[Federal Register Volume 59, Number 12 (Wednesday, January 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-613]
[[Page Unknown]]
[Federal Register: January 19, 1994]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 272, 273, 276 and 277
[Amdt. No 342]
RIN 0584-AB08
Food Stamp Program: Recipient Claims and Automated Data
Processing (ADP) Funding Requirements
AGENCY: Food and Nutrition Service, USDA.
ACTION: Final rule.
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SUMMARY: This rulemaking implements provisions of the Mickey Leland
Memorial Domestic Hunger Relief Act. The Act amends the timeframe for
household election of a repayment method for intentional Program
violation (IPV) claims, changes retention rates on food stamp recipient
claims for State agencies and reduces the enhanced funding rate for the
costs of planning, designing, developing and installing ADP and
information retrieval systems. This rule also implements a provision of
the Food, Agriculture, Conservation, and Trade Act Amendments of 1991,
relating to household election of repayment method for inadvertent
household error (IHE) claims. This rule also implements a change to ADP
requirements which limits enhanced funding requests for automated
systems to initial development of a ``complete'' system and corrects
errors made in previously published regulations relating to recipient
claims and enhanced ADP funding. In addition, this rule clarifies
exceptions to requirements to provide notice of adverse action when an
allotment is reduced to recoup a recipient claim and clarifies the
Federal funding rate allowed for preparation of a Planning Advance
Planning Document (PAPD). Finally, this rule gives State agencies, at
their request, the option to make payment by check for FNS-209 amounts
due FNS, and to have payments due from FNS to the State made by check
in place of amending the States' letter of credit.
Section 13961 of the Omnibus Budget reconciliation Act of 1993
(OBRA), (Public Law 103-66), Signed August 10, 1993, reduces the
federal reimbursement rate for development of automated data processing
and information retrieval systems development to the standard 50
percent Federal reimbursement level effective April 1, 1994. During the
last week of October 1993 and the first week of November 1993, the
Department issued a memorandum which briefed States on the details of
this change in the law. The memorandum will be followed by conforming
regulations which will be effective April 1, 1994.
DATES: 7 CFR 273.18(d)(4)(ii) is effective retroactive to November 28,
1990. 7 CFR 273.18(d)(4)(i) is effective December 13, 1991. 7 CFR
273.18(h) and (i) are effective October 1, 1990. 7 CFR 277.4(b)(11) and
(b)(12), 277.18(b), (c)(1) introductory text, (c)(1)(ii), (d)(1)(ii),
(g) heading, (g)(1), (g)(2) and (g)(5) introductory text, (g)(2)(ii),
(g)(3), (g)(6), (g)(7), (g)(8) introductory text, (g)(8)(iv), and
(p)(5), and part 277, appendix A, paragraph B(1) are effective October
1, 1991. All remaining amendments are effective February 18, 1994.
FOR FURTHER INFORMATION CONTACT: John Knaus, Chief, Quality Control
Branch, Program Accountability Division, Food and Nutrition Service
(FNS), USDA, 3101 Park Center Drive, Alexandria, Virginia 22302, (703)
756-2474.
SUPPLEMENTARY INFORMATION:
Classification
Executive Order 12866/Secretary's Memorandum 1512-1
This final rule is issued in conformance with Executive Order
12866.
Executive Order 12372
The Food Stamp Program is listed in the Catalog of Federal Domestic
Assistance under No. 10.55l. For the reasons set forth in the final
rule and related notice to 7 CFR 3015, subpart V (48 FR 29115), this
Program is excluded from the scope of Executive Order 12372 which
requires intergovernmental consultation with State and local officials.
Executive Order 12778
This rule has been reviewed under Executive Order 12778, Civil
Justice Reform. This rule is intended to have preemptive effect with
respect to any state or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect
unless so specified in the ``Effective Date'' section of this preamble.
Prior to any judicial challenge to the provisions of this rule or the
application of its provisions, all applicable administrative procedures
must be exhausted.
Regulatory Flexibility Act
This action has been reviewed with regard to the requirements of
the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat. 1164,
September 19, 1980). George Braley, Acting Administrator of the Food
and Nutrition Service, has certified that this rule does not have a
significant economic impact on a substantial number of small entities.
This rule will affect recipients who must elect a repayment method for
IPV claims. State and local agencies which administer the Food Stamp
Program will be affected by the change in retention rates on food stamp
recipient claims and the reduction in the enhanced funding rate for
development of ADP system.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.
3507), the reporting and recordkeeping burden associated with the
Notice of Adverse Action and the demand letter for recipient claims is
approved by the Office of Management and Budget (OMB) under OMB number
0584-0064. The reporting and recordkeeping burdens associated with the
collection of claims assessed against food stamp households have been
approved by OMB under OMB number 0584-0069. Information collection
requirements relating to automated data processing and information
retrieval systems have been approved by OMB Approval No. 0584-0083. The
provisions of this rule do not contain any additional reporting and/or
recordkeeping requirements subject to OMB approval.
Background
On September 10, 1991, the Department published in the Federal
Register (56 FR 46127) a Notice of Proposed Rulemaking (NPRM) which
proposed changes to Food Stamp Program recipient claims and ADP funding
requirements as required by the Mickey Le Lano Memorial Hunger Relief
Act, Pub. L. 101-624, (hereinafter ``Pub. L. 101-624''). The Department
received 21 comment letters which addressed provisions of the proposed
rule. FNS has given careful consideration to all comments received. The
major concerns of the commenters are discussed below.
Recipient Claims
Repayment Decision Timeframe
The proposed rule would have shortened the time for participating
households to choose how they would repay inadvertent household error
(IHE) and intentional Program violation (IPV) claims in order to
forestall involuntary reduction of their allotments. The timeframe for
such elections would have been shortened from 30 days to the day of
receipt of the demand letter for repayment unless the adverse action
period for the claim had not elapsed or the household had timely
requested a fair hearing and continued benefits. Public Law 101-624
mandates the shortened timeframe for IPV claims. The proposed rule
would have also applied this timeframe to IHE claims. The preamble to
the proposed rule should be consulted for the complete discussion of
the background of this decision.
We received 13 comments on this part of the proposed rule, 10 from
State agencies, one from the welfare department of a large city, and
two from public interest groups. Five State agencies supported the
proposal; most other commenters objected to it, primarily because it
applied the shortened timeframe to IHE claims.
One commenter stated that since the statute spoke only to IPV
claims, applying the ``same day'' decision timeframe to IHE claims was
against the law. Several commenters objected to the proposal on the
grounds that the shortened decision timeframe for IHE claims would
cause hardship on households, especially those in rural areas, and was
in any event too short to allow adequate time for due process. Two
commenters objected to our statement that the proposal would enhance
conformity with Aid to Families with Dependent Children (AFDC) rules on
claims management. Several commenters stated that if it were
established for either IHE or IPV claims, the ``same day'' standard
would impose significant operational problems on State agencies, and
that a 10-day minimum should be adopted for both types of claims. One
of the operational difficulties cited was the need to track responses
due at varying intervals because of the consideration of such
circumstances as geography. One commenter believed that the proposed
rule required a fair hearing on IPV claims in addition to an
administrative disqualification hearing or comparable action
establishing such claims.
In section 911 of Public Law 102-237, which was signed December 13,
1991, Congress resolved this issue by providing that for an IHE claim,
``the household shall be given notice permitting it to elect another
means of repayment [other than allotment reduction] and given 10 days
to make such an election before the State agency commences action to
reduce the household's monthly allotment.'' The Department understands
by this language that no action to reduce the household's monthly
allotment may be taken by the State agency until the eleventh day
following the household's receipt of notice of the IHE claim.
Typically households first receive notice about IHE claims through
the mail in demand letters. Consequently, there is no practical way to
determine exactly when households receive such notices and, in turn,
the eleventh day afterwards. There is also the problem of allowing for
return mail time. This rule provides that within 20 days of the date of
the demand letter, households must notify State agencies of their
choice of repayment method or be deemed to have elected allotment
reduction. This timeframe should allow for the newly required 10-day
decision timeframe and adequate mail time, five days for delivery to
households and five days for household return mail to State agencies.
As discussed below, the provision is restated to deal with IHE and
IPV claims separately and to clarify that the timeframe for the IHE
claim repayment decision relates both to initial demand letters and to
demand letters following fair hearings which sustain IHE claims.
Finally, to take account of demand letters which may be handed to the
household, the language makes clear that the 20-day period begins on
the date the demand letter is mailed or otherwise delivered to the
household.
Several commenters objected to the statement in the preamble to the
proposed rule to the effect that the claim itself was the adverse
action, not the collection action. (This statement was made in
connection with exempting the initiation of allotment reductions from
the adverse notice requirements when households have been provided
notice about appeal rights on the underlying claim. That proposal is
discussed later in this preamble.) The Department would like to clarify
this matter. Current rules require that households be provided specific
information about their rights to appeal recipient claims. Once this
information is provided, if a fair hearing is requested and a
determination to sustain the claim is made, the household's remaining
decision is how it will pay the claim. Making that decision should take
relatively little time. To clarify how this policy applies to IHE
claims, the final rule provides that in cases of IHE claims, if a fair
hearing sustains the claim, the household must notify the State agency
of its election of repayment method within 20 days of receipt of the
notice of the hearing decision or be deemed to have elected allotment
reduction.
With respect to IPV claims, the final rule provides that households
must elect a method of repayment on the date of receipt of the demand
letter required by 7 CFR 273.16(e)(9), 7 CFR 273.16(f)(3) and (g)(3) of
current rules (or if the date of receipt is not a business day, on the
next business day) or be deemed to have elected allotment reduction.
The final rule requires that for an IPV claim, the first claim demand
letter following an action which establishes the claim, inform the
household about this timeframe for election of a method of repayment
and the consequence of failing to meet it. This is intended to clarify
that the timeframe for electing a repayment option begins with the
demand for repayment.
The final rule also provides that each State agency must, for IPV
claims, determine a deadline for the return of completed election forms
in order to determine if the election is timely. The Department does
not expect State agencies to set such deadlines case by case. State
agencies should establish uniform timeframes for responses to demands
for repayment of IPV claims, if necessary allowing for situations such
as mail time to and from remote areas. The final rule states that the
deadline cannot exceed 10 days from the date that the demand letter is
mailed or otherwise delivered to liable households. The time period is
set at a maximum of 10 days because the law requires a ``same day''
decision from households and a relatively short response time is
appropriate to that statutory requirement.
In addition to these changes, to accommodate the different
requirements for IHE and IPV claims relating to repayment decisions,
the final rule treats IHE and IPV claims in separate sections.
Furthermore, since recoupment is a method of collection which is used
only for participating households, when appropriate, the final rule
refers to ``participating households.'' In 7 CFR 273.18(d)(4), which
contains the policies on repayment decision timeframes, the heading is
changed to ``Further collection actions'' since that more accurately
describes the material in the paragraph. Also, because IHE and IPV
claims are treated in separate subparagraphs, the first sentence of
paragraph (4)(i) of the proposed rule has been deleted to eliminate
potential confusion. This deletion also eliminates the redundant phrase
``do not respond timely or fail to respond.''
The Department was concerned that a significant number of
commenters believed that in reducing the time for electing repayment
for IHE claims the proposed rule would also have abridged the right to
appeal the claim. Consequently, in addition to treating IHE and IPV
claims separately, the final rule sets forth requirements for the
content of the initial demand letter for IHE claims separately from the
content of a demand letter for IHE claims which are sustained by fair
hearings. An initial IHE demand letter needs to inform the household
that it has an option of timely electing a repayment method or
requesting a fair hearing. A demand letter provided after a hearing
decision which sustains the claim would not offer the hearing option.
Similarly, the first demand letter for an IPV claim can only be issued
following an administrative disqualification hearing or other action
which establishes an IPV claim. The rule adds a phrase to clarify this
point.
In response to other comments, the final rule makes several other
changes with respect to the required content of the demand letter for
IHE and IPV claims. One commenter recommended that the proposed list of
repayment methods in 7 CFR 273.18(d)(3)(iii) be expanded to include
repayment in coupons. However, a full list of repayment methods is
already contained in 7 CFR 273.18(g). Paragraph (d)(3)(i) of that
section already requires that the demand letter inform the household of
these methods of repayment. Consequently, in addition to being
incomplete, the proposed list in paragraph (d)(3)(iii) is redundant,
and so the final rule deletes it.
Another commenter pointed out that we do not require that the
demand letter inform households when recoupment would begin and the
amount of benefits the household would then receive. The Department
believes that it would be useful to include this information in the
demand letter. Current rules at 7 CFR 273.18(g)(4) require that prior
to reduction State agencies inform households about the effect of
recoupment on their benefits. Consequently, the final rule provides
that, unless the State agency has otherwise informed the household what
its allotment would be net of the reduction for repaying the claim, it
provide that information in the demand letter.
Current rules at 7 CFR 273.12(c)(2) provide that decreases in
benefits must be made effective no later than the month following the
lapse of the adverse notice period. Consistent with this general policy
and the required timeframe for election of a repayment method, the
final rule provides that the initial demand letter for IHE claims must
inform the household that the reduction will begin with the first
allotment issued after the household either timely elects allotment
reduction or, if it fails to make a timely election, with the first
allotment issued after the expiration of the time for its election.
Demand letters provided subsequent to a fair hearing sustaining an IHE
claim must inform the household that if it fails to make a timely
election, allotment reduction will begin with the first allotment
issued after timely notice of such election is due to the State agency.
Another commenter on this paragraph recommended that we be more
specific about the acceptable ways for households to communicate their
decisions about repayment. The Department is not aware of any
operational difficulties with how State agencies and households
currently communicate about claims collections. Current rules at 7 CFR
273.15(h) provide that requests for fair hearings may be oral or in
writing so long as they are clear and if they are not, State agencies
may ask households for clarification. The Department encourages State
agencies to apply this standard to communications concerning elections
of repayment methods. Consequently, the final rule does not specify
ways households must communicate elections about repayment methods.
The proposed rule would have amended 7 CFR 273.13(b) which lists
exemptions from notices of adverse action. As mentioned earlier in this
preamble, the proposed rule would have added situations where the State
agency initiates allotment reduction against a household which has been
provided notice of its appeal rights for the underlying claim to the
list of exemptions. No commenter objected to this action or indicated
the need for clarification. Consequently, the final rule adopts the
language as proposed in 7 CFR 273.13(b)(14). Several commenters did
remark about an associated statement in the preamble which was that the
claim itself was the adverse action, not the collection action. The
Department believes that the changes in this final rule clarify that
statement. Households are due notice of specific appeal rights
regarding claims such as how the claim arose, the information on which
the claim is based, how the amount of the claim was calculated and the
right to contest the claim. Once those due process requirements have
been met and the claim has been established, State agencies are
expected to proceed to collection activities without additional notices
of adverse action.
Technical Corrections to Current Rules
The Department used the proposed rule to correct two errors in 7
CFR 273.18(d)(3) of current rules which resulted from the final
Administration-Management rule published February 22, 1990 (55 FR
6233). The first correction clarified that a notice of adverse action
is required when a claim is not established in a fair hearing. It
deleted the phrase which limited this requirement to those
circumstances where ``the amount of the claim'' had not been
established. The one comment received on this matter was from a State
agency which indicated it was already in compliance with the broader
requirement. Consequently, the final rule adopts the language as stated
in the proposed rulemaking.
The second correction reinstated a provision in 7 CFR
273.18(d)(4)(iii) allowing other methods of collecting claims for IHE
and State agency error claims. A commenter objected on the grounds that
the law does not authorize other collection methods for IHE claims.
However, section 13(b)(2)(B) of the Food Stamp Act of 1977 (7 U.S.C.
2022(b)(2)(B)) does authorize such collection action for IHE claims.
Accordingly, the final rule adopts the language as stated in the
proposed rulemaking.
State Agency Retention of Claims Against Households
The proposed rule would have reduced the recipient claims retention
rate for State agencies from 50 percent to 25 percent for IPV claims
and from 25 percent to 10 percent for IHE claims. The proposed rule
further specified that the new rates are effective for the period
beginning October 1, 1990 and ending September 30, 1995. Beginning
October 1, 1995 the old rates of 50 percent for IPV claims and 25
percent for IHE claims will again take effect. The proposed rule also
would have allowed State agencies the opportunity to submit a one-time
request for any additional amount due under the old, higher retention
rates by November 30, 1991. Four comments were received on this
section.
As explained in the proposed rule, the Department had previously
directed State agencies to implement the new retention rates for
reporting and payment purposes. This was done in order to comply with
the Act and to minimize the need for revised reporting on the Form FNS-
209, Status of Claims Against Households. Effective with the first
quarter Fiscal Year 1991 FNS-209 report, the Department has been
recovering funds from State agencies at the new retention rates in
accordance with the Act. The Department had also previously advised
State agencies of the procedure for requesting any additional retention
due on collections received prior to October 1, 1990 and the deadline
for filing such requests.
One State and one local agency felt that the retention rates should
be restored to their former levels. The commenters indicated that the
higher retention rates in effect prior to October 1, 1990 were a
significant incentive for States to pursue the collection of Food Stamp
Program claims and felt that the new lower retention rates could result
in a loss of State or local support for collection and fraud control
activity. The local agency stated that it used the money to help
administer the fraud control program and that the cutback would hamper
the county's effort to locate and prosecute food stamp fraud. The new
retention rates were mandated in the Act and do not involve
Departmental discretion. Since the retention rates are mandated by law,
the final regulation retains the new retention rates as specified in
the proposed rule.
Two State agencies commented on the procedure in the proposed rule
of claiming only the new retention rates on the FNS-209 and filing an
adjustment request for any additional retention amount due the State
agency. The proposed rule provided that a one-time request to claim the
higher rates for transactions occurring on or after October 1, 1990 but
involving collections received prior to October 1, 1990, may be filed
with the Department after Fiscal Year 1991 but no later than November
30, 1991. One State agency believed that States should be given the
option of using the old, higher retention rates on the FNS-209 if they
can identify those collections, or the lower retention rates if it is
in the State's best interest. The commenter felt that States should not
be burdened with requesting and justifying higher retention rates in a
special request if their systems are able to identify those collections
that qualify. Another State agency recommended that there be no time
limitation to filing a request and that States should continue to
receive the higher retention amount due under the higher rates in
effect prior to October 1, 1990 if all other conditions are met.
The Department is not adopting the suggestion to allow State
agencies to claim higher retention rates for collections received prior
to October 1990 on the FNS-209 rather than requiring submission of an
adjustment request. The FNS-209 and the FNS automated system which
supports State reporting are structured to recognize one retention
percentage for each type of claim. Edit checks are designed to detect
mathematical errors and inadvertent under- or over-retention for each
claims category prior to the Department accepting the report. Instead
of redesigning the FNS-209 and the automated system, the Department is
permitting State agencies to claim for the additional retention by
submitting an adjustment request after the end of the fiscal year.
The Department is also not adopting the suggestion to eliminate the
time limitation for filing a request for retention adjustment, but has
decided to allow State agencies an additional year to claim any
additional retention. The proposed rule allowed a one-time request for
retention adjustment and specified a deadline of November 30, 1991 for
filing the request. In October 1992, the Department advised State
agencies that it would allow a second round of adjustment requests
after Fiscal Year 1992 which must be filed no later than November 30,
1992. Accordingly, the final rule allows State agencies to submit a
first time request (if they have not previously done so), or second
request for additional retention which must be filed no later than
November 30, 1992. The Department believes the additional year should
be sufficient time for any adjustments, transfers, and refunds of
collections received in Fiscal Year 1990 or earlier to be adjusted and
claimed by State agencies at the old, higher retention rates.
The Department is also using this opportunity to update the
reference in the proposed rule concerning amending the States' letter
of credit for FNS-209 payments to reflect current practice. The
proposed rule restated current policy in that it provided that FNS
would collect amounts due FNS or pay State agencies by amending the
States' letter of credit. Although in most cases the State agency owes
FNS for FNS' share of collections, FNS may owe the State agency in
situations where the retention amount due the State agency exceeds the
cash collection. This occurs when the State agency experiences a
preponderance of non-cash rather than cash collections.
The regulations in 7 CFR 273.18 and 276.2 previously provided that
FNS would collect amounts due FNS for recipient claims collections and
title IV reimbursements and pay State agencies by offsetting or
amending the States' letter of credit. However, in order to accommodate
State and Federal financial management requirements, FNS has accepted
FNS-209 payments by check from a number of State agencies and has sent
checks to State agencies which were owed money. The Department believes
it is appropriate to change the current language to provide for checks
when requested by State agencies rather than require a number of State
agencies to conform to the letter of credit procedure. In the final
rule the Department is allowing State agencies to request that FNS
accept checks from the State for FNS-209 amounts due FNS, or that FNS
pay the State by check for FNS-209 amounts due the State. If such a
request has not been or is not made, payment to the State agency and
collection from the State agency will be made through the letter of
credit. The Department reserves the right to offset any amount due FNS
by letter of credit offset if payment is not made.
The final rule also amends similar provisions relating to title IV
reimbursements in 7 CFR 276.2 and letter of credit offsets in 7 CFR
277.16 to conform with this change. Title IV reimbursements are
reported as a separate line item on the FNS-209 and are used along with
claims collection data in the calculation of the total amount due FNS
from the FNS-209. Thus, a change in the method of collection or payment
of the total amount due from the FNS-209 would also apply to the line
items that make up the total figure. The change in the general
authority for letter of credit offset in 7 CFR 277.16 is a
consolidation of the authority for organization purposes. As noted
above, the regulations in 7 CFR 273.18 and 276.2 previously allowed FNS
to offset from the letter of credit for FNS-209 payments due FNS.
Automated Data Processing (ADP) Enhanced Funding Rate Reduction to 63
Percent
The proposed rule stated that section 1752(a) of Public Law 101-
624, enacted on November 28, 1990, changed the enhanced funding rate
for ADP and information retrieval system development from 75 percent to
63 percent effective October 1, 1991. The proposed rule also stated
that pursuant to section 1752(b) of Public Law 101-624 this change in
the funding rate does not apply to proposals approved prior to the
enactment date of November 28, 1990.
Three comments were received which stated that this reduction is
unreasonable at a time when automation efforts need to be increased to
keep pace with growing caseloads and decreasing resources. One other
commenter stated that this reduction was unfair to those States that
had never requested enhanced funding because they had not previously
had the necessary resources available for development purposes and that
were now in the process of pursuing such development. The reduction in
the enhanced funding rate was mandated by law and does not allow
Departmental discretion. Since the retention rate is mandated by law,
the final regulation retains the 63 percent rate as specified in the
proposed rule.
One commenter requested clarification of whether approval of the
planning advance planning document (PAPD) prior to November 28, 1990,
constituted total project approval at the enhanced funding rate. The
Department believes that the purpose of the PAPD is to determine
whether the developing system would be a viable one and whether
continued system development is appropriate. Therefore, approval for
funding a PAPD is separate from later funding decisions.
The Department was also made aware of concerns about the approval
of funding proposals after November 28, 1990 that were submitted prior
to that date. Specifically, there was a concern that States which had
submitted complete implementation advance planning documents (IAPD)
prior to November 28, 1990, but did not receive approval by FNS until
after that date were being unfairly penalized. The Department reviewed
the legislation in light of this concern and has made a change in 7 CFR
277.4(b)(12) of the final rule. This section now provides that a State
will receive 75 percent enhanced funding for automated system
development, if prior to November 28, 1990, the State had both an
approved (PAPD) and had submitted an IAPD along with all the paperwork
required for approval. However, modifications to approved IAPDs and any
increase in costs which occur after September 30, 1991 (during system
development), will be funded at the 63 percent level. Other than this
modification, 7 CFR 274.4(b)(12) is adopted as proposed.
One-time Enhanced Funding
Nine comments were received on the proposed one-time enhanced
funding provision which provided that all requests for more than one-
time enhanced funding for automated system development in a particular
State be denied. These comments focused on the rapid pace of changes in
technology and the need for federal enhanced funding to allow States to
incorporate these changes into a system once the initial system
development has been completed.
As noted in the proposed rule, a 1988 audit issued by the General
Accounting Office (GAO) interpreted the original legislation
differently than the Department. According to GAO, the funding scheme
was initially designed so that enhanced funding for automation should
only be available for a State's first attempt at automation
development.
FNS recognizes the concern expressed by commenters to keep pace
with the rapid change in computer technology. However, the legislative
history accompanying Public Law 96-249, The Food Stamp Amendments of
1980, specifically addressed the funding of upgrading or modification
of a system originally funded at the enhanced level. In the House
Report the Committee stated that the 75 percent rate for cost sharing
was intended to be one-time and funds were to be strictly limited to
initial development. H.R. Rep. No. 96-788, 96th Cong., 2nd Sess. 112-
113 (1980). Ongoing system utilization or upgrading expenses would be
shared at the 50 percent level applicable to most other administrative
costs.
Based on the House Report and the General Accounting Office (GAO)
audit cited in the proposed rule, the Department has decided that
enhanced funding should not be available for system changes to an
already existing system which was initially developed with enhanced
funding. Accordingly, with some technical corrections described later,
the proposed Sec. 277.18(g)(1) is adopted.
The Department also wants to clarify that it will fund one
``complete'' system development effort at the enhanced level one time,
if the system meets all applicable standards. A ``complete'' system
contains both certification and issuance components that meet existing
standards. For example, a State may receive enhanced funding for the
development of a certification component of a system which meets all of
the applicable functional standards. The State may then also receive
enhanced funding for a subsequent project to ``upgrade'' the system by
adding an issuance component which also meets all of the applicable
functional standards.
States are currently given the opportunity to pay back the
difference between regular and enhanced funding for a partial system
(i.e. certification component only) and then move forward to develop a
``complete'' new system. As of (insert effective date of final rule),
States will no longer be given the opportunity to pay back this
difference. The Department will fund to ``complete'' system development
but will not permit paybacks that allow the State to replace at
enhanced levels a component already funded at the enhanced level which
is no longer useful in the new system design. For example, a State has
received enhanced funding for a certification component and completes
component development. At a later date, the State re-evaluates
automation activity and a decision is made to automate the issuance
function, and to redo the certification component. In this situation,
the Department may allow enhanced funding for the issuance component
but will not allow funding at the enhanced level for a new
certification component. Finally, if a ``complete'' system was funded
at the enhanced level, a replacement system is not eligible for
enhanced funding.
The Department will reimburse States at the enhanced level, if
appropriate, for ``planning efforts'' that did not lead to
implementation of a system. The purpose of the planning effort is to
ensure that the ultimate system development effort is a viable one.
Therefore, a State may qualify a second time for enhanced funding for
planning if the previous planning effort was not successful. However, a
State will not be eligible for enhanced funding for the actual
implementation efforts for the second time if the initial
implementation effort failed to develop a ``complete'' system that
meets all applicable standards. Paybacks by States for failed
implementation attempts will no longer be approved as of (insert the
effective date of the final rule).
Federal Funding for Preparation of the Planning Advance Planning
Document (PAPD)
The Proposed rule provided clarification that the 50 percent rate
of Federal Financial Participation (FFP) would be allowed for State
administrative expense incurred during preparation of the PAPD. Two
commenters felt that the preparation of a PAPD should be funded at the
enhanced rate since the preparation took more time than suggested in
the regulations and resulted in a document more extensive than 6-10
pages. One commenter suggested that a clear description of specific
costs eligible for enhanced funding would help to adequately
differentiate between preparation of the PAPD and the actual planning
phase activities.
The Department is maintaining the requirement that the preparation
of the PAPD by States be funded at the regular FFP rate of 50 percent.
The PAPD is intended to be a brief written plan of action which
describes the State agency's intended activities and proposed budget
for planning phase activities as well as an estimate of the total
project costs. At a minimum, the State agency is required to include
information set forth in 7 CFR 277.18(d) in the PAPD submission.
Planning phase activities will be reimbursed at the enhanced rate only
if the PAPD was approved at that rate. Planning phase activities that
are eligible for reimbursement at the enhanced funding rate are
identified in 7 CFR 277.18(g) of these regulations. In addition, the
Department would like to clarify language in paragraph 277.18(g)(8)(iv)
of that section which may have contributed to the confusion surrounding
the level of FFP allowed for the preparation of a PAPD. The second
sentence in this paragraph has been changed to read as follows: ``The
cost of planning activities which were approved for enhanced funding
under a Planning APD may be funded at the 63 percent level regardless
of final approval or denial of the Implementation APD''.
Miscellaneous Comments
One commenter stated that the Department had failed to provide
recipient protections in ADP systems through the proposed rule and
requested that the Department republish the rule to include provisions
for this concept. Through this rule the Department is addressing only
the automation funding provision of the Public Law 101-624. Public Law
101-624 also contains provisions concerning standards for automated
systems that include concerns about recipient protection. However, this
rule does not implement those provisions.
The Department is primarily interested in the use of automated
systems to provide more timely and accurate benefits to recipients as
well as more program and system accountability and the APD process, the
Department is emphasizing recipient protection when a system is under
development as well as when the system is operational. Notices,
expedited service and processing procedures are being emphasized.
One commenter requested clarification regarding whether
``development'' of an automated system includes transfer and
modification of an existing State system in an enhanced funding
situation. The Department believes that current regulations at
Secs. 272.10(a)(3) and 277.18(d)(2)(ii) adequately address the
requirement that a State, as part of the development of its automated
system, assess whether the transfer or modification of an existing
State system is cost effective. Transfer or modification may be
reimbursed at either the regular or enhanced funding levels according
to the criteria discussed above.
Other Revisions
An additional change is contained in these final provisions in
order to correct language in 7 CFR 277.4 and 277.18 of current
regulations. There is a typographical error in 7 CFR 277.4(b) (11) and
(12), 277.18(b), under the definitions for enhanced funding or enhanced
FFP and regular funding or regular FFP, and in 7 CFR 277.18(g)(1) and
277.18(g)(3). The word ``or'' appearing after the word ``development''
and before the word installation in these sections has been changed to
``and''.
Implementation
The provisions of this action relating to household election of
repayment method for IPV claims at 7 CFR 273.18 are effective
retroactive to November 28, 1990, when Public Law 101-624 was enacted.
The provisions at 7 CFR 273.18 relating to household election of
repayment method for IHE claims is effective December 13, 1991, the
date of enactment of Public Law 102-237. The provisions at 7 CFR 273.18
which reduce State agency retention rates on claim collections applies,
by its terms, to the period beginning October 1, 1990 and ending
September 30, 1995. Therefore, the new retention rates are effective
retroactively to October 1, 1990. The provision at 7 CFR 277.18 which
reduces the enhanced funding level for ADP is effective retroactively
to October 1, 1991 for costs incurred on that date and thereafter and
does not apply to ADP plans approved prior to November 28, 1990. The
corrections to the Administration Management final rule, the correction
to the reference to enhanced ADP funding, the change to FNS-209 methods
of payment and the amendments relating to one-time enhanced funding and
to Federal funding for preparation of Planning APD's are effective 30
days following the date of publication of this final rule.
List of Subjects
7 CFR Part 272
Alaska, Civil rights, Food stamps, Grant programs-social programs,
Reporting and recordkeeping requirements.
7 CFR Part 273
Administrative practice and procedure, Aliens, claims, Food stamps,
Fraud, Grant programs-social programs, Penalties, Records, Reporting
and recordkeeping requirements, Social Security, Students.
7 CFR Part 276
Administrative practice and procedure, Food stamps, Fraud, Grant
programs-social programs, Penalties.
7 CFR Part 277
Food stamps, Government procedure, Grant programs-social programs,
Investigations, Records, Reporting and recordkeeping requirements.
Accordingly, 7 CFR parts 272, 273, 276 and 277 are amended as
follows:
PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES
1. The authority citation for part 272 continues to read as
follows:
Authority: 7 U.S.C. 2011-2032.
2. In Sec. 272.1, a new paragraph (g)(130) is added in numerical
order to read as follows:
Sec. 272.1 General terms and conditions.
* * * * *
(g) Implementation. * * *
(130) Amendment (342). The provision relating to household election
of repayment method for IPV claims at Sec. 273.18(d)(4)(ii) is
effective retroactive to November 28, 1990. The provision relating to
household election of repayment method for IHE claims at
Sec. 273.18(d)(4)(i) is effective December 13, 1991. The provisions for
State agency retention rates on claim collections at Sec. 273.18(h)(2)
and (i) are effective retroactive to October 1, 1990. The provisions at
Sec. 277.18 which reduce the enhanced funding level for ADP is
effective October 1, 1991 for costs incurred on that date and
thereafter and does not apply to ADP funding approved prior to November
28, 1990.
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS
3. The authority citation for part 273 continues to read as
follows:
Authority: 7 U.S.C. 2011-2032.
4. In Sec. 273.13, a new paragraph (b)(14) is added to read as
follows:
Sec. 273.13 Notice of adverse action.
* * * * *
(b) Exemptions from notice. * * *
(14) The State agency initiates recoupment of a claim as specified
in Sec. 273.18(g)(4) against a household which has previously received
a notice of adverse action with respect to such claim.
5. In Sec. 273.18:
a. The third sentence and the last sentence of the introductory
text of paragraph (d)(3) are amended by removing the words ``the amount
of'';
b. Paragraph (d)(3)(iii) is revised, paragraphs (d)(3)(iv) through
(d)(3)(viii) are redesignated (d)(3)(vi) through (d)(3)(x) respectively
and new paragraphs (d)(3)(iv) and (d)(3)(v) are added;
c. The heading of paragraph (d)(4) and paragraph (d)(4)(i) are
revised, paragraphs (d)(4)(ii) and (d)(4)(iii) are redesignated
(d)(4)(iii) and (d)(4)(iv) respectively; and a new paragraph (d)(4)(ii)
is added;
d. Newly redesignated paragraph (d)(4)(iv) is amended by adding a
new sentence following the first sentence;
e. Paragraphs (h) through (l) are redesignated as paragraphs (i)
through (m) respectively, and a new paragraph (h) is added; and
f. Newly redesignated paragraph (i)(1) is revised in its entirety.
The revisions and additions read as follows:
Sec. 273.18 Claims against households.
* * * * *
(d) Collecting claims against households. * * *
(3) Initiating collection on claims. * * *
(iii) For inadvertent household error claims, the first demand
letter to a participating household shall inform the household:
(A) That unless it elects a method of repayment and informs the
State agency of its election within the time specified in paragraph
(d)(4)(i) of this section, or timely requests a fair hearing and
continued benefits, its allotment will be reduced;
(B) How allotment reduction will affect household benefits, if the
State agency has not otherwise informed the household about this
matter;
(C) That if the household timely elects allotment reduction, such
reduction will begin with the first allotment issued after such
election, as provided in Sec. 273.12(c)(2) of this part; and
(D) That if the household fails to make a timely election, or to
timely request a fair hearing and continued benefits, the reduction
will begin with the first allotment issued after timely notice of such
election or request is due to the State agency, as provided in
Sec. 273.12(c)(2) of this part.
(iv) For inadvertent household error claims, a demand letter
provided to a participating household subsequent to a fair hearing
which sustains the claim shall inform the household:
(A) That unless it elects a method of repayment and informs the
State agency of its election within the time specified in paragraph
(d)(4)(i) of this section, its allotment will be reduced;
(B) How allotment reduction will affect household benefits, if the
State agency has not otherwise informed the household about this
matter;
(C) That if the household timely elects allotment reduction, such
reduction will begin with the first allotment issued after such
election, as provided in Sec. 273.12(c)(2) of this part; and
(D) That if the household fails to make a timely election, the
reduction will begin with the first allotment issued after timely
notice of such election is due to the State agency, as provided in
Sec. 273.12(c)(2) of this part.
(v) For intentional Program violation claims, the first demand
letter provided a participating household following the action which
establishes the claim, as required in Sec. 237.16 of this part, shall
inform the household:
(A) That it must elect a method of repayment and inform the State
agency of its election within the time specified in paragraph
(d)(4)(ii) of this section, or its allotment will be reduced;
(B) How allotment reduction will affect household benefits, if the
State agency has not otherwise informed the household;
(C) That if the household timely elects allotment reduction, such
reduction will begin with the first allotment issued after such
election, as provided in Sec. 273.12(c)(2) of this part; and
(D) That if the household fails to make a timely election, the
reduction will begin with the first allotment issued 10 days after the
date of the demand letter, as provided in Sec. 273.12(c)(2) of this
part.
* * * * *
(4) Further collection actions. (i) Inadvertent household error
claims. Participating households which are liable for inadvertent
household error claims shall be deemed to have elected allotment
reduction unless they notify the State agency of their choice of
repayment method within 20 days of the date an initial demand letter,
or a demand letter for payment following a fair hearing which sustains
the claim, is mailed or otherwise delivered to them.
(ii) Intentional Program violation claims. Participating households
which are liable for intentional Program violation claims shall elect a
method of repayment on the date of receipt of the demand letter
required in Sec. 273.16(e)(9) and (g)(3) of this part (or if the date
of receipt is not a business day, on the next business day) or be
deemed to have elected allotment reduction. Each State agency shall
determine a deadline for receipt of such elections for them to be
considered timely. In no event shall that deadline exceed 10 days from
the date the demand letter is mailed or otherwise delivered to liable
households.
* * * * *
(iv) * * * The State agency may also pursue other collection
actions, as appropriate, to obtain restitution of a claim against any
household which fails to respond to a written demand letter for
repayment of any inadvertent household error or administrative error
claim. * * *
* * * * *
(h) Retention rates. The following retention rates shall apply for
claims collected by the State agency, including the value of allotment
reductions for the purpose of collecting claims but not allotment
reductions due to disqualification:
(1) For amounts collected prior to October 1, 1990, the State
agency shall retain 25 percent of the value of inadvertent household
error claims collected and 50 percent of the value of intentional
Program violation claims collected;
(2) For amounts collected during the period October 1, 1990 through
September 30, 1995, the State agency shall retain 10 percent of the
value of inadvertent household error claims collected and 25 percent of
the value of intentional Program violation claims collected;
(3) For amounts collected on or after October 1, 1995, the State
agency shall retain 25 percent of the value of inadvertent household
error claims collected and 50 percent of the value of intentional
Program Violation claims collected;
(4) The State agency shall not retain any percentage of the value
of administrative error claims collected.
(i) Submission of payments. (1) The State agency shall retain the
value of funds collected for inadvertent household error, intentional
Program violation, or administrative error claims rather than
forwarding the payments to FNS. This amount includes the total value of
allotment reductions to collect claims, but does not include the value
of benefits not issued as a result of a household member being
disqualified. The State's grant and letter of credit will be
established or amended on a quarterly basis to reflect the State
agency's retention of the value of claims collected as specified in
paragraph (h) of this section unless the State agency requests or has
requested that payment be by check. The State agency may request that
FNS accept checks from the State for FNS-209 amounts due FNS, or that
FNS pay the State by check for FNS-209 amounts due the State. If the
State agency fails to pay FNS the amount due as reported on the FNS-
209, FNS shall offset the amount due from the State's letter of credit.
For FNS-209 reporting purposes, State agencies shall calculate the
retention amount using the appropriate rate specified in paragraph (h)
of this section which is in effect during the reporting period for the
report. For those claims collected in Fiscal Year 1990 or earlier for
which adjustments are made and reported in Fiscal Year 1991 or 1992,
States may request a correction to reflect the difference between the
old, higher rate (paragraph (h)(1) of this section) which is applicable
to those claims, and the new, lower rate (paragraph (h)(2) of this
section) at which the adjustments to those claims were reported on the
FNS-209. One request for correction for each of fiscal years 1991 and
1992 may be filed with FNS after the fiscal year, but no later than
November 30, 1991 for Fiscal Year 1991 reporting and no later than
November 30, 1992 for Fiscal Year 1992 reporting. The request must be
in writing, must include appropriate verifying documentation, and must
reflect the net effect of all increases and decreases resulting from
the application of the old retention rate.
* * * * *
PART 276--STATE AGENCY LIABILITIES AND FEDERAL SANCTIONS
6. The authority citation for part 276 continues to read as
follows:
Authority: 7 U.S.C. 2011-2032.
7. In Sec. 276.2 paragraph (e)(3) is revised to read as follows:
Sec. 276.2 State agency liabilities.
* * * * *
(e) Title IV reimbursements. * * *
(3) The State agency shall reimburse FNS through an adjustment to
the Letter of Credit (LOC) unless it requests or has requested that it
be allowed to pay by check. The reimbursement amount shall be reported
quarterly on the Form FNS-209, Status of Claims Against Households, to
be offset against LOC credit adjustments reported on that form. The
State agency may request that FNS accept checks from the State for the
amount due FNS. If a State agency fails to pay FNS the amount due as
reported on the FNS-209, FNS shall offset the amount due from the State
agency's Letter of Credit. The State agency shall maintain monthly
records which detail the computation of reimbursement amounts reported
on the Form FNS-209 for audit purposes.
PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE
AGENCIES
8. The authority citation for part 277 continues to read as
follows:
Authority: 7 U.S.C. 2011-2032.
9. In Sec. 277.4:
a. Paragraph (b)(1) is revised; and
b. New paragraphs (b)(11) and (b)(12) are added. The revision and
additions read as follows:
Sec. 277.4 Funding.
* * * * *
(b) Federal Reimbursement Rate. * * *
(1) A 75 percent Federal reimbursement is payable for Food Stamp
Program allowable costs incurred for State fraud investigations,
prosecutions, and fraud hearings upon presentation and approval of a
State Plan addendum as outlined in Sec. 277.15.
* * * * *
(11) A 63 percent Federal reimbursement is payable for Food Stamp
Program allowable costs incurred for State agency planning, designing,
developing, and installing of computerized systems as described in
Sec. 277.18 and approved for enhanced funding by FNS after September
30, 1991.
(12) A 75 percent Federal reimbursement is payable for Food Stamp
Program allowable costs incurred for State agency planning, designing,
developing, and installing of computerized systems as described in
Sec. 277.18 and submitted for approval for enhanced funding by FNS
before November 28, 1990. Those proposals, including modifications and
cost increases, which received approval at the 75 percent level during
the period from November 28, 1990 through September 30, 1991, shall be
reimbursed at the 75 percent rate for costs incurred through September
30, 1991, and at the 63 percent rate for costs incurred thereafter. All
modifications approved after September 30, 1991 and any cost increases
which occur after this date shall be reimbursed at 63 percent
regardless of when the original system was approved. For purposes of
this paragraph, no system shall be funded at 75 percent unless all
required paperwork for enhanced funding is (or was) either approved by
FNS prior to the appropriate date contained in this paragraph or a
planning advance planning document (PAPD) was approved and an
implementation advance planning document (IAPD) was submitted with all
the required paperwork for enhanced funding to FNS prior to November
28, 1990. The required paperwork is described in Sec. 277.18.
* * * * *
10. In Sec. 277.16, paragraphs (c)(1)(ii) and (c)(1)(iii) are
revised and a new paragraph (c)(1)(iv) is added.
The revisions and addition read as follows:
Sec. 277.16 Suspension, disallowance and program closeout.
* * * * *
(c) Offsets to the Letter of Credit. (1) * * *
(ii) Unallowable costs resulting from audit or investigation
findings;
(iii) Amounts owed which have been billed to the State agency and
which the State agency has failed to pay without cause acceptable to
FNS; or
(iv) Amounts owed to FNS for title IV reimbursements and recipient
claims collections which were reported on the FNS-209 and which the
State agency has failed to pay.
* * * * *
11. In Sec. 277.18:
a. In paragraph (b) the definitions of ``Enhanced funding or
enhanced FFP rate'' and ``Regular funding or regular FFP rate'' are
amended by removing ``75 percent'' and adding ``63 percent'' in their
place. The reference to ``Sec. 277.4(b)(1)(ii)'' in both of these
definitions is removed and a reference to ``Sec. 277.4(b)(11) and
(b)(12)'' is added in its place. These definitions are further amended
by removing the word ``or'' after the word ``development'', and adding
the word ``and'' in its place;
b. The introductory text of paragraph (c)(1), paragraphs (c)(1)(ii)
and (d)(1)(ii), the heading of paragraph (g), paragraph (g)(1), the
introductory text of paragraphs (g)(2) and (g)(5), paragraphs (g)(6)
and (g)(7), the introductory text of paragraph (g)(8), and paragraphs
(g)(8)(iv) and (p)(5) are amended by removing all references to ``75
percent'' and adding the words ``63 percent'' in their place;
c. Paragraph (g)(1) is further amended by adding the words ``one
time'' after the word ``reimbursement''; by removing the word ``or''
after the word development, and adding the word ``and'' in its place;
d. Paragraph (g)(2)(ii) is amended by removing the reference to
``(g)(2)(vi), (g)(2)(vii), and (g)(3)(ix)'' and adding in their place
reference to ``(b)(2)(vi), (b)(2)(vii), and (b)(3)(xi)'';
e. The first sentence of paragraph (g)(3) is amended by removing
the word ``or'' after the word development, and adding the word ``and''
in its place; and
f. The last sentence of paragraph (g)(8)(iv) is revised to read as
follows:
Sec. 277.18 Establishment of an Automated Data Processing (ADP) and
Information Retrieval System.
* * * * *
(g) * * *
(8) * * *
(iv) * * * The cost of planning activities, which were approved for
enhanced funding under a planning APD, may be funded at the 63 percent
level regardless of final approval or denial of the Implementation APD.
* * * * *
Appendix A to Part 277 [Amended]
12. In part 277, appendix A in the section titled ``Standards for
Selected Items of Cost'', paragraph B (1) is amended by removing the
words ``75 percent'' and adding the words ``63 percent'' in their
place.
Dated: December 27, 1993.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-613 Filed 1-18-94; 8:45 am]
BILLING CODE 3410-30-U
