii), we propose that the State does not have to 
apply section 475(5)(E) of the Act when there is a compelling reason, 
documented in the case file and available for court review, for 
determining that the application of section 475(5)(E) is not in the 
child's best interests. We have not defined the term ``compelling 
reason.'' Rather, we provide two broad examples:
    (1) Adoption is not the appropriate plan for the child. This 
category could include cases where an older child expresses a wish not 
to be adopted and another permanency plan has been identified, a child 
has a significant bond with a non-family member who wishes to serve as 
legal guardian, the parent and child have a significant bond but the 
parent is unable to care for the child because of an emotional or 
physical disability and another permanency plan has been identified, or 
the State agency and the Tribe have identified another permanency plan 
for the child; or,
    (2) Insufficient grounds for filing such a petition exist. This 
category could include cases where the parent has made significant 
measurable progress and continues to make diligent efforts to complete 
the requirements of the case plan but needs more than 15 months to do 
so, the State agency is working with a non-offending biological parent 
to establish a permanent placement, or the State need not join an 
existing petition if it does not agree with the arguments presented in 
the petition or it believes that the petitioner would not serve as an 
appropriate placement option for the child.
    In paragraph (i)(2)(iii), we follow the statute in proposing that 
the State need not apply section 475(5)(E) when the services identified 
in the case plan have not been provided.
    We think it is critical that we assess States' implementation of 
this new provision for terminating parental rights, particularly the 
extent to which States make use of the exceptions discussed above. In 
the self-assessment completed for the child and family services 
reviews, States will be asked to document the extent to which they make 
use of the exceptions provided at section 475(5)(E) of the Act.
    During the consultation process we learned of confusion regarding 
the requirements for the court with respect to the compelling reason. 
We are not interpreting the statutory language which requires that the 
documentation of the compelling reason be ``* * * available for court 
review * * *'' as a requirement that the court make a determination 
with respect to the compelling reason. To interpret this language as 
requiring a court

[[Page 50078]]

determination with respect to the compelling reason not to file a TPR 
would place an unnecessary additional burden on the State agency and 
the courts. We do anticipate, however, that the court will have the 
opportunity to review the compelling reason not to file for TPR as part 
of its ongoing oversight.
    In paragraph (i)(3), we follow the statute in requiring States to 
concurrently identify, recruit, process, and approve a qualified 
adoptive family for the child when it files for or joins a petition to 
terminate parental rights to that child.

Section 1356.21(j)  Child of a Minor Parent in Foster Care

    In this section, we paraphrase statutory language found in section 
475(4)(B) of the Act.

Section 1356.21 (k) and (l)  Removal From the Home of, and Living With, 
a Specified Relative

    In paragraphs (k) and (l), we propose a new policy regarding the 
requirements in sections 472(a) (1) and (4) of the Act regarding a 
child's removal from the home of a relative and the six month ``living 
with'' exception. The purpose of this new policy is to provide a clear 
statement about what constitutes a child's home or foster home for the 
purpose of title IV-E eligibility and to ensure equitable treatment of 
relative and non-relative foster care providers.
    Eligibility for foster care under title IV-E, which is based on the 
child's eligibility for AFDC (as in effect in the State on July 16, 
1996), derives from the title IV-A (AFDC) requirement that the child 
must be living in the home of a relative specified in section 406(a) of 
the Act (as in effect on July 16, 1996). To be eligible for title IV-E, 
the child must have been eligible for AFDC in the month court 
proceedings leading to removal were initiated or the month in which a 
voluntary placement agreement was signed. If the child had not been 
living with a specified relative in the month that removal proceedings 
were initiated or the voluntary agreement was signed, s/he must have 
been: (1) Living with such a relative at some time within the previous 
six months; and (2) AFDC eligible in the month of the initiation of 
court proceedings leading to removal or the voluntary agreement if the 
child had still been living with such relative in that month. 
Obviously, the child must continue to be eligible at the time of entry 
into foster care as well as throughout the placement.
    In the absence of regulations specific to the foster care program, 
we have previously followed the AFDC regulations at 45 CFR 
233.90(c)(l)(v)(B). Under the AFDC definition, the child's home is the 
family setting maintained or in the process of being established as 
evidenced by assumption and continuation of responsibility for the day-
to-day care and control of the child by a relative with whom the child 
is living, if the relative is one of specified degree. Under current 
policy, if a parent who is eligible for AFDC leaves a child with 
another relative and does not return, the child's home is considered to 
have shifted to the home of the other relative. If legal custody or 
responsibility for placement and care is given to the State agency and 
the child remains with the relative, such transfer of responsibility 
does not constitute removal, and the child is therefore ineligible for 
title IV-E foster care. Thus, current policy does not recognize that 
there can be a temporary or indefinite stay with another relative 
without that relative's home becoming the child's home.
    Under the proposed policy change, an otherwise eligible child who 
had been living with a parent or other specified relative within six 
months of the initiation of court proceedings or a voluntary placement 
agreement would meet the ``living with'' requirement under the title 
IV-E foster care program, regardless of the child's relationship to the 
interim caretaker and regardless of whether the interim caretaker 
becomes the subsequent foster care provider. The removal of the child 
from the home of a specified relative within the six-month period can 
be either a physical removal or a court-ordered removal of custody.
    The following examples illustrate the operation of the proposed 
rule:
    (1) An AFDC eligible parent leaves the child with either a relative 
or a non-relative caretaker for the weekend. Two months later the 
parent has not returned. The caretaker contacts the State agency which 
petitions the court to remove the child from the parent's custody due 
to neglect. The court grants the petition and the State agency assumes 
responsibility for placement and care. The agency licenses the same 
caretaker's home as a foster home and decides that the child should 
remain with this caretaker for the purpose of foster care. The AFDC 
eligible child had been living with the parent within six months of the 
initiation of court proceedings. Under the proposed regulation 
(paragraph (j)(1)(iii) of Sec. 1356.21), the court's authorization of 
the removal of the child from the parent's custody would meet the 
eligibility requirements in section 472(a)(1) and the fact that the 
child had been living with the parent within six months of the date of 
petition would meet the eligibility requirements in section 
472(a)(4)(B)(ii). Thus, the child, if otherwise eligible, would be 
eligible for title IV-E foster care.
    (2) The same situation as in (1) above exists, but the caretaker 
waits seven months to contact the agency and the agency makes the 
caretaker the foster care provider. The child would not be eligible for 
title IV-E foster care, regardless of whether the caretaker is or is 
not a relative, because she/he had not been living with the parent 
within six months prior to the initiation of court proceedings 
pertaining to removal. Thus, the requirements of section 472(a)(4)(B) 
and subsection (j) of Sec. 1356.21 would not be met.
    (3) An AFDC eligible parent leaves the child with a relative and 
does not return. The relative, who meets the AFDC eligibility criteria, 
keeps the child for seven months, but then requests that the child be 
removed and placed in a foster home. The State agency petitions the 
court to remove the child from the parent's custody. The court grants 
the petition and gives the State agency responsibility for placement 
and care. Although the court removes custody from the parent, the child 
is physically removed from the caretaker relative's home and is placed 
in a licensed foster family home. The child is eligible for title IV-E 
foster care because she/he has been physically removed from the home of 
a specified relative within six months of initiation of court 
proceedings and was eligible for AFDC while living there, and the 
``living with'' requirement has been met, thus meeting the requirements 
of section 472(a)(1) and 472(a)(4)(B).
    (4) The same situation as in (3) above exists, but the child had 
been living with a non-relative caretaker for seven months prior to 
placement in foster care. She/he would be ineligible for title IV-E 
foster care since the ``living with'' requirement of section 
472(a)(4)(B) would not have been met.
    (5) A parent and child live in the home of the parent's mother, all 
of whom are eligible for AFDC. The parent leaves the home and does not 
return. Four months later, the child's grandmother contacts the State 
agency which petitions the court to remove the child from the parent's 
custody due to her neglect. The court grants the petition and gives the 
State agency responsibility for placement and care. The agency licenses 
the grandmother's home as a foster home and decides that the child 
should remain with this relative caretaker for the purpose of foster 
care. Since the child had been living with the parent within six months 
of the initiation of court proceedings

[[Page 50079]]

and the court authorized removal of the child from the parent's 
custody, this would meet the eligibility requirements in sections 
472(a)(1) and 472(a)(4)(B) and the otherwise eligible child would be 
eligible for title IV-E foster care. If the grandmother had waited 
longer than six months to contact the agency, the child would have been 
ineligible for title IV-E foster care in her home. However, if the 
grandmother had waited longer than six months to contact the agency and 
the agency physically removed the child from the grandmother and placed 
him/her in another licensed home for the purpose of foster care, the 
child would be eligible for title IV-E foster care because the child's 
eligibility is then tied to the grandmother.
    We think that the proposed policy which expands the circumstances 
in which a child may remain with a relative and be eligible for foster 
care accords with the statutory purposes. Foster care placement with 
relatives can provide continuity during the period of separation from 
the parent and enhance the possibility that a child will ultimately be 
able to return home.

Section 1356.21 (m) and (n)  Review of Payments and Licensing 
Standards; Foster Care Goals

    Paragraphs 1356.21(g) and (h) in the current regulation have been 
re-designated paragraphs (m) and (n), respectively.

Section 1356.21(o)  Notice and Opportunity To Be Heard

    In this paragraph, we implement the new requirement for the case 
review system at section 475(5)(G) of the Act that mandates giving 
notice to foster parents, preadoptive parents and relative caregivers 
of hearings and reviews and provides them an opportunity to be heard. 
While Congress recognizes foster parents, preadoptive parents, and 
relative caregivers as a valuable resource in obtaining information 
regarding the progress of a case and in permanency planning, it 
intended only to provide these individuals an opportunity to provide 
input regarding the children in their care. Congress did not intend 
giving notice of and an opportunity to be heard to be construed as 
providing these individuals standing as a party to the case, as stated 
in the statute and proposed regulation. This provision does not, 
however, preclude the court from awarding foster parents, preadoptive 
parents, and relative caregivers standing. Foster parents, preadoptive 
parents, and relative caregivers must receive notice of permanency 
planning hearings and reviews that occur while a child is placed with 
them. We do not intend to prescribe how this noticing should occur. We 
presume that a State will use the same procedure for giving notice to 
foster parents, relative caregivers, and preadoptive parents as it does 
for parents and others who are parties to the case.

Section 1356.22  Implementation Requirements for Children Voluntarily 
Placed in Foster Care

    This section has been redesignated and revised by updating the 
statutory and regulatory provisions which include the requirements a 
State must meet in order to receive title IV-E funds for voluntary 
foster care placements. The ASFA requirements, including expedited 
termination of parental rights, apply to all children in foster care, 
regardless of whether the child entered as a result of a voluntary 
placement agreement.

Section 1356.30  Safety Requirements for Foster Care and Adoptive Home 
Providers

    In paragraph (a), we propose that the State conduct or require 
criminal records checks for prospective foster and adoptive parents 
unless it elects to ``opt out'' of this provision as provided for at 
section 471(a)(20)(B) of the Act. Section 471(a)(20) applies to all 
foster parents, including those foster family homes that operate under 
the auspices of a child placing agency's license rather than their own 
license.
    In paragraph (b), we propose that the State may not license or 
approve any prospective foster or adoptive parent, nor may the State 
claim Federal reimbursement for any foster care maintenance or adoption 
assistance payment made on behalf of a child placed in a foster home 
operated under the auspices of a child placing agency or on behalf of a 
child placed in an adoptive home through a private adoption agency, if 
the State finds that the prospective foster/adoptive parent has been 
convicted of a felony involving child abuse or neglect, other crimes 
against children, spousal abuse, or a violent crime.
    In paragraph (c), we propose that the State may not license or 
approve any prospective foster or adoptive parent, nor may the State 
claim Federal reimbursement for any foster care maintenance or adoption 
assistance payment made on behalf of a child placed in a foster home 
operated under the auspices of a child placing agency or on behalf of a 
child placed in an adoptive home through a private adoption agency, if 
the State finds that the prospective foster/adoptive parent has, within 
the last five years, been convicted of a felony involving physical 
assault, battery, or a drug-related offense.
    In paragraph (d), we follow the statute in describing the means by 
which the State can elect not to conduct or require criminal records 
checks: a letter from the Governor to the Secretary indicating the 
State has made such an election or through State legislation. States 
should note that, because of the statutory connection to licensing and 
reimbursement for foster care maintenance and adoption assistance 
expenditures, conducting criminal records checks is an allowable title 
IV-E administrative expenditure.
    We used the language ``conduct or require'' with respect to the 
State agency's role in obtaining criminal records checks because we do 
not intend to hold the State responsible for conducting criminal 
records checks on the employees of the child placing agencies with 
which it contracts for foster family placements. However, the State 
must have documentation that these checks have occurred before claiming 
title IV-E reimbursement for children placed with contractors.
    In paragraph (e), we propose that, for all foster care placements 
and prospective adoptive homes where a criminal records check of the 
caretaker(s) has not been performed, the State must document, in the 
licensing file of that provider, the process or procedures it has 
undertaken to meet the safety requirements at section 475(1) of the 
Act.
    This requirement applies to all foster family homes, adoptive 
homes, relative caregivers, and the staff of child care institutions. 
Section 475(1), as amended by the ASFA, requires States to ensure the 
safety of foster care and adoptive placements. The State may claim the 
cost of conducting this procedure as a title IV-E administrative 
expenditure, as it would if it elected to conduct criminal records 
checks.
    During the consultative process we learned that there is confusion 
in the field regarding the ``final approval'' language in section 
471(a)(20) of the Act. Final approval means full licensure or approval. 
Furthermore, States cannot claim Federal financial participation (FFP) 
for foster care maintenance and adoption assistance payments until all 
title IV-E eligibility criteria are met. Criminal records checks are a 
title IV-E eligibility requirement because licensure, in part, is 
predicated on such checks. Therefore, the State may not claim FFP until 
the criminal record

[[Page 50080]]

check has been completed and the foster or adoptive parent has final 
approval. The same holds true in those situations where the State 
chooses to comply with section 475(1) through some procedure or process 
other than a criminal records check.
    We were asked during the consultation process if the ASFA requires 
criminal records checks at the State level, Federal level, or both. 
There is no statutory language that would suggest an answer to this 
question. Therefore, the State may exercise its discretion in choosing 
whether to conduct criminal records checks at the State or Federal 
level.

Section 1356.71  Federal Review of the Eligibility of Children in 
Foster Care and the Eligibility of Foster Care Providers in Title IV-E 
Programs

    Although Federal standards and guidelines for title IV-E 
eligibility reviews have been previously issued in different forms of 
ACF policy memoranda, this is the first time they have been published 
in accordance with the rulemaking process. We have taken the 
opportunity to review these standards in the context of ACF's overall 
review strategy, and determined that some changes are warranted. The 
following paragraphs highlight the significant changes which we are 
proposing in this section, and the underlying rationales.

Section 1356.71(b)  Composition of Review Team and Preliminary 
Activities Preceding an On-Site Review

    In paragraph (b)(1), we propose that State agency staff participate 
in eligibility reviews as part of the review team. Our experience when 
conducting pilot reviews in conjunction with State staff proved to be 
an excellent example of how Federal and State staff can work together 
as partners. The experience of reviewing case records to ascertain 
whether appropriate documentation was in the record was often as useful 
and enlightening to State staff as it was to their Federal 
counterparts. As a result of their participation, State representatives 
could more easily pinpoint deficiencies and plan corrective action 
accordingly. Federal staff were able to provide immediate technical 
assistance to State staff as issues presented themselves, thereby 
increasing their knowledge base.
    Paragraph (b)(2) proposes that the State agency provide ACF with 
the complete payment history for each of the 88 sample and oversample 
cases (or 165 cases, if a second review is warranted) prior to the on-
site review. This information will enable ACF at the exit conference to 
provide the State agency with preliminary estimates of the potential 
disallowance (if any) of title IV-E funds based on the number of cases 
initially determined to be ineligible. Access to this information early 
in the review process will also prevent later delays in the calculation 
of final disallowances and the preparation of the final report.

Section 1356.71(c)  Sampling Guidance and Conduct of Review

    We propose that data reported in the Adoption and Foster Care 
Analysis and Reporting System (AFCARS) and transmitted to ACF by State 
agencies for the most recent reporting period be used by ACYF 
statisticians to select the title IV-E foster care sample of children 
to be reviewed. The ``period of review'' will coincide with the AFCARS 
reporting period, which is currently six months in duration. This 
procedure will reduce the burden on States (in the past, some States 
had elected to draw their own samples), promote uniformity in sample 
selection, and utilize the AFCARS database in a practical and 
beneficial way. If the AFCARS data for the most recent reporting period 
are not available or are deficient, an alternative sampling frame will 
be selected in conjunction with the State agency for the period of time 
comparable to the most recent AFCARS reporting period.
    In determining the sample size for this new review system, we 
elected not to rely on or replicate that used in the prior review 
system, 50 cases. We originally planned to use a ``discovery'' sampling 
methodology with respect to the initial review. However, by definition, 
this would have resulted in a State being in non-compliance if one or 
more cases were found to be ineligible by the review team.
    Therefore, after deliberating over various combinations of sample 
sizes and critical numbers of ineligible cases, a more reasonable 
``acceptance'' sampling methodology requiring a sample size of 80 (plus 
a 10 percent oversample of eight cases) with a critical number of eight 
(ineligible cases) is proposed based on the following information.
    According to Appendix D: Table for Determining Minimum Sample Size 
and for Evaluating Attributes Sample Results in Practical Statistical 
Sampling for Auditors by Arthur J. Wilburn (A copy is reprinted at 
Attachment B at the end of this Preamble with permission of the 
publisher), there is an 88 percent probability that the population 
ineligibility case error rate (case error rate) in a universe size that 
exceeds 1000 is less than 15 percent when the number of ineligible 
cases is less than or equal to eight. (Wilburn's text is found in a 
1984 publication by Marcel Dekker Inc. called STATISTICS: Textbooks and 
Monographs series, volume 52). This probability is sufficiently high 
for ACF to propose that a case error rate of less than 15 percent be 
utilized as the standard by which States will be determined to be in 
compliance. We are proposing a higher case error rate than that 
previously used in title IV-E reviews (the previous standard was a 10 
percent error rate) in recognition of the fact that States will need 
some time to modify procedures and/or implement system modifications to 
comply with the proposal requiring documentation of judicial 
determinations of ``reasonable efforts'' to reunify a child and family, 
to make and finalize a permanent placement when the case plan goal is 
not reunification, and that reasonable efforts to prevent a removal or 
to reunify a child with his or her family are not required. We are 
proposing that, after a three-year transition period, the case error 
rate threshold revert to less than 10 percent, with the critical number 
of ineligible cases equal to four in a sample of 80 cases. Under the 
proposed rule, States in which cases were determined to be ineligible 
would be subject to disallowances equivalent to the amount of payments 
associated with those cases for the entire period of time they have 
been determined to be ineligible.
    We also propose that States in which ACF has made a final 
determination of substantiated ineligibility for nine or more cases 
undergo a second eligibility review following the completion of their 
program improvement plans (see paragraph (i) of this section). It is 
anticipated that the successful implementation of the program 
improvement plan will contribute significantly to the correcting of 
deficiencies identified during the first review and, as a consequence, 
result in smaller disallowances. Upon completion of the subsequent 
review consisting of 150 cases, we propose that disallowances be made 
based on an extrapolation from the sample to the universe of payments 
made during the period reviewed. (This larger sample size is necessary 
in order to accommodate the extrapolation procedure and ensure its 
statistical validity). Critical values that will determine whether an 
extrapolated disallowance will be assessed against the State will be 
the same as those utilized in previous eligibility reviews to determine 
whether a stage two review would be conducted, that is, both the

[[Page 50081]]

case and dollar error rates will have to exceed 10 percent. (Case and 
dollar error rates are determined by dividing the number of cases in 
the sample, and the total of their associated payments, by the number 
of ineligible cases and the total of their associated payments, 
respectively). If either or both of these error rates is less than 10%, 
there will be no extrapolation and the disallowance amount will be 
computed only on the basis of payments associated with ineligible cases 
for the period of time they have been determined to be ineligible.

Section 1356.71(e)  Review Instrument

    The eligibility review checklist which has been used in past on-
site reviews has undergone significant modification in order to 
accommodate policy changes reflected in this proposed rule. It has been 
repeatedly tested during pilot reviews conducted by ACF in fiscal years 
1995 through 1998.
    State agencies and ACF Regional Offices participating in these 
reviews were asked to evaluate the checklist and provided comments on 
its format, language, and content. ACF will make available to the 
States copies of the checklist upon publication of the final rule.

Section 1356.71(f)  Eligibility Determination--Child

    In this paragraph, we propose that the case record contain proper 
and sufficient documentation, in accordance with paragraph (d)(1) to 
verify a child's eligibility.

Section 1356.71(g)  Eligibility Determination--Provider

    In order to ascertain that children are being properly placed in 
foster care provider facilities which are in compliance with statutory 
requirements contained in sections 472(c), 471(a)(20), and 475(1)(A) of 
the Act, we propose that the State agency make available pertinent 
licensing files to the review team. These files must contain the 
licensing history, including documentation in the form of letters of 
approval or certificates of licensure/approval, and substantiate that 
for each case being reviewed the facility(ies) in which the child is 
placed is(are) licensed or approved (during the period of care under 
review) by the agency in the State responsible for this activity. The 
licensure or approval must be in accord with standards established by 
the State which are consistent with recommended standards of national 
organizations for the licensure of foster homes and institutions and 
include documentation that safety requirements per Sec. 1356.30 have 
been met. If the licensing file does not contain sufficient information 
to support a child's placement in a facility, as determined by the 
reviewer, then the State agency may provide supplemental information 
via access to other resources, for example, a computerized database. 
Failure to provide appropriate documentation supporting a child's 
placement in a properly licensed or approved facility will result in a 
finding of ineligibility for the case for a specified period of time. 
In determining the period of ineligibility, any foster care home or 
facility that is licensed for a portion of a month will be considered 
to have been licensed that entire month.

Section 1356.71(h)  Standards of Compliance

    In this section, we propose definitions of ``substantial 
compliance'' and ``non-compliance'' so that ACF will be able to make 
this determination, and so that State agencies will know beforehand the 
standard to which they must adhere. When discussing what a reasonable 
standard of compliance might be for States to meet, we considered 
retaining a 10 percent error rate which had been the standard used in 
earlier reviews to determine whether or not a State had to undergo a 
stage two review. If we apply this standard in future reviews where we 
plan to examine a sample of 80 foster care cases, it means that, in 
accordance with ``acceptance'' sampling methodology, a State's case 
records could contain no more than four errors (ineligible cases) if it 
is to be in ``substantial compliance'' with statutory and regulatory 
eligibility requirements. This determination, in conjunction with the 
recognition that States in the future will need to document judicial 
determinations of ``reasonable efforts'' to reunify a child and his/her 
family and to make and finalize alternate permanent placements, leads 
us to believe that maintenance of the 10 percent error rate for the 
initial review would be too stringent under these circumstances. 
Therefore, we propose as a new standard an acceptable error rate of 
less than 15 percent, thus permitting a State to have as many as eight 
errors (ineligible cases) within a sample of 80 cases and still be in 
``substantial compliance'' for its initial review. However, we propose 
that three years after the date the final regulation becomes effective, 
this error rate decrease to 10 percent based on the expectation that 
States will have had sufficient time to modify their procedures to 
accommodate the new requirements regarding the documentation of 
judicial determinations of ``reasonable efforts'' to reunify the family 
and to make and finalize alternate permanent placements.

Section 1356.71(i)  Program Improvement Plans

    We propose in paragraph (i)(1) to require that States determined 
not to be in substantial compliance develop a program improvement plan 
designed to correct the areas of non-compliance, and that it be 
developed jointly between the State and ACF in keeping with the desire 
to promote State and Federal partnerships through the reviews. Under 
the former title IV-E review process, ineligible title IV-E payments 
were identified and, if claimed by States, were subsequently 
disallowed. While this procedure, in most cases, allowed for the 
recovery of funds by ACF, it did not necessarily lead to correcting the 
deficiencies identified by reviewers. We propose that the program 
improvement plan identify action steps to be taken by the State to 
correct deficiencies identified by the review team, and that each 
action step have a projected completion date which will not extend more 
than one year from the date the program improvement plan is approved by 
ACF. (When a legislative change is necessary to bring a State into 
substantial compliance, an extension of the one-year time frame may be 
negotiated between the State agency and ACF). This will assure that 
proper attention is given to correcting deficiencies in a timely 
manner. In this way, by identifying the problems, proposing solutions, 
and implementing corrective action, we expect to remove the basis for 
future adverse findings of non-compliance.
    Approval of the program improvement plan means that ACF is in 
agreement with the information provided within it, and does not mean 
that a State can be assured of being in ``substantial compliance'' 
following a subsequent review of its case records.
    In paragraph (i)(2), we propose that the State agency submit a 
program improvement plan to ACF within 60 days after receiving 
notification that it is not in substantial compliance. We think a 
period of 60 days is adequate for a program improvement plan to be 
developed, since the on-site review will have identified the reasons 
for disallowing certain cases, and it is our intention to convey this 
information to the State agency verbally at the exit conference as well 
as in the letter of notification following the review. However, if the 
State agency and ACF need more time to submit and/or review additional 
documentation in support of

[[Page 50082]]

cases determined to be ineligible, a 30-day extension may be granted to 
accommodate this task. We would appreciate comments as to whether the 
time frame for the joint development of the program improvement plan is 
adequate as proposed.

Section 1356.71(j)  Disallowance of Funds

    We propose that the amount of funds to be disallowed be determined 
by the extent to which a State is not in compliance with eligibility 
requirements. A State which is in ``substantial compliance'' would have 
its disallowance calculated on the basis of the number of actual cases 
reviewed and found to be ineligible. We propose that the disallowance 
be computed on the basis of payments associated with the ineligible 
cases for the entire period of time that each case has been determined 
to be ineligible. Thus if, for example, a case was deemed ineligible on 
the basis that a judicial determination regarding ``contrary to the 
welfare'' had not been properly made at the time a child was removed 
from home, all title IV-E payments which were claimed for this case 
from the time of removal would be disallowed. For States found to be in 
``non-compliance'' after the first review (i.e., not in substantial 
compliance), we propose that they have a disallowance calculated on the 
same basis, but also be required to develop and implement a program 
improvement plan and undergo a second review.
    Since the implementation and completion of a program improvement 
plan may take as long as one year, we propose that a second review be 
conducted during the AFCARS reporting period which immediately follows 
the latest projected completion date approved in the program 
improvement plan. For example, if there were three action steps 
outlined in a program improvement plan with completion dates of January 
1, April 1 and July 1, 1998, the second review must be conducted 
sometime between October 1, 1998 and March 31, 1999. This should allow 
sufficient time for the planning and preparation that needs to take 
place by Federal and State agencies prior to an on-site review, as well 
as provide an opportunity for the review team to examine cases which 
will have been impacted by a State's corrective action. The review will 
provide a basis for determining if a State has successfully corrected 
deficiencies identified in the program improvement plan and continued 
to meet all other eligibility requirements since the first review was 
conducted. If the review team determines that a State is in 
``substantial compliance'', a second disallowance will be calculated on 
the basis of actual cases reviewed and found to be ineligible. We 
propose that this disallowance be computed on the basis of payments 
associated with the cases from the point in time from which they have 
been determined to be ineligible.
    If a State remains in non-compliance, we propose that the 
disallowance be determined based on extrapolation from the sample to 
the universe of claims paid for the duration of the AFCARS reporting 
period under review (currently six months). Thus a State should be able 
to forestall a potentially significant disallowance by focusing its 
efforts on improving specified aspects of operations identified as 
needing strengthening. However, in any event, we anticipate that 
disallowances resulting from the second review of cases made in States 
determined to be in non-compliance will be smaller than those taken in 
the past by ACF. This is due to a number of reasons: (1) the required 
implementation of a program improvement plan for States that are in 
non-compliance; (2) the provision of technical assistance (upon 
request) to a State agency by ACF; (3) the State agency's own efforts 
to correct the deficiencies identified in its program improvement plan; 
and (4) the fact that any extrapolated disallowance will be for a six-
month period of time (corresponding with the reporting period of AFCARS 
unless, or until such time as, it changes), rather than a one-year 
period of time as has been the case in past years. More important than 
the monetary benefits that may accrue to States from ACF's new 
monitoring approach, however, is the recognition that the protections 
afforded children under title IV-E are likely to be provided and 
subsequently documented by States in the future in a more consistent 
manner.
    In paragraph (j)(3), we specify that the State agency will be 
liable for applicable interest on the amount of funds disallowed by the 
Department, in accordance with regulations at 45 CFR 30.13.

XII. Impact Analysis

Executive Order 12866

    Executive Order 12866 requires that regulations be drafted 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. This Notice of 
Proposed Rulemaking presents a revised framework for reviews of 
Federally-assisted child and family services and for reviews of related 
eligibility determinations for Federally-assisted foster care programs. 
The revised review procedures for these programs were developed in 
response to concerns expressed by the Congress and the States regarding 
the effectiveness of the current review procedures and the benefits to 
the States relative to the efforts required of them. ACF had begun 
revising the review procedures when Congress, through the Social 
Security Amendments of 1994 (Public Law 103-432), mandated changes in 
the Federal monitoring of State child and family service programs 
funded under titles IV-B and IV-E. In conformance with this 
legislation, we are proposing regulations for child and family service 
programs which will:
     determine whether these programs are in substantial 
conformity with applicable State plan requirements and Federal 
regulations;
     develop a timetable for conformity reviews; and
     specify the State plan requirements subject to review, and 
the criteria to be used in determining a State's substantial conformity 
with these requirements.

Regulatory Flexibility Act of 1980

    The Regulatory Flexibility Act (5 U.S.C. Ch. 6) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses. For each rule with a 
``significant number of small entities'' an analysis must be prepared 
describing the rule's impact on small entities. ``Small entities'' are 
defined by the Act to include small businesses, small non-profit 
organizations and small governmental entities. These regulations do not 
affect small entities because they are applicable to State agencies 
that administer the child and family services programs and the foster 
care maintenance payments program.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act (Pub. L. 104-4) requires agencies 
to prepare an assessment of anticipated costs and benefits before 
proposing any rule that may result in an annual expenditure by State, 
local, and tribal governments, in the aggregate, or by the private 
sector, of $100,000,000 or more (adjusted annually for inflation). This 
proposed rule does not impose any mandates on State, local, or tribal 
governments, or the private sector that will result in an annual 
expenditure of $100,000,000 or more. We anticipate that one-third (17) 
of the States will be reviewed under both review procedures

[[Page 50083]]

each year, for an annual cost of $225,420. This estimate was based on 
the burden hours associated with each information collection identified 
in the ``Paperwork Reduction Act'' section. We did not include State 
travel costs in the estimate because these costs will vary 
significantly based on how a State chooses to structure its 
participation in the reviews.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, Public Law 104-13, all 
Departments are required to submit to the Office of Management and 
Budget (OMB) for review and approval any reporting or record-keeping 
requirements inherent in a proposed or final rule. This NPRM contains 
information collection requirements in certain sections which the 
Department has submitted to OMB for its review.
    The sections that contain information collection requirements are: 
1355.33(b) on State self-assessments, and (c) on submission of data; 
1355.35(a) on program improvement plan; 1355.38 (b) and (c) on 
corrective action plans; and 1356.71(i) on program improvement plan. 
Section 1356 on State plan document and submission requirements (OMB 
Number 0980-0141) and case plan requirements (OMB Number 0980-0140) 
contains information collections, however, these are approved 
collections and no changes are being made at this time.
    The respondents to the information collection requirements in this 
rule are State agencies. The Department needs to require this 
collection of information: (1) in order to review States' compliance 
with the provisions of the statute and implementing regulations of 
title IV-E of the Act; and (2) effectively implement the statutory 
requirement at section 1123A of the Act which requires that regulations 
be promulgated for the review of child and family services programs, 
and foster care and adoption assistance programs, for conformity with 
State plan requirements.
    The frequency of State responses will vary. It is known that each 
State will have to do self assessments at least once every three years. 
States not in substantial conformity must submit a program improvement 
plan. Case plans for title IV-E must be done in accordance with the 
case review system. The following table provides annual estimates of 
the burden hours associated with each collection.

----------------------------------------------------------------------------------------------------------------
                                                                                  Average burden                
             Collection                 Number of respondents        Number of       hours per     Total burden 
                                                                     responses       response          hours    
----------------------------------------------------------------------------------------------------------------
1355.33(b)--State Agency Self        17--State Agencies                        1             240           4,080
 Assessment.                          Administering the Title IV-                                               
                                      B & E Programs.                                                           
1355.33(c)--On-Site Review.........  17--State Agencies                       35               8           4,760
                                      Administering the Title IV-                                               
                                      B & E Programs.                                                           
1355.35(a)--Program Improvement      17--State Agencies                        1              80           1,360
 Plan.                                Administering the Titles                                                  
                                      IV-B & IV-E Programs.                                                     
1355.38 (b) and (c)--Corrective      5--State Agencies                         1              80             400
 Action Plan.                         Administering Titles IV-B                                                 
                                      and IV-E.                                                                 
1356.71(i)--Program Improvement      17--State Agencies                        1              63           1,071
 Plan.                                Administering the Title IV-                                               
                                      E Program.                                                                
----------------------------------------------------------------------------------------------------------------

    When the Department publishes its pre-clearance Notice requesting 
approval of this information collection under the Paperwork Reduction 
Act, we will publish, in their entirety, the self-assessment and the 
on-site review instruments.
    The Administration for Children and Families will consider comments 
by the public on this proposed collection of information in:
     Evaluating whether the proposed collections are necessary 
for the proper performance of the functions of ACF, including whether 
the information will have practical utility;
     Evaluating the accuracy of ACF's estimate of the burden of 
the proposed collection of information;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department on the proposed 
regulations. Written comments to OMB for the proposed information 
collection should be sent directly to the following: Office of 
Management and Budget, Paperwork Reduction Project, 725 17th Street, 
NW, Washington, DC 20503, Attn: Desk Officer.

List of Subjects

45 CFR Part 1355

    Adoption and foster care, child welfare, grant programs--social 
service programs.

45 CFR Part 1356

    Adoption and foster care, administrative costs, fiscal requirements 
(title IV-E).

Attachment A To The Preamble (For discussion on Sec. 1355.34)--
Index of Performance Indicators to Outcomes

    1. Safety Outcome 1: Children are, first and foremost, protected 
from abuse and neglect, and are safely maintained in their homes 
whenever possible.

Performance Indicators

     Services to family to protect child(ren) in home.
     Current risk of harm to child.
     Child deaths due to maltreatment.
    2. Safety Outcome 2: The risk of harm to children will be 
minimized.

Performance Indicators

     Timeliness of initiating investigations.
     Repeat maltreatment.
     Current risk of harm to child.
     Child maltreatment in foster care.
     Child deaths due to maltreatment.
    3. Permanency Outcome 1: Children will have permanency and 
stability in their living situations.

Performance Indicators

     Foster care re-entries.
     Stability of foster care placement.
     Unachieved permanency goals.
     Independent living services for youths >16 y.o.
     Use of long term foster care.
     Effectiveness of adoption services.
    4. Permanency Outcome 2: The continuity of family relationships, 
culture and connections will be preserved for children.

Performance Indicators

     Proximity of current placement.
     Placement with siblings.
     Visiting with parents and siblings in foster care.

[[Page 50084]]

     Cultural connections and preservation.
     Relative placement.
     Current relationship of child in care with parents.
    5. Well-Being Outcome 1: Families will have enhanced capacity to 
provide for their children's needs.

Performance Indicators

     Needs and services of child, parents, foster parents.
     Child and family involvement in case planning.
     Current relationship of child in care with parents.
     Worker visits with child.
     Worker visits with parents.
    6. Well-Being Outcome 2: Children will receive appropriate 
services to meet their educational needs.

Performance Indicators

     Educational needs of the child.
    7. Well-Being Outcome 3: Children will receive adequate services 
to meet their physical and mental health needs.

Performance Indicators

     Physical health of the child.
     Mental health of the child.

BILLING CODE 4184-01-P

[[Page 50085]]

[GRAPHIC] [TIFF OMITTED] TP18SE98.016



BILLING CODE 4184-01-C

[[Page 50086]]

(Catalog of Federal Domestic Assistance Program Numbers 93.658, 
Foster Care Maintenance; 93.659, Adoption Assistance and 93.645, 
Child Welfare Services--State Grants)

    Dated: April 30, 1998.
Olivia A. Golden,
Assistant Secretary for Children and Families.

    Approved: July 8, 1998.
Donna E. Shalala,
Secretary.

    For the reasons set forth in the Preamble, 45 CFR Parts 1355 and 
1356 are proposed to be amended as follows:

PART 1355--GENERAL

    1. The authority citation for Part 1355 continues to read as 
follows:

    Authority: 42 U.S.C. 620 et seq., 42 U.S.C. 670 et seq., 42 
U.S.C. 1302.

    2. Section 1355.20 is amended by revising the definition of foster 
care and by adding the following definitions to read as follows:


Sec. 1355.20  Definitions.

    (a) * * *
    Child-care institution means a private child-care institution, or a 
public child-care institution which accommodates no more than twenty-
five children, and is licensed by the State in which it is situated or 
has been approved by the agency of such State responsible for licensing 
or approval of institutions of this type as meeting the standards 
established for such licensing.
    This definition must not include detention facilities, forestry 
camps, training schools, or any other facility operated primarily for 
the detention of children who are determined to be delinquent.
* * * * *
    Date the child enters foster care means the earlier of: the date of 
the first judicial finding that the child has been subjected to child 
abuse or neglect and placement and care responsibility is given to the 
State by the court; or, the date that is 60 calendar days after the 
date on which the child is physically removed from the home. When a 
child enters foster care on the basis of a voluntary placement 
agreement, the ``date a child enters foster care'' means the date on 
which the voluntary placement agreement is signed. This definition 
determines the date used in calculating all time period requirements 
related to the case review system in section 475 of the Social Security 
Act and for providing time-limited reunification services described at 
section 431(a)(7) of the Act.
* * * * *
    Foster care means 24 hour substitute care for children placed away 
from their parents or guardians and for whom the State agency has 
placement and care responsibility. This includes, but is not limited 
to, placements in foster family homes, foster homes of relatives, group 
homes, emergency shelters, residential facilities, child care 
institutions, and pre-adoptive homes. A child is in foster care in 
accordance with this definition regardless of whether the foster care 
facility is licensed and payments are made by the State or local agency 
for the care of the child, whether adoption subsidy payments are being 
made prior to the finalization of the adoption, or whether there is 
Federal matching of any payments that are made.
    Foster care maintenance payments are payments made on behalf of a 
child eligible for title IV-E foster care to cover the cost of (and the 
cost of providing) food, clothing, shelter, daily supervision, school 
supplies, a child's personal incidentals, liability insurance with 
respect to a child, and reasonable travel for a child's visitation with 
family, agency workers, or other caretakers. Local travel associated 
with providing the items listed above is also an allowable expense. In 
the case of child-care institutions, such term must include the 
reasonable costs of administration and operation of such institutions 
as are necessarily required to provide the items described in the 
preceding sentences. (1) Daily supervision for which foster care 
maintenance payments may be made includes:
    (i) Foster family care--licensed child care, when work 
responsibilities preclude foster parents from being at home when the 
child for whom they have care and responsibility in foster care is not 
in school, licensed child care when the foster parent is required to 
participate, without the child, in activities associated with parenting 
a child in foster care that are beyond the scope of ordinary parental 
duties, such as attendance at administrative or judicial reviews, case 
conferences, or foster parent training; and
    (ii) Child-care institutions--routine day-to-day direction and 
arrangements to ensure the well-being and safety of the child.
    (2) [Reserved]
    Foster family home means the home of an individual or family 
licensed or approved by the State licensing or approval authority(ies) 
(or with respect to foster family homes on or near Indian reservations, 
by the tribal licensing or approval authority(ies)), that provides 24-
hour out-of-home care for children. The term may include group homes, 
agency operated boarding homes or other facilities licensed or approved 
for the purpose of providing foster care by the State agency 
responsible for approval or licensing of such facilities. Foster family 
homes that are approved must be held to the same standards as foster 
family homes that are licensed. Provisional licensure or approval is 
insufficient for meeting title IV-E eligibility requirements. States 
may not claim title IV-E reimbursement until final licensure or 
approval is granted.
    Full hearing (often referred to by State courts as the evidentiary 
hearing, jurisdictional hearing, fact-finding hearing, merits or 
adjudication hearing) is the civil hearing in which the allegations, as 
set forth in the petition, of dependency, abuse or neglect concerning a 
child are addressed. The hearing enables the court to determine which 
allegations of the petition have been proven or admitted, if any, and 
whether court or agency intervention should continue. This is the 
hearing in which the State agency is assigned responsibility for 
placement and care of the child. The full hearing is never a shelter 
care hearing or emergency removal hearing (see definition of temporary 
custody proceeding).
    Full review means the joint Federal and State review of all 
federally-assisted child and family services programs in the States, 
including family preservation and support services, child protective 
services, foster care, adoption, and independent living services, for 
the purpose of determining the State's substantial conformity with the 
State plan requirements of titles IV-B and IV-E as listed in 
Sec. 1355.34 of this part. A full review consists of two phases, the 
State self-assessment and a subsequent on-site review, as described in 
Sec. 1355.33 of this part.
* * * * *
    Legal guardianship means a judicially created relationship between 
child and caretaker which is intended to be permanent and self-
sustaining as evidenced by the transfer to the caretaker of the 
following parental rights with respect to the child: protection, 
education, care and control of the person, custody of the person, and 
decision-making. The term ``legal guardian'' means the caretaker in 
such a relationship.
    National Child Abuse and Neglect Data System (NCANDS) means the 
voluntary national data collection and analysis system established by 
the Administration for Children and Families in response to a 
requirement in the Child Abuse Prevention and

[[Page 50087]]

Treatment Act (Public Law 93-247), as amended.
    Partial review means the joint Federal and State review of one or 
more Federally-assisted child and family services programs in the 
States, including family preservation and support services, child 
protective services, foster care, adoption, and independent living 
services. A partial review may consist of any of the components of the 
full review, as mutually agreed upon by the State and the 
Administration for Children and Families as being sufficient to 
determine substantial conformity of the reviewed components with the 
State plan requirements of titles IV-B and IV-E as listed in 
Sec. 1355.34 of this part.
    Permanency hearing means: (1) the hearing required by section 
475(5)(C) of the Act to determine the permanency plan for a child in 
foster care. Within this context, the court (including a Tribal court) 
or administrative body determines whether, and if applicable when:
    (i) The child will be returned to the parent;
    (ii) The child should be placed for adoption, with the State filing 
a petition for termination of parental rights;
    (iii) The child should be referred for legal guardianship;
    (iv) The child should be placed permanently with a fit and willing 
relative; or
    (v) The child should be placed in another planned permanent living 
arrangement, but only in cases where the State agency has documented to 
the State court a compelling reason for determining that it would not 
be in the best interests of the child to return home, be referred for 
termination of parental rights and placed for adoption, placed with a 
fit and willing relative, or placed with a legal guardian.
    (2) The permanency hearing must be held no later than 12 months 
after the date the child enters foster care or within 30 days of a 
judicial determination that reasonable efforts to reunify the child and 
family are not required. After the initial permanency hearing, 
subsequent permanency hearings must be held not less frequently than 
every 12 months during the continuation of foster care. The permanency 
hearing must be conducted by a family or juvenile court or another 
court of competent jurisdiction or by an administrative body appointed 
or approved by the court which is not a part of or under the 
supervision or direction of the State agency. Paper reviews, ex parte 
hearings, agreed orders, or other actions or hearings which are not 
open to the participation of the parents of the child, the child (if of 
appropriate age), and foster parents or preadoptive parents (if any) 
are not considered permanency hearings.
* * * * *
    State self-assessment means the initial phase of a full review of 
all federally-assisted child and family services programs in the 
States, including family preservation and support services, child 
protective services, foster care, adoption, and independent living 
services, for the purpose of determining, in part, the State's 
substantial conformity with the State plan requirements of titles IV-B 
and IV-E as listed in Sec. 1355.34 of this part. The self-assessment 
refers to the completion of the Federally-prescribed self-assessment 
instrument by members of a review team that meet the requirements of 
Sec. 1355.33(a)(2) of this part.
    Temporary custody proceeding (often referred to as the shelter care 
hearing, detention hearing, preliminary protective hearing, or 
emergency removal hearing) is the judicial proceeding held at the time 
of, or shortly after, the emergency removal of a child from the home. 
This proceeding gives the State agency temporary custody of a child 
until a full hearing is held.
* * * * *
    3. New sections 1355.31 through 1355.39 are added to read as 
follows:


Sec. 1355.31  Elements of the child and family services review system.

    Scope. Sections 1355.32 through 1355.39 of this part apply to 
reviews of child and family services programs administered by States 
and Indian Tribes under subparts 1 and 2 of title IV-B of the Act, and 
reviews of foster care and adoption assistance programs administered by 
States under title IV-E of the Act.


Sec. 1355.32  Timetable for the reviews.

    (a) Initial reviews. Each State must complete an initial full 
review as described in Sec. 1355.33 of this part during the three-year 
period that begins six months after the final rule becomes effective.
    (b) Reviews following the initial review. (1) A State found to be 
operating in substantial conformity during an initial or subsequent 
review, as defined in Sec. 1355.34 of this part, must:
    (i) Complete a full review every five years; and
    (ii) Submit a completed State self-assessment to ACF three years 
after the on-site review. The State self-assessment will be reviewed 
jointly by the State and the Administration for Children and Families 
to determine the State's continuing substantial conformity with the 
State plan requirements subject to review. No formal approval of this 
interim State self-assessment by ACF is required.
    (2) State programs found not to be operating in substantial 
conformity during an initial or subsequent review will:
    (i) Be required to develop and implement a program improvement 
plan, as defined in Sec. 1355.35 of this part; and
    (ii) Complete a full review in the six month period that begins 
three years after the approval of the program improvement plan.
    (c) Reinstatement of reviews based on information that a State is 
not in substantial conformity. (1) ACF may require a full or a partial 
review at any time, based on information that indicates the State may 
no longer be operating in substantial conformity.
    (2) Prior to conducting a full or partial review, ACF will conduct 
an inquiry and require the State to submit additional data whenever the 
following information indicates that the State may not be in 
substantial conformity:
    (i) Information included in the State self-assessment (completed 
between full reviews) or Annual Progress and Services Reports on the 
CFSP;
    (ii) Information from reports from data bases, including the 
Adoption and Foster Care Analysis and Reporting System (AFCARS) and the 
National Child Abuse and Neglect Data System (NCANDS);
    (iii) Information from reviews, audits or assessments conducted by 
ACF, the Office of Inspector General, or other public or private 
organizations;
    (iv) The disposition of class action lawsuits brought against a 
State, whether such disposition is through the process of litigation or 
through settlement of the lawsuit through a consent decree; or
    (v) Other information brought to the attention of the Secretary.
    (3) If the additional information and inquiry indicate to the 
satisfaction of ACF that the State is operating in substantial 
conformity, ACF will not proceed with any further review of the issue 
addressed by this inquiry at this time.
    (4) ACF may proceed with a full or partial review if the State does 
not provide the additional information as requested, or the additional 
information confirms that the State may not be operating in substantial 
conformity.


Sec. 1355.33  Procedures for the review.

    (a) The full child and family services reviews will:

[[Page 50088]]

    (1) Consist of a two-phase process that includes a State self-
assessment and an on-site review; and
    (2) Be conducted by a team of Federal and State reviewers that 
includes:
    (i) Staff of the State child and family services agency, including 
the State and local offices who represent the service areas that are 
the focus of any particular review;
    (ii) Representatives selected by the State, in collaboration with 
the ACF Regional Office, from those with whom State was required to 
consult in developing its CFSP, as described and required in 45 CFR 
1357.15(l);
    (iii) Federal staff of HHS; and
    (iv) Other individuals, as deemed appropriate and agreed upon by 
the State and ACF.
    (b) State self-assessment. The first phase of the full review will 
be a State self-assessment conducted by the internal and external State 
members of the review team. The self-assessment must assess:
    (1) The outcome areas of safety, permanency, and well-being of 
children and families served by the State agency;
    (2) The characteristics of the State agency that impact most 
significantly on the agency's capacity to deliver services to children 
and families that will lead to improved outcomes; and
    (3) The strengths and areas of the State's child and family 
services programs that require further examination through an on-site 
review.
    (c) On-site review. The second phase of the full review will be an 
on-site review.
    (1) The on-site review will cover specific areas of the State's 
child and family services continuum. It will be jointly planned by the 
State and ACF, and guided by information in the completed State self-
assessment that identifies areas thought to be in need of improvement 
or further review.
    (2) The on-site review may be concentrated in several specific 
political subdivisions of the State, as agreed upon by the ACF Regional 
Office and the State, provided the State's largest metropolitan 
subdivision is one of the locations selected for the on-site review.
    (3) ACF has final approval of the selection of specific areas of 
the State's child and family services continuum described in paragraph 
(c)(1) of this section and selection of the political subdivisions 
referenced in paragraph (c)(2) of this section.
    (4) Sources of information collected during the on-site review to 
determine substantial conformity must include, but are not limited to:
    (i) Case records on children and families served by the agency;
    (ii) Interviews with children and families whose case records have 
been reviewed and who are, or have been, recipients of services of the 
agency;
    (iii) Social workers, foster parents, and service providers for the 
cases selected for the on-site review; and
    (iv) Interviews with other individuals, such as those representing 
the sources of consultation for the development of the State's CFSP, as 
required by 45 CFR 1357.15(l).
    (5) The composition of the sample of cases selected for the on-site 
review, by number of cases and type of cases, will be jointly 
determined by the ACF Regional Office and the State, based on the 
findings of the State self-assessment, subject to the following 
criteria:
    (i) Cases comprising the sample, including any sub-samples, of the 
sample must be randomly selected;
    (ii) The number of cases reviewed must be sufficient to evaluate 
the qualitative issues agreed upon by the ACF Regional Office and the 
State as the focus of the on-site review based on analysis of the State 
self-assessment and any other relevant data available to the State;
    (iii) The sampling plan used to select cases for the on-site review 
must be approved by the ACF designated official.
    (d) Partial review. A partial review, when required, will be 
planned and conducted jointly by ACF and the State agency based on the 
nature of the concern.
    (e) Within 30 calendar days following either a partial or full 
review, ACF will notify the State agency in writing of whether the 
State is, or is not, operating in substantial conformity.


Sec. 1355.34  Criteria for determining substantial conformity.

    (a) Criteria to be satisfied. A State's substantial conformity with 
title IV-B and title IV-E State plan requirements will be based on the 
following:
    (1) its ability to meet criteria related to outcomes for children 
and families;
    (2) its ability to meet criteria related to the State agency's 
capacity to deliver services leading to improved outcomes;
    (3) aggregate data in the State self-assessment used to examine 
each outcome and performance indicator which corroborates the findings 
of the on-site component of the review, and;
    (4) the determination of conformity by the ACF Regional Office 
based on the criteria described in paragraphs (a) through (c) of this 
section.
    (b) Criteria related to outcomes.
    (1) A State's substantial conformity will be determined by its 
ability to substantially achieve the following child and family service 
outcomes:
    (i) In the area of child safety:
    (A) Children are, first and foremost, protected from abuse and 
neglect, and are safely maintained in their homes whenever possible; 
and
    (B) The risk of harm to children is minimized;
    (ii) In the area of permanency for children:
    (A) Children have permanency and stability in their living 
situations; and
    (B) The continuity of family relationships and connections is 
preserved for children; and
    (iii) In the area of child and family well-being:
    (A) Families have enhanced capacity to provide for their children's 
needs;
    (B) Children will receive appropriate services to meet their 
educational needs; and
    (C) Children receive adequate services to meet their physical and 
mental health needs.
    (2) A State's level of achievement with regard to each outcome 
reflects the extent to which a State has implemented the following CFSP 
requirements or assurances:
    (i) The requirements in 45 CFR 1357.15(p) regarding services 
designed to assure the safety and protection of children and the 
preservation and support of families;
    (ii) The requirements in 45 CFR 1357.15(q) regarding the permanency 
provisions for children and families in sections 422 and 471 of the 
Act;
    (iii) The requirements in section 422(b)(9) of the Act regarding 
recruitment of potential foster and adoptive families;
    (iv) The assurances by the State as required by section 
422(b)(10)(C) (i) and (ii) of the Act regarding policies and procedures 
for abandoned children;
    (v) The requirements in section 422(b)(11) of the Act regarding the 
State's compliance with the Indian Child Welfare Act;
    (vi) The requirements in section 422(b)(12) of the Act regarding a 
State's plan for effective use of cross-jurisdictional resources to 
facilitate timely adoptive or permanent placements; and,
    (vii) The requirements in section 471(a)(15) of the Act regarding 
reasonable efforts to prevent removals of children from their homes, to 
make it possible for children in foster care to safely return to their 
homes, or, when the child is not able to return home, to place the 
child in accordance with the permanency plan and complete the steps 
necessary to finalize the permanent placement.
    (3) A State will be determined to be in substantial conformity if 
each

[[Page 50089]]

outcome listed in paragraph (b)(1) of this section is rated as 
``substantially achieved'' in 95 percent of the cases examined during 
the on-site review (90 percent of the cases for a State's initial 
review). Information from various sources (case records, interviews) 
will be examined for each outcome and a determination made as to the 
degree to which each outcome has been achieved for each case reviewed.
    (c) Criteria related to State agency capacity to deliver services 
leading to improved outcomes for children and families.
    In addition to the criteria related to outcomes contained in 
paragraph (b) of this section, the State agency must also satisfy 
criteria related to the delivery of services. Information from the 
self-assessment and the on-site review must indicate that the State has 
implemented the referenced State plan requirements related to the State 
agency's capacity to deliver services leading to improved outcomes, and 
actually delivered those services, by meeting each of the criteria 
listed for the following core systemic factors:
    (1) Statewide information system: The State is operating a 
statewide information system that, at a minimum, can readily identify 
the status, demographic characteristics, location, and goals for the 
placement of every child who is (or within the immediately preceding 12 
months, has been) in foster care (section 422(b)(10)(B)(i) of the Act);
    (2) Case review system: The State has procedures in place that:
    (i) provide, for each child, a written case plan to be developed 
jointly with the child's parent(s) that includes provisions: for 
placing the child in the least restrictive, most family-like placement 
appropriate to his/her needs, and in close proximity to the parents' 
home where such placement is in the child's best interests; for visits 
with a child placed out of State at least every 12 months by a social 
worker of the agency or of the agency in the State where the child is 
placed; and for documentation of the steps taken to make and finalize 
an adoptive or other permanent placement when the child cannot return 
home (section 422(b)(10)(B)(ii) of the Act);
    (ii) provide for periodic review of the status of each child no 
less frequently than once every six months by either a court or by 
administrative review (section 422(b)(10)(B)(ii) of the Act);
    (iii) assure that each child in foster care under the supervision 
of the State has a permanency hearing in a family or juvenile court or 
another court of competent jurisdiction (including a Tribal court), or 
by an administrative body appointed or approved by the court, which is 
not a part of or under the supervision or direction of the State 
agency, no later than 12 months from the date the child entered foster 
care (and not less frequently than every 12 months thereafter during 
the continuation of foster care) (section 422(b)(10)(B)(ii) of the 
Act);
    (iv) provide a process for termination of parental rights 
proceedings in accordance with section 475(5)(E) of the Act; and,
    (v) provide foster parents, preadoptive parents, and relative 
caregivers of children in foster care with notice of and an opportunity 
to be heard in any review or hearing held with respect to the child.
    (3) Quality assurance system: The State has developed and 
implemented standards to ensure that children in foster care placements 
are provided quality services that protect the safety and health of the 
children (section 471(a)(22) and is operating an identifiable quality 
assurance system (45 CFR 1357.15(u)) as described in the CFSP that:
    (i) is in place in the jurisdictions within the State where 
services included in the CFSP are provided;
    (ii) is able to evaluate the adequacy and quality of services 
provided under the CFSP;
    (iii) is able to identify the strengths and needs of the service 
delivery system it evaluates;
    (iv) provides reports to agency administrators on the quality of 
services evaluated and needs for improvement; and (v) evaluates 
measures implemented to address identified problems.
    (4) Staff training: The State is operating a staff development and 
training program (45 CFR 1357.15(t)) that:
    (i) supports the goals and objectives in the State's CFSP;
    (ii) addresses services provided under both subparts of title IV-B 
and the training plan under title IV-E of the Act;
    (iii) provides training for all staff who provide family 
preservation and support services, child protective services, foster 
care services, adoption services and independent living services soon 
after they are employed and that includes the basic skills and 
knowledge required for their positions;
    (iv) provides ongoing training for staff that addresses the skills 
and knowledge base needed to carry out their duties with regard to the 
services included in the State's CFSP; and,
    (v) provides short-term training for current or prospective foster 
parents, adoptive parents, and the staff of State-licensed or State-
approved child-care institutions providing care to foster and adopted 
children receiving assistance under title IV-E that addresses the 
skills and knowledge base needed to carry out their duties with regard 
to caring for foster and adopted children.
    (5) Service array: Information from the State self-assessment and 
on-site review determines that the State has in place an array of 
services (45 CFR 1357.15(n) and section 422(b)(10)(B)(iii) and (iv) of 
the Act) that include, at a minimum:
    (i) services that assess the strengths and needs of children and 
families assisted by the agency and are used to determine other service 
needs;
    (ii) services that address the needs of the family, as well as the 
individual child, in order to create a safe home environment;
    (iii) services designed to enable children at risk of foster care 
placement to remain with their families when their safety and well 
being can be reasonably assured;
    (iv) services designed to help children achieve permanency by 
returning to families from which they have been removed, where 
appropriate, be placed for adoption or with a legal guardian or in some 
other planned, permanent living arrangement, and through post-legal 
adoption services;
    (v) services that are accessible to families and children in all 
political jurisdictions covered in the State's CFSP; and,
    (vi) services that can be individualized to meet the unique needs 
of children and families served by the agency.
    (6) Agency responsiveness to the community: (i) the State, in 
implementing the provisions of the CFSP, engages in ongoing 
consultation with a broad array of individuals and organizations 
representing the State and county agencies responsible for implementing 
the CFSP and other major stakeholders in the services delivery system 
including, at a minimum, tribal representatives, consumers, service 
providers, foster care providers, the juvenile court, and other public 
and private child and family serving agencies (45 CFR 1357.15(l)(4));
    (ii) the agency develops, in consultation with these or similar 
representatives, annual reports of progress and services delivered 
pursuant to the CFSP (45 CFR 1357.15(l)(4));
    (iii) there is evidence that the agency's goals and objectives 
included in the CFSP reflect consideration of the major concerns of 
stakeholders consulted in developing the plan and on an ongoing basis 
(45 CFR 1357.15(m)); and

[[Page 50090]]

    (iv) there is evidence that the State's services under the plan are 
coordinated with services or benefits under other Federal or federally-
assisted programs serving the same populations to achieve the goals and 
objectives in the plan (45 CFR 1357.15(m)).
    (7) Foster and adoptive parent licensing, recruitment and 
retention: (i) the State has established and maintains standards for 
foster family homes and child care institutions which are reasonably in 
accord with recommended standards of national organizations concerned 
with standards for such institutions or homes (section 471(a)(10) of 
the Act);
    (ii) the standards so established are applied by the State to every 
licensed or approved foster family home or child care institution 
receiving funds under title IV-E or IV-B of the Act (section 471(a)(10) 
of the Act);
    (iii) the State complies with the safety requirements for foster 
care and adoptive placements in accordance with sections 471(a)(16) and 
475(1) of the Act and 45 CFR 1356.30;
    (iv) the State has in place an identifiable process for assuring 
the diligent recruitment of potential foster and adoptive families that 
reflect the ethnic and racial diversity of children in the State for 
whom foster and adoptive homes are needed (section 422(b)(9) of the 
Act); and,
    (v) the State has developed and implemented plans for the effective 
use of cross-jurisdictional resources to facilitate timely adoptive or 
permanent placements for waiting children (section 422(b)(12) of the 
Act).
    (d) Availability of review instruments.
    ACF will make available to the States copies of the review 
instruments, which will contain the specific standards to be used to 
determine substantial conformity, on an ongoing basis, whenever 
significant revisions to the instruments take place.


Sec. 1355.35  Program improvement plans.

    (a) Mandatory program improvement plan. States found not to be 
operating in substantial conformity shall develop a program improvement 
plan. The program improvement plan must:
    (1) Be developed jointly by State and Federal staff in consultation 
with the review team;
    (2) Identify the areas in which the State's program is not in 
substantial conformity;
    (3) Set forth the goals, the action steps required to correct each 
identified weakness or deficiency, and dates by which each action step 
is to be completed in order to improve the specific areas;
    (4) Establish benchmarks that will be used to measure the State's 
progress in implementing the program improvement plan and describe the 
methods that will be used to evaluate progress;
    (5) Identify the technical assistance needs and sources of 
technical assistance, both Federal and non-Federal, which will be used 
to make the necessary improvements identified in the program 
improvement plan.
    (b) Voluntary program improvement plan. States found to be 
operating in substantial conformity may voluntarily develop and 
implement a program improvement plan in collaboration with the ACF 
Regional Office, under the following circumstances:
    (1) The State and Regional Office agree that there are areas of the 
State's child and family services programs in need of improvement which 
can be addressed through the development and implementation of a 
voluntary program improvement plan;
    (2) ACF approval of the voluntary program improvement plan will not 
be required; and
    (3) No penalty will be assessed for the State's failure to achieve 
the goals described in the voluntary program improvement plan.
    (c) Approval of program improvement plans.
    (1) A State determined not to be in substantial conformity must 
submit the program improvement plan to ACF for approval within 60 
calendar days from the date the State receives the written notification 
from ACF that it is not operating in substantial conformity.
    (2) Any program improvement plan will be approved by ACF if it 
meets the provisions of paragraph (a) of this section.
    (3) If the program improvement plan does not meet the provisions of 
paragraph (a) of this section, the State will have 30 calendar days 
from the date it receives notice from ACF that the plan has not been 
approved to revise and resubmit the plan for approval.
    (4) If the State does not submit a revised program improvement plan 
according to the provisions of paragraph (c)(3) of this section, or if 
the plan does not meet the provisions of paragraph (a) of this section, 
withholding of funds pursuant to the provisions of Sec. 1355.36 this 
part will apply.
    (d) Duration of program improvement plans. A State will have two 
years to successfully complete the provisions in its program 
improvement plan. However, a State must complete provisions in its 
program improvement plan that address child safety in less than two 
years. The level of risk to child safety will be considered by the 
State and ACF in determining such time frames. The ACF may grant a one-
year extension, for a maximum of three years, when the provisions in 
the program improvement plan are too extensive for the State to 
successfully complete within the two-year period.
    (e) Evaluating program improvement plans. Program improvement plans 
will be evaluated jointly by the State agency and ACF, in collaboration 
with other members of the review team, as described in the State's 
program improvement plan and in accordance with the following criteria:
    (1) The methods and information used to measure progress must be 
sufficient to determine when and whether the State is operating in 
subsequent substantial conformity;
    (2) The frequency of evaluating progress will be determined jointly 
by the State and Federal team members, but no less than annually. 
Evaluation of progress will be performed in conjunction with the annual 
updates of the State's CFSP, as described in paragraph (f) of this 
section.
    (3) Action steps may be jointly determined by the State and ACF to 
be achieved prior to projected completion dates, and will not require 
any further evaluation at a later date; and
    (4) The State and ACF may jointly renegotiate the terms and 
conditions of the program improvement plan as needed, provided that:
    (i) The renegotiated plan is designed to correct the areas of the 
State's program determined not to be in substantial conformity;
    (ii) The amount of time needed to implement the provisions of the 
plan does not extend beyond three years from the date the original 
program improvement plan was approved; and
    (iii) The renegotiated plan is approved by ACF.
    (f) Integration of program improvement plans with CFSP planning. 
The elements of the program improvement plan must be incorporated into 
the goals and objectives of the State's CFSP. Progress in implementing 
the program improvement plan must be included in the annual reviews and 
progress reports related to the CFSP required in 45 CFR 1357.16.


Sec. 1355.36  Withholding Federal funds due to failure to conform 
following the completion of a State's 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

[[Page 50091]]

administrative costs for foster care 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) Title IV-B funds and a portion of title IV-E funds will be 
withheld for States determined not to be operating in substantial 
conformity only after the State has had an opportunity to correct the 
areas of nonconformity through the development and implementation of a 
program improvement plan.
    (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 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's failure to comply is ended either through the 
successful completion of a program improvement plan or until a 
subsequent full review determines the State is operating in substantial 
conformity.
    (4) The amount of title IV-B and title IV-E funds to be withheld by 
ACF will be computed as follows:
    (i) The pool of title IV-B and title IV-E funds from which funds 
will be withheld due to a determination that a State is not operating 
in substantial conformity includes:
    (A) The State's allotment of title IV-B funds for each of the years 
to which withholding applies, and
    (B) 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.
    (ii) An amount equivalent to one percent of the funds described in 
paragraph (b)(4)(i) 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)(2) of this part that is determined not to be 
substantially achieved, and
    (iii) An amount equivalent to one percent of the funds described in 
paragraph (b)(4)(i) 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)(2) of this part that is determined 
not to be in substantial conformity.
    (5) The maximum amount of title IV-B and title IV-E funds to be 
withheld due to the State's failure to comply is fourteen percent per 
year of the funds described in paragraph (b)(4)(i) 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 under the following circumstances:
    (1) When the State's failure to conform is ended by the successful 
completion of a program improvement plan;
    (2) Upon determination by the State and ACF that action steps have 
been completed and goals achieved as specified in the program 
improvement plan, ACF will rescind the withholding of the portion of 
title IV-B and title IV-E funds related to those goals as of the date 
at the end of the quarter in which they were determined to be achieved.
    (e) Withholding of funds. (1) States determined not to be in 
substantial conformity which 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 latest 
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:
    (i) Funds related to goals and action steps which have not been 
achieved at the conclusion of a program improvement plan will be 
withheld by ACF at that time for a period beginning October 1 of the 
fiscal year for which the determination of nonconformity was made to 
the latest completion date specified in the program improvement plan; 
and
    (ii) 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.
    (3) When the point in time at which the State is determined to be 
in substantial conformity 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 withholding of fourteen percent of its 
title IV-B and title IV-E funds, as described in paragraph (b)(5) of 
this section, for each year or portion thereof to which the withholding 
of funds applies.
    (5) Interest on withheld funds. 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.


Sec. 1355.37  Opportunity for public inspection of review reports and 
materials.

    The State agency must make available for public review and 
inspection all self-assessments (1355.33(b)), report of findings 
(1355.33(e)), and program improvement plans (1355.35(a)) developed as a 
result of a full or partial child and family services review.


Sec. 1355.38  Enforcement of section 471(a)(18) of the Act regarding 
the removal of barriers to interethnic adoption.

    (a) Determination that a violation has occurred in the absence of a 
court finding. (1) If ACF becomes aware of a possible section 
471(a)(18) violation, whether in the course of a child and family 
services review, the filing of a complaint, or through some other 
mechanism, it will refer such a case to the Department's Office for 
Civil Rights (OCR) for investigation.
    (2) Based on the findings of the OCR investigation, ACF will 
determine if a violation of section 471(a)(18) has occurred. A section 
471(a)(18) violation occurs if a State or an entity in the State:
    (i) has denied to any person the opportunity to become an adoptive 
or foster parent on the basis of the race, color, or national origin of 
the person, or of the child, involved;
    (ii) has delayed or denied the placement of a child for adoption or 
into foster care on the basis of the race, color, or national origin of 
the adoptive or foster parent, or the child involved; or,
    (iii) with respect to a State, maintains any statute, regulation, 
policy,

[[Page 50092]]

procedure, or practice that, if applied, would likely result in a 
violation against a person as defined in paragraphs (2)(i) and (2)(ii) 
of this section.
    (3) ACF will provide the State or entity involved with written 
notification of its determination.
    (4) If there has been no violation, there will be no further 
action. If ACF determines that there has been a violation of section 
471(a)(18), it will take enforcement action as described in this 
regulation.
    (5) Compliance with the Indian Child Welfare Act of 1978 does not 
constitute a violation of section 471(a)(18).
    (b) Corrective action and penalties for violations with respect to 
a person or based on a court finding.
    (1) A State found to be in violation of section 471(a)(18) with 
respect to a person, as described in paragraphs (a)(2)(i) and 
(a)(2)(ii) of this section, will be penalized in accordance with 
paragraph (g)(2) of this section. A State determined to be in violation 
of section 471(a)(18) of the Act as a result of a court finding will be 
penalized in accordance with paragraph (g)(4) of this section. The 
State may develop, obtain approval of, and implement a plan of 
corrective action any time after it receives written notification from 
ACF that it is in violation of section 471(a)(18) of the Act.
    (2) Corrective action plans are subject to ACF approval.
    (3) If the corrective action plan does not meet the provisions of 
paragraph (d) of this section, the State must revise and resubmit the 
plan for approval until it has an approved plan.
    (c) Corrective action for violations resulting from a State's 
statute, regulation, policy, procedure, or practice.
    (1) A State found to have committed a violation of the type 
described in paragraph (a)(2)(iii) of this section must develop, obtain 
approval of, and implement a corrective action plan within six months 
of receiving notification from ACF that it is in violation of section 
471(a)(18) of the Act. If the State fails to implement the corrective 
action plan within six months, a penalty will be imposed in accordance 
with paragraph (g)(3).
    (2) Corrective action plans are subject to ACF approval.
    (3) If the corrective action plan does not meet the provisions of 
paragraph (d) of this section, the State must revise and re-submit the 
plan until it has an approved plan.
    (4) ACF will consider a State to have implemented its corrective 
action plan when it begins to carry out the action step(s) in the plan.
    (5) Once implemented, a State must complete the corrective action 
plan according to the time frame in the plan. If the State fails to 
complete the corrective action plan within the specified time, a 
penalty will be imposed in accordance with paragraph (g)(3) of this 
section.
    (d) Contents of a corrective action plan. A corrective action plan 
must:
    (1) identify the issues to be addressed;
    (2) set forth the steps for taking corrective action;
    (3) identify any technical assistance needs and Federal and non-
Federal sources of technical assistance which will be used to complete 
the action steps; and,
    (4) specify dates for completing each action step. Extension of 
these dates may be negotiated with ACF.
    (e) Evaluation of corrective action plans. ACF may evaluate action 
steps in a corrective action plan that address a violation of section 
471(a)(18) as they are completed. ACF will evaluate corrective action 
plans and notify the State (in writing) of its success or failure to 
complete the plan within 30 calendar days of the latest projected 
completion date specified in the plan. If the State has failed to 
complete the corrective action plan, ACF will calculate the amount of 
reduction in the State's title IV-E payment and include this 
information in the notification of failure to complete the plan.
    (f) For the purposes of this section: The term title IV-E funds 
refers to the Federal share of expenditures a State claims for foster 
care maintenance payments, adoption assistance payments, 
administrative, and training costs under title IV-E and the State's 
allotment for the Independent Living program.
    (g) Reduction of title IV-E funds. (1) Title IV-E funds may be 
reduced in specified amounts in accordance with subsection (h) under 
the following circumstances:
    (i) a determination that a State is in violation of section 
471(a)(18) of the Act with respect to a person as described in 
paragraphs (a)(2)(i) and (a)(2)(ii) of this section, or;
    (ii) after a State's failure to implement or complete a corrective 
action plan described in paragraph (c) of this section.
    (2) Once ACF notifies a State that it has committed a section 
471(a)(18) violation with respect to a person, the State's title IV-E 
funds will be reduced for the fiscal quarter in which the State 
received such notification and for each succeeding quarter within that 
fiscal year or until the State completes a corrective action plan, 
whichever is sooner.
    (3) For States that fail to implement or complete a corrective 
action plan as described in paragraph (c) of this section, title IV-E 
funds will be reduced by ACF for the fiscal quarter in which the State 
received notification of its violation. The reduction will continue for 
each succeeding quarter within that fiscal year or until the State 
completes the corrective action plan, whichever is sooner.
    (4) If, as a result of a court finding, a State is determined to be 
in violation of section 471(a)(18) of the Act, ACF will assess a 
penalty without further investigation. Once the State is notified of 
the violation, its title IV-E funds will be reduced for the fiscal 
quarter in which the court finding was made and for each succeeding 
quarter within that fiscal year or until the State completes a 
corrective action plan, whichever is sooner.
    (5) The maximum number of quarters that a State will have its title 
IV-E funds reduced due to the State's failure to conform to section 
471(a)(18) of the Act is limited to the number of quarters within the 
fiscal year in which a determination of nonconformity was made. 
However, an uncorrected violation may result in a subsequent review, 
another finding, and additional penalties.
    (h) Determination of the amount of reduction of Federal funds. ACF 
will determine the reduction in title IV-E funds due to a section 
471(a)(18) violation in accordance with section 474(d)(1) of the Act.
    (1) State agencies that violate section 471(a)(18) with respect to 
a person or fail to implement or complete a corrective action plan as 
described in paragraph (c) of this section will be subject to a 
penalty. The penalty structure will follow section 474(d)(1) of the 
Act. Penalties will be levied for the quarter of the fiscal year in 
which the State is notified of its section 471(a)(18) violation, and 
for each succeeding quarter within that fiscal year until the State 
comes into compliance with section 471(a)(18). The reduction in title 
IV-E funds will be computed as follows:
    (i) 2 percent of the amount of title IV-E funds claimed by the 
State for the fiscal year in which the first finding of noncompliance 
was made;
    (ii) 3 percent of the amount of title IV-E funds claimed by the 
State for the fiscal year in which the second finding of noncompliance 
was made;
    (iii) 5 percent of the amount of title IV-E funds claimed by the 
State for the fiscal year in which the third or

[[Page 50093]]

subsequent finding of noncompliance was made.
    (2) Any entity (other than the State agency) which violates section 
471(a)(18) of the Act during a fiscal quarter with respect to any 
person must remit to the Secretary all title IV-E funds paid to it by 
the State during the quarter in which the entity is notified of its 
violation.
    (3) No fiscal year payment to a State will be reduced by more than 
5 percent where the State has been determined to be out of compliance 
with section 471(a)(18) of the Act.
    (4) The State agency or entity, as applicable, will be liable for 
interest on the amount of funds reduced by the Department, in 
accordance with the provisions of 45 CFR 30.13.


Sec. 1355.39  Administrative and judicial review.

    States determined not to be in substantial conformity with titles 
IV-B and IV-E State plan requirements, or in violation of section 
471(a)(18) of the Act:
    (a) May appeal the final determination and any subsequent 
withholding of, or reduction in, funds to the HHS Departmental Appeals 
Board within 60 days after receipt of a notice of nonconformity 
described in Sec. 1355.36(e)(1) of this part, or receipt of a notice of 
noncompliance by ACF as described in Sec. 1355.38(b) of this part; and
    (b) Will have the opportunity to obtain judicial review of an 
adverse decision of the Departmental Appeals Board within 60 days after 
the State receives notice of the decision by the Board. The State must 
appeal to the district court of the United States for the judicial 
district in which the principal or headquarters office of the agency 
responsible for administering the program is located.
    (c) The procedure described in paragraphs (a) and (b) of this 
section will not apply to a finding that a State has been determined to 
be in violation of section 471(a)(18) which is based on a judicial 
decision.

PART 1356--REQUIREMENTS APPLICABLE TO TITLE IV-E

    4. The authority citation for Part 1356 continues to read as 
follows:

    Authority: 42 U.S.C. 620 et seq., 42 U.S.C. 670 et seq., and 42 
U.S.C. 1302.

    5. Section 1356.20 is amended by revising paragraph (e)(4) to read 
as follows:


Sec. 1356.20  State plan document and submission requirements.

* * * * *
    (e) * * *
    (4) Action. Each Regional Administrator, ACF, has the authority to 
approve State plans and amendments thereto which provide for the 
administration of foster care maintenance payments and adoption 
assistance programs under section 471 of the Act. The Commissioner, 
ACYF, retains authority for determining that proposed plan material is 
not approvable, or that a previously approved plan no longer meets the 
requirements for approval.
* * * * *
    6. Section 1356.21 is revised to read as follows:


Sec. 1356.21  Foster care maintenance payments program implementation 
requirements.

    (a) To implement the foster care maintenance payments program 
provisions of the title IV-E State plan and to be eligible to receive 
Federal financial participation (FFP) for foster care maintenance 
payments under this part, a State must meet the requirements of this 
section, and sections 472, 475(1), 475(4), 475(5) and 475(6) of the 
Act.
    (b) Reasonable efforts. In order to satisfy the ``reasonable 
efforts'' requirements of section 471(a)(15) as implemented through 
section 472(a)(1) of the Act, the State must meet the requirements of 
paragraphs (b), (d) and (g)(4) of this section. In determining 
reasonable efforts to be made with respect to a child and in making 
such reasonable efforts, the child's health and safety must be the 
State's paramount concern.
    (1) Judicial determination of reasonable efforts to prevent removal 
in non-emergency situations. When a child is removed from home pursuant 
to a court order, the court must determine, before issuing such an 
order, whether reasonable efforts had been made to prevent removal 
prior to the removal of the child from home. Except as specified in 
paragraph (b)(2) of this section, if a judicial determination regarding 
reasonable efforts to prevent removal is not made prior to the child's 
removal from the home, as evidenced in the court order initiating that 
removal, the child is not eligible under the title IV-E foster care 
maintenance payments program for the duration of that stay in foster 
care.
    (2) Judicial determinations of reasonable efforts to prevent 
removal in emergency situations. (i) A child will be considered to be 
removed from his/her home in an emergency situation when a court order 
has not been obtained in advance of the removal.
    (ii) When it is necessary to remove a child from his/her home prior 
to obtaining a court order, the judicial determination as to whether 
reasonable efforts were made to prevent removal or that reasonable 
efforts to prevent removal were not required in accordance with 
paragraph (b)(5) of this section must be made at the first full hearing 
pertaining to removal of the child or no later than 60 days after a 
child has been removed from home, whichever is first. A State may claim 
Federal financial participation from the first day of the month in 
which all eligibility criteria have been met.
    (iii) If the determination concerning reasonable efforts to prevent 
removal is not made as specified in clause (ii) above, the child is not 
eligible under the title IV-E foster care maintenance payments program 
for the duration of that stay in foster care.
    (3) Judicial determination of reasonable efforts to reunify the 
child and family. (i) The court must determine that the State agency 
made reasonable efforts to reunify the family within twelve months of 
the date the child enters foster care when the permanent plan or goal 
for the child is to reunify the family, and at least once every twelve 
months thereafter as long as the permanent plan or goal is 
reunification. If such a judicial determination regarding reasonable 
efforts to reunify is not made, the child becomes ineligible under 
title IV-E from the end of the twelfth month following the date the 
child entered foster care or the most recent judicial determination of 
reasonable efforts to reunify, and remains ineligible until such a 
determination is made.
    (ii) When, in accordance with paragraph (b)(5), the court 
determines that reasonable efforts to reunify the child and family are 
not required, the State must hold a permanency hearing within 30 days 
of such a determination, unless the requirements of the permanency 
hearing are fulfilled at the hearing in which the aforementioned 
determination was made.
    (4) Judicial determination of reasonable efforts to make and 
finalize permanent placements other than reunification. The court must 
determine that the State agency made reasonable efforts to make and 
finalize a child's permanent placement at least once every twelve 
months from the date the permanency goal becomes adoption or placement 
in another permanent home. If such a judicial determination regarding 
reasonable efforts to make and finalize a permanent placement is not 
made, the child will become ineligible under title IV-E from the end of 
the

[[Page 50094]]

twelfth month following the date the alternate permanency goal was 
established or the most recent judicial determination of reasonable 
efforts to make and finalize a permanent placement, and will remain so 
until such a determination is made.
    (5) Circumstances in which reasonable efforts are not required to 
prevent a child's removal from home or to reunify the child and family. 
Reasonable efforts to prevent a child's removal from home or to reunify 
the child and family are not required if the State agency obtains a 
judicial determination that such efforts are not required because:
    (i) a court of competent jurisdiction has determined that the 
parent has subjected the child to aggravated circumstances (as defined 
in State law, which definition may include but need not be limited to 
abandonment, torture, chronic abuse, and sexual abuse);
    (ii) a court of competent jurisdiction has determined that the 
parent has:
    (A) committed murder (which would have been an offense under 
section 1111(a) of title 18, United States Code, if the offense had 
occurred in the special maritime or territorial jurisdiction of the 
United States) of another child of the parent;
    (B) committed voluntary manslaughter (which would have been an 
offense under section 1112(a) of title 18, United States Code, if the 
offense had occurred in the special maritime or territorial 
jurisdiction of the United States) of another child of the parent;
    (C) aided or abetted, attempted, conspired, or solicited to commit 
such a murder or such a voluntary manslaughter; or
    (D) committed a felony assault that results in serious bodily 
injury to the child or another child of the parent; or,
    (iii) the parental rights of the parent to a sibling have been 
terminated involuntarily.
    (6) Reasonable efforts to place a child for adoption or with a 
legal guardian may be made concurrently with reasonable efforts to 
reunify.
    (7) The State may use the Federal Parent Locator Service to search 
for absent parents in order to facilitate the permanency plan.
    (c) Contrary to the welfare determination. Under section 472(a)(1) 
of the Act, a child's removal from the home must have been the result 
of a judicial determination (unless the child was removed pursuant to a 
voluntary placement agreement) to the effect that continuation of 
residence in the home would be contrary to the welfare, or that 
placement would be in the best interests, of the child.
    (1) In nonemergency situations. When a child is removed from home 
pursuant to a court order, the court must make the ``contrary to the 
welfare'' determination prior to the removal of the child from home. 
The judicial determination must be documented in the court order which 
removes the child from home. If such a judicial determination is not 
made prior to the removal, the child is not eligible for title IV-E 
foster care maintenance payments for the duration of his/her stay in 
foster care.
    (2) In emergency situations. When it is necessary to remove a child 
from home prior to obtaining a court order, the ``contrary to the 
welfare'' determination must be made in the first court ruling that 
sanctions (even temporarily) the removal of a child from home. If the 
determination regarding ``contrary to the welfare'' is not made in the 
first court ruling pertaining to removal from the home, the child is 
not eligible for title IV-E foster care maintenance payments for the 
duration of his/her stay in foster care.
    (d) Documentation of judicial determinations. The judicial 
determinations regarding ``contrary to the welfare'' and ``reasonable 
efforts'' to prevent removal, reunify the family, make and finalize a 
permanent placement, and that reasonable efforts are not required must 
be explicit and must be made on a case-by-case basis and so stated in 
the court order.
    (1) If the ``reasonable efforts'' and ``contrary to the welfare'' 
judicial determinations are not included as required in the court 
orders identified in paragraphs (b) and (c) of this section, a 
transcript of the court proceedings is the only other documentation 
that will be accepted to verify that these required determinations have 
been made.
    (2) Neither affidavits nor nunc pro tunc orders will be accepted as 
verification documentation in support of ``reasonable efforts'' and 
``contrary to the welfare'' judicial determinations.
    (3) Court orders which reference and rely on State law to 
substantiate that judicial determinations have been made are not 
acceptable, even if State law provides that a removal must be based on 
a judicial determination that remaining in the home would be contrary 
to the child's welfare or that removal can only be ordered after 
reasonable efforts have been made.
    (e) Trial home visits. A trial home visit must not exceed six 
months in duration, unless a longer visit is ordered by a court. If a 
trial home visit extends beyond six months and has not been authorized 
by the court, or exceeds the time period the court has deemed 
appropriate, and the child is subsequently returned to a foster care 
setting, that placement must then be considered a new placement and 
title IV-E eligibility must be re-established. Under these 
circumstances, a new court order removing the child from the home, 
including judicial determinations regarding ``contrary to the welfare'' 
and ``reasonable efforts'' to prevent removal, is required.
    (f) Case review system. In order to satisfy the provisions of 
section 471(a)(16) of the Act regarding a case review system, each 
State's case review system must meet the requirements of sections 
475(5) and 475(6) of the Act.
    (g) Case plan requirements. In order to satisfy the case plan 
requirements of sections 471(a)(16), 475(1) and 475(5)(A) and (D) of 
the Act, the State agency must promulgate policy materials and 
instructions for use by State and local staff to determine the 
appropriateness of and necessity for the foster care placement of the 
child. The case plan for each child must:
    (1) Be a written document, which is a discrete part of the case 
record, in a format determined by the State, which is developed jointly 
with the parent(s) or guardian of the child in foster care; and
    (2) Be developed within a reasonable period, to be established by 
the State, but in no event later than 60 days from the time the State 
agency assumes responsibility for providing services including placing 
the child; and
    (3) Include a discussion of how the case plan is designed to 
achieve a safe placement for the child in the least restrictive (most 
family-like) setting available and in close proximity to the home of 
the parent(s) when the case plan goal is reunification and a discussion 
of how the placement is consistent with the best interest and special 
needs of the child; and
    (4) Include a description of the services offered and the services 
provided to prevent removal of the child from the home, to reunify the 
family, and to finalize a placement when the case plan goal is or 
becomes adoption or placement in another permanent home in accordance 
with sections 475(1)(E) and (5)(E) of the Act.

(This requirement has been approved by the Office of Management and 
Budget (OMB) under OMB control number 0980-0140)

    (h) Application of permanency hearing requirements. (1) If a State 
chooses to claim Federal financial participation (FFP) for the costs of 
foster care maintenance payments, it must, among other requirements, 
comply with those in section 475(5)(C) of the Act.

[[Page 50095]]

    (2) The provisions of this paragraph and section 475(5)(C) of the 
Act apply to all children under the responsibility of the title IV-E 
State agency for placement and care, except for a child with special 
needs or circumstances which prevent his or her return to the home or 
being placed for adoption. If this child is placed in a court-
sanctioned permanent foster family home with a family caregiver 
specified by the court, no permanency hearings are required during that 
specified permanent placement. If the foster care placement of this 
child is subsequently changed, the State is again required to hold 
permanency hearings, the first of which must be held within three 
months of the date of such change.
    (3) In accordance with paragraph (b)(5) of this section, when a 
court determines that reasonable efforts to return the child home are 
not required, a permanency hearing must be held within 30 days of that 
determination, unless the requirements of the permanency hearing are 
fulfilled at the hearing in which the aforementioned determination was 
made.
    (4) If the State concludes, after considering other permanency 
options, that the most appropriate permanency plan for a child is 
placement in a permanent foster family home, the State must document, 
to the State court, the compelling reason which prevented the child 
from being placed in an adoptive home, with a relative, or with a legal 
guardian. An example of a compelling reason for establishing such a 
permanency goal is the case of an older teen who specifically requests 
that such a goal be established.
    (5) When an administrative body, appointed or approved by the 
court, conducts the permanency hearing, the procedural safeguards set 
forth in the definition of permanency hearing must be so extended by 
the administrative body.
    (i) Application of the requirements for filing a petition to 
terminate parental rights at section 475(5)(E) of the Social Security 
Act. (1) Unless one of the exceptions at subparagraph (2) exists, the 
State must file a petition (or, if such a petition has been filed by 
another party, seek to be joined as a party to the petition) to 
terminate the parental rights of a parent(s):
    (i) whose child has been in foster care under the responsibility of 
the State for 15 of the most recent 22 months. The petition must be 
filed by the end of the child's fifteenth month in foster care. In 
calculating when to file a petition for termination of parental rights, 
the State:
    (A) must use the date the child entered foster care as defined at 
section 475(5)(F) of the Act as the date from which the 22 month clock 
begins for calculating the 15 months in foster care;
    (B) must use a cumulative method of calculation when a child 
experiences multiple exits from and entries into foster care during the 
22 month period;
    (C) must not include trial home visits or runaway episodes in 
calculating 15 months in foster care; and,
    (D) need only apply section 475(5)(E) to a child once if the State 
does not file a petition because one of the exceptions at paragraph (2) 
of this section applies;
    (ii) whose child has been determined by a court of competent 
jurisdiction to be an abandoned infant (as defined under State law). 
The petition to terminate parental rights must be filed within 60 days 
of the judicial determination that the child is an abandoned infant; 
or,
    (iii) who has been found, by a court of competent jurisdiction, to 
have committed one of the felonies listed at paragraph (b)(5)(ii) of 
this section. Under such circumstances, the petition to terminate 
parental rights must be filed within 60 days of a judicial 
determination that reasonable efforts to reunify the child and parent 
are not required.
    (2) The State may elect not to file or join a petition to terminate 
the parental rights of a parent per paragraph (i)(1) of this section 
if:
    (i) at the option of the State, the child is being cared for by a 
relative;
    (ii) the State agency has documented in the case plan (which must 
be available for court review) a compelling reason for determining that 
filing such a petition would not be in the best interests of the child. 
Two examples of compelling reasons for not filing a petition to 
terminate parental rights are:
    (A) that adoption is not the appropriate permanency goal for the 
child; or,
    (B) insufficient grounds for filing a petition to terminate 
parental rights exist; or,
    (iii) the State agency has not provided to the family, consistent 
with the time period in the case plan, services that the State deems 
necessary for the safe return of the child to the home, when reasonable 
efforts to reunify the family are required.
    (3) When the State files or joins a petition to terminate parental 
rights in accordance with paragraph (i)(1) of this section, it must 
concurrently identify, recruit, process, and approve a qualified 
adoptive family for the child.
    (j) Child of a minor parent in foster care. Foster care maintenance 
payments made on behalf of a child placed in a foster family home or 
child-care institution, who is the parent of a son or daughter in the 
same home or institution, must include amounts which are necessary to 
cover costs incurred on behalf of the child's son or daughter. Said 
costs must be limited to funds expended on those items described in the 
definition of foster care maintenance payments.
    (k) Removal from the home of a specified relative.
    (1) For the purposes of meeting title IV-E eligibility under the 
requirements of section 472(a)(1) of the Act, the term removal from the 
home applies if a child had been living with a parent or other 
specified relative within six months of:
    (i) a voluntary placement agreement entered into by such parent or 
relative which leads to physical removal of the child from the home;
    (ii) a State agency's initiation of court proceedings which results 
in a judicial removal of the child from such parent or relative; or
    (iii)the State agency's physical removal of the child from the home 
of another specified relative, or a court-ordered removal of custody 
from the specified relative while the child was residing in the home of 
an interim caretaker.
    (2) Under the circumstances described in paragraph (k)(1) of this 
section, the act of ``removal from the home'' must have occurred for 
the purposes of title IV-E eligibility. This does not include 
situations where legal custody is removed from the parent or relative 
and the child remains with the same relative in that home under 
supervision by the State agency.
    (l) Living with a specified relative. For purposes of meeting the 
requirements for living with a specified relative prior to removal from 
the home under section 472(a)(1) of the Act and all of the conditions 
under section 472(a)(4), either of the two following situations may 
apply:
    (1) The child was living with and physically removed from the home 
of the parent or specified relative and was AFDC eligible in that home 
in the month of initiation of court proceedings, as well as at the time 
of removal; or
    (2) The child was removed from the custody of the parent or 
specified relative with whom the child had been living within six 
months of the month in which court proceedings were initiated and the 
child would have been AFDC eligible in that month if he/she had still 
been living in that home.
    (m) Review of payments and licensing standards. In meeting the 
requirements of section 471(a)(11) of the Act, the State must review at 
reasonable, specific,

[[Page 50096]]

time-limited periods to be established by the State:
    (1) The amount of the payments made for foster care maintenance and 
adoption assistance to assure their continued appropriateness; and
    (2) The licensing or approval standards for child care institutions 
and foster family homes.
    (n) Foster care goals. The specific foster care goals required 
under section 471(a)(14) of the Act must be incorporated into State law 
by statute or administrative regulation provided such administrative 
regulation has the force of law.
    (o) Notice and opportunity to be heard. The State must provide the 
foster parent(s) of a child and any preadoptive parent or relative 
providing care for the child with notice of and an opportunity to be 
heard in permanency planning hearings and reviews held with respect to 
the child during the time the child is in the care of such foster 
parent, preadoptive parent, or relative caregiver. Notice of and an 
opportunity to be heard does not provide a foster parent, preadoptive 
parent, or a relative caring for the child with standing as a party to 
the case.
    7. Section 1356.30 is redesignated as section 1356.22 and 
paragraphs (a) and (b) revised to read as follows:


Sec. 1356.22  Implementation requirements for children voluntarily 
placed in foster care.

    (a) As a condition of receipt of Federal financial participation 
(FFP) in foster care maintenance payments for a dependent child removed 
from his home under a voluntary placement agreement, the State must 
meet the requirements of:
    (1) Section 472 of the Act, as amended;
    (2) Sections 422(b)(10) and 475(5) of the Act;
    (3) 45 CFR 1356.21(h), (i), and (j); and
    (4) The requirements of this section.
    (b) Federal financial participation is available only for voluntary 
foster care maintenance expenditures made within the first 180 days of 
the date the voluntary placement agreement was signed by all pertinent 
parties unless there has been a judicial determination by a court of 
competent jurisdiction, within the first 180 days of the date the 
voluntary placement agreement was signed, to the effect that the 
continued voluntary placement is in the best interests of the child.
    (c) The State agency must establish and maintain a uniform 
procedure or system, consistent with State law, for revocation by the 
parent(s) of a voluntary placement agreement and return of the child.
    8. New Sec. 1356.30 is added to read as follows:


Sec. 1356.30  Safety requirements for foster care and adoptive home 
providers.

    (a) Unless an election provided for in paragraph (d) of this 
section is made, the State must provide documentation that criminal 
records checks have been conducted with respect to prospective foster 
and adoptive parents.
    (b) The State may not approve or license any prospective foster or 
adoptive parent, nor may the State claim FFP for any foster care 
maintenance or adoption assistance payment made on behalf of a child 
placed in a foster home operated under the auspices of a child placing 
agency or on behalf of a child placed in an adoptive home through a 
private adoption agency, if the State finds that, based on a criminal 
records check conducted in accordance with paragraph (a) of this 
section, that a court of competent jurisdiction has determined that the 
prospective foster or adoptive parent has been convicted of a felony 
involving:
    (1) child abuse or neglect;
    (2) spousal abuse;
    (3) a crime against children (including child pornography); or,
    (4) a violent crime, including rape, sexual assault, or homicide, 
but not including other physical assault or battery.
    (c) The State may not approve or license any prospective foster or 
adoptive parent, nor may the State claim FFP for any foster care 
maintenance or adoption assistance payment made on behalf of a child 
placed in a foster home operated under the auspices of a child placing 
agency or on behalf of a child placed in an adoptive home through a 
private adoption agency, if the State finds, based on a criminal 
records check conducted in accordance with paragraph (a) of this 
section, that a court of competent jurisdiction has determined that the 
prospective foster or adoptive parent has, within the last five years, 
been convicted of a felony involving:
    (1) physical assault;
    (2) battery; or,
    (3) a drug-related offense.
    (d) (1) The State may elect not to conduct or require criminal 
records checks on prospective foster or adoptive parents by:
    (i) notifying the Secretary in a letter from the Governor; or
    (ii) enacting State legislation.
    (2) Such an election also removes the State's obligation to comport 
with paragraphs (b) and (c) of this section.
    (e) In all cases where no criminal records check was conducted, the 
licensing file for that foster family, adoptive family, child care 
institution, or relative placement must contain documentation that 
safety considerations with respect to the caretaker(s) have been 
addressed.


Secs. 1356.65, 1356.70  [Removed]

    8. Sec. 1356.65 and Sec. 1356.70 are removed.
    9. New Sec. 1356.71 is added to read as follows:


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 and scope. (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.
    (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 be responsible for providing 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. If these data are not available or are deficient, an 
alternative sampling frame 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 
first 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 listed in error in 
AFCARS.

[[Page 50097]]

    (4) At the completion of the first eligibility 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. 
(Three years after the date the final rule becomes effective, the 
acceptable population ineligibility case error rate threshold will be 
reduced from less than 15 percent (eight ineligible cases) to less than 
10 percent (four 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 have been determined 
to be ineligible.
    (5) A State which has been determined to be in ``non-compliance'' 
(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 second on-site 
review. For the second review, a sample of 150 cases (plus a 10 percent 
oversample of 15 cases) will be drawn from the most recent AFCARS 
submission. Cases from the oversample will be substituted and reviewed 
for each of the original sample of 150 cases which is listed in error 
in AFCARS.
    (6) At the completion of the second eligibility 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 only for the 
ineligible cases for the period of time the cases have been determined 
to be ineligible. The State must provide the payment history for all 
165 cases at the beginning of the eligibility review.
    (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).
    (2) The eligibility of the providers of foster care (see sections 
471(a)(20), 472(b) and (c), and 475(1) of the Act).
    (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 proper and sufficient documentation to verify a child's 
eligibility in accordance with paragraph (d)(1), 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, relative, 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 non-compliance are defined as 
follows:
    (i) Substantial compliance--For the first review (of the sample of 
80 cases), eight or fewer of the title IV-E cases reviewed must be 
determined to be ineligible. (This critical number of ``errors'', i.e., 
ineligible cases, is reduced to four errors or less, three years after 
the final rule becomes effective). For the second 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 
first review (of the sample of 80 cases), nine or more of the title IV-
E cases reviewed must be determined to be ineligible. (This critical 
number of ``errors'', i.e., ineligible cases, is reduced to five or 
more three years after the final rule becomes effective). For the 
second review (if required), noncompliance means both the case 
ineligibility and dollar error rates exceed 10 percent.
    (3) The ACF will notify the State in writing within 30 calendar 
days after the completion of the on-site eligibility 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 (i.e., a State will have a maximum 
period of one year in which to implement the provisions 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 the first review must submit the program improvement plan to 
ACF for approval within 60 calendar days from the date the State 
receives the 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's program improvement plan is not submitted 
for approval in accordance with the provisions of paragraph (i)(1) and 
(2) of this section, funds will be disallowed

[[Page 50098]]

pursuant to the provisions of paragraph (k) 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 first or second 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 determined to be ineligible.
    (2) States which are found to be in noncompliance during the first 
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 second 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 in non-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 
AFCARS reporting period. 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.

[FR Doc. 98-24944 Filed 9-17-98; 8:45 am]
BILLING CODE 4184-01-P