Title 45—Public Welfare--Volume 1
PART 262—ACCOUNTABILITY PROVISIONS—GENERAL
§ 262.0   What definitions apply to this part?
The general TANF definitions at §§ 260.30 through 260.33 of this chapter apply to this part.
§ 262.1   What penalties apply to States?
(a) We will assess fiscal penalties against States under circumstances defined in parts 261 through 265 of this chapter. The penalties are:
(1) A penalty of the amount by which a State misused its TANF funds;
(2) An additional penalty of five percent of the adjusted SFAG if such misuse was intentional;
(3) A penalty of four percent of the adjusted SFAG for each quarter a State fails to submit an accurate, complete and timely required report;
(4) A penalty of up to 21 percent of the adjusted SFAG for failure to satisfy the minimum participation rates;
(5) A penalty of no more than two percent of the adjusted SFAG for failure to participate in IEVS;
(6) A penalty of no more than five percent of the adjusted SFAG for failure to enforce penalties on recipients who are not cooperating with the State Child Support Enforcement (IV-D) agency;
(7) A penalty equal to the outstanding loan amount, plus interest, for failure to repay a Federal loan;
(8) A penalty equal to the amount by which a State fails to meet its basic MOE requirement;
(9) A penalty of five percent of the adjusted SFAG for failure to comply with the five-year limit on Federal assistance;
(10) A penalty equal to the amount of contingency funds that were received but were not remitted for a fiscal year, if the State fails to maintain 100 percent of historic State expenditures in that fiscal year;
(11) A penalty of no more than five percent of the adjusted SFAG for the failure to maintain assistance to an adult single custodial parent who cannot obtain child care for a child under age six;
(12) A penalty of no more than two percent of the adjusted SFAG plus the amount a State has failed to expend of its own funds to replace the reduction to its SFAG due to the assessment of penalties in this section in the immediately succeeding fiscal year;
(13) A penalty equal to the amount of the State's Welfare-to-Work formula grant for failure to meet its basic MOE requirement during a year in which it receives the formula grant;
(14) A penalty of not less than one percent and not more than five percent of the adjusted SFAG for failure to impose penalties properly against individuals who refuse to engage in required work in accordance with section 407 of the Act; and
(15) A penalty of not less than one percent and not more than five percent of the adjusted SFAG for failure to establish or comply with work participation verification procedures.
(16)(i) A penalty of not more than five percent of the adjusted SFAG (in accordance with § 264.61(a) of this chapter), for failure to report annually on the state's implementation and maintenance of policies and practices required in § 264.60 of this chapter.
(ii) A penalty of not more than five percent of the adjusted SFAG (in accordance with § 264.61(b) of this chapter), for FY 2014 and each succeeding fiscal year in which the state does not demonstrate that it has implemented and maintained policies and practices required in § 264.60 of this chapter.
(iii) The penalty under paragraphs (a)(16)(i) and (ii) of this section may be reduced based on the degree of noncompliance of the state.
(iv) Fraudulent activity by any individual receiving TANF assistance in an attempt to circumvent the policies and practices required by § 264.60 of this chapter shall not trigger a state penalty under paragraphs (a)(16)(i) and (ii) of this section.
(b) In the event of multiple penalties for a fiscal year, we will add all applicable penalty percentages together. We will then assess the penalty amount against the adjusted SFAG that would have been payable to the State if we had assessed no penalties. As a final step, we will subtract other (fixed) penalty amounts from the adjusted SFAG.
(c)(1) We will take the penalties specified in paragraphs (a)(1), (a)(2), and (a)(7) of this section by reducing the SFAG payable for the quarter that immediately follows our final decision.
(2) We will take the penalties specified in paragraphs (a)(3) through (6) and (8) through (16) of this section by reducing the SFAG payable for the fiscal year that immediately follows our final decision.
(d) When imposing the penalties in paragraph (a) of this section, the total reduction in an affected State's quarterly SFAG amount must not exceed 25 percent. If this 25-percent limit prevents the recovery of the full penalty amount imposed on a State during a quarter or a fiscal year, as appropriate, we will apply the remaining amount of the penalty to the SFAG payable for the immediately succeeding quarter until we recover the full penalty amount.
(e)(1) In the immediately succeeding fiscal year, a State must expend additional State funds to replace any reduction in the SFAG resulting from penalties.
(2) The State must document compliance with this replacement provision on its TANF Financial Report (or Territorial Financial Report).
§ 262.2   When do the TANF penalty provisions apply?
(a) A State will be subject to the penalties specified in § 262.1(a)(1), (2), (7), (8), (9), (10), (11), (12), (13), and (14) for conduct occurring on and after the first day the State operates the TANF program.
(b) A State will be subject to the penalties specified in § 262.1(a)(3), (4), (5), and (6) for conduct occurring on and after July 1, 1997, or the date that is six months after the first day the State operates the TANF program, whichever is later.
(c) For the time period prior to October 1, 1999, we will assess State conduct as specified in § 260.40(b) of this chapter.
(d) The penalty specified in § 262.1(a)(15) takes effect on October 1, 2006, for failure to establish work participation verification procedures and on October 1, 2007, for failure to comply with those procedures.
(e) In accordance with § 264.61(a) and (b) of this chapter, the penalty specified in § 262.1(a)(16) will be imposed for FY 2014 and each succeeding fiscal year.
§ 262.3   How will we determine if a State is subject to a penalty?
(a)(1) We will use the single audit under 45 CFR part 75, subpart F, in conjunction with other reviews, audits, and data sources, as appropriate, to determine if a State is subject to a penalty for misusing Federal TANF funds (§ 263.10 of this chapter), intentionally misusing Federal TANF funds (§ 263.12 of this chapter), failing to participate in IEVS (§ 264.10 of this chapter), failing to comply with paternity establishment and child support requirements (§ 264.31 of this chapter), failing to maintain assistance to an adult single custodial parent who cannot obtain child care for a child under 6 (§ 261.57 of this chapter), failing to reduce assistance to a recipient who refuses without good cause to work (§ 261.54 of this chapter), and after October 1, 2007 failing to comply with work participation verification procedures (§ 261.64 of this chapter).
(2) We will also use the single audit as a secondary method of determining if a State is subject to other penalties if an audit detects lack of compliance in other penalty areas.
(b)(1) We will use the TANF Data Report required under part 265 of this chapter to determine if a State failed to meet participation rates (§§ 261.21 and 261.23 of this chapter) or failed to comply with the five-year limit on Federal assistance (§ 264.1 of this chapter).
(2) Data in these reports are subject to our verification in accordance with § 265.7 of this chapter.
(c)(1) We will use the TANF Financial Report (or, as applicable, the Territorial Financial Report) as the primary method for determining if a State has failed to meet the basic MOE requirement (§ 263.8 of this chapter), meet the Contingency Fund MOE requirement (§ 264.76 of this chapter), or replace SFAG reductions with State-only funds (§ 264.50 of this chapter).
(2) Data in these reports are subject to our verification in accordance with § 265.7 of this chapter.
(d) We will determine that a State is subject to the specific penalties for failure to perform if we find information in the reports under paragraphs (b) and (c) of this section to be insufficient to show compliance or if we determine that the State has not adequately documented actions verifying that it has met the participation rates or the time limits.
(e) To determine if a State has met its MOE requirements, we will also use the supplemental information in the annual report required in accordance with § 265.9(c) of this chapter.
(f) States must maintain records in accordance with 45 CFR 75.361 through 75.370.
(g) To determine if a State is subject to a penalty under § 262.1(a)(16), we will use the information provided in annual state reports at § 265.9(b)(10) of this chapter, in accordance with Section 409(a)(16) of the Social Security Act.
§ 262.4   What happens if we determine that a State is subject to a penalty?
(a) If we determine that a State is subject to a penalty, we will notify the State agency in writing, specifying which penalty we will impose and the reasons for the penalty. This notice will:
(1) Specify the penalty provision at issue, including the penalty amount;
(2) Specify the source of information and the reasons for our decision;
(3) Invite the State to present its arguments if it believes that the information or method that we used were in error or were insufficient or that its actions, in the absence of Federal regulations, were based on a reasonable interpretation of the statute; and
(4) Explain how and when the State may submit a reasonable cause justification under § 262.5 and/or corrective compliance plan under § 262.6.
(b) Within 60 days of when it receives our notification, the State may submit a written response that:
(1) Demonstrates that our determination is incorrect because our information or the method that we used in determining the violation or the amount of the penalty was in error or was insufficient, or that the State acted, in the absence of Federal rules, on a reasonable interpretation of the statute;
(2) Demonstrates that the State had reasonable cause for failing to meet the requirement(s); and/or
(3) Provides a corrective compliance plan, pursuant to § 262.6.
(c) If we find that we determined the penalty erroneously, or that the State has adequately demonstrated that it had reasonable cause for failing to meet one or more requirements, we will not impose the penalty.
(d) Reasonable cause and corrective compliance plans are not available for failing to repay a Federal loan; meet the basic MOE requirement; meet the Contingency Fund MOE requirement; expend additional State funds to replace adjusted SFAG reductions due to the imposition of one or more penalties listed in § 262.1; or maintain 80 percent, or 75 percent, as appropriate, basic MOE during a year in which the State receives a Welfare-to-Work grant.
(e)(1) If we request additional information from a State that we need to determine reasonable cause, the State must ordinarily provide such information within 30 days.
(2) Under unusual circumstances, we may give the State an extension of the time to respond to our request.
(f)(1)(i) We will notify the State in writing of our findings with respect to reasonable cause generally within 60 days of the date when we receive its response to our penalty notice (in accordance with paragraph (b) of this section).
(ii) If the finding is negative and the State has not yet submitted a corrective compliance plan, it may do so in response to this notice in accordance with § 262.6.
(2) We will notify the State of our decision regarding its corrective compliance plan in accordance with the provisions of § 262.6(g).
(g) We will impose a penalty in accord with the provisions in § 262.1(c) after we make our final decision and the appellate process is completed, if applicable. If there is an appellate decision upholding the penalty, we will take the penalty and charge interest back to the date that we formally notified the Governor of the adverse action pursuant to § 262.7(a)(1).
§ 262.5   Under what general circumstances will we determine that a State has reasonable cause?
(a) We will not impose a penalty against a State if we determine that the State had reasonable cause for its failure. The general factors a State may use to claim reasonable cause include:
(1) Natural disasters and other calamities (e.g., hurricanes, earthquakes, fire) whose disruptive impact was so significant as to cause the State's failure;
(2) Formally issued Federal guidance that provided incorrect information resulting in the State's failure; or
(3) Isolated problems of minimal impact that are not indicative of a systemic problem.
(b)(1) We will grant reasonable cause to a State that:
(i) Clearly demonstrates that its failure to submit complete, accurate, and timely data, as required at § 265.8 of this chapter, for one or both of the first two quarters of FY 2000, is attributable, in significant part, to its need to divert critical system resources to Year 2000 compliance activities; and
(ii) Submits complete and accurate data for the first two quarters of FY 2000 by September 30, 2000.
(2) A State may also use the additional factors for claiming reasonable cause for failure to comply with the five-year limit on Federal assistance or the minimum participation rates, as specified at §§ 261.52 and 264.3 and subpart B of part 260 of this chapter.
(c) In determining reasonable cause, we will consider the efforts the State made to meet the requirement, as well as the duration and severity of the circumstances that led to the State's failure to achieve the requirement.
(d)(1) The burden of proof rests with the State to fully explain the circumstances and events that constitute reasonable cause for its failure to meet a requirement.
(2) The State must provide us with sufficient relevant information and documentation to substantiate its claim of reasonable cause.
§ 262.6   What happens if a State does not demonstrate reasonable cause?
(a) A State may accept the penalty or enter into a corrective compliance plan that will correct or discontinue the violation in order to avoid the penalty if:
(1) A State does not claim reasonable cause; or
(2) We find that the State does not have reasonable cause.
(b) A State that does not claim reasonable cause will have 60 days from receipt of our notice described in § 262.4(a) to submit its corrective compliance plan.
(c) A State that unsuccessfully claimed reasonable cause will have 60 days from the date that it received our second notice, described in § 262.4(f), to submit its corrective compliance plan.
(d) The corrective compliance plan must include:
(1) A complete analysis of why the State did not meet the requirements;
(2) A detailed description of how the State will correct or discontinue, as appropriate, the violation in a timely manner;
(3) The time period in which the violation will be corrected or discontinued;
(4) The milestones, including interim process and outcome goals, that the State will achieve to assure it comes into compliance within the specified time period; and
(5) A certification by the Governor that the State is committed to correcting or discontinuing the violation, in accordance with the plan.
(e) The corrective compliance plan must correct or discontinue the violation within the following time frames:
(1) For a penalty under § 262.1(a)(4), (a)(9), or (a)(15), by the end of the first fiscal year ending at least six months after our receipt of the corrective compliance plan; and
(2) For the remaining penalties, by a date the State proposes that reflects the minimum period necessary to achieve compliance.
(f) During the 60-day period following our receipt of the State's corrective compliance plan, we may request additional information and consult with the State on modifications to the plan including in the case of a penalty under § 262.1(a)(15), modifications to the State's work verification procedures and Work Verification Plan.
(g) We will accept or reject the State's corrective compliance plan, in writing, within 60 days of our receipt of the plan, although a corrective compliance plan is deemed to be accepted if we take no action during the 60-day period following our receipt of the plan.
(h) If a State does not submit an acceptable corrective compliance plan on time, we will assess the penalty immediately.
(i) We will not impose a penalty against a State with respect to any violation covered by a corrective compliance plan that we accept if the State completely corrects or discontinues, as appropriate, the violation within the period covered by the plan.
(j) Under limited circumstances, we may reduce the penalty if the State fails to completely correct or discontinue the violation pursuant to its corrective compliance plan and in a timely manner. To receive a reduced penalty, the State must demonstrate that it met one or both of the following conditions:
(1) Although it did not achieve full compliance, the State made significant progress towards correcting or discontinuing the violation; or
(2) The State's failure to comply fully was attributable to either a natural disaster or regional recession.
§ 262.7   How can a State appeal our decision to take a penalty?
(a)(1) We will formally notify the Governor and the State agency of an adverse action (i.e., the reduction in the SFAG) within five days after we determine that a State is subject to a penalty under parts 261 through 265 of this chapter.
(2) Such notice will include the factual and legal basis for taking the penalty in sufficient detail for the State to be able to respond in an appeal.
(b)(1) The State may file an appeal of the action, in whole or in part, with the HHS Departmental Appeals Board (the Board) within 60 days after the date it receives notice of the adverse action. The State must submit its brief and supporting documents when it files its appeal.
(2) The State must send a copy of the appeal, and any supplemental filings, to the Office of the General Counsel, Children, Families and Aging Division, Room 411-D, 200 Independence Avenue, SW., Washington, DC 20201.
(c) We will submit our reply brief and supporting documentation within 45 days of the receipt of the State's submission under paragraph (b) of this section.
(d) The State may submit a reply and any supporting documentation within 21 days of its receipt of our reply under paragraph (c) of this section.
(e) The appeal to the Board must follow the provisions of the rules under this section and those at §§ 16.2, 16.9, 16.10, and 16.13-16.22 of this title, to the extent that they are consistent with this section.
(f) The Board will consider an appeal filed by a State on the basis of the documentation and briefs submitted, along with any additional information the Board may require to support a final decision. Such information may include a hearing if the Board determines that it is necessary. In deciding whether to uphold an adverse action or any portion of such action, the Board will conduct a thorough review of the issues.
(g)(1) A State may obtain judicial review of a final decision by the Board by filing an action within 90 days after the date of such decision. It should file this action with the district court of the United States in the judicial district where the State agency is located or in the United States District Court for the District of Columbia.
(2) The district court will review the final decision of the Board on the record established in the administrative proceeding, in accordance with the standards of review prescribed by 5 U.S.C. 706(2). The court will base its review on the documents and supporting data submitted to the Board.