[Federal Register Volume 73, Number 142 (Wednesday, July 23, 2008)]
[Rules and Regulations]
[Pages 42718-42721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16854]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Part 263
RIN 0970-AC15
Cost Allocation Methodology Applicable to the Temporary
Assistance for Needy Families Program
AGENCY: Administration for Children and Families (ACF), Department of
Health and Human Services (HHS).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule applies to the Temporary Assistance for Needy
Families (TANF) program and requires States, the District of Columbia
and the Territories (hereinafter referred to as the ``States'') to use
the ``benefiting program'' cost allocation methodology in U.S. Office
of Management and Budget (OMB) Circular A-87 (2 CFR part 225). It is
the judgment and determination of HHS/ACF that the ``benefiting
program'' cost allocation methodology is the appropriate methodology
for the proper use of Federal TANF funds. The Personal Responsibility
and Work Opportunity Reconciliation Act (PRWORA) of 1996 gave
federally-recognized Tribes the opportunity to operate their own Tribal
TANF programs. Federally-recognized Indian tribes operating approved
Tribal TANF programs have always followed the ``benefiting program''
cost allocation methodology in accordance with OMB Circular A-87 (2 CFR
part 225) and the applicable regulatory provisions at 45 CFR 286.45(c)
and (d). This final rule contains no substantive changes to the
proposed rule published on September 27, 2006.
EFFECTIVE DATE: This rule is effective July 23, 2008.
FOR FURTHER INFORMATION CONTACT: Robert Shelbourne, Director, State
TANF Policy Division at (202) 401-5150, [email protected].
SUPPLEMENTARY INFORMATION: On September 27, 2006, ACF published a
Notice of Proposed Rulemaking (NPRM) to add section 263.14 to 45 CFR
part 263, requiring a State or Territory to use a benefiting program
cost allocation methodology consistent with the general requirements of
OMB Circular A-87 to allocate TANF costs. We provided a 60-day comment
period that ended on November 27, 2006. We offered the public the
opportunity to submit comments by surface mail, e-mail, or
electronically via our Web site.
Comment Overview
After accounting for duplication, we received one comment on the
NPRM. We have summarized the public comment and our response to it in
Section II of the preamble to this final rule.
Table of Contents
I. Statutory Authority
II. Background
III. Discussion of Regulatory Provisions
IV. Paperwork Reduction Act of 1995
V. Regulatory Flexibility Analysis
VI. Regulatory Impact Analysis
VII. Unfunded Mandates Reform Act of 1995
VIII. Congressional Review
IX. Assessment of Federal Regulation and Policies on Families
X. Executive Order 13132
I. Statutory Authority
We are issuing this regulation under the authority granted to the
Secretary of Health and Human Services (HHS) by 42 U.S.C. 1302(a).
Section 1302(a) authorizes the Secretary to make and publish such rules
as may be necessary for the efficient administration of functions with
which he is charged under the Social Security Act.
42 U.S.C. 617 limits the authority of the Federal government to
regulate State conduct or enforce the TANF provisions of the Social
Security Act, except as expressly provided. We interpret this
[[Page 42719]]
provision to allow us to regulate the use of a permissible cost
allocation methodology because States and the Territories need to know
what they may and may not do to avoid potential misuse of funds
penalties under 42 U.S.C. 609(a)(1).
Pursuant to 42 U.S.C. 609(a)(1), we may impose a financial penalty
whenever a State misuses Federal TANF funds. The TANF regulations at 45
CFR 263.11 address the proper and improper uses of Federal TANF funds.
Section 263.11(b) sets forth the circumstances that constitute misuse
of Federal funds. Use of Federal TANF funds in violation of any of the
provisions in OMB Circular A-87 (2 CFR part 225) is one such
circumstance. Accordingly, we are specifying that the ``benefiting
program'' cost allocation methodology is the appropriate methodology
for the proper use of Federal TANF funds.
II. Background
The Office of Management and Budget (OMB) has issued government-
wide standards for allocating the costs of government programs.
Specifically, OMB Circular A-87 (2 CFR part 225), ``Cost Principles for
State, Local and Indian Tribal Governments,'' provides that ``A cost is
allocable to a particular cost objective if the goods or services
involved are chargeable or assignable to such cost objective in
accordance with relative benefits received.'' Thus, costs that benefit
multiple programs may not be allocated to a single program. An
illustrative way to determine whether multiple programs benefit from a
cost objective is to ask, for example: In the absence of the TANF
program, would another program still have to undertake the function? If
the answer is yes, there is a benefit to each program and the costs
should be allocated using the ``benefiting programs'' cost allocation
method.
The ``benefiting program'' cost allocation method applies to all
Federal programs, unless there is a statutory or OMB-approved
exception. Prior to enactment of the TANF program, HHS allowed States,
the District of Columbia, and the Territories to charge the common
administrative costs of determining eligibility and case maintenance
activities for the Food Stamp and Medicaid programs to the AFDC
program--a so-called ``primary program'' allocation method. This
exception to the ``benefiting program'' cost allocation requirement of
OMB Circular A-87 (2 CFR part 225) was consistent with Conference
Committee language indicating AFDC might pay for these common costs
because families who were eligible for AFDC (the primary program) were
also automatically eligible for Medicaid and met the categorical, but
not necessarily the income, requirements of Food Stamps.
The Personal Responsibility and Work Opportunity Reconciliation Act
of 1996 (PRWORA) (Pub. L. 104-193) was enacted on August 22, 1996.
Title I of PRWORA repealed the AFDC program and replaced it with the
TANF program. Unlike AFDC, TANF eligibility no longer automatically
makes a family eligible for Medicaid, and eligibility for certain TANF
services and benefits do not lead to categorical eligibility for Food
Stamps.
As a result, HHS issued guidance prohibiting States from continuing
to use the ``primary program'' allocation methodology. On September 30,
1998, the Office of Grants and Acquisition Management (OGAM) in HHS
issued OGAM Action Transmittal (AT) 98-2 which required States to
allocate costs to each ``benefiting program'' in accordance with the
provisions in OMB Circular A-87 (2 CFR part 225). According to the
instructions and rationale in OGAM AT 98-2, ``Cost shifting (to a
primary program) is not permitted by most program statutes, except
where there is a specific legislative provision allowing such cost
shifting. While the former AFDC program allowed such an exception, the
TANF legislation that replaced AFDC does not permit it being designated
as the sole benefiting or primary program.'' All States submitted
revised cost allocation plans to comply with this policy and since then
have continued to allocate Medicaid, Food Stamp and TANF costs in
accordance with a ``benefiting'' methodology.
Six States filed suit in District Court to prevent HHS from
enforcing OGAM AT 98-2 (Arizona v. Thompson, 281 F.3d 248 (DC Cir.
2002). The States alleged that they incur common administrative costs
that benefit the TANF, Medicaid, and Food Stamp programs and contended
that the ``grandfather provision'' under 42 U.S.C. 604(a)(2) permits
them to use TANF grants as they did under the AFDC program. Section
604(a)(2) allows States to use Federal TANF funds in any manner that
the State was authorized to use Federal funds received under the
State's former AFDC program, the Job Opportunities and Basic Skills
Training (JOBS) program or the Emergency Assistance program in effect
as of either September 30, 1995 or August 21, 1996, whichever date the
State has elected.
The United States District Court for the District of Columbia
upheld the Department's position. However, the States appealed to the
United States Court of Appeals for the District of Columbia Circuit
(Court of Appeals). The Court of Appeals decided, on March 5, 2002,
that the TANF legislation does not require HHS to conclude that States
are prohibited from using the ``primary program'' cost allocation
methodology (281 F.3d at 256). The Appeals Court noted that: ``The
background against which Congress enacted the Welfare Reform Act
included both Circular A-87's general principle of benefiting program
allocation and its well-recognized exception for the AFDC program.''
Id. However, the Court left open the possibility that HHS could, in the
exercise of its rulemaking discretion, prospectively prescribe that
States use the ``benefiting program'' method to allocate common costs
among programs. Id. The case was ultimately remanded to HHS for further
consideration. After considerable deliberation, we have determined that
the benefiting program cost allocation methodology is the appropriate
cost allocation rule to apply to the TANF program.
Comment: A national association requested that we reconsider our
proposal, because it restricts State flexibility and State options. It
maintains that the ties between the TANF program and the Food Stamp
program are strong and numerous in most States. It points to the 2002
Farm Bill as an example of legislation which enables States to align
the definition of income and/or resources under the Food Stamp program
to that used in the TANF or Medicaid program. As another example, it
points to the close connection between the Food Stamp program and the
TANF program set forth in the interim final TANF rule published in the
Federal Register on June 29, 2006. A provision in the rule urges States
to implement a Simplified Food Stamp Program, for purposes of
considering the required hours of work participation in a work
experience or community service program. It argues that the widespread
adoption of such conformity options has led States to combine staff,
automated systems, and other administrative functions when operating
these programs.
Response: The 2002 Farm Bill provisions and the Simplified Food
Stamp Program give States the option to align certain Food Stamp and
TANF program eligibility rules. But, this flexibility did not alter or
affect in any way the required cost principles applicable to both
programs. The Food Stamp program, administered by the U.S. Department
of Agriculture's Food and Nutrition Service, is subject to the
[[Page 42720]]
same Common Rule cost principles as the TANF program. In using Federal
Food Stamp program funds or Federal TANF program funds, States have
been and continue to be required to follow the uniform cost principles
for determining allowable costs in OMB Circular A-87 (2 CFR part 255).
OMB Circular A-87 (2 CFR part 225) states that program costs must
be necessary, reasonable, and allocable. A cost must also be allowable
under OMB Circular A-87 cost principles and the program's laws, terms
and conditions of the Federal award, or governing regulations. An
allowable cost is allocable to a particular program in accordance with
the relative benefits received by that program. Thus, allowable shared
costs must be allocated in accordance with the ``benefiting program''
cost allocation methodology and no changes have been made in this final
rule.
III. Discussion of Regulatory Provisions
We have added the following new section to part 263, subpart B of
the TANF regulations.
Section 263.14 What methodology shall States use to allocate Federal
TANF costs?
This section provides that States shall use only the ``benefiting
program'' cost allocation methodology. Requiring a ``benefiting
program'' cost allocation methodology is consistent with the TANF final
rules which make the TANF program subject to 45 CFR part 92 and
includes the cost principles of OMB Circular A-87 (2 CFR part 225).
One of the fundamental Federal appropriation principles at 31
U.S.C. 1301(a) states that appropriations can only be used for the
purposes for which they were appropriated, unless otherwise provided by
law. OMB Circular A-87 (2 CFR part 225) reflects this principle by
requiring ``benefiting program'' cost allocation. The overall purpose
of OMB Circular A-87 (2 CFR part 225) is to achieve more efficient and
uniform administration of Federal awards and to provide the foundation
for greater uniformity in the costing procedures of non-Federal
governments. Without an explicit legislative provision permitting
``primary program'' cost allocation, we believe it would be
inconsistent with and contrary to these appropriation principles to
allow TANF funds to be used to pay for costs allocable to other
programs.
Since the decision of the Appeals Court, no State has submitted a
revised ``primary program'' cost allocation plan for allocating the
common costs of determining eligibility or case maintenance for TANF,
Food Stamps and Medicaid to HHS for approval. These were the primary
common costs previously claimed and allowed under a ``primary program''
cost allocation methodology under the former AFDC program.
Under the President's Management Agenda of improved accountability,
each program needs to know its full costs using consistent and
comparable data to assess program trends and measure performance.
Appropriate program and funding decisions, both now and in the future,
must be based on the knowledge and accounting of total program costs,
including those costs incurred under a consistent benefiting program
methodology. Under this rule, we will not permit an exception to the
benefiting program cost allocation methodology generally required under
OMB Circular A-87 (as permitted for the AFDC program prior to the
enactment of the TANF program). Thus, HHS will disapprove any TANF cost
allocation amendments proposing a ``primary program'' cost allocation
methodology.
Therefore, the Secretary is exercising his discretion to require a
``benefiting program'' cost allocation methodology under TANF in
accordance with OMB Circular A-87 (2 CFR part 225). This final rule
requires States to make no changes to their TANF cost allocation plans,
but instead will affirm and lock in place, current cost allocation
practice.
Readers should note that we revised the title of this section to be
more concise. ``States'' has already been defined in 45 CFR 260.30 to
mean the 50 States, the District of Columbia, and the Territories.
This final rule does not affect federally-recognized Indian tribes
operating approved Tribal TANF programs. Prior to enactment of PRWORA
of 1996, needy families in a federally-recognized Indian tribe received
assistance under the State's former Aid to Families with Dependent
Children (AFDC) program. PRWORA gave federally-recognized Tribes the
opportunity to operate their own Tribal TANF programs. These Tribes
have always followed the ``benefiting program'' cost allocation
methodology in accordance with OMB Circular A-87 and the applicable
Tribal TANF regulatory provisions at 45 CFR 286.45(c) and (d).
IV. Paperwork Reduction Act of 1995
This rule contains no new information collection activities that
are subject to review and approval by the Office of Management and
Budget (OMB) under the Paperwork Reduction Act of 1995, codified at 44
U.S.C. 3507.
V. Regulatory Flexibility Analysis
The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the
Regulatory Flexibility Act (Pub. L. 96-354), that this rule will not
result in a significant impact on a substantial number of small
entities. The primary impact is on State governments. State governments
are not considered small entities under the Regulatory Flexibility Act.
VI. Regulatory Impact Analysis
Executive Order 12866 requires that regulations be reviewed to
ensure that they are consistent with the priorities and principles set
forth in the Executive Order. The Department has determined that this
rule is consistent with these priorities and principles. This rule is
considered a ``significant regulatory action'' under the Executive
Order, and therefore has been reviewed by the Office of Management and
Budget.
Since all States should be using a ``benefiting program'' cost
allocation methodology under TANF, we believe the impact of this final
rule is minimal. We do not believe this rule will have a significant
negative impact or reduce potential Federal reimbursement, as States
receive a fixed Federal block grant amount.
VII. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that a covered agency prepare a budgetary impact statement before
promulgating a rule that includes any Federal mandate that may result
in the expenditure by State, local, and Tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any one
year.
The Department has determined that this rule would not impose a
mandate that will result in the expenditure by State, local, and Tribal
governments, in the aggregate, or by the private sector, of more than
$100 million in any one year.
VIII. Congressional Review
This regulation is not a major rule as defined in 5 U.S.C. Chapter
8.
IX. Assessment of Federal Regulation and Policies on Families
Section 654 of The Treasury and General Government Appropriations
Act of 1999 requires Federal agencies to determine whether a proposed
policy or regulation may affect family well-being. If the agency's
determination is affirmative, then the agency must prepare an impact
assessment
[[Page 42721]]
addressing seven criteria specified in the law. These regulations will
not have an impact on family well-being as defined in the legislation.
X. Executive Order 13132
Executive Order 13132 ``Federalism'' requires that Federal agencies
consult with State and local government officials in the development of
regulatory policies with Federalism implications. In the NPRM, we did
solicit comments from State and local government officials, consistent
with this Executive Order. We did not receive any comments from State
and local government officials.
List of Subjects in 45 CFR part 263
Grant programs--Federal aid programs, Penalties, Public assistance
programs--Welfare programs.
Approved: May 16, 2008.
Daniel C. Schneider,
Acting Assistant Secretary for Children and Families.
Michael O. Leavitt,
Secretary of Health and Human Services.
0
For the reasons set forth in the preamble, the Administration for
Children and Families amends 45 CFR chapter II to read as follows:
PART 263--EXPENDITURES OF STATE AND FEDERAL TANF FUNDS
0
1. The authority citation for 45 CFR part 263 continues to read as
follows:
Authority: 42 U.S.C. 604, 607, 609, and 862a.
0
2. Add Sec. 263.14 to subpart B to read as follows:
Sec. 263.14 What methodology shall States use to allocate TANF costs?
States shall use a benefiting program cost allocation methodology
consistent with the general requirements of OMB Circular A-87 (2 CFR
part 225) to allocate TANF costs.
[FR Doc. E8-16854 Filed 7-22-08; 8:45 am]
BILLING CODE 4184-01-P