Food Stamp Program: Revision of the Definition of Insured Financial Institutions and Modification of Food Stamp Redemption Procedures

SUMMARY: This rule amends Food Stamp Program regulations relative to

food stamp redemption and changes the definition of ``insured financial

institution''. This change is necessary because of statutory revisions

to the Federal bank insurance system. Financial institutions formerly

insured by the Federal Savings and Loan Insurance Corporation (FSLIC)

are now insured by the Savings Association Insurance Fund (SAIF), which

is administered by the Federal Deposit Insurance Corporation (FDIC).

This rule also modifies the procedures for financial institutions which

deposit food stamps at Federal Reserve Banks in order to be consistent

with changes in Federal Reserve requirements.

In addition, this rule amends 7 CFR chapter II to reflect the

abolishment of the Food and Nutrition Service and the establishment of

the Food and Consumer Service in the recent Department of Agriculture

reorganization.

DATES: The amendments to parts 271 and 278 are effective December 22,

1994. The amendments to the heading of 7 CFR Chapter II and to the

references in the chapter are effective November 22, 1994.

FOR FURTHER INFORMATION CONTACT: Suzanne Fecteau, Chief, Coupon and

Retailer Branch, Benefit Redemption Division, by telephone at (703)

305-2418.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant for purposes of

Executive Order 12866, and therefore, has not been reviewed by the

Office of Management and Budget.

Executive Order 12372

The Food Stamp Program is listed in the Catalog of Federal Domestic

Assistance under No. 10.551. For the reasons set forth in the final

rule and related Notice(s) to 7 CFR part 3015, subpart V (48 FR 29115,

June 24, 1983 or 48 FR 54317, December 1, 1983, as appropriate, and any

subsequent notices that may apply), this program is excluded from the

scope of Executive Order 12372 which requires intergovernmental

consultation with State and local officials.

Regulatory Flexibility Act

This action has been reviewed with regard to the requirements of

the Regulatory Flexibility Act of 1980 (Pub. L. 96-354). The

Administrator of the Food and Consumer Service has certified that this

action does not have a significant economic impact on a substantial

number of small entities. The rule makes only slight technical changes

to the Food Stamp Program coupon redemption procedures to improve

system accountability, while also revising the definition of ``insured

financial institution''.

Paperwork Reduction Act

The reporting requirements relating to the provisions on the

redemption of food stamps at 7 CFR 278.5 have been approved under OMB

number 0584-0085. The public reporting burden for this collection of

information is estimated to average .020 hours per response, including

the time for reviewing instructions, searching existing data sources,

gathering and maintaining the data needed, and completing and reviewing

the collection of information. Send comments regarding this burden

estimate or any burden, to the U.S. Department of Agriculture,

Clearance Officer, OIRM, Room 404-W, Washington, D.C., 20250; and to

the Office of Management and Budget, Paperwork Reduction Project (OMB

#0584-0085), Washington, D.C., 20503.

Executive Order 12778

This final 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'' paragraph 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. In the Food Stamp Program the

administrative procedures are as follows:

(1) For program benefit recipients--state administrative procedures

issued pursuant to 7 U.S.C. 2020 (e)(10) and 7 CFR 273.15;

(2) For State agencies--administrative procedures issued pursuant

to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to non-

quality control (QC) liabilities) or part 284 (for rules related to QC

liabilities);

(3) For program retailers and wholesalers--administrative

procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Background

Current regulations at 7 CFR part 278 contain requirements that

firms authorized by the Food and Consumer Service to accept food stamps

may redeem them only at financial institutions which are insured by the

FDIC or the FSLIC; or at financial institutions which are insured under

the Federal Credit Union Act and which have retail food stores or

wholesale food concerns in their field of membership (7 CFR 278.5). On

August 9, 1989, the FSLIC, along with its parent organization, the

Federal Home Loan Bank Board, ceased to exist. These institutions have

been consolidated into the SAIF pursuant to sections 211(6) and 401 of

the Financial Institution Reform, Recovery and Enforcement Act of 1989

(FIRREA) (Pub. L. 101-73, 103 Stat. 183). The SAIF is administered by

the FDIC. This rule amends the Food Stamp Program regulations to delete

FSLIC wherever that reference appears.

The Department is also amending the regulations to be consistent

with the Federal Reserve requirements that financial institutions

submit only balanced deposits to the Federal Reserve and use Magnetic

Ink Character Recognition (MICR) to encode on the Food Stamp Redemption

Certificate the verified amount of coupons received from authorized

firms. The redemption certificate is the deposit document that

authorized firms use to deposit coupons with financial institutions for

credit.

Deposit Balancing Requirements

In an effort to improve the accountability in the food coupon

redemption process and reduce the likelihood of fraud, the Department

enlisted the cooperation of the Federal Reserve to modify its

depositing requirements for food coupons to facilitate reconciliation

of coupons deposited with deposit documents and redemption

certificates. Financial institutions are now required by the Federal

Reserve to submit balanced deposits, which means that the face value of

coupons deposited must match both the amount of coupons entered on the

financial institution's deposit document and the total amount of

coupons entered by authorized firms on the redemption certificates

accompanying the deposit.

MICR-Encoding Requirement

Requiring financial institutions, or retailers with MICR-encoding

capability, to MICR-encode the verified coupon amount on redemption

certificates allows redemption data to be electronically captured at

the Federal Reserve Banks and transmitted directly to the Department's

computer processing center. It also allows the Federal Reserve Banks

and the Department to achieve greater accuracy and accountability in

the coupon deposit reconciliation system while using standard banking

technology.

A proposed rule dealing with these requirements was published at 56

FR 13,601 on April 3, 1991 and provided the public with a 60-day period

to submit comments on the proposed provisions. The Department received

no public comments on the proposed rule and this rule is being

finalized without change.

Establishment of the Food and Consumer Service

Pursuant to Pub. L. 103-354, The Federal Crop Insurance Reform and

Department of Agriculture Reorganization Act of 1994, the Secretary of

Agriculture issued Secretary's Memorandum 1010-1, Reorganization of the

Department of Agriculture, on October 20, 1994. SM 1010-1 orders the

abolishment of the Food Nutrition Service (FNS), and the establishment

of the Food and Consumer Service, which assumes the functions

previously performed by FNS. This rule includes amendments to 7 CFR

chapter II which are necessary to bring Agency regulations into

alignment with the Departmental reorganization.

List of Subjects

7 CFR Part 271

Administrative practice and procedure, Food stamps, Grant

programs--social programs.

7 CFR Part 278

Administrative practice and procedure, Banks, Banking, Claims, Food

stamps, Groceries--retail, Groceries, general line--wholesaler,

Penalties.

Accordingly, 7 CFR chapter II and parts 271 and 278 are amended as

follows:

Chapter II--Food and Consumer Service, Department of Agriculture

1. The heading of 7 CFR chapter II is revised to read as set forth

above.

Chapter II [Amended]

2. In 7 CFR chapter II (consisting of parts 210-299) all references

to ``Food and Nutrition Service'' are revised to read ``Food and

Consumer Service'', and all references to ``FNS'' are revised to read

``FCS''.

3. The authority citation for parts 271 and 278 continues to read

as follows:

Authority: 7 U.S.C. 2011-2032.

PART 271--GENERAL INFORMATION AND DEFINITIONS

Sec. 271.2 [Amended]

4. In Sec. 271.2 the definition of Insured financial institution is

amended by removing the words ``or the Federal Savings and Loan

Insurance Corporation (FSLIC)''.

PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD

CONCERNS AND INSURED FINANCIAL INSTITUTIONS

5. In Sec. 278.5:

a. Paragraph (a)(1) is amended by removing the words ``or the

Federal Savings and Loan Insurance Corporation (FSLIC)'' in the first

sentence, and adding two new sentences to the end of the paragraph.

b. Paragraph (a)(2) is revised.

The revision and additions read as follows:

Sec. 278.5 Participation of insured financial institutions.

(a) Accepting coupons. (1) * * * All verified and encoded

redemption certificates accepted by insured financial institutions

shall be forwarded with the corresponding coupon deposits to the

Federal Reserve Bank along with the accompanying Food Coupon Deposit

Document (Form FNS-521). In accordance with Federal Reserve

requirements, the coupon deposit value entered on the Food Coupon

Deposit Document must be equal to the actual value of coupons being

deposited and to the total value of verified amounts encoded on the

corresponding redemption certificates.

(2) An insured financial institution shall verify the amount of the

coupons being redeemed and record the amount in the designated space on

the redemption certificate. In order to conform with Federal Reserve

requirements, the verified amount shall be recorded in the appropriate

field on the redemption certificate using Magnetic Ink Character

Recognition (MICR) encoding. Redemption certificates accepted by

insured financial institutions shall be forwarded with the

corresponding coupon deposits to the Federal Reserve Bank along with

the Food Coupon Deposit Document (Form FNS-521).

* * * * *

6. In Sec. 278.9, a new paragraph (k) is added to read as follows:

Sec. 278.9 Implementation of amendments relating to the participation

of retail food stores, wholesale food concerns and insured financial

institutions.

* * * * *

(k) Amendment No. 331. The program changes made to Secs. 271.2 and

278.5 by this amendment are effective December 22, 1994.

Dated: November 4, 1994.

William E. Ludwig,

Administrator, Food and Consumer Service.

[FR Doc. 94-28750 Filed 11-21-94; 8:45 am]

BILLING CODE 3410-30-U