U.S. Virgin Islands, DAB No. 3172 (2025)

DECISION

U.S. Virgin Islands (USVI) appeals a decision by the Administration for Children & Families (ACF) that USVI is subject to a financial penalty that would reduce its funds under title IV-A of the Social Security Act (Act) by $71,076, for failing to achieve an appropriate paternity establishment percentage (PEP) for federal fiscal year (FFY) 2016. The penalty amount of $71,076 is equal to two percent (2%) of USVI’s adjusted State Family Assistance Grant (SFAG) for its Temporary Assistance for Needy Families (TANF) program for FFY 2014. For the reasons discussed below, the Board upholds ACF’s determination to impose the penalty of $71,076 for FFY 2016.

Authorities

Title IV-A of the Act, “Block Grants to States for Temporary Assistance for Needy Families,” provides grants to eligible states that have approved programs for assisting needy families with children, and for providing their parents with job preparation, work, and support services to enable them to leave the program and become self-sufficient. Act §§401-419 (42 U.S.C. §§ 601-619).¹ To receive TANF funds, a state must operate a child support enforcement program in accordance with title IV-D of the Act. Act §402(a)(2). Title IV-D of the Act authorizes a cooperative federal-state program that aims at increasing the effectiveness of child support collection by such measures as locating absent parents, establishing paternity, obtaining child and spousal support, and assuring that assistance in obtaining support is available to all children for whom such assistance is requested. Act §§ 451-469B (42 U.S.C. §§ 651-669b); see Virgin Islands Dep’t of Justice, DAB No. 2003, at 2 (2005) (citing Md. Dep’t of Human Resources, DAB No. 1875 (2003)). States operate their child support enforcement programs subject to oversight by ACF’s Office of Child Support Enforcement (OCSE).² Titles IV-A and IV-D of the Act and the regulations in

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45C.F.R. Part 305 create a system of incentives and penalties under which TANF grant funds are awarded to or withheld from states based on the scores they achieve on IV-D performance measures, which are determined each federal fiscal year based on data submitted by the states.

Section 409(a)(8)(A) of the Act authorizes the imposition of a penalty if the Secretary of Health and Human Services (Secretary) finds a state’s title IV-D child support enforcement program noncompliant with one of the following requirements in each of two consecutive years:

(1) the state failed to achieve the “paternity establishment percentage” performance measure as defined in section 452(g)(2) of the Act or to meet other performance measures that may be established by the Secretary;

(2) the state’s data submitted pursuant to section 454(15)(B) of the Act are incomplete or unreliable; or

(3) the state failed to substantially comply with one or more title IV-D requirements (with certain exceptions as specified in section 409(a)(8)(A)).

The performance measure at issue here is the “paternity establishment percentage,” or PEP. The PEP is the percentage of children born out of wedlock for whom paternity has been established or acknowledged. Essentially, the PEP looks at how effectively the state established paternity for children in the caseload who were born out of wedlock (with some exceptions not at issue here). See 45 C.F.R. §305.2(a)(1); Indiana Family & Soc. Servs. Admin., DAB No. 2001, at 6 (2005), aff’d sub nom.Alabama Dep’t of Human Resources, et al. v. U.S. Dep’t of Health & Human Servs., 478 F. Supp. 2d 85 (D.D.C. 2007).

Section 452(g)(2) of the Act sets out two types of PEP measurements, the IV-D PEP³ and the statewide PEP. USVI elected to use the statewide PEP, as permitted by 45 C.F.R.

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§305.40(a)(1). The statewide PEP measures paternity established or acknowledged for all children born out of wedlock in the state. The statewide PEP is the following ratio, expressed as a percentage:

Total # of Minor Children who have been Born Out-of-Wedlock and for
Whom Paternity has been Established or Acknowledged During the Fiscal Year
Total # of Children Born Out-of-Wedlock During the Preceding Fiscal Year

45 C.F.R. §305.2(a)(1)(ii); see also Act §452(g)(2)(B).

A state must achieve a PEP of 90% for each fiscal year to avoid a penalty against, or reduction of, its annual title IV-A TANF grant, the SFAG. Act §452(g)(1)(A). A PEP below 90% could be a basis for imposing a penalty unless the state has increased its PEP over the previous year by the following percentages:

45 C.F.R. §305.40(a)(1) (Table 4); see also Act §452(g)(1)(A)-(F).

ACF imposes funding reduction penalties, which range from one to two percent of the SFAG, if the state is found in noncompliance for two consecutive years and increase in subsequent years if ACF finds that the noncompliance still is not corrected. Act §409(a)(8)(B); 45 C.F.R. §305.61(c); see also 45 C.F.R. §§262.1(b)-(e), 305.66. The first of two consecutive years is the performance year; the second year is the corrective action year. 65 Fed. Reg. 82,178, 82,186-87, 82,189 (Dec. 27, 2000); Wyoming Dep’t of Family Servs., DAB No. 2074, at 4 (2007); 45 C.F.R. §305.66(b)(2) (The “automatic corrective action year” is the “succeeding fiscal year following the year with respect to which the deficiency occurred.”). A penalty must be assessed if the state failed to correct the cited noncompliance by the end of the corrective action year. 45 C.F.R. §305.66(c). A state must expend additional state funds to replace any reduction in the SFAG resulting from the penalties. Act §409(a)(12); 45 C.F.R. §262.1(e)(1).

“States must submit data used to determine . . . [the] penalties [described above] following instructions and formats as required by HHS on Office of Management and Budget (OMB) approved reporting instruments.” 45 C.F.R. § 305.32(f). As relevant here, the OMB-approved reporting instrument is form OCSE-157, titled “Child Support Annual Data

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Report.”⁴ “Data necessary to calculate performance for . . . penalties for a fiscal year must be submitted to [OCSE] by December 31st, the end of the first quarter after the end of the fiscal year. Only data submitted as of December 31st will be used to determine the State’s performance for the prior fiscal year and the amount of incentive payments due the States.” 45 C.F.R. § 305.32(f); 65 Fed. Reg. at 82,184 (explaining that the timely-submission requirement in section 305.32(f) “is consistent with the requirement in [45 C.F.R.] § 305.15 under which States must maintain statistical, fiscal and other records necessary for reporting and other accountability required by the Secretary and make such reports in the form and containing the information the Secretary requires. . . . A cut-off point is necessary for us to make the required performance determinations and calculations on a timely basis.”).⁵

ACF also conducts data reliability audits pursuant to section 452(a)(4)(C) of the Act to determine if the data submitted by states are complete and reliable. The data must meet a 95% standard of reliability. 45 C.F.R. §305.1(i). “[R]eliable data” are “the most recent data available which are found by the Secretary to be reliable.” Id. (italics omitted).“Reliable data” “exist[] when data are sufficiently complete and error free to be convincing for their purpose and context.” Id. (italics omitted). The term “complete data” is defined as “all reporting elements from OCSE reporting forms, necessary to compute a State’s performance levels . . . .” Id. §305.1(j) (italics omitted). The requirement to meet “a 95 percent standard of reliability . . . is with the recognition that data may contain errors as long as they are not of a magnitude that would cause a reasonable person, aware of the errors, to doubt a finding or conclusion based on the data.” Id. §305.1(i).

In accordance with section 409(a)(8)(C) of the Act and 45 C.F.R. §305.62 (which we will address in more detail below), the Secretary may “disregard” certain noncompliance findings of a technical nature.

A state may appeal ACF’s decision to impose a penalty for failure to meet PEP performance measures to the Board within 60 days after it receives notice of the decision. 45 C.F.R. § 262.7(b)(1). “The State must submit its brief and supporting documents when it files its appeal.” Id. “The appeal to the Board must follow the provisions of the rules under [45 C.F.R. § 262.7] and those at [45 C.F.R.] §§ 16.2, 16.9, 16.10, and 16.13-16.22 . . ., to the extend they are consistent with” section 262.7. Id. § 262.7(e). “The Board shall be bound by all applicable laws and regulations.” Id. § 16.14.

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ACF’s Decision⁶

USVI underwent a data reliability audit (DRA) for FFY 2016. ACF Ex. 2, at 1. ACF’s OCSE issued its DRA findings on November 1, 2018. ACF Ex. 2 (audit report and attachments to report).

By decision dated November 15, 2018, ACF notified USVI that, as reflected in the FFY 2016 DRA findings, USVI “did not achieve an appropriate [PEP] level for FFY 2016” and is “[t]herefore . . . subject to a financial penalty.” ACF Ex. 3, at 1. ACF stated:

[USVI] attained a PEP level of 72 percent for FFY 2015, which is a 6 percent decrease from the FFY 2014 PEP level of 78 percent. In accordance with 45 CFR 305.40, the minimum acceptable level of performance for the PEP is 90 percent or an improvement of 2 to 6 percentage points over the previous year’s level of performance. As a result of this consecutive finding after the automatic corrective action year of FFY 2015, [USVI] received a financial penalty of $28,466 equal to 1 percent of [USVI’s] adjusted SFAG for the TANF program for FFY 2014, which was assessed against [USVI’s] FFY 2016 TANF grant in accordance with 45 CFR 305.61 and 305.66. [USVI] has appealed this penalty to the [Board]. The case is still pending.⁷

* * * *

Additionally, [USVI] attained a PEP level of 67 percent for FFY 2016, which is a 5 percent decrease from the FFY 2015 PEP level of 72 percent. The minimum acceptable level of performance for the PEP is 90 percent or an improvement of 2 to 6 percentage points over the previous year’s level of performance. As a result of this second consecutive finding after the automatic corrective action year, [USVI] will receive a financial penalty of $71,076, equal to 2 percent of [USVI’s] adjusted SFAG for the TANF program for FFY 2014.

Id. at 1-2.

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ACF also noted that, based on the FFY 2016 DRA results, USVI “did not meet the data reliability standard required by 45 CFR 305.1(i) for the data” related to children in USVI born out-of-wedlock during the current year and children in USVI with paternity established or acknowledged during the year. Id. at 2. ACF stated that USVI was “subject to a potential financial penalty in FFY 2018 for failure to submit complete and reliable data for FFY 2016, as required by section 409(a)(8) of the Act and 45 CFR 305.61(a)” and that “[t]he penalty will be assessed if [USVI] has consecutive failures.” Id. (also stating that the potential penalty for FFY 2018 for failure to submit complete and reliable data is $35,540).

USVI appealed ACF’s November 15, 2018 decision to the Board in accordance with 45 C.F.R. §262.7(b)(1). USVI filed a “Notice of Appeal,” a brief in support of its appeal (captioned “Appellant’s Brief” (USVI Br.)), and USVI exhibits A and B (which includes multiple documents).

In its Notice of Appeal, USVI states that it “appeals the assessment of the financial penalty .. . in the amount of $35,540.00 for data that did not meet reliability standards and a penalty of $71,076.00, equal to two (2%) percent of [its] adjusted [SFAG] for failing to achieve an appropriate [PEP] level for FFY 2016.” Notice of Appeal at 1; see also USVI Br. at 3 (stating that ACF assessed a combined total penalty of $106,616).

With respect to the $71,076 penalty for FFY 2016, USVI does not dispute the amount of the penalty as calculated by OCSE or that its FFY 2016 PEP is 67% as ACF stated in its determination. However, USVI informs the Board that, “[i]n 2018, following receipt of the assessed FY 2015 penalty” (meaning the $28,466 penalty for FFY 2015 ultimately upheld in DAB No. 2943), USVI’s Office of Paternity & Child Support conducted a “hand count” of acknowledged paternity cases for FFYs 2014, 2015, and 2016 maintained by USVI’s Office of Vital Records. USVI Br. at 4-5. Thus, as we understand it, USVI is representing that, after it submitted the relevant data in the OCSE-157 forms as required by the applicable deadlines for FFYs 2014, 2015, and 2016, it performed a recount, by hand, in 2018.

According to USVI, the data derived from the 2018 manual count (or re-count) do not reflect negatively on USVI’s performance overall. See id. at 6-7. Although USVI did not submit evidence corroborating its manual count with its appeal, USVI says the data from the 2018 manual count reveal or support the following:

(1) USVI “[s]ufficiently [i]mproved” its PEP level. Id. at 7 (emphasis omitted); see also id. at 8 (stating that its “PEP stats improved well within the prescribed limits”). According to USVI, the PEP levels derived from the 2018 manual count indicate that its PEP increased by four percent from FFY 2014 (71%) to FFY 2015 (75%), though, as noted, it does not dispute that it had a PEP of 67% in FFY 2016. Seeid. at 5, 8.

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(2) There is a “[c]orrelation” between the decline in USVI’s population, driven by an economic downturn, and USVI’s declining birthrate, which USVI says “must be factored in[to] the present assessment.” Id. at 4-5, 7; see also ACF Ex. 2 (DRA report), at 8-9 (discussing, inter alia, USVI’s report of a depressed economy, declining birthrate, and decreased population).

USVI expressly acknowledges that it is attempting to have ACF and the Board now consider the data for multiple years derived from a 2018 manual count, after the due date prescribed in 45 C.F.R. § 305.32(f) for submission of annual data. See USVI Br. at 4, 7 (acknowledging that data derived from the 2018 manual count are “admittedly outside of the prescribed time period”). However, USVI explains the circumstances that occasioned the 2018 manual count. USVI states that before 2013, USVI’s Office of Vital Records regularly provided its Office of Paternity & Child Support and other agencies with an official manual count of children born out of wedlock. Id. at 4. However, as of January 2019, the Office of Vital Records transitioned from a paper-based, manual-count system to an “automated,” electronic system. Id. at 5. USVI reportedly experienced “technical difficulties” associated with the transition and “audit issues” related to USVI’s use of a contractor to facilitate the transition, all of which USVI says adversely affected its ability to “access[ ] the required information within the prescribed time periods.” Id. at 7-8. According to USVI, any differences in the figures initially reported in the OCSE-157 forms and those derived from the 2018 manual count do not negatively reflect on USVI’s “system of recording births and [paternity] acknowledgments,” but rather on the “unique difficulties” USVI encountered during the transition to an electronic system. Id. at 8.

USVI further asserts that “any issues regarding [its PEP] data . . . were of a technical nature and do not impact the level of paternity establishment.” Id. at 6. USVI asks the Board to issue a decision ordering a waiver or a reduction of the penalty. Id. at 9.

In its response brief (submitted with eight exhibits), ACF first maintains that USVI is mistaken in its belief that, in its November 2018 decision, ACF imposed a $35,540 penalty for the failure to meet data reliability standards, clarifying that it had not assessed a $35,540 penalty in that decision. ACF Response Br. at 1 n.1, 7 (stating that the “appeal of the $35,540 penalty related to [USVI’s] lack of data reliability for FFY 2016 is premature”) (underline omitted). With respect to the $71,076 penalty for failure to achieve PEP performance levels, ACF asserts that the penalty is “legally supportable” based on the data USVI submitted on its OCSE-157 forms. Id. at 7-8. ACF states that its finding that USVI failed to meet the PEP requirements for FFY 2016 constituted a second finding that USVI failed to correct the initial deficiency from FFY 2014, thus resulting in an enhanced penalty for FFY 2016 and, further, that USVI performed below the required PEP levels for three years, FFYs 2014, 2015, and 2016. Id. at 6 n.4 (citing Act § 409(a)(8)(B)). ACF also states that “only data submitted on the OCSE-157 forms that are timely submitted, by

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December 31st after the end of the fiscal year, ‘will be used to determine the State’s performance for the prior fiscal year . . . .’” Id. at 8 (quoting 45 C.F.R. § 305.32(f)).

ACF argues that the $71,076 penalty may not be waived because the “disregard provision” under title IV-D does “not apply where a state fails to meet PEP performance standards” and even if USVI’s “failure to achieve the required PEP level could be disregarded,” that failure “would not meet the criteria for waiver of the penalty.” Id. at 11, 13.

The Board gave USVI an opportunity to file a reply brief if it had any disagreement with ACF’s arguments in its response brief. See Board’s Jan. 18, 2019 letter to the parties at 2 (citing 45 C.F.R. § 262.7(d), which provides that a “[s]tate may submit a reply and any supporting documentation within 21 days of its receipt of [ACF’s] reply”). USVI did not use that opportunity.

Analysis

In section I below, we clarify that in its November 2018 decision, ACF indicated only that USVI could be subject to the imposition of a penalty of $35,540 for alleged failure to meet data reliability standards in FFY 2018, not that ACF will impose or has imposed that penalty. To date, the Board has no record of an appeal by USVI of any ACF decision imposing on USVI a $35,540 penalty for FFY 2018 based on alleged failure to submit reliable data. Accordingly, no such matter is now before the Board.

In section II, we address the parties’ arguments concerning the only matter now properly before us: ACF’s imposition of a penalty for FFY 2016, for failure to achieve PEP performance standards. We conclude that ACF had a lawful basis to impose the penalty, which, as we explain in section III, may not be waived or reduced.

I. The only matter before the Board is ACF’s decision to impose a penalty for USVI’s failureto meet PEP performance standards.

USVI states that it appeals the penalty “of $35,540.00 for data that did not meet reliability standards.” Notice of Appeal at 1. USVI thus reads ACF’s November 2018 decision to mean that ACF imposed such a penalty. USVI misapprehends ACF’s decision.

As indicated above, the Act and the regulations authorize the imposition of a penalty on a state that, for two consecutive years, fails to demonstrate with reliable data that it achieved the required level of performance on any performance measure. Thus, a state is subject to a penalty if, for two consecutive years, it fails either to achieve the required level of performance, or to submit reliable data needed to calculate its performance, or both with respect to the same performance measure. See Virgin Islands, DAB No. 2003, at 4; see also 65 Fed. Reg. at 82,192 (“Two consecutive years of failure (either poor data or poor

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performance) in the same performance measure criterion will trigger a penalty imposition.”).

In its November 2018 decision, ACF noted that USVI was “subject to a potential financial penalty in FFY 2018 for failure to submit complete and reliable data for FFY 2016, as required by section 409(a)(8) of the Act and 45 CFR 305.61(a)” and that “[t]he penalty will be assessed if [USVI] has consecutive failures.” ACF Ex. 3, at 2 (emphasis added); see also ACF Response Br. at 1 n.1, 7. ACF wrote:

[T]he penalty will be assessed for quarters following the end of the corrective action year if [USVI’s] data submitted for the FFY 2017 data reliability audit is either incomplete, or unreliable or if the calculated performance does not meet the required level(s) identified in section 452(g) of the Act and 45 CFR 305.40. The amount of the penalty will be equal to $35,540, which is 1 percent of the adjusted [SFAG] for FFY 2016.

ACF Ex. 3, at 2. Thus, ACF notified USVI that it could besubject to such a penalty for FFY 2018 if ACF later determines that USVI had consecutive failures in submitting complete and reliable data, not that it had found consecutive failures or that it had imposed such a penalty.

The parties have not informed the Board of, and the Board has no record of any appeal by USVI concerning, ACF’s imposition of a penalty on USVI for FFY 2018 based on consecutive failures to submit complete and reliable data. Accordingly, the question of whether USVI lawfully may be assessed a penalty for FFY 2018 based on alleged shortcomings in the reliability and completeness of USVI’s data is not ripe for Board resolution. The only matter now before us is ACF’s imposition, in November 2018, of a $71,076 penalty for FFY 2016 for failure to achieve a minimum acceptable level of PEP performance. We turn to this matter in the next section.

II. ACF lawfully imposed a penalty of $71,076 for FFY 2016 for failure to meet PEP performance level requirements.

A. USVI failed to meet PEP performance level requirements based on data USVI submitted in OCSE-157 forms in accordance with 45 C.F.R. § 305.32(f) and which ACF used to determine the authorized penalty.

As set out above, the Act and the regulations authorize ACF to impose funding reduction penalties, which range from one to two percent of the SFAG if the state is found in noncompliance for two consecutive years and increase in subsequent years if ACF finds that the noncompliance still is not corrected. ACF has submitted as exhibits the OCSE-157 forms USVI filed for FFYs 2014, 2015, and 2016, the relevant data from which ACF derived the PEP percentages. See ACF Exs. 5-7. ACF states that USVI’s failure to meet

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the PEP requirements for FFY 2016 constituted the second finding of failure to correct the deficiency from FFY 2014. See ACF Response Br. at 6 n.4 (citing Act §409(a)(8)(B)).

To aid the reader, we present the relevant data from the OCSE-157 forms (ACF exhibits 5-7) in the following chart:

See ACF Ex. 5, at 2; ACF Ex. 6, at 2; ACF Ex. 7, at 2; ACF Response Br. at 8.⁹

USVI does not dispute that the above figures, as reflected in the OCSE-157 forms ACF produced as ACF exhibits 5, 6, and 7, are those that USVI submitted. USVI also does not dispute the accuracy of the percentages of 78%, 72%, and 67% for FFYs 2014, 2015, and 2016, respectively, derived by ACF using the figures USVI submitted in the OCSE-157 forms and in accordance with 45 C.F.R. §305.2(a)(1)(ii) (setting out the statewide PEP).

USVI’s PEP was below 90% in all years. And, since its FFY 2015 PEP was below 90%, USVI was obliged to improve its PEP in FFY 2016 over its PEP in FFY 2015. USVI did

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not improve its PEP in FFY 2016. In fact, the above percentages show a decrease from year to year. In short, USVI failed to meet the PEP performance level requirements.

B. We reject USVI’s attempt to rely on data that it did not submit to ACF in accordance with 45 C.F.R. § 305.32(f), including data purportedly derived from a 2018 manual count (or re-count).

PEP data are to be submitted using OCSE-157 forms by December 31 after the end of the fiscal year and “will be used to determine the State’s performance for the prior fiscal year.” 45 C.F.R. § 305.32(f); 65 Fed. Reg. at 82,184; see also Virgin Islands, DAB No. 2943, at 10 n.9. “Only data submitted as of December 31st will be used to determine the State’s performance for the prior fiscal year . . . .” 45 C.F.R. § 305.32(f). Thus, FFY 2016, for instance, ran from October 2015 through the end of September 2016, and data for that year were due on December 31, 2016.

To the extent USVI now asks the Board to consider any data for FFYs 2014-2016 purportedly derived from a 2018 manual re-count, which had to have occurred after the submission due dates for all three years in accordance with section 305.32(f), that request is, essentially, an improper attempt to circumvent the requirement to submit data to the agency for consideration and to do so by the due dates as prescribed by section 305.32(f). The same could be said about the attempt to use, now, an OCSE-157 form for FFY 2015, which USVI apparently revised to reflect the number “758” in Section B.9 of the OCSE-157 form. See supra note 8; USVI Ex. B.3.c at 2. If USVI disagreed with ACF’s apparent position on appeal that USVI’s certification of the revised OCSE-157 form on December 31, 2015, was not equivalent to submission and wanted to assert that it had in fact submitted the revised version on or before December 31, 2015 (due date), it could have made arguments to that effect in reply. However, as noted, USVI did not use its opportunity to submit a reply brief. And, as also noted, USVI itself repeatedly acknowledges that it now seeks to rely on data that were not submitted timely. See USVI Br. at 4, 7-8.

Furthermore, to the extent USVI asserts in this case that its FFY 2014 PEP was 71% and its FFY 2015 PEP was 75%, we note that this is not USVI’s first attempt to do so. In the earlier case (Docket No. 17-117), USVI asserted, as it does now, that “corrected” data derived from a manual count supported a 71% PEP for FFY 2014 and a 75% PEP for FFY 2015, which the Board construed as an argument that USVI improved its PEP level by 4% between FFY 2014 and FFY 2015. See DAB No. 2943, at 9. However, in the earlier case, as here, USVI merely represented that it submitted “corrected” data, though admittedly late, and did not show that ACF was timely provided or considered such “corrected” data. See id. at 9-10. Nor did USVI “avail itself of the opportunity to offer the Board for its examination any evidence of data that purportedly support such PEP levels.” See id. Thus, the Board rejected USVI’s argument that it improved its PEP level from 71% in FFY

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2014 to 75% in FFY 2015. See id. That determination is administratively final and cannot be challenged here.

Lastly, we also note that, in its brief, USVI appears to represent that an OCSE-157 form reflects a 75% PEP for FFY 2014. See USVI Br. at 5 (chart). USVI has not identified or submitted an OCSE-157 form that would support a 75% PEP for FFY 2014. Possibly, USVI’s reference to a 75% PEP for FFY 2014 (rather than 78%) in its brief is a typographical error. In any case, to be clear, the only OCSE-157 form of record for FFY 2014 (ACF Ex. 5) reflects a higher 78% PEP for FFY 2014. See ACF Ex.5, at 2; see also USVI Br. at 19 (Ex. B).

Based on the foregoing, we reject USVI’s attempt to rely on allegedly “corrected” data that it did not submit to ACF consistent with 45 C.F.R. § 305.32(f), including data USVI purportedly derived from a 2018 manual count.

III. The $71,076 penalty for FFY 2016 may not be waived or reduced.

A. The “disregard” provision is inapplicable.

USVI states that it had “unique difficulties in compiling the needed data when transitioning from a purely manual system to one that is electronic.” USVI Br. at 8. USVI claims that “any issues regarding the data submitted by [USVI] were of a technical nature and do not impact the level of paternity establishment.” Id. at 6. To the extent USVI is implicating the statutory “disregard” provision in section 409(a)(8)(C) of the Act, USVI may not avail itself of this provision here.

Section 409(a)(8)(C) of the Act provides:

(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.

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The implementing regulation at 45 C.F.R. §305.62, captioned “Disregard of a failure which is of a technical nature,” states:

A State subject to a penalty under §305.61(a)(1)(ii) or (iii) of this part may be determined, as appropriate, to have submitted adequate data or to have achieved substantial compliance with one or more IV-D requirements, as defined in §305.63 of this part, if the Secretary determines that the incompleteness or unreliability of the data, or the noncompliance with one or more of the IV-D requirements, is of a technical nature which does not adversely affect the performance of the State’s IV-D program or does not adversely affect the determination of the level of the State’s paternity establishment or other performance measures percentages.

The Board has stated that the above “disregard” provision does not refer to a state subject to a penalty under section 305.61(a)(1)(i) for failure to achieve the specified PEP. Virgin Islands, DAB No. 2943, at 7 (citing Wyoming at 10). The “disregard” provision expressly refers to a state subject to a penalty under either section 305.61(a)(1)(ii) (failure to submit complete and reliable data) or section 305.61(a)(1)(iii) (failure to substantially comply with one or more IV-D requirements, as defined in section 305.63). Id. Thus, the regulations, by which we are bound (45 C.F.R. §16.14), preclude our applying the “disregard” provision to USVI’s penalty for failing to achieve the required PEP performance level.

The Board has also rejected the argument that a failure to achieve the specified PEP is equivalent to a failure to substantially comply with a title IV-D requirement for purposes of the “disregard” provision. The Board explained that “the regulations appear to reflect ACF’s interpretation that the disregard provision does not apply to a failure to meet PEP performance levels,” and opined that such an interpretation was reasonable, for two reasons. Wyoming at 11. First, section 409(a)(8)(A) of the Act distinguishes a failure to “substantially comply with 1 or more of the requirements in part D” from a data failure or a failure to meet performance measures. The disregard provision at section 409(a)(8)(C) lists only “failures to substantially comply with 1 or more of the requirements in part D” when identifying bases for disregarding noncompliance of a technical nature, and data failures, with no reference to performance measures. Id. Second, the Board noted that the lead-in language of section 409(a)(8)(C) refers only to a determination “as a result of an audit,” but a penalty for failure to meet a PEP level may be the result of either an audit or a state’s own report of its PEP level on the OCSE-157 form, such that the limitation to audit result determinations does not support an argument that PEP performance measures were all intended to be included in the “disregard” option. Id. Thus, the statutory language can reasonably be read as not encompassing performance measure failures.

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The FFY 2016 penalty at issue in this case concerns whether USVI met required PEP performance measures, not whether it met data reliability standards. Accordingly, USVI may not avail itself of the “disregard” provision. Moreover, section 305.62’s “disregard” provision limits its application to either data failure (which is not the case here with respect to FFY 2016) or a failure to comply substantially with IV-D requirements as set out in section 305.63, which, in turn, does not treat failure to meet a specified PEP level as a failure to substantially comply with one or more IV-D requirements.¹⁰ In any case, USVI makes no argument as to why its failure to meet the PEP performance measure in FFY 2016 nevertheless is or should be treated as a failure to comply substantially with IV-D requirements so as to implicate the applicability of the “disregard” provision in section 409(a)(8)(C) of the Act or 45 C.F.R. §305.62.

Accordingly, we conclude that the “disregard” provision does not apply to USVI’s failure to achieve the PEP performance measure in FFY 2016. No waiver or reduction of the penalty may be permitted by applying the provision.

B. USVI’s remaining arguments raise no legally permissible grounds for overturning ACF’s lawful imposition of the penalty.

In its appeal, USVI stated that “the audit upon which the penalty was based failed to include data, apparently at the auditor’s discretion, leading to a variance between the prior year and the audited year,” but did not explain what it meant by this statement. Notice of Appeal at 1. USVI does not explain what, if anything, the audit allegedly omitted and how, if at all, any such omission contributed to a “variance” between FFY 2015 and FFY 2016, the audited year. That aside, importantly, USVI’s statement about the audit appears to disregard that the matter or issue before us is not the audit itself,¹¹ but whether ACF lawfully imposed a penalty for FFY 2016 for failure to meet PEP performance measures.

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As we explained in detail earlier, based on the percentages derived from the PEP data that USVI itself submitted in OCSE-157 forms, ACF lawfully imposed a penalty. Furthermore, since USVI urges us to overturn or reduce the penalty based on USVI’s own revised data and percentages, purportedly derived after the audit, we fail to see how an unexplained, unsubstantiated statement about the audit serves USVI.

USVI also states, “No notice was ever given to [USVI] that data would be excluded or that a certain percentage in variance would result in an automatic finding of unreliability, which could subject it to penalties,” which left USVI “without an opportunity to take corrective action.” Id. USVI does not explain in its brief what it means by this statement. USVI does not show that ACF “excluded” any relevant data or that it made an “unreliability” determination that could be germane to the issue at hand: whether ACF lawfully imposed a penalty for FFY 2016 based on USVI’s performance as measured by the PEP.

Furthermore, we note that USVI had both legal and actual notice that it would be subject to a penalty for failing to meet PEP performance standards. In its July 6, 2017 letter to USVI, ACF explained that USVI did not meet PEP standards in FFY 2014 and FFY 2015, the latter being the “automatic corrective action year”; that, as a result of the consecutive failures, ACF was imposing a penalty for FFY 2015; and that “the penalty will continue to be assessed . . . until [USVI] . . . achieve[s] the required performance levels . . . .” ACF Ex. 1, at 1-2; see also ACF Ex. 3, at 1-2 (discussing the penalty imposed for FFY 2016 for failure to meet PEP performance standards in consecutive years, FFY 2015 and FFY 2016, and explaining that a penalty will be assessed if PEP performance does not improve). USVI had legal notice through the provisions in Titles IV-A and IV-D of the Act and the regulations in 45 C.F.R. Part 305. Contrary to USVI’s assertions, 45 C.F.R. Part 305 provides for a corrective action year and USVI had until December 31, a full quarter after the end of each fiscal year, to submit corrected data for that year. See 45 C.F.R. §§ 305.66, 305.61, 305.32(f).

Referring to the closure of a refinery “followed by the economic downturn that hit [USVI] particularly hard,” USVI states that its population is continuing to decline and that “[c]orrelation with the decline in birthrate is evidence and must be factored into the present assessment.” USVI Br. at 7. It is conceivable that there could be a correlation between economic decline and a decline in population which, in turn, could result in fewer births, regardless of whether births were out-of-wedlock. However, USVI does not explain how, specifically, these trends and developments affected or could affect the statewide PEP itself, which is a percentage derived from the number of minor children born out of wedlock for whom paternity has been established or acknowledged during the fiscal year divided by the number children born out of wedlock during the preceding fiscal year. If, as a consequence of the imposition of a penalty, USVI has an added burden to already-existing financial constraints due to factors like economic depression, the Board would not be able to take that into consideration to overturn or reduce the penalty in the absence of

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authority to so, of which USVI identifies none. See Indiana, DAB No. 2001, at 25 (citing Latino Resource Org., DAB No. 1974, at 6-7 (2005) and stating that the Board cannot consider, for instance, financial hardship unless the applicable authorities permit the Board to consider it). If the law and regulations authorize ACF to impose the penalty and we determine that ACF lawfully imposed the penalty, as here, then we must uphold ACF’s decision.

To the extent USVI’s discussion of the difficulties it experienced during the transition from a manual system to an electronic system could be considered as an argument for equitable reduction or waiver of the penalty, the Board, being “bound by all applicable laws and regulations,” 45 C.F.R. §16.14, is not authorized to grant equitable remedies. Accordingly, we may not order ACF to waive or reduce the penalty for failure to meet the required PEP level for equity reasons where, as here, the applicable law and regulations authorize the penalty. See Virgin Islands, DAB No. 2943, at 10 (citing Camden Cnty. Council on Econ. Opportunity, DAB No. 881, at 7-8 (1987) (“The Board is bound by all applicable laws, and cannot invent equitable remedies without a basis in law.”)).

Conclusion

The Board sustains the penalty of $71,076 for FFY 2016.

Endnotes

¹ The current version of the Act can be found at http://www.socialsecurity.gov/OP_Home/ssact/ssact-toc.htm.
Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section. Cross-reference tables for the Act and the United States Code can be found at http://uscode.house.gov/table3/1935_531.htm and https://www.ssa.gov/OP_Home/comp2/G-APP-H.html.

² The title IV-D regulations refer to the Office of Child Support Enforcement, but we refer to ACF herein since it is the respondent federal agency. We note, moreover, that, for purposes of the title IV-A TANF and the title IV-D child support enforcement programs, the term “state” includes the U.S. Virgin Islands. See Act §1101(a)(1); 45 C.F.R. §§260.30, 301.1; Virgin Islands, DAB No. 2003, at 2-3. ACF (through OCSE) evaluates a state’s administration of its title IV-D child support enforcement program by reviewing, as relevant here, the state’s “paternity establishment percentage,” or “PEP,” which, simply put, reflects established or acknowledged paternity of children born out of wedlock. We will discuss the PEP in more detail later.

³ The IV-D PEP is the alternative measurement. See Act § 452(g)(2)(A); 45 C.F.R. §305.2(a)(1)(i). The IV-D PEP is a ratio, expressed as a percentage:

Total # of Children in IV-D Caseload in the Fiscal Year or, at the option of the State, as of the end
of the Fiscal Year who were Born Out-of-Wedlock with Paternity Established or Acknowledged
Total # of Children in IV-D Caseload as of the end of the preceding Fiscal Year who were Born Out-of-Wedlock

45 C.F.R. § 305.2(a)(1)(i). We need not further discuss the IV-D PEP because USVI did not use it and it is not at issue here.

⁴ A blank form OCSE-157, OMB No. 0970-0177, approved by the OMB for use through March 31, 2025, and the instructions for completing form OCSE-157 are accessible through the following link:
https://www.acf.hhs.gov/css/form/ocse-157-child-support-enforcement-annual-data-report-form-and-instructions.

⁵ A federal fiscal year begins on October 1 of one year and ends on September 30 of the next year. See 45 C.F.R. § 305.32(a). FFY 2016, at issue here, ran from October 1, 2015 through September 30, 2016. Thus, in accordance with section 305.32(f), relevant PEP data for FFY 2016 were due by December 31, 2016.

⁶ ACF’s OCSE issued the November 15, 2018 decision, but we will refer to the decision as ACF’s decision.

⁷ On November 15, 2018, when ACF issued its decision that is now on appeal, the Board’s decision in the case concerning the penalty imposed for FFY 2015 for failure to meet PEP standards (Appellate Division Docket No. A-17-117) was pending. On May 23, 2019, the Board issued its decision in Docket No. A-17-117. U.S. Virgin Islands, DAB No. 2943 (2019). In DAB No. 2943, the Board upheld ACF’s imposition of a penalty of $28,466 for FFY 2015, for USVI’s failure to achieve either a 90% PEP level in FFY 2015, or the required minimum improvement in its PEP from FFY 2014 to FFY 2015. Id. USVI did not ask the Board to reconsider DAB No. 2943; we are not aware of an appeal of DAB No. 2943 for judicial review. Thus, the Board’s decision in DAB No. 2943 is administratively final and not subject to further review.

⁸ ACF informs the Board that USVI initially submitted its OSCE-157 form for FFY 2015 (ACF Ex. 6) on October 30, 2015, and ACF accepted it. See ACF Response Br. at 8 n.5. However, on appeal, USVI apparently attempts to rely on a different OCSE-157 form for FFY 2015, because it submitted another one which shows “758” in Section B.9 for “Children in the State with Paternity Established or Acknowledged during the Year,” which would yield a 75% PEP (using 758/1006). See USVI Ex. B.3.c at 2; compare USVI Ex. B.3.c at 2 with ACF Ex. 6, at 2. ACF informs the Board that its tracking system showed that USVI certified the “revised” OCSE-157 form showing “758” in Section B.9 on December 30, 2015, but did not actually submit the document to ACF for review; thus, ACF did not accept the document. ACF Response Br. at 8 n.5 (citing ACF Ex. 8, at 1). We understand ACF to be taking the position that, with respect to the OCSE-157 form for FFY 2015, it relied on the one submitted on October 30, 2015, and accepted by ACF, which is now before the Board as ACF exhibit 6. We also note that, in its brief, USVI refers to a revision date of “12/31/16” for the FFY 2015 data (USVI Br. at 4 (stating, “(As revised 12/31/16)”), but does not explain the meaning of this reference or offer evidence of revision purportedly made on December 31, 2016. Even if the number of children with paternity established or acknowledged were 758, this would not materially change the analysis because the PEP for FFY 2015 (adjusted to 75%) would still be below the PEP for FFY 2014 (78%).

⁹ In the case docketed under A-17-117, which arose from USVI’s appeal of ACF’s imposition of a penalty for FFY 2015 for failure to meet the PEP performance standards, ACF determined that USVI’s PEP for FFY 2014 was 78% and that its PEP for FFY 2015 was 72%. See DAB No. 2943, at 5.

¹⁰ The Board noted that, for some purposes, the failure to achieve a specified PEP level may be treated as a failure to substantially comply with IV-D requirements. For instance, section 452(g)(1) of the Act provides that, to be substantially compliant with IV-D requirements, a state must meet specified PEP levels. The Board also noted, however, that the disregard provision “limits application of the disregard to either a data failure or a failure to comply substantially ‘as defined in section 305.63,’” which, “in turn, does not treat failure to meet the required PEP performance level as a failure to substantially comply with one or more IV-D requirements.” Wyoming at 10 (emphasis on the word “not” removed here). Section 305.63, the Board further noted, includes a standard for provision of required IV-D services such as establishment of paternity, but the substantial compliance standard is different from the performance levels established for the PEP and uses a measure different from the PEP and, specifically, that section 305.63(c) contains a standard that requires provision of numerous types of IV-D services (including establishment of paternity) in 75% of the cases reviewed in an audit. In contrast, the PEP measures only the program’s success during the year in having paternity established or acknowledged for either all children born out of wedlock in the state (statewide PEP) or all title IV-D children born out of wedlock (IV-D PEP). Moreover, the required PEP level is either 90% or a specified percentage increase, and a state’s success in achieving the level may be determined on the basis of either a state’s report or an audit. Id. at 10-11 n.3.

¹¹ The Board reviews the agency’s decision (here, ACF’s November 15, 2018 imposition of a penalty for failure to meet PEP performance measures) to determine whether the agency’s decision is grounded in law and fact, not the conduct of the audit itself. See Neb. Dep’t of Health and Human Servs., DAB No. 3071, at 7 n.7 (2022) (and cited Board decisions).