184
‘‘(3) DETERMINATION OF INCENTIVE ADJUST-
MENT.—The Secretary shall determine the amount
(if any) of the incentive adjustment due each State
on the basis of the data submitted by the State pur-
suant to section 454(15)(B) concerning the levels of
accomplishment (and rates of improvement) with re-
spect to performance indicators specified by the Sec-
retary pursuant to this section.
‘‘(4) REDUCTION OF INCENTIVE ADJUSTMENT
IN CERTAIN CASES.—
‘‘(A) IN GENERAL.—If the Secretary finds,
as a result of an audit conducted under section
452(a)(4)(C) that the paternity establishment
percentage of a State does not meet the re-
quirement of subparagraph (B) for a fiscal year
and that the State has failed to take sufficient
corrective action, or that the data submitted by
the State under section 454(15)(B) is incom-
plete or unreliable, the Secretary shall reduce
the amount (if any) of the incentive adjustment
due the State for the fiscal year—
‘‘(i) in the case of the 1st such find-
ing, by not less than 3 percent and not
more than 5 percent;
185
‘‘(ii) in the case of the 2nd such find-
ing, by not less than 5 percent and not
more than 8 percent; or
‘‘(iii) in the case of the 3rd or subse-
quent such finding, by not less than 10
percent and not more than 15 percent.
‘‘(B) REQUIREMENT.—The requirement of
this subparagraph is that the paternity estab-
lishment percentage of the State for the fiscal
year must be not less than—
‘‘(i) 90 percent;
‘‘(ii) the paternity establishment per-
centage of the State for the immediately
preceding fiscal year plus 6 percentage
points, if the paternity establishment per-
centage of the State for the fiscal year is
not less than 50 percent and less than 90
percent; or
‘‘(iii) the paternity establishment per-
centage of the State for the immediately
preceding fiscal year plus 10 percentage
points, if the paternity establishment per-
centage of the State for the fiscal year is
less than 50 percent.
186
‘‘(5) 
RECYCLING
OF
INCENTIVE
ADJUST-
MENT.—A State to which funds are paid by the
Federal Government as a result of an incentive ad-
justment under this section shall expend the funds
in the State program under this part within 2 years
after the date of the payment.
‘‘(b) DEFINITIONS.—As used in this section:
‘‘(1) PATERNITY
ESTABLISHMENT
PERCENT-
AGE.—The term ‘paternity establishment percent-
age’ means, with respect to a State and a fiscal
year—
‘‘(A) the total number of children in the
State who were born out of wedlock, who have
not attained 1 year of age and for whom pater-
nity is established or acknowledged during the
fiscal year; divided by
‘‘(B) the total number of children born out
of wedlock in the State during the fiscal year.
‘‘(2) OVERALL PERFORMANCE IN CHILD SUP-
PORT ENFORCEMENT.—The term ‘overall perform-
ance in child support enforcement’ means a measure
or measures of the effectiveness of the State agency
in a fiscal year which takes into account factors in-
cluding—
187
‘‘(A) the percentage of cases requiring a
support order in which such an order was es-
tablished;
‘‘(B) the percentage of cases in which child
support is being paid;
‘‘(C) the ratio of child support collected to
child support due; and
‘‘(D) the cost-effectiveness of the State
program, as determined in accordance with
standards established by the Secretary in regu-
lations (after consultation with the States).’’.
(b) CONFORMING AMENDMENTS.—Section 454(22)
(42 U.S.C. 654(22)) is amended—
(1) by striking ‘‘incentive payments’’ the 1st
place such term appears and inserting ‘‘incentive ad-
justments’’; and
(2) by striking ‘‘any such incentive payments
made to the State for such period’’ and inserting
‘‘any increases in Federal payments to the State re-
sulting from such incentive adjustments’’.
(c) CALCULATION OF IV–D PATERNITY ESTABLISH-
MENT PERCENTAGE.—
(1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is
amended in the matter preceding subparagraph (A)
by inserting ‘‘its overall performance in child sup-
188
port enforcement is satisfactory (as defined in sec-
tion 458(b) and regulations of the Secretary), and’’
after ‘‘1994,’’.
(2) 
Section 
452(g)(2)(A) 
(42 
U.S.C.
652(g)(2)(A)) is amended in the matter preceding
clause (i)—
(A) by striking ‘‘paternity establishment
percentage’’ and inserting ‘‘IV–D paternity es-
tablishment percentage’’; and
(B) by striking ‘‘(or all States, as the case
may be)’’.
(3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is
amended—
(A) by striking subparagraph (A) and re-
designating subparagraphs (B) and (C) as sub-
paragraphs (A) and (B), respectively;
(B) in subparagraph (A) (as so redesig-
nated), by striking ‘‘the percentage of children
born out-of-wedlock in a State’’ and inserting
‘‘the percentage of children in a State who are
born out of wedlock or for whom support has
not been established’’; and
(C) in subparagraph (B) (as so redesig-
nated)—
189
(i) by inserting ‘‘and overall perform-
ance in child support enforcement’’ after
‘‘paternity establishment percentages’’; and
(ii) by inserting ‘‘and securing sup-
port’’ before the period.
(d) EFFECTIVE DATES.—
(1) 
INCENTIVE
ADJUSTMENTS.—(A) 
The
amendments made by subsections (a) and (b) shall
become effective on October 1, 1997, except to the
extent provided in subparagraph (B).
(B) Section 458 of the Social Security Act, as
in effect prior to the enactment of this section, shall
be effective for purposes of incentive payments to
States for fiscal years before fiscal year 1999.
(2) PENALTY REDUCTIONS.—The amendments
made by subsection (c) shall become effective with
respect to calendar quarters beginning on and after
the date of the enactment of this Act.
SEC. 543. FEDERAL AND STATE REVIEWS AND AUDITS.
(a) STATE AGENCY ACTIVITIES.—Section 454 (42
U.S.C. 654) is amended—
(1) in paragraph (14), by striking ‘‘(14)’’ and
inserting ‘‘(14)(A)’’;
(2) by redesignating paragraph (15) as sub-
paragraph (B) of paragraph (14); and
190
(3) by inserting after paragraph (14) the fol-
lowing:
‘‘(15) provide for—
‘‘(A) a process for annual reviews of and
reports to the Secretary on the State program
operated under the State plan approved under
this part, which shall include such information
as may be necessary to measure State compli-
ance with Federal requirements for expedited
procedures and timely case processing, using
such standards and procedures as are required
by the Secretary, under which the State agency
will determine the extent to which the program
is operated in compliance with this part; and
‘‘(B) a process of extracting from the auto-
mated data processing system required by para-
graph (16) and transmitting to the Secretary
data and calculations concerning the levels of
accomplishment (and rates of improvement)
with respect to applicable performance indica-
tors (including IV–D paternity establishment
percentages and overall performance in child
support enforcement) to the extent necessary
for purposes of sections 452(g) and 458.’’.
191
(b) FEDERAL ACTIVITIES.—Section 452(a)(4) (42
U.S.C. 652(a)(4)) is amended to read as follows:
‘‘(4)(A) review data and calculations transmit-
ted 
by 
State 
agencies 
pursuant 
to 
section
454(15)(B) on State program accomplishments with
respect to performance indicators for purposes of
subsection (g) of this section and section 458;
‘‘(B) review annual reports submitted pursuant
to section 454(15)(A) and, as appropriate, provide
to the State comments, recommendations for addi-
tional or alternative corrective actions, and technical
assistance; and
‘‘(C) conduct audits, in accordance with the
government auditing standards of the Comptroller
General of the United States—
‘‘(i) at least once every 3 years (or more
frequently, in the case of a State which fails to
meet the requirements of this part, concerning
performance standards and reliability of pro-
gram data) to assess the completeness, reliabil-
ity, and security of the data, and the accuracy
of the reporting systems, used in calculating
performance indicators under subsection (g) of
this section and section 458;
192
‘‘(ii) of the adequacy of financial manage-
ment of the State program operated under the
State plan approved under this part, including
assessments of—
‘‘(I) whether Federal and other funds
made available to carry out the State pro-
gram are being appropriately expended,
and are properly and fully accounted for;
and
‘‘(II) whether collections and disburse-
ments of support payments are carried out
correctly and are fully accounted for; and
‘‘(iii) for such other purposes as the Sec-
retary may find necessary;’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall be effective with respect to calendar
quarters beginning 12 months or more after the date of
the enactment of this section.
SEC. 544. REQUIRED REPORTING PROCEDURES.
(a) ESTABLISHMENT.—Section 452(a)(5) (42 U.S.C.
652(a)(5)) is amended by inserting ‘‘, and establish proce-
dures to be followed by States for collecting and reporting
information required to be provided under this part, and
establish uniform definitions (including those necessary to
enable the measurement of State compliance with the re-
193
quirements of this part relating to expedited processes and
timely case processing) to be applied in following such pro-
cedures’’ before the semicolon.
(b) STATE PLAN REQUIREMENT.—Section 454 (42
U.S.C. 654), as amended by sections 503(a), 512(a), and
533 of this Act, is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(26);
(2) by striking the period at the end of para-
graph (27) and inserting ‘‘; and’’; and
(3) by adding after paragraph (27) the follow-
ing:
‘‘(28) provide that the State shall use the defi-
nitions established under section 452(a)(5) in col-
lecting and reporting information as required under
this part.’’.
SEC. 545. AUTOMATED DATA PROCESSING REQUIREMENTS.
(a) REVISED REQUIREMENTS.—
(1) Section 454(16) (42 U.S.C. 654(16)) is
amended—
(A) by striking ‘‘, at the option of the
State,’’;
(B) by inserting ‘‘and operation by the
State agency’’ after ‘‘for the establishment’’;
194
(C) by inserting ‘‘meeting the requirements
of section 454A’’ after ‘‘information retrieval
system’’;
(D) by striking ‘‘in the State and localities
thereof, so as (A)’’ and inserting ‘‘so as’’;
(E) by striking ‘‘(i)’’; and
(F) by striking ‘‘(including’’ and all that
follows and inserting a semicolon.
(2) Part D of title IV (42 U.S.C. 651–669) is
amended by inserting after section 454 the follow-
ing:
‘‘SEC. 454A. AUTOMATED DATA PROCESSING.
‘‘(a) IN GENERAL.—In order for a State to meet the
requirements of this section, the State agency administer-
ing the State program under this part shall have in oper-
ation a single statewide automated data processing and
information retrieval system which has the capability to
perform the tasks specified in this section with the fre-
quency and in the manner required by or under this part.
‘‘(b) PROGRAM MANAGEMENT.—The automated sys-
tem required by this section shall perform such functions
as the Secretary may specify relating to management of
the State program under this part, including—
195
‘‘(1) controlling and accounting for use of Fed-
eral, State, and local funds in carrying out the pro-
gram; and
‘‘(2) maintaining the data necessary to meet
Federal reporting requirements under this part on a
timely basis.
‘‘(c) CALCULATION
OF
PERFORMANCE
INDICA-
TORS.—In order to enable the Secretary to determine the
incentive and penalty adjustments required by sections
452(g) and 458, the State agency shall—
‘‘(1) use the automated system—
‘‘(A) to maintain the requisite data on
State performance with respect to paternity es-
tablishment and child support enforcement in
the State; and
‘‘(B) to calculate the IV–D paternity es-
tablishment percentage and overall performance
in child support enforcement for the State for
each fiscal year; and
‘‘(2) have in place systems controls to ensure
the completeness, and reliability of, and ready access
to, the data described in paragraph (1)(A), and the
accuracy of the calculations described in paragraph
(1)(B).