IMPROVED CALCULATION OF WORK PARTICIPATION RATES AND PROGRAM INTEGRITY.

SEC. 7102. IMPROVED CALCULATION OF WORK PARTICIPATION RATES AND PROGRAM INTEGRITY.(a) Recalibration of Caseload Reduction Credit.—(1) In general.—Section 407(b)(3)(A) (42 U.S.C. 607(b)(3)(A)) is amended—(A) in clause (i), by inserting “or any other State program funded with qualified State expenditures (as defined in section 409(a)(7)(B)(i))” after “this part”; and(B) by striking clause (ii) and inserting the following:“(ii) the average monthly number of families that received assistance under any State program referred to in clause (i) during fiscal year 2005.”.(2) Conforming amendment.—Section 407(b)(3)(B) (42 U.S.C. 607(b)(3)(B)) is amended by striking “and eligibility criteria” and all that follows through the close parenthesis and inserting “and the eligibility criteria in effect during fiscal year 2005”.(b) Inclusion of Families Receiving Assistance Under Separate State Programs in Calculation of Participation Rates.—(1) Section 407 (42 U.S.C. 607) is amended in each of subsections (a)(1), (a)(2), (b)(1)(B)(i), (c)(2)(A)(i), (e)(1), and (e)(2), by inserting “or any other State program funded with qualified State expenditures (as defined in section 409(a)(7)(B)(i))” after “this part”.(2) Section 411(a)(1) (42 U.S.C. 611(a)(1)) is amended—(A) in subparagraph (A), by inserting “or any other State program funded with qualified State expenditures (as defined in section 409(a)(7)(B)(i))” before the colon; and(B) in subparagraph (B)(ii), by inserting “and any other State programs funded with qualified State expenditures (as defined in section 409(a)(7)(B)(i))” after “this part”.(c) Improved Verification and Oversight of Work Participation.—(1) In general.—Section 407(i) (42 U.S.C. 607(i)) is amended to read as follows:“(i) Verification of Work and Work-Eligible Individuals in Order To Implement Reforms.—“(1) Secretarial direction and oversight.—“(A) Regulations for determining whether activities may be counted as ‘work activities’, how to count and verify reported hours of work, and determining who is a work-eligible individual.—“(i) In general.—Not later than June 30, 2006, the Secretary shall promulgate regulations to ensure consistent measurement of work participation rates under State programs funded under this part and State programs funded with qualified State expenditures (as defined in section 409(a)(7)(B)(i)), which shall include information with respect to—“(I) determining whether an activity of a recipient of assistance may be treated as a work activity under subsection (d);“(II) uniform methods for reporting hours of work by a recipient of assistance;120 STAT. 137“(III) the type of documentation needed to verify reported hours of work by a recipient of assistance; and“(IV) the circumstances under which a parent who resides with a child who is a recipient of assistance should be included in the work participation rates.“(ii) Issuance of regulations on an interim final basis.—The regulations referred to in clause (i) may be effective and final immediately on an interim basis as of the date of publication of the regulations. If the Secretary provides for an interim final regulation, the Secretary shall provide for a period of public comment on the regulation after the date of publication. The Secretary may change or revise the regulation after the public comment period.“(B) Oversight of state procedures.—The Secretary shall review the State procedures established in accordance with paragraph (2) to ensure that such procedures are consistent with the regulations promulgated under subparagraph (A) and are adequate to ensure an accurate measurement of work participation under the State programs funded under this part and any other State programs funded with qualified State expenditures (as so defined).“(2) Requirement for states to establish and maintain work participation verification procedures.—Not later than September 30, 2006, a State to which a grant is made under section 403 shall establish procedures for determining, with respect to recipients of assistance under the State program funded under this part or under any State programs funded with qualified State expenditures (as so defined), whether activities may be counted as work activities, how to count and verify reported hours of work, and who is a work-eligible individual, in accordance with the regulations promulgated pursuant to paragraph (1)(A)(i) and shall establish internal controls to ensure compliance with the procedures.”.(2) State penalty for failure to establish or comply with work participation verification procedures.—Section 409(a) (42 U.S.C. 609(a)) is amended by adding at the end the following:“(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.”.(d) Effective Date.—The amendments made by subsections (a) and (b) shall take effect on October 1, 2006.120 STAT. 138