**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.044 SPECIAL PROGRAMS FOR THE AGING\--TITLE III, PART
B\--GRANTS FOR SUPPORTIVE SERVICES AND SENIOR CENTERS**

**CFDA 93.045 SPECIAL PROGRAMS FOR THE AGING\--TITLE III, PART
C\--NUTRITION SERVICES**

**I. PROGRAM OBJECTIVES**

**Grants for Supportive Services and Senior Centers**

The objective of this grant program is to assist States develop and
implement, through a network of public and private agencies and service
providers, comprehensive and coordinated community-based service
delivery systems for older Americans, which will assist them in leading
independent, meaningful and dignified lives in their own homes and
communities as long as possible. The target population for these
supportive services, which include in-home services for frail elderly as
well as those provided in multi-purpose senior centers, is individuals
aged 60 and older with emphasis on those with the greatest social and
economic need, particularly low-income minorities; however, proof of age
is not required as a condition of receiving services.

As the program itself matures, program funding is increasingly being
targeted to serve those elderly who, because of their income or age, may
not be eligible for Medicaid or Medicare, and recipients are
coordinating with other Federal and State programs in ensuring the
availability of the broadest range of services for the elderly. As a
result, many of the organizations funded under this program and the
nutrition program (see below) also receive funds from other Federal
sources as well as from non-Federal sources.

Supportive services may include a full range of economic and social
services, including access services (transportation, outreach,
information and referral, and language translation services), legal
assistance and other counseling services, case management services,
health screening services, services designed to ensure safe and
appropriate housing, pre-retirement planning and assessment of
post-retirement needs, ombudsman services, and services to families of
elderly victims of Alzheimer=s disease and related disorders with
neurological and organic brain dysfunction. Nutrition services are
provided under a separate authorization as described below.

**Grants for Nutrition Services**

The objective of this grant program is to provide individuals aged 60 or
older with nutrition services, including meals and nutrition education,
either in the home or in a congregate setting. This program is clustered
with the grants for supportive services and senior centers for purposes
of this Compliance Supplement (Supplement) since these services,
although separately earmarked, fall under the overall State planning
process and process for allocation of funds.

**II. PROGRAM PROCEDURES**

**Source of Governing Requirements**

These programs are authorized under Parts B and C, respectively, of
Title III of the Older Americans Act, as amended, which is codified at
42 USC 3021-3030. These programs may also be referred to as Part B
(supportive services and senior centers) and Part C1(congregate
nutrition services) and C2 (home-delivered nutrition services). Grants
to Indian tribes for similar purposes are authorized under another title
of the Older Americans Act and are not included in this Supplement.
Implementing regulations are published at 45 CFR part 1321.

**Administration and Services**

The Administration on Aging (AoA), a component of the Department of
Health and Human Services, administers the supportive services and
senior centers program and the nutrition program in cooperation with
States, sub-State agencies, and other service providers. The States
receive a formula grant from AoA, which is used by the State Unit on
Aging (SUA or, hereafter, State Agency) both for its planning,
administration, and evaluation of these programs as well as to pass
through to other entities.

Planning and Service Areas (PSAs) are designated by the State Agency in
accordance with AoA guidelines after considering the geographical
distribution of the service populations, location of available services,
available resources, other service area boundaries, location of units of
general purpose local government, and other factors. An Area Agency on
Aging (AAA or, hereafter, Area Agency) is then designated by the State
for each PSA after considering the views of affected local governments
(States that had a single State-wide planning and service area in place
prior to FY 1981 had the option to continue that method of operation;
there are currently eight States in this category). A single Area Agency
may serve more than one PSA. The Area Agencies, which may be public or
private non-profit agencies or organizations, develop and administer
counterpart area aging plans, as approved by the State Agency, and, in
turn, provide subgrants to or contract with public or private service
providers for the provision of services.

In general, the State Agency and the Area Agencies are precluded from
the direct provision of services, other than ombudsman services, unless
providing the services is necessary to ensure an adequate supply of
services, the services are related to the agency=s administrative
functions, or where services of comparable quality can be provided more
economically by the agency. Federal funds may pay for only a portion of
the costs of administration and services with the State and
subrecipients required to provide a matching share from other sources.

Service providers may include profit-making organizations (42 USC
3020(c)).

**State Plan and Area Plans**

A State plan, approved by AoA, is a prerequisite to funding of the
supportive services and nutrition programs; however, the State Plan
covers the totality of AoA programs for which the State is the recipient
under the Older Americans Act. The State Plan is developed on the basis
of input from the Area Agencies as well as input from the affected
populations as a result of public hearings. The State Plan addresses how
the State intends to comply with the various requirements of the Older
Americans Act and, specifically for Title III, its program objectives,
designation of Planning and Service Areas (PSAs), and specification of
the intrastate allocation formula for distribution of funds to each PSA.
The State Plan also contains assurances required by the Act and
implementing regulations.

Unless a State is not in compliance with Title III requirements, the
State Plan may be submitted on a two-, three-, or four-year cycle, at
the option of the State, with annual amendments, as appropriate;
however, AoA funding is provided annually. States found to be in
noncompliance may be required to submit their State Plans annually until
they are determined to be in compliance. Area plans are prepared and
submitted to the State for approval for either two, three, or four
years, with annual adjustments, as necessary.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

**1. State Agency**

> a\. State Agencies may use any amount of Title III-B (supportive
> services) funding necessary to conduct an effective ombudsman program
> (42 USC 3024 (d)(1)(B)).
>
> b\. Grant funds may be used for paying the costs of providing for a
> State volunteer services coordinator (42 USC 3024 (e)).
>
> c\. Grant funds may be used for State plan administration, including
> State Plan preparation, evaluation of activities carried out under the
> Plan, the collection of data and the conduct of analyses related to
> the need for services, dissemination of information, short-term
> training, and demonstration projects (42 USC 3028 (a)).
>
> d\. No supportive services, nutrition services, or in-home services
> may be provided directly by the State Agency unless the State Agency
> determines that direct provision of services is necessary to ensure an
> adequate supply of services, where such services are related to the
> agency=s administrative functions, or where such services of
> comparable quality can be provided more economically by the State
> Agency (42 USC 3027 (a)(10)).

**2. Area Agency**

> a\. Funds may be used for plan administration, operation of an
> advisory council, activities related to advocacy, planning,
> information sharing, and other activities leading to development or
> enhancement within the designated service area(s) of comprehensive and
> coordinated community-based systems of service delivery to older
> persons (45 CFR section 1321.53).
>
> b\. Funds may be used for paying the costs of providing for an area
> volunteer services coordinator (42 USC 3024(e) and 3026(a)(12)).
>
> c\. If approved by the State Agency, an Area Agency may use service
> funds for program development and coordination activities (42 USC 3024
> (d)(1)(D); 45 CFR section 1321.17(f)(14)(i)).
>
> d\. No supportive services, nutrition services, or in-home services
> may be provided directly by an Area Agency except if, in the judgment
> of the State Agency, direct provision of services is necessary to
> ensure an adequate supply of services, where such services are related
> to the agency=s administrative functions, or where such services of
> comparable quality can be provided more economically by the agency (42
> USC 3027 (a)(10)).

**3. Service Providers**

> a\. Funds may be used to assist in the operation of multi-purpose
> senior centers and to meet all or part of the costs of compensating
> professional and technical personnel required for center operation (42
> USC 3030d (b)(2)).
>
> b\. Funds may be used for nutrition services and supportive services
> consistent with the terms of the agreement between the Area Agency and
> the service provider (42 USC 3026 (a)(1), 3030d(a), and 3030e).
>
> c\. Funds may be used for services associated with access to
> supportive services for in-home services, and for legal assistance (42
> USC 3026 (a)(2)).
>
> d\. Nutrition services may be provided to older individuals= spouses,
> who may not be eligible for these services in their own right, on the
> same basis as they are provided to older individuals, and may be made
> available to handicapped or disabled individuals who are less than 60
> years old but who reside in housing facilities occupied primarily by
> older individuals at which congregate nutrition services are provided
> (42 USC 3027 (a)(13)(A)).
>
> e\. In accordance with procedures established by the Area Agencies,
> nutrition project administrators may offer meals to individuals
> providing volunteer services during the meal hours and to individuals
> with disabilities who reside at home with and accompany eligible
> individuals (42 USC 3027 (a)(13)(I)).
>
> f\. Funds may be used for provision of home-delivered meals to older
> individuals (42 USC 3027 (a)(13)(B)).
>
> g\. Funds may be used to acquire (in fee simple or by lease for 10
> years or more), alter, or renovate existing facilities or to construct
> new facilities to serve as multi-purpose senior centers for not less
> than 10 years after acquisition, or 20 years after completion of
> construction, unless waived by the Assistant Secretary for Aging (42
> USC 3027 (a)(15)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> a\. *State*
>
> \(1\) States must contribute from State or local sources at least 25
> percent of the cost of State Plan administration as their matching
> share. This may include cash or in-kind contributions by the State or
> third parties (42 USC 3028 (a)(1), 42 USC 3029 (b), and 45 CFR section
> 1321.47).
>
> \(2\) Using fiscal year (FY) 1980 as the baseline, the difference, if
> any, between the amount representing the match for services (of at
> least 15 percent State-wide) in FY 1980 and the amount required in any
> subsequent FY shall be met from State sources only (42 USC 3029 (b)).
>
> \(3\) All services, whether provided by the State Agency, an Area
> Agency or other service provider (including any ombudsman services
> provided under the authority of 42 USC 3024 (d)(1)(D)) must be funded
> with a non-Federal match of at least 15 percent. Funds for ombudsman
> services provided under the authority of 42 USC 3024 (d)(1)(B) are not
> required to be matched. This percentage must be met on a State-wide
> basis (42 USC 3042 (d)(1)(D); 45 CFR section 1321.47).
>
> b\. *State and Area Agencies*
>
> Area Agencies, in the aggregate, must contribute at least 25 percent
> of the costs of administration of area plans (42 USC 3024 (d)(1)(A);
> 45 CFR section 1321.47).
>
> \(1\) State - Since this match is computed based on the aggregate of
> all Area Agencies in the State, the auditor\'s testing of the amount
> of this match is performed at the State Agency.
>
> \(2\) Area Agencies - The auditor\'s testing of the allowability of
> the matching (e.g., from an allowable source and in compliance with
> the administrative requirements and allowable costs/cost principles
> requirements) should be performed at the Area Agencies.

**2.1 Level of Effort -** *Maintenance of Effort* - State

> The State Agency must spend for both services and administration at
> least the average amount of State funds it spent under the State plan
> for these activities for the three previous fiscal years. If the State
> agency spends less than this amount, the Assistant Secretary reduces
> the State\'s allotments for supportive and nutrition services under
> this part by a percentage equal to the percentage by which the State
> reduced its expenditures (42 USC 3029 (c); 45 CFR section 1321.49).
> See L.1. for reporting requirement regarding maintenance of effort.

**2.2 Level of Effort -** *Supplement Not Supplant* - Not Applicable

**3. Earmarking**

> a\. *State*
>
> \(1\) Expenditures for administration of the State plan are limited to
> the greater of five percent (or \$300,000 or \$500,000 depending on
> the aggregate amount appropriated or a lesser amount for the U.S.
> territories) of the overall allotment to a State under Title III
> unless a waiver is granted by the Assistant Secretary on Aging (42 USC
> 3028 (a)(1), and (b)(1), (2) and (3)).
>
> \(2\) After determination of the amount to be applied to State plan
> administration under 42 USC 3028 (b), the State may make up to (and
> including) 10 percent of that amount available for the cost of
> administration of Area Plans. The State may either calculate the 10
> percent based on the total allotment from AoA or on the amount
> remaining after deducting the amount to be applied to State Plan
> administration. This is an aggregate amount and need not be applied on
> an Area Agency-by-Area Agency basis (42 USC 3024 (d)(1)(A)).
>
> \(3\) Any amounts available to the State for State plan administration
> which the State determines are not needed for that purpose may be used
> by the State to supplement the amount available for administration of
> Area Plans (42 USC 3028 (a)(2)).
>
> \(4\) Any State which has been designated as a single planning and
> service area may elect to be subject to the State Plan administration
> limit (five percent) or the Area Plan administration (10 percent)
> limit (42 USC 3028 (a)(3)).
>
> \(5\) A State may transfer:
>
> \(a\) Up to 30 percent of a State=s separate allotments for congregate
> and home-delivered nutrition services between those two allotments
> without AoA approval (42 USC 3028 (b)(4)(a); 45 CFR section 1321.45
> (a)).
>
> \(b\) Not more than 20 percent between programs under Part B and Part
> C (Parts C1 and/or C2) for use as the State considers appropriate (42
> USC 3028 (b)(5)(A)).
>
> A State Agency may not delegate to an Area Agency or any other entity
> the authority to make such transfers 42 USC 3028 (b) (6)).
>
> Additional amounts may be transferred with AoA approval (42 USC 3028
> (b)(4)(B) and (b)(5) (B)).
>
> \(6\) If a State allotted 10 percent of its allotment for
> administration of area plans, the State may allow any Area Agency,
> upon request and with justification, to use an amount (that an Area
> Agency would otherwise make available for direct services) for program
> development and coordination activities by that Area Agency (42 USC
> 3024 (d)(1)(D); 45 CFR section 1321.17(f)(14)(i)).
>
> b\. *Area Agency*
>
> As provided in agreements with the State Agency, Area Agencies earmark
> portions of their allotment. The typical earmarks are:
>
> \(1\) A maximum amount or percentage for Program development and
> coordination activities by that agency (42 USC 3024 (d)(1)(D); 45 CFR
> section 1321.17(f)(14)(i)).
>
> \(2\) A minimum amount or percentage for Services related to access,
> in-home services, and legal assistance (42 USC 3026 (a)(2) and (b)).

**H. Period of Availability of Federal Funds**

> Funds are made available to the State annually and must be obligated
> by the State by the end of the Federal fiscal year in which they were
> awarded. The State has two years to liquidate all obligations for its
> administration of the State Plan and for awards to the Area Agencies
> consistent with their intrastate allocation formula. Therefore, in any
> given year, multiple years of funding are being used to provide
> services State-wide.

. Whenever the Assistant Secretary on Aging determines that any amount
allotted to a State under Parts B or C for a fiscal year will not be
used to carry out the purpose for which the allotment was made, the
funds may be reallotted to one or more other States. Any amount made
available to a State as the result of a reallotment shall be regarded as
part of the State=s allotment for the same fiscal year in which the
funds were appropriated, but shall remain available for obligation by
the State until the end of the succeeding fiscal year (42 USC 3024 (b)).

**J. Program Income**

> Service providers are required to provide an opportunity to
> individuals being served under the nutrition services program to make
> voluntary contributions for meals. These voluntary contributions are
> to be added to the amounts made available by the State or Area Agency
> and must be used to increase the number of meals served, facilitate
> access to meals, and provide other supportive services directly
> related to nutrition services (42 USC 3027(a)(13)(C)(i)and (ii)).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269, *Financial Status Report*, and AoA Supplemental Form (OMB
> No. 0985-0004) - Applicable (Required semi-annually)
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Program* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Payments under this
> program are made by the Department of Health and Human Services,
> Payment Management System. Reporting equivalent to the SF-272 is
> accomplished through the Payment Management System and is evidenced by
> the PMS 272 series of reports.
>
> **2. Performance Reporting** - Not Applicable

**3. Special Reporting -** Not Applicable

**M. Subrecipient Monitoring**

> **1. State Agency**
>
> The State Agency is required to develop policies governing all aspects
> of programs operated under the State Plan and to monitor their
> implementation, including assessing performance for quality and
> effectiveness and specifying data system requirements to collect
> necessary and appropriate data (45 CFR sections 1321.11 and 1321.17
> (f)(9)).
>
> **2. Area Agencies**
>
> Area Agencies are required to oversee the activities of service
> providers with respect to provision of services, reporting, voluntary
> contributions, and coordination of services (45 CFR section 1321.65).

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.558 TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF)**

**I. PROGRAM OBJECTIVES**

The objectives of this program are to provide time-limited assistance to
needy families with children so that the children can be cared for in
their own homes or in the homes of relatives; end dependence of needy
parents on government benefits by promoting job preparation, work, and
marriage; prevent and reduce out-of-wedlock pregnancies, including
establishing prevention and reduction goals; and encourage the formation
and maintenance of two-parent families. This program replaces the Aid to
Families with Dependent Children (AFDC), Job Opportunities and Basic
Skills Training (JOBS), and Emergency Assistance (EA) programs.

**II. PROGRAM PROCEDURES**

**Source of Governing Requirements**

This program is authorized under Title IV-A of the Social Security Act,
as amended by the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) (P.L. 104-193), and subsequent
amendments thereto, and codified at 42 USC 601-619. Other sections of
the Social Security Act that were not amended by PRWORA continue to
apply to TANF and may be referenced in this Supplement. PRWORA was
signed into law on August 22, 1996, and required State implementation no
later than July 1, 1997. The statute also afforded the States (other
than eligible territories) the opportunity for earlier implementation.
Proposed implementing program regulations have been published as a
Notice of Proposed Rulemaking in the November 20, 1997, [Federal
Register]{.underline} (62 FR 224, pp.62124 et seq.). The Department of
Health and Human Services (HHS) Administration for Children and Families
(ACF) has issued several Policy Announcements and Program Instructions
for State use, primary among them, TANF-ACF-PA-97-1, January 31, 1997.

TANF is subject to the A-102 Common Rule and OMB Circular A-87. This is
in contrast to AFDC which, as described in Appendix I, was excluded from
the A-102 Common Rule.

**Administration and Services**

ACF, a component of HHS, administers the TANF program on behalf of the
Federal Government. To be eligible for the TANF block grant, a State
(including the District of Columbia, the Commonwealth of Puerto Rico,
the United States Virgin Islands, Guam, and American Samoa) must submit
a State plan containing specified information and assurances within the
27-month period prior to the Federal fiscal year in which the funds are
to be provided.

Indian Tribal governments are also eligible entities for TANF but under
another set of requirements that ACF will implement separately. Until
this Supplement is updated for these requirements, audits of Indian
Tribal governments should follow Part 7 rather than Part 4 of this
Supplement.

Following ACF review of the State Plan and determination that it is
complete, ACF awards the basic \"State Family Assistance Grant\" (SFAG)
to the State using a formula allocation derived from funding levels
under the superseded programs. The SFAG is a fixed amount to the State
subject to reductions based on any penalties assessed. In addition,
amounts may be adjusted on the basis of separate Federal funding of
counterpart Indian tribal programs within the State. States meeting the
qualifying criteria may also receive supplemental grants, bonuses,
loans, and payments from a contingency fund. As long as the minimum
requirements are met, a State has significant flexibility in designing
programs and determining eligibility requirements and may use grant
funds to provide cash or non-cash assistance, including direct services,
and for administrative activities. Along with the discretion provided to
the States, there are also a number of provisions to ensure
accountability for results, in the form of monetary penalties, and
requirements to provide a variety of data to ACF about expenditures and
individuals receiving benefits under the program. In addition to the
penalties for failure to meet programmatic or administrative
requirements, a State may be rewarded for its performance in
program-related areas, such as reducing out-of-wedlock births.

**Other Considerations**

As of July 1, 1997, all States, including the eligible territories, had
to implement the TANF requirements. However, waivers granted under the
authority of Section 1115 of the Social Security Act, that allowed a
State to operate a program that did not comply with specific statutory
requirements of TANF\'s predecessor programs, remain in effect in some
States. In some cases, these waivers are inconsistent with the statutory
requirements of the TANF program, but are being allowed under 42 USC 615
to continue until their expiration, despite the inconsistency.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should look to Part 2,
Matrix of Compliance Requirements, to identify which of the 14 types of
compliance requirements described in Part 3 are applicable and then look
to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Funds may be used in any manner reasonably calculated to achieve
> the purposes of the program (as specified in 42 USC 601), including
> providing low-income households with assistance in meeting home
> heating and cooling costs, or any uses authorized for State
> expenditure under prior Parts A and F, Title IV-A, of the Social
> Security Act as in effect on September 30, 1995 or August 21, 1996, at
> the State\'s option (42 USC 604(a)(1) and (2)).
>
> 2\. A State may use funds for programs to prevent and reduce the
> number of out-of-wedlock pregnancies, including programs targeted to
> law enforcement officials, the educational system and counseling
> services, that provide education and training of women and men on the
> problem of statutory rape (42 USC 602(a)(1)(A)(v) and (vi)).
>
> 3\. Funds may be used to make payments or provide job placement
> vouchers to State-approved public and private job placement agencies
> providing employment placement services to individuals receiving
> assistance under TANF (42 USC 604(f)).
>
> 4\. Funds may be used to implement an electronic benefits transfer
> system (42 USC 604(g)).
>
> 5\. Funds may be used to carry out a program to fund individual
> development accounts (as described in 42 USC 604(h)(2)) established by
> individuals eligible to receive assistance under TANF (42 USC 604(h)).
>
> 6\. Funds may not be used for juvenile justice activities except for
> those States having approved AFDC State Plans under Title IV-A which
> included Emergency Assistance juvenile justice activities as of
> September 30, 1995 or August 21, 1996, at the State=s option (42 USC
> 604(a)(2)).
>
> 7\. Grant funds may not be used to provide medical services other than
> pre-pregnancy family planning services (42 USC 608(a)(6)).
>
> 8\. Funds may not be used for sectarian worship, instruction, or
> proselytization (42 USC 604a(j)).
>
> 9\. A State may contract with charitable, religious and private
> organizations to provide administrative and programmatic services and
> may provide beneficiaries of assistance with certificates, vouchers,
> or other forms of disbursement which are redeemable with such
> organization (42 USC 604a(b)).
>
> 10\. A State may transfer up to 30 percent combined total of the State
> family assistance grant, supplemental grant for population increases,
> and bonus funds for high performance and illegitimacy reduction, if
> any, for a given fiscal year to carry out programs under the Social
> Services Block Grant (Title XX) (CFDA 93.667) and/or the Child Care
> and Development Block Grant (CFDA 93.575). However, no more than 10
> percent may be transferred to Title XX and such amounts may be used
> only for programs or services to children or their families whose
> income is less than 200 percent of the poverty level. Contingency
> funds under 42 USC 603(b) cannot be transferred under this authority
> (42 USC 604(d)).

**C. Cash Management**

> Under the TANF program\'s State Maintenance of Effort (MOE)
> requirement, the drawdown of Federal cash should not exceed the
> federally funded portion of TANF expenditures taking into account the
> State MOE accounts. For example, if a State has an MOE level that is
> calculated to be 40 percent of the total funds for a fiscal year,
> Federal draws should not exceed 60 percent of the amount needed to
> cover disbursements in any time period (Department of the Treasury,
> Financial Management Service CMIA Policy Statement Number 19).

**E. Eligibility**

> **1. Eligibility for Individuals**
>
> The State Plan provides the specifics on how eligibility is determined
> in each State. The State Plan and eligibility requirements must comply
> with the following Federal requirements:
>
> a\. To be eligible for assistance under this program, a family must
> include a minor child, i.e., an individual less than 18 years old, or,
> if a full-time student in a secondary school (or the equivalent level
> of vocational or technical training), less than 19 years old, who
> resides with the family (consistent with 42 USC 608(a)(10)); or a
> pregnant individual. A family must also meet the State=s eligibility
> requirements as provided in the State Plan (42 USC 602, 608(a)(1) and
> 619(2)).
>
> b\. Any family that includes an adult or minor child head of household
> or a spouse of the head of household who has received assistance under
> any State program funded by Federal TANF funds for 60 months (whether
> or not consecutive) from the date of the initiation of the State
> program is ineligible for additional federally funded TANF services
> unless an exemption is granted by the State on the basis of hardship
> or a family member having been battered or subjected to extreme
> cruelty. In determining the number of months for which the head of
> household or the spouse of the head of household has received
> assistance, the State must not count any month during which the adult
> received the assistance while living in Indian country or in an
> Alaskan Native Village and the most reliable data available with
> respect to that month (or a period including that month) indicate at
> least 50 percent unemployment among adults living in Indian country or
> in the village (42 USC 608(a)(7)).
>
> (See III.G.3., Earmarking, for testing the limits related to the
> number of exemptions.)
>
> c\. A State may not use Federal TANF funds to provide assistance to an
> individual who is under age 18, is unmarried, has a minor child at
> least 12 weeks old, and has not successfully completed high school or
> its equivalent unless the individual either participates in education
> activities directed toward attainment of a high school diploma or its
> equivalent, or participates in an alternative education or training
> program approved by the State (42 USC 608(a)(4)).
>
> d\. A State may not use Federal TANF funds to provide assistance to an
> unmarried individual under 18 caring for a child, if the minor parent
> and child are not residing with a parent, legal guardian, or other
> adult relative, unless one of the statutory exceptions applies (42 USC
> 608(a)(5)).
>
> e\. A State may not use any part of the grant to provide assistance
> for a minor child who has been or is expected to be absent from the
> home for a period of 45 consecutive days or, at the option of the
> State, such period of not less than 30 and not more than 180
> consecutive days unless the State grants a good cause exception, as
> provided in its State Plan (42 USC 608(a)(10)).
>
> f\. A State may not use any part of the grant to provide assistance
> for an individual who is a parent (or other caretaker relative) of a
> minor child who fails to notify the State agency of the absence of the
> minor child from the home, as in paragraph e. immediately above,
> within five days of the date that it becomes clear to that individual
> that the child will be absent for the specified period of time (42 USC
> 608(a)(10)(C)).
>
> g\. A State shall require, as a condition of providing assistance,
> that a member of the family assign to the State the rights the family
> member may have for support from any other person. This assignment
> does not exceed the amount of assistance provided (42 USC 608(a)(3)).
>
> h\. A State may not use any part of the grant to provide cash
> assistance to an individual during the 10-year period that begins on
> the date the individual is convicted in Federal or State court of
> having made a fraudulent statement or representation with respect to
> place of residence in order to simultaneously receive assistance from
> two or more States under TANF, Title XIX, or the Food Stamp Act of
> 1977, or benefits in two or more States under the Supplemental
> Security Income program under Title XVI of the Social Security Act. If
> the President of the United States grants a pardon with respect to the
> conduct which was the subject of the conviction, this prohibition will
> not apply for any month beginning after the date of the pardon (42 USC
> 608(a)(8)) .
>
> i\. A State may not use any part of the grant to provide assistance to
> any individual who is fleeing to avoid prosecution, or custody or
> confinement after conviction, for a felony or attempt to commit a
> felony (or in the State of New Jersey, a high misdemeanor), or who is
> violating a condition of probation or parole imposed under Federal or
> State law (42 USC 608(a)(9)(A)).
>
> j\. Qualified aliens, as defined at 8 USC 1641b, entering the United
> States on or after August 22, 1996, are not eligible for Federal TANF
> benefits for a period of five years beginning on the date of the
> alien=s entry into the United States, unless they meet an exception at
> 8 USC 1612(b)(2) or 1613. A State may, at its option, provide Federal
> TANF assistance to qualified aliens who entered the United States
> before August 22, 1996, and, for aliens entering the United States on
> or after August 22, 1996, after the expiration of the five-year time
> bar. Non-qualified aliens may not receive Federal TANF assistance
> unless one of the exceptions at 8 USC 1612(b)(2) applies (8 USC 1612
> and 1613).
>
> k\. An individual convicted under Federal or State law of any offense
> which is classified as a felony and which involves the possession,
> use, or distribution of a controlled substance (as defined the
> Controlled Substances Act (21 USC 802(6)) is ineligible for assistance
> under TANF if the conviction was based on conduct occurring after
> August 22, 1996. A State shall require each individual applying for
> assistance under TANF to state in writing whether the individual or
> any member of their household has been convicted of such a felony
> involving a controlled substance. However, a State may by law exempt
> individuals or limit the time period of this prohibition (21 USC
> 862a).
>
> l\. If an individual refuses to engage in required work, a State must
> reduce TANF assistance to the family, at least pro rata, with respect
> to any period during the month in which the individual so refuses, or
> may terminate assistance. Any reduction or termination is subject to
> good cause or other exceptions as the State may establish (42 USC
> 607(e)(1)). However a State may not reduce or terminate TANF
> assistance based on a refusal to work if the individual is a single
> custodial parent caring for a child who is less than 6 years of age if
> the individual can demonstrate the inability (as determined by the
> State) to obtain child care for one or more of the following reasons:
> (1) the unavailability of appropriate care within a reasonable
> distance of the individual\'s work or home; (2) unavailability or
> unsuitability of informal child care; or (3) unavailability of
> appropriate and affordable formal child care (42 USC 607(e)(2)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery** - Not Applicable

**3. Eligibility of Subrecipients** - Not Applicable

**G. Matching, Level of Effort, Earmarking**

> **1. Matching** - Not Applicable

**2.1 Level of Effort** - *Maintenance of Effort*

> a\. *TANF MOE* - A State is required to maintain in each succeeding
> year an amount of \"qualified State expenditures\" (as defined in 42
> USC 609(a)(7)(B)) at least at the applicable percentage of historic
> State expenditures for eligible families (as defined in 42 USC
> 609(a)(7)(B)(i)(IV)) for the immediately preceding fiscal year. The
> applicable percentage for fiscal years 1997 through 2002 is 80 percent
> of the amount of non-Federal funds the State spent in Fiscal Year (FY)
> 1994 on AFDC or 75 percent if the State meets the Act=s work
> participation rate requirements (42 USC 607(a)) for the fiscal year.
> This is termed \"TANF MOE\" and the requirement is based on the
> Federal fiscal year. This amount was prorated for FY 1997 based on a
> State=s entry into the program. Qualified expenditures with respect to
> eligible families may come from all programs, i.e., the State\'s TANF
> program as well as programs separate from the State\'s TANF program
> (42 USC 609(a)(7)(A) and 609(a)(7)(B)(i)(I)).
>
> If application of a penalty results in a reduction of Federal TANF
> funding, a State is required in the immediately succeeding fiscal year
> to spend from State funds an amount equal to the total amount of the
> reduction, in addition to the otherwise required TANF MOE (42 USC
> 609(a)(12)).
>
> Expenditures to support TANF MOE are shown on the *TANF ACF 196
> Financial Report* under the columns headed \"State TANF
> Expenditures(MOE)\" and \"Separate State Programs (MOE).\"
>
> b\. *Contingency Fund MOE* - A State must exceed its annual
> reconciliation maintenance of effort level, which is 100 percent of
> historic State expenditures in FY 1994, to qualify for contingency
> funding. This is termed \"Contingency Fund MOE.\" The Contingency Fund
> MOE requirement may be met only through qualified expenditures under
> the State\'s TANF program with respect to eligible families. Qualified
> expenditures consist of those defined under 42 USC 609(a)(7)(B)(i)(I),
> but excludes those expenditures described in subclause (I)(bb) (42 USC
> 603(b)(6)(B)(ii) and 609(a)(10)).
>
> c\. *Limitations on \"Qualified State expenditures*\" - Expenditures
> under pre-existing programs, other than those funded under Title IV-A
> existing prior to PRWORA/TANF, may not count toward the State\'s MOE
> requirement for the current year unless the current year\'s
> expenditures with respect to eligible families exceed the expenditures
> made under the State or local program in FY 1995. To be considered as
> \"exceeding\" the FY 1995 level, the expenditures must be new or
> additional expenditures (42 USC 609(a)(7)(B)(i)(II)(aa)). In addition,
> expenditures by the State from amounts that originated from Federal
> funds may not count toward meeting a State\'s MOE requirement even if
> the expenditures \"qualify\" (42 USC 609(a)(7)(B)(iv)(I)).
>
> Except for child care expenditures, double-counting of expenditures to
> meet the MOE requirement is prohibited. For TANF purposes, a State may
> count a limited amount (i.e., the Matching Fund MOE under CFDA 93.596)
> for the child care expenditures also claimed as a condition of
> receiving Federal funds under the Child Care and Development Fund
> (CFDA 93.596) (42 USC 609(a)(7)(B)(iv)(II-IV)).

**2.2 Level of Effort** - *Supplement not Supplant* - Not Applicable

**3. Earmarking**

> a\. A State may not spend more than 15 percent for administrative
> purposes, excluding expenditures for information technology and
> computerization needed for required tracking and monitoring, of the
> total combined amounts available under the State family assistance
> grant, supplemental grant for population increases, bonus funds for
> high performance and illegitimacy reduction, and contingency funds (42
> USC 604(b)(1) and (2)).
>
> b\. The number of exemptions granted by a State for families that
> include an adult or minor child head of household, or the spouse of
> the head of household, who has received assistance under any State
> program funded by Federal TANF funds for 60 months (whether or not
> consecutive) may not exceed 20 percent of the average monthly number
> of families to which the State provided assistance during the fiscal
> year or the immediately preceding fiscal year (but not both), as the
> State may elect (42 USC 608(a)(7)(C)(ii)).
>
> (See III.E.1, Eligibility for Individuals, for related eligibility
> testing.)

**H. Period of Availability of Federal Funds**

> Funds, other than contingency funds, are available to the State until
> expended; contingency funds may be used for qualified expenditures
> only in the fiscal year for which the funding is provided (42 USC
> 603(b) and 604(e)).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269, *Financial Status Report* - Not Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request from Reimbursement for
> Construction Program* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Payments under this
> program are made by the Department of Health and Human Services,
> Payment Management System. Reporting equivalent to the SF-272 is
> accomplished through the Payment Management System and is evidenced by
> the PMS 272 series of reports.
>
> e\. *Temporary Assistance for Needy Families (TANF) ACF-196 Financial
> Report* *(OMB No. 0970-0165)* is due quarterly in lieu of the SF-269,
> *Financial Status Report*. With the fourth quarter report, the State
> must also file definitions and descriptive information on the TANF
> program and expenditure-related information on the State=s separate
> program(s) used to meet the TANF maintenance of effort requirement.
> Each fiscal year=s expenditure reporting must be separate; therefore,
> multiple reports may be required if the State spent funds from more
> than one fiscal year in a given quarter.

**2. Performance Reporting** - Not Applicable

> **3. Special Reporting**
>
> *Emergency TANF Data Report*, ACF-198, *(OMB No.0970-0164)* Quarterly
> on the basis of information collected monthly, including both
> disaggregated and aggregated data (42 USC 611(a)). States should
> select disaggregated data in accordance with the Generic Sampling
> Specifications provided with the form or the report should indicate
> the sampling plan followed. Those States implementing TANF by March
> 31, 1997, were required to submit their initial reports to cover the
> period from six months after the date of their implementation of the
> program or July 1, 1997, whichever is later, through September 30,
> 1997.
>
> *Key Line Items* - Section 1 (disaggregated data):
>
> Item 8 Type of Family for Work Participation

Item 13 B. Cash and Cash Equivalent - Number of Months

Item 14 B. Work Subsidies-Number of Months

Item 15 B. Child CareCNumber of Months

Item 20 Date of Birth (Age)

> Item 24 Relationship to Head of Household
>
> Item 30 Work Participation Status
>
> Items 31-44 Adult Work Participation Activities
>
> *Key Line Items* - Section 3 (aggregated data):
>
> Item 4 Total Number of Families
>
> Item 5 Total Number of Two-Parent Families
>
> Note 1: Section 1, items 30 and 31-44 and Section 3, items 4 and 5 are
> used by HHS to determine whether a State meets the two-parent
> participation rate and the overall rate which are achieved by having
> adults participate in specified work activities for specified minimum
> hours per week. The proper classification of work participation and
> caseload reduction are critical to this calculation. HHS may penalize
> a State for up to 21 percent of the SFAG for failure to meet the
> participation rates (42 USC 607 and 609(a)(3)).
>
> Note 2: Some of the data required by TANF will be maintained at the
> local government level rather than the State level. Regardless of any
> data collection difficulties, the State is required to accurately
> collect and report the data included in the TANF reports.

**N. Special Tests and Provisions**

**1. Child Support Non-Cooperation**

> **Compliance Requirement -** If the State agency responsible for
> administering the State plan approved under Title IV-D of the Social
> Security Act determines that an individual is not cooperating with the
> State in establishing paternity, or in establishing, modifying or
> enforcing a support order with respect to a child of the individual,
> and reports that information to the State agency responsible for TANF,
> the State TANF agency must (1) deduct an amount equal to not less than
> 25 percent from the TANF assistance that would otherwise be provided
> to the family of the individual, and (2) may deny the family any TANF
> assistance. HHS may penalize a State for up to five percent of the
> SFAG for failure to substantially comply with this required State
> child support program (42 USC 608(a)(2) and 609(a)(8)).
>
> **Audit Objective -** To determine whether, after notification by the
> State IV-D agency, the TANF agency has taken necessary action to
> reduce or deny TANF assistance.

**Suggested Audit Procedures:**

> a\. Review the State=s TANF policies and operating procedures
> concerning this requirement.
>
> b\. Test a sample of cases referred by the IV-D agency to the TANF
> agency to ascertain if benefits were reduced or denied as required.
>
> **2. Income Eligibility and Verification System (IEVS)**
>
> **Compliance Requirement -** Each State shall participate in the
> Income Eligibility and Verification System (IEVS) required by section
> 1137 of the Social Security Act as amended. Under the State Plan the
> State is required to coordinate data exchanges with other federally
> assisted benefit programs, request and use income and benefit
> information when making eligibility determinations, and adhere to
> standardized formats and procedures in exchanging information with
> other programs and agencies. Specifically, the State is required to
> request and obtain information as follows (42 USC 1320b-7; 45 CFR
> 205.55):
>
> 1\. Wage information from the State Wage Information Collection Agency
> (SWICA) should be obtained for all applicants at the first opportunity
> following receipt of the application, and for all recipients on a
> quarterly basis.
>
> 2\. Unemployment Compensation (UC) information should be obtained for
> all applicants at the first opportunity, and in each of the first
> three months in which the individual is receiving aid. This
> information should also be obtained in each of the first three months
> following any recipient-reported loss of employment. If an individual
> is found to be receiving UC, the information should be requested until
> benefits are exhausted.
>
> 3\. All available information from the Social Security Administration
> for all applicants at the first opportunity (See *Federal Tax Return
> Information* below).
>
> 4\. Information from the Immigration and Naturalization Service, and
> from other agencies in the State or in other States that might provide
> income or other useful information.
>
> 5\. Unearned income from the Internal Revenue Service (IRS) (See
> *Federal Tax Return Information* below).
>
> *Federal Tax Return Information* - Information from the IRS and some
> information from Social Security Administration (SSA) is Federal tax
> return information and subject to use and disclosure restrictions by
> 26 USC 6103. Individual data received from the SSA\'s Beneficiary
> Earnings Exchange Record (BEER), consisting of wage, self-employment,
> and certain other income information is considered Federal tax return
> information. However, benefits payments such as Supplemental Security
> Income (SSI) are SSA data and not Federal tax return information.
> Under 26 USC 6103, disclosure of Federal tax return information from
> IEVS is restricted to officers and employees of the receiving agency.
> Outside (non-agency) personnel (including auditors) are not authorized
> to access this information either directly or by disclosure from
> receiving agency personnel.
>
> The State is required to review and compare the information obtained
> from each data exchange against information contained in the case
> record to determine whether it affects the individual\'s eligibility
> or level of assistance, benefits or services under the TANF program,
> with the following exceptions:
>
> \- The State is permitted to exclude categories of information items
> from follow-up if it has received approval from ACF after having
> demonstrated that follow-up is not cost effective.
>
> \- The State is permitted, with ACF approval, to exclude information
> items from certain data sources without written justification if it
> followed up previously through another source of information. However,
> information from these data sources that is not duplicative and
> provides new leads may not be excluded without written justification.
>
> The State shall verify that the information is accurate and applicable
> to the case circumstances either through the applicant or recipient,
> or through a third party, if such determination is appropriate based
> on agency experience or is required before taking adverse action based
> on information from a Federal computer matching program subject to the
> Computer Matching and Privacy Protection Act (45 CFR section 205.56).
>
> For applicants, if the information is received during the application
> process, the State must use the information, to the extent possible,
> to determine eligibility. For recipients or individuals for whom a
> decision could not be made prior to authorization of benefits, the
> State must initiate a notice of case action or an entry in the case
> record that no case action is necessary within 45 days of its receipt
> of the information. Under certain circumstances, action may be delayed
> beyond 45 days for no more than 20 percent of the information items
> targeted for follow-up (45 CFR section 205.56).
>
> HHS may penalize a State for up to two percent of the SFAG for failure
> to participate in IEVS (42 USC 609(a)(4) and 1320b-7).
>
> **Audit Objective -** To determine whether the State has established
> and implemented the required IEVS system for data matching, and
> verification and use of such data. (This audit objective does not
> include Federal tax return information as discussed in the compliance
> requirements.)

**Suggested Audit Procedures:**

> a\. Review State operating manuals and other instructions to gain an
> understanding of the State\'s implementation of the IEVS system.
>
> b\. Test a sample of TANF cases subject to IEVS to ascertain if the
> State:
>
> \(1\) Used the IEVS to determine eligibility in accordance with the
> State Plan.
>
> \(2\) Requested and obtained the data from the State Wage Information
> Collection Agency, the State unemployment agency, the Social Security
> Administration (excluding Federal tax return information as discussed
> in the compliance requirements), the Immigration and Naturalization
> Service, and other agencies, as appropriate, and performed the
> required data matching.
>
> \(3\) Properly considered the information obtained from the data
> matching in determining eligibility and the amount of TANF benefits.
>
> **3. Adult Custodial Parent of Child under Six When Child Care Not
> Available**
>
> **Compliance Requirement -** If an individual is an adult single
> custodial parent caring for a child under the age of six, the State
> may not reduce or terminate assistance for the individual\'s refusal
> to engage in required work if the individual demonstrates to the State
> an inability to obtain needed child care based upon the following
> reasons: (a) unavailability of appropriate child care within a
> reasonable distance from the individual\'s home or work site; (b)
> unavailability or unsuitability of informal child care by a relative
> or under other arrangements; and (c) unavailability of appropriate and
> affordable formal child care arrangements. The determination of
> inability to find child care is made by the State. HHS may penalize a
> State for up to five percent of the SFAG for violation of this
> provision (42 USC 607(e)(2) and 609(a)(11)).
>
> **Audit Objective -** Determine whether the State has improperly
> reduced or terminated assistance to adult single custodial parents who
> refused to work because of inability to obtain child care for a child
> under the age of six.
>
> **Suggested Audit Procedures:**
>
> a\. Gain an understanding of the criteria established by the State to
> determine benefits for an adult single custodial parent who refused to
> work because of inability to obtain child care for a child who is
> under the age of six.
>
> b\. Select a sample of adult single custodial parents caring for a
> child who is under six years of age whose benefits have been reduced
> or terminated.
>
> c\. Ascertain if the benefits were improperly reduced or terminated
> because of inability to obtain child care.

**IV. OTHER INFORMATION**

> *Transfers out of TANF*
>
> As discussed in III.A, Activities Allowed or Unallowed, funds may be
> transferred out of TANF to Social Services Block Grant (Title XX)
> (CFDA 93.667) and the Child Care and Development Block Grant (CFDA
> 93.575). These transfers are reflected on the quarterly *Temporary
> Assistance for Needy Families (TANF) ACF-196 Financial Report*. The
> amounts transferred out of TANF are subject to the requirements of the
> program into which they are transferred and should not be included in
> the audit universe and total expenditures of TANF when determining
> Type A programs. On the Schedule of Expenditures of Federal Awards,
> the amount transferred out should not be shown as TANF expenditures
> but should be shown as expenditures for the program into which they
> are transferred.

*Transfers into TANF*

> As described in Part 4, Social Services Block Grant (SSBG) program
> (CFDA 93.667), Subpart III.A. Activities Allowed or Unallowed, a State
> may transfer up to 10 percent of its annual allotment under SSBG to
> this and six other block grant programs for support of health
> services, health promotion and disease prevention activities,
> low-income home energy assistance, or any combination of these
> activities.
>
> Amounts transferred into this program are subject to the requirements
> of this program when expended and should be included in the audit
> universe and total expenditures of this program when determining Type
> A programs. On the Schedule of Expenditures of Federal Awards, the
> amounts transferred in should be shown as expenditures of this program
> when such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.563 CHILD SUPPORT ENFORCEMENT\--TITLE IV-D**

**I. PROGRAM OBJECTIVES**

The objectives of the Child Support Enforcement program are to (1)
enforce support obligations owed by non-custodial parents, (2) locate
absent parents, (3) establish paternity, and (4) obtain child and
spousal support.

**II. PROGRAM PROCEDURES**

**Administration and Services**

The Child Support Enforcement program is administered at the Federal
level by the Office of Child Support Enforcement (OCSE), Administration
for Children and Families (ACF), a component of the Department of Health
and Human Services (HHS). Funding is provided to the 50 States, the
District of Columbia, Puerto Rico, the Virgin Islands and Guam, based on
a State plan and amendments, as required by changes in statutes, rules,
regulations, interpretations, and court decisions, submitted to and
approved by the cognizant ACF Regional Administrator.

This program is an open-ended entitlement program that allows the State
to be funded at a specified percentage, Federal financial participation
(FFP), for eligible program costs.

State child support agencies are required to conduct self-reviews of
their programs. The first round of self-assessments is required to be
completed by March 31, 1999 (42 USC 654.15).

**Source of Governing Requirements**

The Child Support Enforcement program is authorized under Title IV-D of
the Social Security Act, as amended, and is codified at 42 USC 651
through 669. Implementing program regulations are published at 45 CFR
parts 301 through 307. In addition, with regard to eligibility and other
provisions, this program is closely related to programs authorized under
other titles of the Social Security Act, including the Temporary
Assistance to Needy Families (TANF) program (CFDA 93.558), the Medicaid
program (CFDA 93.778), and the Foster Care (Title IV-E) program (CFDA
93.658).

As an HHS entitlement program, the Child Support Enforcement program is
subject to 45 CFR part 74 (in lieu of the HHS implementation of the
A-102 Common Rule), as specified in 45 CFR section 74.1(a)(3), and to
Office of Management and Budget Circular A-87 (as implemented in \"Cost
Principles and Procedures for Developing Cost Allocation Plans and
Indirect Cost Rates for Agreements with the Federal Government,\" HHS
Publication ASMB C-10, available on the Internet at
http://www.hhs.gov/progorg/grantsnet/index2.htm). This program is also
subject to 45 CFR part 95.

States are required to adopt and adhere to their own statutes and
regulations for program implementation, consistent with the requirements
of Title IV-D and the approved State plan.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should look first to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

**1. Activities Allowed**

> Consistent with the approved Title IV-D plan, allowable activities
> include the following. A more complete listing of allowable types of
> activities, with examples, as appropriate, is included at 45 CFR
> sections 304.20 through 304.22.
>
> a\. Necessary expenditures for support enforcement services and
> activities provided to individuals from whom an assignment of support
> rights (as defined in 45 CFR section 301.1) is obtained (45 CFR
> sections 304.20, 304.21, and 304.22).
>
> b\. Parent locator services for eligible individuals (45 CFR sections
> 304.20(a)(2), 304.20(b) and, 302.35(c)).
>
> c\. Paternity and support services for eligible individuals (45 CFR
> section 304.20(a)(3)).
>
> d\. Administration of the Child Support Enforcement program, including
> establishment and administration of the State plan; establishment of
> agreements with other State and local agencies and private providers;
> purchase of equipment; and development of a cost allocation system and
> other systems necessary for fiscal and program accountability (45 CFR
> sections 304.20(b)(1) and 304.24).
>
> e\. The costs of cooperative arrangements with appropriate courts and
> law enforcement officials in accordance with the requirements of 45
> CFR section 302.34, including associated administration and short-term
> training of staff (45 CFR section 304.21(a)).
>
> **2. Activities Unallowed**
>
> a\. The following costs and activities are unallowable pursuant to 45
> CFR section 304.23:
>
> \(1\) Activities related to administering other titles of the Social
> Security Act.
>
> \(2\) Construction and major renovations.
>
> \(3\) Education and training programs other than those for Title IV-D
> agency staff or as described in 45 CFR section 304.20(b)(2)(viii).
>
> \(4\) Any expenditures which have been reimbursed by fees collected.
>
> \(5\) Any costs of caseworkers (45 CFR section 303.20(e)).
>
> \(6\) Medical support enforcement activities performed under
> cooperative arrangements/agreements (45 CFR sections 303.30 and
> 303.31).
>
> \(7\) Any expenditures related to carrying out an agreement under 45
> CFR section 303.15.
>
> \(8\) Any expenditures for jailing of parents in child support
> enforcement cases.
>
> \(9\) Costs of counsel for indigent defendants in IV-D actions.
>
> \(10\) Costs of guardians *ad litem* in IV-D actions.
>
> b\. The following costs associated with cooperative arrangements with
> courts and law enforcement officials are unallowable: service of
> process and court filing fees unless the court or law enforcement
> agency would normally be required to pay the costs of such fees; costs
> of compensation (salary and fringe benefits) of judges; costs of
> training and travel related to the judicial determination process
> incurred by judges; office-related costs, such as space, equipment,
> furnishings and supplies incurred by judges; compensation (salary and
> fringe benefits), travel and training, and office-related costs
> incurred by administrative and support staffs of judges; and costs of
> cooperative agreements that do not meet the requirements of 45 CFR
> section 303.107 (45 CFR section 304.21(b)).

**E. Eligibility**

**1. Eligibility for Individuals**

> Eligible recipients are: (1) individuals applying for or receiving
> TANF benefits for whom an assignment of child support rights has been
> made to the State; (2) non-TANF Medicaid recipients; (3) former Aid to
> Families with Dependent Children/TANF, Title IV-E, or Medicaid
> recipients who continue to receive child support enforcement services
> without filing an application; and (4) individuals needing such
> services who have applied to a State child support enforcement agency
> (42 USC 608(a)(3); 45 CFR sections 302.32(a) and 302.33(a)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients** - Not Applicable

**F. Equipment and Real Property Management**

> Equipment that is capitalized or depreciated or is claimed in the
> period acquired and charged to more than one program is subject to 45
> CFR section 95.707(b) in lieu of the requirements of the A-102 Common
> Rule (and the HHS implementation at 45 CFR part 74) (45 CFR section
> 95.707(b)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> a\. For program costs *other than* laboratory costs related to
> determining paternity, the Federal share of program costs, including
> those related to the planning, design, development, installation and
> enhancement of the Statewide computerized support enforcement system
> is 66 percent (42 USC 655(a)(2)(C); 45 CFR sections 304.20(c) and
> 304.30).
>
> b\. The Federal share of the costs of computerized support enforcement
> systems was 90 percent through Federal Fiscal Year 1997 which includes
> subsequent costs under an approved Advanced Planning Document (42 USC
> 654(24); 45 CFR section 307.30).
>
> c\. The Federal share of laboratory costs for determining paternity is
> 90 percent (42 USC 655(a)(1)(C); 45 CFR sections 304.20(d) and
> 304.30).

**2. Level of Effort** - Not Applicable

**3. Earmarking -** Not Applicable

**H. Period of Availability of Federal Funds**

> This program operates on a cash accounting basis and each year=s
> funding and accounting is discrete; i.e., there is no carry-forward of
> unobligated funds. To be eligible for Federal funding, claims must be
> submitted to ACF within 2 years after the calendar quarter in which
> the State made the expenditure. This limitation does not apply to any
> claim for an adjustment to prior year costs or resulting from a
> court-ordered retroactive adjustment (45 CFR sections 95.7, 95.13, and
> 95.19).

**L. Reporting**

> **1. Financial Reporting**

a\. SF-269, *Financial Status Report* - Not Applicable

> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report -* Payments under this
> program are made by the HHS, Payment Management System (PMS).
> Reporting equivalent to the SF-272 is accomplished through the PMS and
> is evidenced by the PMS-272 series of reports.
>
> e\. OCSE 34A, *Child Support Enforcement Program Quarterly Report of
> Collections* *(OMB No. 0970-0181)*.
>
> f\. OCSE 396A, *Child Support Enforcement Program Quarterly Report of
> Expenditures and Estimates (OMB No. 0970-0181)*.
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

**1. Establishment of Paternity and Support Obligations**

> **Compliance Requirement** - The State IV-D agency must attempt to
> establish paternity and a support obligation for children born out of
> wedlock. The State IV-D agency must establish a support obligation
> when paternity is not an issue. These services must be provided for
> any child in cases referred to the IV-D agency or to individuals
> applying for services under 45 CFR section 302.33 for whom paternity
> or a support obligation had not been established (45 CFR sections
> 303.4 and 303.5). These services must be provided within the time
> frames specified in 45 CFR sections 303.3(b)(3) and (b)(5), 303.3(c)
> and, 303.4(d).
>
> **Audit Objective** - Determine whether the State IV-D agency
> attempted to establish, or established, paternity and a support
> obligation within the required time frames.

**Suggested Audit Procedures**

> a\. Review the agency\'s procedures for tracking case referrals for
> the provision of paternity and support obligation services and the
> type of documentation maintained that these services were provided or
> attempted.
>
> b\. Test a sample of cases referred to the agency during the audit
> period to ascertain if:
>
> \(1\) For cases involving a child born out of wedlock, the agency
> established or attempted to establish paternity.
>
> \(2\) For all cases:
>
> \(a\) The agency established or attempted to establish support
> obligation.
>
> \(b\) Paternity and support obligation services were provided within
> the required time frame.

**2. Enforcement of Support Obligations**

> **Compliance Requirement** - For all cases referred to the IV-D agency
> or applying for services under 45 CFR section 302.33 in which an
> obligation to support and the amount of the obligation has been
> established, the agency must maintain a system for (1) monitoring
> compliance with the support obligation; (2) identifying on the date
> the parent fails to make payments in an amount equal to support
> payable for one month, or an earlier date in accordance with State
> law, those cases in which there is a failure to comply with the
> support obligation; and (3) enforcing the obligation. To enforce the
> obligation the agency must initiate income withholding, if required by
> and in accordance with 45 CFR section 303.100, and initiate any other
> enforcement action, unless service of process is necessary, within 30
> calendar days of identification of the delinquency or other
> support-related noncompliance, or location of the absent parent,
> whichever occurs later. If service of process is necessary, service
> must be completed and enforcement action taken within 60 calendar days
> of identification of the delinquency or other noncompliance, or the
> location of the absent parent whichever occurs later. If service of
> process is unsuccessful, unsuccessful attempts must be documented and
> meet the State\'s guidelines defining diligent efforts. If enforcement
> attempts are unsuccessful, the agency should determine when it would
> be appropriate to take an enforcement action in the future and take it
> at that time (45 CFR section 303.6). Optional enforcement techniques
> available for use by the State\'s are found at 45 CFR sections 303.71,
> 303.73, and 303.104.
>
> **Audit Objectives** - Determine whether the State IV-D agency
> monitored and, when necessary, enforced cases with support obligations
> within required time frames.

**Suggested Audit Procedures**

> a\. Review the agency\'s procedures for tracking case referrals and
> identifying those cases where an obligation to support has been
> ordered and the amount of the support obligation has been established.
>
> b\. Test a sample of cases where an obligation to support had been
> ordered to ascertain that the agency monitored such cases, and
> identified those cases requiring enforcement within the required time
> frame.
>
> c\. For selected cases identified as requiring enforcement, verify
> that enforcement action was initiated within the required time frame.
> Ascertain if a collection resulting from an enforcement action was
> received. If so, no further audit procedures are necessary. If a
> collection was not received:
>
> \(1\) Ascertain if use of income withholding was appropriate. If so,
> verify that it was initiated within required time frame.
>
> \(2\) If income withholding was not appropriate and/or successful,
> ascertain if the agency scheduled and took another enforcement action.
>
> d\. If a service of process was necessary, but unsuccessful, verify
> that unsuccessful attempts were documented and met the diligent effort
> standard under the State\'s diligent effort definition.

**3. Securing and Enforcing Medical Support Obligations**

> **Compliance Requirement** - The State IV-D agency must attempt to
> secure medical support information, and establish and enforce medical
> support obligations for all individuals eligible for services under 45
> CFR section 302.33. Specifically, the State IV-D agency must determine
> whether the custodial parent and child have satisfactory health
> insurance other than Medicaid. If not, the agency must petition the
> court or administrative authority to include medical support in the
> form of health insurance coverage in all new or modified orders for
> support. The agency is also required to establish written criteria to
> identify cases not included above, where there is a high potential for
> obtaining medical support based on (1) available evidence that health
> insurance may be available to the absent parent at reasonable cost,
> and (2) facts (as defined by the State) which are sufficient to
> warrant modification of an existing support order to include health
> insurance coverage for a dependent child(ren). For cases meeting the
> established criteria, the agency shall petition the court or
> administrative authority to modify support orders to include medical
> support in the form of health insurance coverage (45 CFR sections
> 303.31(b)(1)-(4)).
>
> For non-TANF cases, the agency shall petition for medical support when
> the eligible individual is a Medicaid recipient or with consent of the
> individual if not a Medicaid recipient (45 CFR section 303.31(c)).
>
> In cases where medical support is ordered, the agency is required to
> verify that it was obtained. If it was not obtained, the agency should
> take steps to enforce the health insurance coverage required by the
> support order, unless it determines that health insurance was not
> available to the absent parent at reasonable cost (45 CFR section
> 303.31(b)(7)).
>
> The agency shall inform the Medicaid agency when a new or modified
> order for child support includes medical support and shall provide
> information to the custodial parent concerning the health insurance
> policy secured under any order (45 CFR sections 303.31(b)(5) and (6)).
>
> **Audit Objective** - Determine whether the State IV-D agency
> petitioned for and secured or pursued enforcement of medical support
> in the form of health insurance as part of support orders and informed
> the Medicaid agency and custodial parent as required.

**Suggested Audit Procedures**

> a\. Test a sample of cases determined eligible during the audit period
> for services under 45 CFR section 302.33 to ascertain if the agency
> determined whether the custodial parent had satisfactory health
> insurance other than Medicaid.
>
> b\. For those selected cases where the custodial parent and child do
> not have satisfactory health insurance other than Medicaid, verify
> that the agency petitioned the court or administrative authority for
> health insurance coverage when required.
>
> c\. For selected cases where medical support was ordered, ascertain
> that the agency verified that medical support was obtained by the
> absent parent. If medical support was not obtained by the absent
> parent, ascertain if the agency either made a determination that
> health insurance was not available at a reasonable cost or took action
> to enforce and obtain the medical support.
>
> d\. For selected cases where the absent parent had health insurance or
> when health insurance was obtained by the agency, ascertain if there
> is documentation that the Medicaid agency and the custodial parent
> were informed.

**4. Provision of Child Support Services for Interstate Cases**

> **Compliance Requirement** - The State IV-D agency must provide the
> appropriate child support services needed for interstate cases (cases
> in which the child and custodial parent live in one State and the
> responsible relative lives in another State), establish an interstate
> central registry responsible for receiving, distributing and
> responding to inquiries on all incoming interstate IV‑D cases, and
> meet required time frames pertaining to provision of interstate
> services. The case requiring action may be an initiating interstate
> case (a case sent to another State to take action on the initiating
> State=s behalf) or a responding interstate case (a request by another
> State to provide child support services or information only). Specific
> time frame requirements for responding and initiating interstate cases
> are at 45 CFR sections 303.7(a) and 303.7(b)(2), (4), (5) and (6),
> respectively (45 CFR sections 302.36 and 303.7).
>
> **Audit Objective** - Determine whether the State IV-D agency provided
> required child support services to interstate cases within the
> required time frames.

**Suggested Audit Procedures**

> a\. Review the agency\'s interstate central registry and ascertain the
> procedures for receiving, distributing, and responding to all incoming
> interstate claim cases.
>
> b\. Test a sample of initiating interstate cases to verify that
> required information was provided to the responding State within
> required time frames.
>
> c\. Test a sample of responding interstate cases to verify that
> required child support enforcement services were provided within the
> time frames for providing information.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.568 LOW-INCOME HOME ENERGY ASSISTANCE**

**I. PROGRAM OBJECTIVES**

The Low Income Home Energy Assistance Program (LIHEAP) is a block grant
program in which States (including territories and Indian tribes) design
their own programs, within very broad Federal guidelines. There are four
components of LIHEAP: block grants, energy emergency contingency funds,
leveraging incentive awards, and the Residential Energy Assistance
Challenge Option Program (REACH). The objectives of LIHEAP are to help
low-income people meet the costs of home energy, defined as heating and
cooling of residences, and to increase their energy self-sufficiency and
reduce their vulnerability resulting from energy needs. A primary
purpose is meeting immediate home energy needs. The target population is
low income households, especially those with the lowest incomes and the
highest home energy costs or needs in relation to income, taking into
account family size. Additional targets are low income households with
members who are especially vulnerable, including the elderly, persons
with disabilities, and young children.

**II. PROGRAM PROCEDURES**

**LIHEAP Block Grants**

The Department of Health and Human Services (HHS), Administration for
Children and Families (ACF), Office of Community Services administers
the LIHEAP program at the Federal level. LIHEAP block grant funds are
distributed by formula to the States, the District of Columbia, and
territories. In addition, federally or State recognized Indian tribes
(including tribal consortiums and organizations designated by them) have
the option to request direct funding from ACF, rather than being served
by the State in which they are located. Tribes that are directly funded
by HHS receive a share of the funds that would otherwise be allotted to
the States in which they are located, based on the number of eligible
households in the tribal service area as a percentage of the eligible
households in the State, or a larger amount agreed upon in a State/tribe
agreement. Over half the States agree to give the tribes in their State
a larger amount than required by the statute.

Each grantee is required to submit a plan/application annually in order
to receive block grant funding. Grantees must allow for public
participation in the development of their annual plan. A separate
application is required for those LIHEAP grantees that wish to apply for
leveraging incentive awards or a REACH grant.

**Energy Emergency Contingency Funds**

In addition to appropriations for the LIHEAP block grant program, funds
may be awarded to meet the additional home energy assistance needs of
States for a natural disaster or other emergency. Contingency funds that
are awarded generally must be used under the normal statutory and
regulatory requirements that apply to the LIHEAP block grants, unless
special conditions are placed upon their use at the time of the award.

**Leveraging Incentive Awards**

Of the funds appropriated for LIHEAP each year, HHS is required to
earmark a portion to reward those LIHEAP grantees that have acquired
non-Federal resources to help low income persons meet their home heating
and cooling needs, as an incentive to stretch the Federal dollars. This
could involve the grantee or private organizations putting some of their
own funds into LIHEAP or similar State or private programs, buying fuel
at reduced or discount prices through bulk purchases or negotiated
agreements, obtaining donations of weatherization materials or fuels,
waiving utility fees, or any number of other activities. Awards in one
year are based on leveraging activities carried out during the previous
year.

**Residential Energy Assistance Challenge Option Program**

Up to 25 percent of the funds earmarked for leveraging incentive awards
each year may be set aside for the REACH to make competitive grants to
LIHEAP grantees to help LIHEAP eligible households reduce their energy
vulnerability. The purposes of REACH are: (1) to minimize health and
safety risks that result from high energy burdens on low-income
households; (2) to prevent homelessness as a result of inability to pay
energy bills; (3) to increase efficiency of energy usage by low income
families; and (4) to target energy assistance to individuals who are
most in need. REACH grants are to be administered through
community-based organizations. REACH grants are subject to special terms
and conditions, which are specified in the grant awards.

**Source of Governing Requirements**

The LIHEAP program is authorized under Title XXVI of the Omnibus Budget
Reconciliation Act of 1981, as amended (Public Law 97-35, as amended,
also known as OBRA 1981), which is codified at 42 USC 8621-8629.
Implementing regulations for this and other block grant programs
authorized by OBRA 1981 are published at 45 CFR part 96. Those
regulations include general administrative requirements for the covered
block grants programs (in lieu of either 45 CFR parts 74 (OMB Circular
A-110) or 92 (A-102 Common Rule)). Requirements specific to LIHEAP are
in 45 CFR sections 96.80 through 96.89. In addition, grantees are to
administer their LIHEAP programs according to the plans which they have
submitted to HHS.

As discussed in Appendix I of this Supplement, Federal Programs Excluded
from the A-102 Common Rule, States are to use the fiscal policies that
apply to their own funds in administering LIHEAP. Procedures must be
adequate to assure the proper disbursal of and accounting for Federal
funds paid to the grantee, including procedures for monitoring the
assistance provided (42 USC 8624(b)(10); 45 CFR section 96.30).

Under the block grant philosophy, each State is responsible for
designing and implementing its own LIHEAP program, within very broad
Federal guidelines. States must administer their LIHEAP programs
according to their approved plan and any amendments and in conformance
with the their own implementing rules and policies.

**Availability of Other Program Information**

The ACF LIHEAP page on the Internet
(http://www.acf.dhhs.gov/programs/liheap) provides general information
about this program.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> The following guidelines apply to LIHEAP block grants and leveraging
> incentive award funds, unless noted otherwise. Energy emergency
> contingency funds generally are subject to the LIHEAP block grant
> requirements, but the contingency grant award letter should be
> reviewed to see if different requirements apply. REACH grants are
> subject to special rules described in the award.
>
> 1\. LIHEAP funds may be used to assist eligible households to meet the
> costs of home energy, i.e., heating or cooling their residences (42
> USC 8621(a) and 8624(b)(1)).
>
> 2\. LIHEAP funds may be used to intervene in energy-related crisis
> situations, as defined by the grantee (42 USC 8623(c) and 8624(b)(1)).
>
> 3\. LIHEAP funds may be used to conduct outreach activities (42 USC
> 8624(b)(1)).
>
> 4\. Leveraging incentive awards must be used to increase or maintain
> heating, cooling, energy crisis, and weatherization benefits for
> low-income persons (45 CFR section 96.87(j)).
>
> 5\. Leveraging incentive award funds may not be used for planning,
> developing, or administering the LIHEAP program (45 CFR section
> 96.87(j)).
>
> 6\. LIHEAP funds may be used to provide low-cost residential
> weatherization and other cost-effective energy-related home repair (42
> USC 8624(b)(1)).
>
> 7\. LIHEAP grantees may use some or all of the rules applicable to the
> Department of Energy=s Low Income Weatherization Assistance Program
> (CFDA 81.042) for their LIHEAP funds spent on weatherization (42 USC
> 8624(c)(1)(D)).
>
> 8\. LIHEAP funds may be used to provide services that encourage and
> enable households to reduce their home energy needs and thereby the
> need for energy assistance, including needs assessments, counseling,
> and assistance with energy vendors (42 USC 8624 (b)(16)).
>
> 9\. LIHEAP funds (other than leveraging incentive award funds) may be
> used to identify, develop, and demonstrate leveraging programs (45 CFR
> section 96.87(c)).
>
> 10\. No LIHEAP funds may be used for the purchase or improvement of
> land, or the purchase, construction, or permanent improvement (other
> than low-cost residential weatherization or other energy-related home
> repairs) of any building or other facility (42 USC 8628).

**B. Allowable Costs/Cost Principles**

> As discussed in Appendix I of this Supplement, Federal Programs
> Excluded from the A-102 Common Rule, LIHEAP is exempt from the
> provisions of OMB cost principles circulars. State cost principles
> requirements apply to LIHEAP.

**E. Eligibility**

**1. Eligibility for Individuals**

> Grantees may provide assistance to (1) households in which one or more
> individuals are receiving Temporary Assistance for Needy Families
> (TANF), Supplemental Security Income (SSI), Food Stamps, or certain
> needs-tested veterans benefits; or (2) households with incomes which
> do not exceed the greater of 150 percent of the State=s established
> poverty level, or 60 percent of the State median income. Grantees may
> establish lower income eligibility criteria, but no household may be
> excluded solely on the basis of income if the household income is less
> than 110 percent of the State=s poverty level. Grantees may give
> priority to those households with the highest home energy costs or
> needs in relation to income (42 USC 8624(b)(2)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery-** Not Applicable

**3. Eligibility for Subrecipients**

> . To the extent it is necessary to designate local administrative
> agencies, the grantee is to give special consideration to local public
> or private nonprofit agencies (or their successor agencies) which were
> receiving energy assistance or weatherization funds under the Economic
> Opportunity Act of 1964 or other laws, provided that the grantee finds
> that they meet program and fiscal requirements set by the grantee (42
> USC 8624(b)(6)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2. Level of Effort** - Not Applicable

**3. Earmarking**

> The following limitations apply to LIHEAP block grants and leveraging
> incentive award funds, as noted. Energy emergency contingency funds
> generally are subject to the requirements applicable to LIHEAP block
> grant funds, but the contingency grant award letter should be reviewed
> to see if different requirements were applied. REACH grants are
> subject to special rules described in the award.
>
> a\. *Planning and Administrative Costs*
>
> \(1\) No more than 10 percent of the LIHEAP funds payable to the State
> for a Federal fiscal year may be used for planning and administrative
> costs, including both direct and indirect costs. This limitation
> applies, in the aggregate, to planning and administrative costs at
> both the State and subrecipient levels (42 USC 8624(b)(9)(A); 45 CFR
> section 96.88(a)).
>
> \(2\) A tribal or territorial grantee may spend up to 20 percent of
> the first \$20,000 and 10 percent of the amount above \$20,000 for
> administration and planning (45 CFR section 96.88(b)).
>
> \(3\) Leveraging incentive award funds may not be used for planning
> and administrative costs. However, either in the award year or the
> following fiscal year, they may be added to the base on which the
> maximum amount allowed for planning and administration is calculated
> (45 CFR section 96.87(j)).
>
> b\. *Weatherization*
>
> \(1\) No more than 15 percent of the greater of the funds allotted or
> the funds available to the grantee for a Federal fiscal year may be
> used for low-cost residential weatherization or other energy-related
> home repairs. The Secretary may grant a waiver, and the grantee may
> then spend up to 25 percent for residential weatherization or
> energy-related home repairs (42 USC 8624(k)).
>
> \(2\) Leveraging incentive award funds may be used for weatherization
> without regard to the weatherization maximum in the statute. However,
> they cannot be added to the base on which the weatherization maximum
> is calculated (45 CFR section 96.87(j)).
>
> c\. *Energy Need Reduction Services* - No more than 5 percent of the
> LIHEAP funds payable to the grantee may be used to provide services
> that encourage and enable households to reduce their home energy needs
> and thereby the need for energy assistance. Such services may include
> needs assessments, counseling, and assistance with energy vendors (42
> USC 8624(b)(16)).
>
> d\. *Identifying and Developing Leveraging Programs*
>
> \(1\) The greater of 0.08 percent of a State=s LIHEAP funds (other
> than leveraging incentive award funds) or \$35,000 may be spent to
> identify, develop, and demonstrate leveraging programs, without regard
> to the limit on planning and administering LIHEAP (42 USC 8626a(c)(2);
> 45 CFR section 96.87(c)(2)).
>
> \(2\) Indian tribes/tribal organizations and territories may spend up
> to the greater of 2 percent or \$100 on such activities (45 CFR
> section 96.87(c)(1)).

**H. Period of Availability of Federal Funds**

> At least 90 percent of the LIHEAP block grant funds payable to the
> grantee must be obligated in the fiscal year in which they are
> appropriated. Up to 10 percent of the funds payable may be held
> available (or \"carried over\") for obligation no later than the end
> of the following fiscal year. Funds not obligated by the end of the
> following fiscal year must be returned to ACF. There are no limits on
> the time period for expenditure of funds (42 USC 8626).
>
> Leveraging incentive award funds must be obligated in the year in
> which they are awarded or the following fiscal year, without regard to
> the carryover limit. However, they may not be added to the base on
> which the carryover limit is calculated (45 CFR sections 96.87(j)(1)
> and (k)). Funds not obligated within these time periods must be
> returned to ACF (45 CFR section 96.87(k)).
>
> LIHEAP emergency contingency funds are generally subject to the same
> obligation and expenditure requirements applicable to the LIHEAP block
> grant funds, but the contingency award letter should be reviewed to
> see if different requirements were imposed.

**L. Reporting**

**1. Financial Reporting** - Not Applicable

**2. Performance Reporting -** Not Applicable

**3. Special Reporting**

> a\. *LIHEAP Carryover and Reallotment Report* *(OMB No. 0970-0106)* -
> Grantees must submit a report no later then August 1 indicating the
> amount expected to be carried forward for obligation in the following
> fiscal year and the planned use of those funds. Funds in excess of the
> maximum carryover limit are subject to reallotment to other LIHEAP
> grantees in the following fiscal year, and must also be reported (42
> USC 8626).
>
> b\. *Annual Report on Households Assisted by LIHEAP* *(OMB No.
> 0970-0060) -* As part of the application for block grant funds each
> year, a report is required for the preceding fiscal year of (1) the
> number and income levels of the households assisted for each component
> (heating, cooling, crisis, weatherization), (2) the number of
> households served that contained young children, elderly, or persons
> with disabilities, and (3) the number and income levels of households
> applying for assistance. Territories with annual allowments of less
> than \$200,000 and Indian tribes are required to report only on the
> number of households served for each component (42 USC 8629; 45 CFR
> section 96.82).

**IV. OTHER INFORMATION**

> As described in Part 4, Social Services Block Grant (SSBG) program
> (CFDA 93.667), Subpart III.A. Activities Allowed or Unallowed, a State
> may transfer up to 10 percent of its annual allotment under SSBG to
> this and six other block grant programs.
>
> Amounts transferred into this program are subject to the requirements
> of this program when expended and should be included in the audit
> universe and total expenditures of this program when determining Type
> A programs. On the Schedule of Expenditures of Federal Awards, the
> amounts transferred in should be shown as expenditures of this program
> when such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.569 COMMUNITY SERVICES BLOCK GRANT**

**I. PROGRAM OBJECTIVES**

The objective of the Community Services Block Grant (CSBG) program is to
provide funds to States, territories, and Indian tribes and tribal
organizations (tribes) for community-based programs that assist in
ameliorating the causes and consequences of poverty. These programs may
include a range of social and emergency services to assist low-income
individuals and families, including the elderly and the homeless.

**II. PROGRAM PROCEDURES**

**Administration and Services**

The CSBG program is administered by the Office of Community Services,
Administration for Children and Families (ACF), a component of the
Department of Health and Human Services (HHS). CSBG funds are awarded to
States, territories, and tribes in accordance with a pre-established
formula after submission and approval of their applications by ACF. The
State, territorial, or tribal recipient is responsible for overall
program administration but services are carried out by local non-profit
agencies that are funded according to a State-wide formula.

**Source of Governing Requirements**

The CSBG program is authorized under the Omnibus Budget and
Reconciliation Act (OBRA) of 1981 (Public Law 97-35), as amended, and is
codified at 42 USC 9901-9912. The implementing regulations for this and
other block grant programs authorized by OBRA 1981 are published at 45
CFR part 96. Those regulations include both specific requirements and
general administrative requirements for the covered block grant programs
(in lieu of either 45 CFR part 74 (OMB Circular A-110) or part 92 (A-102
Common Rule)). Requirements specific to CSBG are in 45 CFR sections
96.90 through 96.92.

As discussed in Appendix I of this Supplement, Federal Programs Excluded
from the A-102 Common Rule, States are to use the fiscal policies that
apply to their own funds in administering CSBG. Procedures must be
adequate to assure the proper disbursal of and accounting for Federal
funds paid to the grantee, including procedures for monitoring the
assistance provided (45 CFR section 96.30).

Under the block grant philosophy, each State is responsible for
designing and implementing its own CSBG program, within very broad
Federal guidelines. States must administer their CSBG program according
to their approved plan and any amendments and in conformance with the
States own implementing rules and policies.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should look first to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Funds may be used to (1) provide a range of services and
> activities having a measurable and potentially major impact on causes
> of poverty in a community; (2) provide activities designed to assist
> low-income individuals or families (including the homeless, migrants
> and the elderly poor) to secure and retain employment, attain an
> adequate education, make better use of available income, obtain and
> maintain adequate housing and a suitable living environment, obtain
> emergency assistance through grants or loans, meet urgent needs,
> achieve self-sufficiency and promote greater participation in
> community affairs, and make more effective of other programs related
> to the purpose of CSBG; (3) provide or arrange for the provision of
> emergency supplies, services and foodstuffs to counteract conditions
> of starvation and malnutrition among the poor; (4) to coordinate and
> establish linkages between governmental and other social services
> programs to ensure effective delivery of services to low-income
> persons; and (5) encourage use of private-sector entities in the
> community to ameliorate poverty (42 USC 9904(c)(1)).
>
> 2\. Funds may be used for training and technical assistance; to
> support State-wide coordination and communication among eligible
> entities; to better target the distribution of funds to the areas of
> greatest need; and to coordinate State-operated programs and services
> targeted to low-income children and families (42 USC 9904(c)(2)(B)).
>
> 3\. Funds may not be used to purchase or improve land or to purchase,
> construct, or permanently improve buildings or facilities, other than
> low-cost residential weatherization or other energy related home
> repairs (this limitation may be waived by ACF) (42 USC 9909).
>
> 4\. Funds may not be used to support any partisan or non-partisan
> political activity or to provide voters or prospective voters with
> transportation to the polls or provide similar assistance in
> connection with an election or any voter registration (42 USC
> 9904(c)(6) and (7)).

**B. Allowable Costs/Cost Principles**

> As discussed in Appendix I of this Supplement, Federal Programs
> Excluded from the A-102 Common Rule, CSBG is exempt from the
> provisions of OMB cost principles circulars. State cost principles
> requirements apply to CSBG at the State level. However, OMB
> administrative requirements and cost principles circulars do apply to
> subrecipients (42 USC 9904(c)(14)).

**E. Eligibility**

**1. Eligibility for Individuals**

> The official poverty guideline as revised annually by HHS shall be
> used to determine eligibility. The poverty guidelines are issued each
> year in the Federal Register, and HHS maintains a page on the Internet
> which provides the poverty guidelines
> (http://aspe.os.dhhs.gov/poverty/poverty.htm). The State may adopt a
> revised poverty guideline but it may not exceed 125 percent of the
> HHS-determined poverty guideline (42 USC 9902(2)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery** - Not Applicable

**3. Eligibility for Subrecipients**

> Subgrants may be made to the following entities:
>
> a\. Existing community action agencies officially designated under the
> provisions of Section 210 of the Economic Opportunity Act of 1964, or
> which came into existence during fiscal year 1982 as a direct
> successor-in-interest to such an agency, and meeting all the governing
> board requirements specified in 42 USC 9904(c)(3); or limited purpose
> agencies receiving Section 221 funds under the Economic Opportunity
> Act of 1964 and which serve the general purposes of a community action
> agency (42 USC 9902(1)).
>
> b\. Non-profit organizations serving seasonal or migrant farmworkers
> (42 USC 9904(c)(2)(A)).
>
> c\. Other non-profit organizations with a governing board meeting the
> requirements of 42 USC 9904(c)(3) (42 USC 9902(1)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2. Level of Effort** - Not Applicable

**3. Earmarking**

> a\. The grantee must use at least 90 percent of the allotted funds for
> subgrants (42 USC 9904(c)(2)).
>
> b\. The State=s administrative expenses, including monitoring
> activities, may not exceed the greater of \$55,000 or five (5) percent
> of the State=s allotment (42 USC 9904(c)(2)(B)(iv)).

**H. Period of Availability of Federal Funds**

> Funds available to States from their allotment for any fiscal year
> shall be expended by the grantee in that fiscal year or in the
> succeeding fiscal year (42 USC 9907(b)). Similarly, funds distributed
> by the State to subgrantees are also available to the subgrantee for
> expenditure in the year in which provided or in the following fiscal
> year (Public Law 104-134, April 26, 1996, 110 Stat. 1321-226)).

**IV. OTHER INFORMATION**

> As described in Part 4, Social Services Block Grant (SSBG) program
> (CFDA 93.667), Subpart III.A. Activities Allowed or Unallowed, a State
> may transfer up to 10 percent of its annual allotment under SSBG to
> this and six other block grant programs for support of health
> services, health promotion and disease prevention activities,
> low-income home energy assistance, or any combination of these
> activities.
>
> Amounts transferred into this program are subject to the requirements
> of this program when expended and should be included in the audit
> universe and total expenditures of this program when determining Type
> A programs. On the Schedule of Expenditures of Federal Awards, the
> amounts transferred in should be shown as expenditures of this program
> when such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.575 CHILD CARE AND DEVELOPMENT BLOCK GRANT**

**CFDA 93.596 CHILD CARE MANDATORY AND MATCHING FUNDS OF THE CHILD CARE
AND DEVELOPMENT FUND**

**I. PROGRAM OBJECTIVES**

The Child Care and Development Fund (CCDF) provides funds to States
(including territories and Indian tribes) to increase the availability,
affordability, and quality of child care services for low-income
families where the parents are working or attending training or
educational programs. The CCDF consolidates the Child Care and
Development Block Grant and funding formerly provided to States through
the child care programs under Title IV-A of the Social Security Act .

**II. PROGRAM PROCEDURES**

The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (PRWORA) repealed the child care programs under Title IV-A of the
Social Security Act, i.e., Aid to Families with Dependent Children Child
Care, Transitional Child Care and At-Risk Child Care, and required that
all Federal child care funds be spent in accordance with the provisions
of the amended Child Care and Development Block Grant program. While
these Federal child care programs have been consolidated under a single
set of eligibility requirements, there are three distinct funding
sources. The three sources are the Discretionary Fund (CFDA 93.575),
Mandatory Fund (CFDA 93.596), and the Matching Fund (CFDA 93.596).
Additionally, under the Temporary Assistance for Needy Families (TANF)
program (CFDA 93.558), a State may transfer TANF funds to CCDF and the
funds transferred in are treated as Discretionary Funds (42 USC 606(d);
45 CFR section 98.54(a)).

**Administration and Services**

The Child Care Bureau of the Administration for Children and Families
(ACF), a component of the Department of Health and Human Services (HHS),
administers the CCDF. To receive funds a State, territory or Indian
tribe must submit a plan containing specific information and assurances.
The plan serves as the application for funding for States and
territories and is effective for a 2-year period. Tribes, in contrast,
must submit a yearly application as well as a tribal plan. A tribe=s
plan is also effective for 2 years. Tribes are generally subject to the
same program requirements as States and territories, except as
specifically noted below.

Following ACF approval of the plan (and application, in the case of
tribes), funds are awarded based on statutory/regulatory formulas. State
awards are not adjusted by separate direct Federal funding of
counterpart tribal programs within the State. As long as statutory and
regulatory requirements are met (e.g., that the States, territories and
those tribes receiving grants over \$500,000 offer parents certificates
for the purchase of child care services), grantees have broad
flexibility in designing programs and offering services. For example,
CCDF funds may be used in collaborative efforts with Head Start (CFDA
93.600) programs to provide comprehensive child care and development
services for children who are eligible for both programs.

**Source of Governing Requirements**

The Discretionary Fund (CFDA 93.575) is authorized by the Child Care and
Development Block Grant Act of 1990, as amended by Title VI of the
PRWORA of 1996 (Public Law 104-193; 42 USC 9858 - 9858q). The Mandatory
and Matching Funds (CFDA 93.596) are authorized under section 418 of
Title IV-A of the Social Security Act as amended by PRWORA (42 USC 618).
The CCDF (i.e., all three funds) is subject to the implementing
regulations at 45 CFR parts 98 and 99.

*Transition considerations*

Certain of the PRWORA provisions created new or changed requirements
that negated or made obsolete some portions of the August 1992 version
of 45 CFR parts 98 and 99. To the extent that a State, territory or
tribe adopted such provisions following PRWORA enactment (August 22,
1996), and prior to the publication of the revised regulations for CCDF
(July 24, 1998), the language of the statute and, if appropriate, the
State=s reasonable interpretation of the statutory language applies
rather than the requirements of the earlier regulations. For example,
PRWORA raised the upper eligibility limit that States may establish for
families from 75 percent to 85 percent of State median income, which is
a change from the 1992 regulations. Since this statutory change is
clear, it should be controlling. In contrast, PRWORA also provides that
\"activities designed to provide comprehensive consumer education to
parents and the public\" is an allowable expense, but does not define
what those activities might be. The State\'s reasonable interpretation
may be accepted.

**Availability of Other Program Information**

The HHS Administration for Children and Families, Child Care Bureau
Internet page titled \"Welcome to the Child Care Bureau\"
(http://www.acf.dhhs.gov/programs/ccb/policy) provides general
information on this program.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Funds may be used for child care services in the form of
> certificates, grants or contracts (42 USC 9858c(c)(2)(A)).
>
> 2\. Funds may be used for activities that improve the quality or
> availability of child care services, consumer education and parental
> choice (42 USC 9858e).
>
> 3\. Funds may be used for any other activity that the State deems
> appropriate to promoting parental choice, providing comprehensive
> consumer education information to help parents and the public make
> informed choices about child care, providing child care to parents
> trying to achieve independence from public assistance, and
> implementing the health, safety, licensing and registration standards
> established in State regulations (42 USC 9858c(c)(3)(B)).
>
> 4\. No funds may be expended through any grant or contract for child
> care services for any sectarian purpose or activity, including
> sectarian worship or instruction (42 USC 9858k(a)).
>
> 5\. With regard to services to students enrolled in grades 1 through
> 12, no funds may be used for services provided during the regular
> school day, for any services for which the students receive academic
> credit toward graduation, or for any instructional services which
> supplant or duplicate the academic program of any public or private
> school (42 USC 9858k(b)).
>
> 6\. Except for tribes, no funds can be used for the purchase or
> improvement of land, or for the purchase, construction, or permanent
> improvement (other than minor remodeling) of any building or facility
> (42 USC 9858d(b)).
>
> Tribes may use funds for the construction and major renovation of
> child care facilities with ACF approval (42 USC 9858m(c)(6); 45 CFR
> section 98.84).
>
> 7\. Except for sectarian organizations, funds may be used for the
> minor remodeling (i.e., renovation and repair) of child care
> facilities. For sectarian organizations, funds may be used for the
> renovation or repair of facilities only to the extent that it is
> necessary to bring the facility into compliance with the health and
> safety standards required by 42 USC 9858c(c)(2)(F) (42 USC 9858d(b)).

**C. Cash Management**

> Under the Matching Fund=s (CFDA 93.596) Maintenance of Effort (MOE)
> requirement, the drawdown of Federal cash should not exceed the
> federally funded portion of the combination of the Mandatory and
> Matching Funds (CFDA 93.596), taking into account the State MOE and
> State matching requirements. For example, the total expenditures for a
> year, i.e., the sum of: 1) the Mandatory Fund (CFDA 93.596), comprised
> of Federal funds only, 2) the State MOE requirement, and 3) the entire
> Matching Fund \-- both State and Federal shares \-- for a fiscal year
> is \$100. Of this \$100, the sum of the State MOE and the State share
> of the Matching Fund is \$40. For any period, the amount of Federal
> funds drawn down should not exceed 60 percent of the total
> expenditures for that period (Department of the Treasury, Financial
> Management Service CMIA Policy Statement Number 19).

**E. Eligibility**

**1. Eligibility for Individuals**

> The approved plan provides the specific eligibility requirements
> selected by each State/territory/tribe. Those requirements must comply
> with the following Federal requirements for individual eligibility:
>
> a\. Children must be under age 13 (or up to age 19, if incapable of
> self care or under court supervision), who reside with a family whose
> income does not exceed 85 percent of State/territorial/tribal median
> income for a family of the same size, and reside with a parent (or
> parents) who is working or attending a job-training or education
> program; or are in need of, or are receiving, protective services (42
> USC 9858n(4); 45 CFR section 98.20(a)).
>
> b\. The award of CCDF funds to an Indian tribe shall not affect the
> eligibility of any Indian child to receive CCDF services in the state
> or States in which the tribe is located (45 CFR section 98.80(d)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients** - Not Applicable

**G. Matching, Level of Effort, Earmarking**

> The matching and MOE requirements apply only to the Matching Fund
> (CFDA 93.596). The State\'s matching and MOE expenditures are closely
> related. For a State to receive the allotted share of the Matching
> Fund, the State must meet the MOE requirement and obligate the
> Mandatory Fund by year end (see H. Period of Availability of Funds).
> The matching and MOE amounts are reported on the CCDF Financial Report
> (ACF-696) (See L.1. Financial Reporting).
>
> **1. Matching**
>
> a\. A State is eligible for Federal matching funds (limit specified in
> 42 USC 618 and 45 CFR section 98.63) only for those allowable State
> expenditures which exceed the State=s MOE requirement, provided all of
> the Mandatory Funds (CFDA 93.596) allocated to the State are also
> obligated by the end of the fiscal year (45 CFR section 98.53).
>
> b\. State expenditures will be matched at the Federal Medical
> Assistance Percentage (FMAP) rate for the applicable fiscal year. This
> percentage varies by State and is available on the Internet at
> http://www.hcfa.gov/medicaid/ofs%2Dffp.htm. To be eligible an activity
> must be allowable and be described in the approved State plan (45 CFR
> section 98.53).
>
> c\. Private or public donated funds may be counted as State
> expenditures for this purpose subject to the limitations in 45 CFR
> section 98.53.
>
> d\. No more than 20 percent of State matching claims may be for
> pre-Kindergarten services. The same expenditure may not be used for
> both MOE and matching purposes (45 CFR sections 98.53(d) and
> 98.53(h)).

**2.1 Level of Effort** - *Maintenance of Effort*

> If a State requests Matching Funds (CFDA 93.596), State MOE
> (non-Federal) funds for child care activities must be expended in the
> year for which Matching Funds are claimed in an amount that is at
> least equal to the State=s share of expenditures for fiscal year 1994
> or 1995 (whichever is greater) under former Sections 402(g) and (i) of
> the Social Security Act (42 USC 618). Private or public donated funds
> may be counted as State expenditures for this purpose (45 CFR section
> 98.53).
>
> No more than 20 percent of the MOE requirement may be met with State
> expenditures for pre-kindergarten services. The same expenditure may
> not be used for both MOE and matching purposes (45 CFR sections
> 98.53(d) and 98.53(h)).
>
> **2.2 Level of Effort** *- Supplement Not Supplant* - Not Applicable

**3. Earmarking**

> a\. *Administrative Earmark* - A State/territory may not spend on
> administrative costs more than 5 percent of total CCDF awards expended
> (i.e., the total of CFDA 93.575 and 93.596) and any State expenditures
> for which Matching Funds (CFDA 93.596) are claimed (42 USC
> 9858c(c)(3)(C); 45 CFR section 98.52).
>
> Tribes are allowed 15 percent of the amount expended under CFDA 93.575
> and 93.596 for administrative costs. Tribes with at least 50 children
> under age 13 are provided a base amount of \$20,000 which may be
> expended for any purpose consistent with the purpose and requirements
> of the CCDF. Tribes with fewer than 50 children who are members of a
> consortium receive a pro rata amount of the \$20,000 in proportion to
> the number of children under age 13 in relation to 50. The base amount
> is not included in the amount against which the administrative earmark
> is calculated (45 CFR sections 98.61(c), 98.83(e), and 98.83(g)).
>
> The following activities are not considered administrative costs (63
> FR 39962):
>
> \- Eligibility determination and redetermination.
>
> \- Preparation and participation in judicial hearings.
>
> \- Child care placement.
>
> \- Recruitment, licensing, inspection, review and supervision of child
> care placements.

\- Rate setting.

\- Resource and referral services.

\- Training of child care staff.

> \- Establishment and maintenance of computerized child care
> information systems.
>
> \- Establishing and operating a certificate program
>
> b\. *Quality Earmark* - States and territories must spend on quality
> and availability activities, as provided for in the State/territorial
> plan, at least four percent of CCDF funds expended (i.e., the total of
> CFDA 93.575 and 93.596 funds) and any State expenditures for which
> Matching Funds (CFDA 93.596) are claimed (45 CFR section 98.51).
>
> Only those tribes receiving grants over \$500,000 must spend at least
> four percent of CCDF funds expended on quality activities as described
> in the tribal plan/application. The \$20,000 base amount is not
> included in the amount against which the quality earmark is calculated
> (45 CFR sections 98.51(a), 98.83(e), and 98.83(f)).
>
> c\. *Specific Earmark* - Congress may also specifically earmark funds
> for certain purposes. For example, in the fiscal year (FY) 1998 HHS
> appropriation, Congress specified two earmarksCone for resource and
> referral and school-aged activities, and the second for activities to
> increase the supply of quality child care for infants and toddlers.
> When there is such an earmark, a separate award accompanied by
> specific terms and conditions is issued for those earmarked funds.

**H. Period of Availability of Federal Funds**

> 1\. Discretionary Funds (CFDA 93.575) must be obligated by the end of
> the succeeding fiscal year after award, and expended by the end of the
> third fiscal year after award (42 USC 9858h(c); 45 CFR section 98.60).
>
> 2\. Mandatory Funds (CFDA 93.596) for States must be obligated by the
> end of the fiscal year in which they are awarded if the State also
> requests Matching Funds (CFDA 93.596). If no Matching Funds are
> requested for the fiscal year, then the Mandatory Funds (CFDA 93.596)
> are available until expended (45 CFR section 98.60(d)).
>
> 3\. Mandatory Funds (CFDA 93.596) for tribes must be obligated by the
> end of the succeeding fiscal year after award, and expended by the end
> of the third fiscal year after award (45 CFR section 98.60(e)).
>
> 4\. Matching Funds (CFDA 93.596) must be obligated by the end of the
> fiscal year in which they are awarded, and expended by the end of the
> succeeding fiscal year after award (45 CFR section 98.60(d)).
>
> For example, availability periods for FY 1998 funds awarded on any
> date in FY 1998 (October 1, 1997 through September 30, 1998):

+-------------------+-----------------------+-------------------------+
| **If Source of**  | **Obligation must     | **Obligation must Be**  |
|                   | Be**                  |                         |
| **Obligation      |                       | **Liquidated by End of  |
| Is\--**           | **Made by End of      | \--**                   |
|                   | \--**                 |                         |
+-------------------+-----------------------+-------------------------+
| Discretionary\*   | FY 1999 (i.e., by     | FY 2000 (i.e., by       |
|                   | 9/30/99)              | 9/30/00)                |
| (CFDA 93.575)     |                       |                         |
+-------------------+-----------------------+-------------------------+
| Mandatory (State) | FY 1998 (i.e., by     | No requirement for      |
|                   | 9/30/98 but ONLY if   |                         |
| (CFDA 93.596)     | Matching Funds are    | liquidation by a        |
|                   | used)                 | specific date           |
+-------------------+-----------------------+-------------------------+
| Mandatory         | FY 1999 (i.e., by     | FY 2000 (i.e., by       |
| (Tribes)          | 9/30/99)              | 9/30/00)                |
|                   |                       |                         |
| (CFDA 93.596)     |                       |                         |
+-------------------+-----------------------+-------------------------+
| Matching          | FY 1998 (i.e., by     | FY 1999 (i.e., by       |
|                   | 9/30/98)              | 9/30/99)                |
| (CFDA 93.596)     |                       |                         |
+-------------------+-----------------------+-------------------------+

> \* TANF funds (CFDA 93.558) transferred to the CCDF during a fiscal
> year are treated as Discretionary Funds of the year they are
> transferred for purposes of the period of availability (45 CFR section
> 98.54(a)(1)).

**L. Reporting**

1\. Financial Reporting

> a\. SF-269, *Financial Status Report* - Not applicable for States or
> territories, but applies to tribes.
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271*, Outlay Report and Request from Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Payments under this
> program are made by HHS, Payment Management System (PMS). Reporting
> equivalent to the SF-272 is accomplished through the PMS and is
> evidenced by the PMS 272 series of reports.
>
> e\. *Child Care and Development Fund Financial Report* (ACF-696) *(OMB
> No 0970-0163)* is due quarterly from recipient\'s other than tribes,
> in lieu of the SF-269, *Financial Status Report.* Each fiscal year=s
> expenditure report must be separate, therefore, multiple reports may
> be required if the State spends awards from more than one fiscal year
> in a given quarter. Any funds transferred from TANF are treated as
> Discretionary Funds for reporting on the ACF-696 (42 USC 604(d); 45
> CFR section 98.54(a)).

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**IV. OTHER INFORMATION**

> Under the TANF program (CFDA 93.558), a State may transfer TANF funds
> to CCDF and the funds transferred are treated as Discretionary Funds
> under CCDF (42 USC 604(d); 45 CFR section 98.54(a)). The amounts
> transferred into CCDF should be included in the audit universe and in
> total expenditures of CCDF when determining Type A programs. On the
> Schedule of Expenditures of Federal Awards, the amount transferred in
> should be shown as CCDF expenditures when expended.
>
> Also, as described in Part 4, Social Services Block Grant (SSBG)
> program (CFDA 93.667), Subpart III.A. Activities Allowed or Unallowed,
> a State may transfer up to 10 percent of its annual allotment under
> SSBG to this and six other block grant programs for support of health
> services, health promotion and disease prevention activities,
> low-income home energy assistance, or any combination of these
> activities.
>
> Amounts transferred into this program from SSBG are subject to the
> requirements of this program when expended and should be included in
> the audit universe and total expenditures of this program when
> determining Type A programs. On the Schedule of Expenditures of
> Federal Awards, the amounts transferred in should be shown as
> expenditures of this program when such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.600 HEAD START**

**I. PROGRAM OBJECTIVES**

The objectives of the Head Start and Early Head Start programs are to
provide comprehensive health, educational, nutritional, social and other
developmental services primarily to economically disadvantaged preschool
children (ages 3 to 5) and infants and toddlers (birth through age 3) so
that the children will attain overall social competence. Parents receive
social services and participate in various decision-making processes
related to the operation of the program.

**II. PROGRAM PROCEDURES**

**Head Start Services**

The Head Start program provides services in the following areas:

*Early Childhood Development and Health* - Head Start=s educational
program is designed to meet the needs of each child, the community
served, and its ethnic and cultural characteristics. Every child
receives a variety of learning experiences to foster intellectual,
social, and emotional growth. Head Start also emphasizes the importance
of the early identification of health problems. Every child is involved
in a comprehensive health program, which includes immunizations,
medical, dental, mental health, and nutritional services.

*Family and Community Partnerships* - An essential part of the Head
Start program is the involvement of parents in parent education, program
planning, and operating activities. Many parents serve as members of
policy councils and committees and have a voice in administrative and
managerial decisions. Participation in classes and workshops on child
development and staff visits to the home allow parents to learn about
the needs of their children and about educational activities that can
take place at home. Specific services are geared to each family after
its needs are determined. They include community outreach; referrals;
family need assessments; recruitment and enrollment of children; and
emergency assistance or crisis intervention.

**Early Head Start**

The 1994 Head Start Reauthorization (Public Law 103-252) established a
new program for low-income pregnant women and families with infants and
toddlers.

The purpose of this program is to enhance children=s physical, social,
emotional and cognitive development; enable parents to be better
caregivers of and teachers to their children; and

help parents meet their own goals, including that of economic
independence.

**Administration and Services**

Head Start programs operate in all 50 States, the District of Columbia,
Puerto Rico, and the U.S. territories. Head Start grants are awarded for
an indefinite project period, with an annual budget period which is
specific to each grantee. Grants are awarded to public, non-profit, and
for-profit organizations directly by the Administration for Children and
Families (ACF) in the ten Department of Health and Human Service (HHS)
Regional Offices and in Washington, DC.

Early Head Start grantees include Head Start grantees, school systems,
universities, colleges, and other public and private entities. Grants
are for a 5-year project period. In all other respects, Early Head Start
grants are subject to the same program performance standards and
compliance requirements as Head Start grants; therefore, references to
Head Start apply to both.

Grantees may also subgrant some or all of its operational
responsibilities for a Head Start/Early Head Start grant to a \"delegate
agency.\" Delegate agencies (subrecipients) may be public, non-profit,
or for-profit organizations.

Grantees may collaborate with other entities carrying out early
childhood education and child care programs in the community, including
the Child Care and Development Fund (93.575, 93.596) and Temporary
Assistance to Needy Families (93.558).

**Source of Governing Requirements**

Head Start began in 1965 under the Office of Economic Opportunity and is
now administered by the ACF, HHS. These programs are currently
authorized under the Head Start Act (Title VI, Subtitle A, Chapter 8,
Subchapter B of Public Law 97-35), as amended, which is codified at 42
USC 9831- 9843a. The implementing program regulations are 45 CFR parts
1301 through 1308.

**Availability of Other Program Information**

HHS Head Start Bureau home page on the Internet
(http://www.acf.dhhs.gov/programs/hsb) provides general information
about this program.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed Or Unallowed**

> 1\. Allowable services include, but are not limited to, health
> (medical, dental, nutrition, and mental health); education; social
> services; transportation; parent involvement; use of volunteers;
> career development for teachers, nonprofessional aides and other staff
> members; and special services for parents (e.g., literacy) (45 CFR
> part 1304, subparts B, C, and D).
>
> 2\. Grant funds may, with specific ACF approval, be used for capital
> expenditures (including paying the cost of amortizing the principal,
> and paying interest on, loans) such as construction of new facilities,
> purchase of new or existing facilities, major renovations on existing
> facilities, and purchase of vehicles used for programs conducted at
> the Head Start facilities (42 USC 9839 (f) and (g)).

**B. Allowable Costs/Cost Principles**

> Indirect costs attributable to common or joint use of facilities or
> services must be fairly allocated among the various programs which
> utilize such services (42 USC 9839(c); 45 CFR section 1301.32).

**G. Matching, Level of Effort, Earmarking Requirements**

**1. Matching**

> Grantees are required to contribute at least 20 percent of the costs
> of the program through cash or in-kind contributions, unless a lesser
> amount has been approved by ACF (42 USC 9835 (b); 45 CFR sections
> 1301.20 and 1301.21).
>
> **2. Level of Effort** - Not Applicable

**3. Earmarking**

> a\. The costs of developing and administering a Head Start program
> shall not exceed 15 percent of the annual total program costs,
> including the required non-Federal contribution to such costs (i.e.,
> matching), unless a waiver has been granted by ACF. Development and
> administrative costs include, but are not limited to, the cost of
> organization-wide planning, coordination and general purpose
> direction, accounting and auditing, purchasing and personnel
> functions, and the cost of operating and maintaining space for these
> purposes (42 USC 9839(b); 45 CFR section 1301.32).
>
> b\. Enrollment levels must adhere to the levels specified in the
> financial assistance award.
>
> \(1\) For grantees other than Indian tribes/tribal organizations, at
> least 90 percent of the enrollees must come from families whose income
> is below the official Federal poverty guidelines or who are receiving
> public assistance (45 CFR section 1305.4).
>
> \(2\) For tribal grantees, the percentage may be as low as 51 percent,
> providing certain conditions are met (45 CFR section 1305.4(b)(3)).
>
> The poverty guidelines are issued each year in the Federal Register
> and HHS maintains a page on the Internet which provides the poverty
> guidelines (http://aspe.os.dhhs.gov/poverty/poverty.htm).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269, *Financial Status Report* - Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Payments under this
> program are made by HHS, Payment Management System (PMS). Reporting
> equivalent to the SF-272 is accomplished through the PMS and is
> evidenced by the PMS 272 series of reports.

**M. Subrecipient Monitoring**

> Grantees must establish and implement procedures for the ongoing
> monitoring of their own Early Head Start and Head Start operations, as
> well as those of their delegate agencies, to ensure that these
> operations effectively implement Federal regulations. Grantees must
> inform delegate agency governing bodies of any deficiencies in
> delegate agency operations identified in the monitoring review and
> must help them develop plans, including timetables, for addressing
> identified problems (45 CFR sections 1304.51(i)(2) and (3)).

**N. SPECIAL TESTS AND PROVISIONS**

**1. Licensing Requirement**

> **Compliance Requirement** - The facilities used by Early Head Start
> and Head Start grantees for regularly scheduled center-based and
> combination program option class room activities or home-based group
> socialization activities must comply with applicable State and local
> requirements concerning licensing (45 CFR section 1306.30(c)).
>
> **Audit Objective** - Determine whether the grantee has the required
> license and the license is current.
>
> **Suggested Audit Procedures**
>
> a\. Ascertain the applicable State and local licensing requirements.
>
> b\. Ascertain if the grantee holds the required license and that the
> license is current.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.658 FOSTER CARE\--TITLE IV-E**

**I. PROGRAM OBJECTIVES**

The objective of the Foster Care program is to help States provide safe,
appropriate, 24-hour, substitute care for children who are under the
jurisdiction of the administering State agency and need temporary
placement and care outside their homes.

**II. PROGRAM PROCEDURES**

**Administration and Services**

The Foster Care program is administered at the Federal level by the
Children=s Bureau, Administration on Children, Youth and Families,
Administration for Children and Families (ACF), a component of the
Department of Health and Human Services (HHS). Funding is provided to
the 50 States and the District of Columbia, based on a one-time plan and
amendments, as required by changes in statutes, rules, regulations,
interpretations, and HHS Departmental Appeals Board decisions, submitted
to and approved by the cognizant ACF Regional Administrator. This
program is considered an open-ended entitlement program and allows the
State to be funded at a specified percentage (Federal financial
participation) for program costs for eligible children.

The designated State agency for this program, which is authorized under
Title IV-E of the Social Security Act, as amended, also administers ACF
funding provided for other Title IV-E programs, e.g., Adoption
Assistance and Transition to Independent Living; Child Welfare Services
and Family Support and Preservation (Title IV-B of the Social Security
Act, as amended) and the Social Services Block Grant program (Title XX
of the Social Security Act, as amended; CFDA 93.667).

**Source of Governing Requirements**

The Foster Care program is authorized by Title IV-E of the Social
Security Act, as amended (42 USC 670 *et seq.*).

As an HHS entitlement program, the Foster Care program is subject to 45
CFR part 74 (in lieu of the HHS implementation of the A-102 Common
Rule), as specified in 45 CFR section 74.1(a)(3), and to Office of
Management and Budget Circular A-87 (as implemented in \"Cost Principles
and Procedures for Developing Cost Allocation Plans and Indirect Cost
Rates for Agreements with the Federal Government,\" HHS Publication ASMB
C-10, available on the Internet at
http://www.hhs.gov/progorg/grantsnet/index2.htm). This program is also
subject to 45 CFR part 95.

States are required to adopt and adhere to their own statutes and
regulations for program implementation, consistent with the requirements
of Title IV-E and the approved State plan.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should look first to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements**.

**A. Activities Allowed or Unallowed**

**1. Activities Allowed**

> a\. Federal funds may be used for Foster Care maintenance payments, in
> accordance with the State=s Foster Care maintenance payment rate
> schedule, to individuals serving as foster family homes, to child-care
> institutions, or to public or non-profit child-placement or child-care
> agencies. Such payments may include the cost of (and the cost of
> providing, including the associated administrative and operating costs
> of an institution) food, clothing, shelter, daily supervision, school
> supplies, personal incidentals, liability insurance with respect to a
> child, and reasonable travel to the child=s home for visitation (42
> USC 672(b)(1) and (2), (c)(2), and 675(4)).
>
> b\. Federal funds may be used for training (including both short and
> long-term training at educational institutions through grants to such
> institutions or by direct financial assistance to students enrolled in
> such institutions) of personnel employed or preparing for employment
> by the agency administering the plan (42 USC 674(a)(3)(A)).
>
> c\. Federal funds may be used for short-term training, including
> associated travel and per diem, of foster parents and staff of
> licensed or approved child-care institutions at the initiation of or
> during their period of care (45 CFR section 1356.60(c)(4)).
>
> d\. Federal funds may be used for costs directly related to the
> administration of the program, including those associated with
> eligibility determination and redetermination; referral to services;
> placement; preparation for and participation in hearings and appeals;
> rate setting; recruitment and licensing of foster homes and
> institutions; and a proportionate share of related agency overhead (45
> CFR section 1356.60(c)).
>
> e\. With any required ACF approval, Federal funds may be used for
> costs related to design, implementation and operation of a State-wide
> data collection system (45 CFR sections 1356.60(d) and 95.611).

**2. Activities Unallowed**

> Costs of social services provided to a child, the child=s family, or
> the child\'s foster family which provide counseling or treatment to
> ameliorate or remedy personal problems, behaviors, or home conditions
> are unallowable (45 CFR section 1356.60(c)(3)).

**B. Allowable Costs/Cost Principles**

> In addition to the requirements of OMB Circular A-87, States are
> subject to the cost allocation provisions and rules governing
> allowable costs of equipment of 45 CFR part 95, which references OMB
> Circular A-87 at 45 CFR section 95.507(a)(2) (45 CFR sections 1355.57,
> 95.503, and 95.705).

**E. Eligibility**

**1. Eligibility for Individuals**

> Foster Care benefits may be paid on behalf of a child only if all of
> the following requirements are met:
>
> a\. Foster Care maintenance payments are allowable only if the foster
> child was removed from his or her home by means of a judicial
> determination or pursuant to a voluntary placement agreement, as
> defined in 42 USC 672(f) (42 USC 672(a)).
>
> \(1\) If the removal was by judicial determination, the court action
> must have been initiated within 6 months of the child=s removal from
> the home of a specified relative (42 USC 672(a)(4)) and must contain
> language to the effect that: (i) the child=s remaining at home would
> be contrary to his or her welfare, and (ii) reasonable efforts have
> been made to prevent the removal and to make it possible for the child
> to safely return home (42 USC 672(a)).
>
> \(2\) If the removal was by a voluntary placement agreement, it must
> be followed within 180 days by a judicial determination to the effect
> that such placement is in the best interests of the child (42 USC
> 672(e); and 45 CFR section 1356.30(b)).
>
> b\. The child=s placement and care are the responsibility of either
> the State agency administering the approved Title IV-E plan or any
> other public agency under a valid agreement with the cognizant State
> agency (42 USC 672(a)(2)).
>
> c\. A child must meet the eligibility requirements of the former Aid
> to Families with Dependent Children (AFDC) program (i.e., meet the
> State-established standard of need as of July 16, 1996, prior to
> enactment of the Personal Responsibility and Work Opportunity
> Reconciliation Act). Unless the child is expected to graduate from a
> secondary educational institution before his or her 19th birthday,
> eligibility ceases at the child=s 18th birthday (42 USC 672(a)).
>
> d\. The provider, whether a foster family home or a child-care
> institution must be licensed by the proper State Foster Care licensing
> authority. A child care institution is defined as a private child-care
> institution, or a public child-care institution which accommodates no
> more than 25 children, which is licensed or approved by the State in
> which it is situated, but does not include detention facilities,
> forestry camps, training schools, or facilities operated primarily for
> the purpose of detention of children who are determined to be
> delinquent (42 USC 671(a)(10) and 672(c)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery** - Not Applicable

**3. Eligibility for Subrecipients** - Not Applicable

**F. Equipment and Real Property Management**

> Equipment that is capitalized and depreciated or is claimed in the
> period acquired and charged to more than one program is subject to 45
> CFR section 95.707(b) in lieu of the requirements of the A-102 Common
> Rule and the HHS implementation at 45 CFR part 74 (45 CFR section
> 95.707(b)).

**G. Matching, Level of Effort , and Earmarking**

**1. Matching**

> The percentage of required State funding and associated Federal
> funding (\"Federal financial participation\" (FFP)) varies by type of
> expenditure as follows:
>
> a\. The percentage of Federal funding in foster care maintenance
> payments will be the Federal Medical Assistance Program percentage.
> This percentage varies by State and is available on the Internet
> (http://www.hcfa.gov/medicaid/ofs%2Dffp.htm) (42 USC 674(a)(1); 45 CFR
> section 1356.60(a)).
>
> b\. The percentage of Federal funding in expenditures for short- and
> long-term training at educational institutions of employees or
> prospective employees, and short-term training of current or
> prospective foster or adoptive parents and members of staff of
> State-licensed or State-approved child-care institutions (including
> travel and per diem) is 75 percent (42 USC 674(a)(3)(A) and (B); 45
> CFR section 1356.60(b)).
>
> c\. The percentage of Federal funding for expenditures for planning,
> design, development, and installation and operation of a Statewide
> automated child welfare information system meeting specified
> requirements (and expenditures for hardware components for such
> systems) is 50 percent (42 USC 674(a)(3)(C) and (D); 45 CFR sections
> 1355.52 and 1356.60(d)).
>
> d\. The percentage of Federal funding of all other allowable
> administrative expenditures is 50 percent (42 USC 674 (a)(1)(E); 45
> CFR section 1356.60(c)).

**2. Level of Effort** - Not Applicable

**3. Earmarking** - Not Applicable

**H. Period of Availability of Federal Funds**

> This program operates on a cash accounting basis and each year=s
> funding and accounting is discrete. To be eligible for Federal
> funding, claims must be submitted to ACF within 2 years after the
> calendar quarter in which the State made the expenditure. This
> limitation does not apply to any claim (1) for an adjustment to prior
> year costs (defined as an adjustment in the amount of a particular
> cost item that was previously claimed under an interim rate concept
> and for which it is later determined that the cost is greater or less
> than that originally claimed) or, (2) resulting from a court-ordered
> retroactive adjustment (45 CFR sections 95.7, 95.13, and 95.19).

**L. Reporting**

> **1. Financial Reporting**

a\. SF-269, *Financial Status Report* - Not Applicable

> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report -* Payments under this
> program are made by the HHS, Payment Management System (PMS).
> Reporting equivalent to the SF-272 is accomplished through the PMS and
> is evidenced by the PMS-272 series of reports.
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** - Not Applicable

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.667 SOCIAL SERVICES BLOCK GRANT**

**I. PROGRAM OBJECTIVES**

The purpose of the Social Services Block Grant (SSBG) program is to
provide funds to States (including the District of Columbia and five
territories) to provide services for individuals, families, and entire
population groups in one or more of the following areas: (1) achieving
or maintaining economic self-support and self-sufficiency to prevent,
reduce, or eliminate dependency; (2) preventing or remedying neglect,
abuse, or exploitation of children and adults unable to protect their
own interests; (3) preserving, rehabilitating, or reuniting families;
(4) preventing or reducing inappropriate institutional care by providing
for community-based care, home-based care, or other forms of intensive
care; and (5) securing referral or admission for institutional care when
other forms of care are not appropriate, or providing services to
individuals in institutions.

**II. PROGRAM PROCEDURES**

**Administration and Services**

The SSBG program is administered by the Administration for Children and
Families (ACF), a component of the Department of Health and Human
Services (HHS). Funds are awarded based on the State=s population
following receipt and review of the State=s report on the proposed use
of funds for the coming year, which serves as the State=s plan. States
have the flexibility to determine what services will be provided,
consistent with the statutory goals and objectives, who is eligible, and
how funds will be distributed among services and entities within the
State, including whether to provide services directly or obtain them
from other public or private agencies and individuals. The State must
also conduct a public hearing on the proposed use and distribution of
funds, as included in the report, as a prerequisite to the receipt of
SSBG funds.

**Source of Governing Requirements**

The SSBG program is authorized under Title XX of the Social Security
Act, as amended, and is codified at 42 USC 1397 through 1397e. The
implementing regulations for this and other block grant programs
authorized by Omnibus Budget Reconciliation Act 1981 are published at 45
CFR part 96. Those regulations include both specific requirements and
general administrative requirements (in lieu of either 45 CFR part 74
(OMB Circular A-110) or part 92 (A-102 Common Rule)) for the covered
block grant programs. Requirements specific to SSBG are in 45 CFR
sections 96.70 through 96.74.

As discussed in Appendix I of this Supplement, Federal Programs Excluded
from the A-102 Common Rule, States are to use the fiscal policies that
apply to their own funds in administering SSBG. Procedures must be
adequate to assure the proper disbursal of and accounting for Federal
funds paid to the grantee, including procedures for monitoring the
assistance provided (45 CFR section 96.30).

Under the block grant philosophy, each State is responsible for
designing and implementing its own SSBG program, within very broad
Federal guidelines. States must administer their SSBG program according
to their approved plan and any amendments and in conformance with the
their own implementing rules and policies.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Services provided with SSBG funds may include, but are not limited
> to, child care services, protective services for children and adults,
> services for children and adults in foster care, services related to
> the management and maintenance of the home, day care services for
> adults, transportation services, family planning services, training
> and related services, employment services, information, referral,
> counseling services, the preparation and delivery of meals, health
> support services and appropriate combinations of services designed to
> meet the special needs of children, the aged, the mentally retarded,
> the blind, the emotionally disturbed, the physically handicapped, and
> alcoholics and drug addicts (42 USC 1397a(a)). Uniform definitions for
> these services are included in Appendix A to 45 CFR part 96 - Uniform
> Definitions of Services.
>
> Expenditures for these services may include expenditures for
> administration, including planning and evaluation, personnel training
> and retraining directly related to the provision of those services
> (including both short- and long-term training at educational
> institutions), and conferences and workshops and assistance to
> individuals participating in such activities (42 USC 1397a(a)).
>
> 2\. A State may purchase technical assistance from public or private
> entities if the State determines that such assistance is required in
> developing, implementing or administering the SSBG program (42 USC
> 1397a(e)).
>
> 3\. A State may transfer up to 10 percent of its annual allotment to
> the following block grants for support of health services, health
> promotion and disease prevention activities, low-income home energy
> assistance, or any combination of these activities: Preventive Health
> and Health Services Block Grant (CFDA 93.991); Block Grants for
> Prevention and Treatment of Substance Abuse (CFDA 93.959); Maternal
> and Child Health Services Block Grant to the States (CFDA 93.994);
> Low-Income Home Energy Assistance (CFDA 93.568); Temporary Assistance
> for Needy Families (CFDA 93.558); Child Care and Development Fund
> (CFDA 93.575 and 93.596); and Community Services Block Grant (93.569)
> (42 USC 1397a(d); 45 CFR section 96.72).

4\. Funds may not be used for:

> a\. Purchase or improvement of land, or the purchase, construction, or
> permanent improvement (other than minor remodeling) of any facility
> (unless the restriction is waived by ACF) (42 USC 1397(d)(a)(1)).
>
> b\. Cash payments for costs of subsistence or for the provision of
> room and board (other than costs of subsistence during rehabilitation,
> room and board provided for a short term as an integral but
> subordinate part of a social service, or temporary shelter provided as
> a protective service) (42 USC 1397(d)(a)(2)).
>
> c\. Wages of any individual as a social service (other than payment of
> wages of Temporary Assistance for Needy Families (TANF) (CFDA 93.558)
> recipients employed in the provision of child day care services) (42
> USC 1397(d)(a)(3)).
>
> d\. Medical care (other than family planning services, rehabilitation
> services, or initial detoxification of an alcoholic or drug dependent
> individual) unless it is an integral but subordinate part of an
> allowable social service under SSBG (unless the restriction is waived
> by ACF) (42 USC 1397(d)(a)(4)).
>
> e\. Social services (except services to an alcoholic or drug dependent
> individual or rehabilitation services) provided in and by employees of
> any hospital, skilled nursing facility, intermediate care facility, or
> prison, to any individual living in such institution (42 USC
> 1397(d)(a)(5)).
>
> f\. The provision of any educational service which the State makes
> generally available to its residents without cost and without regard
> to their income (42 USC 1397(d)(a)(6)).
>
> g\. Any child day care services unless such services meet applicable
> standards of State and local law (42 USC 1397(d)(a)(7)).
>
> h\. The provision of cash payments as a service (this limitation does
> not apply to payments to individuals with respect to training or
> attendance at conferences or workshops) (42 USC 1397(d)(a)(8)).
>
> i\. Any item or service (other than an emergency item of service)
> furnished by an entity, physician, or other individual during the
> period of exclusion from reimbursement by various provisions of
> Federal regulations (42 USC 1397(d)(a)(9)).

**B. Allowable Costs/Cost Principles**

> As discussed in Appendix I of this Supplement, Federal Programs
> Excluded from the A-102 Common Rule, SSBG is exempt from the
> provisions of OMB cost principles circulars. State cost principles
> requirements apply to SSBG.

**G. Matching, Level of Effort, Earmarking**

**1. Matching** - Not Applicable

**2. Level of Effort** - Not Applicable

**3. Earmarking**

> The State shall use all of the amount transferred in from TANF (CFDA
> 93.558) for only for programs and services to children or their
> families whose income is less than 200 percent of the official poverty
> guideline as revised annually by HHS (42 USC 604(d)(3)(A) and
> 9902(2)). Additional information on this transfer in is provided in
> IV. Other Information.
>
> The poverty guidelines are issued each year in the *Federal Register*
> and HHS maintains a page on the Internet which provides the poverty
> guidelines (http://aspe.os.dhhs.gov/poverty/poverty.htm).

**H. Period of Availability of Federal Funds**

> SSBG funds must be expended by the State in the fiscal year allotted
> or in the succeeding fiscal year (42 USC1397a(c)).

**IV. OTHER INFORMATION**

> *Transfers out of SSBG*
>
> As discussed in III.A, Activities Allowed or Unallowed, funds may be
> transferred out of SSBG to other Federal programs. The amounts
> transferred out of SSBG are subject to the requirements of the program
> into which they are transferred and should not be included in the
> audit universe and total expenditures of SSBG when determining Type A
> programs. On the Schedule of Expenditures of Federal Awards, the
> amount transferred out should not be shown as SSBG expenditures but
> should be shown as expenditures for the program into which they are
> transferred.
>
> *Transfers into SSBG*
>
> A State may transfer up to 10 percent of the combined total of the
> State family assistance grant, supplemental grant for population
> increases, and bonus funds for high performance and illegitimacy
> reduction, if any, (all part of TANF) for a given fiscal year to carry
> out programs under the SSBG. Such amounts may be used only for
> programs or services to children or their families whose income is
> less than 200 percent of the poverty level. The amount of the
> transfers is reflected on the quarterly *Temporary Assistance for
> Needy Families (TANF) ACF-196 Financial Report*. The amounts
> transferred into this program are subject to the requirements of this
> program when expended and should be included in the audit universe and
> total expenditures of this program when determining Type A programs.
> On the Schedule of Expenditures of Federal Awards, the amounts
> transferred in should be shown as expenditures of this program when
> such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.778 MEDICAL ASSISTANCE PROGRAM (Medicaid; TITLE XIX)**

**CFDA 93.775 STATE MEDICAID FRAUD CONTROL UNITS**

**CFDA 93.777 STATE SURVEY AND CERTIFICATION OF HEALTH CARE PROVIDERS
AND SUPPLIERS**

Note: In accordance with OMB Circular A-133, \'\_\_\_.525(c)(2), when
the auditor is using the risk-based approach for determining major
programs, the auditor should consider that HHS has identified the
Medicaid Assistance Program as a program of higher risk. While not
precluding an auditor from determining that the Medicaid Cluster
qualifies as a low-risk program (e.g., because prior audits have shown
strong internal controls and compliance with Medicaid requirements),
this identification by HHS should be considered as part of the risk
assessment process.

**I. PROGRAM OBJECTIVES**

*Medical Assistance Program*

The objective of the Medical Assistance Program (Medicaid or Title XIX
of the Social Security Act, as amended, (42 USC 1396, et seq.)) is to
provide payments for medical assistance to low-income persons who are
age 65 or over, blind, disabled, or members of families with dependent
children or qualified pregnant women or children.

*State Medicaid Fraud Control Units*

The objective of the State Medicaid Fraud Control Units is to control
provider fraud in the Medicaid program. The State Medicaid Fraud Control
Unit\'s grant application contains the organization, administration,
agreements, and procedures for the unit. Federal requirements are
contained in 42 CFR part 1007. This unit is separate and distinct from
the State Medicaid agency.

*State Survey and Certification of Health Care Providers and Suppliers*

The objective of the State Survey and Certification of Health Care
Providers and Suppliers program is to determine whether the providers
and suppliers of health care services under the Medicaid program are in
compliance with regulatory health and safety standards and conditions of
participation. This program is administered in a manner similar to
Medicaid and includes an approved State plan which addresses Federal
requirements.

Even though the State Medicaid Fraud Control Units and State Survey and
Certification of Health Care Providers and Suppliers have substantially
less Federal expenditures than the Medicaid Assistance Program, they are
clustered with Medicaid because these programs provide significant
controls over the expenditures of Medicaid funds. It is unlikely that
the expenditures for these two programs would be material to the
Medicaid cluster; however, noncompliance with the requirements to
administer these controls may be material.

**II. PROGRAM PROCEDURES**

The following paragraphs are intended to provide a high-level, overall
description of how Medicaid generally operates. It is not practical to
provide a complete description of program procedures because Medicaid
operates under both Federal and State laws and regulations and States
are afforded flexibility in program administration. Accordingly, the
following paragraphs are not intended to be used in lieu of or as a
substitute for the Federal and State laws and regulations applicable to
this program.

**Authoritative Sources**

The auditor is expected to use the applicable laws and regulations
(including the applicable State approved plan) when auditing this
program. The Federal law that authorizes these programs is Title XIX of
the Social Security Act (Title XIX), enacted in 1965 and subsequently
amended (42 USC 1396, et seq.). The Federal regulations applicable to
the Medicaid program are found in 42 CFR parts 430 through 456, 1002,
and 1007.

**Administration**

The U.S. Department of Health and Human Services= (HHS) Health Care
Financing Administration (HCFA) administers the Medicaid program in
cooperation with State governments. The Medicaid program is jointly
financed by the Federal and State governments and administered by the
States. For purposes of this program, the term AState@ includes the 50
States, the District of Columbia, and five U.S. territories: Puerto
Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana
Islands. Medicaid operates as a vendor payment program, with States
paying providers of medical services directly. Participating providers
must accept the Medicaid reimbursement level as payment in full. Within
broad Federal rules, each State decides eligible groups, types and range
of services, payment levels for services, and administrative and
operating procedures.

*State Plans*

States administer the Medicaid program under a State plan approved by
HCFA. The Medicaid State plan is a comprehensive written statement
submitted by the State Medicaid agency describing the nature and scope
of its Medicaid program. A State plan for Medicaid consists of
preprinted material that covers the basic requirements, and
individualized content that reflects the characteristics of each
particular State=s program. The State plan is referenced to the
applicable Federal regulation for each requirement and will also contain
references to applicable State regulations.

The State plan contains all information necessary for HCFA to determine
whether the State plan can be approved to serve as a basis for
determining the level of Federal financial participation in the State
program. The State plan must specify a single State agency (hereinafter
referred to as the AState Medicaid agency@) established or designated to
administer or supervise the administration of the State plan. The State
plan must also include a certification by the State Attorney General
which cites the legal authority for the State Medicaid agency to
determine eligibility.

The State plan also specifies the criteria for determining the validity
of payments disbursed under the Medicaid program. This encompasses the
system the State will use to ensure that payments are disbursed only to
eligible providers for appropriately-priced services that are covered by
the Medicaid program and provided to eligible beneficiaries. Payments
must also be based on claims that are adequately supported by medical
records, and payments must not be duplicated.

A State plan or plan amendment will be considered approved unless HCFA
sends the State written notice of disapproval or a request for
additional information within 90 days after receipt of the State plan or
plan amendment. Copies of the State plan are available from the State
Medicaid agency.

*Waivers*

The State Medicaid agency may apply for a waiver of Federal
requirements. Waivers are intended to provide the flexibility needed to
enable States to try new or different approaches to the efficient and
cost-effective delivery of health care services, or to adapt their
programs to the special needs of particular areas or groups of
beneficiaries. Waivers allow exceptions to State plan requirements and
permit a State to implement innovative programs or activities on a
time-limited basis, and are subject to specific safeguards for the
protection of beneficiaries and the program.

Actions that States may take if waivers are obtained include: (1)
implement a primary care case-management system or a specialty physician
system; (2) designate an entity to act as a central broker in assisting
Medicaid beneficiaries to choose among competing health care plans; (3)
share with beneficiaries (through the provision of additional services)
cost-savings made possible through the beneficiaries= use of more cost
effective medical care; (4) limit beneficiaries= choice of providers to
providers that fully meet reimbursement, quality, and utilization
standards, which are established under the State plan and are consistent
with access, quality, and efficient and economical furnishing of care;
(5) include as Amedical assistance,@ under its State plan, home and
community-based services furnished to beneficiaries who would otherwise
need inpatient care that is furnished in a hospital, skilled nursing
facility (SNF), or intermediate care facility (ICF), and is reimbursable
under the State plan; and, (6) impose a deduction, cost-sharing or
similar charge of up to twice the Anominal charge@ established under the
State plan for outpatient services for certain nonemergency services. A
State may also obtain a waiver of statutory requirements to provide an
array of home and community-based services which may permit an
individual to avoid institutionalization (42 CFR part 441 subpart G).
Depending on the type of requirement being waived, a waiver may be
effective for initial periods ranging from two to three years, with
varying renewal periods. Copies of waivers are available from the State
Medicaid agency.

**Payments to States**

Once HCFA has approved a State plan and waivers, it makes quarterly
grant awards to the State to cover the Federal share of Medicaid
expenditures for services, training, and administration. The amount of
the quarterly grant is determined on the basis of information submitted
by the State Medicaid agency (in quarterly estimate and quarterly
expenditure reporting). The grant award authorizes the State to draw
Federal funds as needed to pay the Federal financial participation
portion of qualified Medicaid expenditures. The HHS Payment Management
System Division of Payment Management (PMS-DPM) in Rockville, Maryland,
disburses Federal funds to States including funding under Medicaid.
Currently, all States use a system developed by HHS called SMARTLINK to
request funds on an as needed basis. States may use one of two payment
mechanisms which are linked to SMARTLINK: (1) wire transfers through the
Automated Clearinghouse in conjunction with the Federal Reserve Bank,
which is settled the day after the request date, or (2) FEDWIRE
transfers through the U.S. Department of the Treasury, which is a same
day payment mechanism. The payment method is selected by the State and
approved by the U.S. Department of the Treasury and HHS before payments
are made through either mechanism. States report cash activity to
PMS-DPM with a quarterly Cash Transactions Report (PMS-272).

**State Expenditure Reporting**

Thirty days after the end of the quarter, States electronically submit
form HCFA-64 , AQuarterly Statement of Expenditures for the Medical
Assistance Program.@ The HCFA-64 presents expenditures and recoveries
and other items that reduce expenditures for the quarter and prior
period expenditures. The amounts reported on the HCFA-64 and its
attachments must be actual expenditures for which all supporting
documentation, in readily reviewable form, has been compiled and is
available immediately at the time the claim is filed. States use the
Medicaid Budget and Expenditure System to electronically submit the
HCFA-64 directly to HCFA.

**Eligibility**

Eligibility for Medicaid is based primarily on income and resources. The
States must provide services to mandatory categorically needy and other
required special groups (e.g., individuals receiving Aid to Families
With Dependent Children (AFDC), Temporary Assistance for Needy Families
(TANF), or Supplemental Security Income (SSI)). States may provide
coverage to members of optional groups who do not receive cash
assistance (e.g., individuals who would be eligible for but are not
receiving AFDC) and medically needy individuals (individuals who are
eligible for Medicaid after deducting large medical expenditures from
their income). Eligibility criteria will be specified in the individual
State plan.

Under the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996, the cash welfare program known as AFDC was repealed and
replaced with block grants to States known as TANF. Under the old AFDC
law, children and parents who received cash welfare were automatically
enrolled in the Medicaid program. While the new law eliminates the
entitlement to welfare, access to Medicaid for children and parents who
would have met the State=s old AFDC income and asset standards in place
on July 16, 1996, has been preservedCwhether or not these individuals
are eligible for the new TANF system (P.L. 104-193).

States must provide limited Medicaid coverage for \"qualified Medicare
beneficiaries.\" These are aged and disabled persons who are receiving
Medicare, whose income is below 100 percent of the Federal poverty
level, and whose resources do not exceed twice the allowable amount
under SSI (42 CFR section 407.40).

The State plan will specify if determinations of eligibility are made by
agencies other than the State Medicaid agency and will define the
relationships and respective responsibilities of the State Medicaid
agency and the other agencies. The application process includes
completing and filing an application form, being interviewed, and having
information verified. The State plan must also provide that the State
Medicaid agency will maintain individual records on each applicant and
Medicaid beneficiary including date of application, date and basis for
disposition, facts essential to determination of initial and continuing
eligibility, provision of medical assistance, and basis for
discontinuing assistance.

**Services**

Medicaid expenditures include medical assistance payments for eligible
recipients for such services as hospitalization, prescription drugs,
nursing home stays, outpatient hospital care, and physicians\' services,
and expenditures for administration and training. In order for a medical
assistance payment to be considered valid, it must comply with the
requirements of Title XIX, as amended, (42 USC 1396, et seq.) and
implementing Federal regulations. Determinations of payment validity are
made by individual States in accordance with approved State plans under
broad Federal guidelines.

Some States have managed care arrangements under which the State enters
into a contract with an entity, such as an insurance company, to arrange
for medical services to be available for beneficiaries. The State pays a
fixed rate per person (capitation rate) without regard to the actual
medical services utilized by each beneficiary.

Also, Medicaid expenditures include administration and training, the
State Survey and Certification Program, and State Medicaid Fraud Control
Units.

**Control Systems**

*Utilization Control and Program Integrity*

The State plan must provide methods and procedures to safeguard against
unnecessary utilization of care and services, including those provided
by long term care institutions. In addition, the State must have: (1)
methods of criteria for identifying suspected fraud cases; (2) methods
for investigating these cases; and, (3) procedures, developed in
cooperation with legal authorities, for referring suspected fraud cases
to law enforcement officials.

These requirements may be met by the State Medicaid agency assuming
direct responsibility for assuring the requirements or met by
contracting with a peer review organization (PRO) to perform such
reviews. The reviewer must establish and use written criteria for
evaluating the appropriateness and quality of Medicaid services.

The State Medicaid agency must have procedures for the ongoing
post-payment review, on a sample basis, for the necessity, quality, and
timeliness of Medicaid services. The State Medicaid agency may conduct
this review directly or may contract with a PRO.

Suspected fraud identified by utilization control and program integrity
should be referred to the State Medicaid Fraud Control Units.

*Inpatient Hospital and Long-Term Care Facility Audits*

States are required to establish as part of the State plan standards and
methodology for reimbursing inpatient hospital and long-term care
facilities based on payment rates that represent the cost to efficiently
and economically operate such facilities and provide Medicaid services.
The State Medicaid agency must provide for the filing of uniform cost
reports by each participating provider. These cost reports are used by
the State Medicaid agency to aid in the establishment of payment rates.
The State Medicaid agency must provide for periodic audits of the
financial and statistical records of the participating providers. Such
audits could include desk audits of cost reports in addition to field
audits. These audits are an important control for the State Medicaid
agency in ensuring that established payment rates are proper.

*ADP Risk Analyses and System Security Reviews*

The Medicaid program is highly dependent on extensive and complex
computer systems that include controls for ensuring the proper payment
of Medicaid benefits. States are required to establish a security plan
for ADP systems that include policies and procedures to address: (1)
physical security of ADP resources; (2) equipment security to protect
equipment from theft and unauthorized use; (3) software and data
security; (4) telecommunications security; (5) personnel security; (6)
contingency plans to meet critical processing needs in the event of
short- or long-term interruption of service; (7) emergency preparedness;
and, (8) designation of an agency ADP security manager.

State agencies must establish and maintain a program for conducting
periodic risk analyses to ensure appropriate, cost effective safeguards
are incorporated into new and existing systems. State agencies must
perform risk analyses whenever significant system changes occur. On a
biennial basis State agencies shall review the ADP system security of
installations involved in the administration of HHS programs. At a
minimum, the reviews shall include an evaluation of physical and data
security operating procedures, and personnel practices.

*Medicaid Management Information System (MMIS)*

The MMIS is the mechanized Medicaid benefit claims processing and
information retrieval system that States are required to have, unless
this requirement is waived by the Secretary of HHS. HHS provides general
systems guidelines (42 CFR sections 433.110 through 433.131) but it does
not provide detailed system requirements or specifications for States to
use in the development of MMIS systems. As a result, MMIS systems will
vary from State to State. The system may be maintained and operated by
the State or a contractor.

The MMIS is normally used to process payments for most medical
assistance services and normally includes edits and controls which
identify unusual items for follow up by the utilization control and
program integrity unit. However, the State may use systems other than
MMIS to process medical assistance payments. In many cases the operation
of the MMIS is contracted out to a private contractor. The State plan
will describe the administration of each State=s claims processing
system.

Generally, the MMIS does not process claims from State agencies (e.g.,
State operated intermediate care facility for the mentally retarded
(ICF/MR)) and certain selected types of claims. The claims payments
which are not processed through MMIS may be material to the Medicaid
program.

*Medicaid Eligibility Quality Control System (MEQC)*

Each State is required to operate a MEQC system in accordance with
requirements specified by HCFA. This HCFA-approved system redetermines
eligibility for individual sampled cases and provides national and State
measures of the accuracy of eligibility and benefit amount
determinations (commonly referred to as \"payment accuracy\"), including
both underpayments and overpayments, and of the correctness of decisions
to deny benefits. The MEQC system reviews the determinations of
beneficiary eligibility made by a State agency, or its designee, and
uses statistical sampling methods to select claims for review and
project the number and dollar impact of payments to ineligible
beneficiaries (42 CFR sections 431.800 through 431.865).

**Federal Oversight and Compliance Mechanisms**

HCFA oversees State operations through its organization consisting of a
headquarters and 10 regional offices.

HCFA program oversight includes budget review, reviews of financial and
program reports, and on-site reviews which are normally targeted to
cover a specific area of concern. HCFA conveys areas of national and
local concerns to the States through the regions. Technical assistance
is used extensively to promote improvements in State operation of the
program but enforcement mechanisms are available. HCFA considers the
single audit as an important internal control in its monitoring of
States.

Federal program oversight, because of its targeted nature, should not be
used as a substitute for audit evidence gained through transaction
testing.

**HHS Office of Inspector General (OIG) Fraud Alerts**

The HHS OIG issues fraud alerts, some of which relate to the Medicaid
program. These alerts are available on the Internet from the HHS OIG
Home Page, Special Fraud Alerts section

(http://www.dhhs.gov/progorg/oig/frdalrt/index.htm).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**General Audit Approach for Medicaid Payments**

To be allowable, Medicaid costs for medical services must be: (1)
covered by the State plan and waivers; (2) for an allowable service
rendered (including supported by medical records or other evidence
indicating that the service was actually provided and consistent with
the medical diagnosis); (3) properly coded; and, (4) paid at the rate
allowed by the State plan. Additionally, Medicaid costs must be net of
applicable credits (e.g., insurance, recoveries from other third parties
who are responsible for covering the Medicaid costs, and drug rebates),
paid to eligible providers, and only provided on behalf of eligible
individuals.

Due to the complexity of Medicaid program operations, it is unlikely the
auditor will be able to support an opinion that Medicaid expenditures
are in compliance with applicable laws and regulations (e.g., are
allowable under the State plan) without relying upon the systems and
internal controls. Examples of complexities include:

\- Dependence upon large and complex ADP systems to process the large
volume of Medicaid transactions.

\- Medical services are provided directly to an eligible beneficiary,
normally without prior approval by the State.

\- Medical service providers normally determine the scope and medical
necessity of the services.

\- Notice to the State that service is rendered is after-the-fact when a
bill is sent.

\- Payments systems do not include a review of original detailed
documentation supporting the claim prior to payment.

\- Complex billing charge structures and payment rates for medical
services, including significance of proper coding of services (e.g.,
billing by diagnosis related groups (DRG)).

\- Different types of Medicaid payments (e.g., inpatient hospital,
physicians, prescription drugs and drug rebates).

Medicaid has required control systems that should aid the auditor in
obtaining sufficient audit evidence for Medicaid expenditures. These
control systems are discussed in the preceding Program Procedures under
Control Systems and are: **(1)** utilization control and program
integrity; **(2)** inpatient hospital and long term care facility
audits; **(3)** ADP risk analyses and system security reviews (e.g, of
the MMIS); and **(4)** the MMIS normally includes edits and controls
that identify unusual items for follow up by the utilization control and
program integrity function. The first three are generally performed by
specialists retained by the State Medicaid agency. The following table
indicates the major types of Medicaid payments to which these controls
will likely relate:

  --------------------------------------------------------------------------
  Type of Medicaid Payment                           1     2     3     4
  -------------------------------------------------- ----- ----- ----- -----
  Inpatient Hospital                                 X     X     X     X

  Physicians (including dental)                      X           X     X

  Prescription Drugs (net of rebates)                X           X     X

  Institutional Long-Term Care                       X     X     X     X
  --------------------------------------------------------------------------

Each of the above Medicaid payment types are tested for compliance with
applicable laws and regulations under either \"A. Activities Allowed or
Unallowed;\" \"B. Allowable Costs/Cost Principles;\" or \"E.
Eligibility.\" Based upon the assessed level of control risk, the
auditor should design appropriate tests of the allowability of Medicaid
payments. Testing likely will include tests of medical records, in which
case the auditor should consider the need for assistance of specialists.
The auditor may consider using the same specialists used by the State.

The auditor should consider the following in planning and performing
tests of controls and compliance:

> 1\. Section \"N. Special Tests and Provisions,\" includes required
> internal control, which are compliance requirements (i.e., controls
> **(1)**, **(2)**, and **(3)** above), and audit objectives and
> procedures for each. The audit procedures will entail tests of work
> performed by the State Medicaid agency.
>
> 2\. Tests of compliance with laws and regulations relating to Sections
> A, B, and E below, and the compliance requirements enumerated in
> Section N should be coordinated.

**A. Activities Allowed or Unallowed**

> 1\. Funds can only be used for Medicaid benefit payments (as specified
> in the State plan, Federal regulations, or an approved waiver),
> expenditures for administration and training, expenditures for the
> State Survey and Certification Program, and expenditures for State
> Medicaid Fraud Control Units (42 CFR sections 435.10, 440.210,
> 440.220, and 440.180).
>
> 2\. *Case Management Services* - The State plan may provide for case
> management services as an optional medical assistance service. The
> term case management services means services which will assist
> individuals eligible under the plan in gaining access to needed
> medical, social, educational, and other services.
>
> Medicaid case management services are divided into two separate
> categories:
>
> *Administrative case management* - Services must be identifiable with
> Title-XIX benefit (e.g., outreach services provided by public school
> districts to Medicaid recipients).
>
> *Medical/Targeted case management* - Services must be provided to an
> eligible Medicaid recipient. Services do not have to be specifically
> medical in nature and can include securing shelter, personal needs,
> etc. (e.g., services provided by community mental health boards,
> county offices of aging).
>
> Case management services is an area of risk because of the high growth
> of expenditures, the relative newness of the provision that allows
> these expenditures to be claimed, and prior experience which indicates
> problems with the documentation of case management expenditures.
>
> With the exception of case management services provided through
> capitation (a process in which payment is made on a per beneficiary
> basis) or prepaid health plans, Federal regulations typically require
> the following documentation for case management services: date of
> service; name of recipient; name of provider agency and person
> providing the service; nature, extent, or units of service; and, place
> of service (P.L. 99-272, Section 9508; 42 CFR part 434).
>
> 3\. *Managed Care **-*** A State may obtain a waiver of statutory
> requirements in order to develop a system that more effectively
> addresses the health care needs of its population. For example, a
> waiver may involve the use of a program of managed care for selected
> elements of the client population or allow the use of program funds to
> serve specified populations that would be otherwise ineligible
> (Sections 1115 and 1915 of the Social Security Act). Managed care
> providers must be eligible to participate in the program at the time
> services are rendered, payments to managed care plans should only be
> for eligible clients for the proper period, and the capitation payment
> should be properly calculated. Medicaid medical services payments
> (e.g., hospital and doctors charges) should not be made for services
> that are covered by managed care. States should ensure that capitated
> payments to providers are discontinued when a beneficiary is no longer
> enrolled for services. Requirements related to beneficiaries\' access
> to managed care services are covered under N.6., Special Tests and
> Provisions, Managed Care.
>
> 4\. *Medicaid Health Insurance Premiums -* A State may enroll certain
> Medicare-eligible recipients under Medicare Part B and pay the
> premium, deductibles, cost sharing, and other charges (42 CFR section
> 431.625).
>
> 5\. *Disproportionate Share Hospital -* Federal financial
> participation is available for aggregate payments to hospitals that
> serve a disproportionate number of low income patients with special
> needs. The State plan must specifically define a disproportionate
> share hospital and the method of calculating the rate for these
> hospitals. Specific limits for the total disproportionate share
> hospital payments for the State and the individual hospitals are
> contained in the legislation (Section 1923 of the Social Security Act
> and 42 USC 1396(r)).
>
> 6\. *Home Health Care -* A State may obtain a waiver of statutory
> requirements to provide an array of home and community-based services
> which may permit an individual to avoid institutionalization (42 CFR
> part 441 subpart G). The HHS OIG has issued a special fraud alert
> concerning home health care. Problems noted include cost report
> frauds, billing for excessive services or services not rendered, and
> use of unlicensed staff. The full alert was published in the [Federal
> Register]{.underline} on August 10, 1995, (page 40847) and is
> available on the Internet from the HHS OIG Home Page, Special Fraud
> Alerts section (http://www.dhhs.gov/progorg/oig/frdalrt/frdalrt.html).

**B. Allowable Costs/Cost Principles**

> *Recoveries, Refunds, and Rebates (Costs must be the net of all
> applicable credits)*
>
> 1\. States must have a system to identify medical services that are
> the legal obligation of third parties, such as private health or
> accident insurers. Such third party resources should be exhausted
> prior to paying claims with program funds. Where a third party
> liability is established after the claim is paid, reimbursement from
> the third party should be sought (42 CFR sections 433.135 through
> 433.154).
>
> 2\. The State is required to credit the Medicaid program for (1) State
> warrants that are canceled and uncashed checks beyond 180 days of
> issuance (escheated warrants) and (2) overpayments made to providers
> of medical services within specified time frames. In most cases, the
> State must refund provider overpayments to the Federal Government
> within 60 days of identification of the overpayment, regardless of
> whether the overpayment was collected from the provider (42 CFR
> sections 433.300 through 433.320 and 433.40).
>
> 3\. Section 1903 (w)(1) of the Social Security Act (as amended by P.L.
> 102-234) provides that, effective January 1, 1992, before calculating
> the amount of Federal financial participation, certain revenues
> received by a State will be deducted from the State\'s medical
> assistance expenditures. The revenues to be deducted are (1) donations
> made by health providers and entities related to providers (except for
> *bona fide* donations and, subject to a limitation, donations made by
> providers for the direct costs of out stationed eligibility workers);
> and (2) impermissible health care-related taxes that exceed a
> specified limit ( 42 USC 1396(b)(w) and 42 CFR section 433.57).
>
> \"Provider related donations\" are any donations or other voluntary
> payments (in-cash or in-kind) made directly or indirectly to a State
> or unit of local government by (1) a health care provider, (2) an
> entity related to a health care provider, or (3) an entity providing
> goods or services under the State plan and paid as administrative
> expenses. \"*Bona fide* provider-related donations\" are donations
> that have no direct or indirect relationship to payments made under
> Title XIX (42 USC 1396, et seq.) to (1) that provider, (2) providers
> furnishing the same class of items and services as that provider, or
> (3) any related entity (42 CFR sections 433.58(d) and 433.66(b)).
>
> Permissible health care-related taxes are those taxes which are
> broad-based taxes, uniformly applied to a class of health care items,
> services, or providers, and which do not hold a taxpayer harmless for
> the costs of the tax, or a tax program for which HCFA has granted a
> waiver. Health care-related taxes that do not meet these requirements
> are impermissible health care-related taxes (42 CFR section
> 433.68(b)).
>
> The provisions of P.L. 102-234 apply to all 50 States and the District
> of Columbia, except those States whose entire Medicaid program is
> operated under a waiver granted under section 1115 of the Social
> Security Act (42 CFR part 433; [Federal Register]{.underline}
> published August 13, 1993, 58 FR 43156-43183).
>
> 4\. Section 1927 of the Social Security Act allows States to receive
> rebates for drug purchases the same as other payers receive. Drug
> manufacturers are required to provide a listing to HCFA of all covered
> outpatient drugs and, on a quarterly basis, are required to provide
> their average manufacturer\'s price and their best prices for each
> covered outpatient drug. Based upon these data, HCFA calculates a unit
> rebate amount for each drug which it then provides to States. No later
> than 60 days after the end of the quarter, the State Medicaid agency
> must provide to manufacturers drug utilization data. Within 30 days of
> receipt of the utilization data from the State, the manufacturers are
> required to pay the rebate or provide the State with written notice of
> disputed items not paid because of discrepancies found.

**E. Eligibility**

> **1. Eligibility for Individuals**
>
> The State Medicaid agency or its designee is required to determine
> client eligibility in accordance with eligibility requirements defined
> in the approved State plan (42 CFR section 431.10). States have a high
> degree of flexibility in designating who will determine eligibility.
>
> The State is required to operate a MEQC system in accordance with
> requirements specified by HCFA. The MEQC system reviews the
> determinations of beneficiary eligibility made by State Medicaid
> agencies, or their designee, and uses statistical sampling methods to
> select claims for review and project the number and dollar impact of
> incorrect payments to ineligible beneficiaries (42 CFR sections
> 431.800 through 431.865).
>
> As discussed in the General Audit Approach for Medicaid Payments, the
> auditor will likely combine Activities Allowed or Unallowed, Allowable
> Costs/Cost Principles, and Eligibility testing. Therefore, compliance
> requirements related to amounts provided to or on behalf of eligibles
> were combined with Activities Allowed or Unallowed.
>
> **2. Eligibility of Group of Individuals or Area of Service
> Delivery** - Not Applicable

**3. Eligibility for Subrecipients** - Not Applicable

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> The State is required to pay part of the costs of providing health
> care to the poor and part of the costs of administering the program.
> Different State participation rates apply to medical assistance
> payments. There are also different Federal financial participation
> rates for the different types of costs incurred in administering the
> Medicaid program, such as administration, family planning, training,
> computer, and other costs (42 CFR sections 433.10 and 433.15). The
> auditor should refer to the State plan for the matching rates.

**2. Level of Effort**

> A State waiver may contain a level of effort requirement.
>
> **3. Earmarking**
>
> A State waiver may contain an earmarking requirement.

**L. Reporting**

> **1. Financial Reporting**
>
> a\. *SF-269,* *Financial Status Report* - Not Applicable
>
> b\. *SF-270,* *Request for Advance or Reimbursement* - Not Applicable
>
> c\. *SF-271,* *Outlay Report and Request for Reimbursement for
> Construction Program* - Not Applicable
>
> d\. *SF-272,* *Federal Cash Transactions Report* - Not Applicable
>
> e\. *HCFA-64, Quarterly Statement of Expenditures for the Medical
> Assistance Program (OMB No. 0938-0067)* - Required to be used in lieu
> of *SF-269, Financial Status Report* and is required to be prepared
> quarterly and submitted electronically to HCFA within 30 days after
> the end of the quarter.
>
> f\. *PMS-272, Quarterly Cash Transactions Report (OMB No. 0937-0200)
> -* Required in lieu of the Federal Cash Transaction Report (SF-272).
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** - Not Applicable

**N. Special Tests And Provisions**

> **1. Utilization Control and Program Integrity**
>
> **Compliance Requirements** - The State plan must provide methods and
> procedures to safeguard against unnecessary utilization of care and
> services, including long-term care institutions. In addition, the
> State must have: (1) methods or criteria for identifying suspected
> fraud cases; (2) methods for investigating these cases; and, (3)
> procedures, developed in cooperation with legal authorities, for
> referring suspected fraud cases to law enforcement officials (42 CFR
> parts 455, 456, and 1002).
>
> Suspected fraud should be referred to the State Medicaid Fraud Control
> Units (42 CFR part 1007).
>
> The State Medicaid agency must establish and use written criteria for
> evaluating the appropriateness and quality of Medicaid services. The
> agency must have procedures for the ongoing post-payment review, on a
> sample basis, of the need for and the quality and timeliness of
> Medicaid services. The State Medicaid agency may conduct this review
> directly or may contract with a PRO.
>
> **Audit Objectives** - To determine whether the State has established
> and implemented procedures to: (1) safeguard against unnecessary
> utilization of care and services, including long term care
> institutions; (2) identify suspected fraud cases; (3) investigate
> these cases; and, (4) refer those cases with sufficient evidence of
> suspected fraud cases to law enforcement officials.
>
> **Suggested Audit Procedures**
>
> a\. Obtain and evaluate the adequacy of the procedures used by the
> State Medicaid agency to conduct utilization reviews and identifying
> suspected fraud.
>
> \(1\) Consider the qualifications of the personnel conducting the
> reviews and identifying suspected fraud. Ascertain that the
> individuals possess the necessary skill or knowledge by considering
> the following: (1) professional certification, license, or specialized
> training; (2) the reputation and standing of licensed medical
> professionals in the view of peers; and, (3) experience in the type of
> tasks to be performed.
>
> \(2\) Consider the personnel performing the utilization review and
> identifying suspected fraud are sufficiently organized outside the
> control of other Medicaid operations to objectively perform their
> function.
>
> \(3\) Ascertain if the sampling plan implemented by the State Medicaid
> agency or the PRO was properly designed and executed.
>
> b\. Test a sample of the cases examined by State Medicaid agency or
> the PRO and ascertain if such examinations were in accordance with the
> agency=s procedures.
>
> c\. Test a sample of the identified suspected cases of fraud and
> ascertain if the agency took appropriate steps to investigate and, if
> appropriate, make a referral.
>
> d\. Based on the above procedures, consider the degree of reliance
> that can be placed on the utilization review and identification of
> suspected fraud in performing tests under Sections A, B, and E.

**2. Inpatient Hospital and Long-Term Care Facility Audits**

> **Compliance Requirement -** The State Medicaid agency pays for
> inpatient hospital services and long-term care facility services
> through the use of rates that are reasonable and adequate to meet the
> costs that must be incurred by efficiently and economically operated
> providers. The State Medicaid agency must provide for the filing of
> uniform cost reports for each participating provider. These cost
> reports are used to establish payment rates. The State Medicaid agency
> must provide for the periodic audits of financial and statistical
> records of participating providers. The specific audit requirements
> will be established by the State Plan (42 CFR section 447.253).
>
> **Audit Objectives** - To determine whether the State Medicaid agency
> performed inpatient hospital and long-term care facility audits as
> required.

**Suggested Audit Procedures**

> a\. Review the State Plan and State Medicaid agency operating
> procedures and document the types of audits performed (e.g., desk
> audits, field audits), the methodology for determining when audits are
> conducted, and the objectives and procedures of the audits.
>
> b\. Through examination of documentation, ascertain that the sampling
> plan was carried out as planned.
>
> c\. Select a sample of audits and ascertain if the audits were in
> compliance with the State Medicaid agency=s audit procedures.
>
> d\. Based on the above, consider the degree of reliance that can be
> placed on the inpatient hospital and long term care facility audits in
> performing tests under Sections A, B, and E.

**3. ADP Risk Analysis and System Security Review**

> **Compliance Requirement -** State agencies must establish and
> maintain a program for conducting periodic risk analyses to ensure
> that appropriate, cost effective safeguards are incorporated into new
> and existing systems. State agencies must perform risk analyses
> whenever significant system changes occur. State agencies shall review
> the ADP system security installations involved in the administration
> of HHS programs on a biennial basis. At a minimum, the reviews shall
> include an evaluation of physical and data security operating
> procedures, and personnel practices. The State agency shall maintain
> reports on its biennial ADP system security reviews, together with
> pertinent supporting documentation, for HHS onsite reviews (45 CFR
> section 95.621).
>
> **Audit Objective** - To determine whether the State Medicaid agency
> has performed the required ADP risk analyses and system security
> reviews.

**Suggested Audit Procedures**

> a\. Review the State Medicaid agency\'s policies and procedures and
> document the frequency, timing, and scope of ADP security reviews.
> This should include any reviews following Statement on Auditing
> Standards No. 70 (SAS 70) which may have been performed on outside
> processors.
>
> b\. Consider the appropriateness and extent of reliance on such
> reviews based on the qualifications of the personnel performing the
> risk analyses and security reviews and their organizational
> independence from the ADP systems.
>
> c\. Review the work performed during the most recent risk analysis and
> security review.
>
> d\. Based on the above, consider the degree of reliance that can be
> placed on the ADP Risk Analysis and System Security Reviews in
> performing tests under Sections A, B, and E.

**4. Provider Eligibility**

> **Compliance Requirement -** In order to receive Medicaid payments,
> providers of medical services furnishing services must be licensed in
> accordance with Federal, State, and local laws and regulations to
> participate in the Medicaid program (42 CFR sections 431.107 and
> 447.10; and section 1902(a)(9) of the Social Security Act) and the
> providers must make certain disclosures to the State (42 CFR subpart
> B).
>
> **Audit Objective** - To determine whether providers of medical
> services are licensed to participate in the Medicaid program in
> accordance with Federal, State, and local laws and regulations, and
> whether the providers have made the required disclosures to the State.

**Suggested Audit Procedures**

> a\. Obtain an understanding of the State plan\'s provisions for
> licensing and entering into agreements with providers.
>
> b\. Select a sample of providers receiving payments and ascertain if:
>
> \(1\) The provider is licensed in accordance with the State Plan.
>
> \(2\) The agreement with the provider complies with the requirements
> of the State Plan, including the disclosure requirements of 42 CFR 455
> subpart B.

**5. Provider Health and Safety Standards**

> **Compliance Requirement** - Providers must meet the prescribed health
> and safety standards for hospital, nursing facilities, and ICF/MR (42
> CFR part 442). The standards may be modified in the State plan.
>
> **Audit Objective** - To determine whether the State ensures that
> hospitals, nursing facilities, and ICF/MR that serve Medicaid patients
> meet the prescribed health and safety standards.

**Suggested Audit Procedures**

> a\. Obtain an understanding of the State Plan provisions which ensure
> that payments are made only to institutions which meet prescribed
> health and safety standards.
>
> b\. Select a sample of payments for each provider type (i.e.,
> hospitals, nursing facilities, and ICF/MR) and ascertain if the State
> Medicaid agency has documentation that the provider has met the
> prescribed health and safety standards.
>
> **6. Managed Care**
>
> **Compliance Requirement -** A State may obtain a waiver of statutory
> requirements in order to develop a system that more effectively
> addresses the health care needs of its population. A waiver may
> involve the use of a program of managed care for selected elements of
> the client population or allow the use of program funds to serve
> specified populations that would be otherwise ineligible (Sections
> 1115 and 1915 of the Social Security Act).
>
> **Audit Objective -** To determine whether the State is operating
> managed care in compliance with the approved State plan waiver.

**Suggested Audit Procedures**

> a\. Obtain an understanding of the State plan\'s managed care waiver.
>
> b\. Perform tests to ascertain if the State has a system to handle
> beneficiary complaints of not receiving necessary care and provider
> complaints of not receiving payments for services provided to Medicaid
> recipients.
>
> c\. Perform tests to ascertain if the State has a system to ensure
> beneficiaries have adequate access to health care from managed care
> organizations which are being paid premiums on the beneficiaries\'
> behalf.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.914 HIV EMERGENCY RELIEF PROJECT GRANTS**

**CFDA 93.915 HIV EMERGENCY RELIEF FORMULA GRANTS**

**I. PROGRAM OBJECTIVES**

The objective of this program is to improve access to a comprehensive
continuum of high-quality community-based primary medical care and
support services in metropolitan areas that are disproportionately
affected by the incidence of Human Immunodeficiency Virus (HIV)/Acquired
Immune Deficiency Syndrome (AIDS). The statute refers to both persons
infected with HIV and those who have clinically defined AIDS. These
terms are used interchangeably in this compliance supplement but refer
to this total universe of eligible individuals.

Emergency financial assistance, in the form of *formula-based funding*
and supplemental *project-based funding*, is provided to eligible
metropolitan areas (EMAs) to develop, organize, and operate health and
support services programs for infected individuals and their care
givers. The supplemental grants are discretionary awards and are
awarded, following competition, to EMAs that demonstrate severe need
beyond that met through the formula award. They must also demonstrate
the ability to use the supplemental amounts quickly and
cost-effectively. Other criteria, contained in annual application
guidance documents, may also apply. All EMAs currently receiving formula
assistance are also receiving supplemental assistance.

Beginning in fiscal year (FY) 1998, these two programs will be combined
in the CFDA as 93.914, HIV Emergency Relief Project and Formula Funding.

**II. PROGRAM PROCEDURES**

**Administration**

The Health Resources and Services Administration (HRSA), a component of
the Department of Health and Human Services, administers the HIV
emergency relief programs. HRSA uses data reported to and confirmed by
the Centers for Disease Control and Prevention (CDC) to determine
eligibility (i.e., any metropolitan area for which there has been
reported to CDC a cumulative total of more than 2,000 cases of AIDS for
the most recent five calendar years for which data are available) and to
establish the formula for allocation of funds. A metropolitan area is
not eligible if it does not have an overall population of 500,000 or
more unless it was eligible for FY 1995 or any prior fiscal year.
Geographic boundaries are those that were in effect for FY 1994. A
metropolitan area that was eligible in FY 1996 is an eligible area for
FY 1997 and each subsequent fiscal year (42 USC 300ff-11(c) and (d)).

At least fifty percent of the appropriated amount (and an amount for
subsequent adjustment, if necessary, to ensure funding levels consistent
with the baseline year, i.e., FY 1995) is made available for the EMAs=
formula allocation and the remainder is retained by HRSA for award as
discretionary supplemental \"project\" assistance on the basis of
\"severe need\" and other factors. Since FY 1998, funding of the EMAs is
on the basis of a single application and a combined award is made.

Funds are made available to the chief elected official of the city or
urban county that administers the public health agency that provides
outpatient and ambulatory services to the greatest number of individuals
with AIDS in the EMA in accordance with statutory requirements and
program guidelines. Day-to-day responsibility for the grant is
ordinarily delegated to the jurisdiction=s public health department, and
some administrative functions may be outsourced to a private entity. The
chief elected official of the EMA is also required to establish or
designate an AIDS health services planning council, which carries out a
planning process, coordinating with other State, local and private
planning and service organizations, and establishes the priorities for
allocating funds.

Consistent with funding and service priorities established through the
public planning process, the EMA uses the funds to provide direct
assistance to public entities or private non-profit or for-profit
entities to deliver or enhance HIV/AIDS-related outpatient and
ambulatory health and support services, including case management,
substance abuse treatment and mental health treatment; comprehensive
treatment services, including treatment, education, and prophylactic
treatment for opportunistic infections; inpatient case management
services that prevent unnecessary hospitalization or that expedite
discharge, as medically appropriate, from inpatient facilities; and,
within established limits, for associated administrative activities.
These administrative activities include EMA oversight of service
provider performance and adherence to their subgrant or contractual
obligations. Most of these service providers are non-profit
organizations.

**Source of Governing Requirements**

These programs are authorized under Title I of the Ryan White
Comprehensive AIDS Resources Emergency (CARE) Act of 1990, Public Law
101-381, as amended, which is codified at 42 USC 300ff-11 - 300ff-17.
There are no program regulations specific to these programs.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Funds may be used to provide medical treatment and support
> services for individuals with HIV/AIDS (42 USC 300ff-78).
>
> 2\. Consistent with planning council priorities, funds may be used to
> deliver or enhance HIV/AIDS-related (a) outpatient and ambulatory
> health and support services, including case management, substance
> abuse treatment and mental health treatment, (b) comprehensive
> treatment services, including treatment education, and prophylactic
> treatment for opportunistic infections, for individuals and families
> with HIV disease, and (c) inpatient case management services that
> prevent unnecessary hospitalization or expedite discharge, as
> medically appropriate, from inpatient facilities (42 USC
> 300ff-14(b)(1)).
>
> 3\. Funds may be used for the operation of an HIV health services
> planning council established by the grantee, including: staff support
> to the council; costs incurred by members of the council as a result
> of participation in meetings and other activities, including out-of
> pocket expenses (e.g., transportation and meals); costs associated
> with conducting needs assessment, plan development and publicizing
> council activities; and implementation of grievance procedures (42 USC
> 300ff-12(b)).
>
> 4\. The EMA may use funds for routine grant administration and
> monitoring activities, including, but not limited to, the development
> of applications under this program, the receipt and disbursal of
> program funds, the establishment of accounting systems, the
> preparation of required programmatic and financial reports, and for
> all activities associated with the grantee=s selection, award, and
> administration of contracts under the grant (42 USC 300ff-14(e)(2)).
>
> 5\. Funds may be used for service provider (also referred to as
> first-line entities, including first-tier contractors) administrative
> activities, including normal overhead, management and oversight of
> specific projects, and other program support, such as quality control
> and quality assurance (42 USC 300ff-14(e)(3)).
>
> 6\. The EMA may use funds to support program activities that are not
> service-oriented or administrative in nature, e.g., capacity building,
> technical assistance, program evaluation, and assessment of service
> delivery patterns, if they are established as priorities by the
> planning council and meet the requirements of 42 USC 300ff-12(b)(4)
> (A) and (E).
>
> 7\. Funds may be used for outreach programs that have as their
> principal purpose identifying people with HIV disease so they become
> aware of and may be enrolled in care and treatment services, and
> informing low-income individuals with HIV disease of the availability
> of services. Funds may not be used for programs whose primary purpose
> is to target the general public to increase broad public awareness
> about HIV services, or programs that exclusively promote HIV
> counseling and testing and/or prevention education (42 USC
> 300ff-15(a)(5)(C)).
>
> 8\. Funds may not be used to make payment for any item or service if
> payment has already been made or can reasonably be expected to be made
> under any State compensation program, under an insurance policy or any
> Federal or State health benefits program, or by an entity that
> provides health services on a pre-paid basis (42 USC 300ff-15(a)(4)).
>
> 9\. Funds may not be used to purchase or improve land or to purchase,
> construct or make permanent improvement to any building. Minor
> remodeling is allowed (42 USC 300ff-14(f)).
>
> 10\. Funds may not be used to make cash payments to recipients of
> services; however, vouchers which may be exchanged only for a specific
> commodity or service, such as food or transportation or similar
> programs, may be provided where direct provision of the service is not
> possible or effective (42 USC 300ff-14(f)).
>
> 11\. Funds may not be used to provide individuals with hypodermic
> needles or syringes (42 USC 300ff-1).
>
> 12\. Funds may not be used for programs or to develop materials
> designed to promote or encourage intravenous drug use or sexual
> activity (42 USC 300ff-78).

**E. Eligibility**

> **1. Eligibility for Individuals**
>
> Eligible beneficiaries are individuals or families of individuals with
> HIV/AIDS. To the maximum extent practicable, services are to be
> provided to eligible individuals regardless of their ability to pay
> for the services and their current or past health condition. Services
> to non-infected individuals must have, at least, an indirect benefit
> to a person with HIV/AIDS (42 USC 300ff-14(b) and 15(a)(5)(A)).
>
> **2. Eligibility for Groups of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility of Subrecipients**
>
> The EMA may make funds available to public (including Department of
> Veterans Affairs= facilities) or private non-profit entities or
> private for-profit entities, if they are the only available providers
> of quality HIV care in the area. Eligible subrecipients include
> hospitals, community-based organizations, hospices, ambulatory care
> facilities, community health centers, migrant health centers, and
> homeless health centers (42 USC 300ff-14(b)(2)).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching** - Not applicable
>
> **2.1 Level of Effort** - *Maintenance of Effort*
>
> Each political subdivision within the metropolitan area is required to
> maintain its level of expenditures for HIV-related services to
> individuals with HIV disease at a level equal to its level of such
> expenditures for the preceding fiscal year. Political subdivisions
> within the EMA may not use funds received under the HIV grants to
> maintain the required level of HIV/AIDS-related services (42 USC
> 300ff-15(a)(1)(B)) and (C)).
>
> **2.2 Level of Effort** - *Supplement Not Supplant* - Not Applicable
>
> **3. Earmarking**
>
> a\. An amount not less than the percentage represented by the ratio of
> infants, women, and children with AIDS in the population of the
> metropolitan area to the metropolitan area=s overall population with
> AIDS is to be spent on services to these populations (42 USC
> 300ff-14(b)(3)).
>
> b\. Not more than five percent of the amounts awarded to the EMA may
> be used for administration at that level. Program support and planning
> council support are not considered administration for purposes of this
> limitation. If the EMA contracts with a third party for the
> performance of any part of its administrative activities, the five
> percent limitation applies to the combined total of administrative
> expenditures by the EMA and the contractor(s) (42 USC 300ff-14(e)).
>
> c\. Not more than 10 percent, *in the aggregate*, of amounts allocated
> by the EMA to first-line entities may be used for administrative
> expenses (42 USC 300ff-14(e)).

**H. Period of Availability of Federal Funds**

> Funds are available for the budget period designated on the Notice of
> Grant Award. Funds carried forward from prior years may not be used
> for administration. HRSA may reduce the following year=s award by the
> amount of unobligated grant funds reported by the EMA in its
> *Financial Status Report* (42 USC 300ff-13(a)(3)(D)).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269, *Financial Status Report* - Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Program* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Payments under this
> program are made by the Department of Health and Human Services,
> Payment Management System. Reporting equivalent to the SF-272 is
> accomplished through the Payment Management System and is evidenced by
> the PMS 272-E, *Major Program Statement*.
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting**
>
> *Annual Administrative Report (AAR) (OMB No.0915-0166)*. Aggregate
> provider-level data required from each direct service provider. These
> reports are currently provided to the EMA electronically or in hard
> copy and may be submitted to HRSA in a similar manner (e.g., the
> subrecipient (service provider) submits the report to the pass-through
> entity (EMA), which in turn submits the reports to the Federal agency
> (HRSA)). The reporting entity has the option of completing the reports
> on the basis of \"all clients receiving a service eligible for Title I
> (and Title II\--HIV Care Formula Grants, 93.917) funding\" or \"only
> clients receiving service funded with Title I or II funding.\" If
> those \"funded\" is the reporting basis, the reporting entity would be
> expected to have a tracking system to develop this data.
>
> *Key Line Items* across an EMA\'s reporting entities are:
>
> a\. Part 4: Client Information:
>
> \(1\) Number of clients (unduplicated)
>
> \(2\) Number of new clients served
>
> b\. Part 5, Services Provided/Clients Served - Number of visits for
> each of the following types of office-based health care:
>
> \(1\) Medical care
>
> \(2\) Dental care
>
> \(3\) Mental health services
>
> \(4\) Substance abuse services
>
> \(5\) Rehabilitation services
>
> \(6\) Face-to-face case management encounters
>
> c\. Part 6, Fiscal Information - Total HIV services funding by source:
>
> \(1\) Title I CARE
>
> \(2\) Title II CARE
>
> \(3\) Other CARE Act funding
>
> \(4\) Other Federal funding (exclusive of Medicare and Medicaid)

**M. Subrecipient Monitoring**

> EMAs are required to establish policies in the areas of verification
> and documentation of client eligibility, require that service
> providers follow those policies, and oversee the implementation by
> service providers (42 USC 300ff-14(b) and (e)(2)(B).

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.959 BLOCK GRANTS FOR PREVENTION AND TREATMENT OF SUBSTANCE
ABUSE**

**I. PROGRAM OBJECTIVES**

The objective of the Substance Abuse Prevention and Treatment (SAPT)
Block Grant Program is to provide funds to States, territories, and one
Indian Tribe for the purpose of planning, carrying out and evaluating
activities to prevent and treat Substance Abuse (SA) and other related
activities as authorized by the statute.

The SAPT Block Grant is the primary tool the Federal government uses to
fund State SA prevention and treatment programs. While the SAPT Block
Grant provides Federal support to addiction prevention and treatment
services nationally, it empowers the States to design solutions to
specific addiction problems that are experienced locally.

**II. PROGRAM PROCEDURES**

**Administration and Services**

The Substance Abuse and Mental Health Services Administration (SAMHSA),
an operating division of the Department of Health and Human Services
(HHS), administers the block grant program. For purposes of this
guidance, the term \"State\" includes the 50 States, the District of
Columbia, American Samoa, Guam, the Marshall Islands, the Federated
States of Micronesia , the Commonwealth of the Northern Marianas, Palau,
the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and the Red
Lake Band of Chippewa Indians. The States generally subaward funds for
the provision of services to public and non-profit organizations.
Service providers may include for-profit organizations but for-profits
may not receive financial assistance.

Examples of SAPT activities are:

> a\. *Alcohol Treatment and Rehabilitation* - Direct services to
> patients experiencing primary problems for alcohol, such as outreach,
> detoxification, outpatient counseling, residential rehabilitation,
> hospital based care (not inpatient hospital services), abuse
> monitoring, vocational counseling, case management, central intake,
> and program administration.
>
> b\. *Drug Treatment and Rehabilitation* - Direct services to patients
> experiencing primary problems with illicit and licit drugs, such as
> outreach, detoxification, methadone maintenance and detoxification,
> outpatient counseling, residential rehabilitation, including
> therapeutic communities, hospital based care (not inpatient hospital
> services), vocational counseling, case management central intake, and
> program administration.
>
> c\. *Primary Prevention Activities* - Education, counseling, and other
> activities designed to reduce the risk of substance abuse.

The SAPT funds are allocated to the States according to a formula
legislated by Congress. States may then distribute these funds to
cities, counties, or service providers within their jurisdictions based
on need. Of the SAPT funds dispensed to each State annually, Congress
has specified that not less than 35% will be expended for prevention and
treatment activities relating to alcohol, not less than 35% will be
expended for prevention and treatment activities related to other drugs,
and not less than 20% for programs for individuals who do not require
treatment for substance abuse. The programs should (a) educate and
counsel the individuals on such abuse and (b) provide for activities to
reduce the risk of such abuse by the individuals. SAPT Block Grant
statutory Aset asides@ were established to fund programs targeting
special populations, such as services for women, especially pregnant and
postpartum women and their children, and, in certain States, for
screening for human immunodeficiency virus (HIV).

**State Plan**

The State must submit to SAMHSA for approval, an annual application
which includes a State plan for SA prevention and treatment services
objectives described above and signed assurances required by the Act and
implementing regulations. The entire application, including the plan,
must be reviewed by SAMHSA to ensure that all of the requirements of the
law and regulations are met.

The State plan addresses how the State intends to comply with the
various requirements of Title XIX, Part B, Subparts II and III of the
Public Health Service Act (42 USC 300x) and its program objectives and
specific allocations by: (1) conducting State and local demand and need
assessments; (2) establishing statewide prevention and treatment
improvement plans with specific multi-year goals for narrowing
identified service gaps, implementing training efforts, and fostering
coordination among SA treatment, primary health care, and human service
agencies; and (3) addressing human resource requirements, clinical
standards and identified treatment improvement goals, and ensuring
coordination of all health and human services for addicted individuals.

The State shall make the plan public within the State in such a manner
as to facilitate comment from any person (including any Federal or other
public agency) during development of the plan (including any revisions)
and after submission of the plan to SAMHSA.

**Source of Governing Requirements**

This program is authorized under Title XIX, Part B, Subparts II and III
of the Public Health Service Act (42 USC 300x). Implementing regulations
are published at 45 CFR part 96. Those regulations include general
administrative requirements for the covered block grant programs (in
lieu of either 45 CFR parts 74 (OMB Circular A-110) and 92 (A-102 Common
Rule)). Requirements specific to SAPT are in 45 CFR sections 96.120
through 96.137. In addition, grantees are to administer their SAPT
programs according to the plan which they submitted to SAMHSA.

As discussed in Appendix I of this Supplement, Federal Programs Excluded
from the A-102 Common Rule, States are to use the fiscal policies that
apply to their own funds in administering SAPT. Procedures must be
adequate to assure the proper disbursal of and accounting for Federal
funds paid to the grantee, including procedures for monitoring the
assistance provided (45 CFR section 96.30).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. The State shall not use grant funds to provide inpatient hospital
> services except when it is determined by a physician that: (a) the
> primary diagnosis of the individual is SA and the physician certifies
> this fact; (b) the individual cannot be safely treated in a community
> based non-hospital, residential treatment program; (c) the service can
> reasonably be expected to improve an individual\'s condition or level
> of functioning; and (d) the hospital based SA program follows national
> standards of SA professional practice. Additionally, the daily rate of
> payment provided to the hospital for providing the services to the
> individual cannot exceed the comparable daily rate provided for
> community based non-hospital residential programs of treatment for SA
> and the grant may be expended for such services only to the extent
> that it is medically necessary (i.e., only for those days that the
> patient cannot be safely treated in a residential community based
> program) (42 USC 300x-31(a) and (b); 45 CFR sections 96.135(a)(1) and
> (c))
>
> 2\. Grant funds may be used for loans from a revolving loan fund for
> provision of housing in which individuals recovering from alcohol and
> drug abuse may reside in groups. Individual loans may not exceed
> \$4000 (45 CFR section 96.129).
>
> 3\. Grant funds shall not be used to make cash payments to intended
> recipients of health services (42 USC 300x-31(a); 45 CFR sections
> 96.135(a)(2)).
>
> 4\. Grant funds shall not be used to purchase or improve land,
> purchase, construct, or permanently improve (other than minor
> remodeling) any building or any other facility, or purchase major
> medical equipment. The Secretary may provide a waiver of the
> restriction for the construction of a new facility or rehabilitation
> of an existing facility, but not for land acquisition (42 USC
> 300x-31(a); 45 CFR sections 96.135(a)(3) and (d)).
>
> 5\. The State shall not use grant funds to satisfy any requirement for
> the expenditure of non-Federal funds as a condition for the receipt of
> Federal funding (42 USC 300x-31(a); 45 CFR section 96.135(a)(4)).
>
> 6\. Grant funds may not be used to provide financial assistance (i.e.,
> a subgrant) to any entity other than a public or non-profit entity. A
> State is not precluded from entering into a procurement contract for
> services, since payments under such a contract are not financial
> assistance to the contractor (42 USC 300x-31(a); 45 CFR section 96.135
> (a)(5)).
>
> 7\. The State shall not expend grant funds to provide individuals with
> hypodermic needles or syringes so that such individuals may use
> illegal drugs, unless the Surgeon General of the Public Health Service
> determines that a demonstration needle exchange program would be
> effective in reducing drug abuse and the risk that the public will
> become infected with the etiologic agent for AIDS (42 USC 300ee-5; 45
> CFR section 96.135 (a)(6)).
>
> 8\. Grant funds may not be used to enforce State laws regarding sale
> of tobacco products to individuals under age of 18, except that grant
> funds may be expended from the primary prevention setaside of SAPT
> under 45 CFR section 96.124(b)(1) for carrying out the administrative
> aspects of the requirements such as the development of the sample
> design and the conducting of the inspections (45 CFR section 96.130
> (j)).

**B. Allowable Costs/Cost Principles**

> As discussed in Appendix I of this Supplement, Federal Programs
> Excluded from the A-102 Common Rule, SAPT is exempt from the
> provisions of OMB cost principles circulars. State cost principles
> requirements apply to SAPT.

**G. Matching, Level of Effort, Earmarking**

> **1. Matching** - Not Applicable

**2. Level of Effort**

> a\. The State shall for each fiscal year maintain aggregate State
> expenditures for authorized activities by the principal agency at a
> level that is not less than the average level of such expenditures
> maintained by the State for the two State fiscal years preceding the
> fiscal year for which the State is applying for the grant. The
> \"principal agency\" is defined as the single State agency responsible
> for planning, carrying out and evaluating activities to prevent and
> treat SA and related activities (42 USC 300x-30; 45 CFR sections
> 96.121 and 96.134).
>
> b\. The State must maintain expenditures at not less than the
> calculated fiscal year 1994 base amount for SA treatment services for
> pregnant women and women with dependent children. The fiscal year 1994
> base amount was reported in the State\'s fiscal year 1995 application
> (42 USC 300x-27; 45 CFR section 96.124(c)).
>
> c\. Designated States shall maintain expenditures of non-Federal
> amounts for HIV services at a level that is not less than the average
> level of such expenditures maintained by the State for the 2-year
> period proceeding the first fiscal year for which the State receives
> such a grant. A designated State is any State whose rate of cases of
> HIV is 10 or more such cases per 100,000 individuals (as indicated by
> the number of such cases reported to and confirmed by the Director of
> the Centers for Disease Control for the most recent calendar year for
> which the data are available.) (42 USC 300x-30; 45 CFR sections 96.128
> (b) & (f)).
>
> d\. The State shall maintain expenditures of non-Federal amounts for
> tuberculosis services at a level that is not less than an average of
> such expenditures maintained by the State for the 2 year period
> preceding the first fiscal year for which the State receives such a
> grant (42 USC 300x-24; 45 CFR section 96.127).

**3. Earmarking**

> a\. The State shall expend not less than 35 percent for prevention and
> treatment activities regarding alcohol (42 USC 300x-22; 45 CFR section
> 96.124 (a)(1)).
>
> b\. The State shall expend not less than 35 percent for prevention and
> treatment activities regarding other drugs (42 USC 300x-22; 45 CFR
> section 96.124 (a)(2)).
>
> c\. Of the amount earmarked for alcohol and other drugs prevention and
> treatment activities (III.G.3.a and b above), the State shall expend
> not less than 20 percent of SAPT for primary prevention programs for
> individuals who do not require treatment of SA. The programs should
> educate and counsel the individuals on such abuse and provide for
> activities to reduce the risk of such abuse by the individuals (42 USC
> 300x-22; 45 CFR sections 96.124 (b)(1) and 96.125).
>
> d\. Designated States shall expend not less than 2 percent and not
> more than 5 percent of the award amount to carry out one or more
> projects to make available to individuals early intervention services
> for HIV disease at the sites where the individuals are undergoing SA
> treatment. If the State carries out two or more projects, the State
> will carry out one such project in a rural area of the State unless
> the Secretary waives the requirement (42 USC 300x-24).
>
> e\. The State may not expend more than 5 percent of the grant to pay
> the costs of administering the grant (42 USC 300x-31; 45 CFR section
> 96.135 (b)(1)).
>
> f\. The State may not expend grant funds for providing treatment
> services in penal or correctional institutions in an amount more than
> that expended for such programs by the State for fiscal year 1991 (42
> USC 300x-31; 45 CFR section 96.135(b)(2)).

**H. Period of Availability of Federal Funds**

> The State is required to obligate all of the funds awarded during the
> fiscal year of the award. Amounts obligated by the State which remain
> unexpended at the end of the fiscal year for which the amounts were
> awarded shall remain available until the end of the succeeding fiscal
> year (42 USC 300x-62).
>
> If a State has terminated or reduced the amount of funds awarded to a
> subrecipient for failure of the subrecipient to comply with the terms
> upon which the funds were conditioned, the amounts involved shall be
> available for reobligation by the State through September 30 of the
> fiscal year following the fiscal year for which the amounts were paid
> to the State and any such amounts that are obligated by the State
> should be available for expenditure through such date (42 USC
> 300x-62(b)).

**L. Reporting**

> **1. Financial Reporting** - Not Applicable

**2. Performance Reporting** - Not Applicable

**3. Special Reporting**

> *Substance Abuse Prevention and Treatment (SAPT) Block Grant
> Application - Form 06B, Summary of Tobacco Results by State Geographic
> Sampling Unit (OMB No. 0930-0080*) - This form is part of the overall
> application for the SAPT Block Grant and it summarizes the tobacco
> inspection activities.
>
> *Key Line Items* - The following line items contain critical
> information:
>
> 1\. *(3) No. of Outlets Randomly Inspected.*
>
> 2\. *(4) No. of Outlets Found in Violation During Random Inspections.*

**N. Special Test and Provisions**

> **1. Independent Peer Reviews**
>
> **Compliance Requirements** - The State must provide for independent
> peer reviews which access the quality, appropriateness, and efficacy
> of treatment services provided to individuals. At least 5 percent of
> the entities providing services in the State shall be reviewed. The
> entities reviewed shall be representative of the entities providing
> the services. The State shall ensure that the peer reviewers are
> independent by ensuring that the peer review does not involve
> reviewers reviewing their own programs and the peer review is not
> conducted as part of the licensing or certification process (42 USC
> 300x-53; 45 CFR section 96.136).
>
> **Audit Objectives** - Determine whether (1) the required number of
> entities were peer reviewed, (2) the selection of entities for peer
> review was representative of entities providing services, (3) the
> State ensured that the peer reviewers were independent.
>
> **Suggested Audit Procedures**
>
> 1\. Ascertain the number of entities providing treatment services in
> the State.
>
> 2\. Ascertain if the number of entities reviewed was at least 5
> percent of the entities providing treatment services.
>
> 3\. Ascertain if the selection of entities for peer review was
> representative of entities providing services.
>
> 4\. Select a sample of peer reviews and ascertain if the State ensured
> that the peer reviewers were independent.

**IV. OTHER INFORMATION**

> As described in Part 4, Social Services Block Grant (SSBG) program
> (CFDA 93.667), Subpart III.A. Activities Allowed or Unallowed, a State
> may transfer up to 10 percent of its annual allotment under SSBG to
> this and six other block grant programs.
>
> Amounts transferred into this program are subject to the requirements
> of this program when expended and should be included in the audit
> universe and total expenditures of this program when determining Type
> A programs. On the Schedule of Expenditures of Federal Awards, the
> amounts transferred in should be shown as expenditures of this program
> when such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.991 PREVENTIVE HEALTH AND HEALTH SERVICES BLOCK GRANT**

**IV. OTHER INFORMATION**

> This program is not included in this Compliance Supplement; however,
> the following information is included to alert the auditor to
> transfers from the Social Services Block Grant (SSBG) program (CFDA
> 93.667), a program which is included in this Supplement.
>
> A State may transfer up to 10 percent of its annual allotment under
> SSBG to this and six other block grant programs for support of health
> services, health promotion and disease prevention activities,
> low-income home energy assistance, or any combination of these
> activities.
>
> Amounts transferred into this program are subject to the requirements
> of this program when expended and should be included in the audit
> universe and total expenditures of this program when determining Type
> A programs. On the Schedule of Expenditures of Federal Awards, the
> amounts transferred in should be shown as expenditures of this program
> when such amounts are expended.

**DEPARTMENT OF HEALTH AND HUMAN SERVICES**

**CFDA 93.994 MATERNAL AND CHILD HEALTH SERVICES BLOCK GRANT** **TO THE
STATES**

**IV. OTHER INFORMATION**

> This program is not included in this Compliance Supplement; however,
> the following information is included to alert the auditor to
> transfers from the Social Services Block Grant (SSBG) program (CFDA
> 93.667), a program which is included in this Supplement.
>
> A State may transfer up to 10 percent of its annual allotment under
> SSBG to this and six other block grant programs for support of health
> services, health promotion and disease prevention activities,
> low-income home energy assistance, or any combination of these
> activities.
>
> Amounts transferred into this program are subject to the requirements
> of this program when expended and should be included in the audit
> universe and total expenditures of this program when determining Type
> A programs. On the Schedule of Expenditures of Federal Awards, the
> amounts transferred in should be shown as expenditures of this program
> when such amounts are expended.