[Federal Register Volume 60, Number 97 (Friday, May 19, 1995)]
[Rules and Regulations]
[Pages 26829-26839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11909]



=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 1355 and 1356

RIN 0970-AB38


Statewide Automated Child Welfare Information Systems

AGENCY: Office of Information Systems Management (OISM), ACF, HHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: These final rules implement section 13713 of the Omnibus 
Budget Reconciliation Act of 1993 (Pub. L. 103-66). Under section 
13713, funding is made available for the planning, design, development 
and installation of statewide automated child welfare information 
systems. Such systems must be comprehensive in that they must meet the 
requirements for an Adoption and Foster Care Analysis and Reporting 
[[Page 26830]] System (AFCARS) required by section 479(b)(2) of the 
Social Security Act (the Act) and implementing regulations; to the 
extent practicable, be capable of interfacing with State child abuse 
and neglect automated systems; to the extent practicable, be capable of 
interfacing with, and retrieving information from the State automated 
system for determining eligibility for title IV-A assistance; and, be 
determined by the Secretary to be likely to provide more efficient, 
economical, and effective administration of the programs carried out 
under State plans approved under title IV-B or IV-E of the Act.
    Enhanced Federal funding at the 75 percent matching rate is 
provided for such activities as well as for the cost of hardware 
components effective October 1, 1993. This funding rate is eliminated 
under the statute after September 30, 1996, at which time a Federal 
matching rate of 50 percent is available. Also effective October 1, 
1993, Federal financial participation at the 50 percent matching rate 
is available for the operation of such systems.

EFFECTIVE DATE: May 19, 1995.

FOR FURTHER INFORMATION CONTACT: Naomi Marr (202) 401-6960.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    This rule contains information collection activities which are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1980 (44 U.S.C. Chapter 35).
    In accordance with the Paperwork Reduction Act of 1980, the 
Department resubmitted for OMB clearance the APD process, described in 
this document, under which States may apply for and obtain Federal 
financial participation in their ADP acquisitions. This reporting 
requirement was previously approved under OMB control number 0990-0174.
    The reporting burden over and above what the States already do for 
the current APD approval process is estimated to average 10 hours for 
the initial submission of an APD. This includes time for reviewing 
instructions, and collecting and reporting the needed information in 
the APD.
    Send comments regarding the burden estimate or any other aspect of 
this collection of information, including suggestions for reducing 
burden, to the Administration for Children and Families, 370 L'Enfant 
Promenade, SW, Washington, DC, 20447 and the Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 3208, New 
Executive Office Building, Washington, DC 20503, Attn: Desk Officer for 
ACF.

Statutory Authority

    These regulations are published under the authority of several 
provisions of the Social Security Act (the Act), as amended by Pub. L. 
103-66. Section 474(a)(3) of the Act contains new requirements 
providing funding for statewide automated child welfare information 
systems to carry out the State's programs under parts IV-B and IV-E of 
the Act. Under section 474(a)(3)(C), Federal financial participation at 
the 75 percent matching rate is available from October 1, 1993 through 
September 30, 1996 (after which time the rate is reduced to 50 
percent), for the planning, design, development and installation of 
statewide automated child welfare information systems (including the 
full amount of expenditures for hardware components for such systems) 
to the extent that such systems--
    (i) Meet the requirements imposed by regulations promulgated 
pursuant to section 479(b)(2);
    (ii) To the extent practicable, are capable of interfacing with the 
State data collection system that collects information relating to 
child abuse and neglect;
    (iii) To the extent practicable, have the capability of interfacing 
with, and retrieving information from, the State data collection system 
that collects information relating to the eligibility of individuals 
under part IV-A (for the purposes of facilitating verification of 
eligibility of foster children); and
    (iv) Are determined by the Secretary to be likely to provide more 
efficient, economical and effective administration of the programs 
carried out under a State's plans approved under part IV-B or IV-E of 
the Act.
    Under section 474(a)(3)(D), Federal financial participation at the 
50 percent matching rate is available for the operation of the systems 
described above.
    Section 474(e) provides that the Secretary treat as necessary for 
the proper and efficient administration of the State plan, all 
expenditures of a State necessary to plan, design, develop, install, 
and operate the information retrieval system under section 
474(a)(3)(C), without regard to whether the systems may be used with 
respect to foster or adoptive children other than those on behalf of 
whom foster care maintenance payments or adoption assistance payments 
may be made under part IV-E of the Act.
    These regulations are also published under the general authority of 
section 1102 of the Act which requires the Secretary to publish 
regulations that may be necessary for the efficient administration of 
the functions for which she is responsible under the Act.
Background

    The title IV-E Foster Care and Adoption Assistance program provides 
Federal funds to States for the care of eligible dependent, abused or 
neglected children who must be placed in foster care, and for adoption 
assistance payments for certain children with special needs. The title 
IV-B, subpart 1 program provides Federal funds for service programs for 
children and their families aimed at strengthening families and 
preventing the unnecessary separation of children from their families; 
assuring adequate care by the State of children who are away from their 
homes; providing services to return children when separation occurs; 
and placing children for adoption or other permanent placement when 
restoration to the family is not possible or appropriate.
    The title IV-B, subpart 2 program is a capped entitlement for 
family preservation and family support services. Family preservation 
services are targeted to families that are already in crisis and 
children who are at risk of being placed in foster care and include 
intensive interventions to help families weather crises, provide for 
reunification of families by returning home foster care children 
whenever possible, and by arranging for the adoption of or permanent 
and appropriate living arrangements for those children who cannot 
return home. Family support services are designed to help increase the 
strength and stability of families and include programs to improve and 
reinforce parenting skills and to provide respite care for care 
providers and drop-in centers for families.
    In recognition of the critical need for effective statewide 
automated capability to support these programs in a comprehensive 
fashion, section 13713 of Pub. L. 103-66 amends the funding provisions 
under section 474 of the Act to provide for the development and 
operation of comprehensive information systems to assist in the 
administration of title IV-B and IV-E programs. To encourage States to 
act quickly to develop efficient comprehensive statewide automated 
information systems, Congress limited the availability of Federal 
funding at the 75 percent matching rate for statewide automated child 
welfare information systems (SACWIS) to Fiscal Years 1994, 1995 and 
1996. [[Page 26831]] 
    When implemented, these information systems will result in more 
efficient and effective practices in administering child welfare 
programs which in turn will ultimately result in improved service 
delivery. Readily available information and automated procedures to 
assist in case assessments and plans will allow States to be more 
proactive in program administration and to focus efforts on preventive 
services and measures rather than constantly reacting to crisis. With a 
single statewide automated information system, States will realize more 
efficient and effective processes and procedures.
    An interim final rule providing the requirements for States wishing 
to pursue enhanced funding for the development of statewide automated 
child welfare information systems was published in the Federal Register 
December 22, 1993 (58 FR 67939). We received 22 letters of public 
comment regarding the interim final rule from State agencies and other 
interested parties. Specific comments and responses follow the 
discussion of regulatory provisions. These comments did not generate 
any changes to the regulatory provisions outlined in the interim final 
rule.

Regulatory Provisions

    The requirements for the automation of comprehensive child welfare 
services are included under 45 CFR part 1355, which provides the 
general requirements for Foster Care Maintenance Payments, Adoption 
Assistance and Child Welfare Services. The purpose of these 
regulations, as provided under Sec. 1355.50, is to set forth the 
requirements and procedures States must meet in order to receive 
Federal financial participation authorized under the Budget 
Reconciliation Act of 1993 for the planning, design, development, 
installation and operation of statewide automated child welfare 
information systems.
    Funding authority for statewide automated child welfare information 
systems (SACWIS), is provided at Sec. 1355.52 to effect the statutory 
provisions under section 474(a)(3)(C) of the Social Security Act 
authorizing funding for comprehensive child welfare systems.
    Paragraph (a) provides the basic requirements a State must meet in 
order to be eligible for Federal financial participation at a 75 
percent matching rate for fiscal years 1994, 1995 and 1996 and at a 50 
percent matching rate thereafter for expenditures related to the 
planning, design, development and installation of a statewide automated 
child welfare information system.
    First, under Sec. 1355.52(a)(1), the SACWIS must provide for the 
collection and electronic reporting of data required under section 
479(b) of the Act and the implementing regulations under Sec. 1355.40. 
Under section 479(b) of the Act, States must establish and implement 
adoption and foster care reporting systems designed to collect uniform, 
reliable information on children who are under the responsibility of 
the State title IV-B/IV-E agency for placement and care.
    Under paragraph (a)(2), the SACWIS must, to the extent practicable, 
provide for an interface with the State's data collection system for 
child abuse and neglect. The phrase ``to the extent practicable'' as 
used in this paragraph is statutory and reflects in part the voluntary 
nature of the National Child Abuse and Neglect Data Systems (NCANDS) 
established under Pub. L. 100-294, the Child Abuse Prevention, Adoption 
and Family Services Act of 1988, as well as the inherent requirement 
that such interface be cost beneficial to the title IV-B/IV-E programs. 
(For more information on the term ``practicable'' as used throughout 
this rule, refer to ACF-OISM-AT-95-001.)
    As provided in the interim final rule, we would expect that most 
States would integrate the automation of child abuse and neglect 
activities as part of their SACWIS because of the direct association 
between child protection and child welfare services. While the language 
of the statute speaks of interfacing with child abuse and neglect data 
systems, we understand that in many States these data are already a 
part of a larger child welfare system and/or States will be considering 
the integration of such data as part of an overall comprehensive 
information/client system. Accordingly, the statewide automated child 
welfare information systems development effort may include automated 
procedures which will provide the State with the capability to meet the 
National Child Abuse and Neglect Data System requirements.
    While we believe that such interface/integration is vital, in 
accordance with the statute any State which can clearly demonstrate 
through the submission of documentation with the advanced planning 
document (APD) that such integration or interface is not practicable 
because no automated statewide database exists to complete the 
interface or because of cost constraints would not be required to 
include this provision in the SACWIS as a condition of approval. In the 
latter case, the documentation should establish that the costs to 
develop and operate an automated interface with the existing system 
will exceed the combined costs of manual inquiry, verification and 
information exchange with the existing system, and duplicate data entry 
and maintenance in the SACWIS.
    Similarly, paragraph (a)(3) requires that the SACWIS, to the extent 
practicable, provide for interface with and retrieval of information 
from the State automated information system that collects information 
relating to eligibility of individuals under title IV-A of the Act. 
Interface with, and access to, the data maintained by State IV-A 
systems is of vital importance for gathering information about clients 
or other relevant persons and because eligibility for foster care 
maintenance payments as well as adoption assistance are based in part, 
on a child's eligibility under the AFDC program. However, as provided 
in greater detail under the discussion of Sec. 1355.53 below, this 
requirement need not be met if a State clearly demonstrates through the 
submission of documentation with the APD, as indicated under 
Sec. 1355.52(a)(2), that electronic interface and data retrieval is not 
practicable because of limitations in the design of the IV-A system or 
because of cost constraints.
    Finally, paragraph (a)(4) requires that the SACWIS provide for more 
efficient, economical and effective administration of the programs 
carried out under State plans approved under title IV-B and title IV-E.
    As used here, efficient, economical and effective means that: the 
system must improve program management and administration by addressing 
all program services and case processing requirements by meeting the 
requirements of Sec. 1355.53; the design must appropriately apply 
computer technology; the project must not require duplicative 
application system development or software maintenance; the procurement 
must provide for maximum free and open competition; and the costs must 
be reasonable, appropriate and beneficial.
    Paragraph (b) provides that Federal financial participation 
provided under paragraph (a) is also available for the full amount of 
expenditures for hardware components. The matching rate provided is 75 
percent with respect to Fiscal Years 1994, 1995 and 1996, and 50 
percent thereafter. The general requirements applicable to the 
treatment of hardware expenditures under part 95 apply to all such 
expenditures.
    Paragraph (c) provides that Federal financial participation at the 
50 percent matching rate is available for the operating costs of 
statewide automated [[Page 26832]] child welfare information systems 
described under paragraph (a).
    The conditions for funding systems under Sec. 1355.52 are provided 
at Sec. 1355.53. Functional guidelines providing details of these 
requirements were recently issued in the form of an action transmittal 
(ACF-OISM-AT-95-001).
    Under paragraph (a), as a condition of funding, the SACWIS must be 
designed, developed (or an existing State system enhanced), and 
installed in accordance with an approved advance planning document 
(APD). The APD must provide for an efficient and effective design 
which, when implemented, will produce a comprehensive system which will 
improve the program management and administration of the State plans 
for titles IV-B and IV-E. Comprehensive means that the SACWIS must, to 
the extent feasible and appropriate, introduce, monitor and account for 
all the factors of child welfare services, foster care and adoption 
assistance, family preservation and support services, and independent 
living services, as provided under paragraph (b).
    Paragraphs (b)(1) through (b)(8) provide, in accordance with 
section 474(a)(3)(C)(iv) of the Act, the functional requirements 
determined by the Secretary to be likely to provide more efficient, 
economical and effective administration of the programs carried out 
under State plans approved under part IV-B and IV-E of the Act. First, 
under paragraph (b)(1) the system must provide the State automated 
support to meet the Adoption and Foster Care reporting requirements 
through the collection, maintenance, integrity checking and electronic 
transmission of the data elements specified by the Adoption and Foster 
Care Analysis and Reporting System (AFCARS) requirements mandated under 
section 479(b) of the Act and Sec. 1355.40 of this chapter.
    Paragraph (b)(2) includes the requirements for system interface or 
integration necessary for the coordination of services with other 
Federally assisted programs and for the elimination of paperwork and 
duplication of data collection and data entry. Under this paragraph the 
SACWIS must provide for electronic data exchange with State systems 
for: (A) Title IV-A, (B) National Child Abuse and Neglect Data Systems 
(NCANDS), (C) title XIX, and (D) title IV-D, unless the State 
demonstrates that such interface or integration would not be 
practicable because of systems limitations or cost constraints.
    With respect to the electronic exchange with the NCANDS and IV-A 
systems, these are statutory conditions of funding which must be met to 
the extent practicable. As indicated previously, we have defined 
``practicable'' to mean that the interface requirement need not be met 
if the responding program system is not capable of an exchange (and the 
State does not wish to pursue such capability) or where cost 
constraints render such an interface infeasible as demonstrated by the 
State through the submission of documentation, in the APD, that the 
development and operation of such an exchange would exceed the costs of 
manual inquiry, verification and information exchange as well as the 
cost of duplicate data entry and maintenance.
    Similarly, the electronic data exchange with the title XIX system 
is required unless the State Medicaid system does not have the capacity 
for such an interface or the State clearly demonstrates through the 
submittal of documentation that such an exchange would not otherwise be 
practicable because of cost constraints. The requirement for an 
interface with the State's child support enforcement system, unless 
demonstrated to be impracticable, duplicates the systems requirements 
under the title IV-D program, requiring statewide child support 
enforcement systems to provide electronic data exchange with the title 
IV-E program, to assure that benefits and services are provided in an 
integrated manner and that the State is able to collect support from 
the responsible parent.
    Paragraph (b)(3) requires that the SACWIS enable the State to meet 
the provisions of section 422 of the Act by providing for the automated 
collection, maintenance, management and reporting of necessary 
information. Section 422 of the Act requires that each child in foster 
care under the responsibility of the State agency be afforded specific 
protections related to case planning, case reviews and dispositional 
hearings.
    Accordingly, under paragraph (b)(3) the SACWIS must have automated 
procedures and processes to assist the State in meeting the 422 
requirements. At a minimum, these automated procedures would include 
collection, maintenance, management and reporting of information on all 
children in foster care under the responsibility of the State, 
including statewide data from which the demographic characteristics, 
location and goals for foster children can be determined.
    Under paragraph (b)(4), the SACWIS must provide for the collection 
and management of information necessary to facilitate the delivery of 
client services, the acceptance and referral of clients, client 
registration, and the evaluation of the need for services, including 
child welfare services under title IV-B subparts 1 and 2, family 
preservation and family support services, family reunification and 
permanent placement. This provision speaks to intake and assessment 
activities which include processing referrals for services, conducting 
investigations and determining the need for services.
    Under paragraph (b)(5), the SACWIS must collect and manage 
information necessary to determine eligibility for the foster care 
program, the adoption assistance program, and the independent living 
program.
    Paragraph (b)(6) requires that the SACWIS support necessary case 
assessment activities. Under this requirement, the system must have 
automated procedures to assist in evaluating the client's needs.
    Under paragraph (b)(7), the SACWIS must assist the State in 
monitoring case plan development, review and management, including 
eligibility determinations and redeterminations.
    Under this requirement the system must provide for service 
provision and case management which entails determining eligibility and 
supporting the caseworker's determination of whether continued service 
is warranted, the authorization and issuance of appropriate payments, 
the preparation of service plans, determining whether the agency can 
provide services, authorizing services and managing the delivery of 
services.
    Finally, under paragraph (b)(8), the confidentiality and security 
of the information and the system must be ensured.
    Paragraph (c) provides other program functions which may be 
included at State option in the SACWIS design under paragraph (a) of 
this section. We believe that the vast majority of States would want to 
incorporate these functions in their SACWIS development or enhancement 
activities but we are sensitive to the need for State flexibility to 
determine their own optimal level of automation and thus these elements 
are optional.
    Under paragraph (c)(1), the SACWIS may provide management and 
tracking capability to assist the State in resource management, 
including automated procedures to assist in managing service providers, 
facilities, contracts and recruitment activities associated with foster 
care and adoptive families. [[Page 26833]] 
    Under paragraph (c)(2) the SACWIS may provide for tracking and 
maintenance of legal and court information, and preparation of 
appropriate notifications to relevant parties.
    Under paragraph (c)(3) the SACWIS may provide automated capability 
to assist in the administration and management of staff and workloads. 
This functionality would provide for a sensible and practical balance 
between the workload and workforce and provide a methodology for 
management to prioritize resource allocation and workload decisions.
    Under paragraph (c)(4) of this section, the SACWIS may assist the 
State in tracking and management of licensing verification activities.
    Paragraph (c)(5) provides that the SACWIS may support the State in 
priority setting and risk assessment or risk analysis activities. Such 
automated support could include an expert systems module, or rule-based 
automation to assist in consistent caseworker analysis and to aid in 
decision-making to the extent the APD justifies that such automation is 
both technologically and programmatically feasible as well as cost 
effective.
    Paragraph (d), provides that the SACWIS design may at State option 
provide for interface with other automated information systems, 
including, but not limited to: accounting and licensing systems, court 
and juvenile justice systems, vital statistics and education, as 
appropriate. Such interface or integration would create a link to 
obtain and verify client information that is maintained in other 
systems to ensure appropriate delivery of services such as information 
on school attendance and performance. Other linkages could include 
resource directories and license payment systems.
    Under paragraph (e), if the cost benefit analysis submitted as part 
of the APD indicates that full adherence to paragraph (c) and (d), 
would not be cost beneficial (e.g., relative to the State caseload or 
level of automation), final approval of the APD may be withheld pending 
reassessment of the State's specific automation needs and, as 
necessary, adjustment of the APD to reflect a level of automation which 
is cost beneficial. This paragraph is intended to make clear that any 
optional functionality to be undertaken by a State is subject to the 
same requirement for cost effectiveness as required of all other 
functional elements.
    Paragraph (f) provides that a statewide automated child welfare 
information system may be designed, developed and installed on a phased 
basis, in order to allow States to implement AFCARS requirements 
expeditiously as long as the approved APD includes the State's plan for 
full implementation of a comprehensive system which meets all 
functional and data requirements as specified in paragraphs (a) and (b) 
of this section, and a design which provides for a comprehensive system 
and which will support these enhancements on a phased basis.
    Finally, paragraph (g) requires that the system perform quality 
assurance functions to provide for the review of case files for 
accuracy, completeness and compliance with Federal requirements and 
State standards.
    Requirements for submittal of advance planning documents are 
provided at Sec. 1355.54. Under Sec. 1355.54, Submittal of advance 
planning documents, the State title IV-E agency must submit an APD for 
a statewide automated child welfare information system, signed by the 
appropriate State official, in accordance with procedures specified by 
45 CFR part 95, subpart F. The conditions for FFP at the applicable 
rates for the costs of automatic data processing incurred under an 
approved State plan for titles IV-A, IV-B and IV-E of the Act (among 
others) are contained in 45 CFR part 95, subpart F.
    ACF review and assessment of statewide automated child welfare 
information systems is provided under Sec. 1355.55 of this regulation. 
Under paragraph (a), ACF will, on a continuing basis, review, assess 
and inspect the planning, design, development, installation and 
operation of the SACWIS to determine the extent to which such systems: 
(1) Meet Sec. 1355.53 of this chapter, (2) meet the goals and 
objectives stated in the approved APD, (3) meet the schedule, budget, 
and other conditions of the approved APD, and (4) comply with the 
automated data processing services and acquisitions procedures and 
requirements of 45 CFR part 95, subpart F.
    Under Sec. 1355.56, Failure to meet the conditions of the approved 
APD, information on the consequences and actions resulting from a 
State's failure to meet the conditions of the approved APD is provided. 
Under paragraph (a) of Sec. 1355.56, if ACF finds that the State fails 
to meet any of the conditions cited in Sec. 1355.53, or to 
substantially comply with the criteria, requirements and other 
undertakings prescribed by the approved APD, approval of the APD may be 
suspended.
    Paragraph (b) provides events which shall take place should 
suspension of the APD occur. Under paragraph (b)(1), if the approval of 
an APD is suspended during the planning, design, development, 
installation, or operation of the SACWIS the State will be given 
written notice of the suspension stating: (A) The reason for the 
suspension, (B) the date of the suspension, (C) whether the suspended 
system complies with Part 95 criteria for 50 percent FFP, and (D) the 
actions required by the State for future enhanced funding.
    Under paragraph (b)(2), the suspension will be effective as of the 
date the State failed to comply with the approved APD. Paragraph (b)(3) 
further provides that the suspension shall remain in effect until ACF 
determines that such system complies with prescribed criteria, 
requirements, and other undertakings for future Federal funding. Should 
a State cease development of an approved system, either by voluntary 
withdrawal or as a result of Federal suspension, paragraph (b)(4) 
provides that all Federal incentive funds invested to date that exceed 
the normal administrative FFP rate (50 percent) will be subject to 
recoupment.
    The issue of cost allocation is addressed under Sec. 1355.57. Under 
paragraph (a), all expenditures of a State to plan, design, develop, 
install, and operate the data collection and information retrieval 
system described in Sec. 1355.53 of this chapter shall be treated as 
necessary for the proper and efficient administration of the State plan 
under title IV-E, without regard to whether the system may be used with 
respect to children other than those on behalf of whom foster care 
maintenance payments or adoption assistance payments may be made under 
the State plan.
    Paragraph (b) provides that cost allocation and distribution for 
the planning, design, development, installation and operation must be 
in accordance with Part 95.631 and section 479(e) of the Act, if the 
SACWIS includes functions, processing, information collection and 
management, equipment or services that are not directly related to the 
administration of the programs carried out under the State plans 
approved under titles IV-B or IV-E.
    A conforming provision is provided under Sec. 1356.60, Fiscal 
requirements (title IV-E), in paragraph (e), Federal matching funds for 
SACWIS. This paragraph merely reiterates the statutory provision that 
all expenditures related to an approved APD under Sec. 1355.52, will be 
treated as necessary for the proper and efficient administration of the 
State plan, without regard to whether the system is used with respect 
to foster or adoptive children other than those on behalf of whom 
foster care [[Page 26834]] maintenance or adoption assistance payments 
are made under title IV-E.

Response To Comments

    We received a total of 22 comments on the interim final rule 
published in the Federal Register December 22, 1993, (58 FR 67939) from 
State agencies and other interested parties.
    Specific comments and our responses follow.

General Comments

    Comment: Commenters were extremely supportive of the interim final 
rules. They were pleased with the flexibility provided and noted that 
the rules incorporate the diversity of child welfare programs into a 
realistic automation plan. One commenter however was concerned about 
the limited comment period provided.
    Response: We believe that the partnership strategy employed in 
developing these rules fostered a positive dialogue between the Federal 
government and States and led to the development of a better rulemaking 
document which provides States with the tools they need to improve IV-
B/IV-E effectiveness. As indicated in the preamble to the interim final 
rule, in developing these rules we relied heavily on information from 
existing State efforts to establish systems and the efforts of a State 
and Federal child welfare system workgroup.
    So that the States could begin development and avoid the risk that 
the rules would change, we restricted the comment period to 30 days in 
an effort to quickly identify whether there were any fundamental 
problems or concerns with the terms of the interim rules which would 
have necessitated a major change in direction in the final rule. We 
felt this was critical because of the relatively short window of 
opportunity related to the availability of enhanced funding.

Requirements for FFP

    Comment: One commenter questioned the criteria used to distinguish 
between development and operation and asked how implementation costs 
will be funded. Another commenter asked at what point a system is 
considered operational for the purpose of claiming expenditures at the 
regular rate, particularly under a phased approach.
    Response: Enhanced funding is available for the planning, design 
development and installation of a SACWIS, while operational costs are 
funded at the regular administrative match rate. We view implementation 
costs as part of design, development and installation of the system. 
The State's ability to claim enhanced funding ceases when the system 
(or portion of the SACWIS, in a phased development effort) has 
successfully passed a pilot test and is used to support child welfare 
activities in an automated fashion in any geographical area. However, a 
State may continue to claim enhanced funding for costs associated with 
the planning, design, development and installation of a subsequent 
phase of the total project, as well as allowable installation costs 
(e.g., conversion and training activities) for parts of the State that 
have not yet been converted to the new system.
    As provided in ACF-OISM-AT-95-001, the operational stage of the 
SACWIS is the point at which the system is used for automated 
processing. The implementation APD covers the design, development and 
installation of the SACWIS. It should also be noted that hardware costs 
are eligible for 75 percent matching within the window provided by 
statute regardless of the operational status of the system.
    HHS and the Food and Consumer Service (formerly the Food and 
Nutrition Service) published changes to our information technology 
policies regarding the depreciation or expensing of data processing 
equipment (Action Transmittal AT-94-5, dated July 22, 1994). Equipment 
having a useful life of more than one year and a unit acquisition cost 
of less than $5,000 may now be expensed for the quarter in which it is 
purchased. These recent policy changes should allow States to expense a 
large portion of the hardware necessary for SACWIS; however, there will 
still remain hardware with a unit acquisition cost of greater than 
$5,000. For equipment that falls into this category, the State must 
either depreciate or charge use allowance for the cost of the equipment 
over its useful life, and in accordance with statewide accounting 
practice.
    For more information, see 45 CFR part 95, subpart F, ``Automated 
Data Processing Equipment and Services; Conditions for Federal 
Financial Participation (FFP).''
    Comment: One commenter asked what effect the rules will have on 
current and future claims at the 50 percent matching rate for systems 
enhancements that may not meet these requirements. Another commenter 
asked whether the effective date limitation means that the entire 
system must be accepted prior to September 30, 1996 for enhanced 
funding to be available.
    Response: In response to the first commenter, these rules apply 
only to systems funded at the enhanced matching rate provided in the 
1993 legislation. However, any system initially funded under these 
rules would continue to be subject to these requirements even after the 
start of FY 1997 when the enhanced funding allowance expires.
    With respect to the second comment, the system need not be fully 
operational by September 30, 1996 to receive enhanced funding. As 
provided in ACF-OISM-95-001, the three-year window for claiming 
enhanced funding does not mean that the project must be completed prior 
to the expiration of the availability of enhanced funding. However, 
even though the project may not be complete within this time, the 
statute is clear that expenditures after this date are no longer 
eligible for enhanced funding.
    Comment: A number of commenters expressed concern that the three 
year window for enhanced funding is too short, especially for States 
which are starting with primitive systems or which require the consent 
of the State legislature. Others were concerned with the limitation in 
light of their immediate need to meet the AFCARS requirements.
    Response: The three-year time limit on the availability of enhanced 
funding for statewide automated child welfare information systems is 
contained in statute and we have no statutory authority to extend the 
availability of this funding rate. With respect to the second point, 
however, we understand that States may have difficulty in dedicating 
the necessary time and resources to meet the AFCARS and SACWIS 
requirements concurrently and for this reason the rule provides a 
phase-in strategy to allow the AFCARS requirements of the system to be 
pursued first.
    As provided in ACF-OISM-AT-95-001, a phased approach might allow 
the roll-out of a system on a phased basis under which workers could 
begin to use some of the planned functionality of the system, such as 
enhanced data collection capability which would enable compliance with 
the AFCARS reporting requirements, while additional modules or 
components are not yet available.

Functional Requirements
    Comment: One commenter asked whether guidance will be offered to 
assure that States have a clear understanding of the systems 
requirements.
    Response: Since issuance of the interim final rule, general 
guidance on systems requirements and functionality has been provided to 
the States in [[Page 26835]] several forums, such as the semi-annual 
ACF User Group Meeting, various ACF sponsored State technical advisory 
groups, System and Child Welfare related conferences, State and Federal 
Child Welfare Collaboratives, and issuance of a draft and final version 
of a child welfare related action transmittal (ACF-OISM-AT-95-001). As 
indicated in the interim final rule, we stand ready to assist in the 
planning, design, development and installation of a SACWIS upon 
request.
    Comment: One commenter was concerned that the requirements are too 
client focused, rather than family focused, stating that in a system 
growing out of concern for family preservation, there needs to be 
greater attention to the identification of the strengths and needs of 
the family.
    Response: We disagree with the commenter and believe that the 
SACWIS design envisioned under this rule supports the family. These 
projects are intended to be more than information systems but rather 
comprehensive tools to make service delivery more responsive to the 
needs of families and communities. It is our strong expectation, which 
we had hoped to convey in the interim final rule, that States will take 
advantage of this opportunity to move the child welfare service system 
into a direction which would lead to a more coordinated, flexible 
system, built on and linked to existing community services and support 
able to serve children and their families in a more effective way.

A. Interfaces

    Comment: One commenter asked about the availability of FFP for 
systems modifications to enable the interface and data exchange 
requirements with SACWIS to be met. Another requested additional 
clarification as to what must be addressed in an interface component. 
Still another asked if the cost of an interface is placed completely on 
the State's child welfare agency and questioned the role of the 
agencies with jurisdiction over IV-A, Medicaid and IV-D?
    Response: As provided in ACF-OISM-AT-95-001, FFP is available for 
the IV-B/IV-E portion of the interface. FFP is not available for the 
cost of automating the respondent agency. Because we have no 
legislative authority to pay for the reciprocating end of any 
interface, any modifications to another existing system to support an 
interface with a SACWIS (optional or required) must be funded by the 
program that supports the system to which this interface is being 
established.
    To the extent that such programs are automated, the SACWIS would be 
required to establish an interface. Where these entities are not 
automated, no automated interface is possible, and the State will not 
need to fulfill this requirement. Further, as provided in the above 
cited action transmittal, FFP is not available to develop functionality 
in a SACWIS when it duplicates functionality which already exists in 
other State system(s) to which an interface is required.
    The purpose of these requirements is to provide integrated services 
to clients through more accurate, timely and effective exchange of 
information.
    Comment: One commenter asked that we provide clarification on cost 
allocation procedures between programs sharing data for purposes of the 
interface requirements.
    Response: As indicated above, FFP is not available to develop 
functionality when it duplicates functions which already exist in 
another State system. If a function supports but does not exclusively 
or primarily benefit the program under title IV-E or IV-B, the cost 
must be allocated among all benefitting programs. To illustrate, our 
action transmittal provided the example of factors pertaining to the 
determination of eligibility for an income maintenance program such as 
AFDC. While the determination of eligibility for such benefits is 
clearly linked to the provision of services to children and families 
under title IV-E and IV-B, it is not reasonable to allocate the cost of 
developing eligibility subsystems or modules to title IV-E as the 
primary program benefitting from such automation. In these cases, the 
cost must be allocated between title IV-E and the other benefitting 
eligibility processes.
    The issue of cost allocation is addressed in more detail in 
response to comments later in the preamble and in ACF-OISM-AT-95-001.
    Comment: One commenter requested clarification of the requirement 
for interface with the IV-A (AFDC) and IV-D (child support enforcement) 
programs.
    Response: We believe each of the interfaces referenced by the 
commenter are important to SACWIS development in that they are 
intricately related to the title IV-E program. Title IV-A eligibility 
is a determining factor in title IV-E eligibility. Further, the 
requirement for an interface where practicable between the SACWIS and 
the State's IV-A system is mandated in statute. The title IV-D 
interface requirement replicates a functional requirement of a 
certified IV-D system. Interface between the child support agency and 
the SACWIS may be extremely beneficial to the goals of both programs in 
that it may assist in the collection of increased child support on 
behalf of children receiving child welfare services and could assist in 
the unification and permanent placement of children with formerly 
noncustodial parents.
    As with the requirements for interface with the State Medicaid 
agency and the State child abuse and neglect system, we believe an 
electronic interface will be far more effective in service delivery 
than redundant data entry to multiple systems.

B. Case Assessment Activities

    Comment: One commenter was concerned that the approach to services 
is not sufficiently individual and stated that an adequate SACWIS needs 
to support a sophisticated and highly individualized approach to the 
provision of services.
    Response: Automation is intended to assist workers' needs in 
effective service delivery, not supersede their judgment. We 
wholeheartedly agree that individual assessment is critical but believe 
that the system can support and inform the caseworker by ensuring that 
the right questions are asked and addressed.

C. Confidentiality and Security
    Comment: One commenter was particularly concerned about the 
requirement that the State agency responsible for the APD be 
accountable for the confidentiality of the SACWIS and raised related 
concerns regarding access to information and the cross-training of 
agency workers. Concern was raised by another commenter that the rule 
does not mention confidentiality which the commenter considers to be an 
important aspect of any required cross-agency interface. Still another 
questioned how confidentiality of information can be assured in an 
interface system and what rules the agency with jurisdiction over IV-A, 
IV-D and Medicaid have for treatment?
    Response: These regulations require under Sec. 1355.53, that at a 
minimum the SACWIS must ensure the confidentiality and security of the 
information and the system. Under this requirement, States are expected 
to build systems which provide necessary safeguards which would, for 
example, enable them to share information, when such sharing is legal 
and appropriate, without identifying the source, or which would enable 
them to limit access to specific data elements.
    Each of the programs subject to an interface expectation is also 
subject to [[Page 26836]] specific statutory confidentiality 
requirements which the system must provide. However, Federal statute 
and regulations allow, and in many cases require, designated State 
agencies to disclose confidential information to other State agencies 
for the purpose of administering other Federal programs. Thus, 
confidentiality rules should not be an obstacle to the development of 
an effective interface with the systems used to administer the title 
IV-A, IV-D and XIX programs.
    For more information on the issue of confidentiality, see our 
action transmittal, ACF-OISM-AT-95-001.

Optional Functionality

    Comment: One commenter expressed hope that the final regulations 
will speak to the importance of incorporating outcome measure data 
collection within the comprehensive system development and that data 
collection specifically related to capturing training information for 
State staff be provided as an optional feature.
    Response: We agree that data collection to support outcome measures 
are important to comprehensive systems design and believe that we have 
provided States with flexibility to incorporate these measures in their 
SACWIS. Data collection necessary to support outcome measures are 
integral to meeting the AFCARS requirements and are also embraced under 
Sec. 1355.53(g), which requires that the system perform Quality 
Assurance functions for the review of casefiles for accuracy, 
completeness and compliance with Federal requirements as well as State 
standards. This would include generation of summary management reports 
and exception reports related to services needed and provided.
    With respect to the second point, under Sec. 1355.53(c)(1), the 
system may perform functions related to resource management which would 
include information captured for training purposes.
    Comment: One commenter asked whether the provision at 
Sec. 1355.53(c)(3) includes systems administration or administration of 
staff and workload and asked for clarification of whether costs 
associated with systems administration are eligible for enhanced 
funding and then regular funding for operational costs.
    Response: Under Sec. 1355.53(c)(3) the SACWIS may provide automated 
capability to assist in the administration and management of staff and 
workloads. This would provide a methodology for management to 
prioritize resource allocation and workload decisions to support 
program staff. It is not intended to provide systems administrative 
support.
    Comment: One commenter asked for clarification of whether the 
allowance at Sec. 1355.53(c)(5), i.e., that the system may provide for 
risk analysis, was the same as risk assessment.
    Response: Yes, as used under Sec. 1355.53(c)(5) risk analysis is 
the same as risk assessment.
    Comment: Also regarding risk analysis, one commenter expressed 
concern that ACF may be suggesting that commercially-available off-the-
shelf (COTS) technology is limited in use to the area mentioned in the 
regulation and encouraged ACF to restate the position on this 
technology and its use so it is clear that they are not restricting it 
in some manner or endorsing any particular system approach. The 
commenter further questioned ACF's reference to ``rule based'' 
automation and noted that COTS technology is far preferable to the 
customized rule based software modules which have been embedded in 
other human service systems.
    Response: It was not our intent to suggest that commercially 
available off the shelf technology (COTS) is either limited in its use 
or inferior to customized rule based technology. However, we are not 
aware of a COTS package available today that will meet the case 
management, service delivery and automated support needed to qualify as 
a SACWIS. A State may build or transfer a customized application 
software which is enabled by a COTS software development tool.
    Comment: One commenter questioned whether the intent of 
Sec. 1355.53(e) was to provide that if one of the optional functions 
under paragraph (c) and (d) is not cost beneficial, final approval of 
the APD may be withheld.
    Response: Paragraphs (c) and (d) of Sec. 1355.53 are optional 
levels of system functionality which States have discretion to adopt, 
and for which enhanced funding may be provided, if such functionality 
will be efficient and effective. However, if a State decides to include 
any or all of these elements in their SACWIS design, the APD would have 
to indicate that their inclusion would not negatively affect the cost-
effectiveness of the system. The fact that they are optional functions 
does not eliminate the requirement that the system design prove to be 
cost beneficial. For example, if in a given State inclusion of one or 
more of these elements resulted in over-automation for demographic 
reasons, that is, automated to a level beyond the State's needs and 
thus was not cost beneficial, approval of the APD would be withheld 
until the area of over-automation was dropped.
    If it is shown through the cost benefit assessment that it is more 
cost-effective not to automate to the degree provided under the 
optional functionality, approval of the APD may be withheld.
    Comment: We were asked by one commenter to state that the ``mays'' 
of the system are purely optional. This commenter also remarked that 
States should not have to justify why these functions are not included 
in their APD.
    Response: We would reiterate that the functionality included under 
paragraphs (c) and (d) of Sec. 1355.53 are State options as indicated 
in the preamble. If a State chooses not to include these elements in 
their SACWIS design, no justification is necessary in the APD. However, 
as provided under paragraph (e), if any of these items is included, the 
State must indicate in the APD that such element(s) will be cost 
beneficial.
    Comment: One commenter asked for clarification regarding what 
functions can reside within a statewide payment system and what is 
required for the SACWIS.
    Response: We are not limiting the use or functions of statewide 
payment systems under this regulation. States have flexibility to 
continue to use such systems as long as the IV-B/IV-E related 
information necessary to meet these regulations is accessible through 
communication or link with the SACWIS. In this case, enhanced funding 
may be claimed for the interface to the existing statewide payment 
system. However, any modifications to a separate system must be 
allocated to all benefitting programs affected by such modification. 
Any costs allocable to title IV-B or IV-E for such modifications will 
only be matched at the regular funding rate.
    Comment: One commenter questioned whether it would be possible to 
modify the APD at a later date to include optional interfaces.
    Response: Yes, under Sec. 1355.53(d), the system may interface with 
other automated information systems. This could be included under the 
original APD or as an amendment to the APD, as long as the State can 
show, in accordance with paragraph (e), that such an interface would be 
cost beneficial.
    Comment: One commenter stated appreciation for the section in the 
rules that addresses optional systems functions, acknowledging that not 
all States will be in a position to develop systems so far reaching.
    Response: Our intent was to outline the level of functionality we 
thought appropriate for the vast majority of [[Page 26837]] States 
while recognizing the need for maximum State flexibility.
    Comment: We were asked by one commenter to clarify whether the need 
for a cost benefit analysis in the APD process could be waived.
    Response: The need for a cost benefit analysis in the APD cannot be 
waived. Cost benefit analyses are a required portion of all APDs, 
necessary to determine efficiency, effectiveness and economy of system 
design. As noted in the preamble to the interim final rule, OBRA '93, 
in authorizing enhanced funding for automated information systems for 
family and children's programs, specifically requires for the first 
time that the Secretary include economic considerations along with the 
traditional statutory provisions for systems implementation of 
``efficiency and effectiveness'' in determining whether a system should 
be funded. In accordance with existing requirements at 45 CFR Part 95, 
before a project is approved the State must present a cost benefit 
analysis as part of an APD. We have issued technical assistance in this 
area in the form of a publication entitled Feasibility, Alternatives, 
and Cost/Benefit Analysis Guide. Following our initial publication, we 
issued additional guidance entitled Companion Guide Cost/Benefit 
Analysis Illustrated. Both of these documents are available through 
ACF.
    Sound management practices require that a State perform a cost/
benefit analysis of any proposed undertaking which would result in the 
expenditure of a large amount of funds.
    Comment: One commenter suggested that it might be helpful to revise 
the language in Sec. 1355.53(e) to provide ``any function described 
under paragraph (c) and (d) included in the APD by the State will 
require cost justification or final approval of the APD may be 
withheld.''
    Response: Under paragraph (e), if a State chooses to include 
optional functionality in its system design, such functions are subject 
to all cost benefit tests required of any other functional 
specification. If a State cannot design a system including such 
optional functionality in a manner that proves cost beneficial in the 
APD, approval of the APD may be withheld until such time as the system 
is designed in such a manner that it is cost beneficial.
    While the language suggested by the commenter is acceptable, since 
we did not receive a substantial number of questions on this issue, we 
are not revising the language from that provided in the interim final 
rule.
    Comment: Paragraph (f) of Sec. 1355.53 provides that a statewide 
automated child welfare information system may be designed, developed 
and installed on a phased basis, in order to allow States to implement 
AFCARS requirements expeditiously, in accordance with section 479(b) of 
the Act, as long as the APD includes the State's plan for full 
implementation of a comprehensive system which meets all functional 
requirements and a system design which will support these enhancements 
on a phased basis. According to a commenter, it is not clear in the 
case of a State which has included mandatory components and optional 
components whether they only have to meet the mandatory components 
addressed in the APD to keep from jeopardizing their enhanced match.
    Several commenters indicated that they were pleased with the phased 
approach. One of these requested clarification on enhanced funding 
allowed for the development of non-required features.
    Response: With respect to the first comment, if a State initially 
anticipates developing a system on a phased basis which includes 
mandatory and optional functionality and later decides not to pursue 
the optional elements, they would not jeopardize the enhanced funding. 
In such a case, we would simply adjust funding approvals to reflect 
changes for the cost of the optional elements which were dropped from 
the systems effort. Corresponding changes will be required in the cost-
benefit analysis for the project to reflect the anticipated differences 
in cost-effectiveness resulting from the change in systems 
functionality. However, we expect such situations to be rare and that 
APDs will realistically provide what the State can do.
    With respect to the latter comment, optional elements are eligible 
for enhanced funding as long as other general requirements for enhanced 
funding are met.
    Comment: One commenter expressed the view that the term quality 
assurance functions has no singular or clear meaning in the child 
welfare or social services arena and stated that States should not be 
expected to perform functions beyond their current staffing and 
legislative mandates and scope.
    Another commenter indicated that this provision might be troubling 
because it sounds like the system would need to include almost the 
entire casefile in order to perform the functions necessary to assure 
compliance with Federal requirements and State standards. The commenter 
questioned this mandate since it was not in statute.
    Other commenters requested clarification of why the quality 
assurance function is needed and said the definition should include 
whether it is related to data integrity for AFCARS or rather review of 
a casefile to assure compliance with program policy requirements. One 
commenter asked for further guidance on the requirements for quality 
assurance functions to provide for review of casefiles.
    Response: While not specifically mandated by statute, we believe 
the requirement for quality assurance capability is necessary to meet 
the statutory requirements of efficiency, economy and effectiveness. 
Since a State's SACWIS is intended to be the source of child welfare 
information, it is essential that the State have in place a process to 
ensure the quality and completeness of the data. As provided in our 
action transmittal (ACF-OISM-AT-95-001), it is essential that the 
system incorporate quality assurance measures, processes and functions 
to ensure completeness, accuracy and consistency of critical data and 
to support sound management practices. The requirement is intended to 
ensure that all current and historical information and data maintained 
by the system are kept in logical sequence, and accessible in a timely 
manner to monitor operation and assess performance. With respect to the 
commenter's concern about the need for the system to maintain the 
State's entire casefile, we would remind the commenter that such a 
requirement is inherent in the statutory requirement that the system 
meet the SACWIS case management and AFCARS requirements, to the extent 
that these requirements comprise the most significant data elements 
included in the casefile.
    Further guidance on meeting the requirements for quality assurance 
are detailed in our action transmittal referenced above.
    Comment: One commenter stated that quality assurance functions are 
focused on agency process rather than outcomes for children and 
families and expressed concern that while good attention is given to 
documenting service delivery only minimal attention is given to outcome 
measures. The commenter was concerned that an adequate SACWIS must not 
only address the scope of services but their effectiveness.
    Response: We encourage States to use their SACWIS as a means for 
measuring the effectiveness of service delivery. Furthermore, we 
believe that the language is flexible enough to allow States to address 
outcome measures as part of their SACWIS effort. However, effective 
outcome measures of service delivery do not ensure the accuracy and 
[[Page 26838]] completeness of data, and while we encourage State to 
use the flexibility allowed, it is essential that the system 
incorporate quality assurance measures to ensure the completeness, 
accuracy and consistency of critical data.
    Comment: One commenter stated a desire to see a statement in the 
optional section that allows the Secretary to approve other 
enhancements to the child welfare automated systems not mentioned in 
this section but which will result in a comprehensive system.
    Response: Additional functionality beyond what is defined in 
Sec. 1355.53 of the regulation may be funded at the enhanced rate as 
long as the State can demonstrate that it will provide more efficient, 
economical and effective administration of the programs under title IV-
B and IV-E. To be eligible, added functionality may not duplicate 
functionality included in an existing system to which an interface is 
required and the APD must address the cost benefit of the optional 
functionality requested for approval by the State.
APD Submission

    Comment: One respondent asked how States which have already 
submitted an APD expressing the intent to seek funding for a 
comprehensive system should submit claims now for the enhanced funding.
    Response: Such States would submit requests using existing form IV-
E-12, State Quarterly Report of Expenditures and Estimates, and 
following existing procedures for requesting program funding under 
title IV-E. Procedures for submitting APDs are specified by 45 CFR part 
95, subpart F.
    Comment: Two commenters expressed agreement with the transfer 
policy provided in the interim final rule. However, another requested 
that systems transfer be addressed in the final rule. Still another 
suggested that system transfer may not be the best solution.
    Response: As stated in the preamble to the interim final rule, our 
intent in publishing these rules is to provide States necessary 
flexibility to develop systems fitting their individual needs. Under 
part 95 requirements, a State must conduct an alternative analysis to 
consider both the enhancement of any existing systems and the transfer 
of a system to determine the most cost effective approach. However, as 
noted in the interim final rule, we recognize that at this time, there 
is only limited State experience in comprehensive child welfare systems 
development. Because of the limited scope of current comprehensive 
child welfare systems, a flexible approach has been adopted in 
considering justifications for not transferring existing systems.
    Comment: Two commenters expressed interest in pursuing any 
technical assistance which ACF can provide. Another commenter 
questioned how technical assistance can be provided when ACF Regional 
Office staff have no travel money.
    Response: Budget limitations often necessitate difficult decisions 
concerning allocation of resources, including decisions which may serve 
to limit the availability of on-site technical assistance. However, we 
do not believe that technical assistance must necessarily be on-site to 
be effective. In fact, we are hopeful that our action transmittal and 
our involvement in national users meeting and conferences have 
alleviated much of the need for on-site assistance. Furthermore, ACF 
has awarded a contract to assist in the development of a Child Welfare 
prototype system. As part of that contract, we will sponsor several 
national and regional conferences to share information and provide 
technical assistance to States. Central and Regional Office staff stand 
ready to provide States with help upon request.
    Comment: One commenter asked whether, in the interest of saving 
time, if it is possible to share APD work being done by various other 
States and whether the Federal government will facilitate sharing. 
Another expressed interest in efforts to develop a consortia of States 
with similar commitments to permit more rapid and efficient development 
of systems which have greater capability to produce information of 
quality.
    Response: We have and will continue to share system related 
documents, such as APDs, RFPs and other design documents, as they 
become available. These materials are available to the public upon 
request. We have distributed information to various States, child 
welfare related foundations, vendors and other public interest groups. 
We have entered into partnerships with States to coordinate the joint 
design of child welfare information systems. We have established 
different State Technical Advisory groups to identify the best 
approaches for sharing information. We have participated in regional 
and national system and child welfare conference and we will continue 
to encourage the sharing of State experience at the ACF Users Group 
meetings.

Review and Assessment and Part 95 Requirements

    Comment: One commenter stated that depreciation of equipment is a 
major concern. For many States the three year window could conceivably 
be very narrow for the planning, design and development phases, 
especially under a phased-in approach and for States just entering the 
planning phase and asked that this be addressed in the guidance 
provided under an action transmittal.
    Others stated that the depreciation period should be over the same 
period as the availability of enhanced funding, i.e., equipment should 
be depreciated over a three year period instead of a five year time 
span.
    These commenters point out that the regulation appears to conflict 
with the statute which states that payments to States ``including 75 
percent of the full amount of expenditures for hardware components for 
such system'' and suggested that since enhanced funding is available 
for only 3 years, the rule should reflect an exception to the 5-year 
depreciation schedule requirements.
    On a related issue, commenters thought that language on financing 
of hardware appears to be the same as depreciation and suggested that 
expensing be instituted.
    Response: As provided in our action transmittal, recent policy 
changes delineated at ACF-AT-94-5, dated July 22, 1994, may allow 
States to expense a large portion of the hardware necessary for SACWIS. 
For additional information, see ACF-OISM-AT-95-001.
    However, the statute explicitly eliminates enhanced funding for 
system activities as of October 1, 1996. We have no authority to adjust 
this statutory date or to revise the Department's requirements for 
capitalization and depreciation of equipment in this final rule. The 
controlling requirements for depreciation are found in 45 CFR part 95, 
subparts F and G.
    Comment: One commenter recommended that a clear timeframe for 
review and assessment of the systems be provided to allow States to 
view the process as cooperative, supportive and one that allows regular 
feedback, technical support and a mechanism for State accountability.
    Response: As indicated previously, technical assistance is 
available to ensure that the process for APD review and approval and 
subsequent system approval is as cooperative and supportive as 
possible. Unlike the case with other State systems, the review process 
established does not entail a certification requirement in order to 
allow maximum flexibility. [[Page 26839]] 
    Comment: With respect to the submittal of Advance Planning Document 
Updates, one commenter noted that meeting the timeframe for submitting 
an APD may be problematic due to new Federal requirements, 
identification of proposed project changes and the internal State 
review process.
    Similarly, another commenter expressed concern that the timeframe 
will be difficult for some States to meet and encouraged ACF to 
actively seek out States to which this section applied to ensure they 
understand the importance of meeting this critical deadline.
    Response: The regulations at 45 CFR 95.605(3)(b), indicate that a 
State must submit an As Needed APD Update when significant changes are 
expected to a project. We have identified and worked with the States 
affected by this requirement and have either granted final or 
conditional approval of their APD Updates. None of the concerned States 
were adversely affected by this requirement.
    Comment: On a miscellaneous issue, one commenter noted that 
paragraph (b) has been reserved under 45 CFR 95.641 or 45 CFR 1355.55 
and questioned this.
    Response: The issue raised by the commenter merely speaks to a 
regulatory drafting requirement. Under regulatory drafting rules it is 
inappropriate to refer to a paragraph designated as ``(a)'' without 
referencing a ``(b)'' cite. There are no plans to add to this section.

Failure to Meet the Condition of the Approved APD

    Comment: One commenter thought that it was unclear whether 
recoupment of enhanced FFP applies only to those components of the APD 
that are required under 45 CFR 1355.53. States could develop an APD 
that proposes to develop an automated system that included some 
permissive components, develop required components and then fail to get 
sufficient funding to complete the permissive components. States should 
not be penalized for revising the APD downward as long as they meet the 
minimum requirements.
    Response: While we would hope that States would ensure that their 
plans are realistic prior to submittal, States would not be penalized 
in cases where optional automation plans were dropped, unless such 
changes negatively affected either the cost-effectiveness of the system 
or the State's ability to complete the project successfully. In such 
cases, if a State pulled back on discretionary items, we would simply 
recalculate funding to make the necessary adjustments.
    Comment: Another commenter noted that Sec. 1355.56 provides that 
failure to meet the conditions of these regulations may result in an 
approved APD being suspended while at the same time recognizing that 
penalties are provided for failure to comply with the AFCARS 
regulations. The commenter was concerned that this could put States in 
the position of being unable to meet AFCARS because of a loss of SACWIS 
funding.
    Response: We would like to clarify that the loss of funding 
discussed with respect to Sec. 1355.56 refers only to enhanced funding 
for SACWIS and good systems planning would ensure that no State is put 
in the position of losing this funding.
    We agree that there is a strong interrelationship between AFCARS 
implementation and SACWIS development and for this reason have allowed 
States to implement their SACWIS on a phased based to ensure that 
AFCARS requirements are met expeditiously.

Cost allocation

    Comment: One commenter expressed interest that we acknowledge that 
systems transfer from another State may not be the best solution, but 
shared development (and funding) program to program in the State be 
encouraged.
    Another asked that we provide more detail on cost allocation.
    Response: We agree that systems transfer from another State may not 
be the best solution in SACWIS design and, as indicated in the preamble 
to the interim final rule, plan to be flexible in our consideration of 
State analysis provided in the APD for not going this route in SACWIS 
development.
    For information regarding the effect of shared development on cost 
allocation or for detailed specification of the cost allocation 
requirement, please see our action transmittal, ACF-OISM-AT-95-001.

Regulatory Impact Analysis

    Executive Order 12866 requires that regulations be reviewed to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
rule is consistent with these priorities and principles. An assessment 
of the costs and benefits of available regulatory alternatives 
(including not regulating) demonstrated that the approach taken in the 
regulation is the most cost-effective and least burdensome while still 
achieving the regulatory objectives.

Regulatory Flexibility Analysis

    Consistent with the Regulatory Flexibility Act (Pub. L. 96-354) 
which requires the Federal government to anticipate and reduce the 
impact of rules and paperwork requirements on small businesses and 
other small entities, the Secretary certifies that this rule has no 
significant effect on a substantial number of small entities. 
Therefore, a regulatory flexibility analysis is not required.

List of Subjects

45 CFR Part 1355

    Adoption and foster care, Child welfare, Data collection, 
Definitions grant programs--Social programs

45 CFR Part 1356

    Adoption and foster Care, Administrative costs, Child welfare, 
Fiscal requirements (title IV-E), Grant programs--social programs, 
Statewide information systems

(Catalog of Federal Domestic Assistance Program No. 13.658, Foster 
Care Maintenance, 13.659, Adoption Assistance and 13.645, Child 
Welfare Services--State Grants)

    Approved: April 5, 1995.
Mary Jo Bane,
Assistant Secretary for Children and Families.
    Accordingly, the interim rule amending 45 CFR Parts 1355 and 1356 
which was published at 58 FR 67939 on December 22, 1993, is adopted as 
a final rule with the following change:

PART 1355--GENERAL

    1. The authority citation for Part 1355 continues to read as 
follows:

    Authority: 42 U.S.C. 620 et seq., 42 U.S.C. 670 et seq.; 42 
U.S.C. 1301 and 1302.


Sec. 1355.53  [Amended]

    2. Section 1355.53(b)(3) is amended by replacing the reference to 
``section 427'' in the first line with a reference to ``section 422.''
[FR Doc. 95-11909 Filed 5-18-95; 8:45 am]
BILLING CODE 4184-01-P