[Federal Register Volume 65, Number 16 (Tuesday, January 25, 2000)]
[Rules and Regulations]
[Pages 4020-4093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1122]



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Part II





Department of Health and Human Services





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Administration for Children and Families



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45 CFR Parts 1355, 1356 and 1357



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

  Federal Register / Vol. 65, No. 16 / Tuesday, January 25, 2000 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 1355, 1356 and 1357

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:  Final Rule.

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SUMMARY:  This final rule amends existing regulations concerning 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), and 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 final rule sets 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, and makes other technical changes to the 
race and ethnicity data elements in the Adoption and Foster Care 
Analysis and Reporting System (AFCARS).

EFFECTIVE DATE:  March 27, 2000.

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

SUPPLEMENTARY INFORMATION:
I. Background
II. Approach
    A. Consultation With the Field
    B. Analysis and Decision-Making
    C. Regulation in Context
III. Discussion of Major Changes and Provisions of the Final Rule
    A. Definitions
    B. Child and Family Service Reviews
    C. Enforcement of Section 471(a)(18) of the Act
    D. Reasonable Efforts and Contrary to the Welfare Determinations 
and Documentation
    E. Case Plans and Case Review Requirements
    F. Title IV-E Reviews
    G. Special Populations
IV. Section-by-Section Discussion of Comments
V. Impact Analysis
Final Rule

I. Background

    Titles IV-B and IV-E of the Social Security Act (the Act) are the 
primary sources of Federal funds for State child welfare services, 
foster care and adoption assistance. The Adoption Assistance and Child 
Welfare Act of 1980 (Pub. L. 96-272), amended title IV-B child welfare 
services to institute financial incentives for States to provide 
certain protections for children in foster care under section 427 of 
the Act. Public Law 96-272 also established Part E of title IV of the 
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 on October 1, 1982.
    In August 1993, under the Omnibus Budget Reconciliation Act of 
1993, Public Law 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 family preservation and family 
support services. The family preservation and support services were 
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 and amended section 422 of the Act to include, as 
State plan assurances, the protections formerly required in section 427 
of the Act. As a result, ACF is no longer conducting ``427'' reviews to 
determine if a State is eligible to receive additional title IV-B, 
subpart 1 funds. Besides mandating the Secretary to promulgate 
regulations for reviews of State child and family service programs, the 
amendments to the Act at section 1123A 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 (MEPA), 
Public Law 103-382, to address excessive lengths of stay in foster care 
experienced by children of minority heritage. One factor believed to be 
contributing to these excessive lengths of stay in foster care was 
State agencie' attempts to place children of minority heritage in 
foster and adoptive homes with parents of similar racial or ethnic 
backgrounds. The MEPA forbids 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. At the 
same time, Congress added a title IV-B State plan requirement to 
section 422(b)(9) of the Act, to compel States to make diligent efforts 
to recruit 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.
    As originally enacted, section 553 of MEPA permitted States to 
consider the cultural, ethnic, or racial background of the child and 
the capacity of the prospective foster or adoptive parent to meet the 
needs of a child of such background, as one of several factors in 
making foster and adoptive placements. In 1996, through section 1808, 
``Removal of Barriers to Interethnic Adoptions,'' 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 of Public 
Law 104-188 amended title IV-E by adding a State plan requirement, 
section 471(a)(18) of the Act, 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 of Public Law 104-188 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 broad-
based child welfare reform legislation since Public Law 96-272 was 
enacted in 1980. The Adoption and Safe Families Act (ASFA) of 1997, 
Public Law 105-89, seeks to provide States with the necessary tools and 
incentives to achieve the original goals of Public Law 96-272: safety; 
permanency; and child and family well-being. The impetus for the ASFA 
was a general dissatisfaction with the performance of State' child 
welfare systems in achieving these goals for children and families. The 
ASFA seeks to strengthen the child welfare system's response to a 
child's need for safety and permanency at every point along the 
continuum of care. In part, the law places safety as the paramount 
concern in the delivery of child welfare

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services and decision-making, clarifies when efforts to prevent removal 
or to reunify a child with his or her family are not required, and 
requires criminal record checks of prospective foster and adoptive 
parents. To promote permanency, ASFA shortens the time frames for 
conducting permanency hearings, creates a new requirement for States to 
make reasonable efforts to finalize a permanent placement, and 
establishes time frames for filing petitions to terminate the parental 
rights for certain children in foster care.

II. Approach

A. Consultation With the Field

    A Notice of Proposed Rulemaking (NPRM) was published in the Federal 
Register on September 18, 1998 (63 FR 50058-50098) with a 90-day public 
comment period. We received 176 letters within that period from State 
and local child welfare agencies, national and local advocacy groups 
for children, educational institutions, and individual social workers. 
Other commenters on the NPRM included: Members of Congress, providers 
of child welfare services, State and local courts, national and State 
associations representing groups of practitioners, Indian tribes, and 
local community organizations.
    Prior to developing the NPRM, we consulted extensively with the 
child welfare field. We conducted a series of focus groups related to 
the child and family services reviews with representatives of State 
programs and national organizations, as well as with family and child 
advocates. In addition, State and Federal teams conducted 12 in-depth 
on-site pilots of the child and family services reviews that shaped our 
development of the regulation. We also conducted pilots of the title 
IV-E eligibility reviews in 12 States during the fiscal years 1995 
through 1998. Shortly after the enactment of ASFA, we held focus groups 
in Washington, D.C. and in each of the 10 Federal regions to obtain 
input from the field on the implementation of the new law.

B. Analysis and Decision-Making

    We received a wide range of written comments on the NPRM, 
representing a multitude of perspectives on Federal monitoring of State 
child welfare programs and meeting title IV-E statutory requirements. 
We received widespread support for an outcomes-focused approach to the 
child and family services reviews and the inclusion of a program 
improvement process subsequent to determinations of substantial 
nonconformity, and have thus retained these features in the final rule. 
We also received comments expressing concerns about other provisions of 
the NPRM.
    The major concerns from commenters centered around provisional and 
two-tiered licensing systems for foster care homes, objectivity and 
clarity of substantial conformity determinations in the child and 
family services reviews, the enforcement of the Multiethnic Placement 
Act (as amended), documentation of reasonable efforts and other 
judicial determinations, and exemptions and exceptions from the 
termination of parental rights provisions. We amended and clarified 
many aspects of the final rule in response to these major issues and to 
other comments. To guide us in maintaining an appropriate balance in 
our analysis of the comments and decisionmaking for the final rule we 
used several principles. Those principles are to:
Focus on Achieving the Goals of Safety, Permanency and Well-being in 
State Child Welfare Systems
    We believe that the Adoption and Safe Families Act of 1997 clearly 
establishes safety, permanency and well-being as the key goals for 
State child welfare systems. We were mindful, therefore, to have 
regulatory provisions that would support these statutory goals. For 
example, in the NPRM we proposed to prohibit provisional, or less than 
full licensure of foster care providers for title IV-E purposes. Many 
commenters opposed this prohibition for various reasons. Some were 
concerned that since relative caregivers were often granted less than 
full licensure, disallowing this practice for title IV-E purposes would 
reduce kinship care and the stability it can provide in a child's life. 
While we encourage States to consider permanency in kinship care 
arrangements, the ASFA clearly requires the safety of the child to be 
the paramount concern that will guide all child welfare services. In 
addition, the statute on its face requires that a home is fully 
licensed or approved as meeting the State's licensing standards for the 
purpose of title IV-E eligibility. Therefore, we decided to retain the 
proposed prohibition on less than full licensure, in part because the 
statute as amended by ASFA compels us to ensure that children are in 
safe placements.
    We also chose to strengthen our focus on safety, permanency and 
well-being in the child and family services reviews in a number of 
ways. Many commenters were unclear about how we would measure these 
outcomes, so we have strengthened our process for measuring and 
determining substantial conformity with the safety and permanency 
outcomes in particular, through the statewide assessment. We also heard 
concerns that one of the safety outcomes was in fact two separate 
outcomes, so we have divided the first safety outcome accordingly. We 
believe that these modifications will help clarify our expectations for 
States to achieve these outcomes.
    Another example of strengthening our focus on permanency is in the 
termination of parental rights provisions. Many commenters believed 
that certain groups of children in foster care should be exempted from 
the application of the provision for States to file a petition to 
terminate parental rights. Consistent with the statutory framework and 
desire for timely permanency for all children in foster care, we have 
clarified that no group of children is to be exempted from the TPR 
provision and State or tribal agencies may make exceptions to the TPR 
requirements only on a case-by-case basis.
Move Child Welfare Systems Toward Achieving Positive Child and Family 
Outcomes While Maintaining Accountability
    As we noted in the NPRM, we have dramatically changed the focus of 
State program reviews by examining the results that child and family 
services programs achieve, rather than the accuracy and completeness of 
the case file documentation. Most commenters overwhelmingly supported 
this approach as one that would improve the provision of child welfare 
services for children and families, and we have thus retained a focus 
on outcomes in the final rule.
    Some of the comments, however, also suggested that the flexibility 
that is inherent in an outcomes-based approach must be properly 
balanced with sufficient Federal oversight and State accountability. We 
agree that flexibility and accountability must be balanced, and have 
strengthened several provisions in the final rule in this respect. For 
example, for States who were determined to be out of substantial 
compliance on a child and family services review, we proposed to allow 
States two years, with a possible extension to three years, to complete 
a program improvement plan. Some commenters supported this length of 
time as sufficiently flexible to address needed areas of improvement, 
while others believed the program improvement period to be too long. In 
response, we have clarified that we do not expect States to take the 
full two

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years to complete program improvement in all cases, and note that a 
State will only be able to extend a program improvement plan to three 
years in rare circumstances subject to the approval of the Secretary. 
Finally, we will apply penalties for nonconformity as soon as a State 
fails to improve on an area of nonconformity within the interval noted 
in the program improvement plan, rather than at the conclusion of the 
entire plan. We believe that these changes to the final rule properly 
focus the State on achieving outcomes while maintaining flexibility and 
accountability.
    We also believe it necessary to ensure State accountability in the 
areas of documentation of reasonable efforts and contrary to the 
welfare determinations and requirements related to enforcement of 
section 471(a)(18) of the Act. Some commenters were concerned that the 
documentation requirements and enforcement of section 471(a)(18) of the 
Act were too inflexible. However, we believe that State accountability 
and Federal oversight in these critical areas of child and family 
protections and anti-discrimination consistent with the statute, will 
lead to better outcomes for children and families.
Use Non-Regulatory Resources to Support Federal Statutory and 
Regulatory Provisions
    As we analyzed the comments, we carefully considered whether 
Federal regulations were the appropriate vehicle to address certain 
comments. We believe that we can better respond to some comments in a 
venue separate from the regulatory process, such as through technical 
assistance activities or program guidance.
    For instance, some commenters requested regulations on title IV-E 
training or programs under title IV-B of the Act. We have very limited 
authority to expand the scope of the final rule beyond the issues 
presented for public comment in the NPRM, but we are now aware of 
certain issues that we may consider for future clarification. Other 
commenters asked for specific guidance on working to reunify children 
with parents who have substance abuse problems, or guidelines for 
judges on reasonable efforts, while others requested information about 
``best practices'' in concurrent planning. We are committed to 
providing practice level guidance and will provide technical assistance 
in a variety of forms rather than in regulation. Other commenters 
requested Federal funds to subsidize legal guardianships, or train 
courts and their staff. Under current authority, title IV-E funds 
cannot be used for these purposes. However, we can direct States to our 
resource centers who may have information on seeking non-Federal 
funding sources for such initiatives.

C. Regulation in Context

    This final rule incorporates many provisions of recently enacted 
legislation, including the Adoption and Safe Families Act of 1997, the 
Multiethnic Placement Act of 1994 as amended, and the Social Security 
Act Amendments of 1994. We received some comments that criticized us 
for not focusing on the requirements of ASFA and other amending 
legislation. We believe that some commenters were unclear that, to a 
large extent, provisions of ASFA, MEPA, etc. amend the Social Security 
Act (the Act), and that we refer to the requirements by their citation 
in the Act, rather than their citations in the amending legislation. We 
believe that this final rule does address the requirements of the 
amending legislation in the context of the existing requirements of 
titles IV-B and IV-E of the Act.
    In addition to the guidance provided by this final rule, we 
encourage administrators to use the appropriate statutes as references 
in implementing Federal requirements. Also, the final rule amends 
existing regulations at 45 CFR part 1355 and 45 CFR part 1356. 
Therefore, we encourage the reader to examine and implement the rules 
herein in conjunction with existing regulations that have not been 
amended.

III. Discussion of Major Changes and Provisions of the Final Rule

    Discussed below are some of the major changes and provisions of the 
final rule. A more thorough response to the individual comments can be 
found in the section-by-section discussion.

A. Definitions

    Overall, we received comments that requested greater clarity on 
several definitions. We frequently encountered comments that noted that 
the Federal definitions did not encompass the variety of State 
definitions or practice. Where a definition was not essential to the 
proper implementation of the program, we chose to be flexible and leave 
definitions to the State's discretion. In particular, we deleted 
definitions of a ``full hearing'' and a ``temporary custody hearing'' 
as the comments revealed that they were limiting and not helpful to 
States. We also received comments that requested additional definitions 
for terminology used in the statute or in the regulation, e.g., 
``compelling reasons,'' ``aggravated circumstances,'' and ``reasonable 
efforts.'' In most cases we chose not to regulate additional 
definitions as we do not wish to be more prescriptive and restrict 
State flexibility.
    The proposed definition of the ``date a child is considered to have 
entered foster care'' elicited many comments requesting more clarity 
and State flexibility. In response, we have revised the definition to 
mirror the statutory language more closely. The ``date a child is 
considered to have entered foster care'' is no longer different for 
children placed in foster care under voluntary placement agreements, 
but more consistently applied. We also have clarified that a State can 
use a date earlier than the outside Federal limit set in the statute to 
begin the ``clock'' for satisfying the requirements for holding 
periodic reviews, permanency hearings, and for the termination of 
parental rights (TPR).
    We received many comments on the definition of a ``foster family 
home'' that urged us to allow provisional licensure and a two-tiered 
system of licensing and approval. Despite these comments, we are 
prohibiting these practices, consistent with the statute, to ensure 
that children receiving title IV-E funds are placed safely in licensed 
homes. In recognition that some time may lapse between the date when a 
foster family home satisfies all requirements for licensure or approval 
and the actual date the license is issued, we will allow States to 
claim title IV-E reimbursement during this period, not to exceed 60 
days. To accommodate those States where current State practice is not 
consistent with the requirements for foster family homes, we will allow 
a six-month period for States to bring current foster family homes to 
the appropriate licensing standards.

B. Child and Family Services Reviews

    We received many comments in response to the proposed child and 
family services review process that have helped us strengthen it 
significantly from that proposed in the NPRM. In the NPRM and in the 
early pilot reviews, we relied heavily on the findings from the on-site 
reviews to make determinations about substantial conformity. In the 
final rule, we believe we have balanced our use of statewide 
quantitative indicators with case-specific qualitative observations in 
our decision-making about substantial conformity. Among the major 
changes we have made in the child and family review process are the 
following: We have strengthened the use of the statewide assessment, 
selected particular statewide data indicators to use in determining 
substantial

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conformity, more clearly defined the process for reviewing the systemic 
factors, clarified the criteria for determining substantial conformity, 
increased the frequency of full reviews for States not in substantial 
conformity, added a discrepancy resolution process, and added graduated 
penalties for continuous nonconformity.
    Most of the comments we received, particularly from the States, 
strongly favored the change to the results-and outcome-based review 
process proposed in the NPRM from the prior emphasis on compliance with 
procedural requirements. Similarly, we received very strong support for 
proposing a review process that provides time for States to improve 
programs and enhance services to children and families rather than one 
that imposes immediate penalties for nonconformity with certain 
requirements. A number of comments also indicated concerns about the 
details of the review process and raised issues about the overall 
approach that ACF is taking in reinventing the child and family 
services reviews.
    Since we did not include all of the details of the reviews in the 
proposed rule, we would like to explain the procedures in more detail 
prior to addressing the major changes we made to the child and family 
services review.
    We will 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 
outcomes are as follows:
Safety Outcomes
    1. Children are, first and foremost, protected from abuse and 
neglect.
    2. Children are safely maintained in their homes whenever possible 
and appropriate.
Permanency Outcomes
    1. Children have permanency and stability in their living 
situations.
    2. The continuity of family relationships and connections is 
preserved for children.
Child and Family Well-Being Outcomes
    1. Families have enhanced capacity to provide for their children's 
needs.
    2. Children receive appropriate services to meet their educational 
needs.
    3. Children receive adequate services to meet their physical and 
mental health needs. Each outcome is evaluated by using specific 
performance indicators and two outcomes are evaluated using data 
indicators as well.
    State programs will also be reviewed to determine the extent to 
which the State agency has implemented State plan requirements that 
build the capacity to deliver services leading to improved outcomes. We 
describe such State plan requirements as systemic factors. These 
systemic factors include: (1) Statewide information systems; (2) case 
review system; (3) quality assurance system; (4) staff and provider 
training; (5) service array; (6) agency responsiveness to the 
community; and (7) foster and adoptive parent licensing, recruitment 
and retention. Each of the systemic factors subject to review is based 
on specific State plan requirements. Our review and assessment of the 
systemic factors will be based on the extent to which the State is in 
conformity with those State plan requirements.
    We also want to clarify how the various components of the review 
process will inform decisions regarding substantial conformity.
    Four sources of information are included in the child and family 
services reviews in order to make decisions about substantial 
conformity:
     Statewide AFCARS and NCANDS data on foster care, adoption 
and child protective services, including the State's performance on 
statewide data indicators with respect to the national standards for 
such;
     Narrative information on outcomes and systemic factors;
     Case-specific qualitative information and family 
interviews on outcomes; and
     Interviews with non-case-specific State and local 
community representatives on outcomes and systemic factors.
    To complete this review effort, several tools will be used, 
including:
     A field-tested CFSR procedures manual that addresses the 
steps to be followed in the reviews and supplements information 
included in the rule;
     A statewide assessment instrument that directs the 
utilization of statewide foster care, adoption and child protection 
data to complete a narrative discussion of the outcomes and systemic 
factors reviewed, and the State's performance in meeting the standards 
for the statewide data indicators;
     An on-site intensive review instrument;
     Interview protocols for use with State and local 
stakeholders; and
     A summary of findings and recommendations form that 
enables the review team to address each outcome and systemic factor 
reviewed. This form, when completed, serves as the report of the review 
findings to the State.
    There are five steps in the review process, from the point of 
initiating the review to assessing penalties where determinations of 
nonconformity are made:
     Prior to the State beginning work on the statewide 
assessment, ACF prepares and transmits data profiles of the State's 
foster care and child protective service populations, using AFCARS and 
NCANDS data submitted by the State. Some examples of the data included 
in the profiles include the length of stay in foster care, foster care 
re-entries, and repeat maltreatment rates of children. The data will 
indicate whether or not the State meets the national standards for 
those statewide data indicators used to determine substantial 
conformity.
     The State then completes the statewide assessment. This 
task requires the State to examine the data relative to the State 
programs, goals, and objectives, and consider them in light of the 
outcomes for children and families subject to review. The State also 
addresses in narrative the systemic issues under review relative to 
their influence on the State's capacity to deliver effective services. 
Based on the quantitative and qualitative findings of the statewide 
assessment, the State and the ACF Regional Office jointly make 
decisions about the locations of the on-site review activities and the 
types of cases that will be reviewed on-site.
     The on-site review is conducted by a joint Federal-State 
team that combines both the outcomes and the systemic factors being 
reviewed. In reviewing for the outcomes, a sample of cases is reviewed 
intensively using information from the case record and interviews with 
family members, the caseworker, and service providers involved with the 
family. The findings from the sample of cases are combined with the 
State's performance on selected Statewide data indicators to make 
determinations about substantial conformity on the outcomes. In 
reviewing for the systemic factors, interviews are conducted with State 
and local representatives, e.g., courts, other agencies, foster 
families, and foster care review boards. The information from these 
stakeholder interviews is combined with information on the systemic 
factors in the statewide assessment to make determinations about 
substantial conformity on the systemic factors.
     The review team recommends a determination regarding 
substantial conformity, for each of the outcomes and systemic factors 
reviewed. The basis for the determinations is a

[[Page 4024]]

combination of quantitative and qualitative information from the 
statewide assessment and the on-site review related to each outcome and 
systemic factor.
     States are immediately informed of any penalties 
associated with outcome and systemic factors determined not to be in 
substantial conformity. Program improvement plans are developed to 
address each area of nonconformity and the State has a limited period 
of time to successfully complete the program improvement plan before 
penalties are actually taken.
    A number of the comments we received reflected a need for more 
clarity regarding the overall process. As noted earlier, we did not 
include all the details of the reviews in the proposed rule, but chose 
to regulate only the basic framework of the process, including the 
overall approach to the reviews, the standards for substantial 
conformity, and the State plan requirements subject to review as 
required in section 1123A of the Act. We chose to address specifics 
about how the reviews will be conducted, the performance indicators 
that will be used to measure outcomes, and some aspects of the process 
for determining substantial conformity in a procedures manual we 
developed separately from the NPRM. This procedures manual will 
supplement the regulation with additional detail that State and Federal 
staff will need to conduct the reviews. The procedures manual will be 
in final form for the initial reviews to be conducted following 
publication of this rule.
    While we recognize the need to be clear on the details of the 
review process, we also need to maintain the flexibility to make 
appropriate changes that support the results-focused approach to 
Federal reviews of State programs. Although we have field-tested the 
proposed review process extensively in 12 States to date, we believe 
that not regulating certain aspects of the review process affords both 
the Federal government and the States an ongoing opportunity to benefit 
from lessons learned in future reviews and make improvements to the 
process where needed.
    We have made significant changes to the review protocol in response 
to the concerns raised through public comment. The most significant 
concerns relate to:
     The process and specific criteria for determining 
substantial conformity with State plan requirements;
     The degree of subjectivity involved in determining 
substantial conformity;
     The small sample size used in the on-site portion of the 
reviews; and,
     The amount of penalties associated with nonconformity.
    The following addresses the major issues noted above that were the 
subject of the majority of the comments and changes to the regulation:
Determining Substantial Conformity With State Plan Requirements
    Most of the respondents to the NPRM generally supported a 
determination of ``substantial conformity,'' rather than requiring a 
determination of conformity on each specific title IV-B and IV-E State 
plan requirement. Of particular concern to commenters were:
     The standards used to make determinations of substantial 
conformity for outcomes;
     The process for resolving discrepancies in the aggregate 
data from the statewide assessment and the information obtained from 
the on-site review; and,
     The criteria used to determine substantial conformity for 
the systemic factors being reviewed.
    Standards used to make determinations of substantial conformity for 
outcomes. The primary concerns regarding this issue include a lack of 
clarity with respect to how substantial conformity is determined and 
the standards that States are expected to meet in achieving substantial 
conformity. Commenters particularly requested that we set a more 
tangible, objective standard for substantial conformity. In response to 
these comments, and concerns raised about the sample size for the on-
site portion of the review, statewide data indicators that are measured 
against national standards, in combination with the findings of the on-
site review, will be used to determine substantial conformity.
    Statewide data indicators. The following statewide data indicators 
will be used in combination with findings of the on-site review to 
determine substantial conformity with the outcomes.
    Outcome S1: Children are, first and foremost, protected from abuse 
and neglect. Data indicators: Repeat maltreatment. Of all children who 
were victims of substantiated or indicated child abuse and/or neglect 
during the period under review, what percentage had another 
substantiated or indicated report within a 12-month period?
    Maltreatment of children in foster care. Of all children in foster 
care in the State during the period under review, what percentage was 
the subject of substantiated or indicated maltreatment by a foster 
parent or facility staff?
    Outcome P1: Children will have permanency and stability in their 
living situations. Data indicators: Foster care re-entries. Of all 
children who entered care during the period under review, what 
percentage re-entered foster care within 12 months of a prior foster 
care episode?
    Length of time to achieve the permanency plan.
    Of all children who were reunified with their parents or caretakers 
at the time of discharge from foster care, what percentage was 
reunified in less than 12 months from the time of the latest removal 
from home?
    Of all children who exited care to a finalized adoption, what 
percentage exited care in less than 24 months from the time of the 
latest removal from home?
    Stability of foster care placement. Of all children served who have 
been in foster care less than 12 months from the time of the latest 
removal from home, what percentage have had no more than two placement 
settings?
    Length of stay in foster care. For a recent cohort of children 
entering foster care for the first time in the State, what is the 
median length of stay in care prior to discharge?
    The national standard for each statewide data indicator identified 
above will be based on the 75th percentile of all State' performance 
for that data indicator, as reported in AFCARS and NCANDS. We 
considered using the 90th percentile and the median to establish the 
national standard and rejected both because these standards, 
respectively, were deemed either too high or too low. This is 
illustrated, based on 1998b (April 1-September 30) AFCARS data, and 
1997 NCANDS data (available for repeat maltreatment only) in the chart 
below.

------------------------------------------------------------------------
                     Measure                       Median    75th   90th
------------------------------------------------------------------------
% of children with repeat maltreatment within a         11      7      2
 12-month period................................
% of children re-entering foster care...........        20     13      6
% of children reunified in less than 12 months          72     80     88
 from latest removal............................
% of children adopted in less than 24 months            16     26     43
 from the latest removal........................
% of children in care less than 12 months with          63     77     85
 no more than 2 placements......................

[[Page 4025]]

 
Median length of stay in foster care prior to           18     12    10
 discharge (months).............................
------------------------------------------------------------------------
Note: Data for maltreatment of children in foster care is not available
  for the purposes of this illustration, but will be available when we
  calculate the standard.

    We recognize that we have set a high standard. However, we think it 
is attainable and that our overall approach for moving States to the 
standard through continuous improvement is sound.
    We anticipate that the standard for each data indicator based on 
AFCARS data will be derived from the 1998b, 1999c (complete Federal 
fiscal year) and 2000a (October 1-March 31) reporting periods and the 
standard for each data indicator based on NCANDS data will be derived 
from the 1997 and 1998 reports. However, if we have more current and 
complete data available, for example the 1998 and 1999 NCANDS reports, 
we will use these data submissions to develop the standard. By using 
multiple reporting periods we will increase the number of States that 
participate in setting the standard.
    As we considered how to develop the national standard, we noticed 
that States with smaller caseloads were clustered in the upper 
percentiles with respect to performance on the data indicators. We did 
not want States with larger caseloads to be disadvantaged, therefore, 
we explored setting multiple standards based on caseload size. We 
derived the variable ``number of children in foster care per 10,000 
children under 18 years old in the general population'' and used it to 
test State performance on certain statewide data indicators. We found 
no correlation between the variables. In short, caseload size was not 
useful in explaining the variation in State performance with respect to 
the national standards, so it was not considered in setting the 
national standards.
    Because this concept of setting a national standard for data and 
basing substantial conformity, in part, on a State's ability to meet 
such a standard is untested, we purposely limited the number of 
outcomes to which we assigned statewide data indicators. For example, 
we did not assign data indicators to Safety Outcome #2 or Permanency 
Outcome #2, although we will consider adding indicators to those 
outcomes at a later time. We will also consider adding to or revising 
the data indicators listed above as needed. For example, we will 
consider adding timeliness of initiating investigations of child 
maltreatment to the safety outcomes later if there is a broad enough 
national data base through NCANDS to support that indicator. In 
addition, to date, there are no uniform national data indicators 
collected through AFCARS or NCANDS that can be used to review for the 
Well-being outcomes.
    We expect the statewide data indicators to change over time and, 
therefore, did not regulate them. We chose to base the first set of 
statewide data indicators on the outcome measures that were developed 
in accordance with section 203 of the ASFA for two reasons:
     We received many comments requesting that the section 203 
measures and the child and family services reviews be consistent with 
one another; and,
     The section 203 measures were developed in conjunction 
with a consultation group and were published in the Federal Register 
for public comment.
    We would also like to note that many of the data indicators and 
performance measures we selected are consistent with and support the 
work of ACF in meeting the requirements of the Government Performance 
and Results Act of 1993 (GPRA). Under GPRA, Federal agencies are 
required to work with the States to establish performance goals and 
monitor performance results for all Federal programs. We believe that 
the outcomes and data indicators used in the CFSR support one of ACF's 
objectives under GPRA to increase the safety, permanency, and well-
being of children and youth.
    We have, however, in regulation, retained our authority to add new 
data indicators, change existing data indicators, and suspend the use 
of data indicators as appropriate. We took a similar approach to 
setting the national standards. The standards will not change every 
year. Rather, we have retained our authority to periodically review and 
revise the standards if experience with the reviews indicates 
adjustments are necessary.
    Findings from the on-site portion of the review. During the on-site 
portion of the review, a set of performance indicators is used to 
review the outcome and determine the extent to which the outcome has 
been achieved. Since the individual circumstances of each child and 
family are unique, the performance indicators serve most effectively as 
a guide to help the reviewer gather appropriate information from a 
variety of sources. Experience has taught us that reviewing only the 
information that is recorded in a written case record is insufficient 
for assessing outcome achievement. Therefore, the reviewer explores the 
performance indicators through the case record review and through 
interviews with the individuals relevant to each case. Some components 
of the indicators are quantitative, such as the number of entries into 
foster care a child has experienced or the number of reports of 
maltreatment that have been received on a child. However, there are 
also indicators that are qualitative in nature that help explain the 
circumstances behind the numbers, such as reasons for re-entry into 
foster care or the nature of the reports of maltreatment received on a 
child. Indicators are rated as an area of strength or an area in need 
of improvement. For outcomes that have multiple indicators, if all but 
one of the indicators are rated as a ``strength,'' the outcome is 
determined ``substantially achieved'' in that particular case. We 
learned from the pilots that the information gathered in the on-site 
review using instruments structured in this way most often led 
reviewers to a general consensus regarding the degree of outcome 
achievement.
    Standard for substantial conformity with the outcomes. For the 
outcomes to which statewide data indicators are assigned, a State must 
meet both the national standard for the statewide data indicators and 
substantially achieve the outcome in 90 percent (95 percent in reviews 
subsequent to the initial review) of the cases reviewed on-site to be 
considered in substantial conformity. We will resolve any discrepancies 
between the Statewide data and the on-site review findings so that 
substantial conformity does not rely totally on one or the other 
information source. This approach permits on-site exploration of the 
reasons why performance with respect to the statewide data indicators 
might not be an accurate indicator of statewide performance. Outcomes 
for which there are no assigned statewide data indicators must be 
substantially achieved in 90 percent (95 percent in reviews subsequent 
to the initial review) of the cases reviewed on-site to be considered 
in substantial conformity.
    Program improvement regarding statewide data indicators. Any State 
found not to be in substantial conformity with an outcome must enter 
into a program improvement plan. When the national standard is not met 
on any of the statewide data indicators used to determine substantial 
conformity, States must engage in continuous improvement toward the 
national standard in the program improvement plan. This means that ACF 
will negotiate with the State to determine how much progress toward 
meeting the standard, in terms of absolute percentage points, the State

[[Page 4026]]

will make to successfully complete a program improvement plan. We 
retain final authority to determine how much improvement the State must 
make. In reviews subsequent to the initial child and family services 
review, we will consider prior program improvement efforts, including 
continuous improvement in meeting the national standard, when 
negotiating the degree of improvement required to successfully complete 
a program improvement plan.
    Resolving discrepancies in the aggregate data from the statewide 
assessment and the information obtained from the on-site review 
pertaining to the outcomes. We received a number of comments addressing 
this issue, particularly concerning how discrepancies between the two 
sets of information will be resolved. New Sec. 1355.33(d) provides more 
detailed information on the steps we will take to resolve discrepancies 
between the aggregate data and the findings of the on-site portion of 
the review. In order to resolve discrepancies between the statewide 
assessment and the findings of the on-site portion of the review we 
will provide the State the option of either of the following:
     The submission of additional information by the State that 
will explain or resolve the discrepancy, such as additional data or 
analysis of the existing data, or
     ACF and the State will review additional cases, but only 
for the indicators with a discrepancy that must be resolved. The total 
number of cases reviewed may not exceed 150 cases, and will represent a 
statistically significant sample with a 90 percent (or 95 percent in 
subsequent reviews) compliance rate, a tolerable sampling error of 5 
percent, and a confidence coefficient of 95 percent. The conclusions 
made from reviewing the additional cases will form the basis for 
determining substantial conformity.
    Criteria used to determine substantial conformity for the systemic 
factors being reviewed. The concerns related to determining substantial 
conformity for the systemic factors: (1) Statewide information systems, 
(2) case review system, (3) quality assurance system, (4) staff and 
provider training, (5) service array, (6) agency responsiveness to the 
community, and (7) foster and adoptive parent licensing, recruitment 
and retention were similar to those for the outcome areas: A lack of 
clarity on how substantial conformity is determined and on the 
standards that States are expected to meet in achieving substantial 
conformity. In response to these concerns, we have established a 
process for rating the State's conformity with State plan requirements 
that is based on information obtained from the statewide assessment and 
the on-site stakeholder interviews. Information from the statewide 
assessment and interviews with stakeholders on-site must support a 
determination of substantial conformity. The review team will rate the 
State's performance for each systemic factor using a Likert-type scale, 
with criteria attached to each rating, based on the total information 
obtained from a variety of stakeholders interviewed on-site.
    Except for ``information system capacity,'' all of the systemic 
factors reviewed have more than one State plan requirement associated 
with them that are included in the review process. A State's conformity 
with each systemic factor will be rated on a scale of 1-4, based on the 
extent to which there are processes in place which meet the State plan 
requirements associated with that systemic factor. For example:

----------------------------------------------------------------------------------------------------------------
                 Not in substantial conformity                               Substantial conformity
----------------------------------------------------------------------------------------------------------------
                  1                               2                        3                        4
----------------------------------------------------------------------------------------------------------------
None of the State plan requirements    Some or all of the       All of the State plan    All of the State plan
 is in place.                           State plan               requirements are in      requirements are in
                                        requirements are in      place, and no more       place and functioning
                                        place, but more than     than one of the          as described in each
                                        one of the               requirements fails to    requirement.
                                        requirements fails to    function as described
                                        function at the level    in each requirement *.
                                        described in each
                                        requirement *.
----------------------------------------------------------------------------------------------------------------
* For the systemic factor, ``information system capacity,'' if it is determined that a system is in place but
  not functioning at the level described in the one State plan requirement reviewed, that factor is rated a
  ``2'', rather than a ``3''.

    The statewide assessment requires the State to evaluate each of the 
State plan requirements. Information from that source is used in part 
to determine how the State is complying with each State plan 
requirement. During the on-site review, selected local and statewide 
stakeholders will be interviewed and asked a series of questions that 
relate to the State plan requirements. Not every stakeholder 
interviewed will be able to address each systemic issue thoroughly. 
Thus, for each systemic factor, the review team must use the total 
information obtained from all the interviews to evaluate the extent to 
which the requirements are being met. Both the information from the 
statewide assessment and the stakeholder interviews must indicate that 
the State should receive a ``3'' rating or better for that systemic 
factor in order for the State to be found in substantial conformity. To 
ensure objectivity in the information gathered through stakeholder 
interviews, we have amended the regulation at Sec. 1355.33(c)(4)(iv) to 
set minimum requirements with respect to the selection of stakeholders 
who must be interviewed.
Subjectivity in Determining Substantial Conformity
    Many respondents to the NPRM indicated that we needed to strengthen 
the rule to assure increased objectivity in making determinations of 
substantial conformity. Given the focus of the reviews on qualitative 
measures and degrees of outcome achievement, concerns raised included 
reviewers making subjective judgments on outcome achievement, holding 
States accountable for these judgments, and a lack of clarity on the 
standards used to make decisions.
    We agree that the need to insure objectivity in the decision-making 
process is extremely important. In fact, we realized early in the 
design process of the reviews that proposing a results-focused review, 
as opposed to the checklist-style reviews of documentation conducted in 
the past, would raise concerns about the level of objectivity in the 
reviews. However, to design a review process that focuses on results 
and outcomes we must evaluate not only what happens to children and 
families as a result of the State' interventions, but the circumstances 
and mitigating factors that affect both the interventions and the 
results. To accomplish this, our review process must utilize both 
quantitative and qualitative assessments. We also realize that 
determinations regarding outcome

[[Page 4027]]

achievement in the areas of safety, permanency and well-being require 
judgments based on the specific circumstances of individual children 
and families, and that we need to standardize the criteria for making 
those judgments in order to ensure objectivity.
    As noted in the NPRM, we included several criteria and procedures 
in the pilot reviews that were designed to make the reviews as 
objective as possible and to result in consistency among reviewers and 
across States in making critical judgments about outcome achievement. 
Those measures include:
     Using statewide aggregate data and qualitative information 
from the statewide assessment to understand and interpret the status of 
outcomes and systemic factors;
     Applying uniform criteria or performance indicators that 
guide reviewers to an accurate conclusion about the extent to which the 
outcome is being achieved in each case;
     Training State and Federal reviewers in the use of 
standardized review instruments and protocols; and,
     Using a quality assurance procedure during the course of 
the review by requiring local team leaders to review case ratings and 
debrief daily with reviewers to ensure that criteria are applied 
consistently.
    In piloting the reviews, we also determined that the objectivity 
and uniformity of the process could be strengthened in several areas. 
For example, we learned that the Statewide assessment was prepared 
differently among the pilot States and that the manner of collecting 
the data for the safety and permanency profiles was not uniform, 
particularly in States where AFCARS or NCANDS data were unavailable. 
These factors made it difficult to rely upon information in the 
statewide assessment.
    In regard to case selection, we found that the manner of selecting 
cases for the on-site review varied among States in ways that made it 
difficult to assure randomness. Through the pilots and the comments we 
received on the instruments, we became aware that the protocols used to 
review cases could be improved to reflect, more objectively, those 
factors that determine conformity with State plan requirements.
    In response to these lessons and others, we have strengthened the 
provisions for objectivity in the reviews by adding a number of 
measures to the final rule and the CFSR procedures manual. We are also 
making substantial changes to the content of the instruments used in 
the reviews that will assist in making objective determinations and 
addressing the relevant areas of State plan conformity.
    Most of the comments regarding subjectivity were related to the on-
site review. The comments we received concerning subjectivity in the 
review process arise from genuine concerns that States be held 
accountable to an objective set of criteria. We also have learned from 
the pilot reviews that we must be willing to accept the professional 
judgment of reviewers in determining substantial conformity. Where 
there are adequate procedures in place to assure consistency and 
accuracy in decision-making, as we have described above, we believe 
professional judgments will be objective.
    We recognize that it is much more difficult to determine whether or 
not a child is safe than it is to determine, for example, that a date 
on a court order meets specified time frames. Reviewing for outcomes 
requires gathering both qualitative and quantitative information, 
examining the information within an appropriate context and, 
ultimately, making a judgment about how well the outcome is or is not 
being achieved. Caseworkers in the field must make these judgments 
every day, and children's lives depend upon the accuracy of that 
process. A review process that only checks for procedural requirements 
and does not evaluate the quality of the decision-making process and 
service delivery that we expect of caseworkers is not likely to yield 
findings that will help States improve those processes where needed.
Sample Size for On-Site Reviews
    In the NPRM, we proposed to review a sample of 30-50 cases. Most of 
the comments we received indicated strong concerns that reviewing only 
30-50 cases may not be representative of the State' service populations 
and would not lead to credible judgments of substantial conformity. A 
number of commenters questioned how such a small sample could be 
statistically valid and expressed concern over imposing penalties based 
on a small sample of cases. Some respondents indicated a fear that we 
would be basing decisions about substantial conformity on ``anecdotal'' 
information in the absence of a much larger sample.
    Clearly, to many of the commenters, sample size is a major issue, 
and we wish to explain our rationale for making only modest changes to 
this feature of the review in the final rule, based on the lessons we 
learned in the course of piloting the new review process. We want to 
emphasize that two changes also address these concerns about the sample 
size: Adding the statewide data indicators and a process to resolve 
discrepancies that may include reviewing additional cases.
     We found little discrepancy between the statewide data and 
the findings from the small sample. We should note that we experienced 
minimal disagreement among reviewers (State and Federal) and between 
the statewide data and the findings made on the basis of the small 
samples in the pilot reviews. The findings of the pilots were similar 
to those noted in State quality assurance systems, where those systems 
were in place in pilot States. In most situations, the findings 
provided State officials with sufficient details about the functioning 
of their programs to make improvements where needed and to build on 
existing strengths in their programs.
     We learned that we cannot make accurate decisions in a 
results-focused review by only reviewing documentation in records. We 
began by pulling a large sample in the first four pilot States. We 
conducted a record review in all the cases, similar to prior reviews, 
except we were attempting to capture both qualitative outcome and 
quantitative information from the records. In a smaller subsample of 
the larger sample, we interviewed the relevant parties and focused less 
on record documentation and more on what was actually occurring in each 
case. Inevitably, the review team found that the small sample and the 
strategy of in-depth analysis through interviews was a more reliable 
source of information on outcomes and conformity with applicable 
requirements. The information obtained solely from the case records was 
often incomplete, not current, and left information gaps. Basically, we 
learned that we cannot apply traditional checklist-type reviews of 
documentation to determine the quality of decision-making and service 
delivery.
     We learned that reviewing cases intensely, including all 
the relevant interviews, requires a large number of staff resources and 
is an extremely time-consuming process. The process of reviewing case 
records and conducting multiple interviews in each case reviewed, 
combined with other review team activities, allows a reviewer time for 
only two cases, possibly three, in one week. Even with a sample size of 
50 cases, the process requires a team of approximately 25 reviewers in 
order to complete the on-site review in one week. Increasing the sample 
to 150 cases or more would mean that either a team of 75 reviewers 
would be needed to review a State in one week, or 25

[[Page 4028]]

reviewers would have to remain on-site for three weeks to complete the 
review. Either option creates unreasonable expectations for States and 
the Federal government in terms of staff resources and cost and, 
therefore, does not constitute a cost-effective approach to the 
reviews.
    As originally proposed in the NPRM, the sample would be comprised 
of both in-home and foster care cases. In-home cases do not provide 
insight into the State's performance with respect to the permanency 
outcomes, meaning that not every case in the sample would inform 
decisions regarding substantial conformity for the permanency outcomes. 
On the other hand, we need to assure that the sample accurately 
captures information on in-home service cases in order to examine the 
safety outcomes based on recent practice and for children who never 
entered the foster care system.
    Therefore, in certain circumstances, the sample size may be 
increased to assure that all program areas identified in the statewide 
assessment for further review are adequately represented. In addition, 
we are requiring, in regulation, that the sample of 30-50 cases include 
children who entered foster care in the State during the year under 
review.
    We have also added provisions to the rule for resolving 
discrepancies between the aggregate data and the findings of the on-
site review that address the sample of cases reviewed. We are providing 
States the option of resolving such discrepancies through the 
submission of additional information, or by ACF and the State reviewing 
additional cases that, in combination with the 30-50 cases reviewed on-
site, will be a sufficient number to comprise a statistically 
significant sample. ACF and the State will determine jointly the exact 
number of additional cases to be reviewed, however, the total number of 
cases may not exceed 150. We chose a maximum of 150 cases because it 
exceeds the highest number of cases necessary to review a sample that 
will be statistically significant with a compliance rate of 90 percent 
(or 95 percent for subsequent reviews), a tolerable sampling error of 5 
percent and a confidence coefficient of 95 percent. In order to assure 
that the sample of cases reviewed in the on-site review and the 
additional cases actually comprise one random sample, we will randomly 
select the oversample of 150 cases for the on-site review, from which a 
subsample of 30-50 cases will be drawn. If the State chooses a review 
of additional cases to resolve a discrepancy, those cases will be 
selected from the same oversample. In this manner, we believe we will 
address concerns about the size of the sample, particularly in cases 
where discrepancies in the findings exist and must be resolved.
    We recognize that the sample size does not represent a faultless 
approach to reviewing State programs, and we fully understand the 
varying perspectives on this issue. We must emphasize, however, that 
the quality of information gathered from the overall process, and not 
the on-site sample in isolation, will benefit children and families by 
tracking their outcomes and allowing States to focus on program 
improvements where needed.
Penalties Associated With Nonconformity
    We have made an important change in the final rule regarding 
withholding of funds in situations where States remain in nonconformity 
continuously on the same outcomes or systemic factors, and for States 
that elect not to engage in a program improvement plan. The final rule 
provides for graduated penalties in successive reviews if areas of 
nonconformity remain uncorrected. We have also applied the maximum 
withholding to those States that do not implement program improvement 
plans to correct the areas of nonconformity.
    The comments we received on the imposition of penalties raised a 
number of issues that we considered in making this change to the rule. 
Some comments indicated concerns that the Federal government is not 
meeting its stewardship responsibilities by not taking a more 
aggressive approach to penalizing States found not to be in substantial 
conformity. Other comments indicated that the potential for penalties 
is substantial and could have a serious effect on the capacity of 
States to administer their programs. We also were encouraged to use the 
process for imposing penalties to assure that program improvements are 
made when and where they are needed.
    We wish to note that we have not proposed an ``all or nothing'' 
approach to penalizing States. We have been faithful to the statutory 
mandate that applicable penalties be commensurate with the extent of 
nonconformity. Further, we have designed a review process that is based 
on substantial conformity with the requirements, rather than total 
compliance without exception, to be consistent with the statutory 
mandate. Penalties are attached to each outcome and systemic factor 
determined to be in nonconformity. We are providing time-limited 
opportunities for States to make needed program improvements prior to 
withholding of Federal funds for nonconformity. Only when States fail 
to take advantage of program improvement opportunities or complete a 
plan successfully will they be faced with an actual loss of Federal 
funding as a result of the child and family services reviews.
    At the same time, we have taken seriously the stewardship 
responsibilities of the Federal government in enforcing conformity with 
State plan requirements. These responsibilities are clear and we have 
not abandoned them. We intend to withhold Federal funds where States 
are not using those funds to achieve their designated purpose. To 
clarify that the need to make program improvements will be strongly 
enforced, we are strengthening sections of the final rule to assure 
that penalties will be taken in a timely and certain manner.
    We do not wish to impose penalties in a manner that will impair a 
State's ability to provide essential services to children and families. 
However, we have a responsibility to assure that State plan 
requirements are met and that children and families are served in ways 
that will provide for their safety, permanency, and well-being.

C. Enforcement of Section 471(a)(18) of the Act

    We received a large response to the section of the regulation that 
enforces the Multiethnic Placement Act, as amended. Several commenters 
sought practice guidance on how to implement the law. We believe that 
we have addressed these issues in other forums through policy issuances 
and HHS-funded technical assistance and guides. Other commenters were 
concerned that we were not maintaining the partnership approach 
exemplified in the child and family services reviews. We have made no 
changes to the regulation in response to these comments, since we find 
that the statute is definitive in the manner in which we are to 
implement corrective action and enforce compliance with section 
471(a)(18) of the Act.
    In response to other comments, we have:
     Clarified that we will consider a State in violation of 
section 471(a)(18) when it maintains a policy, practice, law or 
procedure that, on its face, clearly violates section 471(a)(18) of the 
Act;
     Required States to notify ACF upon a final court finding 
that the State has violated section 471(a)(18) of the Act;
     Allowed States up to 30 days to develop a corrective 
action plan to respond to a violation of section 471(a)(18) of the Act 
resulting from a

[[Page 4029]]

State's statute, regulation, policy, procedure or practice, and six 
months in which to complete the plan;
     Clarified which title IV-E funds will be reduced in the 
event of a violation of section 471(a)(18) of the Act; and
     Added a definition of the term ``entity.''

D. Reasonable Efforts and Contrary to the Welfare Determinations and 
Documentation

    Many commenters believed that the requirements for reasonable 
efforts and contrary to the welfare determinations as proposed were 
inconsistent with current State practice. In some instances we agree 
that the regulation was unnecessarily restrictive, and have made the 
following changes to preserve State flexibility while keeping within 
the statute and maintaining the integrity of the program:
     Removed the distinction between emergency and non-
emergency removals in the sections of the rule on contrary to the 
welfare and reasonable efforts to prevent removal. This change is in 
response to concerns that the distinction was artificial.
     Allowed States up to 60 days to obtain a judicial 
determination with regard to reasonable efforts to prevent removal of a 
child from home. This responds to concerns that our proposed policy 
restricted the timing for obtaining such a determination to a specific 
date rather than within a specified time frame.
     Consolidated the requirements regarding reasonable efforts 
to reunify the child with the family and efforts to make and finalize 
alternate permanent placements into a single requirement to be more 
consistent with actual State practice. Within 12 months of the date the 
child is considered to have entered foster care, the State is to obtain 
a judicial determination that the State agency made reasonable efforts 
with respect to the permanency plan that is in effect.
    In other areas, we explained why we are maintaining our policy 
position rather than changing the regulation in response to commenter' 
concerns. We affirmed that judicial determinations regarding contrary 
to the welfare and reasonable efforts are inextricably linked to a 
child's eligibility for title IV-E. The statute makes these judicial 
determinations eligibility requirements which we cannot change despite 
the many opposing comments. We also retained the requirement for the 
State to make a contrary to the welfare determination in the first 
court order sanctioning the removal of the child from the home, because 
it is a longstanding critical protection for children and families. 
Finally, we are not relaxing the documentation requirements or allowing 
nunc pro tunc orders because we wish to preserve the certainty that 
these determinations are made in accord with the statute.

E. Case Plans and Case Review Requirements

    To clarify our existing policy with regard to the timing of the 
case plan, we have amended the regulation to allow States up to 60 days 
from a child's removal from the home to develop the case plan. We also 
made a significant policy shift in the requirements for subsequent 
permanency hearings. We are now requiring subsequent permanency 
hearings for all children, including children placed in a permanent 
foster home or a preadoptive home. We believe that the ASFA compels us 
to ensure, through the protection of a permanency hearing, that 
permanency will be achieved for these children.
    We received a significant number of requests to limit the TPR 
provision to only certain groups of the foster care population. We are 
unable to make this change in the regulation, as no statutory authority 
exists for doing so, and the clear intent of ASFA was to speed critical 
decision-making for all children in foster care. We clarify in the 
final rule that the exceptions to the requirement to file a petition 
for TPR must be done on a case-by-case basis and added additional 
examples of a compelling reason. We also clarify that States must begin 
the process of finding and approving an adoptive family for a child 
when the State files a petition for TPR.

F. Title IV-E Reviews

    We made several changes to strengthen and clarify the title IV-E 
reviews. The title IV-E reviews are designed to review the eligibility 
of children in foster care and providers receiving title IV-E funds. 
Those changes to the final rule include:
     Clarifying that when using an alternate sampling 
methodology when AFCARS data are unavailable, we will review a six-
month period that coincides with the AFCARS reporting period;
     Allowing all State' initial primary reviews to be held at 
a 15 percent threshold of ineligible cases regardless of whether or not 
the review occurs within the first three years of the final rule;
     Providing, on a case-by-case basis, an extension of a 
program improvement plan when a legislative change is necessary for the 
State to achieve substantial compliance; and
     Increasing the initial amount of time to develop a program 
improvement plan from 60 days to 90 days for States found not to be in 
substantial conformity as a result of a title IV-E foster care 
eligibility review.

G. Special Populations

    Several issues of note recurred as themes throughout the comments 
and the regulation. One was the application of the rules to certain 
populations, such as Indian tribal children, adjudicated delinquent 
children, and unaccompanied refugee minors. We clarify how in 
particular the provisions of the final rule apply to these populations 
of children, but also emphasize that overall the statute must apply to 
these children as they would any other child in foster care. We have no 
statutory authority to exempt any group from provisions such as the 
safety requirements or termination of parental rights requirements. 
Furthermore, we strongly believe that, while these requirements must 
apply to all children, the statute affords the State agency the 
flexibility to engage in appropriate individual case planning.
    For Indian tribes, numerous other issues were raised with regard to 
how title IV-E requirements and, more specifically, the recent 
amendments made by the Adoption and Safe Families Act apply to Indian 
tribes as sovereign nations. While we are committed to the government-
to-government relationship between the Federal government and Indian 
tribes, the foster care program under title IV-E is statutorily 
targeted to State agencies, and Indian tribes cannot receive title IV-E 
funds directly. Indian tribes can gain access to title IV-E funds on 
behalf of title IV-E eligible children if they enter into agreements 
with State agencies. Accordingly, Indian tribes must operate within the 
parameters of a particular State plan and the specifics of the 
agreement. Some commenters also requested that we explain how the 
requirements of the Indian Child Welfare Act work in the context of the 
ASFA. Although we can affirm that States must comply with ICWA and that 
nothing in this regulation supersedes ICWA requirements, we cannot 
expound on ICWA requirements since they fall outside of our statutory 
authority.

[[Page 4030]]

IV. Section-by-Section Discussion of Comments

Part 1355--General

Section 1355.20  Definitions

    This section amends 45 CFR 1355.20 to revise the definitions of 
foster care and foster family home and to define new terms used 
throughout the regulation.
    Child care institution. Comment: Some commenters requested that we 
provide more specific guidance or parameters to determine whether a 
facility is a ``child care institution'' and offered a variety of 
suggestions and recommendations. For example, one commenter asked that 
we confirm whether the definition of ``child care institution'' 
precludes group child care programs from taking steps to assure safety 
for foster children, including locking facility doors at night and 
taking other reasonable measures to prevent foster children from 
leaving the facility without consent.
    Response: We understand the desire for more expansive guidance for 
determining whether a facility is appropriate for title IV-E eligible 
children. We strongly believe that any such guidance should be 
developed with input from the field. We have begun this consultation 
process by inviting comments on a notice published in the Federal 
Register on December 7, 1998 (63 FR 67484). That notice specifically 
requested comments on defining appropriate child care facilities in 
which children adjudicated delinquent may be placed. Taking into 
account the comments received on the Federal Register notice, we are 
considering our options for setting forth more expansive guidance for 
identifying child care institutions that are appropriate for title IV-E 
eligible children.
    Comment: One commenter suggested that language such as ``or tribal 
licensing authorities'' be inserted after ``State'' to clarify the 
definition of ``child care institutions'' on Indian reservations.
    Response: We concur with the commenter and have revised the 
definition in the final rule to reflect the tribal licensing authority.
    Comment: One commenter noted that many ``child care institutions'' 
care for more than 25 children.
    Response: The limit of 25 children, by statute, specifically 
applies to public child care institutions and not private facilities. 
Therefore, no changes to the final rule are warranted.
    Date a child is considered to have entered foster care. 
    Comment: We received a great number of comments and suggestions 
regarding how to define the date a child is considered to have entered 
foster care in accordance with section 475(5)(F) of the Act (the date 
the State is to use in calculating when to hold periodic reviews in 
accordance with section 475(5)(B) of the Act, permanency hearings in 
accordance with section 475(5)(C) of the Act, and for complying with 
the termination of parental rights (TPR) provision under section 
475(5)(E) of the Act). Some commenters wanted us to define the term by 
using the date on which the child actually enters foster care and the 
agency assumes responsibility for the placement and care of the child. 
Others suggested that we define the term based on a variety of other 
points in time, such as: The date of a judicial determination that it 
was contrary to the child's welfare to remain at home; the date of the 
full hearing; the date of the initial shelter care hearing; the date of 
removal; or, the date a petition for removal is filed. Many commenters 
observed that, by linking the date the child is considered to have 
entered foster care to a finding of abuse or neglect and the agency 
receiving responsibility for placement and care of the child, we 
incorrectly implied that the aforementioned decisions occur at the same 
hearing when, in fact, these judicial decisions are often made at 
separate hearings.
    Response: The time frames for considering when a child has entered 
foster care, i.e., the earlier of a judicial finding of abuse or 
neglect or 60 days from the date the child is removed from the home, 
are statutory. However, nothing precludes a State from using a point in 
time that is earlier than that required by statute or regulation, such 
as the date the child is physically removed from the home. We have 
changed the regulation to reflect this option. Clearly, if a State uses 
the date a child is physically removed from the home, the requirements 
for holding periodic reviews, permanency hearings, and complying with 
the TPR provision within the time frames prescribed would be satisfied.
    We also have removed to the reference to the agency's 
responsibility for the placement and care of the child so that the 
definition more closely follows the statutory language and is 
consistent with actual practice.
    Comment: One commenter suggested that the time a child spends in 
shelter care not be factored into calculating the timing for holding 
periodic reviews, permanency hearings, and for complying with the TPR 
provision.
    Response: Under long-standing Departmental policy, shelter care is 
considered a form of foster care (see the definition of ``foster care'' 
at 45 CFR 1355.20). Shelter care is one of many possible settings in 
which children in foster care are placed. Therefore, time spent in 
shelter care counts in determining when to hold periodic reviews, 
permanency hearings, and for complying with the TPR provision. We have 
made no changes to the final rule in response to this comment.
    Comment: One commenter requested that we delete the word 
``physically'' from the regulatory definition of the date a child is 
considered to have entered foster care to adhere strictly to the 
statutory language which provides no qualification of the term 
``removal.''
    Response: While we have deleted the word ``physically'' from the 
definition, we have retained the policy on physical removals because it 
is consistent with the intent of ASFA regarding expedited permanency. 
Linking the definition of the date a child is considered to have 
entered foster care to a physical removal ensures that children do not 
languish in care awaiting a judicial order that says that the child is 
removed from the home.
    We have, however, created an exception. Under Sec. 1356.21(k), we 
permit constructive removals (i.e., paper removals) to equalize the 
situation in relative and nonrelative foster family homes. If a child 
is constructively removed from the home, the date he or she is 
considered to have entered foster care, absent a finding of abuse or 
neglect, is the date that is 60 days from the date of the constructive 
removal. We have amended the regulatory text by cross-referencing 
Sec. 1356.21(k), which sets the parameters for the acceptable forms of 
removals.
    Comment: One commenter was concerned about what appeared to be an 
inconsistency between the date a child is considered to have entered 
foster care and the timing for developing case plans. The outside limit 
for considering a child to have entered foster care is 60 days from the 
date of removal, while Sec. 1356.21(g)(2) requires case plans to be 
developed within 60 days of the State agency `` * * * assuming 
responsibility for providing services including placing the child * * 
*''
    Response: We understand the confusion and have amended the 
regulatory language at Sec. 1356.21(g)(2) to state clearly that case 
plans must be developed within 60 days of the date the child is removed 
from the home.
    Comment: We received several comments opposing the manner in which 
we applied this definition to

[[Page 4031]]

voluntary placement agreements. In the NPRM, we set the date a child is 
considered to have entered foster care for a child placed via a 
voluntary placement agreement as the date the voluntary placement 
agreement is signed by all relevant parties. Many commenters wanted to 
be able to use the date the child actually is placed in foster care 
since the child may not enter foster care the same day the agreement is 
signed. Some commenters believed we lacked a statutory basis for not 
applying section 475(5)(F) of the Act to all children, irrespective of 
how they enter foster care.
    Response: We concur that it is more appropriate to adopt a 
consistent application of section 475(5)(F) of the Act for all 
children. We have amended the definition of the date a child is 
considered to have entered foster care so that it makes no distinction 
for children who enter foster care via a voluntary placement agreement. 
Therefore, children placed in foster care via a voluntary placement 
agreement will be considered to have entered foster care no later than 
60 days after the child is removed from the home.
    We want to take this opportunity, however, to note that the purpose 
of the 60-day limit at section 475(5)(F) of the Act is to ensure that 
periodic reviews, permanency hearings, and application of the TPR 
provision are not delayed as a result of contested involuntary 
removals. The danger of such a delay often does not exist when children 
are removed from their homes pursuant to a voluntary placement 
agreement. When children are removed from home via a voluntary 
placement agreement, we encourage States to use the date the child is 
placed in foster care (rather than 60 days later) as the date for 
calculating when to hold periodic reviews, permanency hearings, and for 
complying with the TPR provision.
    Comment: A few commenters requested guidance on how to apply the 
definition to children who are voluntarily relinquished by their 
parents for adoption.
    Response: The date a child is considered to have entered foster 
care according to the statute is the earlier of a judicial finding of 
abuse or neglect or 60 days from the date the child was removed from 
the home. Typically, there is no finding of abuse or neglect in a 
voluntary relinquishment, so the date of entry into foster care would 
be no later than 60 days from the date the child was removed from the 
home.
    Comment: One commenter requested that we specifically clarify, in 
regulation, that the date the child is considered to have entered 
foster care does not affect the date Federal financial participation 
(FFP) may be claimed for foster care maintenance payments. One 
commenter observed that there is a connection between maintaining 
eligibility for title IV-E funding and the date a child is considered 
to have entered foster care.
    Response: Both commenters are correct. Establishing initial 
eligibility for title IV-E funding and initial claiming for FFP have no 
relationship to the date the child is considered to have entered foster 
care defined at section 475(5)(F) of the Act. The purpose of that 
provision is to set the ``clock'' for determining when to satisfy the 
requirements for holding periodic reviews, permanency hearings, and the 
TPR provision. A child's initial eligibility for title IV-E funding is 
not related to this time frame. We have amended the regulation at 
Sec. 1355.20 accordingly.
    The date a child is considered to have entered foster care is, 
however, related to maintaining a child's eligibility for title IV-E 
funding. Under Sec. 1356.21(b)(2), we require the State to use the date 
the child is considered to have entered foster care in determining when 
to obtain a judicial determination that it made reasonable efforts to 
finalize a permanency plan. We intentionally linked the timing for 
obtaining this judicial determination to the date the child is 
considered to have entered foster care so that such determinations 
could occur at the permanency hearing, the logical time for making such 
determinations.
    Comment: Several commenters requested guidance for applying the 
statutory definition of the date a child is considered to have entered 
foster care to children who are adjudicated delinquent, particularly 
for those children who enter foster care subsequent to placement in a 
detention facility.
    Response: In general, a date that is no later than 60 days from the 
date the child was physically removed from his or her home should be 
used in calculating when to satisfy the requirements for holding 
periodic reviews, permanency hearings, and for complying with the TPR 
provision, because judicial determinations regarding abuse or neglect 
are not typically made for children who are adjudicated delinquent. For 
children who enter foster care subsequent to placement in a detention 
facility, States should follow existing policy as stated in ACYF-PA-87-
02 in calculating when to develop case plans, hold periodic reviews and 
permanency hearings, and comply with the TPR provision.
    ACYF-PA-87-02 requires States to satisfy the requirements for 
developing case plans, holding periodic reviews and permanency hearings 
(the requirements at section 427 of the Act at the time ACYF-PA-87-02 
was written) for all children supervised by or under the responsibility 
of another public agency with which the title IV-B/IV-E agency has an 
agreement under title IV-E, and on whose behalf the State makes title 
IV-E foster care maintenance payments. Since the State cannot claim 
Federal financial participation under title IV-E for children in 
detention facilities, the ``clock'' for calculating when to comply with 
the requirements for developing case plans, holding periodic reviews 
and permanency hearings, and the TPR provision begins when the child is 
placed in foster care.
    Although the ASFA was passed long after ACYF-PA-87-02 was issued, 
we think that the existing policy is an appropriate interpretation of 
section 475(5)(F) with respect to adjudicated delinquents who enter 
foster care subsequent to placement in a detention facility.
    Comment: A few commenters suggested that we adjust the date a child 
is considered to have entered foster care for Indian children to 
accommodate the time involved in tribal identification and notification 
required by the Indian Child Welfare Act.
    Response: We are sensitive to the fact that tribal identification 
and notification may take time and limit the amount of time the tribe 
or State has in making reasonable efforts to finalize a permanency plan 
prior to the permanency hearing. However, we have no authority to set a 
different ``date of entry into foster care'' for a particular group of 
the foster care population. Nothing precludes the agency and court at 
the permanency hearing from taking into consideration the amount of 
time it took the State to comply with tribal identification and 
notification requirements when determining appropriate permanency plans 
for Indian children.
    Comment: Several commenters did not want the definition of the date 
a child is considered to have entered foster care to apply to the six-
month periodic reviews. The commenters are concerned that, if the 
definition were so applied, children could potentially be in foster 
care for eight months before a review is held.
    Response: We chose to apply section 475(5)(F) of the Act to the 
six-month periodic reviews, permanency hearings, and the TPR provision, 
for two reasons. First, nothing prohibits the State from holding six-
month periodic reviews

[[Page 4032]]

based on the date the child is physically removed from the home. 
Second, setting different ``clocks'' for calculating when to hold 
periodic reviews and permanency hearings, and for complying with the 
TPR provision would add administrative burdens on States.
    For example, we believe that we would encumber State systems by 
requiring a State to hold six-month periodic reviews based on the date 
the child is removed from the home while holding permanency hearings 
based on section 475(5)(F) of the Act. In that situation, the State 
would be obliged to hold two periodic reviews prior to the permanency 
hearing, the second of which would have to be held two months before 
the permanency hearing if the date of entry into foster care were 60 
days from the date the child is removed from the home. Therefore, we 
have not made any changes to the final rule as a result of this 
comment.
    Foster care. No comments were received on this definition and 
therefore no changes are being made to the language proposed in the 
NPRM.
    Foster care maintenance payments. Comment: One commenter questioned 
our ability to revise the definition of foster care maintenance 
payments to include travel for visits with workers, which is currently 
covered as a title IV-E administrative expense. Another commenter 
recommended that a revision to the definition be made to include the 
travel costs for a parent to visit his/her child(ren) as an allowable 
title IV-E foster care maintenance payment cost.
    Response: The first commenter's observation is correct. Including 
the phrase ``agency workers * * * '' in the definition goes beyond the 
statute and was an error on our part. The statute clearly allows 
reasonable travel by the child for visitation with family. We have 
revised the definition in the final rule, deleting the words ``agency 
workers,'' to conform to the statute. ACYF-PIQ-97-01 addresses the 
second commenter's request to expand foster care maintenance payments 
to include travel by the parent(s). Such costs are service related and 
may be charged to title IV-B, title XX or the State. No change has been 
made to expand foster care maintenance payments to include other 
travel.
    Comment: We received several requests to expand the definition of 
foster care maintenance payments to cover a variety of items. For 
example, one commenter recommended that a State be able to claim child 
care when the foster parent is attending a school meeting or medical 
and mental health staffings for another foster child in his/her care.
    Response: The definition of foster care maintenance payments cited 
in the NPRM mirrors the statutory language at section 475(4) of the 
Act. We do not have the authority to extend the definition beyond the 
statute. Furthermore, ACYF-PIQ-97-01 explains that child care provided 
to a foster child when a foster parent is attending activities that go 
beyond the scope of ``ordinary parental duties'' are reimbursable under 
title IV-E. The PIQ provides a thorough discussion on the child care 
costs that can be included in the title IV-E foster care maintenance 
payment.
    Comment: One commenter asked if the State could seek foster care 
maintenance payments for appropriate child care costs if the State has 
a two-tiered licensing system, ``licensed'' for center-based and 
``regulated'' for home-based child care.
    Response: A State's use of specific terminology or type of child 
care licensing system has no bearing on whether the costs of child care 
can be included in title IV-E foster care maintenance payments. As long 
as the child care facility or individual (in the case of home-based 
child care) is licensed, or otherwise officially authorized or approved 
by the State as meeting the requirements for a child care facility, the 
State may claim the costs of allowable child care as part of a foster 
care maintenance payment.
    Comment: Two commenters requested that the language in the preamble 
to the NPRM which stated that payments for child care could be a 
separate payment to the child care provider or included in the basic 
maintenance payment be inserted in the regulatory text of the final 
rule.
    Response: We agree and have amended the regulation accordingly.
    Foster family home. Comment: We received many comments on the 
definition of ``foster family home'' and related concerns regarding 
title IV-E eligibility and reimbursement. Several commenters noted that 
in some States, the terms ``approved'' and ``licensed'' are 
interchangeable, while in other States there are separate standards for 
each of these categories. States sometimes establish separate 
standards, i.e., approval and provisional licensure, as opposed to full 
licensure, for relative caretakers. Some commenters suggested that we 
allow States to claim title IV-E for eligible children placed with 
relative caretakers who meet the State standards for approval or 
provisional licensure, rather than the State's higher standards for 
full licensure. Some commenters noted that relative placements 
encourage continuity in a child's life, allowing the child to maintain 
a sense of identity and minimize separation and attachment issues. One 
commenter expressed a belief that the statutory language of ``licensed 
or approved'' implies that different standards are acceptable. Another 
commenter suggested that to require that approval and licensure be held 
to the same standard is an extremely problematic higher standard than 
has been required in the past.
    Response: We have given considerable thought to these comments and 
have tried to balance the integrity of the requirement, the safety of 
the child and existing State licensing practices. We did not change the 
requirements: (1) That approved foster family homes must meet the same 
standards as licensed foster family homes; or (2) that relatives must 
meet the same licensing/approval standards as nonrelative foster family 
homes for the reasons below.
    Section 471(a)(10) of the Act requires that a State's title IV-E 
plan provide for the establishment or designation of a State authority 
that is responsible for establishing and maintaining standards for 
foster family homes and child care institutions. This section also 
requires that the title IV-E State plan provide for the application of 
these standards to ``any'' foster family home or child care institution 
receiving either title IV-B or title IV-E funds. Further, the statutory 
definition of ``foster family home'' in section 472(c) of the Act 
states that a foster family home is a home ``* * * which is licensed by 
the State in which it is situated or has been approved (by the State 
licensing authority) as meeting the standards established for such 
licensing.'' Clearly, the statute did not intend that there be separate 
standards for licensing and approval.
    The plain language of the statute requires that, to be considered a 
foster family home for the purpose of title IV-E eligibility, the home 
must be either licensed or approved as meeting State licensing 
standards. It also is clear from the language in section 471(a)(10) of 
the Act that the State licensing standards must be applied to ``any'' 
foster family home that receives funding under titles IV-E or IV-B. The 
licensing provisions of the Act make no exceptions for different 
categories of foster care providers, including relative caretakers.
    In past title IV-E foster care eligibility reviews, we have 
verified the existence of a license without differentiating among the 
types, and we understand State concerns in this regard. We also agree 
that placements that meet the

[[Page 4033]]

child's need for attachment and continuity should be encouraged. We 
further recognize that, consistent with section 471(a)(19) of the Act, 
States must consider giving preference to a relative caregiver, 
provided that the relative caregiver meets all relevant State child 
protection standards. However, given the emphasis in ASFA on child 
safety, and the plain language of the statute with respect to the 
licensing requirements, we believe that it is incumbent upon us, as 
part of our oversight responsibilities, to fully implement the 
licensing and safety requirements specified in the statute by requiring 
that foster care homes, whether relative or nonrelative, be fully 
licensed by the State.
    Comment: In some States, relative caretakers must meet the 
standards for full licensure, but the State allows for a waiver of 
certain provisions for these specific caretakers. One commenter asked 
if the language requiring that ``approved'' and ``licensed'' homes meet 
the same standard would restrict the use of these waivers to approve 
relative foster family homes. Other commenters requested that we 
continue our current policy of allowing certain requirements to be 
waived for relatives.
    Response: Waivers are not addressed in the regulatory text. 
However, as we have explained in ACYF-PIQ-85-11, special situations may 
arise with relative caretakers in individual cases where there are 
grounds for waiving certain requirements, such as square footage of the 
relative's home. The safety standards, however, cannot be waived in any 
circumstance. ACYF-PIQ-85-11 has not been withdrawn and, therefore, 
continues to reflect current policy. To the extent that waivers are 
allowed, they must be granted on a case-by-case basis, based on the 
home of the relative and the needs of the child. The State may not 
exclude relative homes, as a group, from any requirements.
    Comment: Several commenters requested that we reconsider our 
position on requiring that a foster family home be fully licensed 
before the State is eligible to claim for title IV-E. We were advised 
that in some States, a provisional license is issued so that a child 
may be placed in a foster home while the State is awaiting criminal 
background checks or waiting for the prospective foster parents to 
complete required training. In other States, a provisional license is 
issued to all new foster homes during a probationary period, even 
though the home meets the requirements for a full license or approval.
    Response: We considered the commenter' suggestions, but we believe 
that the statute requires a foster family home to meet all of the State 
requirements for full licensure or approval to be eligible for title 
IV-E purposes. Accordingly, if a State issues an interim license 
(provisional, emergency, etc.) pending satisfaction of all licensing 
standards (e.g., while the State is awaiting the results of a criminal 
records check or the completion of training), then the State may not 
claim title IV-E funds on behalf of a child in that home.
    Since there seems to be some confusion over the nomenclature used 
in the draft regulation, we have revised the regulatory language in 
Sec. 1355.20 to remove the reference to provisional licensure and to 
articulate that before a State may claim title IV-E funds, it must find 
that the home meets the State's licensing standards.
    Comment: Several commenters offered varying suggestions on the 
concept of allowing retroactive payments. Generally, the commenters 
suggested that we allow States to claim title IV-E reimbursement back 
to the date of placement once the home becomes fully licensed.
    Response: The statute predicates foster family home eligibility on 
licensure or approval of the home. Allowing retroactive payments to the 
child's date of placement would be inconsistent with this requirement. 
In addition, we do not wish to provide financial incentives for States 
to place children in homes before the safety of the children in those 
homes can be assured.
    However, we recognize that some time may elapse between the date 
that satisfaction of the requirements is received and documented and 
the date on which the license is actually issued. We have concluded 
that 60 days is an ample period of time to allow between the time the 
State receives all the information on a home and the date on which the 
full license is issued. Therefore, we are permitting States to claim 
title IV-E reimbursement during the period of time between the date a 
prospective foster family home satisfies all requirements for licensure 
or approval and the date the actual license is issued, not to exceed 60 
days.
    Comment: One commenter requested that we allow States a six-month 
period to grandfather in homes that are currently operating under a 
provisional license, so long as the safety of the child is preserved.
    Response: We will allow States a grace period to bring homes 
currently operating with less than a full license or approval to full 
licensure/approval status. Accordingly, if a State is currently 
claiming title IV-E foster care for a foster family home that does not 
meet fully the State licensing standards, the State has no more than 
six months from the effective date of this final rule to grant a full 
license or approval for these homes. After that date, a State may not 
claim title IV-E funds for any child in a home that does not meet the 
State's full licensing or approval standards.
    Comment: One commenter suggested that provisional and emergency 
licensure be defined, and a distinction be drawn between these two 
types of licenses.
    Response: The terms provisional licensure and emergency licensure 
are not used in the regulation. Thus, we see no reason to impose a 
definition of these terms on States.
    Comment: One commenter recommended that the definition of ``foster 
family home'' begin with a statement indicating that this definition is 
for purposes of title IV-E foster care so that it is not wrongly 
applied to exclude non-licensed placements from the section 422 
requirements.
    Response: We concur with the commenter and have revised the 
regulation to clarify that the definition relates to title IV-E 
eligibility only. It should be noted that section 471(a)(10) of the Act 
more broadly requires that a State's title IV-E plan provide that a 
State's established licensing standards apply to ``any'' foster family 
home or child care institution receiving either title IV-B or IV-E 
funds. This is a State plan conformance issue, however, and not a title 
IV-E eligibility issue.
    Comment: A commenter opposed inclusion of group homes, agency 
operated boarding homes and other institutional settings in the 
definition of ``foster family home.'' The commenter noted that Congress 
clearly has indicated a desire to avoid a child's placement in such 
settings unless it is necessitated by repeated extreme disruptions of 
the preferred family settings. It was suggested that the definition 
include only homes of individuals or families licensed or approved by 
the State licensing or approval authorities that provide 24-hour out-
of-home care for children.
    Response: Group homes, agency operated boarding homes and other 
facilities have been included in the definition of ``foster family 
home'' since the title IV-E regulations were issued in 1983. The 
purpose of including these facilities has been to assure that all 
foster care placements meet the minimum safety requirements by being 
licensed or approved under State law or

[[Page 4034]]

rules. We believe this is a safety issue for children and not a 
statement of placement preference; therefore, we have retained the 
language in the final rule.
    Comment: We received some comments concerning the licensing of 
homes by tribal authorities. A few commenters suggested that tribes 
should have the authority to license tribal homes irrespective of where 
they are located, and that the language in the definition of ``foster 
family home'' implies that tribes only have the authority to license 
homes that are on or near reservations. A couple of commenters 
suggested that not to allow tribes this authority would be a violation 
of tribal sovereignty and jurisdiction. One commenter suggested that 
this is an overreaching of the Federal government rather than a safety 
issue. It was suggested that HHS strike ``or with respect to foster 
family homes on or near Indian reservations'' from the definition.
    Response: The authority of Indian tribes to license homes that are 
``on or near Indian reservations'' has been part of the title IV-E 
regulations since May 23, 1983. This provision is consistent with the 
Indian Child Welfare Act (ICWA) of 1978. Section 1931 of ICWA 
authorizes Indian tribes and tribal organizations to establish and 
operate child and family services programs ``on or near reservations,'' 
including a system for licensing or otherwise regulating Indian foster 
and adoptive homes. We are maintaining the language to remain 
consistent with the ICWA.
    Comment: One commenter asked whether the definition of ``foster 
family home'' should be interpreted to mean that homes approved through 
the tribal process must meet the same standard as homes licensed by the 
State.
    Response: The definition of ``foster family home'' should not be 
interpreted in that manner. The definition of ``foster family home'' 
gives tribal licensing or approval authorities the jurisdiction to 
license or approve homes that are on or near Indian reservations. This 
is consistent with ICWA at section 1931(b) which states that for 
purposes of qualifying for funds under a federally assisted program, 
licensing or approval of foster or adoptive homes or institutions by an 
Indian tribe is equivalent to licensing or approval by a State. The 
authority to license or approve includes the authority to set 
standards.
    Comment: One commenter was concerned about the requirement that 
approved and licensed homes must meet the same standard. The commenter 
noted that States sometimes use waivers to approve Indian foster homes 
which may not meet certain criteria, such as square footage 
requirements, in order to comply with the ICWA placement preferences. 
The commenter recommended that we include language to assure that this 
type of waiver continues to be permissible.
    Response: Our current policy, set forth in ACYF-PIQ-85-11, 
recognizes that there may be exceptional circumstances that arise with 
a specific relative caretaker where there are grounds for waiving a 
licensing requirement, such as square footage, in order to place a 
child. The policy set forth in that issuance applies also to licensing 
or approving tribal relative foster homes, either by a State or tribal 
licensing authority. This waiver authority does not extend to all 
foster homes, but only to relative homes in certain circumstances 
delineated in ACYF-PIQ-85-11, as determined by the licensing authority 
on a case-by-case basis. We did not address the issue of waivers in the 
NPRM or final rule, but clarify here that the existing policy stands.
    Full hearing. Comment: Several commenters objected to a definition 
for ``full hearing'' because it did not coincide with some States' 
terminology. Many commenters requested clarification, while others 
recommended changes in the definition that would accommodate the 
specific terms and proceedings used in their States.
    Response: We defined a full hearing in an attempt to establish a 
universal term for the hearing at which the State agency is assigned 
responsibility for placement and care of a child who is removed from 
home. Given the multiple requests for clarification and the conflicting 
nature of the recommendations, it is likely that any definition for 
``full hearing'' would be problematic given the variety of State-
specific practices. Therefore, we have deleted this definition from the 
final rule.
    Full review. No comments were received on this definition and 
therefore no changes are being made to the language proposed in the 
NPRM.
    Legal guardianship. Comment: A few commenters supported the 
definition of legal guardianship as written in the proposed rule. 
However, some commenters requested clarification that the term 
``custody,'' as used in the definition, refers only to physical custody 
of the child rather than legal custody. The commenters asserted that 
some States retain legal custody of the child in guardianship 
situations.
    Response: The definition in the final rule is taken directly from 
the statute which makes no distinction between physical and legal 
custody. We believe that the definition is intended to include all 
legal guardianship arrangements that are permanent.
    Comment: A commenter wanted to know how the Federal definition for 
legal guardianship will be applied to States that do not have the same 
definition in their State statutes.
    Response: There is no Federal requirement for States to have the 
statutory definition of legal guardianship in State law. The statute 
requires States to evaluate certain permanency goals, including legal 
guardianship, for children during the development of the case plan and 
the course of a permanency hearing. We believe that the definition was 
developed to clarify that States should consider legal guardianships 
that are permanent and self-sustaining as a permanency option for 
children in foster care.
    Comment: There were several comments on funding legal 
guardianships. We received a suggestion that title IV-E funding be made 
available for subsidized legal guardianship. Another commenter asked 
for clarification on financial and medical assistance available for 
children placed in legal guardianship and how to access funding for 
legal guardianship. A third commenter requested that we clarify that a 
State is not precluded from providing financial assistance in legal 
guardianships.
    Response: While legal guardianship arrangements may be appropriate 
permanency plans, we have no statutory authority to make title IV-E 
funding available for subsidized legal guardianships. However, some 
States are using title IV-E funds to subsidize legal guardianships 
under the terms of a title IV-E demonstration waiver approved by the 
Secretary. The statute does not preclude States from subsidizing legal 
guardianships with State funds.
    Comment: A commenter requested that we make a greater distinction 
between legal guardianships and other living arrangements such as 
permanent foster care placements and parent-child relationships. The 
commenter believed that children placed in legal guardianships often 
are not subject to ongoing judicial review, and that in contrast to 
parent-child relationships, a child is not entitled to inherit from a 
guardian, and vice versa.
    Response: The term legal guardianship should be used in reference 
to the requirements on reasonable efforts to finalize a permanency 
plan, case plans,

[[Page 4035]]

permanency hearings, and TPR. In that context, States determine whether 
a legal guardianship is the most appropriate permanency option for a 
child. We do not believe it is appropriate for us to regulate the 
definition of a legal guardianship further.
    Comment: One commenter requested guidance on the use of legal 
guardianship as a permanency option. The commenter requested that we 
share lessons learned from the title IV-E demonstration waiver States.
    Response: Information on the findings from the States with 
demonstration waivers will be disseminated when available. This 
information will be better provided through our resource centers and 
technical assistance activities rather than through regulation.
    National Child Abuse and Neglect Data System (NCANDS). No comments 
were received on this definition and therefore no changes are being 
made to the language proposed in the NPRM.
    Partial Review. The Department is responsible for State compliance 
with all aspects of the title IV-B and IV-E plan requirements and not 
only the elements covered by the child and family service reviews. 
Accordingly, we have revised the definition of ``partial review,'' to 
clarify its application to title IV-E and title IV-B compliance issues 
that are outside the scope of the child and family services review. 
This partial review may cover whatever the Secretary considers 
necessary to make a determination regarding State plan compliance. An 
example of an area which is not subject to the full child and family 
services review but subject to a partial review is compliance with 
AFCARS. The procedures and standards for AFCARS compliance are set 
forth in 45 CFR 1355.40.
    Permanency Hearing. Comment: One commenter disagreed with the 
requirement that permanency hearings be held within 12 months of the 
date a child is considered to have entered foster care. The commenter 
felt that it did not give families sufficient time to make their homes 
ready for the child to return.
    Response: The requirement to conduct permanency hearings no later 
than 12 months from when a child enters foster care is statutory. One 
of the main purposes of ASFA was to encourage States and parents to 
achieve permanency for children in a more timely manner.
    Comment: One commenter did not think that permanency hearings 
should be conducted by any entity other than a court.
    Response: The option for administrative bodies, appointed or 
approved by the court, to conduct permanency hearings is expressly 
permitted at section 475(5)(C) of the Act.
    Comment: Several commenters were opposed to the requirement that 
any body that conducts permanency hearings may not be part of or under 
the supervision or direction of the State agency. One commenter asked 
if this requirement extended to other public agencies with which the 
State agency has an agreement.
    Response: Critical decisions that have a significant effect on the 
lives of children and their families are made at permanency hearings. 
The purpose of requiring courts to oversee permanency hearings is to 
ensure that these hearings are conducted by an impartial body, which 
includes any body appointed or approved by the court to provide this 
oversight in its stead. An administrative body that is part of the 
State agency or under its direction or supervision would not meet the 
test of impartiality.
    The requirement does extend to other public agencies with which the 
State agency has an agreement. In accordance with ACYF-PIQ-85-2, title 
IV-E requirements extend to any other public agency with which the 
State agency enters an agreement for the performance of title IV-E 
administrative functions, including responsibility for placement and 
care of the child.
    Comment: One commenter requested that the definition of 
``permanency hearing'' be revised to indicate specifically that a 
tribal agency is permitted to appear before a tribal court and that the 
tribal court has the authority to make all the necessary rulings with 
respect to permanency hearings.
    Response: The statutory and regulatory language both clearly 
indicate that permanency hearings may be held before a tribal court. 
The references to State courts in the permanency hearing requirements 
in section 475(5)(C) of the Act and in the definition of permanency 
hearing at Sec. 1355.20 should be understood to include tribal courts.
    Comment: A few commenters requested additional guidance regarding 
whether reunification efforts can be extended beyond the permanency 
hearing or if an alternate permanency plan must be set at the 
permanency hearing if the child and family cannot be reunited at that 
time.
    Response: A major purpose of ASFA is to promote timely permanency 
planning. We recognize, however, that there are situations when 
reunification cannot occur within 12 months but it is not appropriate 
to abandon it as the permanency plan at the permanency hearing. It is 
acceptable to extend reunification efforts past the permanency hearing 
if the parent(s) has been diligently working toward reunification and 
the State and court expect that reunification can occur within a time 
frame that is consistent with the child's developmental needs.
    Comment: One commenter wanted to know if the permanency hearing was 
similar to a dispositional hearing or an administrative review. This 
commenter also wanted to know if the hearing could still be held within 
18 months of a child entering foster care.
    Response: The ASFA changed the name of the former ``dispositional 
hearing'' to ``permanency hearing'' and the timing was changed from 18 
months to 12 months (see p. 50072 of the NPRM). No statutory 
flexibility exists with respect to the time line in the ASFA for 
conducting permanency hearings.
    Comment: One commenter asked that we clarify whether the permanency 
goal of placement with a fit and willing relative was optional because 
the commenter's State had eliminated it as a permanency goal. A few 
commenters asked that we specifically identify placement in ``another 
planned permanent living arrangement'' as the appropriate permanency 
option for all unaccompanied refugee minors. These commenters requested 
that, in establishing placement in ``another planned permanent living 
arrangement'' as the appropriate permanency option for unaccompanied 
refugee minors, this group of the foster care population be exempted 
from the requirement to provide a compelling reason for not setting 
reunification, adoption, legal guardianship or placement with a fit and 
willing relative as the permanency plan.
    Response: We do not believe it is appropriate for ACF or States to 
exclude any permanency options from consideration or to identify one 
permanency goal as the appropriate permanency goal for an entire group 
of the foster care population. Permanency planning is based on the best 
interests, individual needs, and circumstances of the child. The 
requirement to document, to the court, a compelling reason for setting 
a permanency plan other than reunification, adoption, legal 
guardianship, or placement with a fit and willing relative is statutory 
and cannot be waived for any group of the foster care population.
    Comment: We had several commenters request that we include

[[Page 4036]]

placement in a permanent foster family home and emancipation in the 
list of permanency goals at section 475(5)(C) of the Act that are 
exempt from the compelling reason requirement in that section. Some 
commenters also asked us to include long term foster care and 
emancipation as other planned permanent living arrangements.
    Response: Section 475(5)(C) of the Act specifies that the only 
permanency options the State may set without a compelling reason to do 
so include reunification, adoption, legal guardianship, or placement 
with a fit and willing relative. Therefore, ``another planned permanent 
living arrangement'' would be any permanent living arrangement that is 
not enumerated in statute.
    Comment: One commenter suggested that we amend the section of the 
definition that describes the decisions to be made at a permanency 
hearing. The commenter suggested that the term ``should'' be replaced 
with ``will'' in the definition. The commenter thinks the term ``will'' 
is consistent with ASFA's intent to ensure permanency while ``should'' 
is noncommittal.
    Response: We agree and have amended the language accordingly.
    Comment: One commenter was opposed to the prohibition of paper 
reviews, ex parte hearings, and agreed orders as satisfying the 
requirements of a permanency hearing.
    Response: Section 475(5)(C) of the Act requires the State to ensure 
``* * * procedural safeguards shall also be applied with respect to 
parental rights pertaining to the removal of the child from the home of 
his parents, to a change in the child's placement, and to any 
determination affecting visitation privileges of parents * * *.'' In 
our view, paper reviews, ex parte hearings, and agreed orders fail to 
provide these important safeguards. No change was made to the 
regulation based on this comment.
    Comment: One commenter was opposed to the use of the term 
``compelling reason'' for setting another planned permanent living 
arrangement as the permanency plan. The commenter feels the term 
suggests a legal burden of proof that is not appropriate for 
establishing permanency plans.
    Response: The term ``compelling reason'' is taken directly from the 
statutory language. Moreover, the term was adopted because far too many 
children are given the permanency goal of long-term foster care, which 
is not a permanent living situation for a child. The requirement is in 
place to encourage States to move children from foster care into the 
most appropriate permanent situation available.
    Comment: We received several comments regarding the preamble 
language to paragraph 1356.21(g) in the NPRM which states that States 
should exhaust all efforts to place a child in a permanent home outside 
the foster care system before placing the child in a permanent foster 
care setting. The commenters feel this language has created a standard 
above the ``compelling reason'' requirement prescribed in statute.
    Response: We want to clarify that the language should not be 
interpreted to set a standard above what is set in statute. It was 
intended to encourage States to seriously consider placement options 
outside of foster care before settling on a permanent foster care 
placement as the permanency plan.
    Statewide Assessment (formerly State self-assessment). No comments 
were received on this definition, so we made no changes to the 
definition itself. We did, however, change the name from ``State self-
assessment'' to ``statewide assessment.'' The term ``statewide 
assessment'' more accurately reflects the comprehensive nature of the 
assessment conducted during the first phase of a child and family 
services review.
    Temporary custody proceeding. Comment: Several commenters objected 
to a definition for a temporary custody proceeding. Some commenters 
expressed confusion while others asserted that the definition, 
especially in combination with the definition for a ``full hearing,'' 
did not accurately reflect the variety of State proceedings where 
placement and care responsibility is granted to the State agency.
    Response: In the proposed rule we defined ``temporary custody 
proceeding'' as the first judicial proceeding held at or shortly after 
the emergency removal of a child from the home. We intended to clarify 
when the State court must make certain reasonable efforts and contrary 
to the welfare judicial determinations. However, we concur that a 
Federal definition for a temporary custody proceeding is not helpful in 
clarifying when the court must make certain title IV-E eligibility 
determinations, and we have deleted the definition.

Sections 1355.31-1355.37  The Child and Family Services Reviews

Section 1355.31  Elements of the Child and Family Services Review 
System

    This section describes the scope of the child and family services 
reviews as including programs administered by States under titles IV-B 
and IV-E of the Act.
    All of the relevant comments on this section are addressed in the 
following sections.

Section 1355.32  Timetable for the Reviews

    This section specifies the review timetable for the initial and the 
subsequent reviews as required by section 1123A of the Act, and sets 
forth rules for reinstatement of reviews based on information that a 
State is not in substantial conformity.

Section 1355.32(a)  Initial Reviews

    This section sets forth the timetable for the initial child and 
family services reviews.
    Comment: We received many comments concerning the time that it will 
take for States to become familiar with the new review process. Most of 
the commenters indicated that it will take significant time for States 
to prepare for the reviews and requested that ACF add to this section a 
requirement that we provide an advance six-month, or longer, 
notification to States prior to initiating the review process. 
Similarly, most of these commenters indicated that the six-month period 
proposed between publication of the final rule and initiation of the 
new review schedule is necessary and some comments suggested that a 
longer time frame to begin reviews is desirable. A small number of 
comments dissented on this provision.
    Response: We acknowledge that advance notice and preparation are 
required for the child and family services reviews. The exact period of 
preparation may vary by State and may change as the States and ACF 
become more familiar with the process. Taking into consideration that 
Federal staff will also require a period of time to prepare adequately 
for each review, we do not anticipate lack of advance notice becoming 
an issue. Therefore, we do not intend to regulate the notification 
period. We have, however, extended the time for completing the initial 
reviews to up to 4 years following the effective date of the final 
rule.
    Comment: We received comments requesting coordination among the 
components of the child and family services reviews with other Federal 
planning and review functions, i.e., coordinating the statewide 
assessment with the CFSP and coordinating the reviews with the title 
IV-E reviews.
    Response: We have designed the child and family services reviews to 
build on and coordinate with the process in place

[[Page 4037]]

for title IV-B State planning as set forth in 45 CFR part 1357. The 
timing of the statewide assessments will, in part, be determined by the 
timing of the actual reviews which will vary from State to State, and 
coordination with the timing of the annual progress and services 
reports (APSRs) may not be possible.
    We considered combining the child and family services and the title 
IV-E reviews but believe that conducting the two reviews at the same 
time would pose a serious burden on States, given the intensity of the 
review processes and the level of State effort required for each. We 
will coordinate the actual timing of the two different reviews such 
that States will not be over-burdened.

Section 1355.32(b)  Reviews Following the Initial Review

    This section sets forth the timetables for subsequent child and 
family services reviews.
    Comment: We received a range of comments on the proposed frequency 
of the reviews. Although a number of comments supported the proposed 
schedule, some commenters suggested that reviewing at five-year 
intervals for States determined to be in substantial conformity is 
insufficient to assure the safety and permanency of children. Others 
suggested that the interim statewide assessments should not be required 
at three-year intervals if the State is in substantial conformity, but 
should either be eliminated or occur less frequently.
    Response: We proposed a five-year review cycle for States found in 
substantial conformity and do not think that it compromises our ability 
to ensure children's safety and permanency for the following reasons:
    sbull; A full or partial child and family services review can be 
reinstated whenever information from any source indicates that the 
State is not in substantial conformity;
     The standard for achieving substantial conformity is high;
     States in substantial conformity are required to complete 
a statewide assessment at the three-year point between full reviews;
     The title IV-B five-year Child and Family Services plan, 
and the related annual updates, provide significant insight into the 
functioning of the State child welfare program and a mechanism for 
identifying potential conformance issues with respect to safety and 
permanency.
    Because we believe that other types of reviews and information 
gathering provide insight into State performance between on-site 
reviews, we have not changed the requirement to review States every 
five years if they are determined to be in substantial conformity. 
Likewise, we have not eliminated or changed the requirement for the 
statewide assessment to be completed every three years because we 
believe that the use of information from that source is an important 
mechanism for helping States maintain successful performance.
    In order to address the comments about assuring the safety and 
permanency of children between reviews, we have changed the requirement 
for States determined not to be in substantial conformity to be 
reviewed at two-year intervals, rather than three-year intervals.

Section 1355.32(c)  Reinstatement of Reviews Based on Information That 
a State Is Not in Substantial Conformity

    This section sets forth the requirements for a reinstatement of a 
full or partial review and describes the types of information that may 
require a review.
    Comment: We received many comments suggesting that the regulation 
should denote that ACF and the State negotiate a specific time frame 
for the receipt of additional information as part of the detailed 
inquiry to determine if more frequent reviews should be reinstated, and 
that only after that time has been exceeded should we be authorized to 
proceed with an additional review.
    Response: The time frame and circumstances of the request for 
information will vary depending upon the nature of the information 
required to determine if more frequent reviews should be reinstated. We 
have a responsibility to assure compliance with State plan requirements 
and it may be necessary to require information of a particular nature 
within a specific time frame. Thus, we will not provide for a 
negotiated time frame.
    Comment: We received many comments indicating concern about the 
sources of information that could trigger reinstatement of reviews 
based on information that a State is not in substantial conformity. 
Specifically, objections were raised regarding inclusion of information 
from public and private organizations and from the disposition of class 
action lawsuits. The main concern was the accuracy of information from 
these and other sources.
    Response: Section 1123A(b)(1)(C) of the Act gives the Secretary the 
authority to reinstate more frequent reviews based on information 
indicating that the State may not be in conformity with the State plan. 
The statute is silent with respect to the source of the information 
that would trigger an unplanned review. Therefore, we deleted the list 
of potential sources of information that could trigger an investigation 
and, instead, reiterated the statutory language.
    We do recognize that the specific sources mentioned in the NPRM, 
and others not mentioned, may not always provide accurate information 
about the State' compliance with State plan requirements. The provision 
for ACF to conduct detailed inquiries prior to initiating more frequent 
reviews is designed to address this issue by ascertaining the validity 
of the information. A decision whether or not to reinstate reviews to 
determine substantial conformity will only be made after the validity 
of the information is determined.
    Comment: We received questions concerning the process for 
reinstating reviews based on information that a State may not be in 
substantial conformity. Specifically, questions were raised about the 
content and format of the more frequent reviews.
    Response: The reinstatement of reviews could take the form of a 
full or partial review, both of which are defined in Sec. 1355.20. We 
prefer not to specify an exact format for each reinstated review in the 
rule, since the nature of the concerns triggering the review and the 
intensity of reviews needed will vary. We have, however, clarified in 
the regulation that any inquiry conducted by ACF does not replace a 
full review as scheduled according to Sec. 1355.32(b).

Section 1355.32(d)  Partial Reviews Based on Noncompliance With State 
Plan Requirements That are Outside the Scope of a Child and Family 
Services Review

    This new section was added to set parameters for addressing 
noncompliance with title IV-B and IV-E State plan requirements that are 
outside the scope of a child and family services review.
    Comment: A few commenters questioned our proposal to review for 
only certain State plan requirements in the child and family services 
reviews, rather than all State plan requirements.
    Response: We have selected those requirements for the child and 
family services review that are most directly related to the 
achievement of successful outcomes in the areas of safety, permanence 
and child and family well-being. However, the State remains responsible 
for complying with all State plan requirements for titles IV-B and IV-
E, even if each requirement is not

[[Page 4038]]

subject to review in the child and family services review. Therefore, 
we have added Sec. 1355.32(d) to clarify that we will use a partial 
review to determine conformity with State plan requirements outside the 
scope of the child and family services reviews. Because defining the 
variety of State plan compliance issues in advance is not possible, we 
will approach each circumstance on a case-by-case basis. Consistent 
with section 1123A, the necessary elements of the program improvement 
plan and, if necessary, the amount of the withholding, will be 
commensurate with the extent of the State's non-conformity.

Section 1355.33  Procedures for the Review

    This section sets forth the review process and outlines general 
procedures for the statewide assessment and the on-site review.
    Comment: Overall, we received many comments from the States 
favoring the use of the statewide assessment process and applauding the 
partnership between State and Federal reviewers who comprise the 
proposed review teams. Many comments indicated support for the joint 
planning of the on-site review and the proposal that it be guided by 
information in the statewide assessment. Others wrote in support of the 
increased focus on outcomes from prior reviews and the comprehensive 
nature of the reviews in covering the range of child and family 
services.
    Response: None needed.
    Comment: We received comments regarding the review' reliance on 
existing data sources, specifically AFCARS. Some comments supported the 
use of existing data sources for the reviews, while some suggested that 
these data may not be reliable or capable of addressing safety and 
permanency adequately.
    Response: We understand the concerns regarding the AFCARS data and 
acknowledge that the data in the earliest AFCARS submissions had 
weaknesses with respect to quality. The quality of the data has 
increased with every submission and we see this trend continuing as a 
result of three factors:
    (1) Penalties. Since October 1994, States have been required to 
participate in AFCARS and, beginning in Federal fiscal year 1998, 
penalties were imposed on States not in compliance with AFCARS 
submission requirements. The number of States submitting penalty-free 
data has increased significantly since penalties have been imposed.
    (2) State self-analysis prior to submission. Two types of software 
are available to afford States the opportunity to ensure the quality of 
their data prior to submitting it to ACF. The first performs more than 
800 checks on various relationships among AFCARS data elements to 
ensure the accuracy of the data. The second is the same software ACF 
uses to assess data quality and is the basis for imposing penalties.
    (3) Incentives. Two sources provide incentives for improving AFCARS 
data. First, the ASFA established the Adoption Incentive Program, 
section 473A of the Act, under which States receive a bonus for 
increasing the numbers of children adopted out of the public child 
welfare system. While the statute provides flexibility with respect to 
data sources used for establishing initial baselines, AFCARS data must 
be used in calculating bonuses for the number of adoptions over the 
baseline. Second, under section 479A of the Act, the Department is 
required to develop a set of outcome measures based, to the maximum 
extent possible, on AFCARS data. State performance will be rated based 
on these outcome measures.
    AFCARS is the statutorily-mandated information collection system 
for the Federal child welfare programs. Thus, it is the appropriate 
data source for use in Federal reviews.

Section 1355.33(a)  The Full Child and Family Services Reviews

    This section states that the review will be a two-phase process and 
describes the composition of the review team.
    Comment: We received a number of comments about the composition of 
the review team, including requests for specific representatives on the 
team, such as representatives of citizen review panels. Some commenters 
raised concerns that the training and backgrounds of review team 
members reflect strength in child welfare practice. One respondent 
suggested that representatives of the Department's Office for Civil 
Rights (OCR) in particular receive training in the processes and issues 
covered by the child and family services reviews.
    Response: We recognize the necessity of having reviewers who are 
knowledgeable about child and family services and this is an important 
matter for internal ACF consideration. However, the existing 
regulations that implement title IV-B of the Act specify the types of 
representatives with whom the State should consult in its planning 
processes, and we anticipate that States will utilize many of these 
same individuals or types of representatives in staffing the child and 
family services review teams. We will also provide guidance to States 
for the selection of team members and train both Federal and State 
members of the review teams on the review procedures as the reviews are 
conducted. For those reasons, we did not regulate the specific State or 
Federal representatives who will participate on the review team.

Section 1355.33(b)  Statewide Assessment

    This section describes the first phase of the full review, the 
statewide assessment.
    Comment: There were a wide variety of concerns about objectivity in 
the review process, most of which were directed toward the sample of 
cases to be reviewed on-site and the role of the statewide assessment.
    Response: We are making revisions to the following sections of the 
rule to increase the objectivity of the reviews and support accurate 
determinations of substantial conformity:
     In Sec. 1355.33(b)(1), we require that the statewide 
assessment address each systemic factor under review, including the 
statewide information system, case review system, quality assurance 
system, staff training, service array, agency responsiveness to the 
community, and foster and adoptive parent licensing, recruitment and 
retention.
     In Sec. 1355.33(b)(2), we require that the State, using 
data from AFCARS, NCANDS, or, for the initial review, another source 
approved by ACF, assess the outcome areas of safety, permanency, and 
well-being of children and families served by the State agency, 
including a discussion of the State's performance in meeting the 
national standard established for the statewide data indicators.
     In Sec. 1355.33(b)(5), we require that the completed 
statewide assessment include a list of all the persons external to the 
State agency who had input into the preparation of the statewide 
assessment in order to assure that the required participation and 
consultation in Sec. 1355.33(a)(2)(ii) and (iv) actually occurred.
     In Sec. 1355.33(b)(6), we require that the State submit 
the statewide assessment to ACF within 4 months of our transmission of 
the information for the statewide assessment to the State. We 
anticipate that we will need 60 days to review the statewide assessment 
and notify the State of any potential areas that might be an issue 
during the on-site review. It will also afford the State an opportunity 
to gather additional information in advance of the review to clarify 
any concerns raised; and,

[[Page 4039]]

     In Sec. 1355.33(c)(5), we regulate the size of the on-site 
sample of cases to be reviewed and require that the cases be selected 
randomly from AFCARS and NCANDS, or, for the initial review, another 
approved source. This will promote consistency and help to eliminate 
bias in the sample.
    Comment: We received a few comments that expressed concern about 
the use of the statewide assessment in county-administered States. 
Commenters noted that particular items in the statewide assessment have 
the potential for variance among counties.
    Response: We recognize the issues raised by reviewing programs in 
county-administered versus State-administered systems. Following the 
pilot reviews, however, we concluded that we could not design a 
separate review process to measure State compliance for county-
administered system. States, not counties, are ultimately responsible 
and held accountable for compliance with State plan requirements. The 
statewide assessment is designed to be completed by the State, not by 
individual counties, and responses should reflect official State 
policies and the most typical State practice, while noting where 
outstanding exceptions exist.

Section 1355.33(c)  On-site Review

    This section describes the second phase of the full review, the on-
site review.
    Comment: We received some comments about the geographic areas to be 
covered by the on-site review as stated in paragraph (c)(1) through 
(3). In particular, some concern was expressed that including the 
State's largest metropolitan area would lessen the representativeness 
of the sample and would target the area of the State with the most 
resources. Another comment requested that the review also include rural 
areas of the State.
    Response: Urban areas often provide a disproportionate number of 
families who have contact with the child welfare system. In order to 
serve its stated purpose of improving outcomes for children and 
families, the proposed review process must include this population of 
children and families. For example, the reviews could not accurately 
claim to represent statewide issues in Illinois without reviewing 
Chicago, in New York without reviewing New York City, or in California 
without reviewing Los Angeles. It is also important to represent the 
range of other environments in the State including rural and suburban 
areas with their unique family and resource issues. However, since the 
reviews will only permit on-site activities in a limited number of 
locations, we prefer not to regulate geographic sites other than the 
largest metropolitan area. Beyond that, we have provided for the 
statewide assessment to guide the State and Regional ACF Offices in 
determining the most appropriate review sites given each State's unique 
characteristics, issues and population.
    Comment: We received comments requesting that specific 
representatives be interviewed as part of the on-site review process as 
described in paragraph (c)(4). Most often, the commenters suggested a 
requirement that parents and adoptive parents be included, as well as 
the courts or administrative body that conducts administrative reviews 
in the States. One respondent also noted that special consideration 
should be given to the circumstances under which children and families 
should or should not be interviewed and the weight that should be given 
their responses.
    Response: Parents and adoptive parents will be routinely 
interviewed on cases selected for the on-site review. While the rule 
does not specify the community stakeholders who will be interviewed in 
addition to the case-specific representatives, a number of 
representatives with both statewide and local perspectives on the 
systemic functioning of the child and family services delivery system 
will be interviewed. Representatives from the courts or other 
administrative review bodies will be included, as well as children's 
guardians ad litem and other individuals representing the child's best 
interests. We are producing, separate from the rule, a procedures 
manual for use in conducting the reviews that lists the community 
representatives to be interviewed. The procedures manual and the 
training provided by ACF to the reviewers will also address the 
circumstances under which children and families should or should not be 
interviewed.
    Comment: Some commenters requested that we require case information 
obtained by reviewers to be kept confidential.
    Response: All case-specific information disclosed during a child 
and family services review is confidential. Both titles IV-B and IV-E 
have restrictive disclosure provisions (found at section 471(a)(8) of 
the Act and 45 CFR 205.50). One of the purposes for which a State is 
authorized to disclose such information, however, is for an audit or 
similar activity conducted by the Department in connection with the 
State plan. Further, Federal regulations at 45 CFR 205.50 require that 
recipients of information concerning children and families receiving 
assistance and/or services from the title IV-B/IV-E agency be held to 
the same standards of confidentiality as the agency. The 
confidentiality standards for case-specific information are addressed 
in the procedures manual for use in conducting the child and family 
services review. In addition, the confidentiality of case records 
routinely will be reinforced during reviewer training prior to each 
review.
    States have complete flexibility in establishing procedures to 
ensure that confidentiality requirements are met. During the pilot 
reviews, some States chose to require the reviewers who were not State 
or Federal employees to sign confidentiality agreements prior to 
reviewing confidential information.
    Comment: We received a number of comments requesting that we not 
use the term ``social worker'' unless it is a specific reference to 
professionally trained social workers, i.e., persons with B.S.W. or 
M.S.W. degrees.
    Response: Recognizing that not all caseworkers in public agencies 
have academic degrees in social work, we are changing the term ``social 
worker'' in the rule to ``caseworker.''

Section 1355.33(d)  Resolution of Discrepancies Between the Statewide 
Assessment and the On-site Review

    This new section was added to describe the steps we will take in 
resolving discrepancies between the aggregate data and the findings of 
the on-site review.
    ACF will provide States with the option of submitting additional 
information to resolve the discrepancy, or for ACF and the State to 
review additional cases, using only those indicators in which the 
discrepancy occurred. ACF and the State will determine an additional 
number of cases to be reviewed, not to exceed a total of 150 cases. As 
described in section 1355.33(c)(6), the additional cases, in 
combination with the 30-50 cases reviewed on-site, will comprise a 
statistically significant sample with a 90 percent (or 95 percent for 
subsequent reviews) compliance rate, a tolerable error rate of 5 
percent, and a confidence coefficient of 95 percent. We will pull the 
additional cases from an oversample of cases for the on-site review, so 
that both sets of cases will comprise one sample. Only those indicators 
in which the discrepancy occurred will be subject to review.

Section 1355.33(e)  Partial Review (1355.33(d) in the NPRM)

    This section describes the partial review process.

[[Page 4040]]

    We redesignated Sec. 1355.33(d) as Sec. 1355.33(e) and made a 
technical edit to clarify that the partial review requirements in this 
section relate to the partial child and family services reviews. We 
have also clarified that a partial review does not substitute for the 
regularly scheduled full reviews.

Section 1355.33(f)  Notification (1355.33(e) in the NPRM)

    This section describes the manner in which ACF will notify States 
of whether the State is operating in substantial conformity.
    Comment: Some comments requested that the regulation require more 
detail to be included in the ACF notification letter to States, 
informing them if they are operating, or not operating, in substantial 
conformity.
    Response: In the interest of providing the States with timely 
feedback on the child and family services reviews, we have designed a 
review process that is less dependent upon lengthy reports than in the 
past. The review team will provide the State with verbal information on 
the findings of the review throughout the on-site review and subsequent 
exit conference. The written description of the findings will begin 
with the evaluation of the statewide assessment and will be updated as 
a result of the on-site review. The notification to the State following 
the on-site review is a confirmation of those findings and will provide 
specific information to allow a State to know where it is operating in 
or out of conformity.

Section 1355.34  Criteria for Determining Substantial Conformity

    This section pertains to the criteria that must be satisfied to 
find a State in substantial conformity, including a discussion of 
outcomes, level of achievement of outcomes, and criteria related to a 
State agency's capacity to deliver services leading to improved 
outcomes for children and families.

Section 1355.34(a)  Criteria To Be Satisfied

    This section describes the elements on which a State's substantial 
conformance with title IV-B and title IV-E State plan requirements will 
be based.
    Comment: Some respondents requested that decisions regarding 
substantial conformity not be reliant on the resolution of 
discrepancies between aggregate data from the statewide assessment and 
the findings of the on-site review.
    Response: It was always our intention to resolve discrepancies 
between aggregate data from the statewide assessment and the findings 
of the on-site review. Now that substantial conformity is based on 
statewide data indicators, as well as the findings of the on-site 
review, we believe that if significant discrepancies occur among the 
sources of information used to determine substantial conformity, they 
must be reconciled so an accurate determination can be made. To clarify 
our procedures to resolve these discrepancies, we are adding a new 
Sec. 1355.33(d) that gives States the option of either submitting 
additional information to resolve discrepancies between the statewide 
data indicators, or the State and ACF reviewing additional cases for 
the indicators where the discrepancy exists.

Section 1355.34(b)  Criteria Related to Outcomes

    This section sets forth the criteria related to outcomes that will 
be evaluated to determine a State's substantial conformance.
    Comment: We received many comments supporting the proposed approach 
of limiting the reviews to those State plan requirements that relate 
specifically to outcomes and the delivery of improved services. Some 
comments questioned the authority of HHS to select only certain State 
plan requirements for review in the child and family services reviews.
    Response: The child and family service reviews focus on the most 
prominent aspects of the programs under review, specifically child 
safety, permanency for children in foster care, and well-being of all 
the children served by the programs. This focus in no way alters the 
requirements imposed on States to operate their programs in conformity 
with all applicable State plan requirements.
    Therefore, in response to this comment, a new paragraph (d) under 
Sec. 1355.32, ``Partial reviews based on noncompliance with State plan 
requirements that are outside the scope of a child and family services 
review'' has been added to clarify parameters for addressing issues 
regarding compliance with title IV-B and title IV-E State plan 
requirements that are outside the scope of these reviews. If needed, we 
will conduct partial reviews to resolve such issues regarding 
compliance. Partial reviews of this nature will not necessarily follow 
the prescribed format of the child and family services review. Rather, 
such partial reviews will address whatever the Secretary deems 
necessary in order to make a determination concerning State plan 
compliance.
    If a State is determined to be out of compliance with a State plan 
requirement under either title IV-E or title IV-B, there will be an 
opportunity for program improvement, consistent with section 1123A of 
the Act, before funds are withheld.
    Comment: A significant number of comments noted that Safety Outcome 
#1 is actually two separate outcomes.
    Response: We agree and have revised Sec. 1355.34(b)(1)(i)(A) and 
(B). We separated Safety Outcome #1 into its two component parts and 
will use them as the two safety outcomes, replacing the current Safety 
Outcome #2 (The risk of harm to children will be minimized.). The two 
safety outcomes now read as follows:
    Outcome S1: Children are, first and foremost, protected from abuse 
and neglect.
    Outcome S2: Children are safely maintained in their homes whenever 
possible and appropriate.
    In this manner, we will address safety as a State's primary concern 
while measuring compliance with the statutory requirement to maintain 
children safely in their own homes when possible.
    Comment: One commenter questioned whether safely maintaining 
children in their own homes is, in fact, a safety outcome. The 
commenter suggested that it would be more appropriately assessed as a 
permanency outcome.
    Response: Although this outcome addresses decisions about whether 
to remove children and place them in foster care or maintain them in 
their own homes, it is, in fact, a safety outcome. ASFA is clear that 
the child's health and safety must be the primary concern in decisions 
to remove or to reunify. In reviewing the circumstances of those 
children who remain in their own homes, we intend to review for their 
safety and well-being, and not for the foster care provisions under the 
permanency outcomes that are not applicable to them. We will evaluate 
the permanency outcomes only for those children who have been removed 
from their homes and placed in foster care, since foster care is 
intended to be a temporary setting.
    Comment: We received numerous comments questioning the 
applicability of certain performance indicators to their related 
outcomes. One example cited was Well-Being Outcome #1, Families have 
enhanced capacity to provide for their children's needs. Commenters 
raised concerns that the performance indicators associated with it are 
measures of process and do not equate with enhanced capacity for 
parents.

[[Page 4041]]

    Response: For each outcome to be reviewed, we selected indicators 
that, if met, are both within the scope of the State agency's range of 
responsibilities and are likely to promote outcome achievement. Each of 
the on-site indicators includes a subset of questions and issues that 
permits reviewers to explore the indicator below the surface level. We 
believe that this type of exploration during the on-site review is 
necessary to evaluate the quality of work and the successful 
achievement of outcomes for children and families. It is unlikely that 
individual performance indicators, in isolation, can be used to 
evaluate the outcomes accurately. In combination, however, the set of 
performance indicators associated with each outcome will provide a 
balanced perspective on the outcome.
    Comment: A number of comments were received indicating concern that 
Well-Being Outcome #2, Children receive appropriate services to meet 
their educational needs, is not an outcome that can necessarily be 
achieved by the child welfare system. Other comments were received 
questioning if this outcome, as it is stated, meets the definition of 
an outcome.
    Response: The outcome delineated in Sec. 1355.34(b)(1)(iii)(B), 
addresses the responsibilities of public child welfare agencies in 
regard to the educational needs of children in their care and custody. 
Certain aspects of the educational status of children are not within 
the control of the public child welfare agency. We are reluctant to 
describe the outcome in more definitive terms and hold the State 
accountable for educational outcomes that must be addressed primarily 
through the State's educational agencies. Rather, we have proposed to 
review those responsibilities that the State child welfare agency 
legitimately has in this area: Considering and addressing educational 
needs for children in case planning; obtaining and considering 
educational records for children in its care; and, where appropriate, 
advocating for children's educational needs with the education 
authorities in the State.
    Comment: A few commenters raised concerns that length of stay in 
foster care and number of adoptions from the public child welfare 
system were not included as outcomes for the child and family services 
reviews.
    Response: We agree that it is critical to track the length of a 
child's stay in foster care and the number of adoptions from the public 
child welfare system. We have included length of stay as a statewide 
data indicator and we are addressing numbers of adoptions by looking at 
the length of time between a child's entry into foster care and a 
finalized adoption. In this manner, we capture not only the number of 
adoptions but also assess State performance in expediting this 
permanency goal.
    Comment: Commenters noted that some of the outcomes and indicators 
may not be appropriate for all types of cases in the system, 
particularly the well-being outcomes as they relate to families who are 
receiving child protective services.
    Response: We recognize that not all of the outcomes and indicators 
will be applicable to every type of case reviewed. In most areas, we 
have allowed for nonapplicability to be noted on the review instrument. 
However, we also believe that the well-being outcomes very often do 
apply to children and families who are served in their own homes, in 
addition to children placed in out-of-home care. For example, the well-
being outcomes address issues such as: A family's ability to meet a 
child's needs; educational achievements of children; and children's 
physical and mental health needs. We believe that these are concerns 
that should be addressed by child welfare systems regardless of whether 
the child is in out-of-home-care or not.
    Comment: We received many comments urging consistency between the 
outcomes used in the child and family services reviews, and those 
outcomes that will be included in the annual report to Congress on 
State performance.
    Response: We agree with the commenters that it is critical that we 
coordinate the annual report on State performance in child welfare, 
required by Section 203 of the ASFA, with the child and family services 
reviews and have taken the necessary steps to do so. Specific statewide 
data indicators, drawn from the outcome measures included in the annual 
report, in addition to the findings of the on-site review, will be used 
as the basis for determinations of substantial conformity on one 
outcome measure of safety and one of permanency. As we gain experience 
in using statewide data indicators for making determinations of 
substantial conformity, such data indicators may change. However, we 
have committed in regulation, to the extent practical and feasible, to 
keeping the data indicators used in the child and family services 
review consistent with the measures developed pursuant to section 203 
of the ASFA.

Section 1355.34(c)  Criteria Related to State Agency Capacity to 
Deliver Services Leading to Improved Outcomes for Children and Families

    This section describes criteria for seven core systemic factors 
that will be evaluated to determine the State agency's capacity to 
deliver services that improve outcomes for children and families.
    Comment: A number of comments suggested a need for greater detail 
in the regulation on how determinations of substantial conformity will 
be made for the systemic factors being reviewed.
    Response: A detailed description of the changes to the process for 
making determinations of substantial conformity can be found under the 
``Discussion of Major Changes and Provisions of the Final Rule'' 
section. We amended Sec. 1355.34(c) so that determining substantial 
conformity with the systemic factors includes a process by which the 
review team rates the State's conformity with State plan requirements, 
based on information obtained from the statewide assessment and the on-
site review. Information from BOTH the statewide assessment and the on-
site portion of the review must support a determination of substantial 
conformity. State performance will now be rated for each systemic 
factor, using a Likert-type scale, e.g., 1-4 with criteria attached to 
each rating, based on the total information obtained from a variety of 
stakeholders interviewed on-site.
    Comment: We received several comments suggesting that States found 
to be in substantial conformity on the outcomes should not be reviewed 
for conformity with the systemic factors, stating that these are 
process measures. Other comments requested deleting some of the 
systemic requirements.
    Response: The purpose of the child and family services reviews is 
to determine compliance with State plan requirements as well as the 
outcomes for children. Some requirements are related directly to 
outcomes in the areas of safety, permanency, and well-being, while 
others are related to systemic factors that States are accountable for 
implementing in return for receipt of Federal funds. We do not believe 
that a process limited to procedural requirements can assure improved 
outcomes for children and families. We do believe, however, that the 
presence of specific systemic factors is essential to assuring that 
States have the capacity to deliver services in a manner that is most 
likely to help children and families achieve desirable outcomes. We 
cannot forego the responsibility to

[[Page 4042]]

review systemic factors, and abandoning that responsibility would 
weaken the potential of the child and family service review process to 
help States identify areas where needed improvements can lead to better 
outcomes.
    Comment: We received a number of comments requesting that the child 
and family services reviews include the full range of training 
activities permitted under title IV-E, including pre-employment 
training of State staff and long-term training that permits staff to 
obtain social work degrees.
    Response: We have proposed to review staff and provider training 
according to State plan requirements in those areas, as stated in the 
NPRM. Although pre-employment and long-term staff training are 
allowable title IV-E training costs, there are no State plan 
requirements for these activities that would be subject to the child 
and family services review.
    Comment: Several commenters expressed concern that the child and 
family services review does not include the ASFA requirements.
    Response: The child and family services review does examine a 
State's compliance with several requirements of the ASFA. However, the 
rule does not specifically cite the ASFA in identifying those State 
plan requirements under review. The ASFA is not cited because it 
primarily amends the Social Security Act, which is the authorizing 
legislation for the Federal child welfare programs.
    Comment: We received a comment that the NPRM fails to recognize two 
distinct case review systems in Public Law 96-272 and ASFA and does not 
acknowledge the value of the periodic case review system in place since 
1980. The comment noted that periodic review should be recognized as 
necessary to insure safety and permanency.
    Response: This comment seems to confuse the State's periodic 
administrative or judicial review of individual cases with the Federal 
review of State plan requirements. The purpose of the child and family 
service review, in part, is to test whether a State has appropriately 
implemented the case review system required by Public Law 96-272 and 
strengthened by ASFA. We concur with the commenter that periodic 
reviews and other requirements of the case review system are critical 
protections for children and help to promote timely permanency.
    Comment: We received some comments questioning the applicability of 
the review of State plan requirements to the tribes and the Indian 
Child Welfare Act (ICWA), and whether a State's compliance with ICWA 
will be part of the review. Some commenters raised questions about how 
particular State plan requirements will be considered for tribes that 
receive their title IV-B allocations directly.
    Response: In both the statewide assessment and the on-site review 
instruments, we have included items that address how States are meeting 
ICWA requirements. Further, in the pilot reviews, we found that the 
review process helped us successfully assess whether or not the 
interaction between the State and tribes satisfied title IV-B and title 
IV-E requirements for tribal children. However, the child and family 
services reviews are not intended to review for ICWA compliance, per 
se, but to review for the effectiveness of the broad child and family 
service system relative to State plan requirements. Further, the 
reviews are based on the entire child and family service system as 
indicated by the use of AFCARS and NCANDS data as an integral part of 
the process, and assessing penalties for nonconformity on a pool of 
funds that includes both titles IV-B and IV-E. For these reasons, we 
did not tailor the CFSR specifically to examine ICWA requirements.
    Similarly, because the child and family service reviews are 
designed to review the entire system of child and family services, 
which includes both titles IV-B and IV-E, this review process is not 
designed for tribes that receive title IV-B funding only. Furthermore, 
section 1123A of the Act directed the Department to develop a review 
system for State compliance with the State plans under titles IV-B and 
IV-E of the Act. Therefore, tribes that receive title IV-B allocations 
will not be reviewed under the child and family services review 
process.

Section 1355.34(d)  Availability of Review Instruments

    This section states that copies of the review instruments will be 
made available to the State.
    Comment: We received several comments in response to our request 
for suggestions on the most effective method for keeping States updated 
on the content of the review instruments. One of the recommendations 
was to provide States with a copy of the instrument that will be used 
for the review at least six months before the review is conducted.
    Response: We appreciate the State' need to have as much advance 
exposure as possible to the most current review instruments. We 
anticipate revising the instruments as appropriate, based on lessons 
learned from ongoing reviews and from State' feedback to us. Given that 
we expect the statewide assessment process to take approximately six 
months, we easily anticipate having review instruments available to the 
State well before the on-site portion of the review is conducted. In 
addition, we plan to post the instruments on the ACF website (http://
www.acf.dhhs.gov/programs/cb/) in order to make the most current 
version of the instruments available at all times.

Section 1355.35  Program Improvement Plans

    This section pertains to the development of program improvement 
plans for States determined not to be in substantial conformity with 
State plan requirements, including the time frames for submission and 
implementation of the plans.

Section 1355.35(a)  Mandatory Program Improvement Plan

    This section describes elements of a program improvement plan for 
those States found not to be operating in substantial conformity.
    Comment: We received comments concerning Federal technical 
assistance to States upon a finding of nonconformity, ranging from a 
need to develop the capacity for technical assistance prior to 
initiating reviews to suggesting that the need for technical assistance 
is not a valid reason for delaying penalties or the frequency of 
reviews.
    Response: Section 1123A of the Act requires that States be afforded 
opportunities to correct areas of nonconformity with the use of 
technical assistance prior to having penalties withheld. While we have 
not regulated this aspect of the review process, we are committed to 
developing effective sources and means for providing technical 
assistance to States.
    Comment: We received many comments concerning possible conflicts 
between program improvement plans and requirements for State consent 
decrees. Concerns were raised that program improvement plans not be 
required to include any action steps or goals that are inconsistent 
with a State's consent decree. Some respondents also requested that the 
provisions of a State's consent decree not automatically be required to 
be included in a program improvement plan.
    Response: ACF is responsible for reviewing compliance with State 
plan requirements, and we must assure that the program improvement plan 
addresses applicable requirements. We did not include any provisions in 
the NPRM that would require States to include the provisions of consent

[[Page 4043]]

decrees into program improvement plans. We cannot assure that the 
provisions of a State's consent decree do not conflict with Federal 
requirements. It is the State' responsibility to ensure that no such 
conflict exists. We are willing to work with States to minimize such 
conflict within our statutory and regulatory mandates.
    Comment: We received a small number of comments suggesting that 
States determined not to be in substantial conformity should be 
penalized for ASFA violations immediately, rather than suspending the 
penalties pending implementation of a program improvement plan. The 
same comments suggested that the term ``program improvement plan'' 
deviates from the ``corrective action'' language of the statute and 
undermines the enforcement role of HHS.
    Response: Section 1123A(b) of the Act requires that States be 
afforded the opportunity to correct areas of noncompliance prior to 
withholding Federal funds. ASFA primarily amends sections of the Social 
Security Act to which section 1123A applies. Moreover, ASFA did not 
supercede section 1123A, nor did it amend section 1123A to require 
immediate penalties for failure to comply with the ASFA requirements.
    The use of the term ``program improvement plan'' in no way deviates 
from statutory requirements since the result is still that the State 
must correct any identified areas of nonconformity with State plan 
requirements. The term ``program improvement plan'' underscores the 
intent of the reviews to serve as a means of assisting States to help 
families and children experience improved outcomes as a result of the 
services provided by the State and funded by the State and Federal 
governments. Failure to successfully complete a program improvement 
plan will result in penalties.

Section 1355.35(b)  Voluntary Program Improvement Plan

    This section sets forth the condition, under which States found to 
be operating in substantial conformity may voluntarily develop and 
implement a program improvement plan.
    There were no comments on this section and no changes have been 
made to this section.

Section 1355.35(c)  Approval of Program Improvement Plans

    This section sets forth the approval process for the program 
improvement plan.
    Comment: With a few exceptions, most of the comments we received on 
the time frames for submitting and re-submitting program improvement 
plans following reviews encouraged us to lengthen the time frames.
    Response: We recognize that the development and revision of program 
improvement plans requires considerable effort. Given the complexity of 
the issues that will be addressed in many program improvement plans, we 
are extending the length of time for the initial submission of the 
program improvement plan by the State to ACF from 60 days to 90 days. 
We are retaining the 30-day time frame for re-submitting plans that are 
not initially approved by ACF. Given the potential consequences for 
children and families of delaying efforts to correct areas of need, we 
do not believe we can further lengthen the time frames to develop the 
plans.

Section 1355.35(d)  Duration of Program Improvement Plans

    This section sets forth the time frame for successful completion of 
provisions in a State's program improvement plan.
    Comment: We received a number of comments in favor of the two-year 
maximum time frame for implementing program improvement plans, with the 
opportunity for a one-year extension in certain circumstances. Some 
comments, however, indicated the time period was too long and should be 
shortened.
    Response: We have retained this feature in the final rule. However, 
not all program improvement plans will require two years to implement 
and the specific time frame for each State's plan will be negotiated 
and agreed upon between the State and ACF. We are aware though, from 
the complex issues being litigated or settled by a number of States on 
behalf of their child welfare systems, that some improvements will 
require extensive periods of time to implement. Systemic changes that 
lead to identifiable improvements in the outcomes for children and 
families cannot always be achieved by simply modifying a policy, 
creating new tracking procedures or implementing new standards. 
However, in consideration of the comments on this issue and those 
pertaining to Sec. 1355.36 that we strengthen the certainty of a 
penalty when a State fails to make program improvements, we are making 
the following changes in the rule for the time allotted to implement 
program improvement plans:
     ACF will require time frames for a program improvement 
plan to be consistent with the seriousness and complexity of the 
remedies required for any areas determined not in substantial 
conformity.
     We are requiring in paragraph (d)(2) that particularly 
egregious areas of nonconformity impacting the safety of children in 
the State's responsibility receive priority in both the content and 
time frames of the program improvement plans and must be satisfactorily 
addressed in less than two years.
     We are adding a requirement to paragraph (d)(3) that the 
Secretary approve any extensions of deadlines in the program 
improvement plans and any requests to extend the program improvement 
plan by a third year. The circumstances under which requests for 
extensions would be approved are expected to be very rare and will 
require compelling documentation. Requests for extensions must be 
received by ACF at least 60 days prior to the affected completion date.
     Finally, in paragraph (d)(4) we are requiring that 
monitoring of the implementation of the State' program improvement 
plans include quarterly status reports by the States to ACF, unless the 
State and ACF agree to less frequent reports. These reports will inform 
ACF of the State's progress in implementing the plan.

Section 1355.35(e)  Evaluating Program Improvement Plans.

    This section describes the joint process the State agency and ACF 
will use to evaluate the program improvement plan. This section also 
describes the frequency of evaluating progress and the terms for 
renegotiating a program improvement plan.
    No comments were received on this section. Changes were made to 
this section only to the extent necessary to keep it consistent with 
the changes made to the other sections of Sec. 1355.35.

Section 1355.35(f)  Integration of Program Improvement Plans With CFSP 
Planning.

    This section requires that elements of the program improvement plan 
be incorporated into the goals and objectives of the State's CFSP and 
annual reviews and progress reports related to the CFSP.
    No comments were received on this section and no changes have been 
made to the final rule.

Section 1355.36  Withholding Federal Funds Due to Failure To Achieve 
Substantial Conformity or Failure to Successfully Complete a Program 
Improvement Plan

    This section sets forth the penalties associated with a State's 
failure to operate a program in substantial conformity; implements the 
statutory

[[Page 4044]]

requirement to specify the methods for withholding Federal funds for 
substantial nonconformity; and describes the amount of Federal funds 
that are subject to a penalty. The suspension of withholding during the 
course of a State's program improvement plan, and termination of the 
penalty upon successful completion of the plan are also discussed.

Section 1355.36(a)  For the Purposes of This Section

    This section defines ``title IV-B funds'' and ``title IV-E funds'' 
for the purpose of this section.
    Comment: We received comments that the regulation, rather than the 
preamble, should state that the title IV-E administrative costs to 
which withholding applies does not include funds allocated for 
training.
    Response: In the proposed rule, we specified that the 
administrative costs of the foster care maintenance payments program 
are included in the pool of funds from which penalties will be 
assessed. In the final rule, rather than listing those title IV-E 
components that are excluded from the penalty pool, we have amended the 
regulatory language to more specifically identify the administrative 
costs of the foster care maintenance payments program as the source of 
title IV-E funds for the penalty pool.

Section 1355.36(b)  Determination of the Amount of Federal Funds To Be 
Withheld

    This section describes the manner in which ACF will determine the 
amount of the State title IV-B and IV-E funds to be withheld if the 
State is not operating in substantial conformity.
    Comment: We received many comments in favor of the proposal that 
funds 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 by HHS, but a few comments 
objected to this provision.
    Response: This is a statutory requirement under section 1123A of 
the Act. Therefore, we have not made changes to the final rule.
    Comment: We received comments regarding the proposed requirement 
that, upon finding that a State is not in substantial conformity, funds 
be withheld 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. The commenter requested assurance that withholding is not 
unnecessarily extended because of HHS'' lack of capacity to assess the 
completion of the plan or to conduct another review.
    Response: The rule specifies the time frames for conducting reviews 
and for the duration of program improvement plans. Adherence to those 
time frames should limit delays in determining the status of the State' 
substantial conformity. We do not believe any change to the regulation 
is necessary.
    Comment: We received many comments pertaining to the amount of the 
penalties. The comments ranged from the suggestion that the proposed 
penalties are too low to the idea that they are too high. Some 
respondents expressed concern about the cumulative effects of penalties 
for a variety of Federal reviews of child welfare programs and systems, 
and urged us to consider a consolidated penalty proposal based on a 
performance-based incentive system for child welfare or a reinvestment 
policy for nonconformity. Comments on the pool of funds from which 
penalties will be taken ranged from requests to specifically limit the 
pool to increasing it to include additional funds.
    Response: We have given serious consideration to the comments on 
the amount of the penalties and the pool from which they are to be 
taken and believe that a change is warranted. We wish to promote 
practice improvements through the review process, and do not wish to 
use the penalty process to prevent States from making the needed 
improvements. However, we must make clear that the failure to correct 
areas of nonconformity identified in the reviews will result in 
substantial financial penalties. Therefore, we have added sections 
1355.36(b)(7) and (b)(8) to provide a graduated penalty for continuous 
nonconformity.
    To strengthen our commitment to program improvement through the 
review process, we have added these sections to the final rule that 
will increase the penalty for outcomes and systemic factors that remain 
in continuous nonconformity on successive reviews. States that continue 
to remain out of substantial conformity on successive reviews can now 
be penalized up to two percent per outcome or systemic factor at the 
second full review in which the nonconformity continues, and up to 
three percent per outcome or systemic factor at the third and 
subsequent full reviews in which the nonconformity continues. We 
believe the possibility of increased withholding of funds will 
encourage States to engage in active program improvement planning and 
make efforts to resolve areas of nonconformity as early as possible.
    We believe that this revised penalty structure is in accordance 
with the Social Security Act Amendments of 1994 (Pub. L. 103-342), 
since we are making the amount of the penalty commensurate with the 
level of nonconformity and providing States an opportunity to engage in 
corrective action prior to withholding funds. We tried to establish 
penalties in amounts that create significant motivators for States to 
improve programs while not denying services to needy children that are 
critical to their safety, permanency, and well-being. We believe the 
approach contained in these final rules balances the issues in a manner 
that promotes the overall goal of program improvement in States.
    The State's entire title IV-B allocation is included in the pool 
from which penalties will be taken because we are reviewing for all the 
programs funded by title IV-B in the State. A portion of the title IV-E 
administrative funds is included in the pool from which penalties will 
be taken, since a smaller percentage of title IV-E requirements are 
reviewed in the child and family services reviews.
    In addressing the comments that advocated for funding reinvestment, 
the statute specifically mandates withholding Federal funds as 
penalties for nonconformity, rather than reinvesting. Also, the 
statutes for various programs carry penalty provisions that HHS cannot 
waive in favor of a consolidated, performance-based incentive system in 
child welfare.
    We recognize the commenter' concerns that States found to be the 
most egregious in their non-conformity, based on the child and family 
services reviews, may also be determined out of conformity in other 
reviews, e.g., title IV-E eligibility reviews and other reviews that 
cover related issues and requirements. Such States could be exposed to 
multiple penalties in a fiscal year. We strongly encourage States in 
those situations to take full advantage of the opportunities for 
technical assistance and program improvement planning in order to 
increase the effectiveness of their programs and improve the outcomes 
of children and families served by the programs.

Section 1355.36(c)  Suspension of Withholding

    This section describes the circumstances under which ACF will 
suspend the withholding of funds for those States found not to be 
operating in substantial conformance.

[[Page 4045]]

    We did not receive comments on this particular section and have 
made no changes to the regulation.

Section 1355.36(d)  Terminating the Withholding of Funds

    This section describes the circumstances under which ACF will 
terminate the withholding of State funds related to nonconformity.
    We did not receive comments on this particular section and have 
made no changes to the regulation.

Section 1355.36(e)  Withholding of Funds

    This section describes the circumstances under which ACF will 
withhold funds for those States determined not to be in substantial 
conformity.
    Comment: A number of commenters suggested that we emphasize that 
penalties will be enforced.
    Response: As we consider the amount of the penalty and the 
provisions for withholding funds due to nonconformity, we think that 
this is an area where stronger provisions are needed. We want to convey 
in the rule our sense of urgency about the need to implement needed 
improvements in child and family services and to make the application 
of penalties consistent with that sense of urgency. As a result, we 
have amended the regulatory language at Sec. 1355.36(e)(2) so that 
proposed penalties associated with a particular outcome or systemic 
area will be imposed when the State fails to come into substantial 
conformity or fails to make the necessary progress with respect to the 
statewide data indicators by the date specified in the PIP, rather than 
waiting for the completion of the entire PIP. Some problems may only 
require six months to fix, for example, while others may require the 
full two years. In this manner, if the State is required to complete an 
action step in six months, fails to do so, and the Secretary does not 
approve an extension, an immediate penalty will be assessed for that 
area of nonconformity. We also added a provision at Sec. 1355.36(e)(4) 
that applies the maximum withholding of funds of 42 percent of the pool 
to States that elect not to engage in program improvement planning or 
to otherwise correct areas determined not to be in substantial 
conformity.
    Comment: There were several alternatives suggested regarding the 
basis for computing interest on penalties and the time frame during 
which interest will accrue.
    Response: The Department has established regulations with respect 
to interest on withheld funds to which we are bound.

Section 1355.37  Opportunity for Public Inspection of Review Reports 
and Materials

    This section provides that States must make certain sources of 
information related to the child and family services reviews available 
for public inspection.
    Comment: We received several comments requesting that States be 
given flexibility in the methods of making the review reports and 
materials available for public inspection. Some commenters suggested we 
take a more prescriptive approach with respect to this issue.
    Response: Given the variance across State systems, we think it is 
important to permit States flexibility in satisfying this requirement. 
While the suggestions we received regarding ways States should 
publicize information related to the child and family services review 
were excellent, they would be more appropriately deployed through 
technical assistance efforts with States rather than requiring them 
through regulation.
    Comment: We received comments requesting that ACF provide official 
public notice of reviews in advance of the reviews.
    Response: We are considering options for implementing this 
suggestion. However, we do not believe it is an appropriate issue for 
regulation.

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

    This section implements the enforcement of section 471(a)(18) of 
the Act which specifically prohibits the denial of the opportunity to 
any person to become an adoptive or a foster parent, or the delay or 
denial of the placement of a child in an adoptive or foster family home 
on the basis of the race, color, or national origin of the child or of 
the adoptive or foster parent. In addition to the specific comments on 
Sec. 1355.38, we received a number of general comments and requests 
related to the statutory language itself at section 471(a)(18) of the 
Act.
    Many commenters requested that the final rule include a section on 
what constitutes a delay or denial of a child's adoptive or foster care 
placement and when race, color, or national origin can be used in child 
placement decisions. Several commenters also requested that the final 
rule include a discussion of good social work practice and define 
``best interest of the child'' as it relates to section 471(a)(18) of 
the Act. A large number of commenters also requested that the final 
rule include language that stated that compliance with section 
471(a)(19) (which allows the State to give preference to a relative 
over a non-related caregiver) and section 422(b)(9) (which requires the 
State to make diligent efforts to recruit potential foster and adoptive 
families that reflect the ethnic and racial diversity of children 
needing an adoptive or foster home) would not be considered a violation 
of section 471(a)(18) of the Act.
    Also, many commenters believed the tone of the section to be 
adversarial and requested that the section be revised to mirror the 
partnership approach used in the child and family services review. A 
few commenters believed the enforcement of section 471(a)(18) of the 
Act is too heavily focused on the rights of adults rather than the 
needs of the child. Additionally, a few commenters were concerned that 
vigorous enforcement of section 471(a)(18) of the Act may have a 
negative effect on the quality of services available to children.
    In contrast to these comments, one commenter voiced concern that 
Sec. 1355.38 did not adequately enforce section 471(a)(18) of the Act. 
The commenter believed that additional enforcement mechanisms and 
administrative authority should be included in the final rule.
    The regulatory language in Sec. 1355.38 closely follows the 
statutory language and represents our commitment to diligently enforce 
these provisions of law. We have made only limited revisions to this 
portion of the regulation in response to comments, as we believe that 
enforcement of section 471(a)(18) of the Act is clearly defined by the 
statute. We would like to note that the statutory language guiding this 
section is very different from that underpinning the child and family 
services reviews, and it is this distinction that accounts for the 
difference in the approaches taken.
    The request for guidance on what constitutes a delay or denial of a 
child's adoptive or foster care placement and when race, color, or 
national origin can be used in child placement decisions; a discussion 
section on good social work practice; and the inclusion of a definition 
of ``best interest of the child'' as it relates to section 471(a)(18) 
of the Act all represent practice level issues. Practice level issues 
are more appropriately addressed through technical assistance rather 
than regulation. Also, the determination of delay or denial in foster 
care or adoption is based on the facts of the specific case. Thus, we 
did not include

[[Page 4046]]

any additional guidance in the final rule.
    We also did not include qualifying statements regarding relative 
preference and/or diligent recruitment in the final rule. The 
activities regulated in this final rule are procedural directives for 
implementation of financial sanctions. Thus, we do not intend to cite 
all the activities which may or may not violate section 471(a)(18) of 
the Act. Given the number of comments received, we are providing the 
following discussion on relative preference and diligent recruitment as 
they relate to section 471(a)(18) of the Act:
     Section 471(a)(19) of the Act allows the State to give 
preference to an adult relative over a nonrelated caregiver, when 
placing a child for adoption or in foster care provided that the 
relative caregiver meets all relevant child protection standards. 
Relative preference recognizes the importance of maintaining biological 
relationships. Prioritizing biological ties is not a form of race 
preference; rather it is an acknowledgment of the significance of these 
ties. Relatives come under the same scrutiny as nonrelatives and must 
meet the same Federal title IV-E requirements to become foster and/or 
adoptive parents. In all circumstances, the best interests of the child 
must determine a placement decision. A State's appropriate use of the 
relative placement preference does not constitute a violation of 
section 471(a)(18) of the Act.
     Section 422(b)(9) of the Act requires the State to make 
diligent efforts to recruit potential foster and adoptive families that 
reflect the ethnic and racial diversity of children in the State 
needing an adoptive or foster home. Diligent recruitment activities are 
necessary to ensure that all qualified members of a community, who may 
be excluded from or reluctant to request services, have the opportunity 
to become a foster or adoptive parent. Diligent recruitment can provide 
a broad pool of placement resources for those children waiting for 
foster or adoptive homes. A State's general diligent recruitment 
activities do not constitute a violation of section 471(a)(18) of the 
Act. General diligent recruitment activities should not discriminate on 
the basis of race, color or national origin by excluding families who 
are not targeted for services and denying them the opportunity to be a 
part of the pool of available families for children of different 
backgrounds.
     The purpose of the Multiethnic Placement Act of 1994 
(MEPA) was threefold: (1) To decrease the length of time a child waits 
to be adopted; (2) to prevent discrimination in foster care and 
adoption; and (3) to promote the recruitment of ethnic and minority 
families that reflect the children in the public child welfare system. 
We do not interpret any of these purposes to be mutually exclusive. In 
the Removal of Barriers to Interethnic Adoption (IEP) provisions, which 
amended MEPA, Congress further clarified that race, color, or national 
origin should not be routinely considered in foster care and adoption 
placements. The IEP also contained enforcement provisions. The IEP did 
not change the recruitment provision contained at section 422(b)(9) of 
the Act.
    We recommend that the State or entity review Federal policy 
guidance already issued on the MEPA, as amended by IEP (found at http:/
/www.acf.dhhs.gov/programs/cb/). Additionally, both the Office of Civil 
Rights (OCR) and ACF Regional Offices stand ready to provide guidance 
to any State with a specific policy question.
    Rather than attempting to identify the multiple situations which 
may lead to a violation of section 471(a)(18) of the Act, we have found 
that providing technical assistance to specific State questions is most 
useful. Technical assistance is available through the ACF and OCR 
regional offices, as well as through the federally funded national 
resource centers. Periodically the Department will review the issues 
raised to determine the need for additional guidance.
    Specific questions and comments are addressed in the following 
paragraphs.
    Section 1355.38(a)  Determination That a Violation Has Occurred in 
the Absence of a Court Finding
    This section sets forth the requirements for determining a 
violation of section 471(a)(18) of the Act during the course of a child 
and family services review, the filing of a complaint, or some other 
mechanism.
    Comment: One commenter requested clarification of the term ``entity 
in the State'' as used in section 471(a)(18) of the Act, specifically 
if it includes private agencies. Another commenter inquired about the 
application of section 471(a)(18) of the Act to court findings and if 
ACF has the authority to sanction the court as an ``entity.''
    Response: We have added a definition for ``entity'' in Sec. 1355.20 
in response to this comment. According to the statute any entity in a 
State that receives title IV-E funds must comply with section 
471(a)(18) of the Act. We define the term ``entity'' to include private 
agencies. A State court is not an ``entity,'' for purposes of this 
provision, to the extent that it issues decisions or opinions, or 
performs other judicial functions. If, on the other hand, an 
administrative arm of a State court carries out title IV-E 
administrative functions pursuant to a contract with the State agency, 
then it is an ``entity'' for these narrow purposes. If the private 
agency, an administrative arm of the court, or any other entity is 
found not to be in compliance with section 471(a)(18) of the Act, ACF 
has the authority to collect all of the title IV-E funds received by 
the entity for the quarter the violation occurred.
    Comment: Several commenters requested that the final rule contain 
the ``HHS criteria'' that ACF will use to determine if a violation of 
section 471(a)(18) of the Act has occurred.
    Response: HHS has not developed any specific ``criteria'' for 
determining if a violation of section 471(a)(18) of the Act has 
occurred. HHS will determine on a case-by-case basis whether the State 
has delayed or denied a child's adoptive or foster care placement or 
denied a person the opportunity to become an adoptive or foster parent 
based on race, color, or national origin. It is impossible to define 
every situation and circumstance that would result in a civil rights 
violation. Thus, the regional office will review the specific facts of 
each case to determine if a State or entity is in violation of section 
471(a)(18) or if a policy or practice is consistent with previously 
issued guidance. No change has been made to the final rule as a result 
of this comment.
    Comment: One commenter requested that the final rule provide 
guidance on how a complaint from a prospective foster or adoptive 
parent who is not selected for a specific placement and is of a 
different race, color, or national origin of the child to be placed, 
will be handled (i.e., the roles of all parties involved, if the State 
will have an opportunity to respond to the allegation, etc.).
    Response: We have not defined specific procedures for the 
determination of a violation, or the procedures for handling 
allegations of a violation in regulation, as we expect that these 
determinations will be made on a case-by-case basis and rely on the 
specific facts of each situation.
    Comment: Many commenters requested that the final rule detail the 
contents of the notification letter that ACF will provide to the State 
found to be in violation of section of 471(a)(18) of the Act and 
suggested that the letter include specific information on the roles and 
responsibilities of HHS and the State.
    Response: We intend to draw on this suggestion, and others like it, 
in

[[Page 4047]]

preparing the internal agency procedures that will be used to 
investigate and respond to a violation of section 471(a)(18) of the 
Act. However, we believe this level of specificity is inappropriate for 
regulation. No change has been made to the final rule.
    Comment: Several commenters objected to the phrase `` * * * if 
applied, would likely result in a violation against a person * * * '' 
in paragraph (a)(2)(iii). The commenters stated that this ambiguous 
phrase may result in a violation being based on a hypothetical 
situation.
    Response: We concur with the commenters that the phrase `` * * * 
would likely result * * * '' may appear ambiguous. We have reworded 
paragraph (a)(2)(iii) to clarify that a violation will be based on 
policies, procedures, practices, regulations, and laws that on their 
face violate the law.

Section 1355.38(b)  Corrective Action and Penalties for Violations With 
Respect to a Person or Based on a Court Finding

    This section sets forth the requirements for corrective action and 
penalties for a violation of section 471(a)(18) of the Act with respect 
to a person or based on a court finding.
    Comment: One commenter requested that we define the term ``court 
finding,'' to clarify what court is being referred to in this section 
as it relates to the assessment of penalties for a violation of section 
471(a)(18) of the Act.
    Response: While we do not intend to define the term ``court 
finding,'' we would like to clarify that any Federal or State court's 
finding of a violation of section 471(a)(18) of the Act may result in 
the assessment of a penalty by ACF. Under the statute, an individual 
who believes that he or she has been aggrieved by a section 471(a)(18) 
violation, may bring action in the United States District Court. The 
final rule will not be this specific because the District Court finding 
can be appealed to a higher court; thus a court other than the United 
States District Court may ultimately determine that a 471(a)(18) 
violation has taken place.
    Comment: Several commenters opposed the immediate assessment of the 
penalty for a violation with respect to a person, suggesting that there 
should be an opportunity for corrective action beforehand.
    Response: We believe that the statute is clear at 474(d)(1) that 
there is to be an immediate penalty, without corrective action 
beforehand, where there is a violation with respect to a person. This 
is consistent with the Department's commitment to aggressive 
enforcement of section 471(a)(18) of the Act. Thus, no change has been 
made to the final rule as a result of these comments.
    Comment: Several commenters opposed the immediate assessment of a 
penalty for a violation based on a court finding, suggesting that ACF/
OCR investigations be the sole basis for assessing a penalty.
    Response: Section 474(d)(3) of the Act affords an individual who is 
aggrieved by a violation of section 471(a)(18) of the Act the right to 
file a lawsuit against the State or entity. In accordance with the 
statute, a violation with respect to an individual requires an 
immediate penalty if the court finds that the State has violated 
section 471(a)(18) of the Act. Thus, we do not intend to investigate a 
case where the court has already rendered a finding. If a State, an 
entity, or an individual is dissatisfied with the court's finding, the 
appropriate action of recourse is to appeal through the judicial 
system. No change has been made to the final rule as a result of these 
comments.
    Comment: Several commenters expressed concern about dual penalties 
(from both the Court and ACF) that States may incur based on a court 
finding of a violation of section 471(a)(18) of the Act.
    Response: We do not believe that dual penalties will result from 
the situation as described. The statute allows for an individual 
aggrieved by a violation of section 471(a)(18) of the Act the right to 
bring action and seek relief from the State. If the court finds that 
the individual has been aggrieved by the State, it is possible that 
monetary compensation may be awarded to the individual as relief for 
the State's action. This monetary award is not a penalty. Penalties by 
ACF are required by the statute when the State violates the law. No 
change has been made to the final rule as a result of these comments.
    Comment: A few commenters recommended that the final rule require 
the State to notify ACF of a court's finding that the State is in 
violation of section 471(a)(18) of the Act, since ACF will not be a 
party to the proceedings.
    Response: We agree with the commenter' recommendation and have 
revised the final rule to require a State found by a court to be in 
violation of section 471(a)(18) to notify ACF. A new paragraph, 
Sec. 1355.38(b)(4), requires the State to notify the appropriate ACF 
regional office of the violation within 30 days from date of entry of 
the final judgement once all appeals have been exhausted, declined, or 
the appeal period has expired.

Section 1355.38(c)  Corrective Action for Violations Resulting From a 
State's Statute, Regulation, Policy, Procedure, or Practice

    This section sets forth the requirements for corrective action when 
a State's statute, regulation, policy, procedure, or practice is found 
to be in violation of section 471(a)(18) of the Act.
    Comment: We received several comments relating to the time period 
provided for corrective action. One commenter stated that six months 
for corrective action is too short, while another commenter stated that 
six months is excessively long.
    Response: The statute specifies at 474(d)(1) of the Act, that the 
time period to implement a corrective action plan for section 
471(a)(18) of the Act must not exceed six months. We have made a change 
to the regulation to require a State to complete a corrective action 
plan within six months. All corrective action plans will not require 
six months to complete. ACF has the authority to establish a shorter 
time frame for the completion of the corrective action plan consistent 
with the seriousness, complexity, and the remedy required by the 
violation.
    Comment: Another commenter recommended that the time limit for ACF 
to approve or disapprove a State's corrective action plan be defined in 
the final rule to avoid a State's being penalized due to delayed action 
by ACF.
    Response: ACF recognizes the need for approving corrective action 
plans in a timely manner but did not include the commenter's 
recommendation in the final rule. To respond to the commenter's concern 
we have revised Sec. 1355.38(c)(1). The State will have 30 days after 
receipt of written notification of noncompliance with section 
471(a)(18) of the Act, to develop a corrective action plan and submit 
it to ACF for approval. Once the corrective action plan is approved by 
ACF, the State will have six months to complete the corrective action 
and come into compliance before a penalty is applied. The calculation 
for the six months will begin after ACF has approved the plan.
    A State's completion of a corrective action plan within the 
specified time will not, in itself, prevent the assessment of a 
penalty. The completed corrective action plan must result in the State 
coming into compliance with section 471(a)(18) of the Act to avoid 
incurring a penalty. We have revised the final rule to clarify this 
point at Sec. 1355.38(c)(1) and also at (g)(1)-(4).
    Additionally, we have revised Sec. 1355.38(c)(3) to provide the 
State with

[[Page 4048]]

an additional 30 days to revise and resubmit the corrective action plan 
in the event the State's corrective action plan is not approved by ACF. 
If the State fails to resubmit the corrective action plan within the 30 
days, a penalty will be assessed.
    Comment: One commenter was concerned that Secs. 1355.38(c)(1) and 
(g)(3) were inconsistent. The commenter believed paragraph (c)(1) 
provides a State with six months before assessing a penalty while 
paragraph (g)(3) imposes a reduction beginning with the quarter that 
the State received notification.
    Response: Paragraphs (c)(1) and (g)(3) are not inconsistent. 
Paragraph (c)(1) provides the State with six months to complete 
corrective action before a penalty is assessed. Paragraph (g)(3) 
defines the starting point for assessing the penalty in the event a 
State declines to participate in corrective action or fails to 
successfully complete the corrective action plan within six months.
    Comment: One commenter disagreed with the use of the word 
``implement,'' in original paragraph (c)(4), to mean ``begin'' and 
stated that ``implement'' means to ``complete.''
    Response: In light of the addition of up to a 60-day period for the 
State to develop the corrective action plan, we have revised the 
definition of ``implement'' in the final rule to mean ``complete.'' 
Paragraphs (c)(4) and (5) were deleted and paragraph (c)(1) now reads 
that a State in violation of section 471(a)(18) of the Act will have 
six months to complete corrective action and come into compliance once 
its plan has been approved before a penalty is assessed.
    Comment: One commenter requested that the State be allowed to make 
changes to the corrective action plan without incurring additional 
penalties.
    Response: As written, the regulation does not preclude the State 
from making changes to the corrective action plan. The changes made to 
the corrective action plan must be approved by ACF and completed within 
the original six-month time frame.

Section 1355.38(d)  Contents of a Corrective Action Plan

    This section describes the contents of a corrective action plan.
    We did not receive comments related to this section but have 
revised this section to coincide with changes made in Sec. 1355.38(c). 
Paragraph (d)(4) defines the completion date for the corrective action 
and deletes the option to extend the corrective action completion date.

Section 1355.38(e)  Evaluation of Corrective Action Plans

    This section describes the evaluative steps that ACF will take to 
review the implementation of corrective action plans submitted by 
States who have been found to be in violation of section 471(a)(18) of 
the Act.
    We received no comments related to this section but revised this 
section to coincide with changes made to Sec. 1355.38(c) and (d). This 
section now states that ACF will evaluate the corrective action plan 
within 30 days of the six-month completion date.

Section 1355.38(f)  Funds To Be Withheld

    This section defines the term ``title IV-E funds'' in the context 
of this section.
    Comment: One commenter requested clarification on the use of the 
word ``claims.''
    Response: In describing the penalty for a violation of section 
471(a)(18) of the Act, the statute at 474(d)(1) uses the phrase, 
``otherwise payable to the State under this part'' in reference to the 
amount of title IV-E funds to be reduced. We interpret this to mean the 
Federal share of allowable title IV-E costs paid or advanced to the 
State and have revised Sec. 1355.38(f) in the final rule to reflect 
this interpretation. The reader should note that it does not matter 
whether the costs are reported as a current expenditure or as an 
adjustment; all title IV-E funds expended during the quarter(s) the 
State is determined to be in violation of section 471(a)(18) of the Act 
will be subject to a penalty.

Section 1355.38(g)  Reduction of Title IV-E Funds

    This section describes the circumstances under which a State's 
title IV-E funds will be reduced by ACF due to a violation of section 
471(a)(18) of the Act.
    Comment: Several commenters expressed concern about ACF's authority 
to continue a penalty into the next fiscal year.
    Response: The regulation does not provide for a continuation of a 
penalty into the subsequent fiscal year if a State fails to come into 
compliance. ACF may and has the authority to initiate a full or partial 
review in a subsequent fiscal year for those States that are in 
violation of section 471(a)(18) of the Act and have failed to complete 
corrective action to come into compliance. Thus, any statute, 
regulation, policy, procedure or practice that remains uncorrected from 
a previous fiscal year may result in a new finding of a violation of 
noncompliance with section 471(a)(18) of the Act. We will not disregard 
an uncorrected violation simply because a fiscal year has ended. It is 
part of the Department's oversight responsibility to ensure that all 
States are in compliance with section 471(a)(18) of the Act at any 
given time and any uncorrected violation may be subject to a review at 
the beginning of a new fiscal year.
    Comment: One commenter is concerned that the use of fiscal 
sanctions for every quarter that the State has not completed a 
corrective action plan is overly harsh.
    Response: We are unable to modify the penalty structure as it is 
defined in law. The statute clearly states that penalties are to be 
applied quarterly when a State is in violation of section 471(a)(18) or 
has not successfully implemented a corrective action plan; and that the 
penalty will be applied until the State achieves compliance or until 
the end of the fiscal year.
    Comment: Several commenters requested that the final rule permit 
the suspension of the penalty while the State appeals a court finding 
of a violation of section 471(a)(18) of the Act.
    Response: We concur and have included such language in the final 
rule at paragraph (g)(6). This clarifies that penalties will not be 
imposed until a final determination regarding a violation is made 
through the judicial appeal process.

Section 1355.38(h)  Determination of the Amount of Reduction of Federal 
Funds

    This section describes the specific amount a State's title IV-E 
funds will be reduced by ACF in the event of a section 471(a)(18) 
violation and provides instructions related to interest liability.
    Comment: One commenter requested that the final rule clarify that 
the calculation of the penalty is quarterly.
    Response: We have revised paragraph (h) to clarify that the penalty 
is calculated and assessed quarterly.
    Comment: One commenter believed that five percent is the penalty 
and not a cap.
    Response: Five percent is both a penalty and a cap. The statute at 
section 474(d)(1) of the Act requires that the third or subsequent 
violation(s) in a fiscal year will result in a five percent reduction 
of title IV-E funds payable to the State in that quarter. The statute 
also sets an annual cap whereby no State's fiscal year payment will be 
reduced by more than 5 percent.
    Comment: One commenter requested clarification on the State 
agency's

[[Page 4049]]

responsibility for interest if an entity such as a private agency 
violates section 471(a)(18) of the Act.
    Response: The State agency or entity that has been found to be in 
violation is responsible for the interest. No change has been made to 
the final rule.

Section 1355.39  Administrative and Judicial Review

    This section provides States found 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, with an opportunity to 
appeal.
    Comment: One commenter recommended that the final rule provide the 
State with the right to immediately appeal a determination of 
substantial nonconformity or require ACF to provide the State with a 
detailed report of the reasons underlying the finding prior to the 
development and implementation of a program improvement plan.
    Response: A final determination regarding State nonconformity is 
not made until the State has had an opportunity for corrective action. 
Therefore, it would be premature to provide for an appeal to the DAB 
prior to that time. However, we will provide written notification, 
within 30 days following the child and family services review, that the 
State is, or is not, operating in substantial conformity. While we 
understand the commenter's desire to have a detailed report of the 
review findings, specifying the details of the notification letter is 
not appropriate for regulation. Additionally, we have designed the 
review process to be less dependent upon a lengthy report. The team 
will provide the State with verbal information on the findings of the 
review throughout the on-site review and subsequent exit conference. 
The notification letter will confirm findings of the onsite review, 
which builds on information initially reported in the State prepared 
statewide assessment, and will include sufficient information for a 
State to know where it is operating in or out of conformity. No change 
has been made to the final rule.
    Comment: One commenter recommended that the final rule require ACF 
to assume the responsibility for any costs related to the development 
and implementation of the program improvement plan in the event ACF 
determines that the State is not operating in substantial conformity 
but a subsequent DAB decision finds that the State is operating in 
substantial conformity.
    Response: We do not concur with the commenter's proposal that ACF 
should assume full costs for the program improvement plans in the event 
the DAB overturns an ACF finding of substantial nonconformity. The 
State may claim FFP for appropriate program improvement plan activities 
under title IV-E.
    Comment: One commenter stated that if private agencies are to be 
sanctioned for a violation as ``entities in the State,'' they should 
have an opportunity for appeal.
    Response: We concur with the commenter and have revised the final 
rule to allow such entities the opportunity to appeal to the DAB.

Section 1355.40  Foster Care and Adoption Data Collection

    We have made a technical amendment to conform with new Federal 
requirements related to the collection of race and ethnicity data. On 
October 30, 1997, the Office of Management and Budget (OMB) published a 
notice in the Federal Register (62 FR 58781-58790) announcing its 
decision to revise Statistical Policy Directive No. 15, The Race and 
Ethnic Standards for Federal Statistics and Administrative Reporting. 
OMB's Statistical Policy standards provide a common language to promote 
uniformity and comparability of data on race and ethnicity for the 
population groups specified in the directive. The Department is 
required to collect information in accordance with the directive's 
standards.
    The revised standards have five categories for data on race: 
American Indian or Alaska Native, Asian, Black or African American, 
Native Hawaiian or Other Pacific Islander, and White. The new standards 
allow individuals of mixed race to identify with more than one race. 
Also, OMB revised the two categories for data on ethnicity to: 
``Hispanic or Latino'' and ``Not Hispanic or Latino.'' The AFCARS 
currently collects information on the race and ethnicity of children in 
foster care and those who have been adopted, foster parents, and 
adoptive parents. However, we must change the definitions of the racial 
classifications, revise ethnicity classifications, and allow multiple-
race identification in AFCARS race data elements to comply with the OMB 
Directive. In ACYF-CB-PI-99-01 (issued January 27, 1999) we informed 
States of the required changes to the AFCARS collection of race data as 
a result of a change in OMB policy. States were directed to change race 
and ethnicity collections for the report period beginning October 1, 
1999. Since these changes are already underway in the States and a 
matter of HHS policy, we are codifying these changes as technical 
amendments in this final rule.

Section 1355.40(a)  Scope of the Data Collection System

    We removed a reference to the former protections in section 427 of 
the Act in paragraph (a)(2) and replaced it with the correct citation. 
Congress repealed section 427 of the Act with Public Law 103-432, 
effective October 1, 1997. The protections previously included in 
section 427 of the Act are now included as assurances in section 
422(b)(10) of the Act.

Appendix A to Part 1355

    In Appendix A to part 1355, Section I, we included the new race and 
ethnicity classifications consistent with OMB's Statistical Policy 
Directive Number 15. All of the foster care race elements (elements 
II.C.1, IX.C.1 and IX.C.3) are listed in the element chart 
alphabetically as they are in the directive.
    In section II to appendix A, we removed the obsolete reference to 
the section 427 protections and replaced it with the correct statutory 
reference. In Section II, II.C.1, we added new race definitions and 
made an editorial change regarding how a person's race and ethnicity is 
determined. Consistent with the OMB Directive, we make this change to 
emphasize that self-identification or self-reporting is the preferred 
method of gathering information on race or ethnicity except where this 
is not practical. Obviously, in the case of young children, racial or 
ethnic self-identification is not practical and is therefore primarily 
determined by the parent. We recommend that caseworkers ask children 
(if age appropriate) and adults to identify all the racial categories 
that apply.
    In ACYF-CB-PI-99-01 we provided policy guidance on the use of the 
category ``unable to determine'' as it applies to situations where a 
parent or other adult caretaker is unwilling to identify their race or 
that of the child. We have included that clarification in this 
regulation. If a parent or caretaker is unwilling to identify a race, 
then the State should classify the information as ``unable to 
determine,'' indicating that the State attempted to gather the 
information but was unable to do so. This will provide for better data 
as the State will not overstate the amount of missing data for this 
element and jeopardize conformity with the missing data standards. 
Finally, we amend the way that a State must code the data for the race 
categories to properly identify a single race, multiple race or 
``unable to determine'' response.

[[Page 4050]]

    We have made changes similar to those above in Section II, II.C.2, 
which define the Hispanic and Latino ethnicity classifications. In 
addition, we have deleted the last sentence of the paragraph that 
required the State to indicate that the child is not of Hispanic 
ethnicity only when the origin of the child is clear. We believe that 
this distinction is unnecessary and inconsistent with our approach to 
other regulatory definitions on race and ethnicity.
    In Section II, IX.C, we now cross-reference only the definitions of 
race and ethnicity classifications used in the section on child 
demographics (II.C). The existing regulations also cross-reference the 
definition of ``unable to determine,'' however, this definition as 
stated is not applicable to adults. For adults, the code ``f. unable to 
determine,'' must be used only in circumstances where the parent is 
unwilling to identify his or her race or ethnicity. During AFCARS pilot 
reviews, we found that States were inappropriately coding missing 
information as ``unable to determine.'' When data is missing or not 
known because the State has not asked an individual for information on 
race or ethnicity, the response must be left blank.
    Finally, in Section II, we have deleted paragraph IX.D on coding 
ethnicity data. This paragraph incorrectly cross-referenced the section 
on disabilities. We have incorporated the relevant portions of the 
instruction in paragraph IX.C.

Appendix B to Part 1355

    In appendix B to part 1355, we have made the same amendments to the 
race and ethnicity adoption data elements as those listed above for the 
foster care elements.

Appendix D to Part 1355

    In appendix D to part 1355, we amended the race and ethnicity 
elements in the foster care and adoption record layouts consistent with 
the OMB directive. We amended the coding notes that precede each record 
layout table to clarify that the race classifications are now elements 
where more than one response is allowed.
    We also made a technical change to the foster care and adoption 
record layouts to accommodate the year 2000 century date change. Prior 
to October 1996, States were required by regulation to report date 
information in decade format. In response to the year 2000 and the data 
issues associated with the processing of date information, we issued an 
information memorandum, ACYF-IM-CB-96-08 (April 17, 1996), requiring 
States to report in century date format. We are now making the 
requisite technical change to the regulation.
Appendix E to Part 1355
    In appendix E to part 1355, we made several technical edits to 
replace all references to ``Hispanic origin'' with ``Hispanic or Latino 
ethnicity'' in order to be consistent with the OMB directive (see 
element charts and Section B.2.a.(8)). In section A.2.a.(18) for foster 
care and section B.2.a.(9) for adoption, we have added an internal 
consistency validation for race elements. Internal consistency 
validations evaluate the logical relationship between data elements in 
a record. We also revised cross-references to the internal consistency 
checks throughout the Appendix to accommodate the addition.

Part 1356--Requirements Applicable to Title IV-E

Section 1356.20  State Plan Document and Submission Requirements

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

    This section implements the authority of ACF Regional HUB Directors 
and Administrators and the Commissioner of ACYF to approve State plans 
and amendments that govern State programs under section 471 of the Act.
    No comments were received on this section and no changes were made 
in the final rule.

Section 1356.21  Foster Care Maintenance Payments Program 
Implementation Requirements

    In this section, we clarified existing policies and set forth 
additional foster care maintenance requirements which have a direct 
impact on determining the eligibility of children in the title IV-E 
foster care program.
    Comment: A few commenters were concerned that Sec. 1356.21 of the 
regulation was not sensitive to and appeared inconsistent with the 
Indian Child Welfare Act (ICWA).
    Response: The purpose of the regulation is to implement the title 
IV-E foster care program, not the requirements of the ICWA. We want to 
be clear that nothing in these regulations supersedes the requirements 
of the Indian Child Welfare Act. States must continue to comply fully 
with ICWA.
    Comment: We received a large number of general comments expressing 
disappointment that following the outcome orientation of the child and 
family services review that Sec. 1356.21 of the regulation reverts to a 
process orientation.
    Response: We agree, this section of the regulation is process-
oriented. The purpose of this section is to regulate title IV-E 
eligibility criteria and procedural requirements, which are inherently 
process-oriented.
    Comment: One commenter suggested we provide language throughout 
this section that distinguishes title IV-E eligibility criteria from 
State plan requirements.
    Response: Title IV-E eligibility criteria are distinguished from 
State plan requirements in Sec. 1356.21. We have amended 
Sec. 1356.71(f) and (g) to clearly enumerate the title IV-E eligibility 
criteria. However, we agree that we may have caused some confusion by 
addressing a particular State plan requirement in the reasonable 
efforts section relating to permanency hearings that must be held 
within 30 days of a judicial determination that reasonable efforts to 
reunify a child and family are not required. Also, the leading 
sentences to Sec. 1356.21(h) suggest that the permanency hearing is an 
eligibility criterion. We have deleted language that could cause any 
confusion between title IV-E eligibility criteria and State plan 
requirements.
    Comment: Some commenters recommended that the regulations include a 
new section that describes tribal authority and responsibilities in 
satisfying title IV-E requirements when tribes and States enter into 
title IV-E agreements. One commenter also requested that the suggested 
section include a provision that permits the Secretary to waive title 
IV-E provisions with respect to any title IV-E agreement between an 
Indian tribe and a State. The commenter believed such a provision would 
make it easier for State-tribal agreements to be established.
    Response: The regulations are written from the perspective of the 
State agency because the statute makes the State child welfare agency 
ultimately responsible for the proper administration of the title IV-E 
program. Section 472(a)(2) of the Act permits other public agencies to 
have responsibility for placement and care of children in foster care 
under an agreement with the State child welfare agency. The State and 
the public entity with which it is entering into an agreement, whether 
it is a tribe, juvenile justice agency, etc., must determine between 
themselves how roles and responsibilities for meeting title IV-E 
requirements will be shared. The requirements of the title IV-E program 
do not, and cannot, change merely because a public entity other than 
the

[[Page 4051]]

State child welfare agency has responsibility for placement and care of 
certain children in foster care. Tribes and other public entities with 
which the State agency has entered into agreements do, however, have 
the latitude to develop their own procedures for satisfying title IV-E 
requirements as long as the State child welfare agency's ultimate 
responsibility for compliance is assured. We have not made any changes 
to the regulation based on these comments.

Section 1356.21(a)  Statutory and Regulatory Requirements of the 
Federal Foster Care Program

    This section introduces the title IV-E implementation requirements 
for eligibility of Federal financial participation (FFP) under the 
title IV-E foster care program.
    Comment: One commenter observed that Secs. 1356.22 and 1356.30 
should be included in the references in this paragraph.
    Response: We concur and have amended the paragraph accordingly.

Section 1356.21(b)  Reasonable Efforts

    This section sets forth the ASFA requirement that the State hold 
the child's health and safety as its paramount concern when making 
reasonable efforts.
    Comment: We received several suggestions to include, in the 
regulation, the preamble language at page 50073 of the NPRM which 
describes the threefold purpose of the reasonable efforts requirements. 
The basis for this suggestion was a concern that the focus of the 
regulation was on the steps the State agency must take in order to 
access Federal funds rather than the intent of the statute. The 
commenters believe the inclusion of this language in the regulation 
will provide an outcome oriented balance to the process orientation of 
this section of the regulation.
    Response: We concur and have amended Sec. 1356.21(b) accordingly.
    Comment: Many commenters requested that we delete the preamble 
language at page 50073 of the NPRM that provides examples of questions 
the courts should consider in determining whether the agency satisfied 
the reasonable efforts requirements. These commenters are concerned 
that examples provided in regulation or policy guidance become de facto 
policy. Conversely, we received many comments not only supporting the 
list in question, but encouraging us to include it in the text of the 
regulation and expand it to include more guidance on reasonable efforts 
to make and finalize permanent placements.
    Response: We intend for examples to set parameters for the 
appropriate use of the flexibility that is inherent in some title IV-E 
provisions. We believe the examples will be helpful to State child 
welfare agencies in preparing for hearings at which reasonable efforts 
determinations are to be made. We do, however, think the list is more 
appropriate as policy guidance rather than regulatory text and 
therefore, did not change the regulation to include the examples.
    Comment: One commenter suggested that we include regulatory 
language which places the burden of proof in satisfying the reasonable 
efforts requirements on the State agency.
    Response: We believe that the very nature of the reasonable efforts 
determination indicates the burden of proof is on the State agency. 
Section 472(a)(1) of the Act requires that the court determine whether 
the State agency made reasonable efforts in accordance with section 
471(a)(15) of the Act. We believe that the suggested change is 
unnecessary, therefore, and have made no changes to the regulation.
    Comment: We received a few comments suggesting that we have no 
statutory basis for requiring a judicial determination that the State 
made reasonable efforts to prevent the child's removal from his/her 
home, to reunify the child and family, and to make and finalize an 
alternate permanent placement when the child and family cannot be 
reunited. We also received several comments supporting the requirement 
for three separate reasonable efforts determinations but questioning 
our authority to link title IV-E funding to such determinations.
    Response: The judicial determinations are based in the statute. 
Section 472(a)(1) of the Act contains two eligibility criteria. The 
first pertains to the child's removal from home. Such removal must be 
based on a voluntary placement agreement or a judicial determination 
that it was contrary to the child's welfare to remain at home. The 
second eligibility criterion requires a judicial determination that the 
State made reasonable efforts of the type described in section 
471(a)(15) of the Act. Section 471(a)(15) of the Act requires the State 
agency to make reasonable efforts to prevent the child's removal from 
his/her home, to reunify the child and family, and to make and finalize 
an alternate permanent placement when the child and family cannot be 
reunited. The requirements for judicial determinations regarding 
reasonable efforts are title IV-E eligibility criteria. If the 
eligibility criteria are not satisfied, the child is not eligible for 
title IV-E funding.
    Comment: One commenter suggested we permit a 60-day extension to 
the time frames prescribed in the regulation for obtaining judicial 
determinations regarding reasonable efforts to address the problem of 
continuances.
    Response: We are sympathetic to the issue of continuances. However, 
we believe that the need for timely judicial determinations is more 
appropriately addressed by building capacity through training judges 
and attorneys rather than extending the time frames for satisfying 
title IV-E eligibility criteria. Therefore, we have not modified the 
regulation in response to this comment.
    Comment: We received a few comments observing that a sentence in 
the preamble for this section mistakenly read, ``Congress provided a 
list of circumstances in which reasonable efforts are required.''
    Response: Yes, this was a misprint. The sentence should have read, 
``Congress provided a list of circumstances in which reasonable efforts 
are not required (emphasis added).''

Section 1356.21(b)(1)  Judicial Determination of Reasonable Efforts To 
Prevent a Child's Removal From the Home

    This section sets forth the statutory requirement of a judicial 
determination that reasonable efforts were made to prevent removal of a 
child from his or her home.
    Comment: Numerous commenters informed us that the distinction we 
made between emergency and non-emergency removals was not reflective of 
State practice.
    Response: We concur that the distinction was not useful. We have 
removed the distinction and consolidated the requirements for 
reasonable efforts to prevent removals into a single paragraph, (b)(1). 
States will now have up to 60 days from the time a child is removed 
from the home to obtain a judicial determination regarding reasonable 
efforts to prevent removal.
    Comment: We received an overwhelming number of comments on the 
timing prescribed for obtaining judicial determinations that the State 
made reasonable efforts to prevent removals. The proposed language 
required such determinations to be made ``* * * at the first full 
hearing pertaining to the removal of the child or no later than 60 days 
after a child has been removed from home, whichever is first.'' 
Commenters interpreted this

[[Page 4052]]

language to preclude such determinations from being made at an earlier 
time, thus delaying title IV-E eligibility.
    Response: We did not intend to prohibit these determinations from 
being made at an earlier time and we have amended the regulation 
language in paragraph (b)(1)(i) accordingly. The rule now requires the 
State agency to obtain a judicial determination that it either made or 
was not required to make reasonable efforts to prevent a child's 
removal from home no later than 60 days from the date the child was 
removed from the home.
    Comment: Many commenters believed that we were overly harsh in 
prohibiting title IV-E eligibility for an entire foster care episode if 
the reasonable efforts to prevent removal requirements were not 
satisfied. Some suggested that the State be permitted to establish the 
child's eligibility when and if this requirement is met at a later 
date.
    Response: The requirement for the State to make reasonable efforts 
to prevent removals is a fundamental protection under the Act and one 
of several title IV-E eligibility criteria used in establishing 
eligibility. From both a practice and an eligibility perspective, it is 
impossible for the State to provide efforts to prevent the removal of a 
child from home after the fact.
    In terms of practice, there is a profound effect on the child and 
family once a child is removed from home, even for a short time, that 
cannot be undone. If the child is returned after services have been 
delivered, or even immediately, the State has reunified the family, not 
prevented a removal.
    The statute requires that title IV-E eligibility be established at 
the time of a removal. If the State does not make reasonable efforts to 
prevent a removal or fails to obtain a judicial determination with 
respect to such efforts, the child can never become eligible for title 
IV-E funding for that entire foster care episode because there is no 
opportunity to establish eligibility at a later date. Once title IV-E 
eligibility is initially established, the judicial determination 
regarding the reasonable efforts the State made to finalize a 
permanency plan is required to maintain title IV-E eligibility.
    Comment: A couple of commenters stated that it was impossible to 
satisfy the proposed requirements for making reasonable efforts to 
prevent removals for unaccompanied refugee minors.
    Response: We have no authority to waive title IV-E eligibility 
requirements for any child or group of children. If the State wishes to 
claim title IV-E funds for unaccompanied refugee minors, then all title 
IV-E eligibility criteria must be satisfied.

Section 1356.21(b)(2)  Judicial Determination of Reasonable Efforts to 
Finalize a Permanency Plan

    This section (formerly Sec. 1356.21(b)(3) and (b)(4) of the NPRM) 
describes the requirements for obtaining a judicial determination to 
finalize a permanency plan.
    Comment: Most commenters expressed confusion regarding when the 
``clock'' starts for obtaining judicial determinations that the State 
made reasonable efforts to reunify the child and family or to make and 
finalize an alternate permanency plan. A few commenters observed that 
often the permanency plan may change from reunification to an alternate 
permanency plan prior to the State obtaining a judicial determination 
regarding its efforts to reunify the child and family. These commenters 
requested clarification about which permanency plan the court must rely 
on to make its determination in such situations. A couple of commenters 
suggested that we not permit States to change the permanency plan 
outside a permanency hearing or without a court order so that the court 
has an opportunity to determine if the State agency did make reasonable 
efforts to reunify the child and family before sanctioning the change 
in the permanency plan.
    Response: After reviewing the comments and the proposed 
requirements, we determined that our proposal in the NPRM with respect 
to reasonable efforts to reunify a child and family and to make and 
finalize alternate permanency plans was confusing and not responsive to 
actual practice. To simplify the requirements, we have consolidated the 
reasonable efforts requirements regarding efforts to reunify the child 
and family and to make and finalize alternate permanent placements into 
a single requirement related to making reasonable efforts to finalize a 
permanency plan. In new paragraph (b)(2), we require the State to 
obtain a judicial determination that it made reasonable efforts to 
finalize the permanency plan that is in effect, regardless of what it 
is, within 12 months of the date the child is considered to have 
entered foster care in accordance with the definition of such at 
Sec. 1355.20. The State must obtain such a determination every 12 
months thereafter while the child is in foster care. Our purpose in 
imposing this policy, as stated in the NPRM, is to tie the timing for 
obtaining reasonable efforts determinations regarding permanency to the 
timing of the permanency hearing because it is a logical determination 
to make at such hearings and it would ease administrative burden.
    In determining whether the State made reasonable efforts to 
finalize a permanency plan, the court's determination should be based 
on the permanency plan that is in effect at the time at which the 
agency is seeking such a determination. We are not requiring the State 
to obtain judicial determinations on its efforts regarding permanency 
plans that it has abandoned.
    We realize that obtaining reasonable efforts determinations 
regarding finalizing permanency plans every 12 months while a child is 
in foster care is a significant departure from current practice and 
that States will need transition time to implement this requirement for 
children who have been in foster care for more than 12 months. 
Therefore, we will not take adverse action against States who cannot 
comply with this requirement for a period of 12 months from the 
effective date of this final rule.
    Finally, we think it appropriate to permit the State agency to 
alter the permanency plan outside a permanency hearing and will not 
require the court to approve such a plan before the State agency can 
act on it. When a State agency has placement and care responsibility 
for a child, it is responsible for setting and acting on the 
appropriate permanency plan. We understand that, in some States, courts 
provide such active oversight during the course of a permanency hearing 
that the court actually sets the permanency plan. That is the State's 
prerogative. Federal law does not require the courts to play such a 
prescriptive role in the permanency planning process. Section 475(5)(C) 
of the Act requires the court to review the permanency plan presented 
to it by the State agency.
    Comment: We received several comments objecting to the proposal 
that children, for whom judicial determinations are not made regarding 
reasonable efforts to reunify and to make and finalize alternate 
permanency plans, become ineligible for title IV-E funding until such a 
determination is made.
    Response: We did not amend the regulation based on these comments 
because the requirements for judicial determinations are statutory. To 
be eligible for title IV-E funding, section 472(a)(1) of the Act 
requires the State to obtain a judicial determination regarding its 
reasonable efforts of the type described in section 471(a)(15) of

[[Page 4053]]

the Act. Section 471(a)(15) of the Act, among other things, requires 
the State to make reasonable efforts to finalize permanency plans. If 
these criteria are not satisfied, the child is ineligible for title IV-
E funding.
    Comment: We received a number of comments opposing the requirement 
that judicial determinations regarding reasonable efforts to finalize 
permanency plans be made at least every 12 months. These commenters 
suggested that such determinations should be required every six months 
to be consistent with the ASFA's focus on expedited permanency.
    Response: We agree that six-month intervals for making 
determinations regarding reasonable efforts to effect a permanency plan 
may provide an incentive for expediting permanency. However, requiring 
such judicial determinations to be made at the interval suggested would 
limit the flexibility provided at section 475(5)(B) of the Act for 
holding the periodic reviews required therein before an administrative 
body rather than a court. We cannot justify a requirement that would 
limit flexibility provided by the statute, particularly since we know 
it would place a significant burden on the courts and State agencies. 
Therefore, we have made no changes to the regulation.
    We believe that the six-month periodic reviews will encourage a 
timely permanency planning process. These reviews must determine, in 
part: ``the continuing necessity for and appropriateness of the 
placement, the extent of compliance with the case plan * * * and to 
project a likely date by which the child may be returned to and safely 
maintained in the home or placed for adoption or legal guardianship.'' 
Thus, the statute already compels States to review reasonable efforts 
to achieve permanency every six months.
    Comment: One commenter requested that we amend the regulatory 
language to ensure that courts oversee reunification efforts between 
unaccompanied refugee children and the party designated as the child's 
permanent placement.
    Response: The courts oversee the State agency's efforts to finalize 
permanency plans, regardless of what the permanency plan is or with 
whom the child is to be placed. Therefore, we do not believe we must 
regulate such an assurance for a particular group of children in foster 
care.
Section 1356.21(b)(3)  Circumstances in Which Reasonable Efforts Are 
Not Required to Prevent a Child's Removal From Home or to Reunify the 
Child and Family
    This section (formerly Sec. 1356.21(b)(5) in the NPRM) describes 
the circumstances in which reasonable efforts to prevent a removal or 
to reunify a child with his or her family are not required.
    Comment: Many commenters requested additional guidance in defining 
aggravated circumstances in which reasonable efforts are not required. 
The majority of commenters supported State autonomy in identifying 
those aggravated circumstances but wanted further guidance or 
clarification.
    Response: Congress provided specific examples of aggravated 
circumstances in the statute which we have included in the regulation. 
Section 471(a)(15)(D)(i) of the Act requires the State to define, in 
law, those aggravated circumstances in which reasonable efforts are not 
required. We believe that the State legislative process will produce 
decisions that are based on public debate, consideration, and broad 
input from all interested and relevant parties. We strongly believe 
that providing Federal guidance beyond what is included in the statute 
is inconsistent with the intent of the statute to provide States with 
maximum flexibility in this area.
    Comment: Several commenters urged us to permit the court to 
determine that reasonable efforts are not required in circumstances 
other than those enumerated at section 471(a)(15)(D) of the Act when 
the State agency provides evidence to that effect. These commenters 
believe that the interpretation that they are requesting is consistent 
with the Rule of Construction at section 478 of the Act. Many 
commenters made this suggestion because they were uncomfortable with 
the preamble discussion which submits that an assessment of the family 
that indicates that the child is not safe in the home would satisfy the 
reasonable efforts requirements.
    Response: We understand the commenter' concern; however, the 
statute specifically enumerates those circumstances in which reasonable 
efforts are not required. Section 478 of the Act clarifies that the 
State court continues to have discretion when making judgements about 
the health and safety of the child. However, it does not grant ACF the 
authority to add or change the list at section 471(a)(15)(D) of the 
Act. As written, the statute requires the State to make reasonable 
efforts in all cases unless one of the circumstances at section 
471(a)(15)(D) of the Act exists.
    The aforementioned interpretation of the statute should not be 
construed to support unwarranted attempts to preserve families. Rather, 
when reasonable efforts are required, the State agency and the courts 
must determine the level of effort that is reasonable, based on safety 
considerations and the circumstances of the family. Sometimes, based on 
its assessment of a family, the State agency determines that it is 
reasonable to make no effort to maintain the child in the home or to 
reunify the child and family. In such circumstances, if the court 
determines that the agency's assessment of the family is accurate and 
its actions were appropriate, the court should find that the agency's 
efforts in such cases were reasonable, not that reasonable efforts were 
not required.
    Comment: One commenter recommended that we permit Indian tribes to 
identify in tribal code those aggravated circumstances in which 
reasonable efforts are not required in accordance with section 
471(a)(15)(D)(i) of the Act.
    Response: When entering into a title IV-E agreement with a State, 
the tribe must adhere to the list of aggravated circumstances defined 
in State law. The statute at section 471(a)(15)(D)(i) specifically 
requires that the aggravated circumstances in which reasonable efforts 
are not required be defined in State law. Moreover, other public 
agencies and tribes that enter into agreements with the State agency 
are not operating or developing their own title IV-E program separate 
and apart from that operated under the State plan. Rather, the agency 
or tribe is agreeing to operate the title IV-E program established 
under the State plan for a specific population of children in foster 
care. Therefore, the other public agency or tribe is bound by any State 
statute related to the operation of the title IV-E program. We expect 
the State child welfare agency to engage the tribes, and any other 
agency with which it has title IV-E agreements, in developing its list 
of aggravated circumstances.
    Comment: In the preamble to proposed Sec. 1356.21(b)(5), we 
explained that a court determination that reasonable efforts to prevent 
a child's removal were not required did not remove the State's 
obligation to make reasonable efforts to reunify the child and family. 
Only a judicial determination that reasonable efforts to reunify the 
child and family are not required removes that obligation. Several 
commenters requested that we

[[Page 4054]]

eliminate this requirement because they believe it to be unduly 
burdensome.
    Response: We believe that States will frequently encounter 
circumstances in which they are exempt from making efforts to prevent a 
child's removal from the home but it is appropriate to make reasonable 
efforts to reunify the child and family. We think the policy described 
in the comment above ensures that decision making is based on the 
individual circumstances of the child and family rather than blanket 
exceptions. Moreover, the statute supports such an interpretation. 
Section 471(a)(15)(D) of the Act enumerates circumstances in which 
reasonable efforts of the type described at section 471(a)(15)(B) of 
the Act are not required. Two distinct types of reasonable efforts are 
described at section 471(a)(15)(B) of the Act: to prevent removals; and 
to reunify children and their families. Therefore, a judicial 
determination exempting the State from providing each type of 
reasonable effort must be made. We have retained this requirement.
    Comment: A couple of commenters requested that we clarify that we 
are not prescribing the timing for judicial determinations that 
reasonable efforts are not required to reunify the family.
    Response: The commenters are correct that we are not prescribing 
the time frame for judicial determinations that reasonable efforts to 
reunify the child and family are not required. We do not think it is 
appropriate to prescribe a time frame for obtaining such a 
determination and have made this clarification in paragraph (b)(3). 
However, all judicial determinations with respect to reasonable efforts 
to prevent removals, even determinations that such efforts are not 
required, must be obtained within the time frame prescribed in 
paragraph (b)(1), within 60 days of the date the child is removed from 
the home.
    Comment: We received a number of comments regarding the list of 
felonies at Sec. 1356.21(b)(5) used to identify when reasonable efforts 
are not required. The comments included requests for clarification 
regarding whether a criminal conviction is required, support for 
requiring a criminal conviction, and opposition to requiring a criminal 
conviction.
    Response: We have amended Sec. 1356.21(b)(3)(ii) to clarify that a 
parent must be convicted of one of the felonies enumerated before the 
court can determine that reasonable efforts are not required. (We have 
similarly amended language in Sec. 1356.21(i)(1)(iii) which requires 
TPR when a parent is convicted of one of the enumerated felonies). The 
statutory language specifically calls for a court of competent 
jurisdiction to find that one of the felonies was committed. In our 
opinion, this language requires a criminal conviction. As we stated in 
the NPRM, however, in circumstances in which the criminal proceedings 
have not been completed or are under appeal, the court that hears child 
welfare dependency cases determines whether it is reasonable to attempt 
to reunify the child with his/her parent. It is important for this 
decision to be based on the developmental needs of the child and the 
length of time associated with completion of the criminal proceedings 
or the appeals process.

Section 1356.21(b)(4)  Concurrent Planning

    This section (formerly Sec. 1356.21(b)(6) in the NPRM) implements 
the statutory provision which provides States the option of using 
concurrent planning.
    Comment: One commenter suggested that we require an assessment of 
every family to determine the appropriateness of concurrent planning 
before the State implements it for that family.
    Response: We agree that the commenter's suggestion is consistent 
with good practice. However, it would be overly prescriptive to include 
such a requirement in regulation since concurrent planning is an option 
for the State, and not a mandate.
    Comment: One commenter encouraged us to prohibit States from using 
concurrent planning for unaccompanied refugee minors.
    Response: The choice to engage in concurrent planning is optional 
and should be made on a case-by-case basis. We see no reason to 
prohibit the use of this technique for a particular group of children 
in foster care.
    Comment: One commenter asked if the State must present the 
concurrent plan to the court and if the court must make a reasonable 
efforts determination with respect to the concurrent plan.
    Response: The answer to both questions is no. The State is not 
required to present the plan for the purposes of obtaining a reasonable 
efforts determination by the court. The concurrent planning option is 
addressed in the reasonable efforts section because, among other 
things, that section of the regulation addresses permanency planning 
activities, of which concurrent planning is one.
    Comment: One commenter suggested we broaden the concurrent planning 
language in the regulation to include all types of permanency plans. As 
presented in the NPRM, we only address concurrent planning with respect 
to reunification and adoption. The commenter thinks the regulation 
should clarify that concurrent planning may be used regardless of what 
the alternate permanency plan is.
    Response: We agree and have amended the language in paragraph 
(b)(4) accordingly.

Section 1356.21(b)(5)   Use of the Federal Parent Locator Service

    This section (formerly Sec. 1356.21(b)(7) in the NPRM) provides for 
the use of the Federal Parent Locator Service (FPLS) to search for 
absent parents in order to expedite permanency for children.
    Comment: A number of commenters suggested we provide guidance 
regarding the timing for use of the Federal Parent Locator Service. 
Comments ranged from suggesting that we encourage States to locate 
absent parents and/or putative fathers as soon as possible to requiring 
that such searches take place within 30 days of the child entering 
foster care.
    Response: While we agree with the idea that searches for absent 
parents should be conducted as soon as possible after a child enters 
care, we do not think it is appropriate to include such practice level 
guidance in regulation. We have, however, made an editorial change in 
paragraph (b)(5) to note that we are not restricting when a State can 
seek the services of the FPLS.

Section 1356.21(c)  Contrary to the Welfare Determination

    This section sets forth the requirements that there be a judicial 
determination stating that remaining in the home would be contrary to 
the child's welfare.
    Comment: We received numerous comments regarding the distinction in 
the NPRM between emergency and non-emergency removals. The comments 
were similar to those we received regarding reasonable efforts to 
prevent removals; that the distinction is not consistent with actual 
practice in many States.
    Response: We concur and have removed the distinction between 
emergency and non-emergency removals in the final rule. Now a State 
will need to obtain a contrary to the welfare determination in the 
first court order removing the child from the home, regardless of 
whether there is an emergency or non-emergency situation.
    Comment: Commenters overwhelmingly opposed our proposed requirement 
that contrary to the welfare determinations be made at the first 
hearing pertaining to the child's removal from home. The commenters 
said we were inappropriately overturning policy established by the

[[Page 4055]]

Departmental Appeals Board (DAB) decision #1508, which permitted States 
up to six months to obtain a contrary to the welfare determination.
    Response: We recognize that some States may have made changes to 
their contrary to the welfare policies based on this DAB decision. 
However, at the time that the DAB made that ruling, the Department did 
not have regulations addressing the timing of contrary to the welfare 
determinations. Therefore, we are now taking this opportunity to 
clarify in regulation our policy on this issue. Our reasons for 
establishing this policy are set forth below:
    The contrary to the welfare determination was the first of the 
existing protections afforded to children and their families by the 
Federal foster care program and has been in effect since the inception 
of the program in 1961 when it was operated under title IV-A. The 
statute then, and now, recognizes the severity of removing a child, 
even temporarily, from home. This protection is in place because 
Congress believed that judicial oversight would prevent unnecessary 
removals and act as a safeguard against potential inappropriate agency 
action. This policy is consistent with Congressional intent and stands 
as proposed in the NPRM. The contrary to the welfare determination must 
be made in the first court order sanctioning the removal of the child 
from home, as is explicitly required at section 472(a)(1) of the Act.
    Comment: Several commenters requested that we clarify that we did 
not intend to consider an emergency order (sometimes referred to as a 
``pick-up order'' or ``ex-parte order'') as the first court ruling for 
the purpose of meeting the contrary to the welfare requirements.
    Response: We did not make any distinction about the type of order 
in which the contrary to the welfare determination is required. We mean 
the very first court order pertaining to the child's removal from home. 
If the emergency order is the first order pertaining to a child's 
removal from home, then the contrary to the welfare determination must 
be made in that order to establish title IV-E eligibility. We 
understand that some States must change their practices and even State 
statutes to meet this requirement. The critical nature of this 
protection requires us to maintain this policy.
    Comment: One commenter suggested we eliminate the contrary to the 
welfare requirement because it provides an incentive for workers not to 
remove children from their homes.
    Response: The contrary to the welfare determination is a statutory 
requirement and a critical protection that must be afforded to all 
children and their families to assure that unnecessary removals are 
minimized. We have, therefore, made no change to the regulation.
    Comment: A few commenters opposed the policy to make children for 
whom the contrary to the welfare requirements are not satisfied 
ineligible for title IV-E funding. Commenters thought we were 
particularly harsh in making the child ineligible for that entire 
foster care episode.
    Response: Consistent with the reasonable efforts to prevent 
removals requirements, the contrary to the welfare determination is a 
critical statutory protection and a criterion for establishing title 
IV-E eligibility. Once a child is removed from home, the State cannot 
go back and fix an inappropriate removal. If a child's removal from 
home is not based on a judicial determination that it was contrary to 
the child's welfare to remain in the home, the child is ineligible for 
title IV-E funding for the entire foster care episode subsequent to 
that removal because there is no opportunity to satisfy this 
eligibility criterion at a later date. The same does not hold true for 
all other eligibility criteria. For example, judicial determinations 
regarding reasonable efforts to finalize a permanency plan, placement 
in a licensed foster family home or child care institution, and State 
agency responsibility for placement and care are all title IV-E 
eligibility criteria that can be reestablished if lost or established 
at a later time if missing at the beginning of a foster care episode. 
This is not the case with the contrary to the welfare determination.
    Comment: A number of commenters pointed out a technical discrepancy 
between the contrary to the welfare and reasonable efforts to prevent 
removals requirements regarding the consequence for not meeting these 
requirements. In the NPRM, we stated that, if the reasonable efforts to 
prevent removals requirements are not met, the child is ineligible for 
title IV-E funding for the remainder of ``that stay'' in foster care. 
The language for the contrary to the welfare determination states that 
the child is not eligible for the duration of ``his/her'' stay in 
foster care. The commenters are concerned that the language for the 
contrary to the welfare requirements could be construed to mean the 
child is never eligible for title IV-E funding again.
    Response: We have amended the language at Sec. 1356.21(c) so that 
it is consistent with that at Sec. 1356.21(b)(1). If the contrary to 
the welfare requirements are not satisfied, the child is not eligible 
for title IV-E funding for the remainder of that stay in foster care.
    Comment: One commenter suggested that unaccompanied refugee minors 
be exempt from the contrary to the welfare requirements.
    Response: We have no authority to waive or exempt any group of 
children in foster care from this provision. It is a title IV-E 
eligibility criterion that must be satisfied if a State claims title 
IV-E funding for a child.
    Comment: A few commenters requested that we accept a judicial 
determination that the removal of the child from the home was in the 
best interests of society in satisfying the contrary to the welfare 
requirements.
    Response: This suggestion would not comport with the law or the 
intent of the title IV-E foster care program. The statute is clear that 
for title IV-E purposes a removal from the home must be based on a 
determination that remaining in the home would be contrary to the 
child's welfare. We have clarified this requirement previously in ACYF-
PIQ-91-03 which states that, ``* * * if the court order indicates only 
that the child is a threat to the community, such language would not 
satisfy the requirement for a determination that continuation in the 
home would be contrary to the child's welfare * * *''. We find no basis 
to overturn this policy as it is intended to ensure that children are 
not unnecessarily removed from their homes and is based on the child's 
best interests.
Section 1356.21(d)  Documentation of Judicial Determinations
    This section establishes the documentation requirements for the 
reasonable efforts and contrary to the welfare determinations.
    Comment: Many commenters wrote in support of our proposed policy of 
requiring judicial determinations to be explicit, made on a case-by-
case basis, and so stated in the court order. Others felt that we were 
being overly prescriptive in this section. Those commenters expressed 
concern that this requirement prohibits the use of preprinted forms 
that include checklists for making the necessary judicial 
determinations. A few suggested that we permit the court order to 
reference the facts in a court report, related psychiatric or psycho-
social report, or sustained petition to demonstrate that the 
determination was based on the individual circumstances of that case. A 
few commenters even suggested that we delete the paragraph in its 
entirety.
    Response: In keeping with the supportive comments we received on

[[Page 4056]]

the need for individualized judicial determinations, we have not made 
changes in this section, but would like to clarify our reasons for the 
policy. Our purpose for proposing this policy can be found in the 
legislative history of the Federal foster care program. The Senate 
report on the bill characterized the required judicial determinations 
as ``* * * important safeguard(s) against inappropriate agency action * 
* *'' and made clear that such requirements were not to become ``* * * 
a mere pro forma exercise in paper shuffling to obtain Federal funding 
* * *'' (S. Rept. No. 336, 96th Cong., 2d Sess. 16 (1980)). We 
concluded, based on our review of State' documentation of judicial 
determinations over the past years, that, in many instances, these 
important safeguards had become precisely what Congress was concerned 
that they not become.
    Our primary concern is that judicial determinations be made on a 
case-by-case basis and it was not our intent to create a policy that 
was overly prescriptive and burdensome. States have a great deal of 
flexibility in satisfying this requirement. The suggestion that the 
court order reference the facts of a court report, related psychiatric 
or psycho-social report, or sustained petition as a mechanism for 
demonstrating that judicial determinations are made on a case-by-case 
basis is an excellent one and would satisfy this requirement. If the 
State can demonstrate that such determinations are made on a case-by-
case basis through a checklist then that is acceptable also.
    Comment: A few commenters asked for clarification regarding the 
language that must be contained in judicial determinations that satisfy 
title IV-E eligibility criteria. The commenters wanted to know if these 
determinations needed to use the exact terms ``reasonable efforts'' and 
``contrary to the welfare.''
    Response: Existing policy does not require the judicial 
determinations to use the exact terminology of the statute. We have no 
intention of overturning this policy. In fact, in the preamble to this 
section in the NPRM, we specifically stated that,

    * * * (t)he 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.

    Comment: One commenter was opposed to our requiring specific 
judicial determinations. The commenter felt we should be able to cull 
out the fact that the court made the appropriate determinations by 
reading the hearing record.
    Response: While we can allow some flexibility in this area, it is a 
statutory requirement that the specific judicial determinations 
regarding reasonable efforts and contrary to the welfare be explicit in 
court orders. Section 1356.21(d)(1) of the regulation states that we 
will accept transcripts of the court proceedings if the necessary 
judicial determinations are not explicit in the court orders.
    Comment: Overwhelmingly, commenters were opposed to the prohibition 
on nunc pro tunc orders. Commenters generally felt that the States 
would be punished for the failure of the court to fulfill its 
responsibility. Some commenters suggested we permit nunc pro tunc 
orders only to clarify or correct technical errors.
    Response: We placed the ban on nunc pro tunc orders because we 
discovered that they were being used months, sometimes years, later to 
meet reasonable efforts and contrary to the welfare requirements that 
had not been met at the time the original hearing took place. We are 
sensitive to the issue of technical errors. However, it is permissible 
for States to use transcripts of court proceedings to verify that 
judicial determinations were made in the absence of the necessary 
orders. We have, therefore, made no changes to the regulation to modify 
the ban on nunc pro tunc orders.
    Comment: Some commenters opposed our decision not to accept 
judicial determinations regarding reasonable efforts and contrary to 
the welfare determinations which merely reference State statute.
    Response: We believe that judicial determinations should be as 
meaningful as possible and child-specific in order to ensure that the 
circumstances of each child are reviewed individually. We believe that 
explicit documentation is a way to ensure that such determinations 
actually occur and could find no compelling argument to change our 
position. We will not accept judicial determinations that merely 
reference State statute to satisfy the reasonable efforts and contrary 
to the welfare determinations.

Section 1356.21(e)  Trial Home Visits

    This section defines trial home visits for the purposes of 
establishing title   IV-E eligibility.
    Comment: Most commenters supported allowing title IV-E eligibility 
to continue for six months while a child is on a trial home visit.
    Response: No response is necessary to these comments, but we 
changed the term ``foster care setting,'' to ``foster care,'' to have 
consistent terminology throughout the rule.
    Comment: A commenter sought clarification of whether there is a 
regulatory definition of a trial home visit.
    Response: There is no regulatory definition of the term ``trial 
home visit,'' as it is within the State's discretion to define. We do 
not believe that it would be appropriate for us to develop a regulatory 
definition. We also do not believe that we could develop a definition 
that would be inclusive of the variety of State policies on trial home 
visits or that a definition would be helpful. In practice, a trial home 
visit is intended to be a short term option in preparation for 
returning the child home permanently.
    Comment: A commenter asserted that the law does not recognize or 
define a trial home visit, and therefore, we have no authority to 
require a determination of title IV-E eligibility for children who 
reenter foster care after a trial home visit that lasts more than six 
months.
    Response: While it is true that the statute does not explicitly 
address trial home visits and determinations of title IV-E eligibility, 
we believe our policy is consistent with the statute. Further, we are 
allowing maximum flexibility to States regarding establishing title IV-
E eligibility if the child reenters foster care. If a trial home visit 
continues for an extended period, the circumstances of the original 
removal are likely to have changed. For that reason, a State must 
determine title IV-E eligibility upon a child's reentry into foster 
care. When a trial home visit extends beyond six months and the child 
returns to foster care, the child is then considered to be entering a 
new placement.
    Comment: A commenter sought clarification on whether a continuance 
of a hearing scheduled to address the trial home visit satisfied the 
requirement that for title IV-E funding to continue, a court must order 
a longer visit.
    Response: The provision establishes a six-month outer limit for a 
trial home visit, except when a court orders a longer visit. A court 
continuance of a hearing regarding the trial home visit does not 
satisfy this requirement.

Section 1356.21(f)--Case Review System

    This section establishes the case review system requirements for 
the title IV-E foster care program.

[[Page 4057]]

    Comment: A few commenters requested that the regulations contain 
more guidance on how the case review system could determine the safety 
of the child and ensure that the child was maintained safely in the 
home.
    Response: We believe that we can better respond to these comments 
through the provision of technical assistance as this is more of a 
practice issue. Nor do we think that prescribing how a State must 
maintain a child's safety would be useful, since safety considerations 
will vary on a case-by-case basis.
    Comment: Another commenter suggested that the time frames for all 
case review requirements (permanency hearings, TPR and periodic 
reviews) were arbitrary, and should not be prescribed in regulations. 
The commenter recommended that the time frames should be flexible to 
accommodate court calendars.
    Response: We do not have the authority to waive time frames for 
case review requirements because the law requires that States hold 
court hearings and periodic reviews within very specific time frames. 
We believe that States must be held accountable to these statutory time 
frames, and therefore, offer no changes to the case review system. A 
major goal of ASFA was to tighten case review time frames to prevent 
children from experiencing extended stays in foster care.

Section 1356.21(g)  Case Plan Requirements

    This section establishes the development and documentation 
requirements for case plans.
    Comment: The majority of commenters on this section supported the 
requirement in Sec. 1356.21(g)(1) that States develop the case plan 
with the child's parent or guardian.
    Response: None needed.
    Comment: Several commenters suggested that we amend 
Sec. 1356.21(g)(1) to instruct the State to document a parent's 
inability or refusal to participate in the development of the case 
plan. Another commenter suggested that we require a State to document 
in the case plan the efforts caseworkers employed to engage the parent 
in the development of the plan.
    Response: We expect that States will document efforts made to 
engage parents in developing the case plan, but we do not believe that 
it is necessary to prescribe this documentation. We believe it is 
especially critical that caseworkers engage parents early on because of 
the new time frames for permanency established by the ASFA.
    Comment: A couple of commenters suggested that case plans be 
developed within 30 days of a State agency assuming responsibility for 
placement and providing services. One commenter believed that according 
to our proposed rule, case plans might not be developed until 120 days 
after a child has been actually removed from the home.
    Response: The proposed rule at Sec. 1356.21(g)(2) mirrored the 
language in existing regulations which required the case plan to be 
developed within 60 days of a State assuming responsibility for 
providing services, including placing the child. We are not convinced 
that shortening the time frame for developing case plans to 30 days 
will have any measurable effect on the quality and function of a case 
plan, and therefore, are not changing the regulation in this manner. We 
believe that one of the commenters may have misinterpreted the proposed 
rule to mean that States have up to 60 days from the date the child is 
considered to have entered care according to 475(5)(F) of the Act to 
develop the case plan. We would like to clarify that the date the child 
is considered to have entered foster care is irrelevant for purposes of 
developing the case plan. Rather, the case plan must be developed 
within 60 days of the child's removal from the home.
    Comment: Some commenters suggested that we require specific steps 
in Sec. 1356.21(g)(5) that a State should take to make and finalize 
alternate permanency placements.
    Response: We believe that the specific steps a State agency makes 
to finalize alternate permanency placements are practice issues that 
need to be determined on a case-by-case basis. Therefore, we are not 
including these specific steps in regulation. A State agency can best 
formulate the steps necessary to achieve permanency based on the best 
interests of the child and the child's permanency plan. Court review 
and oversight of the permanency plan should provide an adequate check 
on State efforts in this area.
    Comment: A few commenters suggested that we include in the final 
rule the language from section 475(1)(E) of the Act, which requires 
States, at a minimum, to document the steps and child-specific 
recruitment efforts if the child's permanency goal is adoption or 
placement in another permanent home. A couple of commenters also 
requested that we include in the final rule the statutory examples of 
child-specific recruitment efforts, i.e., the use of State, regional 
and national adoption exchanges.
    Response: We agree that a clearer statement of the requirement to 
document the steps to permanently place the child is warranted. We 
have, therefore, made changes to the language and included it in a new 
paragraph, 1356.21(g)(5). We have amended the language in the 
regulation so that the documentation of ``child specific recruitment 
efforts'' is only applicable to children with case plan goals of 
adoption and not to other permanency goals. We believe that the 
illustrative list which mentions adoption exchanges and the reference 
to recruitment limits the requirement to children with case plan goals 
of adoption. States still need to document the steps taken to secure a 
permanent placement for children with alternate permanency goals.
    Comment: A commenter requested clarification on the differences 
between a case plan and a permanency plan.
    Response: We use the term ``case plan'' to refer to a plan 
developed to meet the statutory requirements of sections 
422(b)(10)(B)(ii), 471(a)(16), 475(1) and 475(5)(A) of the Act. The 
case plan is a written document which includes, in part: a description 
of the child's placement; a discussion of the safety and 
appropriateness of the placement; a plan for ensuring that the child 
and family receive services designed to facilitate the return of the 
child to a safe home or to another permanent placement; the health and 
educational records of the child; when appropriate, a description of 
the programs and services which will facilitate the child's transition 
from foster care to independent living; and, documentation of the steps 
to place the child in a permanent living arrangement.
    The ``permanency plan,'' while it may be described in the case plan 
or may be a portion of the case plan, is what the planned permanency 
living arrangement will be for the child, e.g., reunification with the 
family, or adoption. We understand that some States use the term 
``permanency plan'' synonymously with ``case plan,'' because it conveys 
what the case plan is designed to accomplish. We do not believe that it 
is necessary to require States to use distinct terminology, as long as 
States meet the requirements of the statute and regulations.
    Comment: A commenter suggested that we require courts to approve 
case plans.
    Response: There is no statutory basis for requiring judicial 
approval of the State agency's case plan document. The court's role is 
to: exercise oversight of the permanency plan; review the State 
agency's reasonable efforts to prevent

[[Page 4058]]

removal from the home, reunify the child with the family and finalize 
permanent placements; and to conduct permanency hearings. The State 
agency is responsible for developing and implementing the case plan. We 
see no additional benefit in requiring court approval of the case plan.
    In addition, we are clarifying in the regulation at 
Sec. 1356.21(g)(3) that it is not permissible for courts to extend 
their responsibilities to include ordering a child's placement with a 
specific foster care provider. To be eligible for title IV-E foster 
care maintenance payments the child's placement and care responsibility 
must either lie with the State agency, or another public agency with 
whom the State has an agreement according to section 472(a)(2) of the 
Act. Once a court has ordered a placement with a specific provider, it 
has assumed the State agency's placement responsibility. Consequently, 
the State cannot claim FFP for that placement.
    Comment: A couple of commenters requested that we specify that long 
term foster care is an appropriate permanency goal for unaccompanied 
refugee minors.
    Response: The determination of the appropriateness of a permanency 
goal must be made by the State on a case-by-case basis and take into 
consideration the best interests of the child. The State agency is the 
responsible party for making this determination, with the oversight of 
the court. We, therefore, will not regulate appropriate permanency 
goals for any group of children.
    Comment: A commenter suggested that we require case plans to 
address the child's developmental needs and acquisition of life skills.
    Response: We believe that the statute at section 475(1) of the Act 
already requires States to document how the services provided will meet 
the needs of the child, and in the case of a child whose goal is 
independent living, the programs and services that will enable the 
child to transition into independent living. We do not believe that any 
additional regulation in this area is required.

Section 1356.21(h)  Application of Permanency Hearing Requirements

    This section implements the new ASFA requirements related to 
permanency hearings and modifies and clarifies existing policy. It also 
sets forth requirements for an administrative body appointed or 
approved by the court to conduct permanency hearings.
    Comment: One commenter was concerned that children would become 
ineligible for title IV-E funding if the permanency hearing 
requirements were not satisfied as prescribed.
    Response: We agree that the language at paragraph (h)(1) presented 
the permanency hearing as an eligibility criterion. That is not the 
case and we have amended the paragraph to clarify that, in meeting the 
requirements of the permanency hearing, the State must comply with 
section 475(5)(C) of the Act and this paragraph. The permanency hearing 
is a State plan requirement. It is not a title IV-E eligibility 
criterion. If the State fails to meet the permanency hearing 
requirements, it is out of compliance with the State plan. The child 
does not become ineligible for title IV-E funding.
    Comment: We received a number of comments regarding paragraph 
(h)(2) which provides guidance related to determining for whom the 
State must hold permanency hearings. Commenters thought the paragraph 
was confusing and unclear about whether we were referring to initial or 
subsequent permanency hearings. We also received a request not to refer 
to these permanent placements as ``court sanctioned'' because the 
commenter felt the terminology meant the court chooses the placement, 
which would make the placement ineligible for title IV-E funding.
    Response: In the NPRM, we proposed to retain the provision in the 
current regulation for permitting the State to waive subsequent 
permanency hearings for children placed in permanent foster family 
homes. The number of comments received prompted us to review this 
section of the proposed rule against the statutory language as amended 
by ASFA. Based on that review, we have decided to delete the paragraph 
in its entirety. When ASFA was passed the language from the definition 
of permanency hearing in section 475(5)(C) of the Act that addressed 
children remaining in foster care on a ``permanent or long term basis'' 
was removed. Instead, the ASFA requires the State to document a 
compelling reason for establishing a permanency plan that does not call 
for the child to exit foster care through reunification, adoption, 
legal guardianship, or placement with a fit and willing relative. 
Therefore, all children in foster care must be afforded the benefit of 
permanency hearings while they are in foster care.
    Although the paragraph in question has been deleted from the 
regulation, we wanted to take this opportunity to respond to the 
observation that the State may not claim FFP when the court orders a 
specific placement for a child. The commenter is correct. Section 
472(a)(2) of the Act requires responsibility for the child's placement 
and care to be with the State agency. When the court orders a specific 
placement, it in essence takes on the State's responsibility for the 
child's placement and the child becomes ineligible for title IV-E 
funding. To make this clear, we have amended Sec. 1356.21(g) to note 
this restriction. The court may sanction a permanent foster family home 
through its oversight of the permanency plan, however, this does not 
give the court the authority to determine a specific placement for the 
child.
    Finally, we recognize that States will need transition time to 
begin holding subsequent permanency hearings for children who formerly 
were exempt from this requirement. We will not take adverse action 
against a State that cannot comply with this requirement for a period 
of 12 months from the effective date of this final rule.
    Comment: One commenter suggested that the requirement in paragraph 
(h)(2) for holding a permanency hearing within 30 days of a judicial 
determination that reasonable efforts are not required, be extended to 
circumstances beyond those identified at section 471(a)(15)(D) of the 
Act. Another wanted us to exempt unaccompanied refugee minors from this 
provision altogether.
    Response: The statute is very specific to those circumstances 
enumerated at section 471(a)(15)(D) of the Act. We have no authority to 
expand that list. However, the State may hold a permanency hearing any 
time it deems it to be appropriate to do so. We also have no authority 
to exempt unaccompanied refugee minors from this requirement.
    Comment: Some commenters noted that the language in 
Sec. 1356.21(h)(3) (proposed Sec. 1356.21(h)(4)) is inconsistent with 
the definition of ``permanency hearing'' at Sec. 1355.20. The language 
at Sec. 1356.21(h)(3) limited the alternate planned permanent living 
arrangement options to a foster family home.
    Response: We concur with the commenter and have amended paragraph 
(h)(3) to use the exact statutory language, `` * * * another planned 
permanent living arrangement * * *.''
    Comment: Some commenters objected to the inclusion of an example of 
a compelling reason for the State to choose another planned permanent 
living arrangement over reunification, guardianship, or adoption in the 
text of the regulation. These commenters believe that examples included 
in regulation become de facto policy.

[[Page 4059]]

    Response: We do not believe that examples in regulation become de 
facto policy, nor were they intended to do so. However, we do not 
believe the example provided in the NPRM fully illustrates how to 
comply with this provision and have included additional examples in 
paragraph (h)(3) to more accurately reflect its intent.

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

    This section implements the new ASFA provisions regarding 
termination of parental rights.
    Comment: Many commenters sought exemptions for specific populations 
from the requirement for States to file or join TPR petitions for 
certain children who have been in foster care for 15 out of the most 
recent 22 months, abandoned infants, or children of parents who have 
committed certain felonies. Several commenters noted that many tribal 
cultures and traditions do not recognize the concepts of terminating 
parental rights and adoption, and requested a specific exemption from 
the application of the provision to tribes. Several commenters also 
wanted an exemption for unaccompanied refugee minors in foster care. 
The commenters noted that according to Federal regulations for child 
welfare services to unaccompanied refugee minors (see 45 CFR part 400, 
subpart H) such children ``are not generally eligible for adoption 
since family reunification is the objective of the [unaccompanied 
refugee minor child welfare] program.'' Similarly, some advocates and 
providers who work to preserve or reunify foreign-born children with 
their families, noted that the TPR requirement may hinder international 
reunification efforts by switching the focus from reunification to 
adoption after fifteen months. A few commenters also wanted exemptions 
for juveniles adjudicated delinquent, children voluntarily placed in 
foster care, and children deemed ``persons in need of services'' who 
are not considered abused or neglected.
    Response: We have no statutory authority to provide an exemption 
for particular populations from the requirement to file a TPR for 
certain children. Thus, we did not make any exemptions to the 
requirement in the regulation. The TPR requirement is designed to 
encourage State agencies to make timely decisions about permanency for 
children in foster care. Congress developed the TPR provision to be 
applied to all children in foster care, whatever their entry point into 
the system. Exempting groups of children from the requirements would be 
contrary to ASFA's goal to shorten children's time in foster care. 
However, we are changing Sec. 1356.21(i)(2)(ii) in two ways. First, to 
clarify that the State agency must apply the exceptions to the 
requirement to file a petition for TPR by considering the best 
interests of the individual child on a case-by-case basis. Second, we 
added two more examples of compelling reasons regarding unaccompanied 
refugee minors and situations involving international legal or foreign 
policy issues.
    Comment: A commenter requested an explanation of how the TPR 
requirement applies to Indian tribes and the relationship to Indian 
Child Welfare Act requirements. A commenter suggested that the 
regulation clarify that tribal agencies can elect not to file a 
petition for TPR in certain circumstances.
    Response: The Indian Child Welfare Act of 1978 (ICWA), Public Law 
95-608, was passed in response to concerns about the large number of 
Indian children who were being removed from their families and tribes 
and the failure of States to recognize the culture and tribal relations 
of Indian people. ICWA, in part, creates procedural protections and 
imposes substantive standards on the removal, placement, termination of 
parental rights and consent to adoption of children who are members of 
or are eligible for membership in an Indian tribe. The addition of the 
requirement in section 475(5)(E) of the Act to file a petition for TPR 
for certain children in no way diminishes the requirements of ICWA for 
the State to protect the best interests of Indian children. 
Furthermore, States are required to comply with the ICWA requirements 
and develop plans that specify how they will comply with ICWA in 
section 422(b)(11) of the Act.
    The requirement in section 475(5)(E) of the Act applies to Indian 
tribal children as it applies to any other child under the placement 
and care responsibility of a State or tribal agency receiving title IV-
B or IV-E funds. While we recognize that termination of parental rights 
and adoption may not be a part of an Indian tribe's traditional belief 
system or legal code, we have no statutory authority to provide a 
general exemption for Indian tribal children from the requirement to 
file a petition for TPR. If an Indian tribe that receives title IV-B or 
IV-E funds has placement and care responsibility for an Indian child, 
the Indian tribe must file a petition for TPR or, if appropriate, 
document the reason for an exception to the requirement in the case 
plan, on a case-by-case basis.
    Comment: We received many comments on the time frame in which a 
State must file a petition for TPR according to Sec. 1356.21(i)(1)(i). 
Many commenters objected to our requiring a State to file a petition 
for TPR at the end of the child's fifteenth month in foster care, and 
suggested that we allow a grace period of up to 60 days. These 
commenters believed that to meet this time frame, a State agency would 
need to make decisions on permanency before the end of the fifteenth 
month, which they felt was unreasonable. A few commenters supported the 
provision as written. A commenter suggested that the State file before 
the end of the fifteenth month, and another suggested that we establish 
no time frames for filing the petition.
    Response: We believe that States will have adequate time to prepare 
petitions for TPR, when appropriate, by the end of the child's 
fifteenth month in foster care. Furthermore, we can find no statutory 
basis for allowing a grace period for States to file a petition for TPR 
for children who have been in foster care for 15 out of the most recent 
22 months. To meet the permanency hearing requirements, the State 
agency must prepare a permanency plan for the child to present to the 
court within 12 months. This will require the State agency to begin 
working with the family early on, so that the State agency can make 
appropriate decisions about permanency goals for the child, including 
whether to file a petition for TPR and pursue adoption.
    Comment: A commenter suggested that once a State agency has 
determined that a child is an abandoned infant or a parent has 
committed certain felonies as described in section 475(5)(E) of the 
Act, the State file a petition within one week of that determination. 
The NPRM required that a State file such petitions within 60 days of 
the determination of abandonment or a parent's felony conviction.
    Response: We do not concur with the commenter's suggestion to 
require a State to file a TPR petition within one week of a 
determination that the child is abandoned or that a parent has 
committed certain felonies. We continue to believe that 60 days is a 
reasonable period of time for the State agency to complete the 
necessary administrative and legal work required to file a petition for 
TPR.
    Comment: A few commenters expressed uncertainty about whether a 
State must file a petition for TPR after a child has been in foster 
care for 15 months or 22 months.

[[Page 4060]]

    Response: The State agency is required either to file a petition 
for TPR or document an exception to the requirement when a child has 
been in foster care for 15 cumulative months out of 22 months. If the 
child has been in care for 15 cumulative months, the State should not 
wait for 22 months of a child's stay in foster care to elapse before 
filing a petition for TPR. We do not believe that any change to the 
regulation is necessary.
    Comment: A commenter expressed concern that the TPR requirement 
would be misinterpreted as prohibiting a State from filing a petition 
for TPR before a child has been in foster care for 15 months out of the 
most recent 22 months.
    Response: We would like to clarify that a State continues to have 
the discretion to file a petition for TPR whenever it is in the best 
interests of the child to do so. In addition, Congress passed a Rule of 
Construction at section 103(d) of Public Law 105-89 reaffirming a 
State's ability to file a petition for TPR before it is mandated by 
Federal statute or for reasons other than those indicated in Federal 
law. Therefore, States should view the Federal statutory time frames of 
15 out of 22 months of a child's stay in foster care as the maximum 
length of time that can elapse before a State agency must file a 
petition or document an exception for TPR.
    Comment: We received a range of suggestions and comments on our 
proposal to exclude runaway episodes and trial home visits from the 
calculation of the 15-month time frame a child spends in foster care 
for TPR purposes. A few commenters opposed our exclusion of runaway 
episodes and trial home visits for various reasons. One commenter 
suggested that including trial visits and runaway episodes in the 
calculation was a way to ensure that no child languished in foster 
care. Another commenter suggested that we allow States to determine 
whether such time should be included. A third commenter was concerned 
that excluding runaway episodes and trial home visits increased the 
record keeping burden on States. A couple of commenters supported the 
provision as written. These commenters believed that our proposed 
policy is consistent with efforts to reunify the family when that is 
the goal.
    Response: We considered all of these viewpoints and do not believe 
a change in the regulation is warranted. We believe that it is 
inappropriate to count time a child is on a runaway episode because 
during that time the agency is unable to provide services to the child 
or the family. Similarly, counting time when a child is at home with 
the family toward the time for calculating when to file a petition for 
TPR is inappropriate. While the child may be in the legal custody and 
under the supervision of the State agency, both the child and the 
parent consider him or her to be at home. However, as we discussed 
above, the State has the discretion to file a petition for TPR whenever 
it is in the best interests of the child to do so.
    Comment: A commenter suggested that we define the number of 
calendar or business days that constitute a month for the purposes of 
calculating 15 out of the 22 most recent months for the TPR 
requirement. The commenter suggested we define a month as 30 days, 
presumably so that time less than a month spent in foster care would 
not be counted toward the requirement.
    Response: We have decided not to define a ``month'' and leave it to 
the State's discretion.
    Comment: We received a range of comments to our proposal that 
States need only apply the provision to file a TPR petition when a 
child has been in care 15 out of the most recent 22 months once, when 
the State determines that an exception applies. Several commenters 
voiced support for the proposed rule as written. Another commenter 
supported the proposed provision overall, but suggested that we include 
language in the regulation that explicitly requires States 
periodically, to reevaluate the need to file a petition for termination 
of parental rights. Many commenters opposed the provision believing 
that children may stay indefinitely in foster care once a State makes 
an exception to the TPR requirement.
    Response: We understand the concern that children may continue to 
languish in foster care once a State applies an exception if this 
decision is never reevaluated. Nevertheless, we did not change the one-
time application of the TPR provision for two reasons. First, the 
statutory construction of the provision makes it applicable only once. 
Second, we believe that there are at least two existing opportunities 
for the State to reevaluate an exception to the TPR requirement: the 
six-month periodic review and the permanency hearing.
    We encourage States to use the six-month periodic review to review 
the continuing appropriateness of an exception to the requirement to 
file a petition for TPR within the context of the requirements in 
section 475(5)(B) of the Act. States also have another opportunity to 
reevaluate the decision not to pursue a TPR petition at the permanency 
hearing, which must be held at least every 12 months. The permanency 
hearing must address whether the child's permanency plan is to reunify 
the child with the family, file a petition for TPR and move toward 
adoption, or place the child with a fit and willing relative, legal 
guardian, or in another planned permanent living arrangement. The State 
is required to reevaluate the permanency plan during the course of the 
permanency hearing, regardless of whether the State agency has 
previously applied an exception to the requirement to file a petition 
for TPR. As such, we believe there are multiple safeguards to ensure 
that children do not languish in foster care.
    Comment: A few commenters expressed doubt that States would use the 
exceptions in paragraph (i)(2) in appropriate cases and suggested that 
we discourage States from using the exceptions in the regulations. The 
commenters expressed concern that the exceptions could be used as a 
loophole to cover a State agency's deficiency in proper case planning 
or service delivery.
    Response: We understand these concerns, however, the exceptions to 
the requirement to file a petition for TPR are statutory. We expect 
that States will apply the exceptions to filing a petition for TPR 
judiciously and on a case-by-case basis. We believe the intent of the 
requirement to file a petition for TPR for certain children was to 
encourage State agencies to make timely decisions about permanency for 
children in foster care. The exceptions were developed to allow State 
agencies to exercise individual case planning and seek an alternative 
permanent placement when adoption may not be appropriate or available 
for a child.
    Comment: A couple of commenters raised concerns about the exception 
to filing a petition for TPR in situations where the child is placed 
with a relative. The commenters sought more guidance on how and when 
States should use this exception.
    Response: The statute provides the State with the option not to 
file a petition for TPR when a child is placed with a relative. We 
encourage the use of relative placements as an option for ensuring that 
the child achieves permanency, and not only as a temporary placement. A 
State must continue to develop and reevaluate a child's case plan goal 
and conduct permanency hearings if the State decides not to file a 
petition for TPR because the child is placed with a relative. Relative 
placements should not preclude consideration of legalizing the 
permanency of the placement through adoption or legal guardianship.
    Comment: The majority of comments supported our decision not to 
define the

[[Page 4061]]

term ``compelling reason,'' as it is used in section 475(5)(E) of the 
Act, to allow exceptions to the requirement to file a petition for TPR. 
A couple of commenters wanted us to define the term.
    Response: We concur with the majority of commenters who did not 
want us to define the term ``compelling reason'' as used in the statute 
and have made no changes to the regulation. We believe that the 
determination of what constitutes a ``compelling reason'' must be based 
on the individual circumstances of the child and the family, and that a 
Federal definition would not be helpful in that process. We believe 
that the examples provided on possible compelling reasons provide 
adequate guidance about the practical application of this term without 
limiting a State's flexibility.
    Comment: We received both criticism and support for listing two 
examples of a compelling reason not to file a petition for TPR. Many 
commenters did not want the two examples of compelling reasons included 
in the regulation for a variety of reasons. Some commenters believed 
that the examples would become ``de facto policy,'' and would therefore 
exempt groups of children from the requirement. Similarly, other 
commenters thought that specifying examples of compelling reasons was 
inconsistent with our decision not to define the term. Some commenters 
believed that the examples were too broad, and if used, would mitigate 
the effectiveness of the requirement.
    On the other hand, many commenters supported the inclusion of the 
examples of compelling reasons. Some commenters expressed that the 
examples provided critical guidance to the field and would temper 
concerns about increases in the number of ``junk'' petitions and legal 
orphans. Other commenters wanted us to include the language from the 
preamble discussion on the examples in the regulation text, and some 
wanted us to expand the list of examples of compelling reasons. 
Commenters suggested that the expanded list of compelling reasons could 
include: A child belongs to a particular population (i.e., adjudicated 
delinquents, Indian tribal children, and unaccompanied refugee minors); 
a child has not completed treatment in a residential facility; a 
child's parent had not been notified by the State agency that TPR was a 
possible outcome; a parent has made significant measurable progress to 
meet the requirements of the case plan; or, a child had a permanency 
goal other than adoption.
    Response: In developing the two broad examples, we wished to 
provide some basic guidance to States short of the definition that most 
commenters opposed. We have, therefore, decided to retain the two 
examples of compelling reasons in the proposed regulation and added two 
additional examples. Unaccompanied refugee minors are those children 
who enter the country unaccompanied and are not destined to a parent, 
relative, or custodial adult. We received a number of comments noting 
that the Office of Refugee Resettlement (ORR) within the Department 
maintains a policy that reunification, in general, is the appropriate 
goal for these children while they are classified as unaccompanied 
refugee minors. ORR's regulation at 45 CFR part 400, Subpart H, defines 
an unaccompanied refugee minor and the rare circumstances in which 
adoption may be appropriate. In order to clarify that we do not intend 
to contradict HHS policy in this regard, we are listing this as another 
example of a compelling reason for not filing or joining a petition for 
TPR. We have also added a fourth example to address situations in which 
international legal or foreign policy considerations may affect a 
child's status. We are not including other populations as part of the 
examples of compelling reasons because we believe that the broad 
examples provide a framework that allows a State sufficient room to 
make decisions regarding filing a petition for TPR on a case-by-case 
basis that is in the best interests of an individual child.
    Comment: One commenter suggested that the regulations clarify that 
compelling reasons for not filing for TPR may be defined in tribal 
policy. Another commenter suggested clarifying that the tribe rather 
than the State could document the compelling reason.
    Response: The regulations are written from the State perspective 
because the State agency is ultimately responsible for the 
administration of the title IV-E program. If the tribe has 
responsibility for the placement and care of a child pursuant to a 
title IV-E agreement with a State, not only would it be permissible for 
the tribal agency to identify the compelling reason for not filing a 
petition for TPR, it would be the tribal agency's responsibility. 
Tribes and States may not develop a standard list of compelling reasons 
for not filing for TPR that exempts groups of children. Such a practice 
is contrary to the requirement that determinations regarding compelling 
reasons be made on a case-by-case basis.
    Comment: A commenter suggested that we clarify the terminology for 
the second compelling reason example in Sec. 1356.21(i)(2)(ii)(B) from 
``insufficient grounds for filing a petition to terminate parental 
rights exist,'' to ``no grounds to file a petition to terminate 
parental rights exist.''
    Response: We concur that the suggested language more accurately 
conveys our point that a compelling reason for not filing a petition 
for TPR may be that there are no grounds in State law on which to 
pursue a legal action to terminate parental rights. Therefore, we have 
made the suggested change in the regulation text. States, however, are 
not permitted to have State laws that carve out groups of the foster 
care population to be exempted from the requirement to file a petition 
for TPR.
    Comment: A commenter wanted us to elaborate on the exception to TPR 
where the State has not provided the services identified in the case 
plan. The commenter may be concerned that we were not encouraging 
States to provide services in a more timely way. Another commenter 
questioned whether this exception also applied in situations where the 
specified services were not available, how the determination is made, 
and by whom.
    Response: This exception to the requirement to file a petition for 
TPR is taken directly from the statute, as are all of the exceptions. 
We do not believe it is necessary to elaborate in the regulation on how 
the State agency should make the determination that the necessary 
services have not been provided. The exception affirms that the 
provision of services, early in a child's placement in foster care, is 
often crucial to either enabling the child to return to a safe and 
stable home or making a determination to move forward with a petition 
for TPR. By using the exception, a State agency can avoid penalizing 
the parent if the necessary services are not available or accessible to 
a parent or child. We encourage States to strengthen service delivery 
systems and to use this exception judiciously. We will be monitoring 
State' use of all of the exceptions in the child and family services 
review.
    Comment: Many commenters sought clarification about the requirement 
at Sec. 1356.21(i)(3) for a State concurrently to recruit and approve 
an adoptive family for a child while a State petitions for TPR. Most 
commenters wanted language added to the regulation text that 
interpreted the statutory provision to mean that a State agency should 
begin the process of finding an adoptive family at the time a petition 
for TPR is filed. Some commenters were concerned that the proposed rule 
and statutory language imply or encourage a State agency to wait until 
it has an adoptive family available for the child before the State 
agency proceeds with filing a

[[Page 4062]]

petition for TPR. Another commenter wanted to know if this requirement 
could be waived for children who did not have a goal of adoption.
    Response: We understand the commenter' concern regarding the 
wording of this requirement and have made some changes to the 
regulatory language in Sec. 1356.21(i)(3). The final rule now clarifies 
that the State must begin the process to find an adoptive family for 
the child concurrently with filing a petition for TPR. We believe that 
this provision was developed to ensure that a child does not wait 
unnecessarily between the time a TPR is granted and the child's 
permanent placement in a home. The requirement should not be 
interpreted to suggest that a State wait until an adoptive family is 
found for a specific child before a TPR petition is filed. We cannot 
waive the requirement to find an adoptive family for a child 
concurrently with the filing of a petition for TPR as there is no 
statutory authority to do so.
    Comment: Several commenters sought clarification on whether the 
fact that a child had been in foster care for 15 out of the most recent 
22 months was legal grounds for a State to file a TPR petition. Some 
commenters believed that we should specifically exclude the time frame 
as grounds for a TPR, while others thought that we should require or 
permit the time frame to be grounds for TPR.
    Response: States are neither required nor prohibited by Federal 
statute from making a child's length of stay in foster care legal 
grounds to file or grant a petition for TPR. We have made no changes to 
the regulation in response to these comments.
    Comment: A couple of commenters asked for greater specificity on 
the roles of the court and the agency with respect to the exceptions to 
filing a petition for TPR for certain children in foster care. In the 
preamble to the NPRM we noted that there was no requirement for the 
court to make a judicial determination if a State made a compelling 
reason exception to filing a petition for TPR. A commenter disagreed 
and suggested that Congressional intent was for the State agency to 
make an evidentiary case to the court regarding whether an exception 
was appropriate for the child. Another commenter suggested that we 
specify that court decisions prevail in situations where the court and 
State agency disagree on pursuing TPR.
    Response: The requirement to file a petition for TPR or to document 
an exception to the requirement is the State agency's responsibility. 
The statutory language is clear that for a compelling reason, or any 
other exception to the requirement to file a petition for TPR, there is 
no requirement for a judicial determination. However, the State agency 
is to document in the case plan, which is available for court review, 
the compelling reason for why filing a petition for TPR is not in the 
best interests of the child. Clearly, courts play an important 
oversight role for children in foster care. The court exercises 
authority in making decisions at permanency hearings regarding the 
child's permanency plan. It is at these times that the court should 
review State agency decisions with regard to the requirement to file a 
petition for TPR. Finally, we have no authority to suggest that courts 
prevail in situations where there is a disagreement between the court 
and the State agency on filing a petition for TPR. We have made no 
change to the regulation in response to these comments.
    Comment: Several commenters sought regulations on the 
responsibilities of courts and State agencies to finalize proceedings 
to terminate parental rights once the State agency has filed a petition 
for TPR. A couple of commenters proposed that we suggest a particular 
time frame for the court to finalize a TPR, and one suggested a time 
frame of six months. A third commenter suggested that we require the 
State agency to continue to file petitions for TPR if a court denies 
the original petition.
    Response: We understand the concern that court and State agency 
delays occur once a petition for TPR is filed such that it could be 
several years before a child is finally adopted. However, our authority 
does not extend into the finalization of proceedings for termination of 
parental rights as this is a matter of State law. Therefore, we did not 
make any changes to the regulation in response to these comments.
    Comment: A few commenters suggested that we note the importance of 
making reunification efforts with both parents and when necessary, 
filing TPR petitions on both parents.
    Response: We believe that we have addressed this issue in a 
separate section of the regulation. We indicate in Sec. 1356.21(b)(5) 
that State title IV-B/IV-E agencies can use the Federal Parent Locator 
Service (FPLS) in expediting permanency. In that paragraph we encourage 
States to use the FPLS to locate absent parents in order to explore 
permanent placements or pursue TPR. To avoid duplication, we chose to 
make such a statement in the reasonable efforts section to encourage 
States to find noncustodial parents early in a child's stay in foster 
care.
    Comment: We received several comments that requested funding or 
program guidance on staff training, assessments, case planning, and 
concurrent planning around permanency.
    Response: We believe that we can better provide practice-level 
guidance through technical assistance rather than through regulation.

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

    This section implements the statutory provision related to the 
title IV-E eligibility of the child of a minor parent who is in foster 
care.
    Comment: A commenter suggested replacing ``must include amounts * * 
* '' to ``may include amounts * * * '' as some States give minor 
parents financial responsibility for the child.
    Response: To revise this provision to be permissive would be in 
conflict with the statutory requirement. Section 475(4)(B) of the Act 
specifically requires that the foster care maintenance payment made on 
behalf of the minor parent ``shall'' include amounts that may be 
necessary to cover the foster care maintenance costs of a child of a 
minor parent when the parent and child are in the same foster family 
home or child care institution. We, therefore, did not change this 
paragraph of the regulation to reflect the commenter's suggestion.

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

    Section 1356.21(k) describes, for the purposes of meeting the 
requirements of section 471(a)(1) of the Act, a ``removal.'' Section 
1356.21(l) sets forth the required conditions for living with a 
specified relative prior to removal from the home.
    Because of the complexity of this issue, we thought it best to 
explain again how the policy has changed before discussing the comments 
on this section of the regulation. To be eligible for title IV-E 
funding, a child must, among other things, be removed from the home of 
a relative as the result of a voluntary placement agreement or a 
judicial determination that continuation in the home would be contrary 
to the child's welfare. Under prior policy, we interpreted the term 
``removal'' to mean a physical removal. As a result, if a child was 
residing with an interim caretaker who was a relative between the time 
the child lived with the custodial parent and when he or she entered 
foster care, and the State intended to remove custody from the

[[Page 4063]]

parent but let the child remain with that interim caretaker relative, 
the child could not be eligible for title IV-E funding because the 
child was not physically removed from the home of a relative. This 
policy created a disincentive for relative placements. To remove this 
inequity between relative and nonrelative caregivers, we now permit the 
removal of the child from the home, in such circumstances, to be a 
``constructive'' (i.e., a nonphysical) removal.
    As a result of the comments we received on this proposed policy, we 
closely examined the examples provided in the preamble to the NPRM and 
the proposed regulatory text against the statute. As a result of this 
further review, we do not believe that example (3) on page 50078 of the 
preamble should have been included. In example (3), the living with and 
removal from requirements were satisfied by a physical removal from the 
interim relative caretaker with whom the child lived for seven months. 
A physical removal from the home of an interim relative caretaker 
cannot satisfy title IV-E eligibility because it is not the result of a 
voluntary placement or a judicial determination, as required by section 
472(a)(1) of the Act.
    We offer a summary of examples to clarify when a child would be 
eligible for title IV-E foster care under the rule. These examples 
presume that the child is eligible for AFDC (according to the State 
plan in effect on July 16, 1996) in the home of the parent or other 
specified relative:
     The child lived with either a related or nonrelated 
interim caretaker for less than six months prior to the State's 
petition to the court for removal of the child. The State licenses the 
home as a foster family home and the child continues to reside in that 
home in foster care. The child is eligible for title IV-E foster care 
if he or she lived with the parent within six months of the State's 
petition to the court, and was constructively removed from the parent 
(i.e., there was a paper removal of custody).
     The child lived with either a related or nonrelated 
interim caretaker for more than six months prior to the State's 
petition to the court. The State licenses the home as a foster family 
home and the child remains in that home in foster care. The child is 
ineligible for title IV-E foster care since he or she had not lived 
with the specified relative within six months of the State's petition 
to the court, and was not removed from the home of a relative. (The 
constructive removal does not apply to this situation because it had 
been more than six months since the child lived with the parent.)
     The child lives with a related interim caretaker for seven 
months before the caretaker contacts the State to remove the child from 
his/her home. The agency petitions the court and the court removes 
custody from the parents and the agency physically removes the child 
from the home of the interim related caretaker. The child would not be 
eligible for title IV-E foster care since he or she had not lived with 
the parent or other specified relative from whom there was a 
constructive removal within six months of the initiation of court 
proceedings. (Although the child was physically removed from the home 
of the related interim caretaker, that removal cannot be used to 
determine title IV-E eligibility since the removal was not the result 
of a voluntary placement agreement or judicial determination, as 
required in section 472(a)(1) of the Act. Nor does constructive removal 
apply to this situation because it had been more than six months since 
the child lived with the parent from whom custody was removed.)
     The child lived with a nonrelated interim caretaker for 
seven months before the caretaker asks the State to remove the child 
from his/her home and place the child in foster care. The child is 
ineligible for title IV-E foster care because he or she had not lived 
with a parent or other specified relative within six months of the 
petition.
     The child is in a three-generation household in which the 
mother leaves the home. The grandmother contacts the State agency four 
months later and the agency petitions the court within six months of 
the date the child lived with the mother in the home. The State 
licenses the grandmother's home as a foster family home and the child 
continues to reside in the home in foster care. The child is eligible 
for title IV-E foster care since he or she lived with the parent within 
six months of the State's petition to the court, and was constructively 
removed from the parent's custody.
    The regulatory text has been amended to reflect this change in 
policy and to more clearly delineate the requirements of living with 
and removal from the home of a specified relative.
    Comment: Several commenters supported the policy on living with and 
removal from the home of a specified relative. One commenter noted that 
the new policy enhances a child's ability to remain with a relative and 
preserve the child's culture, as well as minimizes the number of out-
of-home placements a child otherwise might experience.
    Response: No changes were necessary in response to these comments.
    Comment: Three commenters opposed the policy. Some of the 
commenters shared beliefs that: (1) The proposed policy creates a six-
month statute of limitations period within which an abused and 
abandoned child must apply for foster care or be forever barred from 
receiving such benefits; (2) the policy impermissibly narrows title IV-
E eligibility for children living with a relative; and (3) the policy 
discriminates against relative homes, and is in violation of the 
language and intent of ASFA.
    Response: We have retained the proposed policy for the reasons that 
follow. In order to be eligible for title IV-E foster care, a child 
must be eligible for AFDC in his or her own home in the month of the 
voluntary placement agreement or initiation of court proceedings (i.e., 
petition). However, if a child is not living with the custodial 
relative in the month of the voluntary placement agreement or petition, 
then the statute allows a six-month period during which the child may 
reside with an interim caretaker and still be eligible for title IV-E. 
In these circumstances, if a child is not living with the specified 
relative from whom he or she is being removed in the month of the 
voluntary placement agreement or petition, the child can be deemed 
eligible for that month if: (1) The child had been living with that 
specified relative at some time within the six-month period prior to 
that month; and (2) would have been eligible in the home of that 
specified relative in the month of the voluntary placement agreement or 
petition if the child had continued to reside with the relative. This 
is a longstanding Departmental policy based upon the statutory language 
in section 472(a)(4)(ii) of the Act, and consistent with the purpose of 
the program which is to provide continuing support for an AFDC-eligible 
child when he or she cannot live safely at home.
    It is a misinterpretation to suggest that the proposed policy 
narrows title IV-E eligibility for children living with relative 
caretakers and is discriminatory against relatives as foster 
caretakers. Rather than limiting a child's eligibility or 
discriminating against relative homes, the policy supports children 
remaining with related caretakers when the State determines that they 
cannot live safely in their own homes, and applies the living with and 
removal from requirements equitably to both relative and nonrelative 
caretakers. Under the previous policy, if a parent left a child with a 
nonrelated caretaker and the agency petitioned the court for

[[Page 4064]]

removal of custody from the parent in less than six months from the 
date the child lived with the parent, the otherwise eligible child 
would have been eligible to receive title IV-E if the interim caretaker 
was subsequently licensed or approved as a foster family home by the 
State and the child remained in that home. Conversely, if the parent 
left the child with a related caretaker and the same circumstances 
existed, the otherwise eligible child would not have been eligible for 
title IV-E foster care because: (1) In the absence of the parents, the 
home and customary family setting was considered to have shifted to the 
home of the other relatives; and (2) the child was living with another 
relative at the time of petition and not physically removed from that 
home. The revised policy provides equitable treatment in either 
circumstance and encourages a child's continued placement with a 
relative caretaker when he or she cannot remain safely at home. The 
policy does not discriminate against relatives, and is consistent with 
the intent of ASFA.
    Comment: Two commenters referenced the Land v. Anderson case and 
related litigation that are currently in the Ninth Circuit Court of 
Appeals. One commenter recommended that we follow the analysis in the 
Land v. Anderson case and the other commenter urged us to withdraw the 
proposed policy and await the outcome of the Ninth Circuit case.
    Response: The final rule with respect to the issue before the above 
referenced court reflects longstanding Departmental policy that is in 
keeping with the statutory requirements. That policy continues to be in 
effect. Should the Ninth Circuit Court of Appeals rule against the 
Department, that decision would be subject to further review by the 
Supreme Court, and it would not, in any event, necessarily require a 
nationwide change in Federal law or policy. No changes were made to the 
regulation as a result of this comment.
    Comment: One commenter suggested that the six-month time limit 
should be waived for relative care to support the child remaining with 
a family member.
    Response: We are unable to waive the six-month time limit because 
it is statutory. The statute at section 472(a)(4) of the Act requires, 
among other things, that a child be living with and removed from the 
home of a specified relative at the time of the voluntary placement 
agreement or initiation of court proceedings. Section 472(a)(4)(B)(ii) 
of the Act provides an exception to that requirement by allowing a six-
month period that the child can live with an interim caretaker and 
still be eligible for title IV-E foster care. We do not have the 
authority to waive a statutory provision and, therefore, did not revise 
the regulations. The flexibility we have afforded States, however, is 
to allow constructive removals (i.e., paper or nonphysical removals) in 
order to provide equal treatment for related and nonrelated caregivers.
    Comment: One commenter supported allowing ``legal'' removals, but 
did not believe that the revised interpretation of the removal 
requirement was clearly expressed. The commenter suggested language be 
included that more clearly states that ``legal'' removals are allowed.
    Response: We concur with the comment and have revised the 
regulatory language to clarify that either physical or constructive 
removals are allowed.
    Comment: A commenter suggested that ``interim caretaker'' be 
defined.
    Response: We have revised the regulatory language to clearly 
provide for the use of constructive removals. In doing so, we have 
removed all references to interim caretakers. Therefore, there is no 
need to define this term in the regulation.
    Comment: A commenter expressed concern that the restriction of 
``within six months'' appears to contradict other areas of title IV-E 
eligibility where removal from the home of a specified relative is a 
determining factor.
    Response: Removal from the home of a specified relative is one of 
several criteria for title IV-E eligibility, as is the six-month living 
with requirement. The commenter did not cite references for the 
sections of the Act about which the concern was raised and we do not 
find any specific citation that conflicts with the six-month 
limitation. No changes were made to the regulation based upon this 
comment.
    Comment: One commenter asked if a child must be AFDC eligible as if 
he or she had been living in his or her home in the removal month even 
in circumstances where the child is not physically removed from that 
home.
    Response: In determining title IV-E foster care eligibility, a 
child must be eligible for AFDC in the month in which either a 
voluntary placement agreement is entered into or a petition to the 
court is initiated to remove the child from his or her home. If the 
child is not living with a specified relative at that time, then 
section 472(a)(4)(B)(ii) of the Act allows a six-month period of time 
during which the child could have been living with an interim 
caretaker. Under these circumstances, a child can be considered AFDC 
eligible in the month of the voluntary placement agreement or petition 
if: (1) The child had been living with the specified relative at some 
time within the six-month period prior to that month; and (2) would 
have been eligible in the home of the specified relative in that month 
if he or she had continued to reside with the relative.
    Comment: One commenter asked if there must be a physical removal 
for a child who lives with the same relative after legal custody is 
transferred to the State.
    Response: Two possible scenarios can be derived from this question. 
In the first, a child is living with his or her parent, custody is 
transferred to the State but the child remains in the home of the 
parent. In this situation, the child is not in foster care and 
ineligible for title IV-E foster care. However, in a second scenario, 
the child is living with a related interim caretaker for less than six 
months prior to the State's petition to the court for removal of the 
child, and custody is removed from the parent. The related caretaker is 
licensed as a foster family home and the child continues to live in 
that home. In this situation, the child remains with the related 
caretaker, who is now a licensed foster parent, and the child is 
eligible for title IV-E foster care.
    Comment: One commenter asked whether the child must have been 
living with the specified relative from whom custody is removed. The 
commenter pointed out that, at times, a child could be absent from such 
a home for six months or longer.
    Response: Yes. The child must have been living with the specified 
relative from whom custody is removed at some time within the six-month 
period prior to the month of the voluntary placement agreement or 
initiation of court proceedings.
    Comment: One commenter questioned the State agency's ability to 
make after the fact assessments of the need for foster care placement 
when families make such placements initially without the agency's 
involvement or determination that such placement/family disruption was 
necessary. The commenter expressed concern that this could create an 
incentive to get higher foster care rates in lieu of lower TANF rates.
    Response: The purpose of title IV-E foster care is to provide 
assistance for the maintenance of AFDC-eligible children who cannot 
remain safely in their own homes. It is not for the purpose of 
maintaining children in the homes of noncustodial relatives when 
protection in their own home is not an issue. The revised policy 
assures equitable treatment for relative and nonrelative interim 
caretakers when the

[[Page 4065]]

child can no longer remain safely with the parent or other custodial 
relative. There are, however, certain requirements that must be met for 
AFDC-eligible children in every case: (1) There must be either a 
voluntary placement agreement between the custodial relative and the 
State agency, or court findings that it is contrary to the child's 
welfare to remain at home and that reasonable efforts have been made to 
prevent placement; (2) the foster care provider's home (whether related 
or not) must be fully licensed or approved in accordance with the State 
licensing standards; and (3) the protective and permanency requirements 
in the Act must be met. We want to emphasize that title IV-E foster 
care funds are available only when the child is at-risk in his or her 
own home and all other eligibility criteria are met.

Section 1356.21(m)  Review of Payments and Licensing Standards

    This section sets forth the State plan requirement regarding review 
of the appropriateness of payments under title IV-E, as well as State 
licensing/approval standards for foster homes. No comments were 
received on this paragraph and therefore we made no changes to the 
regulation.

Section 1356.21(n)  Foster Care Goals

    This section provides the requirements related to foster care goals 
that must be established by States.
    Comment: One commenter requested an explanation of the criteria for 
these goals, and who will identify the goals.
    Response: The criteria for establishing these goals, and who will 
identify the goals, is left to the individual States to determine. One 
example would be to set goals to reduce the number of children, in a 
given year, who have remained in foster care for at least 24 months by 
a certain percentage for each succeeding year and provide the steps 
that the State will take to achieve these incremental reductions. 
States also may want to align their foster care goals with those used 
for the annual report on State performance under section 479A of the 
Act.

Section 1356.21(o)  Notice and Opportunity To Be Heard

    This section implements the new requirement of the case review 
system that mandates giving notice of hearings and an opportunity to be 
heard to foster parents, preadoptive parents and relative caregivers.
    Comment: We received several comments concerning the notification 
process for this requirement. Some commenters suggested that the 
regulation not be prescriptive concerning who must provide the notice, 
while others recommended that we clarify the manner in which the notice 
is given and who is responsible for providing the notice. One commenter 
cautioned that we not presume that foster parents will receive notice 
in the same manner as other parties. Another commenter suggested that 
the State agency be responsible for providing notice. One commenter 
raised a concern that more court hearings could occur as a result of 
improper notice. Another commenter recommended that we state the intent 
of this provision is for notice to be given in a timely manner and that 
the hearings be conducted in a location accessible to the child's 
family.
    Response: We concur with the commenters who suggested that the 
regulation not be prescriptive with respect to who must provide the 
notice of the opportunity to be heard. Since the State title IV-B/IV-E 
agency has the ultimate responsibility for implementing the case review 
system requirements in section 475(5)of the Act and we do not regulate 
the courts, we believe that such decisions are best left to the State. 
Although we expect that a State will choose to use the same procedure 
for giving notice to foster parents, relative caretakers, and 
preadoptive parents as it does for the parents and others who are 
parties to the case, this is a State decision.
    We also agree with the comment that suggested we clarify that the 
notification of the opportunity to be heard be given in a timely manner 
and have revised paragraph (o) accordingly. The right to notification 
of an opportunity to be heard is meaningless unless the individuals are 
notified of the opportunity to be heard at the review or hearing in a 
timely manner.
    In addition, we understood the suggestion that we require that the 
location of the reviews and hearings be accessible to parents to mean 
the parents from whom the child was removed and not the foster parents, 
preadoptive parents or relative caretakers. We did not revise the 
regulation as a result of this comment since such a requirement is not 
covered by the statutory provision, the purpose of which is to afford 
the primary caregivers for a child who is in an out-of-home placement 
the opportunity to provide relevant information about the child at the 
review and hearing.
    Comment: One commenter suggested that the regulatory language for 
this section be the same as that in the Act.
    Response: These regulations implement the Act and clarify for 
States the requirements related to the statutory provisions. We believe 
that this section needs additional language to clarify the statutory 
provisions and therefore have not revised the regulation in the 
suggested manner.
    Comment: One commenter suggested that we require States to provide 
extended family members with written notice of a child's entrance into 
foster care, timelines and permanency goals.
    Response: States are not prohibited from providing extended family 
members with written notification of a child's entrance into foster 
care, if doing so is appropriate for the situation, in the best 
interests of the child, and consistent with the administration of the 
State's title IV-E State plan. However, we believe that the suggestion 
goes beyond the statutory authority; therefore we have not made this a 
requirement in the regulation.
    Comment: One commenter requested more guidance on what 
documentation the State has to give caregivers, e.g., court reports, in 
preparation for their appearance in court. This commenter also 
requested that we require States to provide notice to caregivers who 
have had the child for at least three months during the two years 
preceding the hearing.
    Response: The requirement that States give foster parents, 
preadoptive parents and relative caretakers notice of and an 
opportunity to be heard affords these individuals with a right to 
provide input to these reviews and hearings. However, it does not 
confer a right to appear in person at the review or hearing. The 
requirement can be met as the State sees fit, such as by notification 
to the individuals that they have an opportunity to attend the review 
or hearing and provide input, or notification that they can provide 
written input for consideration at the review or hearing. Since this 
provision does not make these individuals a legal party to the case and 
does not give them a right to appear at the review or hearing, it is up 
to the State to determine what documentation, if any, to provide, 
consistent with Federal and State confidentiality laws.
    In addition, requiring that a State provide notice of an 
opportunity to be heard to previous caregivers goes beyond the 
statutory language. The statute requires only that notice be given to 
caregivers ``providing care'' for the child. This does not, however, 
prohibit a State from offering previous caregivers the opportunity to 
be heard, if the State determines it is appropriate for a particular 
child's situation.

[[Page 4066]]

    Comment: We received several comments requesting clarification 
around the types of hearings these individuals should be attending, and 
the extent of their participation in the hearings. One commenter 
recommended that the regulation clearly lay out the types of hearings 
at which foster parents, preadoptive parents and relative caretakers 
have notice/ opportunity to be heard. Some commenters pointed out that 
section 475(5)(G) of the Act gives foster parents, preadoptive parents, 
and relative caregivers the right to notice and the opportunity to be 
heard at ``any review or hearing,'' and is not limited to ``any review 
or permanency hearing.'' However, one commenter did not feel it would 
make sense to give them the opportunity to participate in purely 
procedural hearings, such as discovery hearings or hearings addressing 
purely legal issues. One commenter requested that HHS delete the 
requirement that these individuals be provided an opportunity to be 
heard at the six-month case reviews, and that the decision to invite 
individuals other than the biological parents should be made on a case-
by-case basis.
    Response: The proposed regulation provides the types of hearings 
and reviews that require notice and an opportunity to be heard for 
foster parents, preadoptive parents and relative caretakers. We made a 
minor revision to the regulatory language, however, to clarify that the 
review is the six-month periodic review as described in section 
475(5)(B) of the Act. We did not make any further revisions as a result 
of these comments as we do not believe that they can be supported by 
the statute. The statute specifically requires that these caretakers be 
provided notice and an opportunity to be heard at ``any review or 
hearing'' held with respect to the child. We, therefore, do not have 
the statutory authority to waive that requirement by allowing a State 
to determine on a case-by-case basis whether these caretakers should be 
provided an opportunity to be heard at the reviews. Also, as stated 
above, the notice and opportunity to be heard does not mean that these 
individuals have to be invited to the reviews and hearings. This 
requirement can be met by providing the caretakers with an opportunity 
to present either written or oral input that can then be considered at 
the review or hearing.
    Comment: Some commenters suggested that these individuals should 
not have the right to be present during entire hearings or access to 
confidential information regarding biological parents that is likely to 
be disclosed in a full hearing.
    Response: We believe that the regulation is consistent with the 
statute with respect to the rights of the foster parents, preadoptive 
parents and relative caretakers regarding this provision and, 
therefore, did not make any changes. The provision only offers an 
opportunity to be heard and does not afford these individuals standing 
as a party in the case. As discussed in the preamble of the NPRM, the 
court, however, is not precluded from making appropriate rulings with 
respect to any of these individuals. Rather than prescribing in 
regulation that these individuals cannot be present during the entire 
hearing or be provided with confidential information, we believe those 
decisions are best left to the State and the court to determine, 
consistent with Federal and State confidentiality laws and the best 
interests of the child.
    Comment: We received several comments concerning legal standing and 
party status for foster and preadoptive parents and relative 
caregivers. One commenter suggested adding language to the effect that 
the court can give standing to these individuals, and further 
recommended that the States set criteria for receiving standing, such 
as when the child has been in a particular foster home for a year. One 
commenter believes that these individuals need not be given the right 
to legal counsel because they do not have standing.
    Response: State courts have the authority to make appropriate 
rulings with respect to these individuals. We believe that to impose 
requirements on States related to standing goes beyond the intent of 
the provision. In addition, the right to provide input on a case at a 
hearing does not convey the right to legal counsel to these 
individuals. We have not made any changes to the regulation in response 
to these comments.

Section 1356.22  Implementation Requirements for Children Voluntarily 
Placed in Foster Care

    This section sets forth requirements States must meet to receive 
Federal financial participation (FFP) for children removed from home 
under a voluntary placement agreement.
    Comment: We received several comments expressing concern around the 
application of the TPR requirement to children voluntarily placed in 
foster care. Some commenters believe that application of the TPR 
provision to this population goes beyond the statute. One commenter 
requested that unaccompanied refugee minors placed voluntarily be 
exempt from the TPR provision.
    Response: We do not have the statutory authority to provide an 
exemption from the requirement to file a TPR for particular populations 
of children. Thus, we did not change the regulation to provide an 
exemption for children, including unaccompanied refugee minors, placed 
in foster care by a voluntary placement agreement. The TPR requirement 
is designed to encourage State agencies to make timely decisions about 
permanency for children in foster care. Congress developed the TPR 
provision to be applied to all children in foster care, whatever their 
entry point into the system. Exempting groups of children from the 
requirements would be contrary to ASFA's goal to shorten a child's time 
in foster care. Exceptions to the requirement to file a petition for 
TPR must be applied on a case-by-case basis considering the best 
interests of the child, consistent with Sec. 1356.21(i)(2).
    Comment: Many commenters expressed concern that there are 
insufficient protections for parents who voluntarily place their 
children in foster care, and that States have an affirmative obligation 
to notify parents of the ASFA requirements. Some commenters suggested 
that States be required to provide written notification to the parents 
or guardian at the time they voluntarily place their children in foster 
care of the requirements for periodic reviews, case plans, permanency 
hearings, and the TPR provisions.
    Response: The statute and the regulation provide sufficient 
protections to parents who voluntarily place their children in foster 
care. Section 472(f)(2) of the Act requires that the voluntary 
placement agreement specify, at a minimum, the legal status of the 
child and the rights and obligations of the parents or guardian, the 
child, and the agency while the child is in an out-of-home placement. 
Further, the statute at section 472(g) of the Act suggests that a 
voluntary placement agreement is a temporary status, such that the 
parents or guardian have the capacity and right to revoke such 
agreement unless a court determines that return to the home would be 
contrary to the best interests of the child. The regulation at 
Sec. 1356.22(c) emphasizes the rights of the parents in this regard as 
it requires the State to have uniform procedures, consistent with State 
law, for revocation by the parents of a voluntary placement agreement. 
In addition, the regulation at Sec. 1356.21(g) requires that the case 
plan be developed jointly with the parent or guardian. Furthermore, it 
is incumbent

[[Page 4067]]

upon the State to work toward a timely reunification when the case plan 
goal is to return the child to his or her parents or guardian. We, 
therefore, do not believe that it is necessary to further prescribe 
what the State must present to the parents or guardian when they 
voluntarily place a child in foster care.
    Comment: One commenter was opposed to the requirement that States 
establish a procedure for revocation of a voluntary placement agreement 
by the parents. The commenter believed that this is an unnecessary 
requirement unless the Department has evidence suggesting that parents 
have difficulty revoking these agreements and having their children 
returned.
    Response: The requirement that States establish a procedure for 
revocation of a voluntary placement agreement is not new. This has been 
included in the voluntary placement agreement requirements since the 
regulations were issued in 1983. In fact, at that time, the Department 
determined that since the practice among States in returning children 
voluntarily placed is sufficiently responsive, we did not need to 
impose further requirements on States to specify the timing and 
procedures for the return home of a voluntarily placed child, as public 
comment had suggested at that time. We believe the requirement that the 
State have uniform procedures, consistent with State law, for 
revocation of such agreements provides a safeguard for parents who 
voluntarily place their children into foster care and, therefore, did 
not revoke this requirement.
    Comment: One commenter suggested that Sec. 1356.22(a)(3) be revised 
to read, ``45 CFR 1356.21 (f), (g), (h), and (i).''
    Response: We concur with these comments and have amended the 
regulation accordingly. We agree that paragraph (f) should be included 
since it sets forth the sections of the statute to which a State must 
adhere in order to meet the case review system requirements. The case 
review system applies to all children in foster care, including 
children placed through a voluntary placement agreement. In addition, 
we concur with the inclusion of Sec. 1356.21(g) in this provision since 
the State is required to develop a case plan for each child in foster 
care, including those voluntarily placed. We also agree with the 
exclusion of paragraph (j) since that sets forth the requirements for 
an infant born to, and placed with, a minor parent who is in foster 
care.

Section 1356.30  Safety Requirements for Foster Care and Adoptive Home 
Providers

    This section pertains to safety requirements for foster care and 
adoptive home providers, and sets forth conditions under which States 
cannot license or approve foster and adoptive homes if the State finds 
that prospective foster or adoptive parents have been convicted of 
certain crimes.
    Comment: We received several comments and questions regarding the 
application of the criminal records check requirement to the 
individuals and groups contained within the definition of foster care 
in Sec. 1355.20 of the regulation. Some commenters recommended that the 
criminal records check provision not be applied to child care 
facilities or to unlicensed relatives. One commenter suggested that 
child care facilities not be included in the requirement, but that upon 
discovery of a criminal record, the facility be required to undertake 
corrective action.
    Response: To address these comments, we would like to clarify the 
requirements for States that institute the criminal records check 
provision and the requirements for States that do not. The criminal 
records check provision does not extend to child care facilities; the 
statute specifically limits this requirement to prospective foster and 
adoptive parents. However, in order to be an eligible provider for 
title IV-E funding purposes, in all cases where no criminal records 
check is conducted, the licensing file must include documentation that 
safety considerations with respect to the caretakers have been 
addressed. This safety documentation requirement applies to child care 
institutions in every situation and to prospective foster and adoptive 
parents in States that opt out of the criminal records check provision. 
Since this provision is a title IV-E funding requirement, it does not 
extend to relative homes that are not licensed or approved in 
accordance with State licensing standards because children placed in 
such homes are not eligible for title IV-E funding.
    Comment: Two commenters asked if this section applies to currently 
licensed foster parents and approved adoptive parents whose licensure 
or approval predates the passage of ASFA.
    Response: The provision applies to ``prospective'' foster and 
adoptive parents. Therefore, the provision applies to foster and 
adoptive parents who are licensed or approved after the date of 
enactment of the law (November 19, 1997), or the approved delayed 
effective date if the State required legislation to implement the 
provision.
    Comment: A commenter requested that we extend the requirements for 
a criminal records check by encouraging States to complete checks for 
any member of the household over the age of 18.
    Response: To require that a State conduct criminal records checks 
for anyone other than prospective foster and adoptive parents goes 
beyond the statute.
    Comment: One commenter requested clarification that this provision 
not be interpreted to require prospective foster/ adoptive parents to 
be U.S. residents for the last five years. The commenter expressed 
belief that such an interpretation would be unfair to prospective 
caretakers of refugee minors.
    Response: This provision does not impose a time-specified U.S. 
residency requirement on prospective foster and adoptive parents. 
However, for the State to claim title IV-E funds on behalf of a foster 
or an adoptive child, the prospective parent and the child must meet 
the requirements in the Personal Responsibility and Work Opportunity 
Reconciliation Act (PRWORA) of 1996 related to qualified aliens. ACYF-
CB-PIQ-99-01 provides guidance with respect to when alien foster and 
adoptive parents and children can be eligible for title IV-E.
    Comment: Several comments were received requesting flexibility in 
awarding adoptive/foster home licenses to individuals who have been 
convicted of certain crimes within the last five years. There is a 
concern regarding the requirement to automatically deny eligibility to 
prospective adoptive and foster parents who have had drug convictions 
within five years. It was recommended that States be allowed to make 
individual assessments of the prospective parent's ability to care for 
a child. Also, it was recommended that States have flexibility in 
decisions concerning rehabilitated relatives.
    Response: The statute is very explicit in specifying that in such 
situations ``final approval shall not be granted.'' We, therefore, did 
not make the suggested changes because the statute does not support 
such an interpretation.
    Comment: One commenter recommended that the phrase in 
Sec. 1356.30(b)(4), ``violent crime, including rape, sexual assault * * 
*,'' be revised to reflect the ASFA language of ``crime involving 
violence.'' The commenter was concerned that certain nonviolent crimes, 
such as robbery, may involve violent actions that should be considered 
when determining the

[[Page 4068]]

suitability of prospective foster and adoptive parents.
    Response: We concur with this comment and have revised the 
regulation to reflect the statutory language.
    Comment: A commenter expressed concern with the inconsistency of 
allowing States to reunite children with biological parents who have 
committed certain crimes, but denying child placements with foster or 
adoptive parents who have committed these same crimes.
    Response: We do not believe the statute is inconsistent in this 
regard. Although the safety of children is the paramount concern in 
both in-home and out-of-home situations, biological parents, who have 
certain rights with respect to their children, cannot be compared to a 
foster parent, who is a substitute caretaker when the child cannot be 
maintained safely in his or her own home. It is up to a State's 
discretion to determine, in individual cases, whether a child and 
biological parent should be reunited in cases where the parent has been 
convicted of certain crimes. It also is incumbent upon the State in its 
custodial role of a child to provide scrutiny of its foster parents to 
assure they meet certain established safety (and other) standards 
before a child is placed in the home.
    Comment: A question was raised about whether ``a drug-related 
offense'' includes an alcohol-related felony conviction.
    Response: The criminal records check provision at section 
471(a)(20)(A) of the Act would apply in such situations. Alcohol is 
considered a drug and a felony conviction for an alcohol-related 
offense is a serious crime. Therefore, unless the State opts out of the 
provision, an alcohol-related felony conviction within the last five 
years would prohibit the State from placing children with the 
individual for the purpose of foster care or adoption under title IV-E.
    Comment: One commenter supported the criminal records check 
provision, but raised a concern that prospective foster and adoptive 
parents not be subjected to duplicate or multiple requirements when 
several jurisdictions, with differing licensing and background checks, 
are involved. The commenter noted that involvement of multiple 
jurisdictions in an adoption may sometimes become a stumbling block to 
achieving permanency and finalizing adoptions.
    Response: This issue is a matter of State discretion. The criminal 
records check provision is intended to assure the safety of children in 
foster care and adoptive placements. The State agency is responsible 
for determining the type of background checks necessary to meet the 
safety standards established by the State.
    Comment: A commenter requested clarification concerning which 
criminal records check provisions apply to title IV-B and which apply 
to title IV-E. The commenter believes that Sec. 1356.30(b), (c), and 
(d) are requirements only for title IV-E, and that (e) should be for 
children in licensed homes receiving title IV-E in States that opt out 
of the criminal records check requirement. The commenter suggests that 
an additional item (f) be added to address safety as a title IV-B 
requirement for all non-title IV-E out-of-home placements.
    Response: The criminal records check requirement is both a title 
IV-E State plan provision and an eligibility requirement for title IV-E 
funding. The specific statutory language of the provision limits its 
authority to eligibility for the title IV-E foster care maintenance 
payment and adoption assistance programs under a State's title IV-E 
State plan. We, therefore, do not have the statutory authority to apply 
the requirement for criminal records checks to all non-title IV-E out-
of-home placements of children and did not make this change in the 
regulation.
    The regulation at Sec. 1356.30(e), as proposed in the NPRM, would 
apply more broadly than only to those States that opt out of the 
criminal records check requirement. Since we may not have made this 
clear, we have separated the requirements of this paragraph into two 
sections for the final rule to clarify the criteria for title IV-E 
eligibility. We revised Sec. 1356.30(e) to apply only in States that 
opt out of the criminal records check. We also added a paragraph (f) to 
set forth the safety requirements that must be addressed for child care 
institutions, which are not covered under the criminal records check 
provision. This revision only clarifies the requirements; it does not 
change the substance of the requirements in any way.
    Comment: We received several comments concerning the inability to 
claim title IV-E until the criminal records check is completed. 
Commenters noted that the length of time required to complete 
background checks, particularly Federal Bureau of Investigations (FBI) 
checks, unfairly penalizes States. Several commenters recommended that 
States be allowed to claim FFP retroactively to the date of placement 
once the criminal records check has been completed, while others 
suggested that HHS allow provisional licensure for up to six months as 
long as application for the criminal records check is made within 30 
days of placement. Another commenter suggested that States be allowed 
to claim FFP if the safety of the placement is documented, including 
checking the names of prospective parents against the State's child 
abuse registry, while awaiting completion of the background check.
    Response: Federal matching funds for payments to foster family 
homes under title IV-E cannot be permitted until all State requirements 
for licensure are satisfied. Further, the criminal records check 
provision restricts eligibility for title IV-E funding until after the 
home has been finally approved for the placement of a title IV-E 
eligible child. In fact, the plain language of the criminal records 
check provision requires such checks on prospective foster and adoptive 
parents ``before'' the parent can be approved for ``placement of a 
child'' for whom foster care maintenance payments or adoption 
assistance payments ``are to be made.'' Accordingly, to allow a State 
to claim retroactively back to the date of placement would be in 
conflict with the statute which bases foster family home eligibility on 
licensure or approval of the home, including completion of a criminal 
records check.
    However, we recognize that some time may elapse between the date 
the requirements are satisfied and the date on which the license or 
approval actually is issued to the foster home. We have concluded that 
60 days is an ample period of time to allow between the time the State 
receives all the information on a home that is required to fully 
license or approve it and the date on which such license or approval is 
issued. Therefore, we have revised the definition of ``foster family 
home'' in the regulation to allow a State to claim title IV-E 
reimbursement for a period, not to exceed 60 days, between satisfaction 
of the approval or licensing requirements and the actual issuance of a 
full license or approval. This accommodation does not conflict with the 
statutory requirement that all licensure requirements must be satisfied 
before a foster home is eligible for title IV-E funding. Rather, it is 
recognition that a period of time may elapse between when the 
eligibility criteria are met and the time it takes a State to issue a 
license or approval.
    Comment: One commenter opposed linking criminal records checks to 
title IV-E eligibility.
    Response: Since the requirement for criminal records checks is 
statutorily linked to title IV-E eligibility, we did not change the 
regulation.

[[Page 4069]]

    Comment: One commenter requested that we specify that the costs of 
conducting criminal records checks are allowable administrative costs 
under title IV-E.
    Response: The regulations at Sec. 1356.60(c)(2) allow States to 
claim costs associated with the recruitment and licensing of foster 
homes as administrative costs under title IV-E. ACYF-PA-83-01 
identifies additional allowable administrative costs specific to the 
title IV-E adoption assistance program. Since the criminal records 
check provision is a condition of licensure or approval in States that 
do not opt out of the provision, costs associated with criminal records 
checks for prospective foster and adoptive parents are allowable under 
title IV-E when claimed pursuant to an approved cost allocation plan. 
No revisions were made to this section of the regulation since this is 
already covered in Sec. 1356.60 which addresses fiscal requirements for 
title IV-E.
    Comment: We received many comments concerning the levels of 
background checks required, e.g., local, State, and Federal. Comments 
ranged from those that approve of State discretion in deciding what 
level of checks to conduct, to those that believe HHS should require 
both State and Federal background checks. One commenter suggested that 
we require all States to conduct Federal criminal records checks on 
prospective parents who have been living in a State for less than two 
years, while another suggested we require States to conduct background 
checks in States where the prospective parent previously resided.
    Response: We have carefully considered the comments in this area. 
We concur with the commenters who approved of State discretion with 
respect to the level of background checks to conduct and, therefore, 
did not make any changes to the regulation. Although the comments with 
respect to expanding the criminal records check requirement were good 
suggestions, we believe that, in the absence of any statutory direction 
in this area, such decisions are best left to the State. We do, 
however, encourage States to be thorough in their safety assessments of 
foster homes and to utilize the information sources available to them 
to the fullest extent possible to assure the safety of children in out-
of-home placements.
    Comment: We received some comments suggesting that HHS require more 
extensive background checks, including child abuse registries, domestic 
violence registries, and adult protective services records.
    Response: These are good suggestions and we encourage States to 
routinely include checks of State registries to assist in determining 
whether a potential foster family home is safe. However, we believe 
that to require a State to include such checks under this provision 
goes beyond the statutory authority.
    Comment: One commenter expressed concern that past suspicions of 
child abuse and neglect will be discarded, and suggested that a 
National central registry be established for child abuse and neglect 
records.
    Response: The establishment of a National central registry, and a 
requirement that States participate in such a registry, goes beyond the 
statutory authority. We did not make any changes to the regulations 
based on this comment since it does not relate directly to criminal 
records checks.
    Comment: Two commenters expressed concern that States may opt out 
of the criminal records check requirement.
    Response: The statute specifically makes the criminal records check 
requirement a State option. However, Sec. 1356.30(e) and (f) of the 
regulation require States that opt out of the requirement to address 
and document safety in foster and adoptive homes, as well as child care 
institutions.
    Comment: One commenter requested that the regulations be revised to 
specify that an Indian tribe may elect not to conduct or require 
criminal records checks on foster or adoptive parents if it obtains an 
approved resolution from the governing body of the Indian tribe.
    Response: While we understand that Tribes often license or approve 
foster homes, we are unable to modify the regulation based on this 
comment. Tribes may only receive title IV-E funds pursuant to a title 
IV-E agreement with a State. A tribe that enters into such an agreement 
must comport with section 471(a)(20) of the Act and Sec. 1356.30 in 
accordance with the State plan in order to receive title IV-E funding 
on behalf of children placed in the homes it licenses. The statute 
expressly gives the State the authority to opt out of section 
471(a)(20) of the Act through State legislation or a letter from the 
Governor to the Secretary. Agreements between the State child welfare 
agency and other public agencies or tribes permit those entities to 
have placement and care responsibility for a particular group of the 
foster care population under the approved State plan. Such agreements 
do not permit other public agencies or tribes to develop a distinct 
title IV-E program separate from that operated under the approved State 
plan.
    Comment: We received several comments asking for clarification 
concerning Sec. 1356.30(e) and the procedures and documentation 
required to show that safety considerations have been made in States 
that have elected not to conduct or require criminal records checks. 
One commenter asked for guidance on what processes and procedures 
should be in place in lieu of a criminal records check. Another 
commenter suggested that the regulations require minimum documentation, 
such as: Written results of an on-site inspection of the home, group 
care facility, or institution; a statement that the home meets the 
minimal standards for health and safety; and an assurance that the 
caregivers have plans or procedures for protecting the safety of 
children.
    Response: Although these were good suggestions, we do not believe 
that we have the statutory authority to specify the mechanism or 
documentation required to verify that safety considerations have been 
made. Although we leave that decision to the State, we continue to 
require that the licensing file for the foster family, adoptive family, 
child care institution and relative placement contain documentation 
that shows safety considerations have been addressed. In addition, we 
made a minor revision to the regulation to clarify that the 
documentation must verify that the safety considerations have been 
addressed. We strongly encourage States to conduct thorough safety 
checks and utilize all available information sources to the fullest to 
assure the safety of children in out-of-home placements.
    Comment: One commenter asked for clarification that for States that 
have elected not to conduct or require criminal records checks, title 
IV-E may be claimed as long as the licensing file contains 
documentation that safety considerations have been addressed.
    Response: We do not believe that a change is required in the 
regulation to confirm that title IV-E can be claimed in such 
circumstances. However, we have separated the requirements of this 
paragraph into two sections for the final rule to clarify the criteria 
for title IV-E eligibility. We revised Sec. 1356.30(e) to apply only in 
States that opt out of the criminal records check. We also added a 
paragraph (f) to set forth the safety requirements that must be 
addressed for child care institutions, which are not covered under the 
criminal records check provision.

[[Page 4070]]

Section1356.50  Withholding of Funds for Noncompliance With the 
Approved Title IV-E State Plan.

    Although we did not propose amendments to Sec. 1356.50 of the 
regulations in the NPRM, we are amending it in this final rule to bring 
the cross-references contained therein into conformity with the new 
regulations.

Section 1356.60  Fiscal Requirements (Title IV-E)

    This section sets for the fiscal requirements and available federal 
financial participation for title IV-E costs
    In Sec. 1356.60(b) we have made a technical amendment to the 
existing regulation with regard to matching for title IV-E training, in 
order to make it consistent with the statute. The existing regulation 
at Sec. 1356.60(c)(4) authorizes States to use administrative funds at 
a matching rate of 50% for the training of foster and adoptive parents 
and staff of licensed or approved child care institutions that provide 
care for children receiving assistance under title IV-E. The existing 
regulation also limits associated costs to per diem and travel 
expenses. Since the promulgation of that regulation, the statute has 
been amended by section 13715 of the Omnibus Budget Reconciliation Act 
of 1993, to authorize State' use of training funds at a 75% match rate 
for the short-term training of current or prospective foster or 
adoptive parents as well as staff of licensed child care institutions. 
Under the statute, a State's claims may include but are not limited to 
per diem and travel.
    The Department has followed the overriding statutory language since 
it was enacted (see ACYF-PI-94-15 and ACYF-PA-90-01). However, we would 
like to take this opportunity to make the regulatory language 
consistent with the statute. Because this change is technical in 
nature, and does not affect policy, we have included this change in 
this final rule. We are rescinding existing paragraph 
Sec. 1356.60(c)(4) and amending Sec. 1356.60(b)(1) to make this 
technical change.

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

    This section sets forth the 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.

Section 1356.71(a)  Purpose, Scope and Overview of the Process

    Comment: Three commenters were of the opinion that the title IV-E 
review, because its major focus is on documentation, is inconsistent 
with the new outcomes-based review for child and family services. Two 
commenters said that this review relies solely on individual case 
eligibility for payments absent any consideration of good casework 
practice and procedures.
    Response: The title IV-E foster care eligibility review and the 
child and family services review are different in purpose and scope. 
The purpose of the title IV-E eligibility review is to validate the 
accuracy of a State's claims to assure that appropriate payments are 
made on behalf of eligible children, to eligible homes and 
institutions, at allowable rates. These determinations are made most 
effectively by an examination of the case record and payment 
documentation. The title IV-E review has been revised, within existing 
statutory constraints, to strengthen the State and Federal partnership 
through the provision of corrective action and technical assistance. 
While we acknowledge the importance of positive outcomes for the 
children and families the title IV-E foster care program serves, we 
also acknowledge our attendant stewardship responsibility in the 
administration of this program.
    Comment: We received five comments indicating that the title IV-E 
eligibility review penalizes child welfare agencies when certain 
eligibility requirements beyond the State's control, specifically those 
related to the documentation of judicial determinations, are not met.
    Response: We recognize that child welfare agencies ultimately may 
be held accountable and lose title IV-E funding when documentation of 
the required title IV-E judicial determinations is not secured. Because 
the statute specifically requires judicial determinations regarding 
contrary to the welfare and reasonable efforts, however, we have no 
authority or flexibility to modify these requirements. Where the 
statute permits, we have afforded State child welfare agencies 
additional time to obtain the required judicial determinations.

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

    This section describes the composition of the on-site review team 
and the preliminary activities which the State must undertake prior to 
the on-site review.
    Comment: We received four comments regarding the composition of the 
review team, including requests for specific representatives on the 
team, such as State foster care review board members, child advocates, 
and individuals with expertise on unaccompanied refugee minors. One 
commenter requested that we require States to include local agency 
staff on the review team.
    Response: The purpose of the title IV-E financial review is to 
assess payment accuracy through an examination of case record 
documentation. Those individuals recommended above to participate on 
the title IV-E review team possess expertise that would be utilized 
more effectively on a review of service delivery issues, such as the 
child and family services review. During the title IV-E pilot reviews, 
we learned that the Federal/State team combination assisted States in 
identifying strategies for training, technical assistance and 
corrective action, and augmented the knowledge of State staff about 
title IV-E eligibility requirements. For these reasons, we see no 
benefit in expanding the review team composition to include external 
representatives. The State may, however, exercise its discretion in 
deciding the range of State and/or local staff to include on the team.
    Comment: One commenter noted that the requirement that the State 
submit the complete payment history records for each sample case does 
not comport with the regulation governing records retention at 45 CFR 
part 74. The commenter inquired if ACF could require States to retain 
the payment history for a child in out-of-home care for more than three 
years. We received an additional comment about the difficulty of 
obtaining the payment history for a child in care for 10 years. A third 
commenter requested clarification regarding whether complete payment 
history encompassed only the six-month period under review or the 
complete life of the case. Another commenter said that complete payment 
history should be required only when the case is determined to be 
ineligible.
    Response: There is no inconsistency between the requirement that a 
State provide the complete payment history and the regulation at 45 CFR 
74.53(b) which, in pertinent part, states that ``Financial records * * 
* shall be retained for a period of three years from the date of 
submission of the final expenditure report * * .*'' (emphasis added). 
For a child in out-of-home care, the final expenditure report would not 
be submitted to ACF until such child is discharged from foster care. 
Since the title IV-E review is designed to look at a sample of more 
recent cases and because ASFA reinforces moving

[[Page 4071]]

children to permanency more expediently, we hope not to encounter any 
case where a child has been in foster care for 10 years. In those rare 
instances where we do review such a case, however, the payment history 
must reflect the title IV-E foster care payments for the duration of 
that child's placement, irrespective of the initial date of placement, 
if the case is still open and title IV-E payments continue to be made 
on that child's behalf. For these reasons, we do not agree that this 
requirement conflicts with 45 CFR part 74 and have made no 
modifications to this section.
    We have concerns with the recommendation that the complete payment 
history be required only after a case is determined to be ineligible. 
The purpose of the title IV-E foster care eligibility review is to 
assure that appropriate payments are made on behalf of eligible 
children at allowable rates to eligible homes and institutions. Our 
experience has demonstrated that assuring that ``appropriate payments 
are made * * * at allowable rates'' is determined as the result of 
identifying duplicate payments, overpayments, underpayments, erroneous 
payments and related fiscal issues for each case under review at the 
time the case is being reviewed. Therefore, we have made no 
modification to this section.
    Comment: We received one comment that ACF should allow sufficient 
time for States to prepare for the review.
    Response: We acknowledge our responsibility to assure that States 
receive ample notice in order to prepare for a title IV-E review. We 
recognize that the specific preparation time may vary by State and may 
change as States become more familiar with the process. Taking into 
consideration the fact that Federal staff also will require time to 
prepare adequately for each review, we do not anticipate the lack of 
advance notice becoming an issue and, therefore, prefer not to regulate 
the notification period. We fully expect that States and Regional 
Offices will negotiate this aspect of the review in a mutually 
agreeable manner.

Section 1356.71(c)  Sampling Guidance and Conduct of Review

    This section describes the process to be used to select the title 
IV-E foster care sample of children to be reviewed.
    Comment: Two commenters recommended that the description of the 
alternative sampling frame to be utilized when AFCARS data are 
unavailable or deficient should specify that the period under review is 
six months.
    Response: We concur and have revised paragraph (c)(1) to clarify 
that the period under review is to be consistent with one AFCARS six-
month reporting period when an alternative sampling methodology is 
utilized.
    Comment: We received numerous comments about the sample that 
included a range of concerns regarding its statistical validity, its 
applicability to States of differing sizes with varying populations of 
children in foster care, its accuracy and its reliability. Three 
commenters questioned the rationale for random sampling as the 
preferred methodology. Several commenters objected to the error rate 
thresholds as abstract and unreasonably high. One commenter supported 
the thresholds as fair and reasonable. Several commenters urged us not 
to regulate the sampling methodology at all.
    Response: The proposed sampling methodology is designed to provide 
national consistency in sample selection, reduce the burden on States 
associated with drawing their own samples, utilize the AFCARS database, 
and assure statistical validity. In our attempt to achieve a balance 
between partnership and stewardship, we considered and evaluated 
several sampling methodologies. The methodology chosen was the result 
of internal deliberations with ACF statisticians and is similar to the 
sampling methodology deployed throughout the history of the title IV-E 
reviews, with a significant modification that affords States an 
opportunity for program improvement prior to an extrapolated 
disallowance. We chose simple random sampling as the preferred 
methodology as we believe it will result in the most representative 
sample. However, we expect that States will work closely with ACF 
statisticians in pulling a sample that is representative and fair. We 
further expect that regulating the sample will afford States and ACF 
maximum accuracy, uniformity, consistency, and reliability.
    Comment: One commenter found the terms ``first'' and ``second'' 
confusing, particularly when applied to the subsequent three-year 
reviews.
    Response: We concur and have modified this and related sections to 
use the terms ``primary'' and ``secondary,'' respectively, to describe 
the reviews. The review of 80 cases is the primary review. In those 
instances where the 15 percent threshold is exceeded and the State 
enters into a PIP, followed by a review of 150 additional cases, this 
subsequent review will be referred to as the secondary review.
    Comment: One commenter recommended that all States have an 
opportunity to have their primary review at the 15 percent threshold, 
since all primary reviews may not be completed within three years of 
the final rule. Another commenter noted that the title IV-E monitoring 
regulations do not indicate when ACF will begin conducting these 
reviews. A third commenter indicated that States should be afforded 
ample time to implement the various requirements.
    Response: We agree in principle and have modified this section 
accordingly to reflect that each State's primary review will be subject 
to the 15 percent threshold. We fully anticipate that ACF and States 
will work together to assure that the primary reviews are held within a 
reasonable period of time after publication of the final rule. In any 
event, we do not expect that States will procrastinate in scheduling 
their primary reviews once they have been approached by ACF.
    Comment: One commenter recommended that we delete the words 
``determined to be'' from the discussion of disallowances in this 
section, noting that the disallowance will be applicable for the period 
of time that the case was ineligible and not from the date the reviewer 
discovered the ineligibility.
    Response: We concur and have modified this section accordingly. Any 
disallowance will be applicable to the period of time during which the 
case is ineligible and not from the date the reviewer makes the 
determination of ineligibility.
    Comment: Several commenters recommended that the secondary review 
should be limited to cases where children entered foster care after the 
PIP was implemented. Four commenters said that the final rules should 
not apply to children who entered foster care before the rule was 
finalized.
    Response: We do not concur that the secondary review should include 
only cases of children who entered foster care after the program 
improvement plan was implemented or that the final rule apply only to 
children who entered foster care after its promulgation. We will apply 
the final rule prospectively so that States are only responsible for 
meeting the new requirements following the effective date of the final 
rule. Compliance with the requirements will be evaluated against the 
standards in effect at the time the action was taken. Therefore, the 
checklist will be modified so that we review for the ACF policy in 
effect at the time of the action and it reflects the transition time 
indicated in the pertinent sections of Secs. 1355.20 and 1356.21(b)(2) 
related to

[[Page 4072]]

licensing of foster family homes and the reasonable efforts 
determination regarding finalizing permanency plans.
    Comment: One commenter requested the discussion of the 10 percent 
and 15 percent error thresholds be clarified to make it apparent that 
the error threshold for the primary review is eight cases or fewer and 
four cases or fewer--not simply ``8'' and ``4.''
    Response: We agree and have modified the regulations such that they 
consistently express that the error threshold for the primary review is 
eight or fewer and four or fewer cases--not simply eight or four. We 
further have revised this section to clarify that the error rate 
applicable to the secondary review of 150 cases is 10%.
    Comment: One commenter requested that unaccompanied refugee minors 
be excluded from the sample of title IV-E cases reviewed.
    Response: Any child on whose behalf title IV-E payments were made 
is subject to review. No statutory basis exists to exclude any specific 
population from review and, consequently, no modifications were made to 
this section.

Section 1356.71(d)  Requirements Subject to Review

    This section describes the requirements subject to the title IV-E 
eligibility reviews.
    Comment: One commenter noted that section 475(1) of the Act was 
inappropriately cross-referenced in paragraph (2).
    Response: We concur and have changed this cross-reference to 
Sec. 1356.30 which addresses the safety requirements for foster care 
and adoptive home providers.
    Comment: One commenter suggested that all title IV-E requirements 
be reviewed, including sections 471(a)(16), 475(1) and 475(5)(B) of the 
Act which are the requirements for case plans and six-month periodic 
reviews.
    Response: The focus of the title IV-E foster care eligibility 
review is those child eligibility criteria set forth at section 
472(a)(1)-(4) of the Act and the criminal records checks required at 
section 471(a)(20) of the Act. The sections noted by the commenter are 
addressed in the child and family services review of State plan 
requirements, and we made no changes to this section.

Section 1356.71(e)  Review Instrument

    This section informs States that a checklist will be used to 
substantiate child and provider eligibility during the on-site title 
IV-E foster care eligibility review.
    Comment: Three commenters requested that the review instrument be 
made available immediately rather than upon publication of the final 
rule.
    Response: It would be premature for us to publish the review 
instrument until the rule becomes final. Once that occurs, we will 
modify the instrument to reflect the final rule and make it publicly 
available.

Section 1356.71(f)  Eligibility Determination--Child

    This section sets forth the case record requirement of 
documentation to verify a child's eligibility.
    Comment: Two commenters requested that the specific child 
eligibility requirements be included in this section.
    Response: We concur that this would be helpful to States and have 
modified this section accordingly.

Section 1356.71(g)  Eligibility Determination--Provider

    This section sets forth the requirement for the licensing file for 
each case under review.
    Comment: One commenter supports obtaining the licensing file and 
indicates that we should look ``beyond'' the actual license. Another 
commenter requested that the specific provider eligibility requirements 
be included in this section. A third commenter wanted to know the 
specific licensing standards to which States will be held accountable 
for the title IV-E foster care eligibility reviews. A fourth commenter 
requested clarification regarding the scope and extent of the provider 
review.
    Response: The State plan requirement at section 471(a)(10) of the 
Act vests the State with the responsibility for establishing minimum 
licensing standards regarding safety, admissions policies, sanitation, 
and civil rights for foster family homes and child care institutions. 
The State is required to apply its licensing standards to any foster 
family home or child care institution receiving funds under titles IV-B 
and IV-E, and for the purposes of title IV-E, only place children in 
facilities that meet the Federal definition of a foster family home or 
child care institution. However, it is not within the scope of the 
title IV-E foster care eligibility review to examine the State 
licensing standards. For the title IV-E eligibility review, we will 
determine that the foster family home or facility has a valid license 
that encompasses the period of the child's stay under review and that 
the safety requirements at Sec. 1356.30 have been addressed. We made no 
changes to the regulation as a result of this comment.
    During a title IV-E eligibility review, we will examine a 
provider's license to determine that; it is an appropriate type of 
facility (i.e., meets the definition of a foster family home or child 
care institution), the license is valid for the duration of the child's 
placement, and the safety requirements at Sec. 1356.30 have been 
addressed. We made no changes to the regulation as a result of this 
comment.

Section 1356.71(h)  Standards of Compliance

    This section defines the terms ``substantial compliance'' and 
``noncompliance,'' and describes the disallowances and program 
improvement plan process.
    Comment: One commenter indicated that reviews should be conducted 
annually, as opposed to at three-year intervals. Another commenter 
recommended that we conduct monthly audits. A third commenter suggested 
reviews at five-year instead of three-year intervals after a State 
completes its primary review.
    Response: The frequency of the title IV-E reviews is not 
statutorily mandated. We decided that three years was a reasonable time 
frame, considering that some States may be required to develop a PIP 
after their primary review. For some States, the PIP will be effective 
for as long as one year. Furthermore, the title IV-E review is not the 
sole mechanism in place to assure the propriety and accuracy of State' 
claiming procedures, since the ACF Regional Offices review the 
quarterly claims submitted by the States. For these reasons, and 
because States will be undergoing an intensive child and family 
services review following the publication of the final rule, we have 
made no modification to this section.
    Comment: One commenter was of the opinion that more meaningful 
sanctions should be imposed. Another commenter supported ACF's proposal 
for the disallowance of funds, indicating that it provides an incentive 
for States to come into compliance.
    Response: We carefully considered various options in developing the 
penalty structure for ineligible cases and believe that our proposal 
achieves the appropriate balance between partnership and stewardship. 
We have developed a more collaborative approach with the goal of 
bringing about the desired results utilizing a process that includes 
technical assistance and corrective action.

[[Page 4073]]

Section 1356.71(i)  Program Improvement Plans

    This section sets forth the requirement for States, determined not 
to be in substantial compliance, to develop a program improvement plan.
    Comment: One commenter requested that we consider a provision for a 
State to negotiate the extension of a PIP in those instances when a 
legislative amendment is necessary for the State to achieve substantial 
compliance.
    Response: We concur and have modified paragraph (i)(1)(i) to 
reflect that the duration of the program improvement plan will be 
determined jointly by the State and the ACF Regional Office, but shall 
not exceed one year, unless legislative action is required. In such 
cases, the State and ACF will negotiate the terms and length of the 
extension not to exceed the last day of the first legislative session 
after the date of the program improvement plan. We believe that this 
time frame is sufficient for a State to make necessary statutory 
changes to achieve substantial compliance.
    Comment: Several commenters said that 60 days is insufficient time 
for a State to produce a comprehensive program improvement plan, since 
such a plan will require collaboration with multiple external entities. 
Proposed time frames ranged from 120 days to two years. Some commenters 
indicated that, under exceptional circumstances, a 30-day extension 
should be an option.
    Response: An extensive period of time should not elapse from the 
completion of the on-site review to the development of the PIP. We do 
recognize, however, that occasionally circumstances may warrant the 
need for additional time for the State to collaborate with entities 
outside the child welfare agency, e.g., the court system. We have, 
therefore, amended paragraph (i)(2) to reflect a modification from 60 
days to 90 days for the development of the PIP.

Section 1356.71(j)  Disallowance of Funds

    This section sets describes how funds to be disallowed will be 
determined.
    Comment: Two commenters noted that we reference a nonexistent 
paragraph ``(k)'' in the NPRM.
    Response: We recognize this oversight and have removed the 
reference to paragraph (k) and clarified that, in the event that a 
State fails to submit a PIP, we will immediately proceed to the 
secondary review process.
    Comment: One commenter noted that the sample period for a review 
after the completion of a PIP should be the first full AFCARS period 
subsequent to completion of the PIP.
    Response: It is our intent to select a sample of cases from AFCARS 
for the secondary review after the PIP has been completed. In most 
instances, the most recent State AFCARS submission subsequent to the 
completion of the PIP will constitute the period under review.
    Comment: One commenter recommends that the first review under the 
new protocol should be a joint pilot review with no disallowances taken 
in order to demonstrate ACF's assertion that the primary objectives of 
the reviews include promoting federal/state partnerships, focusing on 
program improvements and generating useful information.
    Response: We conducted 12 title IV-E foster care eligibility pilot 
reviews over the past three years to inform the development of the new 
protocol. States were afforded many opportunities to volunteer for 
these pilots. We do not concur with the recommendation that we defer 
sanctions until after the primary review, since in the development of 
the process we already have suspended disallowances for more than three 
years.
    Comment: One commenter requested clarification regarding the term 
``universe of claims paid.'' Another commenter requested clarification 
regarding the scope of the title IV-E foster care disallowance and what 
was included in it.
    Response: The term ``universe of claims paid'' means the Federal 
share of allowable title IV-E foster care maintenance payments and 
administrative costs for the period of time the case is ineligible. All 
title IV-E funds expended during the quarter(s) the case is ineligible 
will be subject to disallowance, including funds for administrative 
costs. We have revised this paragraph in the final rule to specify 
which funds will be reduced.

Part 1357--Requirements Applicable to Title IV-B

Section 1357.40  Direct Payments to Indian Tribal Organizations (Title 
IV-B, Subpart 1, Child Welfare Services)

    This section provides the requirements for Indian Tribal 
Organizations to apply for and receive direct funds under title IV-B, 
subpart 1.
    We made a technical change to Sec. 1357.40 in the final rule to 
incorporate a 1995 change to the regulation that was mistakenly 
eliminated by a subsequent final rule. On June 2, 1995, we published a 
final rule (60 FR 28735-28737) amending the regulations governing 
direct payments to Indian Tribal Organizations (ITOs) for child welfare 
services. The revised regulations added a description of the formula 
used to calculate the amount of Federal funds available to eligible 
ITOs under title IV-B. A new paragraph, Sec. 1357.40(g)(6), was added 
to implement the new formula. On November 18, 1996, we published a 
comprehensive final rule for title IV-B, Child and Family Services (61 
FR 58632-58663), which amended Sec. 1357.40 and inadvertently omitted 
the paragraph including the grant formula for ITOs.
    We are taking this opportunity to restore the grant formula for 
ITOs to the regulation as we have been using this formula since it was 
effective in FFY 1996 (see ACYF-IM-CB-95-28). We have, therefore, made 
a technical amendment to add the grant formula in a new paragraph, 
Sec. 1357.40(d)(6).

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 final 
rule amends existing regulations concerning 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), and implements the provisions of the Social Security Act 
Amendments of 1994 (Pub. L. 103-432), the Multiethnic Placement Act 
(MEPA) as amended by Public Law 104-188, and certain provisions of the 
Adoption and Safe Families Act (ASFA) of 1997 (Pub. L. 105-89).
    In addition, this final rule sets forth regulations that clarify 
certain eligibility criteria that govern the title IV-E foster care 
eligibility reviews that the Administration on Children, Youth and 
Families (ACYF) conducts to ensure a State agency's compliance with 
statutory requirements under the Act.
    We received no comments on this section.

Executive Order 13132

    Executive Order 13132 on Federalism applies to policies that have 
federalism implications, defined as ``regulations, legislative comments 
or proposed legislation, and other policy statements or actions that 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government.'' 
This rule does not have federalism implications as defined in the 
Executive Order.

[[Page 4074]]

Family Well-Being Impact

    As required by Section 654 of the Treasury and General Government 
Appropriations Act of 1999, we have assessed the impact of this final 
rule on family well-being. The final rule implements requirements of 
titles IV-B and IV-E of the Social Security Act relating to Federal 
monitoring and oversight of State child welfare programs. The rule will 
promote child safety, child and family well-being and permanence for 
those children who must be removed from their families temporarily to 
assure their safety. The final rule will help to ensure that States are 
taking appropriate steps to protect children and to strengthen, support 
and stabilize both biological and adoptive families.

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 nonprofit 
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.
    We received no comments on this section.

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).
    Comment: One commenter argued that the regulation was not in 
compliance with the Unfunded Mandates Reform Act (UMRA) because the 
ASFA requirements significantly increase the administrative burden and 
cost for State courts and agencies, which are not offset by an increase 
in Federal funding.
    Response: Section 201 of the UMRA states that, ``[e]ach agency 
shall, unless otherwise prohibited by law, assess the effects of 
Federal regulatory actions on State, local, and tribal governments, and 
the private sector (other than to the extent that such regulations 
incorporate requirements specifically set forth in law).'' The UMRA is 
not applicable to the codification of the ASFA requirements because 
they are specifically set forth in law. Rather, it is the requirements 
and procedures of the child and family services review and the title 
IV-E eligibility review processes which come under the auspices of the 
UMRA.
    This final 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 each year 
and that, each year, approximately five States will be required to 
complete a corrective action plan in response to section 471(a)(18) 
compliance issues, for an annual cost of $352,420. This estimate is 
based on the burden hours associated with each information collection 
identified in the ``Paperwork Reduction Act'' section.

Congressional Review

    This rule is not a major rule as defined in 5 U.S.C., Chapter 8.

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 final rule 
contains information collection requirements in certain sections that 
the Department has submitted to OMB for its review.
    The sections that contain information collection requirements are: 
1355.33(b) on statewide assessments, and (c) on-site review; 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 requires this collection of 
information: (1) In order to review State' compliance with the 
provisions of the statute and implementing regulations of titles IV-B 
and 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.
    Comment: A few commenters noted that the estimate for the burden 
hours associated with Sec. 1355.33(c), the on-site portion of the child 
and family services review, was too low. The commenters observed that 
extensive training is required to prepare reviewers.
    Response: We agree and have amended the estimate accordingly. In 
addition, we have significantly increased the estimated burden for the 
on-site portion of the child and family services review to account for 
the logistics associated with scheduling interviews.

----------------------------------------------------------------------------------------------------------------
                                                                                          Average
                                                                            Number of      burden       Total
             Collection                      Number of respondents          responses    hours per      burden
                                                                                          response      hours
----------------------------------------------------------------------------------------------------------------
1355.33(b)--Statewide assessment....  17--State agencies administering              17          240        4,080
                                       the title IV-B & E Programs.
1355.33(c)--On-site review..........  17--State agencies administering             595           18       10,710
                                       the title IV-B & E programs.
1355.35(a)--Program improvement plan  17--State agencies administering              17           80        1,360
                                       the titles IV-B & IV-E programs.
1355.38(b) and (c)--Corrective        5--State agencies administering                5           80          400
 action plan.                          titles IV-B and IV-E.
1356.71(i)--Program improvement plan  17--State agencies administering              17           63        1,071
                                       the title IV-E program.
----------------------------------------------------------------------------------------------------------------


[[Page 4075]]

    We received and considered 38 letters in response to the 
preclearance Notice (63 FR 52703 (October 1, 1998)) published in order 
to obtain approval of this information collection under the Paperwork 
Reduction Act. Several commenters submitted comments on the October 1, 
1998 Notice in conjunction with their comments on the NPRM. The comment 
period for the October 1, 1998 Notice closed on December 1, 1998 while 
the comment period for the NPRM closed on December 17, 1998. In our 
opinion, to consider late comments constitutes an arbitrary extension 
of the comment period for certain groups or individuals. Those comments 
pertaining to the October 1, 1998 Notice that were submitted in 
conjunction with the comments on the NPRM were late and were not 
considered.
    In the October 1, 1998 Notice, we published, in their entirety, the 
statewide assessment, on-site review instrument, and stakeholder 
interview guide used in conducting the child and family service review. 
Overwhelmingly, the comments we received were very technical in nature. 
Commenters offered specific suggestions for rephrasing or adding 
questions, for quantifying responses, for changes in terminology, and 
for increasing the objectivity of the instruments. In response to the 
comments received, each instrument has undergone significant revision. 
We streamlined the statewide assessment so that it targets State 
performance in satisfying the relevant State plan requirements and 
reports on the statewide data indicators used for determining 
substantial conformity. The on-site review instrument and stakeholder 
interview guide have been revised to increase objectivity in drawing 
conclusions regarding the State's performance in achieving the outcomes 
and in implementing the systemic factors. Copies of the instruments 
will be distributed to all State agencies and posted on the ACF web 
site immediately following the effective date of this regulation.

List of Subjects

45 CFR Part 1355

    Adoption and foster care, Child welfare, Grant programs-Social 
programs.

45 CFR Part 1356

    Adoption and foster care, Grant programs-social programs

45 CFR Part 1357

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

    Approved: September 23, 1999.
Donna E. Shalala,
Secretary.
    Dated: August 25, 1999.
Olivia A. Golden,
Assistant Secretary for Children and Families.

    For the reasons set forth in the preamble we are amending 45 CFR 
parts 1355, 1356, and 1357 to read 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 in alphabetical order 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 or tribal licensing 
authority (with respect to child care institutions on or near Indian 
Reservations) 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 a child is considered to have entered foster care means the 
earlier of: The date of the first judicial finding that the child has 
been subjected to child abuse or neglect; or, the date that is 60 
calendar days after the date on which the child is removed from the 
home pursuant to Sec. 1356.21(k). A State may use a date earlier than 
that required in this paragraph, such as the date the child is 
physically removed from the home. This definition determines the date 
used in calculating all time period requirements for the periodic 
reviews, permanency hearings, and termination of parental rights 
provision in section 475(5) of the Act and for providing time-limited 
reunification services described at section 431(a)(7) of the Act. The 
definition has no relationship to establishing initial title IV-E 
eligibility.
* * * * *
    Entity, as used in Sec. 1355.38, means any organization or agency 
(e.g., a private child placing agency) that is separate and independent 
of the State agency; performs title IV-E functions pursuant to a 
contract or subcontract with the State agency; and, receives title IV-E 
funds. A State court is not an ``entity'' for the purposes of 
Sec. 1355.38 except if an administrative arm of the State court carries 
out title IV-E administrative functions pursuant to a contract with the 
State agency.
    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 preadoptive 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 an 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, 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. 
``Daily supervision'' for which foster care maintenance payments may be 
made includes:
    (1) 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

[[Page 4076]]

judicial reviews, case conferences, or foster parent training. Payments 
to cover these costs may be: included in the basic foster care 
maintenance payment; a separate payment to the foster parent, or a 
separate payment to the child care provider; and
    (2) Child care institutions--routine day-to-day direction and 
arrangements to ensure the well-being and safety of the child.
    Foster family home means, for the purpose of title IV-E 
eligibility, the home of an individual or family licensed or approved 
as meeting the standards established 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. 
Anything less than full licensure or approval is insufficient for 
meeting title IV-E eligibility requirements. States may, however, claim 
title IV-E reimbursement during the period of time between the date a 
prospective foster family home satisfies all requirements for licensure 
or approval and the date the actual license is issued, not to exceed 60 
days.
    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 
statewide 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 Treatment Act (Pub. L. 
93-247), as amended.
    Partial review means:
    (1) For the purpose of the child and family services review, the 
joint Federal and State review of one or more federally-assisted child 
and family services program(s) 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; and
    (2) For the purpose of title IV-B and title IV-E State plan 
compliance issues that are outside the prescribed child and family 
services review format, e.g., compliance with AFCARS requirements, a 
review of State laws, policies, regulations, or other information 
appropriate to the nature of the concern, to determine State plan 
compliance.
    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 the child will be:
    (i) Returned to the parent;
    (ii) Placed for adoption, with the State filing a petition for 
termination of parental rights;
    (iii) Referred for legal guardianship;
    (iv) Placed permanently with a fit and willing relative; or
    (v) 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 follow one of the four specified options 
above.
    (2) The permanency hearing must be held no later than 12 months 
after the date the child is considered to have entered foster care in 
accordance with the definition at Sec. 1355.20 of this part 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 permanency hearings.
* * * * *
    Statewide 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 statewide 
assessment refers to the completion of the federally-prescribed 
assessment instrument by members of a review team that meet the 
requirements of Sec. 1355.33(a)(2) of this part.

    3. New Secs. 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 1355.37 of this part apply to 
reviews of child and family services programs administered by States 
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 four-year 
period 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 statewide assessment to ACF three years 
after the

[[Page 4077]]

on-site review. The statewide 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 
statewide assessment by ACF is required.
    (2) A State program 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) Begin a full review two years after 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 any information, regardless of the source, that indicates the State 
may no longer be operating in substantial conformity.
    (2) Prior to reinstating a full or partial review, ACF will conduct 
an inquiry and require the State to submit additional data whenever ACF 
receives information that the State may not be in substantial 
conformity.
    (3) If the additional information and inquiry indicates to ACF's 
satisfaction that the State is operating in substantial conformity, ACF 
will not proceed with any further review of the issue addressed by the 
inquiry. This inquiry will not substitute for the full reviews 
conducted by ACF under Sec. 1355.32(b).
    (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.
    (d) Partial reviews based on noncompliance with State plan 
requirements that are outside the scope of a child and family services 
review. When ACF becomes aware of a title IV-B or title IV-E compliance 
issue that is outside the scope of the child and family services review 
process, we will:
    (1) Conduct an inquiry and require the State to submit additional 
data.
    (2) If the additional information and inquiry indicates to ACF's 
satisfaction that the State is in compliance, we will not proceed with 
any further review of the issue addressed by the inquiry.
    (3) ACF will institute a partial review, appropriate to the nature 
of the concern, if the State does not provide the additional 
information as requested, or the additional information confirms that 
the State may not be in compliance.
    (4) If the partial review determines that the State is not in 
compliance with the applicable State plan requirement, the State must 
enter into a program improvement plan designed to bring the State into 
compliance. The terms, action steps and time-frames of the program 
improvement plan will be developed on a case-by-case basis by ACF and 
the State. The program improvement plan must take into consideration 
the extent of noncompliance and the impact of the noncompliance on the 
safety, permanency or well-being of children and families served 
through the State's title IV-B or IV-E allocation. If the State remains 
out of compliance, the State will be subject to a penalty related to 
the extent of the noncompliance.
    (5) Review of AFCARS compliance will take place in accordance with 
45 CFR 1355.40.


Sec. 1355.33  Procedures for the review.

    (a) The full child and family services reviews will:
    (1) Consist of a two-phase process that includes a statewide 
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 that 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 the State was required to 
consult in developing its CFSP, as described and required in 45 CFR 
part 1357.15(l);
    (iii) Federal staff of HHS; and
    (iv) Other individuals, as deemed appropriate and agreed upon by 
the State and ACF.
    (b) Statewide assessment. The first phase of the full review will 
be a statewide assessment conducted by the internal and external State 
members of the review team. The statewide assessment must:
    (1) Address each systemic factor under review, including the 
statewide information system; case review system; quality assurance 
system; staff training; service array; agency responsiveness to the 
community; and foster and adoptive parent licensing, recruitment and 
retention;
    (2) Assess the outcome areas of safety, permanency, and well-being 
of children and families served by the State agency using data from 
AFCARS, NCANDS, or, for the initial review, another source approved by 
ACF. The State must also analyze and explain its performance in meeting 
the national standards for the statewide data indicators;
    (3) Assess the characteristics of the State agency that have the 
most significant impact on the agency's capacity to deliver services to 
children and families that will lead to improved outcomes;
    (4) Assess the strengths and areas of the State's child and family 
services programs that require further examination through an on-site 
review;
    (1) Include a listing of all the persons external to the State 
agency who participated in the preparation of the statewide assessment 
pursuant to Secs. 1355.33(a)(2)(ii) and (iv); and
    (2) Be completed and submitted to ACF within 4 months of the date 
that ACF transmits the information for the statewide assessment to the 
State.
    (c) On-site review. The second phase of the full review will be an 
on-site review.
    (1) The on-site review will cover the State's programs under titles 
IV-B and IV-E of the Act, including in-home services and foster care. 
It will be jointly planned by the State and ACF, and guided by 
information in the completed statewide assessment that identifies areas 
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 and the 
State; however, the State's largest metropolitan subdivision must be 
one of the locations selected.
    (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) Interviews with caseworkers, foster parents, and service 
providers for the cases selected for the on-site review; and
    (iv) Interviews with key stakeholders, both internal and external 
to the agency, which, at a minimum, must include those individuals who 
participated in the development of the State's CFSP required at 45 CFR 
1357.15(1), courts, administrative review bodies, children's guardians 
ad litem and other

[[Page 4078]]

individuals or bodies assigned responsibility for representing the best 
interests of the child.
    (5) The sample will range from 30-50 cases. Foster care cases must 
be drawn randomly from AFCARS, or, for the initial review, from another 
source approved by ACF and include children who entered foster care 
during the year under review. In-home cases must be drawn randomly from 
NCANDS or from another source approved by ACF. To ensure that all 
program areas are adequately represented, the sample size may be 
increased.
    (6) The sample of 30-50 cases reviewed on-site will be selected 
from a randomly drawn oversample of no more than 150 cases. The 
oversample must be statistically significant at a 90 percent compliance 
rate (95 percent in subsequent reviews), with a tolerable sampling 
error of 5 percent and a confidence coefficient of 95 percent. The 
additional cases in the oversample not selected for the on-site review 
will form the sample of cases to be reviewed, if needed, in order to 
resolve discrepancies between the data indicators and the on-site 
reviews in accordance with paragraph (d)(2) of this section.
    (d) Resolution of discrepancies between the statewide assessment 
and the findings of the on-site portion of the review. Discrepancies 
between the statewide assessment and the findings of the on-site 
portion of the review will be resolved by either of the following 
means, at the State's option:
    (1) The submission of additional information by the State; or
    (2) ACF and the State will review additional cases using only those 
indicators in which the discrepancy occurred. ACF and the State will 
determine jointly the number of additional cases to be reviewed, not to 
exceed a total of 150 cases to be selected as specified in paragraph 
(c)(6) of this section.
    (e) Partial review. A partial child and family services review, 
when required, will be planned and conducted jointly by ACF and the 
State agency based on the nature of the concern. A partial review does 
not substitute for the full reviews as required under Sec. 1355.32(b).
    (f) Notification. Within 30 calendar days following either a 
partial child and family services review, full child and family 
services review, or the resolution of a discrepancy between the 
statewide assessment and the findings of the on-site portion of the 
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. ACF will determine a State's 
substantial conformity with title IV-B and title IV-E State plan 
requirements based on the following:
    (1) Its ability to meet national standards, set by the Secretary, 
for statewide data indicators associated with specific outcomes for 
children and families;
    (2) Its ability to meet criteria related to outcomes for children 
and families; and
    (3) Its ability to meet criteria related to the State agency's 
capacity to deliver services leading to improved outcomes.
    (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,
    (B) Children are safely maintained in their own homes whenever 
possible and appropriate;
    (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 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:
    (i) Met the national standard(s) for the statewide data 
indicator(s) associated with that outcome, if applicable; and,
    (ii) Implemented the following CFSP requirements or assurances:
    (A) 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;
    (B) The requirements in 45 CFR 1357.15(q) regarding the permanency 
provisions for children and families in sections 422 and 471 of the 
Act;
    (C) The requirements in section 422(b)(9) of the Act regarding 
recruitment of potential foster and adoptive families;
    (D) 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;
    (E) The requirements in section 422(b)(11) of the Act regarding the 
State's compliance with the Indian Child Welfare Act;
    (F) 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,
    (G) 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 
its performance on:
    (i) Each statewide data indicator developed pursuant to paragraph 
(b)(4) of this section meets the national standard described in 
paragraph (b)(5) of this section; and,
    (ii) Each 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.
    (4) The Secretary will, using AFCARS and NCANDS, develop statewide 
data indicators for each of the specific outcomes described in 
paragraph (b)(1) of this section for use in determining substantial 
conformity. The Secretary will add, amend, or suspend any such 
statewide data indicator(s) when appropriate. To the extent practical 
and feasible, the statewide data indicators will be consistent with 
those developed in accordance with section 203 of the Adoption and Safe 
Families Act of 1997 (Pub. L. 105-89).
    (5) The initial national standards for the statewide data 
indicators described in paragraph (b)(4) of this section will be based 
on the 75th percentile of all State performance for that indicator, as 
reported in AFCARS or NCANDS. The Secretary may adjust these national 
standards if appropriate. The initial national standard will be set 
using the following data sources:
    (i) The 1997 and 1998 submissions to NCANDS (or the most recent and 
complete 2 years available), for those

[[Page 4079]]

statewide data indicators associated with the safety outcomes; and,
    (ii) The 1998b, 1999c, and 2000a submissions to AFCARS (or the most 
recent and complete report periods available), for those statewide data 
indicators associated with the permanency outcomes.
    (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. Based on information from the statewide 
assessment and onsite review, the State must meet the following 
criteria for each systemic factor in paragraphs (c)(2) through (c)(7) 
of this section to be considered in substantial conformity: All of the 
State plan requirements associated with the systemic factor must be in 
place, and no more than one of the state plan requirements fails to 
function as described in paragraphs (c)(2) through (c)(7) of this 
section. The systemic factor in paragraph (c)(1) of this section, is 
rated on the basis of only one State plan requirement. To be considered 
in substantial conformity, the State plan requirement associated with 
statewide information system capacity must be both in place and 
functioning as described in the requirement. ACF will use a rating 
scale to make the determinations of substantial conformity. The 
systemic factors under review are:
    (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 parent' 
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 
caseworker 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 (sections 422(b)(10)(B)(ii), 471(a)(16) and 475(5)(A) 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 (sections 422(b)(10)(B)(ii), 471(a)(16) and 
475(5)(B) 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) (sections 422(b)(10)(B)(ii), 
471(a)(16) and 475(5)(C) of the Act);
    (iv) Provide a process for termination of parental rights 
proceedings in accordance with sections 422(b)(10(B)(ii), 475(5)(E) and 
(F) 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 
(sections 422(b)(10)(B)(ii) and 475(5)(G) of the Act).
    (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 Statewide 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 includes, 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 subdivisions 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

[[Page 4080]]

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 1357.16(a));
    (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
    (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), 
471(a)(20) 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 are 
made.


Sec. 1355.35  Program improvement plans.

    (a) Mandatory program improvement plan.
    (1) States found not to be operating in substantial conformity 
shall develop a program improvement plan. The program improvement plan 
must:
    (i) Be developed jointly by State and Federal staff in consultation 
with the review team;
    (ii) Identify the areas in which the State's program is not in 
substantial conformity;
    (iii)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;
    (iv) Set forth the amount of progress the statewide data will make 
toward meeting the national standards;
    (v) 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;
    (vi) Identify how the action steps in the plan build on and make 
progress over prior program improvement plans;
    (vii) 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.
    (2) In the event that ACF and the State cannot reach consensus 
regarding the content of a program improvement plan or the degree of 
program or data improvement to be achieved, ACF retains the final 
authority to assign the contents of the plan and/or the degree of 
improvement required for successful completion of the plan. Under such 
circumstances, ACF will render a written rationale for assigning such 
content or degree of improvement.
    (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 a program improvement plan to ACF for approval within 90 
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 of this 
part will begin.
    (d) Duration of program improvement plans.
    (1) ACF retains the authority to establish time frames for the 
program improvement plan consistent with the seriousness and complexity 
of the remedies required for any areas determined not in substantial 
conformity, not to exceed two years.
    (2) Particularly egregious areas of nonconformity impacting child 
safety must receive priority in both the content and time frames of the 
program improvement plans and must be addressed in less than two years.
    (3) The Secretary may approve extensions of deadlines in a program 
improvement plan not to exceed one year. The circumstances under which 
requests for extensions will be approved are expected to be rare. The 
State must provide compelling documentation of the need for such an 
extension. Requests for extensions must be received by ACF at least 60 
days prior to the affected completion date.
    (4) States must provide quarterly status reports (unless ACF and 
the State agree upon less frequent reports) to ACF. Such reports must 
inform ACF of progress in implementing the measures of the plan.
    (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

[[Page 4081]]

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 or has reached the negotiated 
standard with respect to statewide data indicators that fail to meet 
the national standard for that indicator;
    (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 and/or 
achieve a standard for the statewide data indicators that is acceptable 
to ACF;
    (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;
    (iii) The terms of the renegotiated plan are approved by ACF; and
    (iv) The Secretary approves any extensions beyond the two-year 
limit.
    (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 achieve 
substantial conformity or failure to successfully complete a program 
improvement plan.

    (a) For the purposes of this section:
    (1) The term ``title IV-B funds'' refers to the State's combined 
allocation of title IV-B subpart 1 and subpart 2 funds; and
    (2) The term ``title IV-E funds'' refers to the State's 
reimbursement for administrative costs for the foster care program 
under title IV-E.
    (b) Determination of the amount of Federal funds to be withheld. 
ACF will determine the amount of the State title IV-B and IV-E funds to 
be withheld due to a finding that the State is not operating in 
substantial conformity, as follows:
    (1) A State will have the opportunity to develop and complete a 
program improvement plan prior to any withholding of funds.
    (2) Title IV-B and IV-E funds will not be withheld from a State if 
the determination of nonconformity was caused by the State's correct 
use of formal written statements of Federal law or policy provided the 
State by DHHS.
    (3) A portion of the State's title IV-B and IV-E funds will be 
withheld by ACF for the year under review and for each succeeding year 
until the State either successfully completes a program improvement 
plan or is found to be operating in substantial conformity.
    (4) The amount of title IV-B and title IV-E funds subject to 
withholding due to a determination that a State is not operating in 
substantial conformity is based on a pool of funds defined as follows:
    (i) The State's allotment of title IV-B funds for each of the years 
to which the withholding applies; and
    (ii) An amount equivalent to 10 percent of the State's Federal 
claims for title IV-E foster care administrative costs for each of the 
years to which withholding applies;
    (5) The amount of funds to be withheld from the pool in paragraph 
(b)(4) of this section will be computed as follows:
    (i) Except as provided for in paragraphs (b)(7) and (b)(8) of this 
section, an amount equivalent to one percent of the funds described in 
paragraph (b)(4) of this section for each of the years to which 
withholding applies will be withheld for each of the seven outcomes 
listed in Sec. 1355.34(b)(1) of this part that is determined not to be 
substantially achieved; and
    (ii) Except as provided for in paragraphs (b)(7) and (b)(8) of this 
section, an amount equivalent to one percent of the funds described in 
paragraph (b)(4) of this section for each of the years to which 
withholding applies will be withheld for each of the seven systemic 
factors listed in Sec. 1355.34(c) of this part that is determined not 
to be in substantial conformity.
    (6) Except as provided for in paragraphs (b)(7), (b)(8), and (e)(4) 
of this section, in the event the State is determined to be in 
nonconformity on each of the seven outcomes and each of the seven 
systemic factors subject to review, the maximum amount of title IV-B 
and title IV-E funds to be withheld due to the State's failure to 
comply is 14 percent per year of the funds described in paragraph 
(b)(4) of this section for each year.
    (7) States determined not to be in substantial conformity that fail 
to correct the areas of nonconformity through the successful completion 
of a program improvement plan, and are determined to be in 
nonconformity on the second full review following the first full review 
in which a determination of nonconformity was made will be subject to 
increased withholding as follows:
    (i) The amount of funds described in paragraph (b)(5) of this 
section will increase to two percent for each of the seven outcomes and 
each of the seven systemic factors that continues in nonconformity 
since the immediately preceding child and family services review;
    (ii) The increased withholding of funds for areas of continuous 
nonconformity is subject to the provisions of paragraphs (c), (d), and 
(e) of this section;
    (iii) The maximum amount of title IV-B and title IV-E funds to be 
withheld due to the State's failure to comply on the second full review 
following the first full review in which the determination of 
nonconformity was made is 28 percent of the funds described in 
paragraph (b)(4) of this section for each year to which the withholding 
of funds applies.
    (8) States determined not to be in substantial conformity that fail 
to correct the areas of nonconformity through the successful completion 
of a program improvement plan, and are determined to be in 
nonconformity on the third and any subsequent full reviews following 
the first full review in which a determination of nonconformity was 
made will be subject to increased withholding as follows:
    (i) The amount of funds described in paragraph (b)(5) of this 
section will increase to three percent for each of the seven outcomes 
and each of the seven systemic factors that continues in nonconformity 
since the immediately preceding child and family services review;
    (ii) The increased withholding of funds for areas of continuous 
nonconformity is subject to the provisions of paragraphs (c), (d), and 
(e) of this section;
    (iii) The maximum amount of title IV-B and title IV-E funds to be 
withheld due to the State's failure to comply on the third and any 
subsequent full reviews following the first full review in which the 
determination of nonconformity was made is 42 percent

[[Page 4082]]

of the funds described in paragraph (b)(4) of this section for each 
year to which the withholding of funds applies.
    (c) Suspension of withholding.
    (1) For States determined not to be operating in substantial 
conformity, ACF will suspend the withholding of the State title IV-B 
and title IV-E funds during the time that a program improvement plan is 
in effect, provided that:
    (i) The program improvement plan conforms to the provisions of 
Sec. 1355.35 of this part; and
    (ii) The State is actively implementing the provisions of the 
program improvement plan.
    (2) Suspension of the withholding of funds is limited to three 
years following each review, or the amount of time approved for 
implementation of the program improvement plan, whichever is less.
    (d) Terminating the withholding of funds. For States determined not 
to be in substantial conformity, ACF will terminate the withholding of 
the State's title IV-B and title IV-E funds related to the 
nonconformity upon determination by the State and ACF that the State 
has achieved substantial conformity or has successfully completed a 
program improvement plan. ACF will rescind the withholding of the 
portion of title IV-B and title IV-E funds related to specific goals or 
action steps as of the date at the end of the quarter in which they 
were determined to have been achieved.
    (e) Withholding of funds.
    (1) States determined not to be in substantial conformity that fail 
to successfully complete a program improvement plan will be notified by 
ACF of this final determination of nonconformity in writing within 10 
business days after the relevant completion date specified in the plan, 
and advised of the amount of title IV-B and title IV-E funds which are 
to be withheld.
    (2) Title IV-B and title IV-E funds will be withheld based on the 
following:
    (i) If the State fails to submit status reports in accordance with 
Sec. 1355.35(d)(4), or if such reports indicate that the State is not 
making satisfactory progress toward achieving goals or actions steps, 
funds will be withheld at that time for a period beginning October 1 of 
the fiscal year for which the determination of nonconformity was made 
and ending on the specified completion date for the affected goal or 
action step.
    (ii) Funds related to goals and action steps that have not been 
achieved by the specified completion date will be withheld at that time 
for a period beginning October 1 of the fiscal year for which the 
determination of nonconformity was made and ending on the completion 
date of the affected goal or action step; and
    (iii) The withholding of funds commensurate with the level of 
nonconformity at the end of the program improvement plan will begin at 
the latest completion date specified in the program improvement plan 
and will continue until a subsequent full review determines the State 
to be in substantial conformity or the State successfully completes a 
program improvement plan developed as a result of that subsequent full 
review.
    (3) When the date the State is determined to be in substantial 
conformity or to have successfully completed a program improvement plan 
falls within a specific quarter, the amount of funds to be withheld 
will be computed to the end of that quarter.
    (4) A State agency that refuses to participate in the development 
or implementation of a program improvement plan, as required by ACF, 
will be subject to the maximum increased withholding of 42 percent of 
its title IV-B and title IV-E funds, as described in paragraph (b)(8) 
of this section, for each year or portion thereof to which the 
withholding of funds applies.
    (5) The State agency will be liable for interest on the amount of 
funds withheld by the Department, in accordance with the provisions of 
45 CFR 30.13.


Sec. 1355.37  Opportunity for Public Inspection of Review Reports and 
Materials.

    The State agency must make available for public review and 
inspection all statewide assessments (Sec. 1355.33(b)), report of 
findings (Sec. 1355.33(e)), and program improvement plans 
(Sec. 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, procedure, or practice that on its face, is a violation as 
defined in paragraphs (a)(2)(i) and (2)(ii) of this section.
    (3) ACF will provide the State or entity 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 
section.
    (5) Compliance with the Indian Child Welfare Act of 1978 (Pub. L. 
95-608) 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.
    (4) A State found to be in violation of section 471(a)(18) by a 
court must notify ACF within 30 days from the date of entry of the 
final judgement once all appeals have been exhausted, declined, or the 
appeal period has expired.
    (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 and 
submit a corrective action plan within 30 days of receiving written

[[Page 4083]]

notification from ACF that it is in violation of section 471(a)(18). 
Once the plan is approved the State will have to complete the 
corrective action and come into compliance. If the State fails to 
complete the corrective action plan within six months and come into 
compliance, a penalty will be imposed in accordance with paragraph 
(g)(3) of this section.
    (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 within 30 days from the date it receives a written notice from ACF 
that the plan has not been approved. If the State does not submit a 
revised corrective action plan according to the provisions of paragraph 
(d) of this section, withholding of funds pursuant to the provisions of 
paragraph (g) of this section will apply.
    (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 the completion date. This date will be no later than 6 
months from the date ACF approves the corrective action plan.
    (e) Evaluation of corrective action plans. 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. 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 written notification of failure to 
complete the plan.
    (f) Funds to be withheld. The term ``title IV-E funds'' refers to 
the amount of Federal funds advanced or paid to the State for allowable 
costs incurred by a State 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 shall be reduced in specified amounts in 
accordance with paragraph (h) of this section 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 and complete a corrective 
action plan and come into compliance as described in paragraph (c) of 
this section.
    (2) Once ACF notifies a State, in writing, 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 written notification and for each succeeding 
quarter within that fiscal year or until the State completes a 
corrective action plan and comes into compliance, whichever is earlier.
    (3) For States that fail to complete a corrective action plan 
within 6 months, 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 and comes 
into compliance, whichever is earlier.
    (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 (in 
writing) 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 and comes into compliance, whichever is 
sooner.
    (5) The maximum number of quarters that a State will have its title 
IV-E funds reduced due to a finding of a 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.
    (6) No penalty will be imposed for a court finding of a violation 
of section 471(a)(18) until the judgement is final and all appeals have 
been exhausted, declined, or the appeal period has expired.
    (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 State's title IV-E funds for the fiscal year 
quarter, as defined in paragraph (f) of this section, for the first 
finding of noncompliance in that fiscal year;
    (ii) 3 percent of the State's title IV-E funds for the fiscal year 
quarter, as defined in paragraph (f) of this section, for the second 
finding of noncompliance in that fiscal year;
    (iii) 5 percent of the State's title IV-E funds for the fiscal year 
quarter, as defined in paragraph (f) of this section, for the third or 
subsequent finding of noncompliance in that fiscal year.
    (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 of its title IV-E funds, as defined in paragraph (f) of this 
section, 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 a State or entity in 
violation of section 471(a)(18) of the Act:
    (a) May appeal, pursuant to 45 CFR part 16, 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(a)(3) 
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 or entity receives notice of the decision by the Board. 
Appeals of adverse

[[Page 4084]]

Department Appeals Board decisions must be made 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 or entity has been 
determined to be in violation of section 471(a)(18) which is based on a 
judicial decision.

    4. Amend Sec. 1355.40 by revising the second sentence in paragraph 
(a)(2) to read as follows:


Sec. 1355.40  Foster care and adoption data collection.

    (a) Scope of the data collection system.
    (1) * * *
    (2) * * * This includes American Indian children covered under the 
assurances in section 422(b)(10) of the Act on the same basis as any 
other child. * * *
* * * * *

Appendix A to Part 1355--Foster Care Data Elements

    5. Appendix A to part 1355 is amended as follows:
    a. Amend Section I by revising data elements II.C.1. and heading of 
2., IX.C.1., headings of 2. and 4., and IX.C.3.

    b. Amend Section II by revising the first paragraph on ``Reporting 
population'' and the instruction paragraphs II.C. and IX.C., and
    c. Remove paragraph IX.D. to read as follows:

Section I--Foster Care Data Elements

* * * * *
    II. Child's Demographic Information
* * * * *
    C. Race/Ethnicity
    1. Race
    a. American Indian or Alaska Native
    b. Asian
    c. Black or African American
    d. Native Hawaiian or Other Pacific Islander
    e. White
    f. Unable to Determine
    2. Hispanic or Latino Ethnicity______
* * * * *
IX. Foster Family Home-Parent(s) Data (To be answered only if 
Section V., Part A. CURRENT PLACEMENT SETTING is 1, 2 or 3)
* * * * *
    C. Race/Ethnicity
    1. Race of 1st Foster Caretaker
    a. American Indian or Alaska Native
    b. Asian
    c. Black or African American
    d. Native Hawaiian or Other Pacific Islander
    e. White
    f. Unable to Determine
    2. Hispanic or Latino Ethnicity of 1st Foster Caretaker______
* * * * *
    3. Race of 2nd Foster Caretaker (If Applicable)
    a. American Indian or Alaska Native
    b. Asian
    c. Black or African American
    d. Native Hawaiian or Other Pacific Islander
    e. White
    f. Unable to Determine
    4. Hispanic or Latino Ethnicity of 2nd Foster Caretaker (If 
applicable)______
* * * * *

Section II--Definitions of and Instructions for Foster Care Data 
Elements

    Reporting population. The population to be included in this 
reporting system includes all children in foster care under the 
responsibility of the State agency administering or supervising the 
administration of the title IV-B Child and Family Services State 
plan and the title IV-E State plan; that is, all children who are 
required to be provided the assurances of section 422(b)(10) of the 
Social Security Act.
* * * * *
II. Child's Demographic Information
* * * * *
    C. Race/Ethnicity**
    1. Race--In general, a person's race is determined by how they 
define themselves or by how others define them. In the case of young 
children, parents determine the race of the child. Indicate all 
races (a through e) that apply with a ``1.'' For those that do not 
apply, indicate a ``0.'' Indicate ``f. Unable to Determine'' with a 
``1'' if it applies and a ``0'' if it does not.
    American Indian or Alaska Native--A person having origins in any 
of the original peoples of North or South America (including Central 
America), and who maintains tribal affiliation or community 
attachment.
    Asian--A person having origins in any of the original peoples of 
the Far East, Southeast Asia, or the Indian subcontinent including, 
for example, Cambodia, China, India, Japan, Korea, Malaysia, 
Pakistan, the Philippine Islands, Thailand, and Vietnam.
    Black or African American--A person having origins in any of the 
black racial groups of Africa.
    Native Hawaiian or Other Pacific Islander--A person having 
origins in any of the original peoples of Hawaii, Guam, Samoa, or 
other Pacific Islands.
    White--A person having origins in any of the original peoples of 
Europe, the Middle East, or North Africa.
    Unable to Determine--The specific race category is ``unable to 
determine'' because the child is very young or is severely disabled 
and no person is available to identify the child's race. ``Unable to 
determine'' is also used if the parent, relative or guardian is 
unwilling to identify the child's race.
    2. Hispanic or Latino Ethnicity--Answer ``yes'' if the child is 
of Mexican, Puerto Rican, Cuban, Central or South American origin, 
or a person of other Spanish cultural origin regardless of race. 
Whether or not a person is Hispanic or Latino is determined by how 
they define themselves or by how others define them. In the case of 
young children, parents determine the ethnicity of the child. 
``Unable to Determine'' is used because the child is very young or 
is severely disabled and no person is available to determine whether 
or not the child is Hispanic or Latino. ``Unable to determine'' is 
also used if the parent, relative or guardian is unwilling to 
identify the child's ethnicity.
* * * * *

IX. Family Foster Home-Parent(s) Data

* * * * *
    C. Race--Indicate the race for each of the foster parent(s). See 
instructions and definitions for the race categories under data 
element II.C.1. Use ``f. Unable to Determine'' only when a parent is 
unwilling to identify his or her race. Hispanic or Latino 
Ethnicity--Indicate the ethnicity for each of the foster parent(s). 
See instructions and definitions under data element II.C.2. Use ``f. 
Unable to Determine'' only when a parent is unwilling to identify 
his or her ethnicity.
* * * * *

Appendix B to Part 1355--Adoption Data Elements

    6. Appendix B to part 1355 is amended as follows:
    a. Amend Section I by revising data elements II.C.1., headings of 
2. and 4., II.C.3., II.C. and VI.C. b. Amend Section II by revising the 
instruction paragraphs II.C. and VI.C. to read as follows:

Section I--Adoption Data Elements

* * * * *
II. Child's Demographic Information
* * * * *
    C. Race/Ethnicity
    1. Race
    a. American Indian or Alaska Native
    b. Asian
    c. Black or African American
    d. Native Hawaiian or Other Pacific Islander
    e. White
    f. Unable to Determine
    2. Hispanic or Latino Ethnicity______
* * * * *
VI. Adoptive Parents
* * * * *
    C. Race/Ethnicity
    1. Adoptive Mother's Race (If Applicable)
    a. American Indian or Alaska Native
    b. Asian
    c. Black or African American
    d. Native Hawaiian or Other Pacific Islander
    e. White
    f. Unable to Determine
    2. Hispanic or Latino Ethnicity of Mother (If Applicable)______
* * * * *
    3. Adoptive Father's Race (If Applicable)
    a. American Indian or Alaska Native
    b. Asian
    c. Black or African American
    d. Native Hawaiian or Other Pacific Islander

[[Page 4085]]

    e. White
    f. Unable to Determine
    4. Hispanic or Latino Ethnicity of Father (If Applicable)______
* * * * *

Section II--Definitions of Instructions for Adoption Data Elements

* * * * *
II. Child's Demographic Information
* * * * *
    C. Race/Ethnicity
    1. Race--In general, a person's race is determined by how they 
define themselves or by how others define them. In the case of young 
children, parents determine the race of the child. Indicate all races 
(a-e) that apply with a ``1.'' For those that do not apply, indicate a 
``0.'' Indicate ``f. Unable to Determine'' with a 1'' if it applies and 
a ``0'' if it does not.
    American Indian or Alaska Native--A person having origins in any of 
the original peoples of North or South America (including Central 
America), and who maintains tribal affiliation or community attachment.
    Asian--A person having origins in any of the original peoples of 
the Far East, Southeast Asia, or the Indian subcontinent including, for 
example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, the 
Philippine Islands, Thailand, and Vietnam.
    Black or African American--A person having origins in any of the 
black racial groups of Africa.
    Native Hawaiian or Other Pacific Islander--A person having origins 
in any of the original peoples of Hawaii, Guam, Samoa, or other Pacific 
Islands.
    White--A person having origins in any of the original peoples of 
Europe, the Middle East, or North Africa.
    Unable to Determine--The specific race category is ``unable to 
determine'' because the child is very young or is severely disabled and 
no person is available to identify the child's race. ``Unable to 
determine'' is also used if the parent, relative or guardian is 
unwilling to identify the child's race.
    2. Hispanic or Latino Ethnicity--Answer ``yes'' if the child is of 
Mexican, Puerto Rican, Cuban, Central or South American origin, or a 
person of other Spanish cultural origin regardless of race. Whether or 
not a person is Hispanic or Latino is determined by how they define 
themselves or by how others define them. In the case of young children, 
parents determine the ethnicity of the child. ``Unable to Determine'' 
is used because the child is very young or is severely disabled and no 
other person is available to determine whether or not the child is 
Hispanic or Latino. ``Unable to determine'' is also used if the parent, 
relative or guardian is unwilling to identify the child's ethnicity.
* * * * *

VI. Adoptive Parents

* * * * *
    C. Race/Ethnicity--Indicate the race/ethnicity for each of the 
adoptive parent(s). See instructions and definitions for the race/
ethnicity categories under data element II.C. Use ``f. Unable to 
Determine'' only when a parent is unwilling to identify his or her race 
or ethnicity.
* * * * *

Appendix D to Part 1355--Foster Care and Adoption Record Layouts

    7. Appendix D to part 1355 is amended as follows:
    a. Amend Section A by revising 1.b.(2) and (3), revising the 
Element No., Data element description, and No. of numeric characters 
columns of the table under c. for certain elements, and revising the 
number of ``Total characters'';
    b. Amend Section A by revising 2.b.(3) and the table under c. 
including the No. of characters for Element No. 02 and the number for 
``Record Length'';

    c. Amend Section B by revising 1.b.(2) and (3), revising the 
Element No., Data element description, and No. of numeric characters 
columns of the table under c. for certain elements, and revising the 
number of ``Total characters''; and
    d. Amend Section B by revising 2.b.(3) and the table under c. 
including the No. of characters for Element No. 02 and the number for 
``Record Length'', to read as follows:

A. Foster Care

1. Foster Care Semi-Annual Detailed Data Elements Record
a. * * * 
b. * * * 
    (2) Enter date values in year, month and day order (YYYYMMDD), 
e.g., 19991030 for October 30, 1999, or year and month order (YYYYMM), 
e.g., 199910 for October 1999. Leave the element value blank if dates 
are not applicable.
    (3) For elements 8, 11-15, 26-40, 52, 54 and 59-65, which are 
``select all that apply'' elements, enter a ``1'' for each element that 
applies, enter a zero for non-applicable elements.
* * * * *
    c. foster care Semi-Annual Detailed Data elements Record layout 
follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                  No. of numeric
        Element No.                Appendix A data element           Data element description       characters
----------------------------------------------------------------------------------------------------------------
 
                          *         *         *         *         *         *         *
02                           I.B.                                 Report period ending date.....               6
 
                          *         *         *         *         *         *         *
05                           I.E.                                 Date of most recent periodic                 8
                                                                   review.
06                           II.A.                                Child's date of birth.........               8
 
                          *         *         *         *         *         *         *
08                           II.C.1.                              Race..........................
08a                          ...................................  American Indian or Alaska                    1
                                                                   native.
08b                          ...................................  Asian.........................               1
08c                          ...................................  Black or African American.....               1
08d                          ...................................  Native Hawaiian or Other                     1
                                                                   Pacific Islander.
08e                          ...................................  White.........................               1
08f                          ...................................  Unable to Determine...........               1
09                           II.C.2.                              Hispanic or Latino Ethnicity..               1
 
                          *         *         *         *         *         *         *
18                           III.A.1.                             Date of first removal from                   8
                                                                   home.
 

[[Page 4086]]

 
                          *         *         *         *         *         *         *
20                           III.A.3.                             Date child was discharged from               8
                                                                   last foster care episode.
21                           III.A.4.                             Date of latest removal from                  8
                                                                   home.
22                           III.A.5.                             Removal transaction date......               8
23                           III.B.1.                             Date of placement in current                 8
                                                                   foster care setting.
 
                          *         *         *         *         *         *         *
45                           VII.B.1.                             Year of birth (1st principal                 4
                                                                   caretaker).
46                           VII.B.2.                             Year of birth (2nd principal                 4
                                                                   caretaker).
47                           VIII.A.                              Date of mother's parental                    8
                                                                   rights termination.
48                           VIII.B.                              Date of legal or putative                    8
                                                                   father's parental rights.
 
                          *         *         *         *         *         *         *
50                           IX.B.1.                              Year of birth (1st foster                    4
                                                                   caretaker).
51                           IX.B.2.                              Year of birth (2nd foster                    4
                                                                   caretaker).
52                           IX.C.1.                              Race of 1st foster caretaker..
52a                          ...................................  American Indian or Alaska                    1
                                                                   Native.
52b                          ...................................  Asian.........................               1
52c                          ...................................  Black or African American.....               1
52d                          ...................................  Native Hawaiian or Other                     1
                                                                   Pacific Islander.
52e                          ...................................  White.........................               1
52f                          ...................................  Unable to Determine...........               1
53                           IX.C.2.                              Hispanic or Latino ethnicity                 1
                                                                   of 1st foster caretaker.
54                           IX.C.3.                              Race of 2nd foster caretaker..
54a                          ...................................  American Indian or Alaska                    1
                                                                   Native.
54b                          ...................................  Asian.........................               1
54c                          ...................................  Black or African American.....               1
54d                          ...................................  Native Hawaiian or Other                     1
                                                                   pacific Islander.
54e                          ...................................  White.........................               1
54f                          ...................................  Unable to Determine...........               1
55                           IX.C.4.                              Hispanic or Latino ethnicity                 1
                                                                   of 2nd foster caretaker.
56                           X.A.1.                               Date of discharge from foster                8
                                                                   care.
57                           X.A.2.                               Foster care discharge                        8
                                                                   transaction date.
 
                          *         *         *         *         *         *         *
                             ...................................        Total Characters........             197
----------------------------------------------------------------------------------------------------------------

2. Foster Care Semi-Annual Summary Data Elements Record

    a. * * *
    b. * * *

    (3) Enter date values in year, month order (YYYYMM), e.g.,199912 
for December 1999.

    c. Foster Care Semi-Annual Summary Data Elements Record Layout 
follows:

------------------------------------------------------------------------
                                                                No. of
         Element No.                 Summary data file        characters
------------------------------------------------------------------------
 
                          *    *    *    *    *
02                             Report period ending date               6
                                (YYYYMM).
 
                          *    *    *    *    *
                               Record Length...............          174
------------------------------------------------------------------------

B. Adoption

1. Adoption Semi-Annual Detailed Data Elements Record
    a. * * *
    b. * * *
    (2) Enter date values in year, month and day order (YYYYMMDD), 
e.g., 19991030 for October 30, 1999, or year and month order (YYYYMM), 
e.g., 199910 for October 1999. Leave the element value blank if dates 
are not applicable.
    (3) For elements 7, 11-15, 25, 27 and 29-32 which are ``select all 
that apply'' elements, enter a ``1'' for each element that applies; 
enter a zero for non-applicable elements.
    c. Adoption Semi-Annual Detailed Data Elements Record Layout 
follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                  No. of numeric
        Element No.                Appendix B data element           Data element description       characters
----------------------------------------------------------------------------------------------------------------
 
                          *         *         *         *         *         *         *
02                           I.B.                                 Report period ending date.....               6
 
                          *         *         *         *         *         *         *
05                           II.A.                                Date of birth.................               6
 
                          *         *         *         *         *         *         *
07                           II.C.1                               Race..........................
07a                          ...................................  American Indian or Alaska                    1
                                                                   Native.
07b                          ...................................  Asian.........................               1
07c                          ...................................  Black or African American.....               1
07d                          ...................................  Native Hawaiian or Other                     1
                                                                   Pacific Islander.

[[Page 4087]]

 
07e                          ...................................  White.........................               1
07f                          ...................................  Unable to Determine...........               1
08                           II.C.2.                              Hispanic or Latino ethnicity..               1
 
                          *         *         *         *         *         *         *
16                           IV.A.1                               Mother's year of birth........               4
17                           IV.A.2.                              Father's (Putative or legal)                 4
                                                                   year of birth.
 
                          *         *         *         *         *         *         *
19                           V.A.1.                               Date of mother's termination                 8
                                                                   of parental rights.
20                           V.A.2.                               Date of father's termination                 8
                                                                   of parental rights.
21                           V.B.                                 Date adoption legalized.......               8
 
                          *         *         *         *         *         *         *
23                           VI.B.1.                              Mother's year of birth (if                   4
                                                                   applicable).
24                           VI.B.2.                              Father's year of birth (if                   4
                                                                   applicable).
25                           VI.C.1.                              Adoptive mother's race........
25a                          ...................................  American Indian or Alaska                    1
                                                                   Native.
25b                          ...................................  Asian.........................               1
25c                          ...................................  Black or African American.....               1
25d                          ...................................  Native Hawaiian or Other                     1
                                                                   Pacific Islander.
25e                          ...................................  White.........................               1
25f                          ...................................  Unable to Determine...........               1
26                           VI.C.2.                              Hispanic or Latino Ethnicity..               1
27                           VI.C.3.                              Adoptive father's race........
27a                          ...................................  American Indian or Alaska                    1
                                                                   Native.
27b                          ...................................  Asian.........................               1
27c                          ...................................  Black or African American.....               1
27d                          ...................................  Native Hawaiian or Other                     1
                                                                   Pacific Islander.
27e                          ...................................  White.........................               1
27f                          ...................................  Unable to Determine...........               1
28                           VI.C.4.                              Hispanic or Latino Ethnicity..               1
                             ...................................        Total Characters........             111
----------------------------------------------------------------------------------------------------------------

2. Adoption Semi-Annual Summary Data Elements Record
    a. * * *
    b. * * *
    (3) Enter data values in year, month order (YYYYMM), e.g., 199912 
for December 1999.
    c. Adoption Semi-Annual Summary Data Element Record Layout follows:

------------------------------------------------------------------------
                                                                No. of
         Element No.                 Summary data file        characters
------------------------------------------------------------------------
 
                          *    *    *    *    *
02                             Report period ending date               6
                                (YYYYMM).
 
                          *    *    *    *    *
                               Record Length...............          174
------------------------------------------------------------------------

Appendix E to Part 1355--Data Standards

    8. Appendix E to part 1355 is amended as follows:
    a. Amend Section A.2. by adding paragraph a.(18);

    b. Revise Section A.3. paragraph a.(1), and the element description 
for Element No. 09, 53, and 55 of the chart under b.(2);

    c. Amend Section B.2. by revising paragraph a.(8) and adding 
paragraph a.(9); and

    d. In Section B.3. revise paragraph a.(1), the element description 
for Element No. 08, 26 and 28 of the chart under b.(2), to read as 
follows:

A. Foster Care

* * * * *

2. Detailed Data File Submission Standards

    a. * * *
    (18) In Elements 8, 52, and 54, race categories (``a'' through 
``e'') and ``f. Unable to Determine'' cannot be coded ``0,'' for it 
does not apply. If any of the race categories apply and are coded as 
``1'' then ``f. Unable to Determine'' cannot also apply.
* * * * *

3. Missing Data Standards

* * * * *
    a. * * *
    (1) Data elements whose values fail internal consistency 
validations as outlined in A.2.a.(1)-(18) above, and
* * * * *

------------------------------------------------------------------------
             Element No.                      Element description
------------------------------------------------------------------------
 
                  *        *        *        *        *
09                                    Child's Hispanic or Latino
                                       Ethnicity
 
                  *        *        *        *        *
53                                    Hispanic or Latino Ethnicity of
                                       1st foster caretaker
 
                  *        *        *        *        *
55                                    Hispanic or Latino Ethnicity of
                                       2nd foster caretaker
------------------------------------------------------------------------

* * * * *

B. Adoption

* * * * *

2. Detailed Data Elements File Submission Standards

    a. * * *
    (8) If the ``Family Structure'' (Element 22) is option 3, Single 
Female, then the Mother's Year of Birth (Element 23), the ``Adoptive 
Mother's Race'' (Element 25) and ``Hispanic or Latino Ethnicity'' 
(Element 26) must be completed. Similarly, if the ``Family 
Structure'' (Element 22) is option 4, Single Male, then the Father's 
Year of Birth (Element 24), the Adoptive Father's Race'' (Element 
27) and ``Hispanic or Latino Ethnicity'' (Element 28) must be 
completed. If the ``Family Structure'' (Element 22) is option 1 or 
2, then both Mother's and Father's ``Year of Birth,'' ``Race'' and 
``Hispanic or Latino Ethnicity'' must be completed.
    (9) In Elements 7, 25, and 27, race categories (``a'' through 
``e'') and ``f. Unable to Determine'' cannot be coded ``0,'' for it 
does not apply. If any of the race categories apply and are coded as 
``1'' then ``f. Unable to Determine'' cannot also apply.
* * * * *

[[Page 4088]]

3. Missing Data Standards

* * * * *
    a. * * *
    (1) Data elements whose values fail internal consistency 
validations as outlined in 2.a.(1)-(9) above, and
* * * * *

------------------------------------------------------------------------
             Element No.                      Element description
------------------------------------------------------------------------
 
                  *        *        *        *        *
08                                    Is the child of Hispanic or Latino
                                       ethnicity?
 
                  *        *        *        *        *
26                                    Hispanic or Latino ethnicity of
                                       mother
 
                  *        *        *        *        *
28                                    Hispanic or Latino ethnicity of
                                       father
------------------------------------------------------------------------

* * * * *

PART 1356--REQUIREMENTS APPLICABLE TO TITLE IV-E

    9. 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.

    10. Section 1356.20 is amended by revising the first two sentences 
of 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 the authority to determine that proposed plan material is 
not approvable, or that a previously approved plan no longer meets the 
requirements for approval. * * *
* * * * *

    11. Section 1356.21 is revised to read as follows:


Sec. 1356.21  Foster care maintenance payments program implementation 
requirements.

    (a) Statutory and regulatory requirements of the Federal foster 
care program. 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, 45 CFR 1356.22, 45 CFR 1356.30, and sections 472, 475(1), 
475(4), 475(5) and 475(6) of the Act.
    (b) Reasonable efforts. The State must make reasonable efforts to 
maintain the family unit and prevent the unnecessary removal of a child 
from his/her home, as long as the child's safety is assured; to effect 
the safe reunification of the child and family (if temporary out-of-
home placement is necessary to ensure the immediate safety of the 
child); and to make and finalize alternate permanency plans in a timely 
manner when reunification is not appropriate or possible. 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) and (d) 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 a 
child's removal from the home.
    (i) When a child is removed from his/her home, the judicial 
determination as to whether reasonable efforts were made, or were not 
required to prevent the removal in accordance with paragraph (b)(3) of 
this section, must be made no later than 60 days from the date the 
child is removed from the home pursuant to paragraph (k) of this 
section.
    (ii) If the determination concerning reasonable efforts to prevent 
the removal is not made as specified in paragraph (b)(1)(i) of this 
section, 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 determination of reasonable efforts to finalize a 
permanency plan.
    (i) The State agency must obtain a judicial determination that it 
has made reasonable efforts to finalize the permanency plan that is in 
effect (whether the plan is reunification, adoption, legal 
guardianship, placement with a fit and willing relative, or placement 
in another planned permanent living arrangement) within twelve months 
of the date the child is considered to have entered foster care in 
accordance with the definition at Sec. 1355.20 of this part, and at 
least once every twelve months thereafter while the child is in foster 
care.
    (ii) If such a judicial determination regarding reasonable efforts 
to finalize a permanency plan is not made, the child becomes ineligible 
under title IV-E from the end of the twelfth month following the date 
the child is considered to have entered foster care in accordance with 
the definition at Sec. 1355.20 of this part, or the end of the month in 
which the most recent judicial determination of reasonable efforts to 
finalize a permanency plan was made, and remains ineligible until such 
a judicial determination is made.
    (3) 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 been convicted of:
    (A) 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) 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) Aiding or abetting, attempting, conspiring, or soliciting to 
commit such a murder or such a voluntary manslaughter; or
    (D) 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 with respect to a sibling 
have been terminated involuntarily.
    (4) Concurrent planning. Reasonable efforts to finalize an 
alternate permanency plan may be made concurrently with reasonable 
efforts to reunify the child and family.
    (5) Use of the Federal Parent Locator Service. The State agency may 
seek the services of the Federal Parent Locator Service to search for 
absent parents at any point in order to facilitate a 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

[[Page 4089]]

continuation of residence in the home would be contrary to the welfare, 
or that placement would be in the best interest, of the child. 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 that stay in foster care.
    (d) Documentation of judicial determinations. The judicial 
determinations regarding contrary to the welfare, reasonable efforts to 
prevent removal, and reasonable efforts to finalize the permanency plan 
in effect, including judicial determinations that reasonable efforts 
are not required, must be explicitly documented 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 that reference State law to substantiate judicial 
determinations 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 may not exceed six months 
in duration, unless a court orders a longer trial home visit. 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 foster care, 
that placement must then be considered a new placement and title IV-E 
eligibility must be newly established. Under these circumstances the 
judicial determinations regarding contrary to the welfare and 
reasonable efforts to prevent removal are 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 child's removal 
from the home pursuant to paragraph (k) of this section;
    (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 interests and special 
needs of the child. (FFP is not available when a court orders a 
placement with a specific foster care provider);
    (4) Include a description of the services offered and provided to 
prevent removal of the child from the home and to reunify the family; 
and
    (5) Document the steps 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. When the case 
plan goal is adoption, at a minimum, such documentation shall include 
child-specific recruitment efforts such as the use of State, regional, 
and national adoption exchanges including electronic exchange systems.

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

    (h) Application of the permanency hearing requirements. 
    (1) To meet the requirements of the permanency hearing, the State 
must, among other requirements, comply with section 475(5)(C) of the 
Act.
    (2) In accordance with paragraph (b)(3) 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 court determines that reasonable 
efforts to reunify the child and family are not required.
    (3) If the State concludes, after considering reunification, 
adoption, legal guardianship, or permanent placement with a fit and 
willing relative, that the most appropriate permanency plan for a child 
is placement in another planned permanent living arrangement, the State 
must document to the court the compelling reason for the alternate 
plan. Examples of a compelling reason for establishing such a 
permanency plan may include:
    (i) The case of an older teen who specifically requests that 
emancipation be established as his/her permanency plan;
    (ii) The case of a parent and child who have a significant bond but 
the parent is unable to care for the child because of an emotional or 
physical disability and the child's foster parents have committed to 
raising him/her to the age of majority and to facilitate visitation 
with the disabled parent; or,
    (iii) the Tribe has identified another planned permanent living 
arrangement for the child.
    (4) 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) Subject to the exceptions in paragraph (i)(2) of this section, 
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 calculate the 15 out of the most recent 22 month period 
from the date the child entered foster care as defined at section 
475(5)(F) of the Act;
    (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) of the Act to a child once if 
the State

[[Page 4090]]

does not file a petition because one of the exceptions at paragraph 
(i)(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 convicted of one of the felonies listed at 
paragraph (b)(3)(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 
individual child. Compelling reasons for not filing a petition to 
terminate parental rights include, but are not limited to:
    (A) Adoption is not the appropriate permanency goal for the child; 
or,
    (B) No grounds to file a petition to terminate parental rights 
exist; or,
    (C) The child is an unaccompanied refugee minor as defined in 45 
CFR 400.111; or
    (D) There are international legal obligations or compelling foreign 
policy reasons that would preclude terminating parental rights; 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 begin to 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 the requirements of section 
472(a)(1) of the Act, a removal from the home must occur pursuant to:
    (i) A voluntary placement agreement entered into by a parent or 
relative which leads to a physical or constructive removal (i.e., a 
non-physical or paper removal of custody) of the child from the home; 
or
    (ii) A judicial order for a physical or constructive removal of the 
child from a parent or specified relative.
    (2) A removal has not occurred in 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.
    (3) A child is considered constructively removed on the date of the 
first judicial order removing custody, even temporarily, from the 
appropriate specified relative or the date that the voluntary placement 
agreement is signed by all relevant parties.
    (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), one of the two following situations must 
apply:
    (1) The child was living with the parent or specified relative, and 
was AFDC eligible in that home in the month of the voluntary placement 
agreement or initiation of court proceedings; or
    (2) The child had been living with the parent or specified relative 
within six months of the month of the voluntary placement agreement or 
the initiation of court proceedings, and the child would have been AFDC 
eligible in that month if s/he 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, 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 with 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 timely notice of and an opportunity 
to be heard in permanency hearings and six-month periodic 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 include the right to 
standing as a party to the case.

    12. Section 1356.30 is redesignated as Sec. 1356.22 and 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 (f), (g), (h), and (i); 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 child's placement in foster care unless there has been a judicial 
determination by a court of competent jurisdiction, within the first 
180 days of such placement, 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.
    13. 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

[[Page 4091]]

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, 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 a child or children (including child 
pornography); or,
    (4) A crime involving violence, 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 the State opts out of the criminal records 
check requirement, the licensing file for that foster or adoptive 
family must contain documentation which verifies that safety 
considerations with respect to the caretaker(s) have been addressed.
    (f) In order for a child care institution to be eligible for title 
IV-E funding, the licensing file for the institution must contain 
documentation which verifies that safety considerations with respect to 
the staff of the institution have been addressed.

    14. Section 1356.50 is amended by revising paragraphs (a) and (b) 
to read as follows:


Sec. 1356.50  Withholding of funds for noncompliance with the approved 
title IV-E State plan.

    (a) To be in compliance with the title IV-E State plan 
requirements, a State must meet the requirements of the Act and 45 CFR 
1356.20, 1356.21, 1356.30, and 1356.40 of this part.
    (b) To be in compliance with the title IV-E State plan 
requirements, a State that chooses to claim FFP for voluntary 
placements must meet the requirements of the Act, 45 CFR 1356.22 and 
paragraph (a) of this section; and
* * * * *

    15. Section 1356.60 is amended by revising paragraph (b)(1) and 
removing paragraph (c)(4) to read as follows:


Sec. 1356.60  Fiscal requirements (title IV-E).

* * * * *
    (b) Federal matching funds for State and local training for foster 
care and adoption assistance under title IV-E.
    (1) Federal financial participation is available at the rate of 
seventy-five percent (75%) in the costs of:
    (i) Training personnel employed or preparing for employment by the 
State or local agency administering the plan, and;
    (ii) Providing short-term training (including travel and per diem 
expenses) to current or prospective foster or adoptive parents and the 
members of the state licensed or approved child care institutions 
providing care to foster and adopted children receiving title IV-E 
assistance.
* * * * *


Secs. 1356.65 and 1356.70  [Removed]

    16. Sections 1356.65 and 1356.70 are removed.

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

[[Page 4092]]

to less than 10 percent (four or fewer ineligible cases)). A State 
agency which meets this standard is considered to be in ``substantial 
compliance'' (see paragraph (h) of this section). A disallowance will 
be assessed for the ineligible cases for the period of time the cases 
are ineligible.
    (5) A State which has been determined to be in ``noncompliance'' 
(i.e., not in substantial compliance) will be required to develop a 
program improvement plan according to the specifications discussed in 
paragraph (i) of this section, as well as undergo a secondary review. 
For the secondary review, a sample of 150 cases (plus a 10 percent 
oversample of 15 cases) will be drawn from the most recent AFCARS 
submission. Usually, the chosen methodology will be simple random 
sampling, but other probability samples may be utilized, when necessary 
and appropriate. Cases from the oversample will be substituted and 
reviewed for each of the original sample of 150 cases which is found to 
be in error.
    (6) At the completion of the secondary review, the review team will 
calculate both the sample case ineligibility and dollar error rates for 
the cases determined ineligible during the review. An extrapolated 
disallowance equal to the lower limit of a 90 percent confidence 
interval for the population total dollars in error for the amount of 
time corresponding to the AFCARS reporting period will be assessed if 
both the child/provider (case) ineligibility and dollar error rates 
exceed 10 percent. If neither, or only one, of the error rates exceeds 
10 percent, a disallowance will be assessed for the ineligible cases 
for the period of time the cases are ineligible.
    (d) Requirements subject to review. States will be reviewed against 
the requirements of title IV-E of the Act regarding:
    (1) The eligibility of the children on whose behalf the foster care 
maintenance payments are made (section 472(a)(1)-(4) of the Act) to 
include:
    (i) Judicial determinations regarding ``reasonable efforts'' and 
``contrary to the welfare'' in accordance with Sec. 1356.21(b) and (c), 
respectively;
    (ii) Voluntary placement agreements in accordance with 
Sec. 1356.22;
    (iii) Responsibility for placement and care vested with the State 
agency;
    (iv) Placement in a licensed foster family home or child care 
institution; and,
    (v) eligibility for AFDC under such State plan as it was in effect 
on July 16, 1996.
    (2) Allowable payments made to foster care providers who comport 
with sections 471(a)(10), 471(a)(20), 472(b) and (c) of the Act and 
Sec. 1356.30.
    (e) Review instrument. A title IV-E foster care eligibility review 
checklist will be used when conducting the eligibility review.
    (f) Eligibility determination--child. The case record of the child 
must contain sufficient documentation to verify a child's eligibility 
in accordance with paragraph (d)(1) of this section, in order to 
substantiate payments made on the child's behalf.
    (g) Eligibility determination--provider. 
    (1) For each case being reviewed, the State agency must make 
available a licensing file which contains the licensing history, 
including a copy of the certificate of licensure/approval or letter of 
approval, for each of the providers in the following categories:
    (i) Public child care institutions with 25 children or less in 
residence;
    (ii) Private child care institutions;
    (iii) Group homes; and
    (iv) Foster family homes, including relative homes.
    (2) The licensing file must contain documentation that the State 
has complied with the safety requirements for foster and adoptive 
placements in accordance with Sec. 1356.30.
    (3) If the licensing file does not contain sufficient information 
to support a child's placement in a licensed facility, the State agency 
may provide supplemental information from other sources (e.g., a 
computerized database).
    (h) Standards of compliance. 
    (1) Disallowances will be taken, and plans for program improvement 
required, based on the extent to which a State is not in substantial 
compliance with recipient or provider eligibility provisions of title 
IV-E, or applicable regulations in 45 CFR parts 1355 and 1356.
    (2) Substantial compliance and noncompliance are defined as 
follows:
    (i) Substantial compliance--For the primary review (of the sample 
of 80 cases), no more than eight of the title IV-E cases reviewed may 
be determined to be ineligible. (This critical number of allowable 
``errors,'' i.e., ineligible cases, is reduced to four errors or less 
in primary reviews held subsequent to the initial primary review). For 
the secondary review (if required), substantial compliance means either 
the case ineligibility or dollar error rate does not exceed 10 percent.
    (ii) Noncompliance--means not in substantial compliance. For the 
primary review (of the sample of 80 cases), nine or more of the title 
IV-E cases reviewed must be determined to be ineligible. (This critical 
number of allowable ``errors,'' i.e., ineligible cases, is reduced to 
five or more in primary reviews subsequent to the initial primary 
review). For the secondary review (if required), noncompliance means 
both the case ineligibility and dollar error rates exceed 10 percent.
    (3) ACF will notify the State in writing within 30 calendar days 
after the completion of the review of whether the State is, or is not, 
operating in substantial compliance.
    (4) States which are determined to be in substantial compliance 
must undergo a subsequent review after a minimum of three years.
    (i) Program improvement plans.
    (1) States which are determined to be in noncompliance with 
recipient or provider eligibility provisions of title IV-E, or 
applicable regulations in 45 CFR Parts 1355 and 1356, will develop a 
program improvement plan designed to correct the areas determined not 
to be in substantial compliance. The program improvement plan will:
    (i) Be developed jointly by State and Federal staff;
    (ii) Identify the areas in which the State's program is not in 
substantial compliance;
    (iii) Not extend beyond one year. A State will have a maximum of 
one year in which to implement and complete the provisions of the 
program improvement plan unless State legislative action is required. 
In such instances, an extension may be granted with the State and ACF 
negotiating the terms and length of such extension that shall not 
exceed the last day of the first legislative session after the date of 
the program improvement plan; and
    (iv) Include:
    (A) Specific goals;
    (B) The action steps required to correct each identified weakness 
or deficiency; and,
    (C) a date by which each of the action steps is to be completed.
    (2) States determined not to be in substantial compliance as a 
result of a primary review must submit the program improvement plan to 
ACF for approval within 90 calendar days from the date the State 
receives written notification that it is not in substantial compliance. 
This deadline may be extended an additional 30 calendar days when a 
State agency submits additional documentation to ACF in support of 
cases determined to be ineligible as a result of the on-site 
eligibility review.
    (3) The ACF Regional Office will intermittently review, in 
conjunction with the State agency, the State's

[[Page 4093]]

progress in completing the prescribed action steps in the program 
improvement plan.
    (4) If a State agency does not submit an approvable program 
improvement plan in accordance with the provisions of paragraphs (i)(1) 
and (2) of this section, ACF will move to a secondary review in 
accordance with paragraph (c) of this section.
    (j) Disallowance of funds. The amount of funds to be disallowed 
will be determined by the extent to which a State is not in substantial 
compliance with recipient or provider eligibility provisions of title 
IV-E, or applicable regulations in 45 CFR parts 1355 and 1356.
    (1) States which are in found to be in substantial compliance 
during the primary or secondary review will have disallowances (if any) 
determined on the basis of individual cases reviewed and found to be in 
error. The amount of disallowance will be computed on the basis of 
payments associated with ineligible cases for the entire period of time 
that each case has been ineligible.
    (2) States which are found to be in noncompliance during the 
primary review will have disallowances determined on the basis of 
individual cases reviewed and found to be in error, and must implement 
a program improvement plan in accordance with the provisions contained 
within it. A secondary review will be conducted no later than during 
the AFCARS reporting period which immediately follows the program 
improvement plan completion date on a sample of 150 cases drawn from 
the State's most recent AFCARS data. If both the case ineligibility and 
dollar error rates exceed 10 percent the State is in noncompliance 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 (i.e., all title IV-E funds expended for a case 
during the quarter(s) that case is ineligible). 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.

PART 1357--REQUIREMENTS APPLICABLE TO TITLE IV-B

    18. The authority citation for part 1357 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.

    19. Section 1357.40 is amended by revising paragraph (d)(6) to read 
as follows:


Sec. 1357.40  Direct payments to Indian Tribal Organizations (title IV-
B, subpart 1, child welfare services).

* * * * *
    (d)* * *
    (6) In order to determine the amount of Federal funds available for 
a direct grant to an eligible ITO, the Department shall first divide 
the State's title IV-B allotment by the number of children in the 
State, then multiply the resulting amount by a multiplication factor 
determined by the Secretary, and then multiply that amount by the 
number of Indian children in the ITO population. The multiplication 
factor will be set at a level designed to achieve the purposes of the 
act and revised as appropriate.
[FR Doc.00-1122 Filed 1-24-00; 8:45 am]
BILLING CODE 4184-01-P