Federal Register / Vol. 72, No. 171 / Wednesday, September 5, 2007 / Rules and Regulations 50889 

Subpart 3736—Mining Operations 

■ 28. Amend § 3736.2 by revising the 

second sentence of paragraph (b) to read 

as follows: 

§ 3736.2 Hearing; notice of protest. 

* * * * * 

(b) * * * Such notice, accompanied 

by the filing fee for notice of protest of 

placer mining operations found in the 

fee schedule in § 3000.12 of this 

chapter, must contain the party’s name 

and address and a statement showing 

the nature of the party’s interest in the 

use of the lands embraced within the 

mining claim. * * * 

* * * * * 

PART 3810—LANDS AND MINERALS 

SUBJECT TO LOCATION 

■ 29. The authority citation for part 

3810 continues to read as follows: 

Authority: 30 U.S.C. 22 et seq.; 43 U.S.C. 

1201 and 1740. 

Subpart 3816—Mineral Locations in 

Reclamation Withdrawals 

■ 30. Revise the last sentence of 

§ 3816.2 to read as follows: 

§ 3816.2 Application to open lands to 

location. 

* * * Each application must be 

accompanied by the filing fee for 

application to open lands to location 

found in the fee schedule in § 3000.12 

of this chapter. 

PART 3830—LOCATING, RECORDING, 

AND MAINTAINING MINING CLAIMS 

OR SITES; GENERAL PROVISIONS 

■ 31. The authority citation for part 

3830 continues to read as follows: 

Authority: 18 U.S.C. 1001, 3571; 30 U.S.C. 

22 et seq., 242, 611; 31 U.S.C. 9701; 43 U.S.C. 

2, 1201, 1212, 1457, 1474, 1701 et seq. ; 44 

U.S.C. 3501 et seq.; 115 Stat. 414. 

Subpart D—BLM Service Charge and 

Fee Requirements 

■ 32. Amend § 3830.21 by revising 

paragraph (h) to read as follows: 

§ 3830.21 What are the different types of 

service charges and fees? 

* * * * * 

(h) Recording a notice of intent to locate mining claims on 

Stockraising Homestead Act Lands (part 3838).

The filing fee for recording a notice of intent to locate mining claims on 

Stockraising Homestead Act Lands found in the fee schedule in § 3000.12 

of this chapter.

No. 

[FR Doc. E7–17375 Filed 9–4–07; 8:45 am] 

BILLING CODE 4310–84–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Administration for Children and 

Families 

45 CFR Part 98 

RIN 0970–AC29 

Child Care and Development Fund 

Error Rate Reporting 

AGENCY: Administration for Children 

and Families (ACF), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule revises the 

Child Care and Development Fund 

(CCDF) regulations to provide for the 

reporting of error rates in the 

expenditure of CCDF grant funds by the 

fifty States, the District of Columbia and 

Puerto Rico. The error rate reports will 

serve to implement provisions of the 

Improper Payments Information Act of 

2002 (IPIA) and the President’s 

Management Agenda (PMA)’s goal of 

‘‘Eliminating Improper Payments.’’

DATES: Effective October 1, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Cheryl Vincent, Child Care Program 

Specialist, Child Care Bureau, 1250 

Maryland Ave., SW., 8th Floor, 

Washington, DC 20024, telephone (202) 

205–0750, e-mail 

cheryl.vincent@acf.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. Child Care and Development Fund 

B. Summary of the Statutory and 

Administrative Directives To Measure 

Improper Payments 

C. Error Rate Methodology 

D. Notice of Proposed Rulemaking 

II. Statutory Authority 

III. Summary of Existing Regulations 

IV. Provisions of Final Rule 

A. Consultation With States, Territories 

and Other Organizations 

B. Discussion of Comments 

C. Changes Made in Final Rule 

V. Regulatory Impact Analyses 

A. Executive Order 12866 

B. Regulatory Flexibility Analysis 

C. Assessment of the Impact on Family 

Well-Being 

D. Paperwork Reduction Act 

E. Unfunded Mandates Reform Act of 1995 

F. Congressional Review 

G. Executive Order 13132 

I. Background 

This final rule adds a new subpart to 

the Child Care and Development Fund 

(CCDF) regulations that requires States, 

the District of Columbia and Puerto Rico 

to employ a case review process in 

calculating CCDF error rates in 

accordance with an error rate 

methodology established by the 

Secretary of Health and Human Services 

(the Secretary). This methodology is 

specified in this rule and associated 

information collection forms and 

instructions. The final rule requires 

States, the District of Columbia and 

Puerto Rico to report specified 

information regarding errors to the 

Department of Health and Human 

Services. A discussion of comments 

received in response to the publication 

of a Notice of Proposed Rulemaking 

(NPRM) on March 2, 2007 (72 FR 9491) 

may be found below in the preamble. 

This final rule is not substantively 

different from the NPRM; however, 

minor technical changes have been 

made to address concerns raised by 

some commenters. 

A. Child Care and Development Fund 

(CCDF) 

CCDF provides Federal funds to 

States, Territories, Indian Tribes and 

tribal organizations for the purpose of 

assisting low-income families, including 

families receiving or transitioning from 

the Temporary Assistance for Needy 

Families program (TANF), in the 

purchase of child care services, thereby 

allowing parents to work or attend job 

training or an educational program. 

States and Territories also must spend 

no less than four percent of their CCDF 

allotment on expenditures to improve 

the quality and availability of child care. 

CCDF is provided to States, Territories 

and Tribes—there is no provision for 

direct funding to individual families or 

providers. 

Federal law establishes eligibility 

criteria for families receiving CCDF 

assistance; however, States and 

Territories administering CCDF funds 

may impose more restrictive eligibility 

standards. Regulations governing CCDF 

are codified in 45 CFR parts 98 and 99, 

and the Federal definition of a child’s 

eligibility for child care services is set 

forth in 45 CFR 98.20. This description 

includes eligibility requirements related 

to a child’s age, a child’s special needs 

or protective services status, family 


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income and parent’s work, training or 

educational activity. Lead Agencies of 

the CCDF Program, which are the State, 

territorial or tribal entities to which 

CCDF grants are awarded and that are 

accountable for the use of the funds 

provided, have established policies and 

procedures that vary considerably 

across and even within jurisdictions, 

including, but not limited to, stricter 

income limits, special eligibility or 

priority for families receiving TANF and 

eligibility that differs for a child with 

special needs. All clients seeking child 

care assistance supported by CCDF 

funds must undergo an eligibility 

determination process when they 

initially apply, and all Lead Agencies 

have defined a process for verifying 

information submitted in the 

application. Eligibility determination 

affects many other aspects of the 

program, including provider payment 

rates, authorized hours of care and a 

family’s co-payment responsibility. 

Section 658E of the Child Care and 

Development Block Grant (CCDBG) Act 

(42 U.S.C. 9858c) and 45 CFR 98.52 

limit expenditures by States and 

Territories for the costs of administering 

the CCDF program to no more than five 

percent of the State’s or Territory’s 

aggregate expenditures from a fiscal 

year’s allotment of CCDF funds. Various 

costs that are considered an integral part 

of service delivery are excluded from 

the five percent administrative cap, 

including eligibility determination and 

redetermination and the establishment 

and maintenance of computerized child 

care information systems. 

B. Summary of the Statutory and 

Administrative Directives To Measure 

Improper Payments 

The Improper Payments Information 

Act of 2002 (IPIA) (31 U.S.C. 3321 note) 

requires Federal agencies to identify 

programs that are vulnerable to 

improper payments and to estimate 

annually the amount of underpayments 

and overpayments made by these 

programs. An improper payment, as 

defined by the IPIA, is any payment that 

should not have been made or that was 

made in an incorrect amount under 

statutory, contractual, administrative or 

other legally applicable requirement. 

Incorrect amounts are overpayments 

and underpayments (including 

inappropriate denials of payment or 

service). An improper payment includes 

any payment that was made to an 

ineligible recipient or for an ineligible 

service. Improper payments also are 

duplicate payments, payments for 

services not received and payments that 

do not account for credit for applicable 

discounts. 

According to the IPIA, Federal 

agencies must report on the actions they 

are taking to reduce improper payments 

if the estimated amount of improper 

payments for an activity or program 

exceeds $10 million and 2.5 percent of 

program payments. CCDF has been 

identified by the Office of Management 

and Budget (OMB) as a program 

susceptible to significant erroneous 

payments and for which improper 

payment information is required to be 

reported under the IPIA. This report 

must include a discussion of the causes 

of improper payments, what actions 

Federal agencies have taken to correct 

those causes and the results achieved. 

Federal agencies also must state 

whether they have the information 

systems and other infrastructure needed 

to reduce improper payments and, if 

not, what resources they have requested 

in their budget submissions. Finally, 

Federal agencies must report on what 

steps they have taken to hold managers 

accountable for reducing improper 

payments. The IPIA may be downloaded 

at: http://thomas.loc.gov/cgi-bin/ 

bdquery/z?d107:HR04878:TOM:/bss/ 

d107query.html. 

The Executive Branch also has 

worked to address the improper 

payments issue. The President’s 

Management Agenda (PMA)’s goal of 

‘‘Eliminating Improper Payments’’

promises to establish a baseline of the 

extent of improper payments and to 

work with agencies to set goals to 

reduce improper payments for each 

program. The anticipated result of this 

effort is greater accuracy in benefit and 

assistance programs, which will enable 

programs to serve additional eligible 

recipients. The PMA may be 

downloaded at: http:// 

www.whitehouse.gov/omb/budget/ 

fy2002/mgmt.pdf. 

The modifications in this final rule 

are designed to meet the requirements of 

the IPIA as well as to meet the PMA’s 

goal of ‘‘Eliminating Improper 

Payments.’’

C. Error Rate Methodology 

The methodology that is implemented 

in this final rule is based on a 

methodology the Child Care Bureau 

developed and field-tested in 2005 in 

partnership with four States that 

volunteered to participate in a pilot 

study (Arkansas, Colorado, Illinois and 

Ohio). This methodology focused on 

administrative error associated with 

client eligibility and improper 

authorizations for payment. At the 

conclusion of the pilot, it was 

determined that a version of the tested 

methodology would be an appropriate 

tool for calculating error rates related to 

client eligibility. A pilot study of 

additional States (Florida, Kansas, New 

Jersey, Oregon, and West Virginia) was 

completed in 2007. The final reports on 

the error rate methodology pilots may be 

downloaded electronically at: http:// 

www.acf.hhs.gov/programs/ccb/ccdf/ 

ipi/ipi.htm. 

Although this final rule is broad 

enough to encompass reporting on all 

types of errors, the initial methodology 

and reporting requirements will focus 

on administrative errors associated with 

client eligibility and improper 

authorizations for payment, as described 

in more detail in the preamble and 

accompanying information collection 

forms and instructions associated with 

the rule (please refer to the section 

discussing the Paperwork Reduction Act 

below). 

During the initial information 

collection, States, the District of 

Columbia, and Puerto Rico will evaluate 

both the frequency with which errors 

occurred and the amount of improper 

authorization for payment. ACF will use 

the improper authorization for payment 

error rates and amounts for each State, 

the District of Columbia, and Puerto 

Rico to compute a national improper 

authorizations for payment rate and 

amount that will be annually reported 

in the HHS’ Performance and 

Accountability Report (PAR) beginning 

with the Fiscal Year 2008 PAR. 

We will use a three-year rotational 

cycle to measure improper 

authorizations for payment in CCDF 

programs in the States, the District of 

Columbia, and Puerto Rico. Out of this 

group, we have selected 18 to measure 

in the first year of each cycle and 17 to 

measure in each of the remaining two 

years. The result is that each State, the 

District of Columbia, and Puerto Rico 

will be measured once, and only once, 

every three years. This rotation allows 

jurisdictions to plan for the reviews 

because they know in advance in which 

year they will be measured. States, the 

District of Columbia, and Puerto Rico 

have been randomly assigned using the 

following methodology. First, each 

entity was stratified by the 10 ACF 

regions, with the regions randomly 

ordered. Then within region each group 

was sorted by caseload, from the most 

cases to the least cases. Every third State 

(including the District of Columbia and 

Puerto Rico) on the list was selected, 

using a random start number between 

one and three the first year. After 

removing those selected for the first year 

from the frame, a second random start 

was drawn between one and two and 

every other State (including the District 

of Columbia and Puerto Rico, if they 

remained) was selected for the second 


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Federal Register / Vol. 72, No. 171 / Wednesday, September 5, 2007 / Rules and Regulations 50891 

year. The third year includes those not 

selected in year one or year two. This 

sampling approach yielded a mix of 

county-administered and Stateadministered programs and programs 

serving both large and small numbers of 

children each year. A list of States 

(including the District of Columbia and 

Puerto Rico) assigned to each review 

year can be found in the information 

collection instructions. 

D. Notice of Proposed Rulemaking 

A Notice of Proposed Rulemaking 

(NPRM) was published in the Federal 

Register on Friday, March 2, 2007 (72 

FR 9491) with a 60-day public comment 

period. As discussed later in this 

preamble, we received comments from 

19 entities, including State child care 

administrators, national child care 

advocacy groups, and other 

organizations. 

II. Statutory Authority 

This regulation is being issued under 

the authority granted to the Secretary by 

Section 658I of the CCDBG Act (42 

U.S.C. 9858g) and in accordance with 

the IPIA (31 U.S.C. 3321 note). 

III. Summary of the Existing 

Regulations 

Under CCDF regulations, ACF 

employs several methods to gather the 

information from States, the District of 

Columbia, and Territories needed to 

comply with the statutory requirements 

of the CCDBG Act and to efficiently 

oversee the administration of the CCDF 

program. States and Territories must 

submit plans every two years detailing 

their intentions for implementing 

programs under 45 CFR 98.17. Pursuant 

to 45 CFR 98.70, States and Territories 

also must collect monthly case-level 

reports (which may be submitted 

monthly or quarterly) and submit 

annual aggregated reports on services 

provided through all CCDF grant funds. 

Finally, States and Territories are 

required to submit quarterly reports on 

estimates and expenditures in 

conjunction with 45 CFR 98.65. 

45 CFR 98.65(a) requires Lead 

Agencies to have an audit conducted 

after the close of each program period in 

accordance with OMB Circular A–133 

and the Single Audit Act Amendments 

of 1996 and 45 CFR 98.67(c) requires 

Lead Agencies to have fiscal control and 

accounting procedures sufficient to 

establish that funds have been expended 

appropriately. Further, the regulations 

at 45 CFR 98.66 provide that ‘‘[a]ny 

expenditures not made in accordance 

with the Act, the implementing 

regulations, or the approved Plan, will 

be subject to disallowance.’’ However, 

prior to this final rule statute and 

regulations governing CCDF did not 

require States and Territories to 

systematically measure or report on 

errors committed in the administration 

of CCDF funds. 

IV. Provisions of Final Rule 

While retaining the provisions 

governing CCDF Lead Agency audits, 

financial reporting requirements, and 

fiscal requirements (located in 45 CFR 

98.65 and 45 CFR 98.67), this final rule 

adds a new Subpart K—Error Rate 

Reporting to require CCDF Lead 

Agencies of the fifty States, the District 

of Columbia and Puerto Rico to 

measure, calculate and report error rates 

to the Department of Health and Human 

Services. This reporting must be in 

accordance with an error rate 

methodology established by the 

Secretary, as summarized in this final 

rule and detailed in the associated 

information collection forms and 

instructions. States, the District of 

Columbia and Puerto Rico are required 

to report specified information 

regarding errors every three years and to 

report on strategies for reducing the 

error rate. The rule also requires States, 

the District of Columbia and Puerto Rico 

to set target error rates for the next 

cycle. The first cohort of States 

(including Puerto Rico) subject to the 

final regulations will need to complete 

their reviews and submit their data to 

ACF on or before June 30, 2008. 

Requirements under Subpart K apply 

only to the fifty States, the District of 

Columbia and Puerto Rico. American 

Samoa, the U.S. Virgin Islands, the 

Commonwealth of the Northern Mariana 

Islands, Guam and the Tribes are 

exempted from the requirements of this 

rule. We do not believe that the benefits 

of the error rate data obtained from 

these exempted Territories and Tribes 

justify the costs of compliance with the 

regulation, which would require a much 

greater portion of child care resources 

relative to the States, the District of 

Columbia and Puerto Rico. However, we 

encourage exempted Territories and 

Tribes to comply voluntarily with the 

requirements of the rule or to create 

their own methods and strategies for 

identifying and reducing improper 

payments. Additionally, should funding 

and provision of services change in 

these exempted Tribes and Territories, 

we will consider removing the 

exemption through the notice and 

comment rulemaking process. 

Under Section 98.100(b) in the final 

rule, States, the District of Columbia and 

Puerto Rico are required to prepare a 

report calculating ‘‘error rates.’’ At this 

time—and consistent with our initial 

focus on client eligibility errors—we are 

operationalizing these requirements by 

asking States, the District of Columbia, 

and Puerto Rico to measure only 

administrative errors in eligibility 

determination and improper 

authorizations for payments to subsidy 

recipients rather than improper 

payments made to subsidy recipients. 

As stated in the proposed rule and 

detailed in the associated information 

collection forms and instructions, the 

initial error rate methodology includes: 

(1) Sample Selection: A sample of 271 

(or 276) cases will be selected by each 

State using a sampling frame based on 

the child population served by 

eligibility offices for each month of the 

designated Federal Fiscal Year to 

achieve a 90% confidence level +/¥ 

5%; (2) Record Review Worksheet: A 

template of a record review worksheet 

will be customized by each State so its 

worksheet conforms to the specifics of 

State policies and procedures. The 

worksheet captures the detail for each 

element of eligibility, the benefit 

calculation as documented by the 

agency, the amount of the subsidy 

authorized, and any resulting errors; (3) 

Case Review: State reviewers will 

conduct case record reviews and collect 

key pieces of information, including 

administrative errors occurring during 

the review month, cause of improper 

authorization for payment, total amount 

of improper authorizations for payment 

during the review month, and total 

amount of authorizations during the 

review month; (4) Error Measures 

Calculation: States, the District of 

Columbia, and Puerto Rico will prepare 

a report calculating percentage of cases 

with an error, percentage of cases with 

an improper authorization for payment 

(expressed as the total number of cases 

with an improper authorization for 

payment as compared to the total 

number of cases), percentage of 

improper authorizations for payment 

(expressed as the total amount of 

improper authorizations for payment 

compared to the total dollar amount of 

authorizations made), average amount of 

improper authorization for payment, 

and the estimated annual amount of 

improper authorizations for payment; 

(5) Federal Oversight and Monitoring, 

and Ongoing Technical Assistance: The 

Child Care Bureau will provide ongoing 

oversight, monitoring, and technical 

assistance. 

Under CCDF regulations at 45 CFR 

98.52, Lead Agencies are prohibited 

from spending more than five percent of 

the aggregate CCDF funds expended by 

the Lead Agency from each fiscal year’s 

allotment for administrative activities. 

Section 658E(c)(3)(C) of the CCDBG Act 


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50892 Federal Register / Vol. 72, No. 171 / Wednesday, September 5, 2007 / Rules and Regulations 

(42 U.S.C. 9858c(c)(3)(C)) and the 

accompanying Conference Report (H.R. 

Conf. Rep. 104–725) specify that the 

costs of providing direct services are to 

be excluded from any definition of 

administrative costs. The Conference 

Report specifically identified eligibility 

determination and redetermination, 

reviews and supervision of child care 

placements and establishment and 

maintenance of computerized child care 

information systems as ‘‘integral part[s] 

of service delivery’’ that ‘‘should not be 

considered administrative costs.’’

Therefore, provided the focus of the 

error rate calculations and reports 

continue to focus on client eligibility, 

costs to Lead Agencies of conducting 

case reviews and preparing error rate 

reports shall be considered a part of 

service delivery and excluded from 

administrative costs subject to the five 

percent administrative cap. Further, any 

costs incurred by a Lead Agency in 

complying with this regulation that are 

directed toward establishing or 

improving child care information 

systems also shall be excluded from 

administrative costs subject to the five 

percent administrative cap. 

Should an improper payment related 

to specific cases that were included in 

the sample during the case review 

process be identified, these funds are 

subject to existing disallowance 

procedures for misspent funds as set 

forth at 45 CFR 98.66 of CCDF 

regulations. Extrapolations of estimated 

improper payments derived from 

random sampling of total cases are not 

subject to disallowance. 

Pursuant to CCDF regulations at 45 

CFR 98.60(i), a Lead Agency is required 

to recover child care payments that are 

the result of fraud. The Lead Agency has 

discretion as to whether to recover 

misspent funds that were not the result 

of fraud, such as in cases of 

administrative error. Improperly spent 

funds are subject to disallowance 

regardless of whether the State pursues 

recovery. 

In the event that improper payments 

identified through the case review 

process are recovered, 45 CFR 98.60(g) 

provides that such payments shall (1) If 

received by the Lead Agency during the 

applicable obligation period (described 

in 45 CFR 98.60(d) & (e)), be used for 

activities specified in the Lead Agency’s 

approved plan and must be obligated by 

the end of the obligation period; or (2) 

if received after the end of the 

applicable obligation period, be 

returned to the Federal government. 

Section 658F(a) of the CCDBG Act (42 

U.S.C. 9858d(a)) makes clear that CCDF 

funding is not an entitlement to any 

child care provider or recipient of child 

care services. As a result, detection of an 

underpayment in any specific case 

during the error rate review process 

does not create an entitlement to that 

individual to a particular service or 

benefit. Nothing in this final rule should 

be construed to create a right requiring 

the States, the District of Columbia or 

Puerto Rico to remedy any individual, 

even if a payment error in the form of 

an underpayment has been made. 

A. Consultation With States, Territories 

and Other Organizations 

The Child Care Bureau has consulted 

with States, the District of Columbia and 

Territories since 2003 on different 

approaches to addressing improper 

payments and has field tested an error 

rate methodology in nine volunteer pilot 

States. Through quarterly conference 

calls, workshops at annual State 

Administrators Meetings and an 

Improper Payments survey, the Child 

Care Bureau has engaged States and 

Territories in conversations about 

strategies to identify, measure, prevent, 

reduce and collect improper payments. 

The Child Care Bureau also has been in 

contact with national organizations such 

as the American Public Human Services 

Association, the National Association 

for Program Information and 

Performance Measurement and the 

United Council on Welfare Fraud 

through conferences, meetings and 

conference calls regarding strategies to 

address improper payments. 

B. Discussion of Comments 

In response to the proposed rule, 

comments were received from 19 State 

child care administrators, national child 

care advocacy groups, and other 

organizations as follows. 

National Error Rate Does Not Reflect 

Block Grant Flexibility 

Comment: Several commenters 

questioned the practical application of a 

uniform national error rate to a block 

grant program, given the differences in 

programmatic activity that result from 

the flexibility inherent in CCDF. 

Commenters felt it would not be 

appropriate to establish a national error 

rate, since CCDF eligibility requirements 

vary greatly across States meaning that 

the difficulty of achieving accuracy in 

determining client eligibility varies from 

State to State. Commenters 

recommended that the final rule be 

limited to review of Federal 

requirements to reflect a true national 

error rate. 

Response: We acknowledge concerns 

about establishing a national error 

measure for the CCDF program, and 

understand that States differ greatly in 

their eligibility requirements which may 

lead to a wide range of error rates. A 

principle goal of CCDF set forth in 

Section 658A of the Child Care and 

Development Block Grant (CCDBG) Act 

of 1990, as amended (42 U.S.C. 9858, et 

seq.), is to ‘‘Allow each State maximum 

flexibility in developing child care 

programs and policies that best suit the 

needs of children and parents within 

such State.’’ As a result, there is 

significant variation in how CCDF is 

implemented across the country. 

However, the methodology focuses on 

administrative error associated with 

client eligibility and improper 

authorizations for payment. A principal 

reason for focusing on client eligibility 

is that, while the methods used to 

determine initial and ongoing client 

eligibility are not uniform across States, 

Territories and Tribes, all States, 

Territories and Tribes must have 

procedures in place for parents to apply 

for child care services and some system 

to initially determine and periodically 

re-determine eligibility. Also, 

determining client eligibility is the first 

step in the child care subsidy process 

and therefore affects the administration 

of the entire program. 

The primary purpose of this final rule 

is to improve State administration of the 

CCDF program. We believe that the 

State error measures will be useful for 

improving overall program integrity and 

that it will help inform program 

administrators about which quality 

control or other initiatives will be most 

effective in reducing error rates and 

improper authorizations for payment in 

their own programs. At the same time, 

the Improper Payments Information Act 

(IPIA) requires a national-level measure 

of improper payments, which will 

provide a broader perspective of the 

CCDF program as it is administered 

across States. 

Finally, we do not believe limiting the 

rule to only Federal requirements would 

be useful for the purpose of identifying 

and reducing improper payments. 

Federal law establishes broad eligibility 

criteria for families receiving CCDF 

assistance; however, States, Territories, 

and Tribes administering CCDF funds 

may impose more restrictive eligibility 

standards. States must describe the basis 

for determining family eligibility in 

their CCDF Plan and are responsible for 

ensuring that the program complies 

with the approved Plan and all Federal 

requirements. States are accountable for 

properly implementing the eligibility 

policies and procedures they have in 

place. 


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Short Implementation Timeframe 

Comment: A number of commenters 

expressed concerns about the short 

implementation timeframe for the 

proposed rule. Commenters felt that 

States included in the first cycle of the 

review process would not have adequate 

lead time to secure funding from their 

State legislatures, hire and train staff, 

prepare and enhance their automated 

systems, and ensure access to archived 

records. 

Response: The Improper Payments 

Information Act (IPIA) requires Federal 

agencies to submit estimates of 

improper payments to Congress in 

accordance with guidance prescribed by 

the Office of Management and Budget 

(OMB). The timeframe included in the 

rule is based on the requirement that 

HHS report a national improper 

authorizations for payment rate and 

amount for the CCDF program in the 

HHS Performance and Accountability 

Report (PAR) beginning with the Fiscal 

Year 2008 PAR. We recognize that the 

timeframe is expedited and will present 

challenges for some States. The Child 

Care Bureau intends to assist States by 

providing significant technical 

assistance and training to help them 

implement the error rate review process 

within the prescribed timeline. 

Comment: Three commenters noted 

that under the proposed timeframe some 

States will be participating 

simultaneously in Medicaid’s Payment 

Error Rate Measurement Project (PERM) 

and the CCDF error rate reporting cycle. 

Commenters felt that concurrent 

operation of these projects would create 

an extraordinary work burden, and 

asked that States not be subject to error 

rate reporting by multiple Federal 

agencies within the same year. 

Response: States were randomly 

selected to participate in a three-year 

rotational cycle to arrive at a valid 

nationally representative improper 

authorizations for payment rate and 

amount for child care. The sampling 

approach yielded a mix of countyadministered and State-administered 

programs and programs serving both 

large and small numbers of children 

each year. Selectively excluding States 

would undermine this methodology. 

The rotational cycle also allows 

jurisdictions to plan for future reviews 

because they know in advance in which 

year they will be measured. 

Negative Fiscal Impact on States 

Comment: Several commenters argued 

that the proposed rule would have a 

wide range of negative fiscal and 

operational impacts on States and that 

the additional costs of conducting the 

proposed activities would compromise 

the amount of funding available for 

program services. 

Response: This final rule aims to 

identify and reduce errors and improper 

payments in the administration of CCDF 

funds, thus ensuring that the program is 

operated as efficiently and fairly as 

possible. Because States, Territories, 

and Tribes receive a fixed allotment of 

CCDF funds regardless of the number of 

children served, fewer improper 

payments translates into more funds for 

use in assisting eligible low-income 

families in purchasing child care 

services, providing comprehensive 

consumer education to parents and the 

public and improving the quality and 

availability of child care. In addition, 

we have tried to minimize the fiscal 

impact of conducting reviews by 

limiting the frequency of reporting to 

every three years and by allowing for 

sampling of cases as part of the review 

of case records. 

Comment: Several commenters felt 

that the annual burden estimate 

included in the proposed rule did not 

reflect the full implementation cost of 

conducting the error rate review. 

Commenter’s cited additional travel and 

mailing costs, staff hiring and training, 

updating automated computer systems, 

and costs associated with accessing hard 

copy records for the review process. 

Commenters found the estimated cost in 

the NPRM of approximately $150,000 

for a single jurisdiction to conduct its 

case reviews and prepare the required 

reports to be insufficient. One 

commenter cited that travel costs alone 

would exceed the federally estimated 

cost. Commenters estimated the full 

implementation cost as ranging from 40 

percent higher to as much as four times 

the proposed $150,000. 

Response: We agreed with these 

comments and have revised the annual 

burden estimates for conducting the 

error rate case review and preparing the 

three required reports in compliance 

with the final rule. The cost estimate 

analysis was increased to reflect 

comments that costs of preparation, 

training, programming automated 

systems, and other support activities 

associated with the information 

collection forms were underestimated in 

the proposed rule. States vary greatly in 

their systems and personnel capacity 

and the burden of implementing the 

final rule may disproportionately 

impact some States more than others. 

The revised annual burden estimates 

account for these differences among 

States and reflect average burden. 

However, as States implement this 

methodology, we encourage all States to 

keep track of the burden associated with 

these reporting requirements—in terms 

of both time and monetary cost—and to 

provide us comments through the 

Paperwork Reduction Act information 

collection process so that we can update 

our estimates if necessary. 

Distinction Between Improper Payments 

and Improper Authorizations for 

Payment 

Comment: Several commenters 

questioned the inconsistency between 

the information collection forms and 

instructions and the regulatory language 

in the proposed rule, which 

distinguished between improper 

authorizations for payment and an 

actual improper payment. Commenters 

noted that the forms and instructions 

require States to report on the 

‘‘improper authorizations for payment,’’

while the definition of ‘‘improper 

payment’’ given in Section 98.100(d) of 

the rule defines improper payment as an 

actual payment. Commenters noted that 

the broad language of the proposed rule 

would allow for the imposition of more 

extensive review and reporting 

requirements than discussed in the 

preamble and included in the 

information collection forms and 

instructions. Commenters recommended 

that we amend the rule to define 

‘‘improper payment’’ consistently with 

the forms and instructions. 

Response: This deviation between the 

rule and information collection forms 

and instructions is intentional. The 

terms ‘‘error’’ and ‘‘improper payment’’

have purposefully been defined broadly 

enough in the final rule to encompass 

reporting on all possible types of errors 

and improper payments, and are 

consistent with the definitions used in 

the Improper Payments Information Act 

(IPIA). Section 98.100 paragraph (c) 

defines the term ‘‘error’’ and paragraph 

(d) defines the term ‘‘improper 

payment.’’ The important distinction 

between the two terms is that every 

improper payment is the result of an 

error however, not every error results in 

an improper payment. Error is defined 

as any violation or misapplication of 

statutory, contractual, administrative, or 

other legally applicable requirements 

governing the administration of CCDF 

grant funds, regardless of whether such 

violations result in an improper 

payment. An improper payment is 

defined to mean any payment of CCDF 

grant funds that should not have been 

made or that was made in an incorrect 

amount (including overpayments and 

underpayments) under statutory, 

contractual, administrative or other 

legally applicable requirements 

governing the administration of CCDF 

grant funds, including any payment of 


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CCDF grant funds to an ineligible 

recipient, any payment of CCDF grant 

funds for an ineligible service, any 

duplicate payment of CCDF grants funds 

and payments of CCDF grant funds for 

services not received. 

At this time, we are implementing 

this rule narrowly, collecting data from 

States on improper authorizations for 

payment due to administrative error in 

client eligibility determination because 

we believe that improper authorizations 

for payment are closely related to 

improper payments. The forms and 

instructions related to the regulation 

deal only with these errors. (Note: More 

information on the forms and 

instructions that accompany this 

regulation can be found in the 

Regulatory Impact Analysis—Paperwork 

Reduction Act section of this rule.) 

Eligibility determination and payment 

authorization are the first steps in the 

child care subsidy process and errors 

made at this stage are likely to affect the 

administration of the entire program. 

However, the regulatory language in the 

final rule provides flexibility to allow 

for changing or expanding the error rate 

methodology if future circumstances 

warrant doing so. Should we decide to 

revise or broaden the examination of 

‘‘error’’ and ‘‘improper payment’’ we 

would provide advance notice and an 

opportunity for public comment 

through the information collection 

process. 

Comment: Several commenters asked 

that we clearly differentiate between 

administrative errors and errors 

involving the independent verification 

of eligibility and authorization data 

elements. Commenters recommended 

that we amend the language in the 

proposed rule limiting improper 

authorizations for payment— ‘‘based on 

an administrative misapplication of 

statutory or other legally applicable 

requirements.’’

Response: We believe that the review 

of administrative errors in eligibility 

determination should be based on 

policies States have in place. If a State 

has established an eligibility verification 

policy that requires caseworkers to 

independently verify eligibility through 

a phone call or otherwise, then this 

should be documented and supported in 

the case record. The error rate record 

review process itself does not require 

reviewers to independently verify 

eligibility or other authorization data 

elements. 

Comment: A few commenters were 

concerned that the initial error rate 

methodology’s focus on eligibility 

determination and authorization for 

payment does not mirror administrative 

procedures for many States in which 

clients are deemed eligible for CCDF 

and authorized for a range of services 

and a subsidy rate, but then choose a 

particular service from that range and 

receive actual payment based on the 

appropriate applied subsidy. 

Response: We acknowledge that State 

policies regarding eligibility 

determination and subsidy payment 

vary in the extent to which they are 

interrelated. As long as the client’s 

eligibility and authorization for 

payment is correctly determined there is 

no error. If the authorized payment 

range properly reflects the client’s 

eligibility status and need for care there 

is no improper authorization for 

payment. The initial error rate 

methodology is focused on client 

eligibility, and authorization to receive 

a subsidy is indicative of whether the 

eligibility determination process was 

properly conducted. Further, we 

received comments from a number of 

States indicating that their 

administrative procedures do align with 

the error rate methodology. These 

commenters said that there was not a 

distinction between an authorization for 

payment and actual payment in their 

processing of claims for service, and 

thus there would be little additional 

value to expanding the measurement of 

improper payments beyond improper 

authorizations for payment. 

Multiple and Combined Funding 

Sources for Child Care 

Comment: Several commenters 

requested that the proposed rule apply 

only to those cases reported on the 

ACF–801 reporting form to define the 

sample population as only those cases 

paid for with CCDF and pooled funds. 

Commenters were concerned that purely 

State-funded child care services also 

would be accountable to the proposed 

rule. 

Response: This final rule applies to all 

child care cases served with CCDF grant 

funds, including Federal Discretionary 

Funds (which includes any funds 

transferred from the Temporary 

Assistance for Needy Families Block 

Grant), Mandatory and Matching Funds 

and State Matching and Maintenance-ofEffort (MOE) Funds. In States that 

cannot separately report on cases served 

with CCDF funds only, the rule applies 

to cases served by all child care funds 

pooled with CCDF. For many States, 

this will correspond to those cases 

reported on the ACF–801 reporting 

form. 

Comment: One commenter suggested 

that we allow States that pool CCDF and 

non-CCDF funds to use the percentage 

of total CCDF expenditures to calculate 

an estimated amount of CCDF funds 

used to provide child care subsidies 

impacted in the sample. 

Response: We recognize that many 

States do not serve children exclusively 

with CCDF funds. Many States combine 

CCDF and non-CCDF funds to serve the 

child care needs of their State—referred 

to as ‘‘pooling’’ funds—and may be 

unable to isolate those cases served only 

by CCDF funds. We have modified the 

information collection forms and 

instructions to allow States that pool 

child care funds (and correspondingly 

draw their sample for the error rate 

review from the universe of cases served 

by these combined funds) to multiply 

the total pooled child care funds by a 

percentage that reflects the proportion 

of these funds that are CCDF funds (also 

referred to as a ‘‘pooling factor’’) when 

calculating the total estimated amount 

of annual improper authorizations for 

payment. This will more accurately 

reflect the amount of improperly spent 

CCDF funds in those States that 

combine CCDF with non-CCDF funds to 

provide child care services. 

Anticipated Problems With Sampling 

Methodology and Record Review 

Comment: Some commenters thought 

that the proposed sampling frame would 

be a burden for States with smaller 

caseloads and suggested the sample size 

be determined based on the universe of 

cases in a particular State. 

Response: Under § 98.101, Case 

Review Methodology, the error reports 

required by this final rule must be based 

on comprehensive reviews of case 

records conducted in accordance with 

the methodology detailed in this final 

rule and associated information 

collection forms and instructions. In 

determining which case records to 

review, States, the District of Columbia, 

and Puerto Rico must select a random 

sample of 271 (or 276) child records to 

achieve the calculation of an estimated 

annual amount of improper 

authorizations for payment with a 90 

percent confidence interval of +/¥5.0 

percent. We believe this sampling frame 

will achieve statistically valid data with 

the desired confidence levels. Sampling 

the same number of cases, regardless of 

caseload size, standardizes the 

methodology across States and reflects 

accepted practice for achieving the 

required precision. 

Comment: Several commenters 

opposed the requirement to draw the 

sample of cases from 12 monthly 

sampling frames and suggested that 

States be allowed to choose a particular 

month from which to draw the sample 

for the error rate review. 

Response: We believe the sampling 

methodology included in the rule 


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reduces the risk of bias in annual 

estimates associated with selection of 

the sample in particular months and 

accounts for variation that may occur 

throughout the year. If States were to 

review less than twelve months for the 

sampling frame, the resulting error rate 

would not be representative of the entire 

year. 

Comment: A few commenters pointed 

out that some States do not have 

statewide data systems, particularly 

States that are county-administered, or 

do not have a system advanced enough 

to support the sampling methodology in 

the proposed rule. Commenters 

recommended that States be given 

flexibility to define the case review 

process based on the availability of data 

and case file information systems that 

exist in each State. 

Response: A standard sampling 

methodology is necessary to ensure 

integrity and promote uniformity across 

States—particularly since State results 

will be used to calculate a national 

measure for improper payments. We 

understand automated systems capacity 

varies across States and that some States 

may have more difficulty in obtaining 

their sample and associated case 

records. For this reason we have 

increased the burden estimate 

associated with the information 

collection forms to reflect additional 

costs faced by States to implement the 

sampling methodology. 

Comment: A number of commenters 

thought that accessing hard copy case 

records to conduct the record review 

process would require State staff to 

travel long distances in order to pick-up 

and/or review records or would require 

the case records to be mailed to the 

review location and require substantial 

postal costs. Commenters felt that there 

should be consideration in the proposed 

rule allowing for incomplete reviews 

due to inability to locate case records. 

Response: We recognize that States 

have different recordkeeping procedures 

and may face additional costs to locate 

records for the review. As previously 

stated, we have tried to build these costs 

into the revised annual burden estimate 

in the final rule. The sampling process 

requires States to select at least three 

alternate replacement cases that can be 

used in the event a case cannot be 

reviewed for some valid reason. 

Comment: Several commenters were 

unclear about the unit of measurement 

for drawing the sample. Section 

98.101(a) of the proposed rule refers to 

both ‘‘case records’’ and ‘‘child 

records.’’ Commenters recommended 

the rule and information collection 

forms and instructions allow States 

flexibility to define the term ‘‘case’’ to 

be a child or a family. 

Response: For initial implementation 

of the error rate methodology we intend 

for the error rate review to apply to 

child records and this is stated in the 

information collection forms and 

instructions. States do not have the 

flexibility to determine whether the case 

record should be based on the child or 

the family. However, consistent with the 

broader intent of the final rule, the 

regulatory language at 98.101(a) 

continues to use the more inclusive 

term ‘‘case record’’ to allow for future 

adjustments of the error rate 

methodology. The reference to ‘‘child 

record’’ also included at 98.101(a) has 

been changed to ‘‘case record’’ to 

eliminate any confusion. 

Disallowance and Recovery of Funds 

Comment: Many commenters did not 

understand the reference to disallowed 

funds in the proposed rule, given that 

the preamble and the information 

collection forms and instructions clearly 

stated the focus of the review to be on 

improper authorizations for payment. 

Commenters were further concerned 

that interest would be owed to the 

Federal government on disallowances. 

Commenters thought that as long as the 

case review is limited to improper 

authorizations for payment it would be 

incorrect to assume that an improper 

payment in the amount of the 

authorization resulted, meaning States 

would be unjustifiably penalized. 

Response: In order for child care 

subsidies to be received by eligible 

recipients, States need to accurately 

authorize payment for child care 

services. It is our assumption that an 

improper authorization for payment will 

result in an improper payment which 

will be subject to a disallowance. 

However, if a State can demonstrate that 

an authorized improper payment was 

not actually made, that dollar amount 

would not be disallowed. Any actual 

improper payments related to specific 

cases in the sample are subject to 

disallowance in accordance with 

procedures set forth in 45 CFR 98.66 of 

the CCDF regulations. Section 

98.66(3)(j) states that disallowances are 

subject to interest from the date of 

notification of the disallowance. When 

an improper authorization for payment 

is identified during the case record 

review process, the ACF regional office 

will work with the State to determine if 

an improper payment was made and the 

amount of the disallowance, if 

appropriate, using its customary 

procedures. 

Comment: A few commenters pointed 

out that if the proposed error rate 

reporting cycle concludes after the grant 

year for which an obligation is paid to 

a recipient, States that recover payments 

may be acting after the obligation 

period, and thus must return the money 

to the Federal government. Commenters 

recommended that any payments 

recouped through the proposed rule be 

committed to program reinvestment and 

error rate reduction efforts. 

Response: Pursuant to CCDF 

regulations at 45 CFR 98.60(i), a Lead 

Agency is required to recover child care 

payments that are the result of fraud. 

The Lead Agency has discretion as to 

whether to recover misspent funds that 

were not the result of fraud, such as in 

cases of administrative error. 

Improperly spent funds are subject to 

disallowance regardless of whether the 

State pursues recovery. 

In the event that improper payments 

identified through the case review 

process are recovered, 45 CFR 98.60(g) 

provides that such payments shall (1) If 

received by the Lead Agency during the 

applicable obligation period (described 

in 45 CFR 98.60(d) & (e)), be used for 

activities specified in the Lead Agency’s 

approved plan and must be obligated by 

the end of the obligation period; or (2) 

if received after the end of the 

applicable obligation period, be 

returned to the Federal government. 

States may act to recover improper 

payments as soon as they are identified 

and need not wait until the end of the 

Federal error rate reporting cycle. 

We do not have statutory authority to 

waive requirements related to funds that 

are recovered by Lead Agencies or 

mandated obligation and liquidation 

periods. 

Penalties or Incentives Associated With 

Error Rates 

Comment: Two commenters asked 

whether a State would be penalized if 

a certain error rate is found or if 

incentives would be offered for high 

performing States. 

Response: While States are subject to 

disallowances for any identified 

improper payments (as they would be 

for any expenditures not made in 

accordance with CCDF regulations or 

the approved Plan identified outside of 

the error rate review process), there will 

not be penalties or incentives based on 

State error rates. We view the State error 

rate to be primarily useful for the States 

to inform quality control initiatives and 

improve program integrity. An incentive 

for States to decrease error rates and 

improper authorizations for payment is 

the increased availability of funds to 

serve CCDF eligible families. 


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Rule Undermines Existing State Efforts 

Comment: Two commenters believed 

the focus in the proposed rule on client 

eligibility determination would be 

counterproductive for States that have 

existing strategies with proven results in 

reducing improper payments. 

Commenters felt the proposed rule 

might decrease focus in some States on 

errors in CCDF provider payments. 

Response: We support existing State 

efforts to reduce improper payments 

and improve program integrity. States 

should continue to look at all aspects 

and areas in which there is risk for an 

improper payment to be made. We 

recognize that States are at different 

places in terms of approaches and 

initiatives to address program integrity. 

A section in the CCDF State Plan PrePrint gives States an opportunity to 

provide descriptions and information 

related to these initiatives. We look 

forward to working with States to 

ensure that this final rule will 

complement, not supersede or 

complicate, existing State efforts. 

Comment: A number of commenters 

thought that establishing a State 

baseline error rate and setting future 

target rates does not recognize the 

present actions of States to limit their 

exposure to incorrect eligibility 

authorizations. Commenters thought 

that States with more stringent 

standards for reducing administrative 

errors in client eligibility determination 

may be given an incentive to reduce 

their current efforts in order to establish 

more feasible future target rates. 

Response: Section 98.102 of the final 

rule, Content of Error Rate Reports, 

addresses submission of baseline reports 

and standard reports. Under paragraph 

(a), in the initial cycle, States, the 

District of Columbia and Puerto Rico are 

required to submit a baseline report 

listing baseline error rate information 

and targets for the next cycle, as well as 

information about causes of, and 

strategies to address, error and 

information about their information 

technology systems. Under proposed 

paragraph (b), in subsequent cycles, 

States, the District of Columbia and 

Puerto Rico must submit a standard 

report that, in addition to updating the 

information provided in the baseline 

report, enables States, the District of 

Columbia and Puerto Rico to examine 

their ability to meet previously 

submitted targets, set future targets, and 

describe strategies to reduce their error 

rates. 

Establishing a baseline error rate and 

setting future target rates is essential for 

measuring progress and improvement 

over time. Each State will have the 

ability to set its future targets based on 

their specific circumstances, including 

prior efforts to control improper 

payments. Additionally, the reported 

State error and improper authorizations 

for payment rates are not tied to any 

penalties. The State baseline and target 

setting should be used to inform 

existing prevention efforts and improve 

or validate their effectiveness. 

We have deleted the parenthetical 

language at Section 98.102(a)(6) stating 

that targets for errors and improper 

payments must be lower than the most 

recent estimated error rates. We made 

this change recognizing that it is 

possible for a State to achieve a zero 

error rate thereby making the 

requirement obsolete. 

We continue to expect States to set 

ambitious targets for reducing improper 

payments for each reporting cycle. As is 

described in the accompanying forms 

and instructions, State targets should 

anticipate continuous improvement. We 

intend this rule to be written broadly to 

accommodate any future efforts to revise 

or change the error rate reporting 

methodology. We believe it is more 

practical to add guidance on setting 

future target rates to the information 

collection forms and instructions rather 

than include it in the regulatory 

language. 

Combining Overauthorizations and 

Underauthorizations 

Comment: One commenter noted that 

the proposed rule requires States to 

report a combined ‘‘improper 

authorizations’’ figure that sums 

overauthorizations and 

underauthorizations together. The 

commenter thought that reporting only 

a combined figure could be misleading 

and mask the underlying source of the 

error. The commenter recommended 

that we require States to report separate 

figures for overauthorizations and 

underauthorizations along with a 

combined figure, and clarify in the 

instructions what amount of actual 

improper payments States are to base an 

anticipated recovery amount on. 

Response: We agree with the 

comment and have changed the 

information collection forms and 

instructions to require States to 

separately report overauthorizations, 

underauthorizations, and the total 

combined figure. We also have clarified 

that States should base their expected 

recovery amounts on overauthorization 

amounts only. 

Allowing a Threshold for Improper 

Authorizations 

Comment: One commenter argued 

that factors affecting authorized 

payment levels could fluctuate from 

month to month, and States have 

discretion to determine the magnitude 

of changes that must be reported and 

applied in calculating CCDF benefits. 

The commenter felt that, similarly, 

small fluctuations in a clients’ financial 

status should not be considered in the 

calculation of the number and 

percentage of cases with an improper 

authorization for payment. The 

commenter recommended clarifying the 

regulation to stipulate that changes in 

circumstances that do not need to be 

reported by clients will not be counted 

against the States as administrative 

errors. 

Response: The initial methodology for 

the error rate review process is 

developed according to Stateestablished policies and procedures in 

place to determine client eligibility for 

CCDF and to authorize payments. The 

process examines administrative error 

based on information in the case record 

that is available to the State. If a State 

does not require a client to report small 

changes in financial status this would 

not violate State policy and it would not 

be considered an error or improper 

authorization for payment, provided 

that the small change in financial status 

did not result in a violation of Federal 

income requirements, which cannot be 

waived. 

C. Changes Made in Final Rule 

As discussed above, three technical 

changes are made to the final rule in 

response to public comment. First, the 

annual burden estimate associated with 

the accompanying information 

collection forms and instructions has 

been increased to reflect public 

comments regarding additional costs of 

the error rate reporting review 

associated with staff, travel, accessing 

records, and automated systems. 

Secondly, the word ‘‘child’’after Sec. 

98.101(a) has been replaced with the 

word ‘‘case’’to provide consistency in 

the terms used to refer to ‘‘record’’in the 

regulation. Lastly, we have deleted the 

parenthetical language at Section 

98.102(a)(6) stating that targets for errors 

and improper payments must be lower 

then the most recent estimated error 

rates. We intend this rule to be written 

broadly and believe it is more practical 

to add guidance on setting future target 

rates to the information collection forms 

and instructions rather than include it 

in the rule itself. 

V. Regulatory Impact Analyses 

A. Executive Order 12866 

Executive Order 12866 requires that 

regulations be drafted to ensure that 


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they are consistent with the priorities 

and principles set forth in Executive 

Order 12866. The Department has 

determined that this final rule is 

consistent with these priorities and 

principles. 

Executive Order 12866 encourages 

agencies, as appropriate, to provide the 

public with meaningful participation in 

the regulatory process. As described 

earlier, the Child Care Bureau has 

consulted with States, the District of 

Columbia, and Territories on numerous 

occasions since 2003 concerning 

different approaches to addressing 

improper payments and has field tested 

an error rate methodology in nine 

volunteer pilot States. Specifically, 

through quarterly conference calls, 

workshops at annual State 

Administrators Meetings and an 

Improper Payments survey, the Child 

Care Bureau has engaged States and 

Territories in conversations about 

strategies to identify, measure, prevent, 

reduce and collect improper payments. 

The Child Care Bureau also has been in 

contact with national organizations such 

as the American Public Human Services 

Association, the National Association 

for Program Information and 

Performance Measurement and the 

United Council on Welfare Fraud 

through conferences, meetings and 

conference calls regarding strategies to 

address improper payments. In 

addition, we have provided a 60-day 

public comment period and have 

responded to comments in this final 

rule. 

This rule is considered a ‘‘significant 

regulatory action’’ as defined under 

Executive Order 12866 and therefore 

has been reviewed by the Office of 

Management and Budget. Specifically, 

the rule raises ‘‘novel legal or policy 

issues arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order.’’

B. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. Ch. 6) requires the Federal 

government to anticipate and reduce the 

impact of rules and paperwork 

requirements on small businesses and 

other small entities. Small entities are 

defined in the RFA to include small 

businesses, small non-profit 

organizations and small governmental 

entities. This rule will affect only the 50 

States, the District of Columbia and 

Puerto Rico. Therefore, the Secretary 

certifies that this rule will not have a 

significant impact on small entities. 

C. Assessment of the Impact on Family 

Well-Being 

We certify that we have made an 

assessment of this final rule’s impact on 

the well-being of families, as required 

under Section 654 of the Treasury and 

General Appropriations Act of 1999. 

This final rule aims to identify and 

reduce errors in the administration of 

CCDF funds, thus ensuring that the 

program is operated as efficiently and 

fairly as possible. Because States receive 

a fixed allotment of CCDF funds 

regardless of the number of children 

served, fewer improper payments 

translates into more funds for use in 

assisting low-income families in 

purchasing child care services, 

providing comprehensive consumer 

education to parents and the public and 

improving the quality and availability of 

child care. 

D. Paperwork Reduction Act 

The final rule requires States, the 

District of Columbia and Puerto Rico to 

compile information regarding errors 

made in the administration of CCDF 

funds using an error rate methodology 

established by the Secretary and 

detailed in this rule and information 

collection forms and instructions. 

Towards this end, this rule will require 

States, the District of Columbia and 

Puerto Rico to submit reports to the 

Department on their findings. 

The Paperwork Reduction Act of 1995 

(44 U.S.C. Chap. 35; see 5 CFR 1320) 

requires that the Office of Management 

and Budget (OMB) approve all 

collections of information by a Federal 

agency from the public before they can 

be implemented. Respondents are not 

required to respond to any collection of 

information unless it displays a current 

valid OMB control number. 

The information collections in this 

rule, described below, are being 

reviewed by OMB and will not be 

effective until they have received OMB 

approval. Once they have received OMB 

approval, ACF will publish a notice in 

the Federal Register and make them 

available on the Child Care Bureau’s 

Web page on Addressing Improper 

Payments at: http://www.acf.hhs.gov/ 

programs/ccb/ccdf/ipi/ipi.htm. 

Title: Child Care and Development 

Fund: Error Rate Report for States, the 

District of Columbia and Puerto Rico. 

Description: States, the District of 

Columbia and Puerto Rico must prepare 

and submit to the Department reports of 

errors occurring in the administration of 

CCDF grant funds. They will be required 

to report the percentage of cases with an 

error; the percentage of cases with an 

improper authorization for payment; the 

percentage of improper authorizations 

for payment; the average improper 

authorization for payment amount; and 

the estimated annual amount of 

improper authorizations for payment. 

The report also will provide strategies 

for reducing the error rates and allow 

States, the District of Columbia and 

Puerto Rico to set target error rates for 

the next cycle. 

Respondents: The fifty States, the 

District of Columbia and Puerto Rico. 

Changes in Estimate of Burden 

The annual burden in the proposed 

rule was estimated to be $150,000 per 

respondent. This estimate included the 

cost of drawing the sample of cases from 

12 monthly sampling frames, training 

staff, conducting record reviews, 

compiling data, calculating error rates 

and preparing the final report. In 

estimating burden, we used information 

based on the error rate pilots and an 

estimation of the amount of time and 

cost required to complete various tasks 

associated with each of the three 

reporting forms: (1) The Record Review 

Worksheet, (2) the Data Entry Form, and 

(3) the State Improper Authorizations 

for Payment Report. In response to 

public comments, we have recalculated 

the burden estimate associated with 

each of these forms. The final rule 

increases the total cost estimate for case 

reviews and preparing the required 

reports to approximately $180,000 per 

respondent. 

In the proposed rule the total burden 

hours associated with the Record 

Review Worksheet included sampling, 

preparation and training, and record 

review. We have increased the burden 

associated with the preparation and 

training component of this estimate to 

account for additional costs of mailing 

hard copy records, traveling to sites 

where records are maintained, or costs 

to enhance automated systems to access 

case records. Additionally, we have 

increased the burden associated with 

the record review component for 

completion of the Record Review 

Worksheet. Based on public comment 

we felt the original estimate did not 

adequately reflect the burden of 

implementing quality control activities 

associated with completion of this form. 

In the proposed rule, the burden 

hours associated with the Data Entry 

Form primarily included the costs of 

consolidating information. The burden 

estimate associated with this form has 

been increased to account for public 

comment regarding costs of writing 

computer programs and making 

enhancements to automated systems to 

consolidate large quantities of data, 


rfrederick on PROD1PC67 with RULES
50898 Federal Register / Vol. 72, No. 171 / Wednesday, September 5, 2007 / Rules and Regulations 

which were not considered in the 

original estimate. 

Finally, in the proposed rule the 

burden hours associated with the State 

Improper Authorizations for Payment 

Report included the calculation of the 

findings and discussion of findings and 

report preparation. The burden estimate 

for completion of these two tasks 

associated with this form was not 

changed. However, we have added an 

additional component necessary for 

completion of this report, which was 

not previously considered. This 

component is the calculation of the total 

amount of authorizations for payment 

during the review period needed to 

compute the final error measure. The 

burden hours associated with 

completion of this report increased with 

the addition of this task. 

The original burden estimate in the 

proposed rule did not account for States 

in which aggregate information on total 

amount of authorized payments was not 

readily available. Obtaining aggregate 

authorizations for payment information 

increases burden for States in which 

normal reporting requirements involve 

aggregate payments or total 

expenditures, not authorizations for 

payment. These States will experience 

increased burden for completion of this 

report if they are to generate the total for 

calculation of the required error 

measure. While it is important to 

account for the additional burden 

associated with this task, we continue to 

believe that reviewing authorizations for 

payment, rather than actual payments, 

is less burdensome for States when 

reviewing individual case records. We 

believe the benefits of focusing the 

individual record reviews on 

authorizations for payments outweighs 

any additional costs we have added here 

for completing the aggregated State 

Improper Authorizations for Payment 

Report. However, we encourage all 

States to keep track of the burden 

associated with these reporting 

requirements—in terms of both time and 

monetary cost—and to provide us 

comments through the Paperwork 

Reduction Act information collection 

process so that we can accurately 

account for the burden and more 

precisely determine the benefits and 

costs of these requirements. 

RECALCULATED ANNUAL BURDEN ESTIMATES FOR FINAL RULE

Instrument or requirement Number of 

respondents* 

Yearly 

submittals 

Average burden hours per 

submittal 

Total burden hours 

NPRM Final rule NPRM Final rule 

Record Review Worksheet ...................................... 17.33 **271 13.74 15.43 64,562 72,478 

Data Entry Form ...................................................... 17.33 **271 .14 .17 652 815 

State Improper Payments Report ............................ 17.33 1 367 627 6360 10,864 

Estimated Total Annual Burden Hours ............. ........................ ........................ .................... .................... 71,574 84,157 

* States, the District of Columbia and Puerto Rico will compile and submit error rate reports in staggered three-year cycles. 

** These burden estimates are based on a review of 271 cases, which is estimated to be the amount needed to meet the sampling requirements of the rule. 

E. Unfunded Mandates Reform Act of 

1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that a covered agency prepare 

a budgetary impact statement before 

promulgating a rule that includes any 

Federal mandate that may result in the 

expenditure by State, local and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year. 

The total annual cost burden of 

having 17.33 respondents, the average 

number required in any year, to conduct 

error rate case reviews and prepare the 

required reports would be 

approximately $3.1 million. Thus, this 

final rule will not result in the 

expenditure by State, territorial, local 

and tribal governments, in the aggregate, 

or by the private sector, of $100 million 

or more in any one year. 

F. Congressional Review 

This final rule is not a major rule as 

defined in 5 U.S.C. 804. 

G. Executive Order 13132 

Executive Order 13132 guarantees 

‘‘the division of governmental 

responsibilities between the national 

government and the States that was 

intended by the Framers of the 

Constitution, to ensure that the 

principles of federalism established by 

the Framers guide the executive 

departments and agencies in the 

formulation and implementation of 

policies, and to further the policies of 

the Unfunded Mandates Reform Act.’’

The Secretary certifies that this final 

rule does not have a substantial direct 

effect on States, on the relationship 

between the Federal government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. This final 

rule does not preempt State law and 

does not impose unfunded mandates. 

This final rule does not contain 

regulatory policies with federalism 

implications that would require specific 

consultations with State or local elected 

officials. 

List of Subjects in 45 Part 98 

Administrative practice and 

procedure, Day care, Grant programs, 

Reporting and recordkeeping 

requirements. 

(Catalogue of Federal Domestic Assistance 

Programs: 93.575, Child Care and 

Development Block Grant; 93.596, Child Care 

Mandatory and Matching Funds) 

Dated: June 22, 2007. 

Daniel C. Schneider, 

Acting Assistant Secretary for Children and 

Families. 

Approved: July 19, 2007. 

Michael O. Leavitt, 

Secretary, Department of Health and Human 

Services. 

■ For the reasons set forth in the 

preamble, the Administration for 

Children and Families amends part 98 

of title 45 of the Code of Federal 

Regulations as follows: 

PART 98—CHILD CARE AND 

DEVELOPMENT FUND 

■ 1. The authority for part 98 continues 

to read: 

Authority: 42 U.S.C. 618, 9858. 

■ 2. Amend 45 CFR part 98 to add 

Subpart K to read as follows: 

Subpart K—Error Rate Reporting 

Sec. 

98.100 Error Rate Report. 

98.101 Case Review Methodology. 

98.102 Content of Error Rate Reports. 


rfrederick on PROD1PC67 with RULES
Federal Register / Vol. 72, No. 171 / Wednesday, September 5, 2007 / Rules and Regulations 50899 

Subpart K—Error Rate Reporting 

§ 98.100 Error Rate Report. 

(a) Applicability—The requirements 

of this subpart apply to the fifty States, 

the District of Columbia and Puerto 

Rico. 

(b) Generally—States, the District of 

Columbia and Puerto Rico shall 

calculate, prepare and submit to the 

Department, a report of errors occurring 

in the administration of CCDF grant 

funds, at times and in a manner 

specified by the Secretary in 

instructions. States, the District of 

Columbia and Puerto Rico must use this 

report to calculate their error rates, 

which is defined as the percentage of 

cases with an error (expressed as the 

total number of cases with an error 

compared to the total number of cases); 

the percentage of cases with an 

improper payment (expressed as the 

total number of cases with an improper 

payment compared to the total number 

of cases); the percentage of improper 

payments (expressed as the total amount 

of improper payments in the sample 

compared to the total dollar amount of 

payments made in the sample); the 

average amount of improper payment; 

and the estimated annual amount of 

improper payments. The report also will 

provide strategies for reducing their 

error rates and allow States, the District 

of Columbia and Puerto Rico to set 

target error rates for the next cycle. 

(c) Error Defined—For purposes of 

this subpart, an ‘‘error’’ shall mean any 

violation or misapplication of statutory, 

contractual, administrative, or other 

legally applicable requirements 

governing the administration of CCDF 

grant funds, regardless of whether such 

violation results in an improper 

payment. 

(d) Improper Payment Defined—For 

purposes of this subpart, ‘‘improper 

payment.’’

(1) Means any payment of CCDF grant 

funds that should not have been made 

or that was made in an incorrect amount 

(including overpayments and 

underpayments) under statutory, 

contractual, administrative, or other 

legally applicable requirements 

governing the administration of CCDF 

grant funds; and 

(2) Includes any payment of CCDF 

grant funds to an ineligible recipient, 

any payment of CCDF grant funds for an 

ineligible service, any duplicate 

payment of CCDF grant funds and 

payments of CCDF grant funds for 

services not received. 

(e) Costs of Preparing the Error Rate 

Report—Provided the error rate 

calculations and reports focus on client 

eligibility, expenses incurred by the 

States, the District of Columbia and 

Puerto Rico in complying with this rule, 

including preparation of required 

reports, shall be considered a cost of 

direct service related to eligibility 

determination and therefore is not 

subject to the five percent limitation on 

CCDF administrative costs pursuant to 

Section 98.52(a). 

§ 98.101 Case Review Methodology. 

(a) Case Reviews and Sampling—In 

preparing the error reports required by 

this subpart, States, the District of 

Columbia and Puerto Rico shall conduct 

comprehensive reviews of case records 

using a methodology established by the 

Secretary. For purposes of the case 

reviews, States, the District of Columbia 

and Puerto Rico shall select a random 

sample of case records which is 

estimated to achieve the calculation of 

an estimated annual amount of 

improper payments with a 90 percent 

confidence interval of +/¥5.0 percent. 

(b) Methodology and Forms—States, 

the District of Columbia and Puerto Rico 

must prepare and submit forms issued 

by the Secretary, following the 

accompanying instructions setting forth 

the methodology to be used in 

conducting case reviews and calculating 

the error rates. 

(c) Reporting Frequency and Cycle—

States, the District of Columbia and 

Puerto Rico shall conduct case reviews 

and submit error rate reports to the 

Department according to a staggered 

three-year cycle established by the 

Secretary such that each State, the 

District of Columbia, and Puerto Rico 

will be selected once, and only once, in 

every three years. 

(d) Access to Federal Staff—States, 

the District of Columbia and Puerto Rico 

must provide access to Federal staff to 

participate and provide oversight in 

case reviews and error rate calculations, 

including access to forms related to 

determining error rates. 

(e) Record Retention—Records 

pertinent to the case reviews and 

submission of error rate reports shall be 

retained for a period of five years from 

the date of submission of the applicable 

error rate report or, if the error rate 

report was revised, from the date of 

submission of the revision. Records 

must be made available to Federal staff 

upon request. 

§ 98.102 Content of Error Rate Reports. 

(a) Baseline Submission Report—At a 

minimum, States, the District of 

Columbia and Puerto Rico shall submit 

an initial error rate report to the 

Department, as required in § 98.100, 

which includes the following 

information on errors and resulting 

improper payments occurring in the 

administration of CCDF grant funds, 

including Federal Discretionary Funds 

(which includes any funds transferred 

from the TANF Block Grant), Mandatory 

and Matching Funds and State Matching 

and Maintenance-of-Effort (MOE 

Funds): 

(1) Percentage of cases with an error 

(regardless of whether such error 

resulted in an over or under payment), 

expressed as the total number of cases 

in the sample with an error compared to 

the total number of cases in the sample; 

(2) Percentage of cases with an 

improper payment (both over and under 

payments), expressed as the total 

number of cases in the sample with an 

improper payment compared to the total 

number of cases in the sample; 

(3) Percentage of improper payments 

(both over and under payments), 

expressed as the total dollar amount of 

improper payments in the sample 

compared to the total dollar amount of 

payments made in the sample; 

(4) Average amount of improper 

payments (gross over and under 

payments, divided by the total number 

of cases in the sample that had an 

improper payment (both over and under 

payments)); 

(5) Estimated annual amount of 

improper payments (which is a 

projection of the results from the sample 

to the universe of cases statewide during 

the 12-month review period) calculated 

by multiplying the percentage of 

improper payments by the total dollar 

amount of child care payments that the 

State, the District of Columbia or Puerto 

Rico paid during the 12-month review 

period 

(6) For each category of data listed 

above, targets for errors and improper 

payments in the next reporting cycle; 

(7) Summary of methodology used to 

arrive at estimate, including fieldwork 

preparation, sample generation, record 

review and error rate computation 

processes; 

(8) Discussion of the causes of 

improper payments identified and 

actions that will be taken to correct 

those causes in order to reduce the error 

rates; 

(9) Description of the information 

systems and other infrastructure that 

assist the State, the District of Columbia 

and Puerto Rico in identifying and 

reducing improper payments, or if the 

State, the District of Columbia or Puerto 

Rico does not have these tools, a 

description of actions that will be taken 

to acquire the necessary information 

systems and other infrastructure; and 

(10) Such other information as 

specified by the Secretary. 


rfrederick on PROD1PC67 with RULES
50900 Federal Register / Vol. 72, No. 171 / Wednesday, September 5, 2007 / Rules and Regulations 

1See 60 FR 43031, Aug. 18, 1995; Docket No. 

NHTSA–1996–1762–1. 

(b) Standard Report—At a minimum, 

the State, the District of Columbia and 

Puerto Rico shall submit an error rate 

report to the Department, as required in 

§ 98.100, made subsequent to the 

baseline submission report as set forth 

in § 98.102(a) which includes the 

following information on errors and 

resulting improper payments occurring 

in the administration of CCDF grant 

funds, including Federal Discretionary 

Funds (which includes any funds 

transferred from the TANF Block Grant), 

Mandatory and Matching Funds and 

State Matching and Maintenance-ofEffort (MOE Funds): 

(1) All the information reported in the 

baseline submission, as set forth in 

§ 98.102(a), updated for the current 

cycle; 

(2) For each category of data listed in 

§ 98.102(a)(1) through (5), States, the 

District of Columbia and Puerto Rico 

must include data and targets from the 

prior cycle in addition to data from the 

current cycle and targets for the next 

cycle; 

(3) Description of whether the State, 

the District of Columbia or Puerto Rico 

met error rate targets set in the prior 

cycle and, if not, an explanation of why 

not; 

(4) Discussion of the causes of 

improper payments identified in the 

prior cycle and actions that were taken 

to correct those causes, in addition to a 

discussion on the causes of improper 

payments identified in the current cycle 

and actions that will be taken to correct 

those causes in order to reduce the error 

rates; and 

(5) Such other information as 

specified by the Secretary. 

[FR Doc. 07–4308 Filed 8–29–07; 3:01 pm] 

BILLING CODE 4184–01–P 

DEPARTMENT OF TRANSPORTATION 

National Highway Traffic Safety 

Administration 

49 CFR Part 571 

[Docket No. NHTSA 2007–29131] 

RIN 2127–AI93 

Federal Motor Vehicle Safety 

Standards; Occupant Protection in 

Interior Impact 

AGENCY: National Highway Traffic 

Safety Administration (NHTSA), 

Department of Transportation (DOT). 

ACTION: Final rule. 

SUMMARY: Our safety standard on 

occupant protection in interior impact 

requires, in part, that light vehicles 

provide head protection when an 

occupant’s head strikes upper interior 

components, such as pillars, side rails, 

headers, and the roof during a crash. 

While these requirements already apply 

to most vehicles, the compliance date 

for altered vehicles and vehicles built in 

two or more stages is September 1, 2007. 

In April 2006, we responded to two 

petitions for rulemaking by proposing 

certain amendments to the head 

protection requirements as they apply to 

these vehicles. We also proposed to 

delay the compliance date of the 

requirements for these vehicles. In this 

document, after carefully considering 

both the safety benefits of the upper 

interior protection requirements and 

practicability concerns relating to 

vehicles built in two or more stages and 

certain altered vehicles, we are 

amending the standard to limit these 

requirements to only the front seating 

positions of those vehicles. In addition, 

we are excluding from the requirements 

a narrow group of multi-stage vehicles 

delivered to the final stage manufacturer 

without an occupant compartment. 

Finally, we have decided to delay the 

compliance date of the head impact 

protection requirements as they apply to 

final stage manufacturers and alterers 

until September 1, 2009. 

DATES: The amendments made by this 

final rule are effective September 1, 

2007. The compliance date for the head 

impact protection requirements for 

altered vehicles and vehicles built in 

two or more stages is September 1, 2009. 

Petitions for reconsideration: Petitions 

for reconsideration of this final rule 

must be received not later than October 

22, 2007. 

ADDRESSES: Petitions for reconsideration 

should refer to the docket number above 

and be submitted to: Administrator, 

National Highway Traffic Safety 

Administration, 1200 New Jersey 

Avenue, SE., West Building, 4th Floor, 

Washington, DC 20590. 

See the SUPPLEMENTARY INFORMATION

portion of this document (Section V; 

Rulemaking Analyses and Notices) for 

DOT’s Privacy Act Statement regarding 

documents submitted to the agency’s 

dockets. 

FOR FURTHER INFORMATION CONTACT: The 

following persons at the National 

Highway Traffic Safety Administration, 

1200 New Jersey Ave., SE., Washington, 

DC 20590: 

For technical and policy issues: David 

Sutula, Office of Crashworthiness 

Standards, telephone: (202) 366–3273, 

facsimile: (202) 366–7002, E-mail: 

David.Sutula@dot.gov. 

For legal issues: Ari Scott, Office of 

the Chief Counsel, telephone: (202) 366–

2992, facsimile: (202) 366–3820, E-mail: 

Ari.Scott@dot.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

a. Previous History of Head Protection 

Requirements of FMVSS No. 201 

b. Petitions for Rulemaking and Agency 

Response 

II. Summary of the Notice of Proposed 

Rulemaking 

a. Proposal To Limit the Area Subject to 

the FMH Impacts in Certain Vehicles 

b. Proposal To Exclude Vehicles Without a 

Finished Occupant Compartment From 

the FMH Impact Requirements 

c. Question Regarding Multistage Vehicles 

With Raised Roofs 

d. Change of Effective Date 

III. Public Comments 

IV. The Final Rule and Response to Public 

Comments 

a. Limitation of the Areas Subject to 

FMVSS No. 201 

b. Areas Behind the Partition 

c. Conversion Vans and Recreational 

Vehicles 

d. Multi-Stage Vehicles Completed From a 

Cutaway Chassis 

e. Delay of Compliance Date 

f. Miscellaneous Issues 

g. Effective Date 

V. Regulatory Analyses and Notices 

VI. Regulatory Text 

I. Background 

a. Previous History of Head Protection 

Requirements of FMVSS No. 201 

On August 18, 1995, the National 

Highway Traffic Safety Administration 

(NHTSA) issued a final rule (August 

1995) amending Federal Motor Vehicle 

Safety Standard (FMVSS) No. 201, 

‘‘Occupant Protection in Interior 

Impact,’’ to provide enhanced head 

impact protection.1 The August 1995 

final rule required passenger cars, and 

trucks, buses and multipurpose 

passenger vehicles (MPVs) with a gross 

vehicle weight rating (GVWR) of 4,536 

kilograms (10,000 pounds) or less, to 

provide protection when an occupant’s 

head strikes upper interior components, 

including pillars, side rails, headers, 

and the roof, during a crash. The final 

rule set minimum performance 

requirements for upper interior 

components by establishing target areas 

that must be padded or otherwise have 

energy absorbing properties to minimize 

head injury in the event of a crash. The 

final rule added procedures for a new 

in-vehicle component test in which a 

free-motion head form (FMH) is fired at 

certain target locations on the upper 

interior of a vehicle at an impact speed 

of 24 km/h (15 mph). Targets that are 


rfrederick on PROD1PC67 with RULES