PENALTIES
Sec. 409. [42 U.S.C. 609] (a) In General.—Subject to this section:
(1) Use of grant in violation of this part.—
(A) General penalty.—If an audit conducted under chapter 75 of title 31, United States Code[49], finds that an amount paid to a State under section 403 for a fiscal year has been used in violation of this part, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year quarter by the amount so used.
(B) Enhanced penalty for intentional violations.—If the State does not prove to the satisfaction of the Secretary that the State did not intend to use the amount in violation of this part, the Secretary shall further reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year quarter by an amount equal to 5 percent of the State family assistance grant.
(C) Penalty for misuse of competitive welfare-to-work funds.—If the Secretary of Labor finds that an amount paid to an entity under section 403(a)(5)(B) has been used in violation of subparagraph (B) or (C) of section 403(a)(5), the entity shall remit to the Secretary of Labor an amount equal to the amount so used.
(2) Failure to submit required report.—
(A) Quarterly reports.—
(i) In general.—If the Secretary determines that a State has not, within 45 days after the end of a fiscal quarter, submitted the report required by section 411(a) for the quarter, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to 4 percent of the State family assistance grant.
(ii) Rescission of penalty.—The Secretary shall rescind a penalty imposed on a State under clause (i) with respect to a report if the State submits the report before the end of the fiscal quarter that immediately succeeds the fiscal quarter for which the report was required.
(B) Report on engagement in additional work activities and expenditures for other benefits and services.—
(i) In general.—If the Secretary determines that a State has not submitted the report required by section 411(c)(1)(A)(i) by May 31, 2011, or the report required by section 411(c)(1)(A)(ii) by August 31, 2011, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not more than 4 percent of the State family assistance grant.
(ii) Rescission of penalty.—The Secretary shall rescind a penalty imposed on a State under clause (i) with respect to a report required by section 411(c)(1)(A) if the State submits the report not later than—
(I) in the case of the report required under section 411(c)(1)(A)(i), June 15, 2011; and
(II) in the case of the report required under section 411(c)(1)(A)(ii), September 15, 2011.
(iii) Penalty based on severity failure.—The Secretary shall impose a reduction under clause (i) with respect to a fiscal year based on the degree of noncompliance.
(3) Failure to satisfy minimum participation rates.—
(A) In general.—If the Secretary determines that a State to which a grant is made under section 403 for a fiscal year has failed to comply with section 407(a) for the fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to the applicable percentage of the State family assistance grant.
(B) Applicable percentage defined.—As used in subparagraph (A), the term “applicable percentage” means, with respect to a State—
(i) if a penalty was not imposed on the State under subparagraph (A) for the immediately preceding fiscal year, 5 percent; or
(ii) if a penalty was imposed on the State under subparagraph (A) for the immediately preceding fiscal year, the lesser of—
(I) the percentage by which the grant payable to the State under section 403(a)(1) was reduced for such preceding fiscal year, increased by 2 percentage points; or
(II) 21 percent.
(C) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with respect to a fiscal year based on the degree of noncompliance, and may reduce the penalty if the noncompliance is due to circumstances that caused the State to become a needy State (as defined in section 403(b)(5)[50]) during the fiscal year or if the noncompliance is due to extraordinary circumstances such as a natural disaster or regional recession. The Secretary shall provide a written report to Congress to justify any waiver or penalty reduction due to such extraordinary circumstances.
(4) Failure to participate in the income and eligibility verification system.—If the Secretary determines that a State program funded under this part is not participating during a fiscal year in the income and eligibility verification system required by section 1137, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not more than 2 percent of the State family assistance grant.
(5) Failure to comply with paternity establishment and child support enforcement requirements under part d.—Notwithstanding any other provision of this Act, if the Secretary determines that the State agency that administers a program funded under this part does not enforce the penalties requested by the agency administering part D against recipients of assistance under the State program who fail to cooperate in establishing paternity or in establishing, modifying, or enforcing a child support order in accordance with such part and who do not qualify for any good cause or other exception established by the State under section 454(29), the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year (without regard to this section) by not more than 5 percent.
(6) Failure to timely repay a federal loan fund for state welfare programs.—If the Secretary determines that a State has failed to repay any amount borrowed from the Federal Loan Fund for State Welfare Programs established under section 406 within the period of maturity applicable to the loan, plus any interest owed on the loan, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year quarter (without regard to this section) by the outstanding loan amount, plus the interest owed on the outstanding amount. The Secretary shall not forgive any outstanding loan amount or interest owed on the outstanding amount.
(7) Failure of any state to maintain certain level of historic effort.—
(A) In general.—The Secretary shall reduce the grant payable to the State under section 403(a)(1) a fiscal year[51] by the amount (if any) by which qualified State expenditures for the then immediately preceding fiscal year are less that the applicable percentage of historic State expenditures with respect to such preceding fiscal year.
(B) Definitions.—As used in this paragraph:
(i) Qualified state expenditures.—
(I) In general.—The term “qualified State expenditures” means, with respect to a State and a fiscal year, the total expenditures by the State during the fiscal year, under all State programs, for any of the following with respect to eligible families:
(aa) Cash assistance, including any amount collected by the State as support pursuant to a plan approved under part D, on behalf of a family receiving assistance under the State program funded under this part, that is distributed to the family under section 457(a)(1)(B) and disregarded in determining the eligibility of the family for, and the amount of, such assistance.
(bb) Child care assistance.
(cc) Educational activities designed to increase self-sufficiency, job training, and work, excluding any expenditure for public education in the State except expenditures which involve the provision of services or assistance to a member of an eligible family which is not generally available to persons who are not members of an eligible family.
(dd) Administrative costs in connection with the matters described in items (aa), (bb), (cc), and (ee), but only to the extent that such costs do not exceed 15 percent of the total amount of qualified State expenditures for the fiscal year.
(ee) Any other use of funds allowable under section 404(a)(1).
(II) Exclusion of transfers from other state and local programs.—Such term does not include expenditures under any State or local program during a fiscal year, except to the extent that—
(aa) the expenditures exceed the amount expended under the State or local program in the fiscal year most recently ending before the date of the enactment of this section[52]; or
(bb) the State is entitled to a payment under former section 403 (as in effect immediately before such date of enactment) with respect to the expenditures.
(III) Exclusion of amounts expended to replace penalty grant reductions.—Such term does not include any amount expended in order to comply with paragraph (12).
(IV) Eligible families.—As used in subclause (I), the term “eligible families” means families eligible for assistance under the State program funded under this part, families that would be eligible for such assistance but for the application of section 408(a)(7) of this Act, and families of aliens lawfully present in the United States that would be eligible for such assistance but for the application of title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996[53].
(V) Counting of spending on certain pro-family activities.—The term “qualified State expenditures” includes the total expenditures by the State during the fiscal year under all State programs for a purpose described in paragraph (3) or (4) of section 401(a).
(ii) Applicable percentage.—The term “applicable percentage” means[54] 80 percent (or, if the State meets the requirements of section 407(a)[55], 75 percent).
(iii) Historic state expenditures.—The term “historic State expenditures” means, with respect to a State, the lesser of—
(I) the expenditures by the State under parts A and F (as in effect during fiscal year 1994) for fiscal year 1994; or
(II) the amount which bears the same ratio to the amount described in subclause (I) as—
(aa) the State family assistance grant, plus the total amount required to by paid to the State under former section 403 for fiscal year 1994 with respect to amounts expended by the State for child care under subsection (g) or (i) of section 402 (as in effect during fiscal year 1994); bears to
(bb) the total amount required to be paid to the State under former section 403 (as in effect during fiscal year 1994) for fiscal year 1994.
Such term does not include any expenditures under the State plan approved under part A (as so in effect) on behalf of individuals covered by a tribal family assistance plan approved under section 412, as determined by the Secretary.
(iv) Expenditures by the state.—The term “expenditures by the State” does not include—
(I) any expenditure from amounts made available by the Federal Government;
(II) any State funds expended for the medicaid program under title XIX;
(III) any State funds which are used to match Federal funds provided under section 403(a)(5); or
(IV) any State funds which are expended as a condition of receiving Federal funds other than under this part.
Notwithstanding subclause (IV) of the preceding sentence, such term includes expenditures by a State for child care in a fiscal year to the extent that the total amount of the expenditures does not exceed the amount of State expenditures in fiscal year 1994 or 1995 (whichever is the greater) that equal the non-Federal share for the programs described in section 418(a)(1)(A).
(v) Source of data.—In determining expenditures by a State for fiscal years 1994 and 1995, the Secretary shall use information which was reported by the State on ACF Form 231 or (in the case of expenditures under part F) ACF Form 331, available as of the dates specified in clauses (ii) and (iii) of section 403(a)(1)(D).
(8) Noncompliance of state child support enforcement program with requirements of part d.—
(A) In general.—If the Secretary finds, with respect to a State’s program under part D, in a fiscal year beginning on or after October 1, 1997—
(i)(I) on the basis of data submitted by a State pursuant to section 454(15)(B), or on the basis of the results of a review conducted under section 452(a)(4), that the State program failed to achieve the paternity establishment percentages (as defined in section 452(g)(2)), or to meet other performance measures that may be established by the Secretary;
(II) on the basis of the results of an audit or audits conducted under section 452(a)(4)(C)(i) that the State data submitted pursuant to section 454(15)(B) is incomplete or unreliable; or
(III) on the basis of the results of an audit or audits conducted under section 452(a)(4)(C) that a State failed to substantially comply with 1 or more of the requirements of part D (other than paragraph (24) or subparagraph (A) or (B)(i) of paragraph (27), of section 454 and
(ii) that, with respect to the succeeding fiscal year—
(I) the State failed to take sufficient corrective action to achieve the appropriate performance levels or compliance as described in subparagraph (A)(i); or
(II) the data submitted by the State pursuant to section 454(15)(B) is incomplete or unreliable; the amounts otherwise payable to the State under this part for quarters following the end of such succeeding fiscal year, prior to quarters following the end of the first quarter throughout which the State program has achieved the paternity establishment percentages or other performance measures as described in subparagraph (A)(i)(I), or is in substantial compliance with 1 or more of the requirements of part D as described in subparagraph (A)(i)(III), as appropriate, shall be reduced by the percentage specified in subparagraph (B).
(B) Amount of reductions.—The reductions required under subparagraph (A) shall be—
(i) not less than 1 nor more than 2 percent;
(ii) not less than 2 nor more than 3 percent, if the finding is the 2nd consecutive finding made pursuant to subparagraph (A); or
(iii) not less than 3 nor more than 5 percent, if the finding is the 3rd or a subsequent consecutive such finding.
(C) Disregard of noncompliance which is of a technical nature.—For purposes of this section and section 452(a)(4), a State determined as a result of an audit—
(i) to have failed to have substantially complied with 1 or more of the requirements of part D shall be determined to have achieved substantial compliance only if the Secretary determines that the extent of the noncompliance is of a technical nature which does not adversely affect the performance of the State’s program under part D; or
(ii) to have submitted incomplete or unreliable data pursuant to section 454(15)(B) shall be determined to have submitted adequate data only if the Secretary determines that the extent of the incompleteness or unreliability of the data is of a technical nature which does not adversely affect the determination of the level of the State’s paternity establishment percentages (as defined under section 452(g)(2)) or other performance measures that may be established by the Secretary.
(9) Failure to comply with 5-year limit on assistance.—If the Secretary determines that a State has not complied with section 408(a)(7) during a fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to 5 percent of the State family assistance grant.
(10) Failure of state receiving amounts from contingency fund to maintain 100 percent of historic effort.—If, at the end of any fiscal year during which amounts from the Contingency Fund for State Welfare Programs have been paid to a State, the Secretary finds that the qualified State expenditures (as defined in paragraph (7)(B)(i) (other than the expenditures described in subclause (I)(bb) of that paragraph)) under the State program funded under this part for the fiscal year are less than 100 percent of historic State expenditures (as defined in paragraph (7)(B)(iii) of this subsection), excluding any amount expended by the State for child care under subsection (g) or (i) of section 402 (as in effect during fiscal year 1994) for fiscal year 1994, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by the total of the amounts so paid to the State that the State has not remitted under section 403(b)(6).
(11) Failure to maintain assistance to adult single custodial parent who cannot obtain child care for child under age 6.—
(A) In general.—If the Secretary determines that a State to which a grant is made under section 403 for a fiscal year has violated section 407(e)(2) during the fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not more than 5 percent of the State family assistance grant.
(B) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with respect to a fiscal year based on the degree of noncompliance.
(12) Requirement to expend additional state funds to replace grant reductions; penalty for failure to do so.—If the grant payable to a State under section 403(a)(1) for a fiscal year is reduced by reason of this subsection, the State shall, during the immediately succeeding fiscal year, expend under the State program funded under this part an amount equal to the total amount of such reductions. If the State fails during such succeeding fiscal year to make the expenditure required by the preceding sentence from its own funds, the Secretary may reduce the grant payable to the State under section 403(a)(1) for the fiscal year that follows such succeeding fiscal year by an amount equal to the sum of—
(A) not more than 2 percent of the State family assistance grant; and
(B) the amount of the expenditure required by the preceding sentence.
(13) Penalty for failure of state to maintain historic effort during year in which welfare-to-work grant is received.—If a grant is made to a State under section 403(a)(5)(A) for a fiscal year and paragraph (7) of this subsection requires the grant payable to the State under section 403(a)(1) to be reduced for the immediately succeeding fiscal year, then the Secretary shall reduce the grant payable to the State under section 403(a)(1) for such succeeding fiscal year by the amount of the grant made to the State under section 403(a)(5)(A) for the fiscal year.
(14) Penalty for failure to reduce assistance for recipients refusing without good cause to work.—
(A) In general.—If the Secretary determines that a State to which a grant is made under section 403 in a fiscal year has violated section 407(e) during the fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not less than 1 percent and not more than 5 percent of the State family assistance grant.
(B) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with respect to a fiscal year based on the degree of noncompliance.
(15) Penalty for failure to establish or comply with work participation verification procedures.—
(A) In general.—If the Secretary determines that a State to which a grant is made under section 403 in a fiscal year has violated section 407(i)(2) during the fiscal year, the Secretary shall reduce the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year by an amount equal to not less than 1 percent and not more than 5 percent of the State family assistance grant.
(B) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with respect to a fiscal year based on the degree of noncompliance.
(16)[56] Penalty for failure to enforce spending policies.—
(A) In general.—If, within 2 years after the date of the enactment of this paragraph, any State has not reported to the Secretary on such State’s implementation of the policies and practices required by section 408(a)(12), or the Secretary determines, based on the information provided in State reports, that any State has not implemented and maintained such policies and practices, the Secretary shall reduce, by an amount equal to 5 percent of the State family assistance grant, the grant payable to such State under section 403(a)(1) for—
(i) the fiscal year immediately succeeding the year in which such 2-year period ends; and
(ii) each succeeding fiscal year in which the State does not demonstrate that such State has implemented and maintained such policies and practices.
(B) Reduction of applicable penalty.—The Secretary may reduce the amount of the reduction required under subparagraph (A) based on the degree of noncompliance of the State.
(C) State not responsible for individual violations.—Fraudulent activity by any individual in an attempt to circumvent the policies and practices required by section 408(a)(12) shall not trigger a State penalty under subparagraph (A).
(b) Reasonable Cause Exception.—
(1) In general.—The Secretary may not impose a penalty on a State under subsection (a) with respect to a requirement if the Secretary determines that the State has reasonable cause for failing to comply with the requirement.
(2) Exception.—Paragraph (1) of this subsection shall not apply to any penalty under paragraph (6), (7), (8), (10), (12), or (13) of subsection (a) and, with respect to the penalty under paragraph (2)(B) of subsection (a), shall only apply to the extent the Secretary determines that the reasonable cause for failure to comply with a requirement of that paragraph is as a result of a one-time, unexpected event, such as a widespread data system failure or a natural or man-made disaster.
(c) Corrective Compliance Plan.—
(1) In general.—
(A) Notification of violation.—Before imposing a penalty against a State under subsection (a) with respect to a violation of this part, the Secretary shall notify the State of the violation and allow the State the opportunity to enter into a corrective compliance plan in accordance with this subsection which outlines how the State will correct or discontinue, as appropriate the violation and how the State will insure continuing compliance with this part.
(B) 60-day period to propose a corrective compliance plan.—During the 60-day period that begins on the date the State receives a notice provided under subparagraph (A) with respect to a violation, the State may submit to the Federal Government a corrective compliance plan to correct or discontinue, as appropriate the violation.
(C) Consultation about modifications.—During the 60-day period that begins with the date the Secretary receives a corrective compliance plan submitted by a State in accordance with subparagraph (B), the Secretary may consult with the State on modifications to the plan.
(D) Acceptance of plan.—A corrective compliance plan submitted by a State in accordance with subparagraph (B) is deemed to be accepted by the Secretary if the Secretary does not accept or reject the plan during 60-day period that begins on the date the plan is submitted.
(2) Effect of correcting or discontinuing violation.—The Secretary may not impose any penalty under subsection (a) with respect to any violation covered by a State corrective compliance plan accepted by the Secretary if the State corrects or discontinues, as appropriate,[57] the violation pursuant to the plan.
(3) Effect of failing to correct or discontinue violation.—The Secretary shall assess some or all of a penalty imposed on a State under subsection (a) with respect to a violation if the State does not, in a timely manner, correct or discontinue, as appropriate, the violation pursuant to a State corrective compliance plan accepted by the Secretary.
(4) Inapplicability to certain penalties.—This subsection shall not apply to the imposition of a penalty against a State under paragraph (2)(B), (6), (7), (8), (10), (12), (13), or (16)[58] of subsection (a).
(d) Limitation on Amount of Penalties.—
(1) In general.—In imposing the penalties described in subsection (a), the Secretary shall not reduce any quarterly payment to a State by more than 25 percent.
(2) Carryforward of unrecovered penalties.—To the extent that paragraph (1) of this subsection prevents the Secretary from recovering during a fiscal year the full amount of penalties imposed on a State under subsection (a) of this section for a prior fiscal year, the Secretary shall apply any remaining amount of such penalties to the grant payable to the State under section 403(a)(1) for the immediately succeeding fiscal year.
[49] See Vol. II, 31 U.S.C. 7501–7507.
[50] P.L. 112-96, §4005(b), struck out “403(b)(6)” and inserted “403(b)(5)”, effective February 22, 2012.
[51] P.L. 112-35, §2(b)(1), struck out “or 2012” and inserted “2012, or 2013”, effective September 30, 2011.
P.L. 112-96, §4002(c)(1), struck out “fiscal year 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2011, 2012, or 2013” and inserted “a fiscal year”, effective February 22, 2012.
[52] July 1, 1997.
[53] P.L. 104-193; 110 Stat. 2260.
[54] P.L. 112-35, §2(b)(2), struck out “2011” and inserted “2012”, effective September 30, 2011.
P.L. 112-96, §4002(c)(2)(A), struck out “for fiscal years 1997 through 2012,”, effective February 22, 2012.
[55] P.L. 112-96, §4002(c)(2)(B), struck out “407(a) for the fiscal year,” and inserted “407(a),”, effective February 22, 2012.
[56] P.L. 112-96, §4004(b), added paragraph (16), effective February 22, 2012.
[57] P.L. 112-96, §4005(d), inserted a comma.
[58] P.L. 112-96, §4004(d), struck out “or (13)” and inserted “(13), or (16)”, effective February 22, 2012.